The past 700 years of finance have been marked by tremendous change, with the pace of such transformations enough to easily make finance the most permanently innovative sector in the world, Dervishi said in a keynote speech at the Hangzhou Global Investment Conference held by Euromoney on November 21.
“Now it’s a new era, with a quantum leap of breadth and depth for financial services,” he said.
While the impact of technology has been transformative across a number of sectors, from travel to commerce, the already mostly virtual nature of financial transactions means finance is going to see the deepest change.
“The globalisation of commerce gives rise to the globalisation of finance, which is not limited to the borders of one country anymore, just like commerce.”
Dervishi pointed to the development of new, extra-large communities through social and commerce platforms — such as Facebook and Twitter in the West and Alibaba and WeChat in China — and the impact that such developments will have on finance.
“Once we develop these communities, finance is developed to fit them. Looking at those super-communities, we are now redefining banks and bank accounts.”
The impact of these dynamics is such that IFC’s mission statement of creating financial inclusiveness, which used to refer to bringing banking services to the underserved, is now being redefined as new technologies arise.
“One fascinating aspect from the global financial crisis has been the rise of new money. Bitcoin is not just a new currency but an expression of what kind of money a new community can bring with it."
He particularly emphasised the revolutionary side of blockchain technology in eliminating fractional lending.
“With bitcoin, there are no central banks or banks. And you don’t have fractional lending; you cannot lend more than you have,” he said.
China's push to be at the forefront of these new developments in finance, including a government-led plan to develop applications based on blockchain technology, could also have implications for the rise of the renminbi as a global currency, said Dervishi.
"China today dominates the world of payments worldwide given its manufacturing base, so it also dominates payment corridors. This has implications for the future of the RMB and other global currencies."
Dervishi's forecast is for a world of trade where companies increasingly favour using the least possible amount of currencies. And, alongside the dollar and euro, he sees the RMB standing a chance to be the third pillar of that global payment landscape.
"The RMB is flowing deeper and deeper into the business ecosystem of the rest of the world. China is already the largest direct investor in many economies including Latin America, Europe and southeast Asia. That will give rise to a new reserve currency, the RMB,” he added.