Tabula Rasa

Obviously, the future of banks is technology. Banks have to become high-tech companies as much as or probably even more than any other institution of our age. All-embracing big data applications, AI and deep learning systems, predictive analytics, identity recognition tools as well as augmented or virtual realities will change the face of society, the business world and of course the banking experience drastically. It will redefine how we deal with our affairs, how we manage our finances, our customers and our time.

Everyone agrees on this, but reality shows only few are vaguely acting on it. Agreed, we are not there yet. But we are most definitely on the way – regardless of whether we want to acknowledge it or not. The pivotal implications of this development however lie, as usual, beyond statements of platitude. What are the next generation of challenges and opportunities with these technologies –  with the whole system? and what are the hidden leverages to apply for a successful future?

One of the main points of action is technical debt. Technical debt is the black cloud over the bright high-tech future. Our institutions – especially big and cumbersome banks – have accumulated a huge amount of technical debt. The fact that we keep on building on top of outdated, insecure, cumbersome and often straight out flawed IT systems does not only hurt the mission of banks and its operation directly it also inflates costs exponentially.
There is the need for a tabula rasa. A technical debt extermination. A reset. However, this goes along with considerable investment and a management that is not only decisive, has a clear vision but takes risks and prioritizes long-term resilience and prosperity over short term stability.

In the face of new competition and players that are either much more proficient in tech, more agile or both, banks need to find the courage to actively step into the future with their IT systems and technological approaches.
Patching up old technologies will be the gallows banks will be dangling from, when the interest payed will far exceed the current investment to rebuild – bankrupting the banks of their future and their potential for yet unexplored business opportunities.

Don’t wait for your technological execution. Get a technical debt exterminator, build long-term goals and visions on a clean slate to ensure your future.

Yours, Julia

John, I know where you are coming from …

To everyone who doesn’t watch John Oliver: You should probably start. It is an amazingly brilliant and very entertaining show. Here is the episode to catch up.

To everyone else: Last week’s piece on Cryptocurrencies and Blockchain gave me a bit of a ponderous night and I decided it is worth a written thought.
Besides revealing some next level insane aspects of the crypto industry, he did a pretty decent breakdown of what Crypto is and potentially could be, concluding that investing in Crypto is:

a) A psychological mass phenomenon of FOMO (Fear Of Missing Out)

b) … not actually an investment but a gamble.

Overall it was a classical position of the establishment. Its Fear Of New Technology ;). But for me it also raised the question of, how can we be so sure it actually is a thing?

It most definitely is always hard to judge the potential of a technology in its infancy. No one actually knows if it is going to have a fundamental impact on how we organize and operate as a society. But we do forget that we are always only looking at a window in time. Electric vehicles have flopped hugely – up until today. So, it is not just a do or die scenario, but a situation of potential in context. The knowledge about who is driving it, in which direction and with what financial weight behind it is what revels its true action potential.

Looking at the interlaced relationships of various huge technological break throughs that are just being utilized, are on their way and are being explored right now – whatever your bet is, it’s better than assuming things will go on the way they are right now.
We also already lived through that with the internet. Still are – but just for the sake of this argument, look how it already changed our world, our jobs and communication. Never in human history before we had a situation where children had more knowledge about how the world works than a 60-year-old.

Technology is a generational thing and so is Crypto. I agree it is still a gamble, as it really is impossible to say exactly which currencies are going to do what. It is a hype that has little or nothing to do with the reality of its mind-blowing technology – but who cares? Fact is, it really is a mind-blowing technology, that will be crucial to unlock machine-to-machine-trade in the future, giving us a currency with traits that are dearly needed in modern times and that traditional currencies simply lack. And as I stated in my post on the Cryptocrash – trust was the hardest step to accomplish.

And even if the parents do not trust in it, their children do.

Yours, Julia

The Past is the Future of Banks

It is funny how we preach that the individual customer will be the focus of any banking service in the future, with adaptive and personalized products tailored to actual needs and preferences. That the knowledge about the individual will unlock not just their money but their loyalty and a cost-effective business on the side of the bank.

But let’s be honest here. A big part of this goal had been achieved in the very beginning of the success story of the institution bank. In society everybody knew each other; literally their credibility. Banks have always been information hubs of highest quality: But with the organizational blow-up into multinational ecosystems and global entities this knowledge got lost in the dealing with the masses and one-size-fits-all solutions. The system needed to be based on rules and parameters not on personal relationships and the intuition of the banker.
This reveals the tension between reality, feasibility and ideal. This is the situation.

Yesterday, an acquaintance of mine, a wealthy elderly woman of society, told me how outraged she was about the behavior of her bank. They sent her a letter stating that her income does not meet the requirements to have unlimited credit on her Master Card – even though she clearly has the necessary funds. With a stiff lip she went straight to the competitor, which of course was very understanding and very happy to accept her as a new customer.

How can we systematically mass-handle individual cases? Is this really still a contradiction on the verge of AI and Big Data? I don’t think so.
And FinTech vividly demonstrates it. They are successful because they do offer more flexible, adaptive, quick and easy solutions, which on top of it all are cheaper.
The only reason banks have not completely lost their turf is the fact that also the customers are slow with technology. But this can be a misleading feeling of safety as the younger generation is much quicker to adopt what is working and spills it over to older generations.

In ten years the traditional bank customer will have died out, and the traditional bank with them. The only way forward for these institutions is to truly reform their processes and leverage the things they still have over all the other actors in the industry: trust and relations. With this trust, the access to the individual’s information and the personal contact they will be able to build a system that combines these assets with the new ways, the knowledge and experiences that FinTechs are currently making. Especially when it comes to turning themselves into HighTech Companies. This, and only this, will make banks future proof.
Let go of the present, understand the core of the issue by building on the past and learn from the new actors to ensure your future. Banks need to find their way back to the role of economic leaders otherwise the current leaders like Google, Apple or Amazon will one day swoop in and take it all away with the launching of a single app.

Yours, Julia

Update 20 March 2018

“I don’t really worry about big financial institutions. Some of them have tried to do the things that we have done, and it’s a little bit laughable in how it’s executed because they don’t really understand what the consumer wants or how they want it.”

Joanne Bradford, CMO of SoFi – Quote from Feb. 26, 2018, issue of Adweek magazine

Female FinTech

The gender issue exploded over the last year. The financial sector is probably one of the most male dominated industries there is. Therefore, I was intrigued to focus in this post on women who, against all odds, made it – and made it big. They take a path through the system that not only tells a commanding success story, but hold a lesson for the future of finance. One individual specifically has caught my attention long before I started to write about finance: Leda Glyptis.

Watch her interview:

‘She leads, writes on, lives and breathes transformation and digital disruption.’

I started to ponder. Is it really that simple? Are these exceptional women so successful in the world of finance just because they have a fresh perspective on the way things are done? I personally try to avoid this gender biased viewpoint arguing that personal success is about a person not their chromosomes. But that can also be very naïve. There is a systemic bias making us into two different people …

The truth is we are stuck to routines and we believe in traditions. They give us structure, mind frames and safety and they are often quite useful in the day to day. However, for true and meaningful innovation they are a big burden. They keep us from changing. They keep us from preparing for the tectonic changes that are happening all around us.
We hire New Work Gurus and Consultants; those who restructure processes, make them agile. Those externals have recipes – some work better, some less. We as future scientists for example have independent insights of where the industry is going, what trends and developments are hitting a business the hardest and know where the real opportunities lie.
However, what is done with these insights is back in the hands of visionary leaders and exceptional individuals, who are an integral part of the system. They stir the whole ship towards the future and actively shape the path ahead.

This for me is Leda Glyptis. She started out as an outsider to the banking system – and not just because she is a woman. Facing deep rooted adversities along the way and overcoming them makes one more likely to act and look for opportunities, then those who have had their career handed to them on a silver platter.
She has the courage to step forward and see that things don’t need to be a certain way and most definitely won’t be for much longer – making innovation happen herself. She sits in the driver seat.

And I deeply respect that.

Yours, Julia | 21 Feb 2018

Update 01 March 2018

This is Ledas Blog!

AI Trading

I just had a Ben&Jerry’s with coffee and, as one of the rare creatures left on this planet actually still affected by coffee, I decided to venture off into the night to understand a bit more about what was going on at the stock markets earlier this week. The funny thing is – not much, but a lot. Meaning, that no one quite understands why Wall Street was so jumpy, but the matter of fact is, that it was.
Now, some are throwing around AI trading – that’s when I start paying attention. Because normally I really don’t get excited about jitterish stocks, but AI is one of these modern magic dust dispensaries: With AI everything gets this long-lasting-systemic-effects-angle worth spending a sleepless night over. And even though algorithms and trading aren’t a nouveau thing at all, the world of finance is uniquely qualified to be Ken for Barbie. Or something like that. What I want to say: Super attractive due to it’s inherent basis in numbers as well as clean, accessible and large sets of data.

Back fishing in the ether of the internet I start smirking. A website called ‘The American Thinker’ just published a comment on the stocks taking a dive. “When I think of AI, I think of self-driving cars, which are only as good as the humans programming their cameras and computers.”
Except – Nope. I am always stunned how deeply today’s AI is getting confused with either the 90ies or Terminator. AI at the moment is neither a sentient being able of creative though or social susceptibility nor the sum of what we program it to be. It’s more like a (still very very small) child we are painfully trying to teach not to paint on the walls (as there is an importance difference between this white piece of the world and the white piece of paper on the table). Regarding the trading of stocks that basically means, that deep neural nets are trying to learn how to trade. Or at least to trade better then traders. And looking at the testosterone filled Wall Street trading hall it really doesn’t need a machine learning expert to realize that that’s not too hard to do.
But that’s the short term. Algorithms being simply better at the same thing. What about the long term?

I would say the thing that will really change with AI for trading is long term investment. Humans are notoriously bad at rational assessments of long term risks versus gain. We are too emotional for that. We are too disheartened by seeing the stocks crash.
And many may disagree towards the opposite direction, but I think it’s too easy to assume that with machines everything will just change hands much faster, accelerating the game, trading in a fraction of a second with real-time-analytics rendering human actions either unfit or without any value. To me this seems to only stir the pot of volatility. A scenario like that would not only make absolutely everybody capable of playing almost exactly the same game (exponential volatility), but it would also use the computing power for little (because extremely short-term) gain, while excluding the human factor of risk evaluation to a detriment. Finally, most importantly and with absolute certainty, it would also call upon the regulators to tax those exchanges – as heavily as necessary.

So I guess the perfect symbiosis between the abilities of humans and machines is not just a positive long term scenario but a rather likely one – and it actually rings true for most AI applications also beyond finance.

Yours, Julia | 08 Feb 2018

Update 21 Feb 2018

Netflix’s new documentary ‘Dirty Money’ takes a closer look at exactly this kind of emotional and irrational human investment in its 3rd Episode ‘Drug Shot’ – the shocking case of drug maker Valeant’s glorious rise and inevitable fall.

The Cryptocrash

My husband and I had an argument a couple of weeks ago – whether or not to invest in Bitcoin. To be completely honest, I am glad he won that argument.

I, as a futurist, am as susceptible to linear thinking as any other human brain – especially in the short term. We tend to presume that things will go on the way they have been. And statistically that is true. One day is more likely to be like the other then not. However, as crypto has shown us in a dramatic fashion over the past few weeks its not about statistics but about disruption.

Today, many claim to have known ‘this is going to crash’. In a way we all probably did, even though I don’t want to know how many middle class struggling households jumped on the hype train just months ago and lost quite some money in this endeavor. We knew because money is a token of trust. And as much as we might dislike bureaucratic systems and governments sometimes, we do trust them. We trust them to provide us with health care, infrastructure, law and order and our childrens’ education. And we trust in them to ensure the value of the currency. We trust without a second thought in the morning, that we can go to the bakery and buy a bun and a coffee.
So in the end crypto is also all about trust (besides its revolutionary tech). And the people in the very beginning, who trusted and handed in ‘real’ money seemed totally insane. They had absolutely no insurance. They are the ones who turned it into a real currency. The circumstance that the financial crisis deeply shook the trust in the financial system of many average citizens helped a lot, but the individuals ahead of the curve made it happen.

Today we accept it. At least in my generation. Yes, there is a crash, one that is extreme if not existential, but without regulation and failsafes that is not really shocking. The concept of crypto, however, has established itself in our minds – even in a situation like this. And that is the interesting thing. Trust can be much easier restored then established.
What really intrigues me in this is to look at the developments beyond the horizon.

The internet has opened all aspects of life up to be rediscovered and crypto is exactly that in the case of money. We traded goods, we traded valuables, we replaced it by a physical token and today only value is left. Digitally inscribed values. This opens us up to a whole other world of possibilities and to the discussion of what it really is that is valuable in our society?
By 2030 I don’t think the government and the banks have been replaced as the trustees of our valuables, however they will no longer hold the monopoly on currency as they did in the analogue age. Crypto has a place and a purpose. That is why it will be an essential part of our financial future. And there is still a lot of unknown potentials to discover, which really only will unfold in the long term.

I for my part am pretty sure that as soon as the crash found its low, I am going to try to convince my husband to invest again.

Yours, Julia | 02 Feb 2018

Update 07 Feb 2018

“You know the criticisms are just a failure of the imagination, […] Cryptocurrencies aren’t really important for human-to-human transactions … but when machines-to-machines trade economic value, they are going to plug into protocols like bitcoin and ethereum. They are not going to open bank accounts at J.P. Morgan … those were invented by bankers before the internet existed. Trying to use them as payments or money on the internet is a square peg in a round hole at best.”

Tyler Winklevoss