IoD talk
Good morning
It is a Privilege to be asked to address this audience in this venue on this topic at this time.
I say at this time because some big things are happening. Developments not just with computer science: but with biology and chemistry and our general understanding are challenging not just the way a product is designed or manufactured or sold but its very existence.
Some Internet Guru once said that we tend to overstate the importance of new technologies in the early days [of a new invention]: then underestimate its impact in the long term.
That short term was the midst late 90s.
The beginning of the underestimating stage is most definitely upon us.
Examples.....
Stats
Music
Films
It's not just digital technology DNA, the microbiome 3d printing artificial I intelligence robots etc
The word innovation has become the must have Noun or adjective in. Job title ... A sure sign that companies are concerned about the shelf life of their product .
As leaders of businesses prolonging the shelf life of our products and ensuring the maximum return on investments from our assets must surely be our primary objective or measure of success.
Science and the ubiquity of the Internet: a cultural change towards risk not only amongst those who provide finance but those who might have been or are employees.
Where does or should innovation come from?
At Barclays my colleague Derek White describes three sources which I think answers The question well:
Slide idea...
Organic : Acquisition : open
Organic- we or our customers have the ideas. Launch pad and internal Pitching forums managed and reviewed.
Acquisition - we buy teams and products from others Ms integrate them into our businesses
- this is not cheating Facebook stats. Apple. Acquisition stats
Open: This is the hard one. The open one ... When I look at the Financial Institutions over the decades we have outsourced critical operational functions making other businesses very rich quickly.
Open innovation is about the deconstruction of the value chain. It is about creating opportunities for third parties and making those opportunities available to any company who meets the criteria
This has several benefits in that it allows [should require] a company to drop significant areas of cost from their business.
But the hardest part of this type of innovation is not the technology it is 'saying no.' Ending the life of people and products and teams. The people being asked to make these decisions are often either impacted or associated with the current approach. They know too many reasons why something cannot be done.
But achieving this well is the key to the efficient business models that we see in the most successful internet Business Models:
Queue slide on Uber, Facebook etc....
What is these people do....?
Creative demand.
Comment on the the fact that these companies do not own the things they are selling from be Tory turnover ratios to reduced operating costs : these efficiencies also allow a degree of focus that is uncommon on most big businesses done well these business models are often referred to as the E word the ecosystem.
Now let's look at the area of my focus and the developments in Computer science that offer most opportunity for banks and financial institutions.
Crypto Currency.
Given to the world in 2008 (check date ) by the brilliant software engineers behind Bitcoin
The original objective was and as far as I am aware remains a censorship resistant means of payment. To allow two people or entities or indeed 'things' to transfer money immediately over the internet and without the need for a 3rd party....
To help explain this concept to you I would like t relate a conversation j had with my 5 year old son George recently:
My wife and I have 6 children and they are great at teaching adults how to talk... Not just because we need to use simple sentence structures .... subject verb object but because we often have to invent metaphors to help them to understand concepts wig which they may not be familiar.
I returned home late one evening .....
Etc.
So once you spot something that offers opportunities for improvement or threatens what you do... The next step is to think very hard and clearly about what EXACTLy it is that you do today that is / will be shown to be inefficient or costly or unattractive.
Taking this thinking to retail banking I looked long and hard at what it is we do today to enable two people to send money to each other.
You soon realise that the systems and people and rules and regulations that we have in place today do not actually allow you to transfer money to her.... What they enable is your bank to transfer a liability to her bank.
This simple design truth is at the heart of the challenges banks face in removing barriers, reducing costs and increasing scrutiny and broadening inclusion....
When we make a faster payment in the UK today between two different banks there are about 16 database writes and 6 archives.
The Blockchain one of the more important foundations of crypto (get the building blocks addressed in the earlier reference to crypt)....
Can be though of as WORM drive worm
Is an acronym it means wrote once and read many ....
Therein lies lies the basis of the argument for where and how does this technology helps.
A single version of events: an immutable ledger. Where history cannot be changed. There are no DB Admin roles on the Blockchain.
But just because computer science does not require a third party : does not mean that humans will not value a trusted party to provide privacy confidence and security and scrutiny .....
The role of innovation is to work out how to provide and deliver these inhuman needs on top of the efficiencies of crypto currencies.
Keeping the efficiencies whilst upholding customer needs.
So in summary.....
Bits missing...
Quotes:
1. At least 15 years old
2. Over state significance [of new technologies ] in short term ...
3. Agile is all about the journey.... Vision is all about the destination. Why is this important??? It provides a context for decision making. Visual example....
4. Better to make your own product redundant than to watch someone else do it for you... Less painful and costly ....
5.
6.
What’s happening and why?
A focus on my own limited area of expertise.
Draw out some aspects which are probably relevant to a broader section of your businesses.
Agile Versus Context
Outsourced Versus Open
Agile Versus Context
Outsourced Versus Open
my wife and I have 6 children.
children are brilliant at teaching humans how to talk..
often you have to invent metaphors to help them to understand a new concept
Recently I returned home late and my 5 year old son George asked::
“what is it you do all day.. anyway Papa?
I said..” I am building a giant piggy bank in the clouds George.”
weetabix
NDA
Dissect the metaphor.
piggy = blockchain
clouds = a data center open to the internet
the label is the cryptographic signature that can be appended to one of these digital tokens.
when thinking about innovation and new service concepts it is critical to be clear about the problem you want to fix and why.
the people, processes, systems, rules and regulations which underpin retail banking today do not allow ‘YOU [look to camera] to transfer money to me: they enable your bank to transfer a liability to my bank.
Each bank maintains its own version of transactions.
These are reconciled through settlement processes, agreed proprietary networks and messaging systems and of course the central bank.
two people could send a digital asset or token electronically between each other and this could be immediately accepted or recognised.
No third party
instant global settlement over open networks that do not carry the costs and do not need specific customised processes and which are open to all.
it’s a bit like chat.
but we’d have to provide ways of checking things like:
who owned it: who owns it now:
has it been spent before ?
???
Areas for improvement for a Barclays crypto product when compared to BITCOIN as is today.
the building blocks of crypto currencies are open source:
traditionally in retail banking we would refer to the 4 corner model: here issuers create buyers and acquirers enable sellers.
some refer to crypto building blocks as the NEW 4 corner model:
cryptography
the blockchain
peer to peer networking protocols
proof of work or stake
we can use this [like lego building blocks to do other things]..
Just because the mathematics does not require a 3rd party to be involved in a decision to transfer money from one person or entity to another does not mean that HUMAN beings do not want this.
Remember we add ‘petrol engine sounds to an electric car because humans wanted that feedback.
talk is about the limitations of BITCOIN and hint at the modifications we have made
there are about 2 billion people with a job but no bank account. However what most people want is arguably not a bank account but Financial Inclusion.
A simple means to receive and send money.
they may not have bank account but most do have some form of mobile phones.
Making it easier to be our customer
relevance globally.
Agile Versus Context
Outsourced Versus Open
Agile Versus Context
Outsourced Versus Open
And the VC and investment community are endorsing this means of dong business.
Fuelled by the hugely successful business models of companies like:
Why are these people pumping money int this field?
I want to stress once more that I am in the engineering team and commenting on this topic as an engineer. Nothing I say constitutes a product or business strategy rather a n open discussion of the ‘important things’ likely to shape the future of payments.
We showed that the smartphone has become the preferred channel for banks to connect with their customers. it is the interface and increasingly, with things like Apple Pay the payment vehicle.
But underneath all of this the foundations for global payments remain relatively unchanged. The banks still handle 400 Trillion$ of transfers each year through existing systems …
The Internet is NOT [YET] the RAILS.
Correspondent banking and the 4 corner model still exist.
A new possible four corner model is CRYPTO, BLOCKCHAIN, peer to peer networking protocol and a proof of stake / worth algorithm.
To understand the opportunity and significance of crypto think of this: most of the systems and processes and people and supply chains and regulation today were designed and built NOT to support the transfer of money from one person or business or thing to an other: but to transfer a liability from one persons bank to another. This is at the core. The promise of crypto currency is to allow the transfer of an asset [be that Bearer instrument or promissory note, the law has not yet decided] from one person or business or thing to another without the need for a third party to be involved.
However, just because mathematics does not require the presence of a bank or trusted intermediary: does not mean that HUMANS will not continue to want TRUST, PrIVACY, SCRUTINY and confidence.
This is the opportunity for banks to layer these things on top of the efficiencies of this new developments.