A normal-looking dad-of-two may well be the most famous person you’d ever meet — but you almost certainly have never heard of him.

James Karat, an ordinary-looking banker, invented something that would go on to revolutionise the financial world.

Astonishingly, he was only 17 at the time.

Most Brits will use the technology he devised multiple times a week, a day or whenever they buy something from a shop.

Here’s how.

When a customer gets to the till, the attendant will hand them a machine for them to tap or insert their debit or credit card.

There’s a short wait of a few seconds before the word ‘approved’ comes up and the shopper can be on their way.

Some 35 years ago, that financial transaction would have looked a little different – and would certainly have taken a lot longer to complete had it not been for James’s invention.

Straight through processing (STP), as it would come to be known, revolutionised the banking and financial markets in the 1990s, providing an automated step-by-step electronic method that allowed business or financial transactions to progress from start to finish without manual, and importantly, human help.

But to fully understand how this idea came about and why it was so desperately needed, you first need to understand a bit more about the man behind it.

James was born in Camden, north London, in 1975. After leaving school with zero qualifications, he started working in the Royal Parks renting out deckchairs, getting five pence for every chair hired for 10 times that.

It was only after spotting a job advert in the back pages of the then Evening Standard that he ended up applying for and getting a role as a runner on the London Liffe (The London International Financial Futures and Options Exchange) trading floor.

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‘I was 16 at the time, I would go run into a room, get a deal ticket, run out into the pit, give the ticket to the trader,’ James explained. ‘The trader would then execute it, and then I’d have to send a contract note out in the post.’

The only problem was that in those days there were no computers and everything was paper-based.

‘The person who wrote out the ticket, the order, they’d probably get some of the information, for which there was lots, wrong,’ he added. ‘Five days later the client would phone up and start screaming and shouting saying it’s wrong.

‘But the problem was, because I was a kid, I always got blamed. You’re not going to blame the bloke in the room because his dad owned the company, you’re not going to blame the trader because the trader’s a multi-billionaire, you’re going to blame the kid.’

In 1991, in an effort to get the ‘bullies’ off his back and remove the possibility of him being blamed, James came up with a novel solution.

The idea for STP is based on three simple steps:

– Confirmation: I send a message to someone asking if they confirm that the details of the transaction are correct

– Affirmation: The person receiving the confirmation affirms that the details are correct or rejects it if not

– Allocation: The funds are moved from one person to another, instantly

In everyday terms, a supermarket customer puts their card in the machine and enters their pin, authorising the transaction on your behalf (confirmation). It sends a message to the bank to confirm that they spent £20 in Tesco (affirmation). The bank automatically checks the money is in their account, and sends a message back saying approved (allocation).

James presented the idea to the chairman of the bank, who he describes as having a ‘light bulb’ above his head.

‘I wasn’t the IT geek who built it,’ he added. ‘I want to stress that. I went into this huge room and there was these elderly gentlemen all smoking pipes with their slippers on. And I told them how to build it, what I wanted, what I needed it to do.’

The system took about a month to build in full and, once tested, the London Stock Exchange sold it to all its clients. James returned to his day job, not realising the enormity of what he had just helped build.

Despite inventing something used by each of us every single day, in hundreds of different scenarios, James, now 50, remains for the most part anonymous but nevertheless humble. Or as his wife Alison jokingly says: ‘The most famous person you’ll ever meet, you’ve never heard of.’

Being just 17 at the time of his ‘eureka moment’, James didn’t think to patent the idea, and so he’s not benefited directly from his own creation.

‘So I built it and it went live… And I got nothing for it,’ he adds with a knowing glance and wry smile. ‘The thing was that it all happened so quickly that the chairman of the bank who I was working for, we never realised the enormity of what we were doing. You’re just trying to solve a problem that you had in your everyday job.’

James also stresses how much the initial idea has changed and adapted to new technologies, likening his scenario in some respects to Tim Berners-Lee, the British computer scientist, famed for having invented the World Wide Web in 1989.

‘He used it to store information in the cloud,’ he explains. ‘What we now use it for has evolved, and it’s just like my invention. My invention has evolved over time.’

STP has also been adapted into other fields like medicine to improve patient care and minimise risk in processes.

But for James it’s never been about profiting from his invention and he has zero regrets, having enjoyed a long and successful career in investment banking over the last 35 years, which has taken him all over the world.

The dad-of-two now lives in Darenth, near Dartford with Alison. They have two grown-up sons, Max, 28 and Patrick, 21.

James now works for Nomura, a Japanese investment bank, and says some of his most important work is in their outreach programmes.

‘So I go into the schools and I tell the kids about my background and the fact that I unfortunately didn’t have any education,’ he explains.

‘I try to give these kids a little bit of hope and inspiration that I’m not a freak; it can be done.

‘That for me is the biggest, nicest thing to do, because especially when you tell them, now you know the man who invented that payment system. So whenever you go into a shop to pay for something, you know the man who invented it.’

James also credits his background with helping him achieve in what is often a high-stakes, hyper-competitive industry.

‘I think it’s coming from nothing, that you just want to keep on, and also, it’s proving to myself as well, that you don’t need a rich family, you don’t need to have education, to succeed in life,” he added.

‘When I used to be a trader, honestly, the best I ever worked with were barrow boys, just kids who naturally knew when to buy and sell.’

On his own unique stamp on history, which saw him nominated for a knighthood, he adds: ‘I won’t lie, I was just very, very lucky. Right place, right time.’


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