Bank 4.0 Read online

  Praise for Bank 4.0

  “From Bank 2.0 to 4.0, Brett has not only been tremendously accurate in predicting where the ball is going in the future of money, but, more importantly, he’s been actively shaping how it will get there. Here’s a tip: don’t bet against him.”

  — Alex Sion

  Co-founder of Moven and

  General Manager, Mobile Channel, JP Morgan Chase

  “Brett King has done it again with his latest volume. Bank 4.0 pushes us to deconstruct the mouse trap we call a bank, wipe the digital slate clean, and re-imagine banking for the year 2050 by focusing on first principles and customer needs. Drawing on examples from the developing world, King paints a compelling vision for how digitally-native banking can be a winning strategy—and an inclusive one.”

  — Jennifer Tescher

  President & CEO, the Center for Financial Services Innovation

  “In Bank 4.0, Brett does it again and moves our thinking along in financial services from rethinking the bank model as discussed in his previous books to pointing to how to build the new model using first principles thinking. It’s another ground-breaking book and brings together not only his own thoughts, but the thinking of many of us who are trying to create the next generation of finance using technology, or FinTech if you prefer. Anyone involved in finance, technology, money and banking who doesn’t pick up this book is missing the key to their future and, as a result, might not have one.”

  — Chris Skinner

  Bestselling Author of Digital Human and

  Chairman of The Financial Services Club

  “Brett’s best yet! While one may not agree with all his assertions, the fundamental insights—that banking needs to be reimagined from first principles, that it must be embedded into daily lives, that data, AI and voice are game changers in this regard—cannot be argued against. Bank 4.0 is a tour de force that opens your eyes to what already exists, and your mind to the imminent possibilities. A must read.”

  — Piyush Gupta

  Group Chief Executive Officer, DBS Bank

  “As the banking industry continues to disrupt at an ever-accelerating pace, this unputdownable book paints a future that is both exciting and inspiring. This is Brett, the King of futurism, at his compelling best! Speaking as a banker, you must read Bank 4.0.”

  — Suvo Sakar

  Senior EVP and Group Head of Retail Banking

  and Wealth Management, Emirates NBD

  “Banking is being disrupted on a global basis and Brett’s book helps to navigate through these rapid transformations. A must read in the new era of banking.”

  — Valentin Stalf

  CEO and co-founder of N26

  “Yet again, Brett King brings together some of the most knowledgeable and experienced figures in global FinTech for this authoritative guide to the very latest mega trends.”

  — Anne Boden

  CEO and founder, Starling Bank

  “‘I don’t think anyone else on the planet has Brett’s ability to piece together what is happening around the globe and forecast the future of banking. A thoroughly researched, data-driven analysis from someone who has ‘walked the walk’.”

  — Anthony Thompson

  Founder & former chairman Atom Bank and Metro Bank,

  co-author of No Small Change

  “Two years ago on stage in Beirut, I called Brett King ‘the King of Ban- King’ and I stand by every word. This book continues his canon on the subject of where banking is going next. Everybody in a FinTech company should read it, everybody in traditional banking HAS to read it or they will be without a business in five years.”

  — Monty Munford

  Founder of Mob76, SXSW emcee and Public Speaker,

  writing for The Economist, BBC, Forbes and Fast Company

  “The organizations we develop partnerships with know that our customers are in the driver’s seat. We’re innovating for them and that’s non-negotiable. Brett King and Moven understood that from day one, and Bank 4.0 is his manifesto.”

  — Rizwan Khalfan

  EVP, Chief Digital and Payments Officer, TD Bank Group

  BANK 4.0

  © 2018 Brett King

  All content information in this book is correct at press time. Care has been taken to trace the ownership of any copyright material contained in the book. Photographs are used with permission and credit given to the photographer or copyright holder.

  Published by Marshall Cavendish Business

  An imprint of Marshall Cavendish International

  All rights reserved

  No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. Requests for permission should be addressed to the Publisher, Marshall Cavendish International (Asia) Private Limited, 1 New Industrial Road, Singapore 536196. Tel: (65) 6213 9300. E-mail: [email protected]. Website: www.marshallcavendish.com/genref

  The publisher makes no representation or warranties with respect to the contents of this book, and specifically disclaims any implied warranties or merchantability or fitness for any particular purpose, and shall in no event be liable for any loss of profit or any other commercial damage, including but not limited to special, incidental, consequential, or other damages.

  Other Marshall Cavendish Offices

  Marshall Cavendish Corporation. 99 White Plains Road, Tarrytown NY 10591-9001, USA • Marshall Cavendish International (Thailand) Co Ltd. 253 Asoke, 12th Flr, Sukhumvit 21 Road, Klongtoey Nua, Wattana, Bangkok 10110, Thailand • Marshall Cavendish (Malaysia) Sdn Bhd, Times Subang, Lot 46, Subang Hi-Tech Industrial Park, Batu Tiga, 40000 Shah Alam, Selangor Darul Ehsan, Malaysia

  Marshall Cavendish is a registered trademark of Times Publishing Limited

  National Library Board, Singapore Cataloguing-in-Publication Data

  Names: King, Brett, 1968-

  Title: Bank 4.0 : banking everywhere, never at a bank / Brett King.

  Description: Singapore : Marshall Cavendish Business, [2018]

  Identifiers: OCN 1042194265 | e-ISBN: 978 981 4828 38 3

  Subjects: LCSH: Banks and banking—Customer services. | Financial services industry—Technological innovations.

  Classification: DDC 332.17—dc23

  Cover art by Kylie Eva Maxwell

  Printed in Singapore

  To Katie, with whom I am quantum entangled, and my Dad, whose energy and role model allowed me the freedom to go well beyond my limitations.

  Contents

  Preface

  Acknowledgements

  PART ONE: Bank 2050

  Chapter 1: Getting Back to First Principles

  First principles design thinking

  Applying first principles to banking

  A bank that is always with you

  Is it too late for the banks?

  Feature: Ant Financial—The First Financial Firm for the Digital Age by Chris Skinner

  The Alibaba stories

  Ant Financial: Building a better China

  Chapter 2: The Regulator’s Dilemma by Brett King and Jo Ann Barefoot

  The risk of regulation that inhibits innovation

  A flawed approach to financial crime and KYC

  The future form and function of regulation

  Elements of reform

  Feature: How Technology Reframes Identity by David Birch

  PART TWO: Banking re-imagined for a real-time world

  Chapter 3: Embedded Banking

  Friction isn’t valuable in the new world

  New experiences don’t start in the branch

  Advice, when and where you need it

  Mixed reality and its impact on banking<
br />
  Feature: Contextual Engagement and Money Moments by Duena Blomstrom

  Are banking chatbots the future?

  Chapter 4: From Products and Channels to Experiences

  The new “network” and “distribution” paradigms

  Bye-bye products, hello experiences

  The Bank 4.0 organisation chart looks very different

  Onboarding and relationship selling in the new world

  Feature: Future Vision: Your Personal Voice-Based AI Banker by Brian Roemmele

  Chapter 5: DLT, Blockchain, Alt-Currencies and Distributed Ecosystems

  Emerging digital currencies

  Bitcoin and cryptocurrencies on a surge

  The structural implications of DLT

  PART THREE: Why FinTech companies are proving banks aren’t necessary

  Chapter 6: FinTech and TechFin: Friend or Foe?

  “For me? Two servers”

  Where the new players are dominating

  Partner, acquire or mimic?

  Killing FinTech partnerships—the barriers to cooperation

  If you can’t beat them, join them

  Feature: Why Banks Should Care About FinTech by Spiros Margaris

  Feature: The Speed Advantage by Michael Jordan

  Chapter 7: The Role of AI in Banking

  Deep learning: How computers mimic the human brain

  Robo-advisors, robo-everything

  A bank account that is smarter than your bank

  Where automation will strike first

  Redefining the role of humans in banking

  Chapter 8: The Universal Experience

  The expectations of the Post-Millennial consumer

  The new brokers and intermediaries

  Ubiquitous banking

  Feature: Going Beyond Digital Banking by Jim Marous

  Going beyond digital banking basics

  Amazon model provides a guide for banking

  Feature: Digitise to Lead: Transforming Emirates NBD by Suvo Sarkar

  PART FOUR: Which banks survive, which don’t

  Chapter 9: Adapt or Die

  Key survival techniques

  Survival starts at the top

  Chapter 10: Conclusion: The Roadmap to Bank 4.0

  Technology first, banking second

  Experience not products

  The Bank 4.0 roadmap

  Conclusion

  Glossary

  About Brett King

  Preface

  Bank 2.0 was written in 2009 when mobile had just started to become a significant part of retail banking, and just after the internet had surpassed all other banking channels for day-to-day access. Bitcoin had just launched. Betterment, Simple and Moven were yet to be announced, in fact, FinTech overall was not yet even a term for most of us. Bank 2.0 was a simple exploration of the fact that customer behaviour was rapidly evolving as a result of technology, and this was creating an imperative for change within banking which was undeniable.

  By 2012 mobile was the next big thing. It was on track to surpass internet, and there was no longer an argument about whether or not banks should have a mobile application. The importance of day-to-day use of technology to access banking was clear, but most banks were still in the evolutionary mode, where mobile was considered simply a subset of internet banking and the technology team were still begging the executive floor for adequate funding. That was by no means an easy battle. Bank 3.0 was the further realisation that you could be a bank based exclusively on emerging technology. As I wrote in Bank 3.0: “Banking is no longer somewhere you go, but something you do.” Banking was moving out of the physical realm into the digital.

  That was more than six years ago. That’s a long time between drinks, as we say in Australia. The reason for the delay in me writing a Bank 4.0 vision was simple—the future of where banking would go after the whole multi-channel realisation wasn’t yet clear. It took some incredible changes in financial inclusion and technology adoption via unconventional, non- bank players for me to realise that there was a systemic shift in financial access that would undermine traditional bank models over the coming decade or two. The unexpected element of this was that the future of banking was, in fact, emerging out of developing economies, and not the established incumbent banking sphere.

  Over the last 40 years we have moved from the branch as the only channel available for access to banking services, to multi-channel capability and then omni-channel, and finally to digital omni-channel for customers exclusively accessing banking via digital. The problem for most banks was that we were simply adding technology on top of the old, traditional banking model. We can tell this primarily because the products and processes were essentially identical, just retrofitted for digital. The application forms had just changed from the paper forms in the branch to electronic application forms online. We still shipped plastic cards, we still sent paper to customers in the mail, we still used signatures, we still maintained you needed a human for complex banking problems.

  In markets like China, India, Kenya and elsewhere, however, non- conventional players were attacking payments, basic savings, micro- lending and other capabilities in ways that were nothing like how we banked through the branch traditionally. By building up new customer scenarios on mobile without an existing bank product as a reference point, we started to see new types of banking experiences that were influenced more by technology and behaviour than the processes or policies born from branch distribution. This evolution was led by technology players like m-Pesa, Ant Financial’s AliPay, Tencent’s WeChat, PayTM and many more. This combined with new FinTech operators in the established economies like Acorns, Digit, Robinhood and others who were creating behavioural models for savings and investing. There was a realisation that if you took the core utility and purpose of financial services, but optimised the design of that for the mobile world, that you’d get solutions that would scale better than retrofitting branch banking, and that would integrate into customer’s lives more naturally.

  If we observe the trend over the last 25-plus years since the commercial internet arrived, we can see that there’s an overwhelming drift towards low-friction, low-latency engagement. Like every other service platform today, banking is being placed into a world that expects real-time, instant gratification. Banking, however, is not easily retrofitted into a real-time world if you’re used to static processes that were based on a paper application form and hardwired compliance processes. Compared with many other industries, banking has been slower to adapt when it comes to the revenue aspects of e-commerce.

  When technology-first players emerged in markets where there were large unbanked populations that had never visited a bank branch, there was no need to replicate branch-based thinking, there was just the need to facilitate access to the core utility of the bank. This, combined with the design possibilities afforded by technologies like mobile, allowed for some spectacular rethinking of how banking could be better embedded in our world. It turned out that these new approaches offered much better margin, better customer satisfaction, engendered trust that was just as good as the old-world incumbents, and businesses that held far more dynamic scaling potential.

  This was when it became clear to me that the trajectory was shifting and that we were seeing an emerging template for the future of banking, one that wouldn’t include most of the banks we know today. Why? Because if you’re retrofitting the branch and human on to digital, you’re going to miss the boat. Banking is being redesigned to fit in a world where technology is pervasive and ubiquitous; the only way you stay relevant in this world is by creating experiences purpose-built for that world. Iterating on the branch isn’t going to be enough.

  I hope you enjoy Bank 4.0.

  Brett King

  Founder of Moven

  Host of Breaking Banks Radio

  Acknowledgements

  As with any book like this, it takes a tribe. This time around was much tougher to get the book done because Moven has been growing significa
ntly and it required more focus. So the first people I’d like to thank are the team at Moven—specifically my executive team, including our new CEO Marek Forsyiak, Richard Radice, Kumar Ampani, Andrew Clark, Denny Brandt, Ryan Walter, and our teams dotted around the world in New York, Philly, Tokyo and Sydney. We work hard, but we have a mission we share and we have plenty of laughs along the way.

  Secondly, the team at Marshall Cavendish, who remained extremely patient as I rolled past each consecutive deadline with constant apologies for the delays, including Melvin, Janine, Norjan, Mei and Mike and our partners for translation in markets like China, especially Daisy.

  Thirdly, the team at Breaking Banks and Provoke Media that kept the pressure off by helping me get the radio show out each week, including JP Nicols, Jason Henrichs, Simon Spencer, Liesbeth Severiens and Rachel Morrissey.

  The contributors for this book were also phenomenal. Anytime I get to collaborate with my FinTech Mafia pals Chris Skinner, Dave Birch, Jim Marous, Duena Blomstrom and others, you know it’s going to be something special for readers. To the team at Ripple, Jo Ann Barefoot, Suvo at Emirates NBD, Brian Roemmele, Michael Jordan, Spiros Margaris, and John Chaplin—thank you.

  I would be remiss to not thank the coffee shops that once again contributed to this tome.

  Lastly, I couldn’t have done this without the constant support of a small team who keep me sane daily. Jay Kemp and Tanja Markovic at Provoke Management speaker bureau, and my social media team. To my dad, who despite daily challenges with his health remains my greatest fan, and my greatest mentor.

  Most of all, my partner in life, Katie Schultz, who inspires me, drives me to new heights and puts up with my crazy schedule and global travels. Her, Charli, Matt, Hannah and Mr. T are a constant delight and make me one very happy author.

  Part 01

  Bank 2050

  1 ➡ Getting Back to First Principles

  2 ➡ The Regulator’s Dilemma

  1 Getting Back to First Principles

  Everybody has a plan until they get punched in the mouth.