In the world today, there are many different industries that are being disrupted using technology. The banking industry is no exception to this as it has been met with the rise of fintech companies, new technologies and non-traditional methods. Many of these non-traditional methods already existed, but when new legislation was adopted, it has caused for the democratization of finance and the validation of these preexisting non-traditional methods are on the rise. Or are they?
The banking industry has been investing in these technologies for a while, but they’ve increased their investments as they see more opportunities for profit. Banks need to be up to date with the trends of innovating or risk losing ground on those who do innovate, so it’s important that they embrace these new technologies wholeheartedly.
Digitalization is changing the banking industry. Nowadays, it is not just about opening a bank account. Banks are more interested in how they can make a profit from your money and what specific service they can provide you with.
This section discusses how banks and VCs are making money from your money leveraging their customer’s personal data to make more profit. It also talks about how they are using this data to provide better services as well as making more profits off their customer’s data! The data collection is weaponizing the people’s behavior to be use against them, which they use to underwrite, create policies, financial conditions to control and penalize to collect fees that eventually eat away at the people’s money. People’s behavior is based on their level of understanding about the definition of money, so they act based on their own perception, thereby producing the financial result either in their favor or someone’s else such as the bank, VCs, or any other financial intermediary.
Banks and Venture Capitalist are Businesses
The purpose of a business is to add value to society. In other words, a business should be solving problems and generating solutions for the customer. (Not usurping their financial and power of authority under a unilateral type of contract.
A business should also have a viable product or service that can be sold or given to the customer in exchange for money. Finally, it needs a way to make money from this process to continue running the business. Banks and Venture Capitalist loan money? This is the perception based on everyone’s education and their perception of what money is and who they think or believe has the power over it. The real viable product of these entities are the people, their data, and their authorization power. The real service that is provided by these entities is fiduciary, such as a power of attorney, broker, funding portal, lawyer and so on. Therefore, they are regulated and are required to get a special type of license when acting in a fiduciary capacity. Stated earlier, this is the authorization power unknowingly delegated by the real viable product, the people.
The sustained growth and viability of any organization depends on the purpose for which it exists.
A company may be organized for profit, as a not-for-profit, or as a cooperative. A company or business may also have different purposes at different points in time. The purpose of a business changes depending on the type of business and its stage in its life cycle among other factors.
The purpose of a company is important because it determines how this company will allocate resources to achieve its goals.
Allocating People as a Capital Resource
In many cases, resources are allocated or distributed based on a set of criteria, which may be specified in some detail. This can be done either by a human acting as a resource allocator, or by using one or more algorithms.
Depending on the specific context of what’s being allocated, some common examples include time, money, personnel (human resources), materials or supplies, facilities such as buildings and equipment.
Many companies waste time and resources by assigning one person to do what is usually done by two people. For example, a salesperson might handle the advertising, the online presence, and customer service. This can be a problem because each of those roles requires different skillsets.
The allocation of resources is a difficult problem in many organizations. It is hard to make sure that an employee has the right skillset for their job. In other words, it’s hard to find someone who can do every part of the job well and not just do one aspect of the job well.
A company needs to allocate its resources among its projects so that the total expected return of all the projects is maximized. This can be done by assigning weights to each project and then summing up the weights. If we have two projects that we want to compare, it would look like this: (These are only examples. Do not worry if you do not understand right now. You will be walked through these calculations as you progress):
Weights = 0.5
Expected Return = $50 000
Total Weighted Return = 0.5 x $50 000 = $25 000
Weights = 0.3
Expected Return = $100 000
Total Weighted Return = 0.3 x $100 000= 36000
In our next section we will discuss what money is. Just as money is a social construct, so too is the definition. Money has evolved in tandem with our evolving needs and desires. It has always been shaped by technology and our needs for stability, trade, and convenience. And it will continue to evolve as we invent new ways to use money in the future.