 Hello, this is Gerard Leonhardt, futurist and CEO of the Futures Agency. We're having a conversation today about the digital transformation, the digital economy of banking and financial services. With me are Simon Torrens and Rohit Talwar, both from London. And we're going to jump in and ask a key question. In my view, the discussion about how banks are going to go digital or not has been raging for a long time. And a lot of banks have said, you know, it's too difficult what we do and it won't happen, but it feels like it's happening now. It feels like money is going digital, Bitcoin is everywhere, even though nobody's really using it. But is it actually real? I mean, are the banks and financial services being transformed digitally? I think what's happening now is for a long time, you know, people heard the mantra that we need banking, not banks. And the banks said, well, it's too complicated to go digital in the way you're saying. And now what's happening is they're being bypassed. We've now got a whole bunch of platforms, crowdfunding platforms, crowdfinancing platforms, every single aspect of financial services from debt financing to mortgage financing to raising equity can now be done with one of these platforms. And we have lots of distrust, right? I mean, the trust crisis is humongous in banking, right? And these players are bypassing the old clothes that we don't trust and they're demonstrating they can do it and they're doing it in a way that benefits both sides of the party, the transaction more. They're eliminating the profits of the banks. You are going to start to see this erode and you're going to start to see the banks adapt to this. Some will disappear, some will merge, some will embrace it. But is it just the low-hanging fruits that are going to go away? Like the low-hanging fruits being the transfer fees to my son in America, you know, those are low-hanging fruits or everything? Yeah, well, I don't know. Well, maybe you're exactly the right point. There's banking and financial services and then the banks themselves. So I'll just stick on the banks for a moment here on this. But I think they, although they have been obviously their reputation has been damaged over the last, you know, some time ago, they've got an interesting transformation to make in terms of what had a deep in their relationship with their customers. And they are, relative to other sectors, actually quite well trusted. You know, you put your money in the bank, that's quite a trusted thing. They have a lot of information about you. So I think a lot of many banks are now starting to think, well, what else could we sell our customers? We tend to sell a little bit of extra things on the side, maybe a bit of obviously banking services, a bit of insurance. But could we not sell telecom services, for example? Could we not sell entertainment services? Could we not sell healthcare services? And that would be in the past, you know, very, you know, they'd never think about that. But with new digital technologies enabling very rapidly to integrate partners that the organizations like banks can make available to their customers. I think that's a possibility. I think the other thing you're seeing is the people who paid the bill are starting to challenge it now. So in the past, I raised a billion dollars through a bank. I paid somewhere between 50 million and 80 million dollars in fees. And look at what the bank did. And basically they went round to all the same people said, would you buy this equity or take this debt? I've no platforms that will enable me to do that. And I've invested in those platforms. So why wouldn't I use them to do my own debt and equity raising? And then suddenly I'm cutting my transaction fees from 50 to 80 million dollars to a few hundred thousand dollars. It makes no sense for me to use these other guys because they're adding no value. Yeah, I think we have to distinguish between the consumer facing part and the low-hanging fruit for other disruptants to come in. And of course, the mortgages and the large loans and the financial system. But underlying all of that is, in my view, is the shift to digital currency. So that comes on top of this stuff. I mean, I use transfer wise to send money to all over the place and Africans use and pay certain stuff. And that is already going away. And lots of people have said that will take away 45, 50% of US banks from all that stuff that people used to pay for. But what about digital money? I mean, is it real or is it a pipe dream? Unencumbered, imperfected, peer to peer? I think there's two things going on there. One is the digital currency itself just starts to give you a universal currency to do these local transactions. So most people don't even realize now that a lot of the international money payments they're doing are being executed with Bitcoin. Because the bank is doing it in dollars to euros at the other end, but underneath it's all being done in Bitcoin. What, all or a lot? Or a tonne or a lot? More and more of it. More and more players doing it. The second thing that's going on is that people are beginning to understand blockchain technology. The secure communications technology that sits underneath these transactions is something that could be used across every industry for communicating financial data, health data, a secure data of any kind. That in itself is going to be quite transformational. And then you're starting to see the new players like Bank to the Future coming up who are saying, we can build a whole ecosystem that completely bypasses the banks from everything from consumer finance right the way through to large-scale corporate debt and equity raising. We don't need the banks anymore to do any of this stuff. We've got super secure, highly efficient platforms where we're taking a tiny fraction of the payment that we've been taking in the past and you, the consumer and you, the investor, have faith on what controls it. That reminds me of the sort of Simon, are they the next record labels really? Because it really reminds me of the music business to where you couldn't do anything with our banks until just recently and now you can. Is that the future? No, I guess like any industry, all the industries are being disrupted and those will be successful ones who grab hold of the new technologies and work out how to almost disrupt themselves. So the clever banks will be the ones that can adapt. Like, you know, it's the Darwinism again. So who knows? Well, I see a real rift there because now governments are also saying, okay, if we get this digital currency thing that becomes encrypted without government supervision, for example, which is peer-to-peer, essentially decentralized, that opens up a whole bunch of things that are quite at the core of a capitalist economy, right? Outside of a central bank? And I mean, is that real or what? Bank of England has already started to explore how you incorporate those kind of transactions into the measuring economy. We're going to see this more and more as countries begin to understand that what the visible economy is only a fraction of the real economy. In some countries, up to 90% of all the activity goes on the informal economy. It's a distant cousin of the tax system. Right, right. As this all moves to an electronic transactional system whether it's Bitcoin or some other one, it gives you the potential to at least know what's going on. Even if you can't take tax from it, you can measure and monitor. So some countries are actually saying, we'll encourage this because it starts to regularize the way money flows around the economy. I think that raises a good point about the regulation as well because you have banking regulators and you have telecoms regulators and you have other regulators. And in fact, this stuff is sort of merging together. But the regulations are often created in very isolated silos. Well, let's wrap this up the session. Let's say if you are a big bank today, international bank or a big national bank, let's give two pieces of advice each to how you're going to transform that bank into the digital age. One, understand the new players that are coming into your market and what's coming over the horizon in terms of people coming up with new and disruptive ideas. Secondly, more than ever, you have to get inside the head of your customer and whether it's the people making investments or the people borrowing money from you and understand the sheer range of options now being presented to them for how they can compete those transactions. Get your head into the space of recognizing that you no longer have a monopoly. You no longer have a dominance over the space and the more the world becomes digital, the easier it will be for people to erode that which you thought was your unique domain. Well, I would echo that. I think the key thing in all of these digital transformation discussions is that most customers tend to be quite lazy. They want an easy life and convenience and I've been with my bank for 30 years now. As long as the bank can understand my needs and serve me in a way that is reasonable price, I'll stick with them. So I think your point is exactly right there. Understand the customers and get into their head and be more proactive in working out the problems that you can solve for them while also understanding the disruptive technology that's coming over the hill and try and grab hold of that and adopt it in how you serve your customers. Yeah, I think from my point of view, the most important part is that always if you're looking around, there is in financial technology, fintech as they call it in Switzerland, you know, there's tens of thousands of startups and innovators. If I was a banker, I would say, hey, let me put money into those people that want to kill me. Like, you know, record labels with natural, right? But to its conclusion, there will be a logical step saying, maybe I can bring those people in to help me be part of that new future. Well, it's interesting. Most of the many banks that I set up offices in Silicon Valley, and there's a big ecosystem there because that's where you get all the... Yeah, and that was my second point is, I think banking in the future is a giant ecosystem of different layers interconnecting rather than giant banks. And to become part of that, to become indispensable in the ecosystem, that would be my advice, my second piece. Well, just one thing we haven't touched on there is who is tomorrow's consumer going to trust? Are they going to place their trust in banks who they have almost no contact with or the likes of Apple, Google, Facebook with whom they have a daily relationship? You know, what the banks don't quite get yet is that those who own the consumer high ground, those who own the most intimate relationship, are probably going to be the ones who end up being trusted to manage people's finances. Well, this is a lot like a newspaper, they can't imagine a world without them because they're living inside of their own head going towards the consumer. And the consumer, I mean, digital natives have already done just fine in a world without printed paper, right? So same exercise. Anyway, we're wrapping it up on this session on the digital transformation of the banking financial business. Simon Torrance, Robert Talba, Gerhard Leonhard, there's more information at thefuturesagency.com. Thanks for tuning in.