 honor to introduce our other two panelists. And I'll begin right here with a warm welcome to Jose Gonzalez Paramo. He is a member of the executive board of Banco Bilbao, Vizcaya, Ahrentharia. I hope I'm more or less, no, not quite right. Okay. Well, he'll correct me later. He serves as the group's chief officer for global economic regulation and public affairs, and also as chairman of its International Advisory Board. And he was formally a member of the executive board here at the ECB, and also has served on Banco de España's governing council and its executive committee. So a very warm welcome to you. Thanks for participating in this discussion. And next to him, we're very glad to have with us, Dirk Fauta. He is partner in the Frankfurt office of Bain, the consulting company, Bain and company. And he heads its global retail banking practice with a particular focus on major transformational programs and strategic development for financial institutions, including, above all, digitalization. So warm welcome to you as well. And we're going to now try to bring this to the banks and talk about that technology and banking nexus. And Martin Ford, I know you're not an expert on banking, so I'm going to suggest that in the initial part of this discussion, you just jump in as you like. Just give me a sign if you want to add something or comment. And I'd like to begin, then, to talk about how does the relationship between fintech and the banking sector look at the moment. And we heard Daniel Nuissey earlier. She thinks we've come to the point where there's a mixed role for fintechs in relation to banks, namely as both partners and rivals. So asking you, Mr. Gonzalez-Paramo, you have said in the past that it is certain that banks are going to change. The main question is, are they going to steer that change proactively, or are they going to be changed? And if you look at where banks are heading in their relationship to fintechs, certainly there was initial skepticism even just a couple of years ago. There was perhaps a little bit of indifference mixed with skepticism. But increasingly, we are seeing banks absolutely embracing both startups directly and also creating their own accelerators. So the question would be, is that the kind of proactive approach that you think is needed? Yeah, of course. I mean, your question has many questions. So let me first say that, of course, banking will change. Not all banks will be able to change, because it's not just about putting apps above the glass in this device, but also changing the processes that are below the glass, which is not trivial. There will be different modes of interaction with fintechs. Of course, some fintechs are real competitors and go straight to the most profitable lines of banking activity, think of, I should not name names, but there are big payments, fintechs that are not any more startups are giants in the field, and these are real competitors. But there are other modes of interaction with the fintechs that could be profitable in helping the banks to change within. So you could think of M&A strategies when it is convenient or to have partnerships with EI and that could help you, for instance, in the cloud domains or in blockchain. So partnering with Google or with Amazon or with Salesforce would be a clever strategy in this domain. You could even buy some in order to fertilize from within domains, say, loans to SMEs, which is an area where there are many fintechs that do a very good work in scoring, for instance. So if you team up, as we do, for instance, in the U.S. with on deck, in order to identify the risk profile for SMEs, you increase your business, you could have also benches, also as an investor in benches, you are uncertain as to whether they will succeed or not. So cooperation and competition between us. But on the line this, I think it's a very important thing. If you don't have the vision on who is going to be your competitor going forward, if you think that your competitors will be all the banks and not the fintechs or the big giants in the net, you're dead, because you have to provide the same customer experience as they do, and they are the masters of this. And in order to be able to be at the same level, you have to work like them. And this means very deep changes in talent and culture within organization technology. Very, very good. Thank you very much. And I want to come back to the details of how that can and needs to look. But let me ask Dirk Fatah. In your global practice, what are you seeing in the way of investment shifts on the parts, part of banks? Are they moving money increasingly into, for example, artificial intelligence, as Martin essentially predicted in his keynote? They don't have another choice. What we see around the world is absolutely the fact that banks are heavily investing in digitalization. But depending on their own strengths, on their financial strengths, and of course on the leadership team, which how convinced they are about the digital strengths of the future. And there we're going to see the differentiation very strongly between winners and losers in the industry, because there are banks who are already still suffering in their local, national, regional competition. And there are also banks on which the leadership team is not as much convinced about the technology trends as probably Mr. Gonzales and myself are. But let me put one point on the question before, because I often hear that our banking and pricing the fintechs and just want to correct this in the name of the bankers, because it's only one direction. What we do see around the globe is fintechs are also embracing the banks, because there are some very few ones who are very successful, and they are going survive and succeed without bank collaborations. But I would say 95% of these fintechs, as in all startup industries, they are struggling and they are struggling with one fact. This is the number of clients. And that's why the fintechs are also embracing the banks. Unfortunately, these weddings which are happening all around the globe, I think there has been not the silver bullet yet, how to run a perfect collaboration between fintechs and banks. Is it only cooperation? Is it investments? Is it full takeover integration of the team? So the whole industry are still sorting that out. Last remark, what we do see is because they are not missing clients, a much bigger threat coming now from the big giants or the big tech companies, because they are stepping into financial services, especially in my sector and retail banking, all around the globe. And they are, from the day one they are entering these markets, they are at scale. At scale which no local or regional bank could run when they are entering a fintech market. Let me ask Mr. Gonzalez-Paramo to perhaps comment on that and whether that, he sees that as a threat, but also the question of motivation here. When banks embrace fintechs, what's driving that? Is it simply the desire and need for greater profitability? That was something mentioned earlier by Danielle Rui in her dialogue. She said, look, they are hoping that this will drive them toward greater profitability. Would you say that's the main motivation? Well, of course it is, because this is one of the main drivers, not the only one. But you have to understand that the economic environment has not made life easy to the banks. So there is still a lot of damage in the balance sheet of the banks. We spoke about the MPLs. Second, rates are low connected to the former, and with low rates the revenue side is a bit impaired. Third, reputation. Banks are not cool. So giant generations are not vocationally getting close to the banks, neither to work nor to do business with. Regulation, and this is put in pressure also on returns. So finally you have digital. And digital you can see as a threat and then you resist. It was an opportunity. If you understand that your client is changing fast, because the internet is redefining the consumer experience that they want. So you have an opportunity to get closer to them and to overcome the reputational issue of you deliver what they want 24-7. And this is the real challenge. But also the business models that you are facing are different. It's not taking the passage just to make loans. Business models are concentrating in niches like many fintechs do, or business models associated to data. Data is the essential thing that makes this revolution different. Because these technologies were out there time ago. But they didn't have enough data to produce knowledge in order to deliver value added to customers. Now the amount of data is immense. And if you understand this, it is not just about profits. It's about having full conscience that the customers are entirely different and are changing very fast. It's not just millennials or centennials. This is also ourselves. I'm a digital immigrant, but I see the advantage of this. And these new business models, if you don't realize that you have to compete with them using agile technologies and flexibility as they do, you are lagging behind. So assuming that those are the goals of the banks, Dick Fata, will the way they're approaching this deliver that? Will they in fact fulfill the goal of increasing profitability with their approach? I have had fintech entrepreneurs tell me, look, if banks really want to disrupt themselves and get more innovative, they're going to have to do more than just buy a startup here and there or create an accelerator. They need truly proprietary R&D under their own roof, essentially moving into innovation the way that a startup would do it and not simply outsourcing this. The answer to this, to be clarified, because now the tipping point is the data Mr. Gonzalez was talking about, because so far banks digitalized. They digitalized most of them on the front end, customer experiences, new apps, new solutions in interacting on the customer interface. But most of the banks were sitting on old IT legacy systems, which were totally not the same like a new fintech starting their company from the very day on in the cloud, having totally structurally different cost positioning. But here comes the point now why artificial intelligence and blockchain probably also is from our perspective now the real disrupting technology, because now banks will be able with artificial intelligence to substitute processes which are repetitive. Really the lower end of the scale what Mr. Ford already said, but also some business will be easier, approaching clients will be with data not only on the physical, not only on the online channels, but also on the physical channels. We also already see examples in Asia by, for example, where banks are using artificial intelligence in their wealth management relationship approach, saving two hours per relationship manager a day. And so the first time now we are seeing with artificial intelligence and potentially blockchain to come to really taking cost out of the industry, and therefore at least bringing profitability to a reasonable stage back. Mr. Gonzalez, may I ask how you see the relative merits of those two technologies? And when you speak with other bankers, what is their approach? Because I have certainly heard that whereas banks are putting more focus and emphasis on AI, many startups, many fintechs think blockchain is going to be the big thing. Would you say it breaks down like that or is that too simplistic? Well, I would not put both at the same level. They are not competing technologies, but they would reinforce each other. They do different things. So artificial intelligence helps expand our minds, our brains, and eventually at some point replaces or many of us. Blockchain, goes away with intermediation because it decentralizes confidence. And in a world which is made with many intermediate steps, it will be revolutionary. Second, I think the stage at which we are in terms of developing the blockchain is not comparable to artificial intelligence. Blockchain, I think we are a few years to have a standard. We are involved in all the main initiatives dealing with blockchain, but blockchain has to solve many issues including legally because it's associated to the smart contracts and computer capacity. There are many things. Artificial intelligence is there. You speak to your phone. You speak to Siri or to Alexa in Echo. And this works. You can manage your account just with your voice because biometrics and voice recognition is there, is absolutely ready. So I don't think they are competing. Stages of development are different, but they will, of course, be part of the future set of technologies available to the banks. So, Dirk Vater, what exactly is that going to mean for the user experience for the bank customer in future? How is my interaction going to look with my bank? Or am I even going to be interacting with my bank at all? Of course you do. Depending on the segment you are, depending what at the end of the day you can afford to pay for these services. In the retail space, we think it will be all digital. You are interacting with Alexa on Echo. You are interacting with voice, with your face recognition, with your every biometric tool and onboarding with the bank. But also in the overall process, you don't need physical client advisory services. It probably will change as more attractive or more wealthy the segment gets and as more complex the advice gets because there will be, it's a function of unsecurity and a function of the duration of investment decisions you as a customer are doing. And as longer and as more complex and unsecure as more people will be needed to help you to find these decisions. And that's going to be in affluent and in wealth management banking but different than before because there will also be supporting, machines will support these kinds of decisions. Martin, can I ask you to just jump in here and you're welcome by the way to also speak to the point about blockchain if that's something you're familiar with but then I'd like to ask you about this as well. Go ahead. Okay, yeah in terms of what it looks like in the future actually one place to look there is China because they are really ahead of the curve. There's an app called WeChat that you may have heard of is put out by company Tencent and people that do everything with it. I mean all their banking, paying their bills, everything can be done through this app and I think that the future looks a lot like that and of course all of that just generates enormous amounts of data and that ties into what can be done with machine learning as well and that's why Tencent is one of the leaders in this area. So I think that this integration of you know the tech companies and banks is something that I kind of expect. One point you can make is that the tech companies have enormous capital that could be used to acquire banks as well so they may actually at some point in the future become banks and compete directly. That's one thing that many people I think expect. As to blockchain I do think it has enormous potential. It's also subject right now to enormous amounts of hype. I mean it's become the latest and greatest thing and so it's very hard to really sort of weed out exactly what's happening there but I do think it has great potential to be very disruptive. So Mr. Gonzalez-Paramo if all of this were indeed to come to pass that I have less and less contact with my bank directly why would I then be loyal to a bank? Are banks going to have to get used to the idea that they have essentially customers coming and going and there's a much more fluid relationship than there has been in the past? There are two dimensions to your question. First there are two strategies as to the incumbents now. Either you try to adapt and resist and become slowly an infrastructure like the telephone lines and PSD2 is the payments directive number two is requiring the banks to open up their networks for third parties to operate on them. This process will go and go and go and if you don't have the capacity to see that you need to keep the relation direct relation with your customer you're basically dead as a bank. And the second answer or second dimension has to do with the different modes of interaction that young people have between themselves. You have seen youngsters sitting alongside talking to each other in the social media and they don't feel far away is the way they interact. So to the extent that you deliver what the customers want you are close to them in spite of the fact that they will go less to the branches because this is not the mode of interaction anymore. Young kids don't understand what a branch is for. So if you are there 24 seven okay loyalty will be less than in the past certainly because now with one click you can compare and comparison and transparency is one of the new ingredients. But if you start from a situation and this is the general situation of banks where you have the trust of your clients. So you have consent to use their data so you can pull this data with the data this out there in the Internet using big data techniques you generate knowledge with knowledge you produce value at the products that are satisfying to them. You have a virtual circle that you can reinforce to to your advantage regardless of the fact that you are not in touch physically. Of course this mode of operation will be open. But now we talk about omnichannel experience where you talk to an employee in a branch or you go through the iPad or through the mobile or your laptop you get the same kind of experience even the same visual appearance of things and of course the same message that's that's key. So contact with clients is not lost and this is the bottom line for the fact that you interact with them through different channels which is the general trend. So that was the user and customer side. Let me ask about the other side and in view of what we heard from Martin Ford would you advise your daughter or your granddaughter to become a banker? That's that's another question. I'll see what the capacity is when she blossoms. My youngest daughter is a fascinating profession I have to say especially at this very momentous times. Will it remain one if we have artificial intelligence moving into the highest echelons of decision making? Absolutely absolutely because this is about understanding that banking is not just about the policy taken and given loans but it's about making accessible and easy everything that is connected to finance and this is not replicated as far as I can imagine by any robot or artificial intelligence. So anticipating what you want and this is big data and consumer experience for instance you're looking to a building and see flood number two how should I start to negotiate now you have an application in the mobile our bank offers that that says okay this is the assessor's price that you could start with and of course associated to that we are ready to know that this person might likely ask for a loan. Finance is a source of stress which ranks number one in many surveys even I mean people prefer to go to the dentist than going into a branch of a bank because it's complex because it's very important and if you are mistaken you can be broke at some point in time and not saving sufficiently and so on so advice again is not deposit taken and lending but it's also advising people this will never be I think replicated by a robot or artificial intelligence. Dirk Vater what do your studies show in terms of the impact on bank headcount and the footprint of the industry as a whole? First of all in terms of what kinds of qualification capabilities is needed in the future and I think you can summarize it that you need people who are very creative who are critical intelligent and who are emotional intelligent because that are you know cornerstones with differentiated for analytical intelligence so keep you safe in comparison to robots so in terms of yeah these are definitely jobs which will be very important also in the future in an industry which is transforming in a such huge way as banking is. In terms of numbers we analyze the different processes and divisions across business lines and of course depending on the individual point of departure of the bank but in summary we would argue that 30 to 40% of jobs in the overall industries are at risk through artificial intelligence right now. Martin Ford do you care to comment perhaps also on whether you'd advise your daughter to go into banking? You know it's not so much banking or another profession it's really what kind of job we're going to do within that and I would agree that right now as we look at least to the next couple of decades the qualities that are likely to make a job relatively safe for human beings are number one creativity are you really generating new ideas thinking outside of the box and number two would be interaction with people on a deep level having that emotional or you know the ability to really understand another person and where they're coming from so those kinds of jobs that really rely on those qualities for the foreseeable future not forever I mean eventually you know nothing is off the table as these technologies advance but I think that they're going to be relatively safe in banking and also in other occupations but the main message is that the last thing you want to be doing is something that's routine and repetitive and predictable right if you're doing the same kinds of things again then it's definitely going to be susceptible to automation if I may clarify on this one is less accountant to be very plastic graphic and more about STEM abilities so science technology engineering math experience design and you have designers out there that sell things just because they go into your into your eyes and of course it it expert it architects because now you need the special it scales in order to design very flexible it systems that of course cloud experts be data experts this is the profiles that now make it in banking thank you very much let's talk about another occupation now and creativity and that would be the occupation of regulators because of course they are also they are facing new entrepreneurs who don't necessarily fit the old paradigms and my first question to you mr. Gonzalez parama would be whether supervisors are equipped to handle the kind of transformation that we're talking about we've heard all of you saying we're going to be looking at at firms coming in from entirely different industries and essentially moving into this space would you say that at the moment at least that supervisors are enablers for innovation in this area or are they essentially putting the break on it well there are many different types of situations but supervisors and regulators like banks are now grappling with this new brave brave new world of digital change so I understand that you may find very conservative regulators and very progressive regulators and given that we are now sailing without any maps because this is entirely new I think the collaboration culture is essential in order to learn from each other and understand each other of course you you may have a very safe pair of hands trying to block all initiatives that are not foreseen in the rulebook okay you may have a very safe system short term but in the long term it will be little of little profitability and ends up with the death probably of many banks because this gives advantage to the startups and fintechs a second thing is level playing fields I think this is a very serious issue because level playing field means that same regulation for same type of activity and it makes little sense that for the sake that when activity is being performed by a bank is regulated differently than a startup there was a recent study done by the european banking authority and published in spring where you find out that at least one third of startups and fintechs handle money from clients without being subject to any regulation not even AML which is a bit of scary because this in the case of a big scandal it could have knock on effects on confidence across the board and a final point if I may progressive regulators now are embarking on understanding that they have to allow experimentation in safe environments and this means having or putting in place innovation hubs or sandboxes and also investing in the skills that will make them able to understand what's going on which means hiring engineers hiring design experts having hiring cyber security experts in order to conclude something for instance on the relative merits of cloud computing vis-a-vis mainframes when it comes to security and protection of individual data because you have many that say cloud whoa that's very complicated what is your data how safe it is it looks like if it is in the air and in the cyberspace is more prone to hacking and to alterations in the in the data of consumers and this is not what the experts tell you so you have to invest in these qualities in order to understand really whether you should allow things and put banks in in the same footing and on a level playing field with the startups we acknowledge that we start with legacies in the IT domain that we could overcome more quickly if it were not for the conservatism of many supervisors and regulators. Dirk Vater perhaps you could weigh in on this question of how we get it right with the playing field one model that's out there is the UK its financial conduct authority is viewed by some as as a model it prides itself on being a forum for exchange in order to try to tease out some of the issues that perhaps and and the new paradigms is that do you think a potential model and when have the kids outgrown the sandbox? First of all when I'm talking about the the impact on regulators I always make the comparison that digitalization on new technology if you discuss that you usually think about new customer experience digital as I said before frontline a little bit IT usually in banks or in organizations the impact on HR on compliance on legal on finance all other overhead functions or controlling functions are often forgotten but the whole organization as we already talked about has to adapt they there are new ways of working agile working for methodologies for example so and as these controlling function has to adapt of course also regulators have to adapt into these new technology work time and yes what what was invented I think in the UK but it's now I don't I think in 10 to 12 countries Hong Kong has it Switzerland has it now different Australia different countries in the world using this sandbox system to allow on a temporary time new tests test test and learn we always argue that in the digital space everything is about test and learn yes then of course regulators and sandbox is a way to find that to test and learn and we agree that this is probably the way how it should be derived in in other countries as well can I just ask you because you are based in Frankfurt Buffin consumer protection very high in the Buffin mandate fostering financial sector innovation is not an explicit part of that mandate does that create problems for a regulator do we need to think about perhaps defining regulators mandates in a different way oh that's a complicated question because I think in the past regulators already have done a lot of innovation created a lot of innovation opportunities for in the in the name of the consumer which are still facing the overall industry and which pst2 is for example one of them and which we still don't know what the impact of these regulations at the end of the day will be in the name of the consumer so before we come up with a new way of how to sort out things I would love to digest first everything what we have put on the table from the regulator to see what the impact at the end of the day will be because pst2 just as a last sense is highly underestimated highly underestimated by a lot of players all around Europe I'm 100% sure just to add a point on this one not about buffing of course which is of course the objectives of regulators which are not always the same institution buffing has to combine or liaise with the bundlesbank and others here because there is of course solvency financial stability consumer protection and the integrity of the financial system and all those objectives are equally valid today but the way you secure how you get there has to be different of course when the technology differs so consumer protection today means in an overriding way protection of data avoiding the denial of servers so good systems against cyber attacks and financial stability should be also in the radar screen what is financial stability in a world made up by a small number of banks and a lot of fintechs and big techno companies does anyone understand this landscape so I would like to hear reflections on how you secure financial stability in this world what about solvency and of course integrity integrity is a crucial part I mean you should not allow by any means and the bad guys with digital have more reach AML should be as stronger as before you have means but also the bad guys have the means to you know do the bad things know your clients again this is very or equally valid as in the past but the way you secure that is entirely different let me bring Martin Ford in on this point because there is of course something called reg tech that says there are technical solutions to the problems that we're talking about that reg tech is in a position to essentially know the client much better and much faster than any conventional means of doing so that we've had in the past would you would you think that going forward we will see regulators as well essentially become learning machines I think to some extent that will definitely happen and will have to happen in part because a lot of these things are going to move so so fast in terms of the threats that that come especially you know cyber security threats and so forth a lot of that is going to move at a rate that people can reasonably deal with so I think it will we will have to rely on artificial intelligence to to meet a lot of those threats but more broadly I mean there is a lot of creativity as you say involved in figuring out how to regulate new technologies and that's not something that machines can do yet so there is definitely a very important role for people there and I think you think you think back to the financial crisis in 2008 there was a lot of discussion then about how regulators weren't equipped to deal with derivatives and you know that kind of thing couldn't definitely happen more in the future so we need people that are very prepared to to deal with rapid change let me come back to the questions that I asked to the audience at the outset and the question of risks and benefits and then I want to go to audience questions in general but last question to both of you Mr. Gonzalez and Mr. Fatah with the request for short answers if you would the financial stability board definitely sees both benefits and risks and in a recent report it highlighted two particular risks one third party dependencies meaning the rise of systemically relevant actors who are outside the regulatory framework you both touched on that on pass on but maybe you can say a word about that and secondly the lack of interpretability and auditability of AI and machine learning in other words models that are opaque and possibility that those could lead to unintended consequences and this is something you hear in every industry it's by no means confined to the financial sector I recently was in an additive manufacturing event where the truth Germany's essential equality supervisor said you know we actually are looking at entirely new processes that we don't understand so we don't know how to certify them so I cannot agree more we do these two conclusions but those can be addressed in in a very clear way as a guest third party liaisons business continuity requirement should be there if you treat these third parties say like externalization when you are thinking of the cloud there are ways to ensure that you don't depend only on one provider also you should push as a regulator for interpretability of clouds in order to be able to ship your data immediately when when you wish so you are not locked in and of course there is this very important issue of kind of auditing knowing what's what goes in or within the artificial intelligence world and it's quite a difficult thing because algorithms could unabettantly discriminate against the people based on ethically or morally irrelevant characteristics features like the color of your skin or where do you leave and one should be very sure that an algorithm is not introducing discrimination through the back door that's going to be more difficult but I think these new technologies could help also in the auditing of of both artificial intelligence and the very specific part which is the algorithmic the algorithmic link into decision-making fully agreeing because I don't want to repeat but perhaps one another thought on the second one what I'm always discussing when I'm faced with fintechs and incumbents in discussions fintechs always arguing than the incumbents how many tech competencies do you really have in your boardroom how many tech competes do you really have in your leadership team to really at the end of the day understand what the impact of the strategic steps you are doing will be so and this is definitely with all honesty one of the risks that we have to upgrade the game on technology fintechs are tech companies not fins they are all technologists they come from the technology side they learn financial services as an add-on banks are coming from the other direction but I unfortunately see two less steps in the way that we are really embracing technology as a capability and there's also one big hurdle that our incumbent industry that's why that we are not so opened for the war of talent on these tech people or let's fake different different message we are probably we are opened but they are not so much attracted by the industries because they in the in the incumbent industries doesn't feel themselves fully understood and there's a chicken egg problem which we have really to crack to upgrade the game and to minimize this risk which was laid on the table thanks very much small anecdote related to the fact that these are tech companies and not fins in the reading that I was doing before this event I encountered one regulator saying you know it's really funny because we talk to these fintechs and we can't find any lawyers as a lawyer I found that very interesting who has a question for our panel if you have one raise your hand yes please we have a microphone coming to you I would have one question and basically do the how would you suggest to banks and also then to supervisors to approach artificial intelligence how should we build up the capabilities and and how do you suggest to do that then first of all you should think about the different use cases where you as a bank as a regulator use artificial intelligence what I always or often see that you know everybody's claiming for the big data lake and saying we need hundreds of data scientists and there's no clear use cases which have to be defined for what you need these data scientists and then this is a second step you have to hire this talent you need data scientists all over the place there was I was on one conference and the guy I don't remind his name but he said one day there will be more dye into scientists data scientists in bank than risk managers and I tend to agree on this quote if only because risk managers would be experts in big data because now yeah now risk management is being done on the basis of big data I know that well from our bank who else has a question Mr. Tucker this is all going to change the way that banking is distributed and what the products look like but is it going to have any material effect on the structure of bank balance sheets so if you were Danielle you should be a bit interested in this but should you be very interested in it in terms of ensuring the safety and soundness of banks I'm obviously not convinced that she should be more than a bit interested in it as a citizen very interested but in her given her responsibilities I mean this is just a guess I presume that the deposit taking activity remark to granting loans will reduce its weight in the balance sheets and the profit lines to the banks coming from other sources would would increase associated to fees and commissions on advice and all these services connected to finance wealth management is going to go up in all balance sheets also regulation is pushing in that direction so if I would cover to to give a hunch I would bet that the loan part and the deposit taking part of the balance sheet would will go down you know I would agree this I mean there are some substitutes models already out there which are replacing parts of the balance sheets need to be proven whether they are successful as alternative models peer-to-peer lending I hardly doubt that this will be such such an impact that it will highly influence Danielle's perspective on the balance sheet but nevertheless I fully agree these these directions on the balance sheets what's Mr. Gonzalez said thank you so I had a question in the second row the lady if you will put your hand up again so he can see you uh yes over here as well and then uh i'll see you not you I was a bit less optimistic about the impact of fintech and I think we should go back and you know go on the call that Martin Fudd was giving that you know this is a threat and it was it was already proven as a threat to the manufacturing sector I wonder whether it's a threat also to the banking sector for the very simple reason that banks exist not because they produce goods but because they have a monopoly rents which comes from the fact that they manage information the moment that with fintech everybody discloses voluntarily his information on the platform both consumers depositors and borrowers investors there is absolutely no service that they are providing so they have to come up with a new service for their own existence and it's not only in that case the fact that people are losing jobs so financial advisors are replaced by a large now by robot advisors but simply because the mere existence of the service is under threat no I would just say that you are I think reflecting on a static way because this is a very dynamic world what banks do today has little to do with what banks were doing 10 years ago so it's now understanding new clients and accompanying the client throughout all the financial journey which is not just a given service like making a payment of course payments is quite a juicy part but this is under threat if you provide the confidence you handle the data of the clients with extreme care to the extent that they rely entirely on you you are permanently anticipating needs because you know a lot of data and the journey and the family situation and what they need and what the business is because you're a bank basically and you can combine this information with the information that is out there you're changing constantly the way you provide service to your clients and this cannot be put at risk if you are sufficiently aware by any given fintech real competitor could be the big text because they have a lot of information and they can combine it in ways that are extremely clever with not with an unlevel playing field because they don't give you the information they have to us the banks but they don't want at the moment to be regulated like banks that's a great thing because they don't want the hands of these supervisors to be put in the core business of these institutions for a good reason but at some point they will find the way and this is why I said at the beginning identify your competitors going forward it is not all the banks it is these guys but of course it does seem that there are some banks who don't see it quite as optimistically as you do I think there is a legal complaint actually from a group of fintechs saying that banks are denying them information and data that they need in order to make some of the transfers that they have in back been hired to make by clients I think that's a publicity point but it that's not true on the contrary I see that and it's a good thing to have competition with fintechs because this makes us better and stronger but that's not entirely true we are obliged now by the PSD2 by the payments services directive number two and also by the GDP sorry for the acronyms the privacy directive or not the regulation that enters into place next year and we are abiding by that we could put the question in the other direction there are techniques in order to access the data of clients which are not foolproof in terms of protecting privacy and data think of screen scraping and we are not yet there as to the choice of the technique that these third parties use in order to access data from clients I would not like one of these startups to pretend it's me operating on my behalf but under the instructions of a bad guy thank you so I think Ignacio had a question and also I'll go ahead please Ignacio automation in banking has been going on for a while and yet I don't think we've seen the type of the decoupling between earnings and productivity that that Martin has showed for the manufacturing sector actually banks are keeping paid pretty well at most levels do you have any interpretation for that I don't know I give you a chance while I think about that thank you um I can take it back if it's too difficult no no no no no um I think you are addressing one really important part which is a lot of banks still mix up automation with digitalization and through the golden angle of we digitalize now everything they want to fix homeworks which have should have been done for decades so what I'm saying is and I made this point already the old legacy systems had been always a good excuse for not optimizing processes very efficiently and now a lot of banks think through digitalization this is all gone but at the end of the day I know this quote is also very old you're still digitalizing old bad processes so what you really have to do is really rethink your overall business model and therefore artificial intelligence can bring us new ways on how to create businesses than it has been before if I can just make a point I am not aware of any study that compares remuneration and says okay at these and these and these levels have gone up or stayed or gone down but I can tell you is that there was a huge overcapacity in the system and remains now there are many more and more banks that close branches when the profits that they obtain from the branch are less than the cost and this is a rational way to go but as regards the productivity such I'm not aware of of this kind of thing but what I can tell you is the following regulation on occasion is not helping to hire talent that is externally well paid out there because there is a regulation on the limit ceiling on remuneration the bonus vis-a-vis the fixed part and out there the smart take guys I used to kind of success payment which surpasses by many times what is fixed in our remuneration so we are deliberately or unadventedly I don't know putting banks at a disadvantage with other industries that want to innovate themselves so in that respect I would like to see more flexibility especially when they don't create a genuine risk or when you can reference the activity of of those professionals that help the banks to change from within and be more profitable but whether the remunerations have remained very high or low I'm not aware of any any study thank you last question yes I have a question about the artificial intelligence and it goes back to the beginning of the presentation of mr. four I also was surprised to see alpha go the new player the new artificial player created and that bit that was so successful beating humans many times as I understand it was amazing that the game the machine learn its learn or its own without being taught but I've played go a couple of times and as I understand it it is a purely deterministic game and life life is stochastic not only life is stochastic we don't know we don't know the underlying distributions the priority distributions are unknown to us and we humans more or less successful react to that so my question is will artificial intelligence move to the next step and cope with an stochastic world I there's you know evidence to suggest the answer is yes I mean certainly the the researchers in the field are working on that in fact deep mind you know the company that did alpha go they're very interested in they're moving on to other kinds of games video games that require advanced planning for example and these kinds of qualities that are more like real life so so you're right right now it is limited to very deterministic things and artificial intelligence as it exists today is very narrow and specialized and it can do certain specialized things at superhuman levels of competence but it will certainly get broader and more capable and no one really has the exact the the answer to exactly how far it can go but many people expect that ultimately it will and what that means we will address perhaps at a future congress but for now let us please give all of our panelists a very warm round of applause and we go now to a coffee break and we'll return probably in about 20 minutes more or less so thank you very much for your attention ladies and gentlemen and for your good questions