New Belsize Story: James Karat
Never too young to be a visionary
James Karat
James Karat was born in 1975 at Tudor Close in Belsize Avenue. At the age of sixteen he left school with no qualifications and a year later he had invented something that worldwide we all know and take for granted. James Karat devised the system whereby using a credit or debit card we can simply swipe a card reader or put a pin number into a payment terminal to transfer money from one bank account to another. The system is called Straight Through Processing. Here, in his own words, is James Karat’s remarkable story.
James Karat at Tudor Close in 2021, photographed by David S. Percy
I never did well at school and was always bottom of my class but from a young age I did like to work. When I was twelve, I got an after-school job at a chemist in Belsize Park. Every evening I was paid one pound to cut up boxes and do odd jobs around the shop. Aged fourteen in my summer holidays I worked in the Royal Parks hiring out deck chairs. In those days I got five pence for every chair hired for fifty pence.
I had always dreamed of becoming an investment banker. I saw city traders on TV and in pubs, and they seemed to have money and glamour and I was impressed. One day after I had left school, I saw a recruitment advert in the London Evening Standard and I ended up getting a placement as a filing clerk on the trading room floor of Merrill Lynch. It was not long before I was asking one of the secretaries to help me get a meeting with the Head of Trading so I could ask him for a permanent job. When he found out that I was sixteen he told me I was too young to train as an investment banker, and I left his office disappointed. His secretary saw that I was upset and gave me a telephone directory book which listed the numbers of all the trading desks in England. I started at the letter A and by the time I got to G I had secured an interview at GT Asset Management.
I struggled in the interview, mostly because I had no experience except for a week at Merrill Lynch. Then I noticed the man interviewing me, Nigel, was holding a pen with the name Charlton Athletic engraved on it. I had never heard of this team but when Nigel asked me “What do you like to do at weekends?” I told him that I liked watching football and in answer to his next question I said that my favourite team was Charlton Athletic. The conversation took off from there and needless to say I got hired as a runner.
My job was to pick up trade tickets and print off contract notes to send to clients. In the early nineties computers were only just starting to make their mark and we were still using Telex machines to communicate. We had clients executing million-pound deals and waiting for confirmation of their trades by relying on Royal Mail. As I was the junior every time there was an incorrect booking I got blamed. I always had to buy drinks in the pub to apologise and I was spending more money on drinks than I was earning. I knew I had to come up with an idea which would stop me being the scapegoat. So, using computer technology I devised the Straight Through Processing system (STP) to ensure there would be no error between the salesperson, the trader and their client.
Around that time, I was called to meet with the chairman of the London Stock Exchange who was looking to reduce the lengthy time that it took for trading transactions to happen. Unbelievably after a few more meetings the chairman told me that he wanted me to build the system that would allow Straight Through Processing and offered me an IT team who would build my design. The concept was quite simple. I needed to be able to send a message to someone asking them to confirm the details of a transaction were correct and then once I had that confirmation, funds needed to be moved from one account to another. The system took a month to build and afterwards I returned to my “day job.” It never occurred to me to patent the idea and I was just glad to get a bonus that year.
When I was twenty one, I was named the youngest managing director in my industry, and I have now been in Investment Banking for thirty years. Throughout my life there have been many articles written about me and how I found “the holy grail” for swift and easy money transactions. My wife and I always joke about how strange it is that the people who cross my path every day do not know that when I was seventeen I invented the system for card readers.
James Karat, September 2021
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BELSIZE Remembered is available from Daunt Books, Waterstone's Hampstead and from Amazon.
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