Martin Banks, Personal Computer World 01/82 - checked

January 1982

Many of my relatives have, over the years, made considerable sums of money by providing financial services to a broad spectrum of industrial and individual customers. I have a great many of these relatives spread all over the world and the amount of money they have made over the years is gargantuan. I am definitely the poor relation.

You may have heard of some of them. For example, in this country my relatives include Barclay, Lloyd and Williams and Glyn. There are also the obscurely named National Westminster and Trustee Saving (what their parents were thinking of I dread to think).

Abroad, there are cousins such as Amro in Holland, Credit Lyonnaise in France and Citi and First National in America (the Americans are nothing if not arrogant).

All of them have made a quiet, respectable and decidedly lucrative living out of their skill and at financial manipulation. They have managed to lock up vast amounts of money for themselves with a simple sales message - security. The message runs along the lines of: 'you give your money to us and we will keep it safe'. Sounds fine, doesn't it? What they then do is lend it to others at extortionate interest rates, the proceeds from which they keep. It is only in certain circumstances that they give any back. These are called deposit accounts and are controlled by rules about when, how and if you can get hold of your money. The other money, held in current accounts, gets no interest even though the banks get it for lending the stuff out. They levy a charge for keeping it for you and charge even more interest if they decide to let you have a little bit more than their arithmetic says you are entitled to (why is their arithmetic always right?). They have also devised some quite clever tricks for controlling the outflow of money - especially to what they consider to be profligate individuals (which is everybody, without exception). One trick is the cheque book, a collection of bits of negotiable paper that can be turned, by some secret and miraculous process, selectively into rubber. Another is only being open at times when customers have great difficulty in getting there. Yet another is to strictly limit the number of potential interface ports for those customers that do make it.

But all this is going to change - the revolution cometh, etc, etc.

This month, I would like to briefly look at a use for personal computers that has been discussed a little and investigated even less, but is, I feel, likely to become one of the fundamental changes that are eventually wrought on our industrialised society by these beasties. It is a use that is not totally out of court. No less a personage than Steve Jobs of Apple has said that his company has had some discussions with its local banking fraternity in California about the potential for using personal computers in financial management.

The discussions, however, have not been about using them as microcosms of the data crunching roles of mainframe systems in banking. Several banking institutions are already dabbling with this approach, especially now that the concepts of local area networking are beginning to creep through into reality. Instead, this is about something different - a replacement for the good old cheque book.

There would appear to be a considerable opening for the banking fraternity to offer their customers personal computers in exactly the same way that they currently offer them cheque books. Though the economics of such an idea might seem to militate against it, it does stand up to closer examination.

While it is an idea that would not be suitable for all customers of the major clearing banks, (particularly the individual private customer who tends to use a cheque book 'on location' as much as at home), it would suit the vast number of business customers that make use of banking services.

Here, a cheque book is normally kept at base as part of the overall accounting and financial management system of a company. It is 'provided' by the bank as a lever to use its services, offering security of funds transfer, etc. Each customer is charged for the cheques used, the charges being intended to cover all the relevant processing involved in actioning the required fund transfers and maintaining the records of an account. All of this can be done by computer, especially a small personal computer operating on a communications or networking system. The economics of providing such a service to customers involves the bank in a high front-end charge to buy the equipment and software, but this can be spread over two or three years of use. The current bank charges accrued by companies using cheque books over the same period of time are almost certainly comparable to the cost of buying and installing the system.

Such an approach would have several advantages, both for the customer and the bank, though admittedly, most of them would go the latter. If the hardware and software were provided by the bank, the customer would have a'proved' system to work with. It would be an essential part of the sales story for the bank that 'its' system is the best, most complete, most accurate, most reliable, etc. If it wasn't, the customer would have an immediate comeback; unlike today, where the bank's maths is right and the customer's isn't always. The customer would have access, through the network, to any and all of the bank's financial services. This, of course, would be at a price, dependent on the service involved.

With an approach like this, these services could not only include the more esoteric financial management offerings, such as investment portfolios and taxation, but also all data storage and printing functions. The bank could easily offer a full invoice, statements and whatever printing service to its customers, together with complete storage of all relevant data and records.

This would allow the bank to pare down the front end cost of the system hardware to the minimum, for the customers would be able to function adequately on a minimal system, almost to the point of a glorified ZX81 coupled to a modem. The front end cost would be further reduced by the sheer potential volume of hardware, allowing the banks to screw the system unit price into the ground.

For the banks themselves there would be several advantages. The two major ones could well be described as Revenue, and Control. They would get similar revenues to those already obtained via the cheque book service (while, at the same time, probably reducing their internal operating costs). They would, however, be able to add to the services available a wide range of alternatives. The printing service is just one, but there are many others. They could include a wide range of accountancy and financial management services, for example, which would be no bad thing for the software industry. I say that because there seems to be no way yet around the dilemma facing personal computer software, where the customer wants something brilliant for nothing, or very close, while brilliant software costs someone an arm and a leg to develop.

The banks could afford to fund such developments, and with the approach I have outlined here, have a large enough captive market to more than justify the investment.

In what might appear to be a momentary digression, the personal computer industry and the large body of existing users know that the number of potential applications of the beast are limited only by imagination. There is, however, a vast army of potential users who have yet to grasp that concept. They see no reason to spend good money on a technology they cannot understand and for which they see no immediate need. To get to the point where some of the utopian scenarios that have been painted for new technology can become realisable (and I appreciate that that could be a highly questionable place to be) it is first necessary to hand-hold the uninitiated through the basics.

The possibility of the banking fraternity using the opportunities for gain set out here is just one of the ways that this hand-holding process can be achieved, and from this spread of knowledge who knows what might transpire. For example, someone must have hand-held a Polish gentleman by the name of Joseph Conrad through the rigours of English before he became one of the best writers ever in that tortuous language.

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