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Cash is already headed for a whole new dimension. MasterCard, for example, has invested millions in the development of an E-cash system called Mondex. Smart Mondex cards have tiny embedded microchips that can store not only electronic dollars but also five other types of currency, an abbreviated medical history and even a personalized electronic "key" that can open everything from your apartment to your office. Says Henry Mundt, MasterCard executive vice president for global access: "The chip that we are putting on the card now will form the platform for the ultimate in remote access for consumers to their funds, anytime, anywhere. What we really see happening in the future is consumers being able to design their cards to meet their individual needs. We refer to that as moving more toward life-style cards." E-cash is already everywhere, from highway tolls to subways. Security? Privacy? The second is more troublesome than the first and presents a fearsome scenario for crimebusters and tax collectors alike.
In just two decades we've gone from a world of simple mortgages and passbook savings to a universe of Roth IRAs, 401(k) plans, personal-risk-management scenarios and collateralized-mortgage obligations. Years ago, some genius figured out that mutual funds might save investors the hassle of choosing among thousands of stocks. Yet today there are 7,000 mutual funds, almost as many funds as there are stocks. And more technology just means more change. Says investment banker David Shaw: "The whole financial industry will likely be turned upside down, with shrinkage in some areas and perhaps some outright failures among those firms that are unable to use technology effectively."
At the center of this new world is a conflict between consolidation and disintermediation (a word that sounds like a tropical disease but means the removal of intermediaries, such as banks, from financial transactions). The disintermediation camp--led by software firms like Microsoft and Intuit--believes that the future will belong to companies that master the technology of this new era, firms that give investors subatomic-level control over their finances with sophisticated products that balance risk and reward, cost and value. The opposite camp--led by McColl and others--argues that the future belongs to huge financial institutions that will package investments and provide investors with cradle-to-grave services: everything from insurance to car loans to airplane tickets.
It is not an either/or proposition: McColl and company recognize that technology is their business and size is poor insulation from change (just ask Japanese banks, among the world's largest, now immobilized by bad debt, weak management and a stunted economy). The future lies in being both nimble and smart. "We have a lot of competition these days, even from people like Microsoft," said McColl recently, revving up his engines. "Software is becoming everything."