By John Kell and Alan Murray
February 3, 2016

One industry clearly ripe for disruption in the next few years is banking. Anyone who spends days waiting for a check to clear, for an overseas money transfer to take place, or for a complicated securities transaction to close, must wonder why, in the digital 21st century, banking so often seems stuck in the 20th.


“Information moves instantly and for free, but value is still stuck in these closed networks,” says Chris Larsen, CEO of a software startup called Ripple. I was introduced to Larsen in Davos last month by Gene Sperling, an economic adviser to Presidents Obama and Clinton who sits on his board, and I followed up yesterday. Larsen is one of hundreds of entrepreneurs who see big opportunities in financial technology right now. His goal is global: to use blockchain technology to create a “new infrastructure where value can move instantly and for free, internationally” – what he calls a new, global “internet of value.”


The biggest money center banks may have an incentive to slow this change, since they make money off of the current system. But Larsen says the vast majority of smaller banks have an incentive to embrace change, since they must rely on the biggest banks for certain global transactions. CFOs of global companies also have an incentive to support change. And increasingly, there’s evidence the big banks “see the handwriting on the wall.” That’s why Goldman Sachs recently made an investment in Digital Asset Holdings, a blockchain venture run by former JPMorgan Chase executive Blythe Masters, and why JPMorgan Chase announced this week it is partnering with Masters for an experiment in the settlement of certain securities.


Who wins and who loses in this grand game remains unclear. But the writing is indeed on the wall. “Over the next 2-3 years, “ says Larsen, “you are going to see enormous change.”


More news below. And a correction from yesterday. I said Alphabet’s “other bets” loss was $3.6 billion “during the quarter.” It was actually $3.6 billion for the year. Apologies.


Alan Murray


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