In 1993 David Taylor founded the first digital bank and today he is reinventing banking again with VersaBank. As a true inventor, Taylor also recently created a new flying machine called “Sky”. I recently met David to talk about inventing and his vision for the future of banking.
Robert Reiss: As a piece of history, what is the story of the creation in 1993 of the first remote digital bank?
David Taylor: Before that time, the banking industry was based on branch networks. Setting up a branch network is very expensive. So I was looking for a new affordable model. I had the idea to use other people’s premises as a branch network and connect them to the modern technology of the time. Instead of the expensive mainframes that traditional banks ran on, I figured I could write the software using an IBM PC, to be the heart of the bank. It was therefore a necessity to be the mother of invention.
Reiss: As banking is a highly regulated industry, how did you overcome the challenges to get approval?
Taylor: I spent a few years with the various regulators trying to convince them that this new model would work. They taught me that Canadians must enter physical premises. But in the end, I was able to convince them with a slightly different model. They granted me the first scheduled online banking license.
Reiss: I understand that VersaBank stands for general purpose bank; describe the model.
Taylor: Today, VersaBank has evolved into exactly what it was originally meant to be, it’s a fully remote banking connected to those who collect deposits for us. These would be financial planning organizations and wealth managers. On the loan side, we get our loans from sales finance companies. They fund motorcycles, spas, and even cosmetic surgery. Deposits therefore come from a network of asset managers. And on the other side, loans and leases come in from finance companies at the point of sale.
Reiss: What do you think the future of banking is?
Taylor: Let’s look a little way into the future. As you know, things are moving so quickly that I have a vision of a new way the banking function will be performed. I see that the established banks that exist today will become redundant; I think the banking function will take place with the electronic wallets. Banks, like us, will issue digital deposit receipts that reside in electronic wallets.
People will place these digital receipts in a stable coin category that acts as a vehicle for commerce, eliminating the need for old-fashioned banking. To go in this direction, there will always be a regulation concerning the banking functions, that is to say the lending function. You will need people who know what they are doing when it comes to lending in the various aspects of banking. However, they could very well be consultants to other companies that lend and raise funds. This will decentralize the financial services sector.
Reiss: As a true inventor, you built something called the “Sky”. Talk about what it is exactly how you found it?
I thought I needed the ultimate plane that would come off a grass runway quickly, safely, and economically. I also have an affinity for the Corvette and I thought wow, a Corvette engine would work well in an airplane. So I built this plane and nicknamed it the “Sky”. I installed the Corvette engines with two large German propellers. It was like a flying spaceship. I finally got it in the experimental, house building category, which was quite an achievement. It was similar to obtaining a banking license. In fact, I might have told regulators at the time, if regulators looked at planes like banks, the Wright brothers would never have gotten certified to fly. Civil Aviation Canada gave me the certification so yes the Sky did fly and did what I expected, go up quickly just like VersaBank did.
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