Carney Joins Startups as Bank of England Launches Acceleratorby
Governor embraces a potential ‘revolution’ in fintech
Will tap startups for help on blockchain and cyber-security
The Old Lady of Threadneedle Street is taking the plunge into the startup world.
Bank of England Governor Mark Carney said Friday that it plans to launch a financial technology accelerator program to tap the expertise of startups as a flurry of innovations reshape finance. This may be the first time a central bank has employed this approach to research and development, a practice long used in Silicon Valley as a way to incubate young companies.
Carney had planned to make the announcement in his annual Mansion House speech in London on Thursday evening. He and Chancellor of the Exchequer George Osborne canceled their originally planned remarks at the event in tribute to Jo Cox, the member of Parliament killed in northern England earlier that day.
In a copy of his speech released by the bank, Carney said peer-to-peer lenders, robo-advisers -- which use computer programs to provide online investment advice -- and crypto-currencies were fomenting a potential "revolution" in finance.
“This could, with time, unbundle traditional banking models and deny banks their traditional economies of scale and scope,” he said in his speech.
Accelerators, a Silicon Valley invention typically housed in loft spaces in hipster neighborhoods like Shoreditch in London, have become an increasingly important way for traditional banks to catch up with digital innovations.
Commercial lenders such as Barclays Plc and Citigroup Inc. are using them to find ways to upgrade their aging information technology systems. The aim is to help them adapt to a marketplace that’s changing how consumers manage their money and becoming more vulnerable to attack by hackers.
Carney said technology based on the blockchain, the distributed accounting database that underpins virtual currency bitcoin, will be a key focus in the program. The technology shows "great promise" in enabling central banks to strengthen their defenses against cyber attack and overhaul the way payments are made between institutions and consumers, he said. In January, the bank undertook a review of Britain’s payments system to determine how digital banking and currencies might make it more robust and resilient.
"If distributed ledger technology could provide a more efficient way for private sectors to deliver payments and settle securities, why not apply it to the core of the payments system itself?" Carney said in the speech.
Andy Haldane, the BOE’s chief economist, said the advent of crypto-currencies has raised questions around the very future of money. Deutsche Bank AG Chief Executive Officer John Cryan has said cash may not even exist in a decade.
Even so, Carney cautioned that BOE is still a long way from from creating a digital version of sterling on a distributed ledger.
"We will work to make payments easier, and though cash may no longer be the king it once was, its reign will endure for some time."