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ClockA few years ago, a well known and well respected bank CEO observed that in today’s world three years of change seem to be compacted into every six months of banking history.  I hardly ever disagreed with him, but in this case I believe that his compression idea is on target but a little too conservative.

After meditating on the observation, I thought it might be interesting to try to condense the history of modern banking into a single week—a mere seven days.  While daunting, I think it will depict just how much has happened in a relatively short span of time.  For the next few months, follow along with me as we review the 7 short days of the week and  the evolution and the rapidity of that change.  In this context, banking as we know it has developed within the last hour.  And, in the next few minutes, banking is almost certain to be changed beyond recognition by profound technological, economic, political and cultural changes buffeting our business.  Today, it is not change, but the pace of change that is unique and creates banking challenges of a new magnitude.  Creative strategy becomes a necessity, but difficult to tackle.

So, to depict how history’s pace has quickened, try to measure banking events in terms of one ordinary Monday-through-Sunday week.  The first day of this week – a Monday – marks the arrival of modern banking, while the latter part of Sunday represents 2009, the 400th anniversary of modern banking.  We will have just gone to bed when the first four years of the next century begins – and what a beginning!  For this exercise, the first minute of Monday – 12:01 a.m. – is the year 1609.  It is when the Amsterdam Wisselbank opens its doors – an excellent beginning for our modern era.

Of course, many aspects of banking predate 1609 and set the stage for our four century banking week.  But the banking week we have defined is more than adequate to demonstrate the accelerating pace of change.  On the Monday modern banking arrived, Shakespeare was busy writing sonnets, trade was flourishing and the merchant class was on the rise.  The Amsterdam Wisselbank opens with a broad charter – to accept deposits and bills of exchange, transfer payments among customer accounts, mint coins and lend money.  This institution thrives for 200 years – about 4 days in our compressed time capsule.

Throughout the wee hours of Monday morning, growing numbers of English goldsmiths who safeguard customer deposits discover that owners never demand more than a fraction of their reserves in payment.  So they gain more and more confidence about using promissory notes to lend on deposits.  These goldsmiths’ paper certificates serve as currency, increase the money in circulation and fuel economic expansion.  One might say that their strategic vision was to enable customers to build businesses through providing credit and thereby enhancing profitability.  It is now a short step to a bank check.  The first check is written at about 9:00 Monday night.  This 1659 check evolves from the practices of British institutions that specialize in mortgages and legal services.  Adding additional products and services has already begun.

By the end of the century –2:13 p.m. Tuesday, London has become a major financial center and the Bank of England has begun to serve as a role model for central banks.  Next time we will see what Tuesday evening and part of the rest of the week brings as the pace of progress is beginning to quicken.

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