A brief history of business banking, in five eras

I keep a printed timeline of U.S. business banking on the wall behind my desk. It is mostly there as a humility exercise. The team’s instinct, when we hit a hard problem, is to assume the problem is new. Most of the problems are not. They have been in flight for a hundred and fifty years.

Here is the timeline, in five eras.

I. The relationship era (1860s–1920s)

Business banking was, for most of its early history, a personal relationship between a banker and a business owner. Lending decisions were made over a desk. Reputation traveled by letter. A new business in a new town opened an account by being introduced to the banker by an existing customer.

This era is romanticized today, sometimes correctly. It produced extraordinarily high-trust relationships. It also entirely excluded — by design — businesses that could not be vouched for by an established member of the community.

II. The standardization era (1920s–1960s)

Forms arrive. Branches multiply. The Federal Reserve assumes its modern shape. The relationship banker does not disappear, but the work that used to happen at a desk is now codified in a form that any branch employee can process.

This era was good for consistency. A business in one city now had access to roughly the same products and pricing as a business in another. It was less good for speed. A loan that took a week of conversation now took a month of paperwork.

III. The mainframe era (1960s–1990s)

Banking gets a backend. Mainframes replace ledgers. A national check-clearing system makes interbank transfers routine. The 1970s introduce overnight processing, the 1980s introduce ACH at scale, and the 1990s introduce the first crude business banking software.

This is the era during which most of the systems we still operate on were built. Many of them have not been substantially redesigned since. Our partner banks run COBOL.

IV. The portal era (2000s–2010s)

Business banking gets a website. The website is, for a long time, a thin veneer over the mainframe — slow, ugly, and prone to outages on Sunday nights. Mobile arrives late. The product is, for most businesses, a way to check their balance and initiate the few transactions that the back office will eventually process.

This is the era we entered as a company. The portals were not adequate. Our first product was, in important respects, the first business banking product designed primarily as software, not as a portal over banking.

V. The programmable era (2020s–)

Balances become first-class data. Cards are issued by API in seconds. Compliance and policy are enforced by code, not by phone calls. Treasury, ledger, payments — the core functions of business banking — are exposed to customers as primitives they can compose.

This is the era we are inside. It is barely begun.

What the next decade is likely to undo

Three things, I think.

First, the branch. Branches were a logical artifact of geography. They were how, in the relationship era, banks reached businesses. Most of the businesses we work with do not visit a branch in a given year. The ones that do are usually doing it under duress, to handle some legacy artifact.

Second, the batched workday. Most banking still runs on a midday cutoff, a nightly batch, and a multi-day settlement window. None of these are, anymore, technical constraints. They are scheduling habits. The decade is going to compress them, hard.

Third, the separation of banking from software. The next generation of business banking is likely to dissolve into the operating systems of the businesses themselves. The bank stops being a place you log into. It becomes a layer that the rest of your tools use.

What it asks of us

We treat the timeline as a reminder that the era we’re in does not, structurally, look like the eras before it. The constraints are different. Some of the institutions are not going to make it through. The ones that do will be built by teams that take the programmable era seriously and the prior eras seriously and the gap between them seriously.

We are trying to be one of those teams.