The Persistence of the Quill Pen

The Persistence of the Quill Pen

Peter K Hargreaves

Guest Author

We are proud to share the Persistence of the Quill Pen with you. Written by Peter Hargreaves, one of the founders of Hargreaves Lansdown.

"Most IT systems waste the electrical power businesses pay to run them.

In our ever-online world, today’s financial services firms are at the forefront of our minds, and it would be remiss to rely solely on data, at the expense of creativity. After all, the greatest inventions were not born from the insights of an analytical platform. Da Vinci plotted out the parachute and the first flying machines with coloured chalk. Edison sketched the world’s first lightbulb with a three-and-a-half-inch pencil. While online financial services may be leading the way in some ways, they are not yet significantly changing our lives. This feat is led by “Apps” to order takeaways, taxis or even organise rooms for holidays. Such firms are not leaving their innovations to the confines of an operating system, more, fixing manual problems in our lives with lightweight technology.

Double-entry bookkeeping has been attributed to a few origins, but the consensus is that the Italians invented it c.500 years ago. It is a system of accounting that records indebtedness and the eventual settlement of the debt separately, in a way that both entries are easily reconciled. At the time, the only available tool was the sharpened quill of a bird’s feather.

During the following centuries, the recording tools were improved but the system resolutely persevered. Some readers may remember NCR 2000 and Burroughs Sensimatic machines. They merely emulated the same system but mechanically. There was no ability to carry out calculations or had any storage facility (memory).

500-year habits die hard and when electronic data processing (computing) was harnessed the users specified systems emulating the laborious process dictated by crude writing instruments. I was known to scream “Computers don’t work that way”.

Today more people are working in IT (Information Technology) than the total that has worked in the industry before. Sadly, few business analysts inside Financial Services can specify a computer system as opposed to a manual one. Most are unsure on the right questions to ask the users. They still allow the end-user to request computerised, internal, manual systems.

It’s a simple problem with obvious parameters:-

  1. What information will be entered into the computer?

  2. What information do you wish to have available from those original transactions?

What happens inside the box of tricks referred to as a computer should only be in the domain of the System Developers, or Software Engineers as they now like to be called. It should not copy the process enforced by the crude pointed manual instrument known as a pen. However, 95% of all life assurance, banking and broking companies use crude double entry systems most inappropriate to the working of modern computers. And some wonder why these established companies are being left behind by the approach of using Apps. A problem of legacy to some is the inability to appreciate the power of a computer to others.

FinTech, as in the combination of good technology to deliver financial solutions, is a powerful combination and an overused buzzword. Caution is needed when looking to solve the issues of the manual inefficiencies of the past. Especially as the desired pace of change increases to appease investors, the best-laid plans of ‘measure twice, cut once’ are being replaced by technology tools.

Quantity over Quality, you may say, is an approach also to be conscious of when managing the systems that oversee our life savings. Especially when technologists with no prior experience of working in financial services come to prominence with little appreciation for a client-centric and highly regulated environment. Such risk is being mitigated by a technology firm called Navos, which is led by David Davies, a man I know well from our time working together on the Board of Hargreaves Lansdown.

In summary, there is no denying FinTech is powerful. But only when we enable both parts to complement each other, not let one be the tail that wags the proverbial dog, as the potential is endless.

Caution is allowing the tech to do what it does best, and the finance to do its bit, combining an effective fin and tech. If manual processes are simply replicated by technology, you will get inefficiencies built in from the ground up, and not the slick future you envisaged. Angry clients, followed by investors will undoubtedly follow."

Peter K Hargreaves - July 2021

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