Why copying Western banking systems didn’t work.
There is also another set of reasons why copying a Western banking system to a country like Kenya or Russia has not been as simple and effective for Western banks. Many of the banks in the West have been in business for centuries. The roots of Bank of America go to the Bank of Italy that Amadeo Giannini has founded in San Francisco in 1904, over a hundred years ago. Citibank was founded as City Bank of New York in 1812, over two hundred years ago. These banks have developed in the Western legal and compliance system that is very different from legal and compliance systems in the developing countries, where there have been periods of no systems, such as the period in Russia immediately after the collapse of the Soviet Union, when one country stopped its existence and its laws stopped working and another country has been created on paper, but had yet no laws and no enforcement agencies.
All of this has also had a profound influence on the technological and software side of the banking systems in the Western countries and the developing world.
To the amazement of many people, banks and banking systems in the developing countries often have more sophisticated software and more features available to their users than banks in the West do. There are two reasons for that. The first reason is that the banks in the West have developed software before any of the banks in the developing countries. Then, as companies and people were inventing new features, adding them to the existing systems was not always easy because of the costs of labor and costs of maintenance of the old and new system.
This is similar to the problem that the subway system in New York City is having at the moment. A lot of the equipment on the subway system is decades old and outdated, but there are so many people using the subway in New York City, that shutting it down or shutting just one of the lines at a time down, is not an option because shutting it down would disrupt the workflow of the entire system and have a negative impact on the lives of hundreds of thousands of people.
At the same time, when it comes to the banks, customers of large banks in the West would not necessarily switch to using a different bank simply because of a new software feature when the customers have been using their bank for decades and have really got used to going to the same branch where they know everybody and feel like family.
Also, when adding new features and capabilities into the software, banks in the West have to comply with massive regulations and make sure that their software satisfies all the regulations. In the developing countries, the number of requirements and regulations is often much lower, which is why banks can add more features.
Not only that, but because many of the banks in the developing countries have started creating software much later than the banks in the West, they were able to create better systems because they were creating them from scratch. It is as if someone were to build a modern system with a subway system from scratch today. They would be able to take a look at what the cities all around the world have been doing for centuries and then build a subway system that really works because they would not have to think about replacing or patching old equipment or spend any money on doing so.
For example, services such as two-factor verification, multi-factor verification and text verification are still new to many people in the West because the level of trust in the West has always been higher that in the developing countries.
The multi-step verification system means that an institution wants to verify knowledge (information that only the specific customer would know), possession (such as a possession of a device or multiple devices such as a computer and a smartphone), and inheritance (meaning a property that the customer and only the customer has). This verification system is one of the reasons why more people in the West are not buying and trading cryptocurrencies. A typical person has a bank account that they opened when they were a teenager and all they needed to open one was a social security card and an identification document. Now they are trying to register an account with a cryptocurrency exchange and the exchange is asking them to take a selfie, write a date and time on a piece of paper and take a picture of that, install Google Authenticator, and more. For many people in the West, this feels like too much to do, but people in the developing countries are used to all of these steps and for them these steps feel perfectly normal.
This this partly because many of the banks in countries such as Kenya, Tanzania, China and Russia, have implemented these verification systems from the very beginning. The existence of these systems in the developing countries is yet another reason why cryptocurrencies have such a bright future there.