Evolution and Innovation of the Financial Systems. Can the Financial System be updated?

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Finance has always been my Achilles’ heel. It was my weakest subject during my MBA, the subject in which I scored my lowest grades. Never understood anything about the subject, but now that I think about it, it was probably because finance never interested me. And, as fate would have it, the first job I got straight from college was with a bank, and a few years later, the second job was with an insurance company.

So, whether we like it or not, finance will always be a big part of our lives. And if you think about it, you have been involved with finance ever since that day your mother gave you that coin to buy that candy from that shop near your school. And today finance is part of everything we do.

In today’s world, without a financial medium there is very little that can be done – no shopping, no job, no entertainment, no companies, no products, etc., etc., you get the picture! Finance is one of the key fulcrums around which the human existence revolves.

Today’s financial system is a product of thousands of years of financial evolution. The world’s financial system is very complex, formed by the overlapping of multiple, global financial networks that move trillions of dollars a day to serve billions of people. People who in turn use it to improve their quality of life – purchasing, trading, and investing.

Like everything huge and complex, there are a number of drawbacks. The system’s size and complexity makes it slow, expensive, lacking in transparency, and hence open to fraud. It is a system that thrives on speculation and seems to create concentrations of wealth. In today’s age of information and globalisation, is it possible to create a more functional financial system?

A complex system, formed by the overlapping of multiple, global financial networks that move trillions of dollars a day to serve billions of people

So, what is a financial system?

Simply put, it is the information layer that records and mediates economic activity. Finance serves the function of accounting for, and exchanging of, economic value. Financial systems enable funds to be stored and moved between the people involved in an economic transaction. Enabling the economic players involved, be it individuals or organisations, to share in the ownership of the economic activity, with the associated risks and returns.

Evolution of the Financial System

A financial system has always existed, and throughout history it has evolved from a community based financial system, to an industrial age centralised system, to today’s new global financial institutions centred around information technology. There are of course a number of factors that have contributed to the development of the modern financial systems, from double entry accounting, to nations adopting a single, common economic system that spanned a relatively large geographic area, and finally, to capitalism and large investments in industrial infrastructure.

Capitalism and industrial investments lead to the amassing of great wealth, which in turn resulted in even greater investment in industry. This resulted in the need for bigger, more sophisticated institutions for the regulating, storing, investing, and distribution of financial assets. Due to industrialisation, organisations moved from a more local/regional level to a national level, as a result, small local community banks with their local financial systems could not meet the demands of the industrial age. This naturally resulted in a centralised national/federal/reserve banking system coming into existence, which was the driving force behind the industrial economy.    

With the world economy becoming more accessible and deregulated, financial systems have evolved to become more standardised at a global level, becoming a system that manages a large flow of capital, organising the assets and liabilities of people and organisations around the planet.

The financial system continues to evolve and innovate to serve customers better, and move money more efficiently – from credit cards, to SWIFT interbank exchange, to ATM’s, online and mobile banking, and finally to financial products that are heavily based on speculation.

While the modern financial system continues to innovate, evolve, and improve the lives of the people using the system, there are also a number of challenges that impact the system.

A large percentage of society today is only interested in making the “quick buck”. This has resulted in the creation of financial products that are based on speculation, and this is where most people are investing their money. As a consequence of this, the actual investment made to the economy, and industry is reduced, and makes the system unstable and prone to collapse.

  • Global financial systems, while having a digital façade of simplicity, are in reality very complex and expensive to create and maintain, requiring a number of intermediaries to keep the entire system functional. All of this adds to the cost of the system, making the system inaccessible to billions of people around the world.
  • The system is made closed on purpose to protect the data it contains, as a result it lacks transparency, which from time to time, results in people on the inside taking advantage of the system to commit crimes and abuse trust.

45% of financial services organisations have suffered frauds in the last 12 months

PricewaterhouseCoopers LLP, Sixth Global Economic Crime Survey – Financial Services Report
  • Like any system centred around information technology, security is a major concern, and back doors into the system can always be found by a determined hacker.
  • The modern financial system can be complex and difficult to understand, especially with the evolution of FinTech (finance + information technology). Technology companies have entered the world of financial services, offering a number of products along the value chain, but are still not able to offer the full services that a traditional financial service provider offers.

The financial system is once again starting to evolve with the internet driving innovation, pushing the financial system into a more decentralised model. Blockchain, distributed ledgers and tokens are showing the potential for the new forms of the financial system. With the internet providing the platform to record, store and exchange value independent of centralised institutions, resulting in an economy wide accounting system that is secure and transparent. Is this the future of the truly global financial system?

This is all truly complicated to be covered in a blog post, and especially not by me!

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The difference between a College and a University – is there even one?

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Before we get into the rest of the article and try to go past the surface differences between a college and a university, let me talk about the difference as it relates to us (Robert Kennedy College) and our partner universities (University of Cumbria, University of Salford, and York St John University). 

The relationship between Robert Kennedy College and our partner universities

As a college, Robert Kennedy College (RKC), like our university partners, is a higher education institution offering a number of master’s degree programmes. However, we are not the ones who award the degree to a student who successfully completes a programme with us. The degrees are awarded by our university partners, who are recognised and accredited by the government (in our case, as our partners are British, by the government of the United Kingdom). 

As the degree is awarded by the university, we are required to maintain education standards as prescribed by the university. They are also the ones who determine which programmes we can deliver on their behalf and generally also the syllabus of the programmes we deliver.  

Now you might be asking – What exactly is RKC’s role in all this? 

We are the ones who deliver the programmes to our students. We determine the most effective methodology of teaching the syllabus to the students, evaluating and guiding them, and providing teaching support. Not only that, we market the programmes, filter and guide students through the admission process, and provide student support. We are responsible for developing and maintaining the entire OnlineCampus and for record keeping, and are the ones who ultimately deliver the programme to the students. 

We also share responsibility with our partners on delivering residencies – the one week face-to-face components of our programmes. With this year’s residencies affected by COVID-19, we have moved to an online delivery of this component, with great success even if we say so ourselves (well, our students agree too!)

RKC’s OnlineResidency™

So far, we have focused on the relationship between RKC and our partner universities. But, in today’s world, is there really a difference between a college and a university? I will argue there is, especially in the UK, however, more and more this difference diminishes, especially globally.  

The British perspective  

Now, as we are talking about British universities, let’s talk a little about the education system in the United Kingdom and get a basic understanding of it.

There are 5 stages to the education system in the UK: 

  • Early Years 
  • Primary Years 
  • Secondary School 
  • Further Education 
  • Higher Education 

The first 3 stages are mandatory and on completing secondary school, students have to sit for GCSE or A-Levels exams. After secondary education (high school), getting a better understanding of the differences between college and university becomes important in making an informed decision about the future. 

College

A college in the UK is an educational institution that offers higher education courses that can either be vocational courses or lead to specific degree programmes. A student attending college will be equipped with the skills and knowledge required to enter into a specific job or a university programme. 

College programmes in the UK tend to focus on practical and hands-on experiential learning, whereas university programmes tend to be a mix of both practical and theoretical knowledge. Colleges also offer more part-time study options, and are usually cheaper than a university programme. 

Some of the certifications colleges in the UK offer are: 

  • Diploma 
  • Foundation Degree
  • General Certificate of Secondary Education GCSE 
  • Higher National Certificate HNC 
  • Higher National Diploma HND 

 University 

In the UK, a university is a higher education institution which has the legal authority to issue degrees. The title of “university” is obtained by ensuring a certain quality of education that is specified and monitored by a duly appointed government authority. The degrees that are awarded are: 

University of Salford
  • Undergraduate degrees 
  • Postgraduate degrees 
  • Doctorate (Ph.D.) 

However, some British universities might have branch colleges under them that run different programmes like foundation degrees, helping prepare students for university.  

Now that you have a better understanding of the British educational system, and more importantly, the relationship between RKC and our partner universities, please go through the list of programmes we offer and make your choice! Which programme is right for you?  

Celebrating our Graduates – University of Salford

Get in touch with our team of admission advisers who can have a look at your profile and give you some advice on the programmes that best meet your requirements.  Chat LIVE on WhatsApp with our Education Advisor today! Or, if you have already made up your mind, click here to apply