579 Spotlight Banker’s Bookshelf — Future Money

Welcome to Breaking Banks, the number one global fintech radio show and podcast. I’m Brett King. And I’m Jason Henricks.

Every week since 2013, we explore the personalities, startups, innovators, and industry players driving disruption in financial services. From incumbents to unicorns and from cutting edge technology to the people using it to help create a more innovative, inclusive, and healthy financial future. I’m J.P. Nichols, and this is Breaking Banks.

Hello, listeners, it’s Brett King here, and I’m very excited to tell you about some news for Provoke FM’s newest podcast. It’s a spinoff of a spinoff. So you may know that we launched Breaking Banks, of course, 2013 May.

We spun off Breaking Banks Europe a few years ago. And now Breaking Banks Europe is spinning off a spinoff called The Banker’s Bookshelf. This is a segment that Paolo Soroni was doing on the show.

It’s become a really cool topical segment, and it’s getting a lot of traction on LinkedIn and stuff and social media. So Banker’s Bookshelf is talking about cutting edge banking and fintech, of course, sharing the stories and the strategies behind financial innovation, bridging the gap between technology and finance, but it’s looking at authors who are, you know, really speaking about this space and trailblazing. Now, of course, Paolo, he’s a global researcher in banking and financial markets and fintech at IBM Institute for Business Value.

So you’d have to say he’s also a trailblazer. But this week, he runs into Ronit Ghose, who runs the Future of Finance team in Citi. And that’s their thought leadership unit called Citi Global Insights.

We’ve had him on the show before. He’s the author of Future Money, Fintech, AI, and Web3, but it’s a great episode. So I want you guys to check it out.

Of course, we see right now with what’s happening with the Trump administration, with the embracing of crypto and a lot of the traction that’s happening with stable coins and smart contracts and CBDCs, that that sort of world of money is really changing. So it’s a really great discussion to get into. Lots of deep narratives on Bankers’ Bookshelf to check out.

So subscribe to Bankers’ Bookshelf at Provoke.fm, or of course, you can listen via your preferred podcast platform where every good podcast is available. Buongiorno a tutti, I am Paolo Sironi, your host of the Bankers’ Bookshelf. The Bankers’ Bookshelf is a podcast show in which I invite the authors and researchers of the most interesting books and research publications about the banking present and its fintech future.

And in this episode, I have invited Ronit Ghosh for a conversation inspired by his new book, Future Money, Fintech, AI, and Web3. Ronit, welcome to the Bankers’ Bookshelf. Thank you for having me, Paolo.

I’m sure that everybody knows Ronit, but for those that who didn’t have the chance, he worked almost 30 years for Citi with an exceptional research experience. And currently, he runs the Citi’s Future of Finance think tank. So Ronit has access to an incredible number of conversations across the banking and fintech space.

I would say Ronit is everywhere in the world, which I am sure inspired the writing of his book, Future Money, because when I read it, I found it plenty of anecdotes and real life examples that are worth learning about. So Ronit, first of all, what makes this book special and different from the others? I know there’s a bit of an odyssey in the fintech world, but this one is pretty valuable. So in your own words, what makes Future Money different and worth reading? Sure.

Maybe I’d quote someone who read the book, a friend of mine, and they said to me what they found different about the book was that it was truly global. Now we live in a world that’s hyper connected. We live in a world that’s global, but our experiences, I mean, not you, Paolo, but many people have experiences that are limited to one market or maybe a few markets.

So typically you might have built a fintech in the UK or analyzed it, invested in fintechs in America, and you know everything about what’s happening in the Valley or in the US. What I find, and we can see this by just looking at media, if you ever pick up a, I was going to say newspaper, I’m showing my age, but now, you know, a channel online and you listen to a story from an Italian perspective versus an American perspective or an Indian perspective. It’s amazing how different the news is, that the same fact is so different.

And I wanted to explore that multidimensionality in the world, while the world is hyper connected and communication and information networks make us so close. At the same time, we still have very different views and perspectives and experiences. And so in the book, I tried to have some of the common themes, which is how the internet and mobile technology has transformed our lives, including finance, reflected.

But I also tried to show how building in Pakistan is different to building in the UK and the problems you’re solving in Southern Africa are different to in East Asia. And I wanted to bring that globality out. And I’ve been lucky through a combination of, I guess, biography, my personal biography, and the company I’ve worked for all these years that I’ve happened to have seen the world.

And seen it sometimes standing in the shoes or walking in the footsteps of people from very different parts of the world, very different cultures. And that gives you hopefully a slightly richer perspective on whether it’s fintech or the world of finance or whatever. This is actually very true because we all have fragmented experiences.

I have a chance, as you have, to travel a lot. So I realized that the way we use money, the way we access banking is not necessarily the same way everywhere in the world. But also you mentioned something that is dear to me, which is that the fact that we look at the world from very different perspectives, which changes somehow our opinion about things.

And I want to give you an example before we proceed. Think about Napoleon. We know everything about Napoleon, right? This is well documented.

We even have access to his private emails, to his lover. But for the French, Napoleon might well be an emperor. For the British, a dictator.

For an Italian, it’s a traitor because he seduced Italians and then he gave Venice to the Austrians. So it’s always Napoleon, right? So the same, I guess, is like the CBDCs somehow. In some places of the world, the same concept is seen as an opportunity.

In other places, it’s seen as a threat. But now let’s start step by step to get into the future of money. When my stepkid was 12 years old, he planted 50 cents into a pot, hoping that a tree with money could grow.

And I said, oh, no, no, no, money doesn’t grow on trees. And now I’m reading a book and the first chapter is money grows on trees. What’s the story here? Very good.

Very good. So, yeah, it’s something that we’re told by our parents as we’re growing up, right? It’s a very common story across so many different cultures. Money doesn’t grow on trees.

So I had to put that as my first chapter title, Money Grows on Trees. Because literally when paper money arrives, so paper money arrives in China, banknotes arrive in China somewhere between 600 and 800 AD. And the first, the Chinese invent printing and paper, basic printing.

Obviously, Gutenberg in the 1400s invents movable type, more sophisticated printing, but basic woodblock printing the Chinese invent. And what the Chinese do shortly after is invent, if you like, paper money. And there’s a long story behind that, which we explain in the book as to how they’re like vouchers initially.

People leave their bronze because the money in China and what we call now in the modern world, the European modern world, the Great Silk Road, the money on that, on the roads, the routes were bronze coins. And people realized it was quite impractical to carry lots of bronze coins. So they would leave it with their friends, brothers, cousins, other merchants, and they would get receipts.

And those receipts become the original proto banknotes. And then the government says, hang on, this looks like money and money is our business. So the government then basically regulates it.

And all the way through history, and we discuss this in the book, even the creation of the central banks like the Sberia Riksbank, the oldest central bank in the world in Sweden, or the Bank of England. They start as private companies. Bank of England is a private company.

So money in China is originally privately printed. And then the government says, no, no, we’re going to control it. But the printing happens on the bark of a mulberry tree.

And I discovered this while writing the book that in the Bank of England, so in the Central Bank of the UK, in the Bank of England, in London, in the central courtyard, there are three or four mulberry trees in homage of these original banknotes. So literally money grows on trees. So the Fed prints all of the greenbacks, but we blame the Chinese for those to be on paper.

Now, the Chinese made money on paper, and now the Chinese are actually accelerating the transformation of money in the digital world. So that’s pretty interesting in terms of historical parallel. But before we get there, it’s also important to understand how money moves around.

And it’s not only on paper, which brings to the surface another perspective. You discuss in a paper, like in the 1990s, finance got internationalized. So Wall Street paired with London on the interbank markets to basically transform the way finance operates.

So why is that important in this discussion? Yeah, so finance finance has always had an international aspect. When you think about the oldest banks in the world, they had a domestic, local aspect and had an international aspect. As you’re doing this podcast with a proud Italian, let’s use an Italian example, the Medici’s.

So much of modern banking that we got in the world or modern finance comes from the Medici’s in the late 1300s and the 1400s. And of course, you know this, Paolo, so I don’t need to tell you this, but if you go to Firenze, so much of what you see today is still was funded by the Medici’s. But in financial terms, why they’re important is not the Botticelli’s and the Leonardo’s and Michelangelo’s they help sponsor.

It’s because double entry bookkeeping came out of the Medici’s. They popularized it. Letters of credit, bills of exchange.

Now, all of this happened because in the 1300s, so the early Renaissance period, proto-banks and banks are emerging. They finance the local economy, the princes and the, but then they also finance trade. And the 1300s in Europe and the 1400s trade is basically physical cross-border.

And then after a while, trade becomes more maritime. So, you know, the Genovese and the Venetian bankers and so on, it goes maritime, mainly the Mediterranean and the 1600s onwards, trades goes much more overseas. You know, the Bank of Amsterdam created in the early 1600s basically was to fund what we call venture capital today.

These ships would go sailing. So there’s a long, long history of banks and finance being about cross-border. This gets turbocharged in the 1900s when London becomes this hub for this, probably the world’s biggest empire up to now.

And London is an amazing financial center for the British Empire. And the pound sterling is the reserve currency of the world, sort of. It’s not quite like the dollar because the currency of the British Empire, the French have their own currency and so on, and the Chinese have their own currency.

But it’s somewhat like the dollar. And then when the UK from the 30s and then after the Second World War goes into decline, the relevance of the pound declines and the pounds replaced in the 20s, 30s onwards, but particularly after the Second World War by the dollar. And the dollar becomes as dominant currency, it still is.

And one of the things we argue in the book is the dollar is going to remain the dominant currency for quite a long time to come. Maybe in 50 years time, you know, it’ll have been changed, something else, but the next 10, 15 years, the dollar will remain really dominant. Now, London has played this very, very interesting role in the spread of the international dollar, if you like.

And that’s what we write in chapter two of the book, chapter one’s about history, China, but chapter two is really diving into why has London become so important as an international financial center again from the 1980s onwards? It’s not the stock market. It’s not the local economy. The UK is actually still quite a big economy.

It’s very popular now to be, you know, negative on the UK economy, still the world’s fifth, the sixth largest economy. But the reason London became such a big financial center wasn’t the UK economy. It’s because dollars spread around the world and the world needed a financial center to trade dollars.

And London grew up as the kind of almost offshore dollar financial center or the international dollar center. So the 80s, London’s growing and it really accelerates in the 1990s and 2000s. And one of the things I write about in the book is that technology accelerates that process in the wholesale markets, because in the wholesale markets, what you have is in the 80s, lots and lots of centers in the world, financial centers that are trading currency.

So you can have currency trading in Athens between the banks. You can have it in wherever, in Milan and all over the world. But the power from technology allows trading to be concentrated and traders and investors always looking for the best price and the best execution.

So the best effective price. And you can get the best effective price when you have the most liquidity. And technology allows liquidity in financial markets to get concentrated in London.

And most of this liquidity is dollar linked. So most currency trading, one leg of about 80, 90 percent of FX trading, one of the legs is the US dollar. And this is happening in London.

And there’s a reason why so many of the American banks for the last 20, 30 years have had big operations in London and often had their heads of global heads of FX trading based in London. London has been the home of the FX markets and it kind of built on that imperial heritage of the 19th century. But then it got turbocharged by time zone and technology and other things like we’re saying money grows on trees, especially the first money in Chinese trees.

The Italians with the Medici’s formalized somehow the usage of money with accounting rules and the sharing of that the British turbocharged that on the ashes or the foundations of their British empire to be very concentrated, but also accessible everywhere in the world. But now technology is also changing. Money, again, can be decentralized or decentralized in somewhere else.

So what do you see in the future of money and what is the implication for financial institutions going forward? Yeah. So money, like we talked about with the mulberry trees or the growth of London, money runs on technology rails. Money is a mix of a social, cultural idea.

Money is money because we all come together and agree it is money. It’s like language. It’s a way to communicate languages, to communicate information, money is to communicate value.

It’s just like it’s a communication tool. And to communicate, you normally need at least two people, maybe more than two people. I’ve had this discussion with my wife the other day, like maybe just one person.

You wouldn’t need money if you had one person. You wouldn’t need money. If my wife and I were in a desert island, we wouldn’t need money, right? Because we just do things for each other.

If you were on a desert island, Paolo, with a friend or a family, you wouldn’t, we wouldn’t need money. And that’s how it used to be in that kind of proto world. How would I pay my subscription to the Banker’s Bookshelf podcast? The Banker’s Bookshelf podcast happens live on the desert island and your poor family have to listen to you, right? But then as we become more complicated as a society, we create this idea of money.

So and then from that idea of money, we base it, we link it to technology, right? So when we start, you know, coins like the bronze coins from Lydia or wherever, the gold coins or the silver coins, there’s a certain technological foundation you need to have those coins. And the same happens as we go forward. We look at today, everything is online and guess what? Payments.

We can’t imagine a world where we don’t have online payments, right? But 25 years ago, we didn’t do shopping online. In fact, 25 years ago, when e-commerce was emerging in the U.S. and places like China, many incumbent banks and retailers had the view that only weird things would happen online or bad things that happen online, which is why these fintechs grew up. The first generation of fintechs grew up.

So if you think about the OGs in fintech, and there’s many ways of defining fintech, but the OGs in fintech, like the PayPal’s and the Alipay’s, they emerged in the late PayPal 1990s, Alipay’s 2004. And they emerged to solve a particular problem, which is e-commerce payments. And that’s their use case.

And if you didn’t have e-commerce, you wouldn’t have PayPal and Alipay. Now, of course, Alipay is ubiquitous for all kinds of payments in China. I think I say in my book, I have this example of when I spoke at an Alibaba conference in 2018, I think, in Hangzhou, and I couldn’t pay because I didn’t have Alipay, my MasterCard and my Amex didn’t work.

Oh, there was one shop. Like, we had to look so many places to find that one shop that accepted my, in this Alibaba convention center. And my point here is those kind of form factors, Alipay, PayPal, even before them, like in the fifties and sixties and seventies, Visa, MasterCard, actually starting with diners, they all emerged because of certain technologies.

So Visa, Master really take off because we start getting computerization because if you didn’t have computerization, Visa, MasterCard would be like literally cottage industries, right? You’d have a little slip like those, you know, those old machines where you’d swipe your card, literally, they would call Visa, MasterCard for authorization. I mean, if you didn’t have computerization, that’s how it would work. It would, I mean, still, I mean, rarely, occasionally happens when technology breaks down.

Most of the time, you know, computerization allowed the growth of Visa, MasterCard, electronic transfers between banks. So the whole Swift, like Visa, MasterCard really take off in the sixties. Swift, which is of course the messaging standard for payments between banks cross-border.

Swift starts in the early seventies as a way of standardizing. I think it was Telex messages between banks, which is why, you know, and then, so as we look forward, you can think, how is technology changing? One of the most exciting things about writing the book or this adventure that, you know, you and I both been on is finding out how, you know, form factors like the phone just completely changed societies. In the book, I write about how inclusion, bank accounts, bank penetration in India in as recently as 15 years ago was super low.

If you went back to the late 2000s, 2007, eight, nine, very few women had bank accounts. By 2017, the number of women and men in India that had bank accounts was almost exactly the same. It was about 80%, four and five, roughly.

Now, if you’re in Europe, you go, well, that’s not very good. But 10 years before that in about 07, 08, it would have been way lower. It would have been maybe, you have to fact check me, it’s in my book.

I should have it with me, but it was like, if I had to say top of my head, like one in four of the women had a bank account and that in 10 years, that transformation was the mobile phone. And so what’s going to come next? The internet, which has been so far first desktop, then mobile, the internet is going to go multidimensional. By that, I mean, the term metaverse is, you know, probably a little bit now in, for the last two years, in disrepute because we overhyped it two years ago.

But we’re already moving into this mixed reality world or augmented reality world where through your smart glasses or through other wearables, you communicate. Now the phone remains the computation or the compute layer, but the phone connects to your smart glasses or connects to another device. We’re moving to a multi-device world and we’ll be communicating, doing commerce, buying and selling on multiple devices, including on smart glasses.

And payments will follow that. Linked to augmented reality, artificial reality is going to be AI, artificial intelligence, and the world we’re in already, including finance. Lives on lots of foundations to do with machine learning and basic AI.

And that’s going to get more and more complicated or sophisticated, and that’s going to change how finance works. But the finance bit comes as part of lots of other things that are changing, which is the technology layer is changing. There’s commerce layer is changing.

And the AI world is, it’s basically, and a founder I spoke to recently based in the US described it to me beautifully and said, in the old days, in the time of the Medicis, you had to be a prince or a proto-prince to have the life that so many of us can have today, which is, you know, a personal chauffeur, someone to drive you around in a horse and cart. You had to be kind of wealthy, someone to cook for you, a personal chef, a personal butler. For most of human history, a tiny, tiny percent of the population had access to that.

With AI and AI embodied into robotics, I mean, we don’t need a driver. I mean, today we have rideshare and we have Ubers and Careens, but in the future, and you could see this in San Francisco already, you’re living it in San Francisco, we’re going to have autonomous vehicles. We’re all going to have access to mobility and we don’t, you know, we’ll have our own virtual chauffeur.

We’re going to have our virtual butlers, virtual chefs, and we’ll have in finance a virtual private banker. Having a banker, having a relationship manager, a person dedicated to you was something that only very rich people had access to. Technology allows us to have effectively a personal, a private banker in your app or in your wearable device.

And that’s how finance is going to change. And it’s going to be very much part of all this technology change that’s taking place. So Rani, a couple of things I want to add from what you just said, you sort of mentioned that finance is a power and money is its language, which was actually the message we spelled with Billotta in the previous episode of the Bankers Bookshelf about this book on the geoeconomics of money.

So that links very, very well. So we invited the audience to take a look at the old series of our episodes. They are all connected, the dots, and this one in particular with Ronit is extremely interesting.

And then you said that money follows how society changes, but it also changes society itself because it creates new opportunities. That’s the reason why the future of money is interesting and important for everyone, not just the bankers, not just the fintech entrepreneurs, but anybody of us that wants to figure out how their life might change going forward with the transformation that the technology brings to the forefront. So, Ronit, I thank you for the conversation that you granted our audience.

I found that very, very interesting. I remind everyone, The Future of Money is an excellent book. It’s easy to read.

I find it fairly entertaining in some pages and it’s recommended really for everyone who wants to understand the forces that are changing the form and the usage of money today and in the not so distant future. So Ronit, thank you for being part of this show. I invite everyone to stay tuned for more as more episodes and research discussions are coming.

Don’t forget to subscribe to the Bankers Bookshelf on your preferred streaming platform. You can find us on Spotify, Apple Podcasts, Amazon Music, YouTube Music and Videos. Thank you all.

That’s it for another week of the world’s number one fintech podcast and radio show, Breaking Banks. This episode was produced by a U.S.-based production team, including producer Lisbeth Severance, audio engineer Kevin Hirsham, with social media support from Sylvie Johnson. If you like this episode, don’t forget to tweet it out or post it on your favorite social media or leave us a five-star review on iTunes, Google Podcasts, Facebook or wherever it is that you listen to our show.

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