 Hi everyone, it's MJ and welcome back to the Actuarial Podcast. For those of you who are watching the YouTube video, I do need to apologize for the hair. It is getting too long and I mean, especially now on the heat that we have here in Cape Town, it's getting a little bit unbearable. So hopefully we're going to cut it soon and I'm going to be looking a little bit more presentable. Anyway, moving on to today's topic, it is banking and actuarial science. This podcast was inspired by one of you. So yeah, like I said, please let me know your thoughts in the comment section as it does inspire what I talk about. So the question was, what role do act trees play in the banks? And it's something that we're seeing a lot of here in South Africa where the banks are hiring the majority of the actuarial students. Now, not only are act trees useful for traditional banking functions such as calculating the risk of default when they're lending some money out and calculating what the interest rate should be, but what we're seeing is banks are starting to sell life insurance and it actually makes a lot of sense why they do it. Now look, I must just be upfront. I'm very skeptical, almost cynical when it comes to the banking industry. I'm kind of, yeah, I don't like them. I don't like them. I say, please do take with a pinch of salt, please be aware of my bias. I'm going to try and not let it influence too much of this talk, but that's normally quite an easier thing to say than do. But Joe, why I think banks are so successful or moving into this life insurance sector is because they have quite a lot of information. They have quite a lot of data on the people who bank with them, with the clients. Just think about it. If you can look at somebody's transactions, you can tell quite a lot about them. If they're paying school fees, you know, once a year you're seeing this massive amount going to a school, you can very easily assume, okay, they have a child. If you see that there isn't a payment to any sort of life insurance company, then you know that, hang on, this person isn't covered. And judging by the rest of their transactions, you can gorge how wealthy this individual is and you can actually go to that person and say, listen here, someone who's living your lifestyle, who has dependence but doesn't have any life insurance cover, we can give you this product right away with this amount of cover and we can deduct these payments straight from your bank account so the admin fees are going to be quite low. All you need to do is tick yes and your children will be protected if you die. And what's lovely about this is that people will look at this and be like, hang on, that's actually quite a good idea. And they tick the box and suddenly they're sold life insurance and the other industries or other life insurance companies who don't have access to this information are panicking. You can imagine, banks have got such an enormous advantage over the other financial institutions. And that's why we are seeing a bit of a race for people to offer banking services or these new apps are coming up where they try and offer banking services for free and just to get that information. And I think that's my problem with banks is the way that they charge people to have a bank account, they charge people every time a transaction is made and yet they're still utilizing our data and being able to milk it. So I do feel that bank fees are too expensive. Also, I mean, once you once you use blockchain technology and you can see, you know, with Bitcoin, it takes 10, 20 minutes to send a transaction. And then with banking and EFT can sometimes take up to three days if it's from a different bank, it's kind of like you want to pull the hair out of your head. It would probably save me getting a haircut. But yeah, banks, you do get that there is a little bit of a frustration around them. Maybe another reason why I don't like banks, and this is specifically banks in a global case is when it comes to setting the libel rate, I mean, the libel rate you've got sometimes is only 12 banks who determine this number and they determine the number basically by taking their thumb, giving it a good long suck and then coming up with a number. They call it expert judgment and I know that this has caused absolute chaos and we are trying to move into the waterfall methodology. They've changed the whole committee of libel. People are submitting different rates because the current system is a stuff up because what you have is you've got these 12 people determining a number. But this number is probably the most important number in the capitalist society as I think they're saying, I think it was 300 trillion. I don't know if someone needs to fact check me on that, but around a lot of trillions of dollars of derivatives are based on this number because it's used as the interest rate. They kind of think, oh, it's the third party interest rate. The problem is a lot of these banks are the parties to these derivatives of contracts. So a bank can enter into an interest rate swap with some institution or some business. And if they have quite a big exposure on the one side, they can just go play some golf with some of the other bankers and say, hey guys, for tomorrow, let's just underestimate the value just a little bit. And they can make billions of dollars just by doing this. And this isn't a conspiracy theory. I mean, go type in libel scandals and you'll see countless times of banks that are screwing the system and are defrauding people this way. And what happens is they just get a little slap on the wrist, a little bit of a fine to pay. No one really gets locked up because do you really want to lock up the bankers who kind of control the economy? So I think that's why I'm very anti-banks. And I think this is one of the reasons why I really got excited about Bitcoin. It was, oh, it's the Bitcoin revolution, you know, Bitcoin's going to disrupt the banking industry. I think Bitcoin got a little bit ahead of itself. It started disrupting governments because as Nathaniel Rothschild said, whoever controls the issuance of currency, you know, controls that country. And if Bitcoin takes that power away from the central banks, which let's admit are owned by government. I know they're supposed to be independent, but if you look at who appoints the central bankers, you'll see that it is the president of the majority of the countries. So that independence, yeah, like I say, I am skeptical, maybe I'm even too cynical here. But for me, it just doesn't seem like a very fair system, especially when we're talking about the amount of numbers that we're discussing here. And it is a complicated system, and it is something that I think the general public seem to be unaware of. But having said that, I mean, I don't want to discourage anyone from going into the banking industry. I think actuaries can do a lot of good there. I have heard some sad stories of people working at banks where they work with the tellers and the people, you know, a little bit lower than them. They write up reports and then the banks use these reports to automate those people's jobs and then just fire those people. And it's kind of like, wow, that is, that is harsh. Gosh, I am sounding a bit like a socialist here, which I'm not, which I am not. I think I was reading a book by Jordan Peterson and he said, he was a socialist until he realized that socialists don't love the poor, they just hate the rich. And I don't hate the rich. And I don't not like the poor. I'm mincing my words. I'm mincing my words. Let's get back back to the topic. Speaking of the topic in time, we have hit eight minutes. So maybe let me let me wrap this up and take it too late. So I think as an actuary, you can do a lot of good in a bank. I think we are going to be seeing banking just be revolutionized in the sense that as banks become more aware of the the dates of goldmine that they're sitting on, they're going to see that they're going to be more effective at at selling certain products than traditional institutions. And I think we are going to be seeing a bit of carnage in the space. And it is something that actually traditionally work for life officers. But if they're not starting to work for banks, we could see life officers be a thing of the past. And this is what makes internet banking and these new digital banks be a potential disruptor because they're probably going to be able to use the data better than the traditional banks who are still focused on the old school way of making money by trying to change the libel rates in their favor. Sorry, I'm being a little bit mean. So let me let me wrap it up. Let me end it there. Let me maybe just also tell you guys a little bit. Yeah, it's maybe end of by talking a little bit about the Facebook group. So we've created a Facebook group, which is different to a Facebook page. I know there's like two different things. So the Facebook page is generally you can just I can just post random things. But the Facebook group allows for a little bit more discussion. So I want to maybe use that space for for you guys to ask video questions. You can use YouTube. YouTube's probably I'll see that one easier. But the Facebook does allow for better discussion. So someone says, let's talk about banking, put it in the YouTube comment. Put it also in the Facebook group. And then we can either hear from people who are actually working in the banking space, giving their feedback or saying, oh, it's actually a great job. Or it's terrible or this or that. And I think your Facebook just allows for better. It's a better ecosystem for discussions than then say the YouTube comment section. Also, I'm thinking of maybe putting my video suggestions in advance on the Facebook group to hear your guys thoughts around it. And we can chat a little bit more more on that space. But anyway, let me know your thoughts if you're actually working in the banking industry, what are some of the cool things that you're doing? If you're working with I know because I think I think everyone's going to start fighting for the space. I think crypto exchanges are going to start trying to become banks. I see there's a lot of startups that are trying to become banks. I know regulation around banking is crazy in South Africa. We've just had another scandal with one of these mutual banks and the EFF and it's just it's a very, very exciting space. So banking is a lot more than just taking people's money and lending it out to other people and hoping that the people you lent it out to repay you back. It does get a lot more interesting. Banks, I think, do or they are the oil in this economic machine. They do make things move. But like I say, I am skeptical about the amount of power that they have. And by their greed factor, I do think their fees are a little bit too high. The interest rates they charge are a little bit too high. But like I say, I do have a bias against it. So I want to maybe hear your thoughts, maybe discuss, debate with me. I'll put a link to the Facebook group and I'll see you guys there. Keep well. Cheers.