Back in 1993 David Taylor founded the first digital bank and today he’s reinventing banking again with VersaBank. As a true inventor, Taylor also recently created a new flying machine called the ‘Sky’. I recently caught up with David to talk about inventing as well as his vision for the future of banking.
Robert Reiss: As a piece of history, what’s the story behind how in 1993 you created the first digital branchless bank?
David Taylor: Prior to that time, the banking industry was based on branch networks. There is a tremendous cost putting together a branch network, so I was looking for a new affordable model. I came up with the idea of utilizing other people’s premises as my branch network, and connecting them with the modern technology at the time. Instead of expensive mainframes that traditional banks were running on, I thought I could write the software using an IBM PC, to be the heart of the bank. So it was a necessity being 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 lectured me that Canadians needed to walk into physical premises. But eventually, I was able to convince them with a slightly different model. They granted me the first scheduled online bank license.
Reiss: I understand VersaBank stands for versatile bank; describe the model.
Taylor: Today VersaBank has evolved into just what it was meant to be in the early days, it’s entirely branchless bank connected to those that raise deposits for us. These would be financial planning organizations, and wealth managers. On the lending side, we receive our loans from sales finance companies. They finance motorcycles, hot tubs and even cosmetic surgery. So deposits are coming in from a network of wealth managers. And on the other side, loans and leases are coming in from point of sale finance companies.
Reiss: What do you believe is the future of banking?
Taylor: Let’s look a little distant into the future. As you know, things are changing so rapidly that I have a vision for a new way that the banking function will take place. I see that the established banks that are out there today will become redundant; I think the banking function will take place with e-wallets. Banks, like us will be issuing digital deposit receipts that reside in e-wallets.
People will be putting these digital receipts into a stable coin category acting as a vehicle for commerce, eliminating the need for the old school bank. To go this way, there will continue to be regulations regarding banking functions, i.e. the lending function. You will need people who know what they’re doing when it comes to lending in the various aspects of banking. However, they could very well be consultants, to other enterprises that are doing the lending and, and raising the funds. This will decentralize the financial services industry.
Reiss: As a true inventor you built something called the ‘Sky’. Talk about what exactly that is how you came up with it?
I thought I needed the ultimate airplane that would get off a grass strip runway quickly, safely and be economical. 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 airplane and dubbed it the ‘Sky’. I put the Corvette engines in with two great big German propellers. It was like a flying spaceship. I finally got it certified under the experimental, home built category, which was quite a feat. It was similar to getting a bank license. In fact, I might have said to the regulators at the time, if regulators looked at planes like banks, the Wright Brothers would never have gotten certification to fly. Canada Civil Aviation gave me the certification so yes indeed the Sky did fly and do what I expected, to climb rapidly just as VersaBank has done.
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