Okay, i know this is late – but better late than never, eh? On day 3, one of the best panel discussions was around the Future of Money. Here are my notes from the big issue debate which asked which is more important data or money?
Data, the Digital Oil
In the introduction Carmel Crimmins, from Reuters, spoke about how data is the digital oil that is powering new services and driving strategic change. Carmel continued to explain how banks are sitting on a huge treasure trove of data, but they cannot be complacent in this new world. For there are mega-technology companies such as Google, Facebook and Amazon who are masters at refining, extracting and selling users data, and these companies plus others will soon have the ability to access this bank data. The problem for banks is that while they are sitting on huge amounts of data, the banks ability to retrieve the data is hampered by legacy systems, silo businesses and a multitude of businesses within a single organisation – each vying for the data and perhaps missing the bigger overall picture.
Data or Money, which is more Important?
The view from the bank was put forward by Ather Williams of Bank of America Merill Lynch:
- Ather explained that it wasn’t a either or question, rather the question should be to understand where is the money?
- While data can be used to provide insights and allow companies to grow their business by better serving their customers, money is at the heart of everything that happens – in short, money is foundational
- Data should be used to enable:
- Simplification – for example, payments are only useful when you know what you’re being paid for
- Risk Management – how to better understand and serve the customer
- Proactive Insights – to manage cybersecurity and fraud
- On cheques Ather gave the crowd a laugh by suggesting that “people that write cheques will probably die before cheques do”
- On giving access to non-banks to customer data held by banks, Ather spoke about the challenges around:
- Giving permission to the data
- Understanding who has access to which data in the new world
- How to anonymise data to protect the customer
The view of the challenger bank was offered by Megan Caywood from Starling Bank:
- Megan was an interesting lady, and explained that Starling Bank was a tech-startup with a banking license that is focusing on retail current accounts on a mobile app
- Clearly for Megan and Starling Bank data is more important…
- Megan explained how historically banks sat on the the data treasure trove and believed that the data belonged to them, but now with the PSD2 regulation banks no longer own the data
- Now the data viewpoint is changing, customers own their data not the banks – and more importantly banks no longer (by default) have the upper hand and ability to upsell within the banking organisation – and pointed to the the unbundling of the bank
- With the disintermediation of banking, customers will have greater choice and greater access and this is a huge threat to traditional banks Megan warned
- And for challenger banks such as Starling, this is a huge opportunity because they have built the bank from scratch using new scalable technology that enables them to build a marketplace, a platform, that other fintech companies can easily plug into
Lastly, Richard Koh from M-DAQ Group represented the Fintech companies:
- I liked this guy – he had some great analogies! These guys give you better foreign exchange visibility, certainty (and savings) into cross border transactions
- Richard talked about how the Amazon one-click patent had recently expired and allowed other companies to offer that one-click experience to their companies, and how that was important – he suggested that for Amazon it was worth up to $2 billion in revenue
- Again Richard was on the side of data, explaining how data offers companies like AliPay to better understand their customers by collecting data around all aspects of the customers online life – and from this companies are able to determine the customers “willingness to pay” – and this is important to know because while some customers may be able to pay, they may not be willing
- Richard talked about:
- Fintech 1.0 – where technology was being used to enable better and faster technology based solutions
- Fintech 2.0 – where data will be used to give unprecedented insights into trends and habits
- Lastly, Richard described how in China, the largest bank is not a bank and that the trend toward eWallets grew in the country due to the amount of counterfeit notes that were in circulation and even being issued through the ATMs – for which there was no recourse
Technology enhances the Customer Experience
- Megan talked about Starling bank being a mobile first, and having a mobile only strategy, company
- She also described how their customer base spans the age spectrum and does not consist of digital natives only
- Banks up to 2008 were pretty innovative but after the financial crisis their attention turned to regulatory compliance and the need to be cautious, but that same year the iPhone was launched, and soon after came WhatsApp, Uber and Airbnb.
- From a product experience perspective, a gap emerged therein between what customers wanted and what the banks delivered
- Customer want to do anything and anywhere over their mobile phones
- Megan gave the example of how it can take up to 6 weeks to open a bank account through a bricks and mortar branch, through the Starling Bank app, it takes less than 2 minutes!
- Megan described how some banks believe they are digital because they have a mobile app, that ain’t enough she warned – it is about giving the customer a complete and end to end digital experience
- Megan wrapped up by explaining that collaboration between banks and fintechs is key, and the successful will be those that keep disrupting their own products and services
The Full Circle
- Ather countered the above argument, explaining how Amazon launched about 20 years ago was entirely an online business but now they are opening up retail stores
- While apps are undoubtedly good, in the end people want to touch and feel things, and speak to real people
- He advocated that bank branches are places of sales and advisory and there is a place for that service
- Ather concluded that the dialogue between banks and fintech has evolved since 2003, now the discussion is one of collaboration and the different viewpoints needed to come together to drive the industry forward
A Different Way of Looking at the Same Thing
- Richard when asked about the need for money explained that even in a digital form, it is still of value – it is still money – and required a different way of looking at the same thing
- On data, Richard explained that there is sometimes too much data and that it needs to be organised appropriately
- Richard gave the example of increasing ice cream sales at a beach in the summer and an increased number of drownings too. But you cannot link increasing ice cream sales with drowning – so you need to be careful of algorithms
- Richard explained that there isnt necessarily a fight between incumbent banks and Fintech companies, rather:
- Fintech’s exist in a space where traditional financial institutions have not really operated in the past and were unprofitable, they had bigger fish to fry
- In fact, fintech companies are helping incumbent banks to re-imagine and reinvent financial services by innovating, experimenting and improving the customer experience
- Richard gave a couple of good examples around how we should rethink the current landscape:
- During the gold rush, the people that made shovels or dug for gold weren’t the successful folks, it was the ones that made jeans
- The urban legend is that Henry Ford was trying to build faster horses, in fact the problem was not building faster horses it was how to clean up the mess made by horses. In this context, the solution was not a faster horse it was a mechanical horse – i.e the automobile
- Richard’s concluding remark was that data and money are two ends of the same spectrum, and that data would help to re-imagine financial services
In the end the audience concluded that data (57%) was more important money (43%).