 Hello, I'm Gerhard Lindhardt, Futurist and CEO of the Futures Agency, together with my colleague and friend, Yuri van Geest, who is a very accomplished internationally known author and speaker and advisor, and he wrote recently the book called The Exponential Organization, co-written with Salim Ismail, and he's also the ambassador for Singularity University in Holland. And we've done quite a bit of work together talking about the future of things, whatever sector we're working in. Today we're going to talk about banking, financial services. So I live in Switzerland, which, you know, right now we have a bit of a crisis in Switzerland because of the euro and the Swiss franc, but also because the Swiss banks are losing the identity of being secure and safe and secret and opening up the banking market. So a question I have for you, what are the key trends that you see in banking for the next, say, five to ten years, and what could banks do if they want to survive, if they cancel out, or are they going to be the next record bankers? Yeah, so there's a lot of questions. So first of all, the key trends, I think the financial services business is coming into a triple disruption scenario. The first disruption is by different individual exponential startups that will attack one individual banking service, let's say lending, payments, mortgages, investments. So they've been disrupted today by transfer wise, by Kickstarter, by Lending Club, by eToro, STMise, Bitcoin, the whole thing, right? So that's disruption number one. The second disruption is that those startups will merge over time in the next five to ten years because they have a common enemy. My enemy's enemy is my best friend, Sun Tzu. So they will merge or align in the next five years. The third disruption is called the blockchain, the peer-to-peer infrastructure for trust. It's basically a way to decentralize trust, and this will undermine fundamentally the core value of financial services over time. So this disruption will be more longer term, or will be the most disruptive of all. You know, when I talk to my banking clients all over the world, anywhere, really, I clear this thing a lot, that people are saying, okay, we've heard this before, and we did in the late 1990s, 2000s, right, but Internet bubble didn't happen. And the second thing is that they always think that regulation and governments will prevent this peer-to-peer, you know, encrypted environment from happening. And what do you think about that? It's interesting to a certain degree. The question is, how long will this uphold in the regulation to protect, let's say, the interests of the incumbents? I think in the end, consumers will always win, or end users. What they want will happen over time. Well, the music business, you know, we said the same thing, it didn't happen, right? I mean, they were protected for 12 years, and the consumer is still not really getting what they want, except for YouTube, that may be Spotify, but the music business has pretty much gone down the toilet to record the music business as a consequence. The same thing will happen here? Yeah, I think it's quite analogous to a very large degree with the media industry in the last 20 years. There will be disruption. It's all about value creation and value capture. If you look at the mix, the symmetry of this in financial services, it doesn't make sense. There's a lot of small value creation and a lot of value capture. So people don't want that, don't like that. There's room for disruption to have a more, let's say, symmetric playing field of value capture and value creation. Absolutely. I mean, in your book, The Exponential Organization, you talk about how this happens with companies that are 10x, you know, and do things 10 times as good, how could they do that? Actually, that's already happening, right? Because if you look, for example, at 10% fur-wise, it's 90% cheaper than the incumbents offering today to transfer money. If you look at Lending Club, if you look at Bitcoin for payments, or maybe Klinko or Stripewater or Alipay or Apple Pay, they have a different model. Not 10x cheaper, but they're also considerably cheaper than, let's say, the alternatives today. So if you look at the broad spectrum, there's a lot of room for improvement. I think that the banking people around the world are wondering at this point to whether so many parts of their business are going to be eaten away by startups, and then by other companies, like neighboring companies like Google and Facebook, the bank license in Alibaba and what have you, that what is going to be left for them? I mean, now we're looking at, I think, Goldman, and not Goldman, American Express, and some bank just invested into the Lending Club scenario, peer-to-peer invested. So would that be a way for them to fund the enemies, so to speak? That's a very big question. I would say they have to be willing to disrupt themselves or die. If you have to disrupt or die, disrupt yourself or die. So they have to look at to create innovation themselves or with partners or how to invest in a portfolio of exponential startups disrupting them to make sure that they will be in business over time. So it's like a hatching strategy, external startups, your own innovation, disrupting yourself and your core business. But in most cases, to innovate or revitalize your own core business won't be enough to survive because it's such a disruptive scenario that we talked about. You won't make it through it. I always say that these kind of businesses are what I call digitally contestable. They can be contested because of technology. And if you're looking at credit cards, why should we carry that card is no point in that. We can do it many other ways. Why should we pay 30 euros to send money to America? Why should we pay 8% interest for a loan when we can get it from friends and so on? So that is a key trend. Bill Gates said 12 years ago, we do need banks and we don't need banks. And this is actually finally happening. I believe we still need banks just like we still need record labels. But their role is going to be entirely different and they're going to have to reinvent. So it doesn't make sense to have a large real estate investment as a bank. You can fully digitize that. Why do you need all those employees? You can implement artificial intelligence to a very large degree. Maybe even 90% according to McKinsey recently. So yeah, so what's the value of all those old school, let's say, investments? I think there could be value in that, for example, if you are a corporate, you have a corporate clients who want to become somewhere and pay a premium for coming somewhere. There could be sense in that. That makes sense. But this is a difficult question. So I think that transformation is actually one of the toughest. Compared to media companies who already have digital assets, now banking is becoming completely digitized and digital currency and all these things. So how to build them? That actually there are many interesting artificial intelligence cases that will disrupt all financial advisors in the next 10 years, like Kensho, that's a big case study. So also Citibank, they implemented a new artificial intelligence solutions to improve productivity by 30% or 40%. So only half a year project of artificial intelligence. So they're talking about substantial improvements using AI above the classic solutions. Big topic. So thanks very much for tuning in. This is Yuri van Geest. I'm Gerd Leonhardt, CEO of the Futures Agency. If you want to know more, go to thefeuturesagency.com or look us up on Twitter. Thanks for tuning in.