The Economist reports about (a book about) Jacob Fugger, the richest and one of the most influential men of his time.
The principal banker to the Habsburgs, Jacob Fugger bet on their ascent. He held interests in the copper and silver business; “helped finance a Portuguese scheme to relocate the pepper and spice trade to Lisbon, a move so successful that it delivered a fatal blow to the commercial stature of Venice”; and created a network of couriers that served as news service.
He raised finance by introducing savings accounts which paid 5% interest and in the process, convinced the Medici Pope Leo X to contravene the Catholic church’s ban on usury in 1515; usury was redefined as “profit that is acquired without labour, cost or risk.”
He also offered money transfers (3% commission) and—unintentionally—helped start the Reformation through his involvement in the sale of indulgences (proceeds split with his business partner and Pope Leo, who needed funds to pay for St. Peter’s). In 1517, Martin Luther wrote his 95 Theses.
The enemies of Jacob Fugger included the Teutonic Knights and Thomas Müntzer, a cleric and leader of the German Peasants’ Revolt in 1520.
Finanz und Wirtschaft, April 18, 2015. PDF. Ökonomenstimme, April 20, 2015. HTML.
Banks increasingly face competition in bread-and-butter businesses like term deposits, lending and payments.
Two trends shape the sector’s changes: Falling trust in banks, both at the political level and by individual clients; and the rise of the internet.
Trust has been squandered. But with cheap access to information, it also has lost importance.
Asymmetric information in financial markets might become less of a friction. This could turn into an existential threat for banks.
When trust is less important and technology more versatile, increasing returns to scale in the provision of financial services might be a thing of the past. And so the universal bank. New regulatory and tax regimes could foster the process of structural change.
Here are some links to background information:
SavingGlobal provides a marketplace for term deposits. It intermediates between German savers and European banks.