How can i industry sign banking new jersey presentation fast
our first speaker today really needs no introduction but for the sake of formality he is a leading authority on financial markets and fintechs globally he's the author of several best-selling books including digital bank value web and digital human it in voted one of the most influential people in financial technology by The Wall Street Journal and Thomson Reuters and he sits on the advisory board of many leading fin tech companies most notably of course Moneta finally he loves an excuse to come visit us here in Iceland that's why he's here please give a warm welcome to mr. Chris Skinner thank you and good morning Reykjavik an early start and I'm impressed everyone arrived so early it's impressive normally if I go to a conference in southern Europe you'd have arrived at 11 o'clock so arriving at 8:30 is pretty impressive yeah I've got a stake in Malaga and I came to Reykjavik the first time about seven years ago and did a tour of Iceland it's an amazing country and I like it a lot and so I'm delighted to be back even though I can't stay very long in that I fly around the world non-stop these days it shows how hot FinTech is I guess and I get invited to fly around the world non-stop so I was in Hong Kong last week I'm flying to Singapore this evening and then I'm in money 2020 hangers.you China next week which is where aunt Financial is based and I'll touch on some of those things equally as mentioned I've written quite a few books and I blog every day and I blog every day because there's always something to talk about there's always something interesting going on around the world of finance and technology in that finance and technology are pretty predominant in our lives I mean money is one of the most important things for us because it enables us to live a good or a bad life and technology is very important to us these days because we cannot be separated from it attached to our phones like sidewalks so it's very dominant in our lives money and technology finance technology it came out to me in that in digital human I talked about the digital revolution of planet Earth and the fact that we are all connected in real time and everybody has access to the network and some people disagree with me but I think anybody in the world if they want to communicate via the mobile network and find somebody who has a mobile phone that's pretty obvious but what's not maybe not so obvious is that twenty years ago when Bill Gates made that comment as referenced I was working in a company called NCR the cash machine company that had a sister company called Tara data and Tara data would analyze terabytes of data on behalf of massive companies like Walmart and Citibank and they would spend millions to analyze his terabytes of data because analyzing terabytes of data was incredibly difficult 20 years ago and yet today we upload 60 terabytes of data to the internet every second and that is quite stunning for me because it says that we have unlimited bandwidth unlimited storage unlimited networking unlimited processing there's no limits to what we can do with technology today it's accessible everywhere for everyone and that's the digital revolution of planet Earth that is transformational it's the reason why the biggest companies in the world today are digital Amazon and Apple have trillion dollar valuations and to put that in context I recently moved to Poland and you may wonder why it's because I have a Polish wife only the reason and Poland has a GDP of 500 billion dollars so Apple could buy Poland and caller:i Poland they could buy to Poland's you know and just rename them if they wanted to and this is what's transformational now in France for services and I've been talking about this for the whole of my career technology is changing the industry but in the last decade specifically in the last decade it formed the industry and it's illustrated by the fact that we're seeing industrial era companies becoming digital platforms and being replaced by new companies that provide that connectivity digital companies don't make or build anything they just connect everything and so that's the reason why over and lyft and Airbnb are massive companies that don't actually have any taxis cars or hotels they just connect people who have rooms and vehicles with people in need journeys and beds and finally in financial services we're seeing the same happening here finally in that the industrial era banks were built for the physical distribution of paper in a localized network of buildings and humans and they're being replaced by specialist companies that deal with the digital distribution of data through software servers my favorite example is stripe mainly because it's being built by two young brothers John and Patrick Collinson and in 2016 their valuation was 22 times more per employee than JP Morgan Chase who are a 200 year old bank this is the difference between industrial era thinking and digital era thinking but what surprised me is that the valuation of stripe was recently updated and so right now October 2018 there are 20 times more per employee or 20 million dollars more per employee but what's notable is a change in JP Morgan Chase if you didn't notice the previous slide $1,000,000 per employee two years later two million dollars per employee valuation and equally what's interesting is the number of people who've disappeared from the bank employees down one third of market valuation up 50 percent this is what's happening right now this is the biggest change that the industrial Arab banks are becoming did or banks because they have to shutting down branches or to making jobs getting rid of excess software eating the world because they have to they have to respond to the digital transformation challenge and that's what's interesting because that's what's going on right now in every bank in the world I talk to and if they're not doing it they won't survive people say that banks will die they're not going to die that's ridiculous banks will survive as long as they adapt and it's how fast you adapt as to how quickly you'll survive and if you don't adapt you'll get acquired simple as that in fact the bank business model I've talked about for a long time and if you see me percent before you'll have seen these slides before or a variation of them you know banks business models based on the back office is all about manufacturing products and providing service mapping a middle office is all about connecting front and back offices all the infrastructure the transactions connectivity the front office all about the customer intimacy the relationship the user experience and this back middle front office has been something that's been around as a business model ever since I was born what's interesting is that most banks have tried to do all of these services back the middle front office across all of these lines of business retail investment private banking across the world as universal banks and they've failed because banks cannot serve everybody everywhere all the time every time well a lot of banks do a lot of things out virtually you can't do everything well not across the whole world across all these lines of business across back middle front office and what fintechs proven is that by specializing in doing one thing brilliantly well they can break this business model apart and that's what fintechs do they focus upon doing one thing brilliantly well you take stripe one thing brilliantly well merchants check out online you take planner one thing brilliantly well online checkout it compete with each other in fact the back office was all about product and process and people but now it's actually more about the digital connectivity between bat middle front offices some more about platform and user experience and so when I look at this there's been some interesting examples you know Airbnb I've already mentioned connecting people who need rooms with people have beds via a platform and they're just connecting them it's that connection in the platform between the product and the people that's what platforms and marketplaces are all about and the first time I ever heard anything talking about this in the FinTech world was on March the 30th 2005 that is the date when I think FinTech was born in my head because I'm March the 30th 2005 I was hosting a presentation in London from a person who talked about connecting people who want to buy something like a vehicle with people who have money through a platform and at the end of the presentation everyone walked out the room going this guy's completely nuts what the hell was that presentation about we have no idea company is called Zopa the first peer-to-peer lender and it was the day before their launch they launched on the 1st of April 2005 and Richard Duvall talked about connecting people who need money with people who have money through a platform as an eBay for loans and people thought he was in completely stupid in 2005 and yet today xopen UK has about 6% of the consumer loans marketplace and they've been growing at almost doubling year on year so 6 percent this year 12% next to 24% 2020 three and a half billion pounds five billion dollars enabled lending through their platform this is serious stuff that's the reason why fin texting seriously but Zopa does one thing brilliantly well connecting people who have money with people who need money through a platform and this is my core message doing one thing brilliantly well through apps api's and analytics in fact the revolution of the financial industry in the digital era is rebuilding the industry from the ground up on the internet through apps api's and analytics getting rid of the buildings and the humans replacing them with software on servers the way to illustrate this really well is in the front office those apps are really all viral they're all based around mobile connectivity but actually it's more than that it's now smart things everything is smart my phone my house my TV my car my clothes everything is smart and connecting everything through that front office the user experience becomes interesting do I really want to authorize my television to download The Game of Thrones next season no they should do it for me it knows me I don't have to authorize anything that virality is what's building that front office experience connectivity a great example of that reality is these two guys it crammin and who had a weekend together in 2010 and they crammed forgot his wallet and so Andy wrote down every item that he was subsidizing it cram for and at the end of weekends if you owe me 180 $6.23 it's crappy piece of paper there you go and they craft an art but checking the post when I get home tomorrow and then they thought this is ridiculous we're Millennials we're coders you can probably tell from the photo let's write some code to make it easy for me to pay you as you subsidize my paninis and martinis in cappuccinos and they wrote venmo that weekend and then those become one of the biggest viral social mobile networks for payments in the USA because when you get a message saying you've got money download memo what you're gonna do download member or downloads L which is the bank's response to the venmo these are the biggest social mobile payment systems in the USA 150 billion dollars transacted in 20 because it's viral is connected it makes it easy but the API is in the middle office are actually far more interesting the API marketplace makes absolute sense specifically when you look at this chart which is quite old now but this is PayPal's internet development platform X launched in 2011 and you see the revenue spiking up and the expense of the costs spiking down and even more so when they launched their mobile development platform in 2013 and the reason why that happens is that with an API marketplace if you're providing the platform people take your code and integrate it into their systems so they do the work it's their cost you get the transactions it's your revenue that's just a fantastic model of any business and it's the reason why thousands of specialist companies are started doing api's as if one thing brilliantly well because they know that you do the work we get the revenue that's the reason why it's so popular and if you take stripe you know two brothers who created seven lines of code that's valued now at 20 billion dollars after seven years it's quite incredible and yet when they invented that system idea they were teenagers teenagers are reinventing banking with code because they can but the back office is where the action really is the back office is all about intelligence and it's all about analytics it's all about having machines that can learn and it's all about having this idea of artificial intelligence it's illustrative really well by several companies one of my favorite examples is JP Morgan who have a system that can analyze their wholesale commercial contracts in one second which previously took three hundred and sixty thousand hours of legal time and the reason why it's my favorite example is we can fire all the lawyers get rid of them but it just goes to show you know this intelligence we can build into machines can change the way we think at UBS used to have emails from high-net-worth clients that were taken average 45 minutes to administer the requirements now it can be done in a second by a machine automatically releasing humans to do better work like thinking about how to serve the client better well most complicated things in Investment Banking is best execution because it requires you to think about lots of dimensions of instruction from the lowest cost the lowest price the fastest speed the highest likelihood a settlement that no human can actually deal with but machines can and so they do and it means that the investment banking markets are being completely automated all the human traders are disappearing this was UBS's trading floor in 2005 in New York in facts in New Jersey because it was just near your Wall Street this is it today we can get rid of people yeah and we worry about the jobs where are we on what jobs will we have where do all the bankers go well they create FinTech startups they can't do something else but we become trainers maintainer sustainers explainers trainers trainer machines how to do that job explained as explaining what the machine is doing to the people and sustainers make sure the machine is corrected when it does something wrong and in particular we need to teach children to learn things that machine's cannot learn if machines can learn everything then what can we learn that machines cannot learn emotions creativity empathy ideas music art things that machine's cannot learn they can replicate of course they can but a machine will never have a soul and we have so that's something we need to focus upon in our education and no presentation is complete about FinTech without mentioning blockchain they done launching dish there was a ledger technology I SEOs cryptocurrencies G God's it's confusing if I think it combines everything that we don't understand about technology with everything we don't understand about money it's like the most complicated thing ever but the reason why it's important is it's transformational yea blockchain is going to build the next generation of our world it's a foundational technology it's as important as the Internet's itself in terms of what it can do and the reason why it's so important is that we can now share databases across the world with people we don't trust and we could never do that before that's the reason why historically we've had all this centralized management of everything and we had to reconcile everything because we don't trust anybody and yet now we can trust the network to do the job for us so everyone has a copy of databases everyone shares the databases the databases are updated and authorized through the network automatically with no human hand involved that gets rid of thousands of jobs again and it changes the whole way we think about things that we do such as supply chain and trade finance get rid of all the bills of lading the letters of credit or the paper disappears and the whole thing is automatically updated through the network on a shared database between corporate clients and commerci
l banks this is transformational but it's going to take a long time to happen the hype around blockchain was ridiculous because everyone thought it would deliver yesterday it's going to deliver tomorrow eventually once the corporate clients and the commercial banks and the government's and the institutions agree how it's gonna work that's what takes time the technology itself is amazing the implementation takes time once it isn't mented its transformational it says foundational as the Internet itself one of the key destroyed as a technology said one seems to be buying into including IBM with hyper ledger is aetherium and as the enterprise the theorem Alliance that has some amazing institutions behind it such as Microsoft JPMorgan Chase Goldman Sachs and others but when you think about aetherium where did it come from a teenager created by vigil at butte him and he was 19 years old teenagers are recreating the world of money government and business because they code this is critical teenagers changed the world and when I look at the FinTech world there's thousands of FinTech companies doing one thing brilliantly well through apps api's analytics and elli all of them have been created and founded by teenagers and millennials young kids and this is where fin tech gets interesting I'm gonna set up you and McCloud with this I told you I say I mentioned you every single presentation he's speaking next but the reason I mentioned you in and every presentation is that fin tech to me is how you bring an old person together with a young person I'm not saying you're old you in but you look at me now I'm gray haired and wrinkled I've been around a bit and that's what banks are like they're old they're wrinkled have been around a bit and what they want and they're like a parents they want stability security they want a nice home they want to keep everything just so and wrap everything around so that nothing is broken it's lovely and stable and it's resilient and secure and the kid comes in and starts kicking everything going I can break that I can change that and do this I'm challenging you and that's the tech so how do you get the parent in the child to work together collaboratively and that's what fin tech Bank collaborations are like so you understood up last year in Oslo and said I'm delighted to introduce our fin tech partner spiff Carr Nikolai come to the stage and Carr Nikolai jumped on the stage and his first words were my three-year-old son likes to play with Dinosaurs so do we not exactly full of their noir dear bank relationship but I know where he's coming from because I walk into an awful lot of banks boardrooms and I'm met by a bunch of old people you know the bank's board room is full of people who don't get technology 94% of banks boardrooms have no one who's ever been in a technology job in their life ever that's ridiculous how can you be a digital Bank if you have no digital people in the leadership team that's got to change we've got to change the leadership team in fact what's interesting when I look at legacy is that we live in a legacy world of Europe in America then he all of our infrastructure was implemented before Mark Zuckerberg was born and we're trying to evolve it it ain't gonna work yeah when you look at other economies like China that's the reason why they're so incredibly fast growing because they started without the legacy it's illustrated well by when I launched the book digital humanly Wang who heads up Ali pay for Europe was on a panel with Ashok Vaswani the CEO of Barclays Bank and in the middle of the discussion Li Wang said the average Alibaba employee generates 16 million dollars a year in revenue the average employee and I shall his face dropped you know the average bark his employee produces about $400,000 that's the difference between thin and tech platforms connecting everybody versus digital physical distribution structures in fact when I jumped through this I'm just gonna jump to area Jing because the reason why I picked on an financial as a case study in the book is that Eric said at the World Economic Forum in 2017 that an finantial wants to deal and serve two billion people by 2025 through technology and I thought there's only one point four billion people in China so what's going on here and luckily enough and financially invited me to come and spend a week with them and I produced a 30 page case study in the book the fact that it's more than 30 pages 30,000 words case study in the book about this company and what amazed me on I met and financial is I met the head of systems architecture for example and he said we're on our fifth generation systems architecture and this is a fifteen year old company they're first generation systems were for escrow check out like Lana the second generation used Oracle to provide payments the third generation needed scale so they regenerated their systems using their own development technology so fourth generation needed to handle a hundred and twenty five thousand transactions per second average with every transaction guaranteed bulletproof with artificial intelligence and fraud analytics their fifth generation is to handle a million transactions per second average for two billion people to put that in context visa globally handles an average two thousand transactions per second these guys are handling a million on singles day last year in the first five minutes they processed a billion dollars of payments as an average 256 thousand transactions per second they processed 10 billion dollars in the first hour this is incredible scale it's incredible vision is incredible different thinking and now they've gone global they're partnering with companies in the Philippines and Indonesia and Thailand in Pakistan in India Paytm is powered by an financials apps API and analytics you don't know ant financial is there there behind the scenes but their experiences their technologies their capabilities are the are the Intel Inside so many payment services worldwide and that's the reason why if they were a technology company there would be the tenth largest financial company in the world but they're so they're not a technology company they're not a financial company they're a different way of thinking a great way of illustrating their different way of thinking is this slide from their slide deck which in the middle there you've got ant financial which is their payments platform just below that you've got a layer called marketing services in data management platform and when I talk about astral intelligence being the difference between the winners and losers I think this illustrates it really well because their data analytics platform is a key part of their layers of functionality and they call it a lis mama because mama looks after Bubba if this is where the action is and this is where everything is completely different in China this is just the icing on the cake you know there's so many layers that I could talk about in China about different ways of thinking although having said that I was in Hong Kong last week and it did make me laugh because this guy was my driver and he's got all these phones on his dashboard and yet he wouldn't take an electronic payment I he insisted I had to pay cash so in conclusion we have these three big forces of change with digital technology revolutionising finance we've got the startups we've got the technology giants we've got the banks the startups a challenge because they have no history and little capital and little trust an equally they're quite naive because the idea that dinosaurs can be just eradicated by these new startups is ridiculous the dinosaurs are not going to disappear and that's the reason why fin tech Bank collaborations are sprouting up everywhere and that we'll see more of them the technology Giants are interesting and it was interesting in the poll at the start just now and that you guys named gaffer Google Amazon Facebook Apple and yet you look in the wrong way cuz I talk about fatback's Facebook Amazon $0.10 Badu Alibaba Google you've got to include the east and giants with the Western giants if you only look at the Western Giants you're gonna miss the game and these technology giants have billions of capital billions of customers decades of history but I don't think they want to get into bank I think they want to collaborate with banks because banking has too many regulations it's too difficult for them and the banks have millions of customers centuries of history and billions of capital and sometimes called massage technology companies that happen to a banking license but that's actually missing the key point which is we have an industry that's grown up over three centuries or more that is regulated for a reason in fact we have five times more regulation than technology companies because we've been around a lot longer and those regulations exist for a reason which is all about trust we will not lose your money and if you trust a technology company with your money you're stupid because they're not regulated like we are that's the reason why banks are around and have to be collaborated with and will be around for a long time to come thank you thank you very much Chris inspirational as always we've had an incredible amount of questions popping up popping up I suggest we take maybe or you take maybe two or three of the most liked ones here I like the first one who do you van with today so i bank with several banks my main business account is with darlie's bank and Bartley's bank will think I'm their best digital company customer rather I open my Barclays Bank app about three or four times a day and they'll say look Chris gonna use his are app three or four times a day he's such an engaged customer I never opened my mom's o app I'm also with Monza but I'm much more engaged with Monza I'm not engaged at Barclays at all and the reason why I'm engaged in munzo is that Mons Oh tell me through alerts when something's happened on my account and Barclays don't and the only reason I going to bar these three or four times a day is to see if I've been paid whereas if they alerted me I'd never go in so um I'm far more engaged in Monza which banks are doing the best jobs of adapting today that's the theme of my new book it's gonna be called doing digital as I always have to have digital title and doing digits was I got fed up with people and throwing rocks at banks and saying the rubbish stupid idiots because they're not I mean banks are intelligent they're not stupid banks have this challenge of transformations rebuilding the bank from the ground up for the digital era and I've identified five banks that from what I know of them I think are they're doing it really well to an ad or two in Europe one in America and the one in America our name just because it's not in the room JPMorgan Chase and you make sake JPMorgan Chase JP Morgan Chase are spending ten billion dollars a year on technology ten billion dollars a year three billion dollars a year on innovation and FinTech and new projects and as you saw from my figures they've got rid of a third of their people through automation they're leading in artificial intelligence and distributed ledger technology they're opening a thousand person FinTech campus between Google and Facebook's has head offices in Silicon Valley they get it they really do and if you haven't looked at JPMorgan Chase and what they're doing go have a look you know Jamie Dimon said four years ago Silicon Valley is coming to eat our lunch he's some he's keeping his stake on the table what part of banking cannot be automated or replaced by AI a great example of what cannot be replaced is mergers and acquisitions are sitting with a guy in investment banking the other day and we were talking about a a leveraged buyout of one of his clients and the emotion involved is incredible if you've read barbarians at the gate or if you haven't please do really amazing story of the leveraged buyout of Nabisco by KKR in the USA and when you think about somebody who's founded a company and grown it from scratch or who has been in a company for the whole of their life and eventually became CEO and then somebody just takes off them in a leveraged buyout through the structured finance demotion is incredible you cannot automate emotions so map mergers and acquisitions definitely is one area which cannot be automated and finally had a financial regulatory environments in China are of an America differ um I actually blogged about this today I say I think I'm not sure when it went live but I think it's today China has this Social Credit school so through any pay in Alibaba and 10 cent and WeChat pay and badou and everything online the Chinese government is monitoring your every activity digitally so everything you say to your friends everything you buy everything that you're looking at on the internet the government can see and they give you a score about whether you're trustworthy or not and the more trust whether you are the more you get rewards the less trust whether you are the more restrictions you have for example you can't fly if you are untrustworthy and we may go ooh that's really scary Chinese government is terrible whereas I actually go if you think that America is not watching what you're doing on Facebook and Twitter and LinkedIn and other online services then you're incredibly naive so your social credit score is just as likely to exist in the USA as a European as it does in China as a Chinese citizen watch out very good thanks again Chris Cheers so incidentally if you haven't read Chris's latest book dated so humor and I strongly encourage you to do so it's really interesting and especially the the case study was referring to an aunt financial
