A typical settlement chain can involve many different intermediaries, meaning securities settlement is comparatively slow. Transactions that take nanoseconds to execute settle in days. This also means large costs and operational risk. And, like in payment systems, economies of scale introduce concentration and create single points of failure. All of that ties up potentially tens of  6  Another key enabler of PSP access to major retail payment systems such as FPS is the development of aggregators that can provide direct technical connections to the infrastructure, reducing the costs of building this capability for newer entrants. The intention is that these aggregators could be used by PSPs without an RTGS account, but under this arrangement PSPs would still need an agent bank for settlement of their obligations across RTGS. 7  The legislative changes include adding Payment Institutions to the list of regulated entities to whom the Settlement Finality Regulations apply, modifying the Payment Services and Electronic Money Regulations to enable safeguarded funds held by E-Money Institutions and Payment Institutions to be posted with the Bank and amending the Banking Act to expand HM Treasury’s powers to grant the Bank of England with the ability to supervise any relevant payments systems if they ultimately grow large enough to pose a systemic threat. The first is essential to enable these firms to benefit from the critical protections the Settlement Finality Regulations offer to users of major UK payment systems.

Money and credit, the universal instruments of commerce, could not exist without this most fundamental of financial technologies, which allows debits and credits to be netted off; debt to circulate as currency; money to replace memory; and with it, trade to expand exponentially. How much have we progressed since Keynes’ bed-ridden globalisation? Replace “telephone” with a “tablet” and “tea” with a “soy latteccino” and you have not the start of the Twentieth Century but the Twenty First, a century in which opportunities are no longer limited to men or denizens of the City. Nonetheless, finance continues to be arranged around a series of hubs like brokers, clearing houses and exchanges; whereas, in other domains, people form connections directly, instantaneously and openly, and this is revolutionising how they consume, work, and communicate. The extent to which finance continues democratising and transforming depends on superficially arcane, but fundamentally vital, enabling technologies. The emergence of mobile telephony, the ubiquity of the internet, availability of high-speed computing, advances in cryptography, and innovations in machine learning could combine to enable rapid changes in finance – just as they have in other areas of the economy. The ledger, once stone, wood, or paper – and always centralised – is now digital and may become distributed. FinTech has the potential to deliver more resilient financial infrastructure, more effective trade and settlement, and new ways to encode, share and analyse data. For the financial sector, these could offer shorter, speedier transaction chains; greater capital efficiency; and stronger operational resilience.