Blog article
See all stories »

The ATM was the last great financial innovation

How do you define innovation in finance?

Are we talking about the creation of new synthetic debt instruments, famously decried by Warren Buffet as "financial weapons of mass destruction".

Or should we be looking at tech or service-led innovations that have contributed to the social good.

The reason I ask is because MIT has just published a ranking of the 50 most innovative companies in the world, selected for their "superiority at inventing technology and using it both to grow as businesses and to transform how we live".

Not surprisingly, the only finance-related company to make the ranking was Obopay, a non-bank mobile payments start-up.

Equally, Fast Company's recent list of the ten most innovative companies in finance included only one recognisable bank - Itaú Unibancoe - if you discount the contributions of Triodos and Canadian credit union Vancity.

It would seem that traditional banks - slow, ponderous and conservative by nature - are being outpaced and outflanked at every turn by a fresh batch of nimble free thinkers, who are prepared to tear up the rule books and experiment with new ways of delivering financial services.

In the UK, upstart newcomer Metro Bank says it plans to "to eliminate every stupid bank rule we can find", by opening all hours, installing public toilets in their branches and by promising to open an account and issue debit and credit cards to new customers within 15 minutes of applying at a branch.

Now does this count as innovation or just common-sense, customer-oriented retailing? It all depends upon the prism you're looking through.

Personally I'm with Paul Volcker, the former chairman of the Federal Reserve, who believes we have to go back more than 30 years to find the last truly great financial innovation: ie the invention of the ATM.  "It really helps people, it's useful," he said.


Comments: (9)

Paul Penrose
Paul Penrose - Finextra - London 25 February, 2010, 12:55Be the first to give this comment the thumbs up 0 likes

On the wholesale side you might also include the creation of the Swift interbank payments network in the 1970s. Ironically, this was a byproduct of communist - rather than capitalist - thinking!

Elizabeth Lumley
Elizabeth Lumley - Girl, Disrupted - Crayford 25 February, 2010, 13:03Be the first to give this comment the thumbs up 0 likes

I like the quote from God (I mean Paul Krugman)

"At this point, however, it's hard to think of any major recent financial innovations that actually aided society, as opposed to being new, improved ways to blow bubbles, evade regulations and implement de facto Ponzi schemes."

Matt White
Matt White - Finextra - Toronto 25 February, 2010, 15:49Be the first to give this comment the thumbs up 0 likes

Obopay deserves its place on the list, if only as a representative of mobile banking and payments, which I'd say is a "great" financial innovation.

Applying Volcker's criteria, it does help people and is useful, particularly for the hundreds of millions of unbanked people in the developing world.

So, I say the former Fed chief and (with all due respect boss!) you are dead wrong.

Stephen Wilson
Stephen Wilson - Lockstep Group - Sydney 26 February, 2010, 01:57Be the first to give this comment the thumbs up 0 likes

Are we talking about innovative companies (as per the body of the blog), or innovative technologies (as per the title)? 

Arguing the toss over innovation companies is always controversial, and inevitably gets complicated by considerations of objective measures, like sales growth, profitability, product development lifecycles etc. All good stuff.

But with regards to innovative technologies, it's a bit clearer.  Surely there are many undisputed technology innovations since the time of the ATM?  I'm thinking Internet banking, debit cards, chip-and-PIN, electronic bill presentment, m-commerce, and electronic verification, to name just a few.


A Finextra member
A Finextra member 01 March, 2010, 13:53Be the first to give this comment the thumbs up 0 likes

Yeah, online banking changed the banking relationship dramaticaly. I mean for the customers who actually use it. 

A Finextra member
A Finextra member 01 March, 2010, 14:23Be the first to give this comment the thumbs up 0 likes

I'd tend to agree that introduction of plastic cards and ATM/POS services based upon those were about the last real great innovations in banking. Internet banking is not, as it comes with significant risks and knowing about these I've given up on home banking. I do go to the branch instead, and use one of those ATM's that have a keyboard and statement printer integrated. These are also operating 24 by 7 - in a controlled environment, and I do get a printed receipt that enables me to prove exactly what transaction I've intended to do. If something goes wrong, the bank would find it very difficult to put the blame on me.

Mobile banking ? Even worse than home banking (where I can at least produce a local printout to document transactions) ...

Elizabeth Lumley
Elizabeth Lumley - Girl, Disrupted - Crayford 01 March, 2010, 14:38Be the first to give this comment the thumbs up 0 likes

I believe some of you are ignoring Matt White's real point about the impact mobile banking will have on the developing world - serving the unbanked and initiatives like micro-loans.

In fact, Deutsche Bank are making mobile banking and remittances a priority strategy within the bank.

Great innovation changes the landscape of whatever environment it affects. Mobile banking will allow areas without broadband, or bank branches, to enter and deal with the first world marketplace.

We aren't talking about buying a latte with your iPhone. Do not confuse online banking in the first world with the soon-to-arrive revolution in mobile banking globally.

A Finextra member
A Finextra member 01 March, 2010, 15:11Be the first to give this comment the thumbs up 0 likes

I'd readily agree that the use of mobile phone technology can - and in fact, already does - help greatly in third world countries. But at least today, the main aspect in these cases is working around infrastructure deficiencies and not so much banking automation.

Local agents (sometimes called "human ATM's") do carry some money, a mobile phone and do some bookkeeping on behalf of their rural customers ...

That local banking agent inherently provides some level of knowledge and trust between the parties involved.


A Finextra member
A Finextra member 01 March, 2010, 16:08Be the first to give this comment the thumbs up 0 likes

Good post as usual. I often find myself referring back to you for your take on things and this is no exception. I was with NCR at the time that the early ATM's were going in.

I wouldn't say that innovation was actually the driver for ATM's, reducing queues and cutting staff costs was. But ATM's were innovative for a different reason. They ushered in a period when control would pass from provider to user. ATMs provided the public's first direct contact with bank systems, with PC and then Internet banking to follow.

Interestingly I covered this in a post I wrote this morning...


Paul Penrose

Paul Penrose

Head of Research


Member since

06 Oct 2006



Blog posts




More from Paul

Blog post

ANZ and Visa lose the plot

Blog post

Now we are ten

Blog post

Finextra's Best of the Web

This post is from a series of posts in the group:

Finance 2.0

A community for discussing the application of Web 2.0 technologies to financial services.

See all

Now hiring