Fintech’s Final Frontier: Central Banks and Disintermediation

The internet has many legacies, but its greatest one is disintermediation. And the greatest disintermediation of the banking system is coming soon to an app near you.

Before the internet, consumers who wanted to buy an airplane ticket would talk to a travel agent, who would type into a “green screen” terminal, which would “talk” to a mainframe computer, which would procure said airplane ticket.

Now the consumer has a computer which can talk to the mainframe, a web browser that accesses Expedia that accesses (amazingly) the same SABRE system.

The same is true for mail order catalogs in the 1980s, which were like Amazon but with one key difference you would call a person, who would type into a computer, which would tell another computer to ship you the item and charge your card.

Now you just access “the seller’s computer” directly, disintermediating the human in the middle and making the whole process so much faster and convenient.

“Do you have a table at 7pm?” or “When is the last flight to Hawaii?” or “Do you have paper clips in stock?” or “How long will that take to ship?” become API-able queries once the consumer’s computer can access the back-end system of record (database).

It is said that governments as the sovereign have a monopoly on money and law enforcement. But the “money” functions of governments almost never reach consumers directly.

Very few people directly own US government bonds, instead earning interest from banks, who own tons of government bonds. No consumers borrow money from the Fed or loan money to the Fed; their banks do when making them loans or earning interest on overnight deposits.

If you have a “conforming mortgage,” you effectively got your mortgage through the government, except you got it through many intermediaries first.

The reason why things like the Paycheck Protection Program (PPP) have been such a disaster, or that stimulus checks still have to be mailed in 2021, is that there is no “direct connection” between consumers and government for money. The government is the mainframe for money, but there’s not really an Expedia yet.