future of banking presentation

8/14/2019 Future of Banking Presentation

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Center for Future Banking

Is this a reactionOR

a strategy?


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2

Where Customers Want and Need banking

Customer

78% US pop

6,100 Banking Centers

18,500 ATMs

5,000+ Affinity Groups24M Active

Online Users

56 Million House Holds2.6B Contacts

1M UsersCan reach 75% wireless

subscribers

Banking is Everywhere


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3

Innovative Products and Services

Banking Innovation


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4

The emergence of financial services as innovators?

Emergent Innovators

5

15

25

35

Products

Customer

Experience

Processes

Business

Models

ServicesCombination

How dothey

innovate?

2005 2006 2007 2008

1

10

20

30

40

45

50

Financial Services Representation inBusiness Weeks 50 Most Innovative

Companies (2005 2008)
http://www.hsbc.com/1/2/homehttp://www.ing.com/group/index.jsp


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If Bankingis starting

to Innovate

then whythe urgencyto explore

the future?


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Historic levels of growth

Unprecedented Scale

2001 1st Billion Networked Humans

6 years later, in 2007,

the 2nd Billion arrived

700,000 new people join every day

Sometime in 2011 the 3rd Billionth person willjoin the network economy

roughly 50% of the worlds population

This massive growth in networked consumers will NOT be:

Homogenous

Predictable

Static

Device Proliferation (Billions)

0.3 0.5 0.91.2

1.61.9

2.32.8

0.1

1.6

3.1

5.1

7.6

10.6

14.6

0.0

3.0

6.0

9.0

12.0

15.0

2008 20092010 20112012201320142015

PC

Mobile Internet Device

0.6


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The Big 5:

Sony, BMG, Universal,EMI & Warner

80% market share

P2P:

2nd Generation: Gnutella, Kazaa, eMule & Kademlia

Counterfeits cost ~ $5 billion/yr

RIAA has filed 18,000 lawsuits

P2P paves the way for IPod & ITunes

Apple:

New channel

150 + million iPods

5 billion downloads

The Shifting of an Industry and the profit pools Music

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Physical

Digital

Source: Recording Industry Association of America

Napster:

56 million users in 2 yrs

5 million downloaded daily

1 million customers per day

Shut down for copyrightinfringements (2001)

25mm downloads

500mm downloads

Video

Applications

Next?

Unprecedented Speed

Drivers for Change:Disruptive Technology,Changing consumer behavior,New entrant in marketplace,Regulatory pressure


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Is it time for a

Bank industry

tectonic shift?


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Things dont change that fast in banking right?

What about ten years ago?

Ten years ago, there was no euro. There was no TARGET system.There was no EURO1 or STEP1 system. The European CentralBank had just been created, as had the EBA.

Ten years ago, the European Union did not include Bulgaria, Croatia, Cyrus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta,Poland, Romania, Slovakia and Slovenia.

Ten years ago, we were enjoying one of the largest stock marketbubbles ever, as the internet boom was in full flow.

Google and PayPal started at the end of 1998.

Shifts in a blink


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1994 Top 10 Banks

In 1994, the Top 10 banks in the World by Tier One Capital,

according to the Banker magazine, were: 1 Sumitomo Bank

2 Sanwa Bank

3 Fuji Bank

4 Dai-Ichi Kangyo Bank

5 Sakura Bank

6 Mitsubishi Bank

7 Industrial & Commercial Bank of China (ICBC)

8 Crdit Agricole

9 HSBC

10 Citicorp

Shifts in a blink


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2008 Top 10 Banks as of Sept. and it changed again

This year, its:

1 HSBC

2 Citigroup

3 Royal Bank of Scotland

4 JP Morgan

5 Bank of America

6 Mitsubishi UFJ Group

7 Crdit Agricole

8 ICBC

9 Banco Santander

10 Bank of China

In 14 years, only 4 of the original banks stayed in the Top 10. Therise of Chinas banks and disappearance of Japans banks is

particularly noteworthy.

Shifts in a blink


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The developing world has come to the rescue ofEuropean and US firms

$9.8B SingaporeInvestment Corp.

$3B ChinaDevelopment Bank

$2B TemasekHoldings

20% share QatarInvestment Authority

$1.1B DubaiInternational Capital

$3B China StateInvestment Co.

$1.4B MubadalaDevpt. Corp.$4.4B Temasek

Holdings

$6.6B KuwaitInvestment Auth. Et. Al.

$6.9B SingaporeInvestment Corp.

$7.5B Abu DhabiInvestment Auth.

$5B ChinaInvestment Corp.

$6.9B DubaiInternational Capital

$6.6B Saad Group;undisclosed

Dubai Intl Capital

Shifts in a blink
http://www.hsbc.com/;brochid=X1W5IEJQFW525QFIYNKSGWQhttp://www.citigroup.com/citigroup/homepage/index.htmhttp://www.ml.com/http://www.carlyle.com/index.htmlhttp://www.ozcap.com/index.htmlhttp://www.londonstockexchange.com/


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However - Power Shifts Equal Strategic Risk

Shifts in a blink


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Z uker punch Facebook effect

110mm users

47,000 organization groups

600MM searches a month

3,000 MM page views a month

6th largest trafficked website Growing users at 3% per week!

Valued at $15B

Shifts in a blink


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Vi i f th F t


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5 year research commitment

Research Themes

Building research capacity

Executives working jointly with researchers

Developing disruptive business models Engaged with other ML sponsors

Government, Academia, Industry expansion plans

Vision of the Future


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Research Macro Themes Described

Macro Theme Description

InformationValue chain

Information flow is the signal versus and noise of information science. Thevalue is an increase or decrease in signal. Information is the lowest atomicunit of measure for our research. The flows form interdependent chains orgraph of relationships. The flows of value are not exclusive to money andinclude any convertible value.

BehavioralEconomics

Includes any behaviors that happen before and after the decision of aconsumer or producer. Behavior is observed, modeled, anticipated,projected, predicted as well as all the vagaries of the human condition. Theunit of measure is at human scale and includes many uncontrolled factors.

Identity, TrustPrivacy, Security

Identity includes concepts of privacy or public disclosure. Trust implies theconcepts of gradations of security or no security if full trust is granted. Bothincluded measures of credibility and honesty or value systems that arehuman. The concepts span system processes and human interaction.

Network

Economies

Networks are the systems that connect and the people acting in social

interactions. Information flows, social behavior, identity and trust areaggregated into economic interactions within a network.

SocialResponsibility

Includes individual actions representing corporations as well their householdand raises questions of ethics. This aggregates the network economies intodefined groups that care for direct and indirect impact and consequences ofdecisions.


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Research Theory and Impact

Macro Theme Consumer Impact * Theory Basis Research Unit

InformationValue chain

Usability

Sensing Store

Communications

Signal/Noise

Bits/Bytes

Numbers/Time

BehavioralEconomics

Consumer

Buying Decision

Individual

Choice Theory

Psychology

Mind/Emotion

Identity, TrustPrivacy, Security

Consumer

Confidence

Risk Containment

Chaos Theory

Safe

Systems

Network

Economies

Connected

Consumption

Complexity/Game/

Graph Theory

Societal

Knowledge

SocialResponsibility

Consumer

LiteracyPhilosophy

Values

Ethics/Law


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CFB Research Outcomes Categories

All outcomes need to be adopted

before they are useful Artifacts

Research results with tangible embodiments that demonstrate what is possible

Early indicators of physical interfaces afforded interaction designers

Example: Patties Maes, Siftables devices

Techniques and methods

The invention of new techniques for analysis of experimental data.

Example: Deb Roy, Human Speechome Project Observations

Speculative insights based on observations that inform hypothesis forexperimentation

Example: Dan Ariely Behavioral Economies patterns

Understandings

Theories that challenge the prevailing beliefs. Intangible experimental demonstration

Example: Sandy Pentland, Sociometer discovery of Honest Signals

Philosophy

Radical thinking that breakthrough common practice

Example: Stallman, Free Software Foundation, Open Source Software
http://images.google.com/imgres?imgurl=http://creativecommons.org/images/deed/cc-logo.jpg&imgrefurl=http://creativecommons.org/licenses/GPL/2.0/&usg=__nqTOiwRwCIMvTRv4o6VpWAx418w=&h=150&w=150&sz=34&hl=en&start=36&sig2=8CENtxReKvlwvgei7QVyNw&um=1&tbnid=X_2SmFg1N5CjwM:&tbnh=96&tbnw=96&ei=E0EwSYWYOpGweqm8xLYE&prev=/images?q=free+software+foundation&start=20&ndsp=20&um=1&hl=en&rls=com.microsoft:*&sa=Nhttp://images.google.com/imgres?imgurl=http://images.starpulse.com/Photos/Previews/Dilbert-02.jpg&imgrefurl=http://www.starpulse.com/Television/Dilbert/gallery/Dilbert-02/&usg=__wOoK-CZpWxLzlDBGcUnOT2prw8o=&h=633&w=400&sz=28&hl=en&start=5&sig2=T0TobuuQWrlmeylDQ6Z9hQ&um=1&tbnid=wMm1GN9fj2ok5M:&tbnh=137&tbnw=87&ei=zUAwSeZRjpR6v9LArwQ&prev=/images?q=dilbert&um=1&hl=en&rls=com.microsoft:*http://images.google.com/imgres?imgurl=http://www.telegraph.co.uk/connected/graphics/2008/04/01/dlfool101.jpg&imgrefurl=http://denmarkvesey.blogspot.com/2008/06/corporate-branding-consumerism-memes.html&usg=__v5HNjDzXn8qccELrm79qWSTHsAY=&h=390&w=280&sz=13&hl=en&start=25&sig2=FpODpmseuNvdOcdW66vYRA&um=1&tbnid=orSBGBSiCZA_nM:&tbnh=123&tbnw=88&ei=bEAwSZaiCpGwesC8yLYE&prev=/images?q=behavioral+economics&start=20&ndsp=20&um=1&hl=en&rls=com.microsoft:*&sa=Nhttp://images.google.com/imgres?imgurl=http://bp1.blogger.com/_xnBKPY_t0YM/SBFp9suAZqI/AAAAAAAAAm8/k8XifZM2DIg/s400/human-speechome-project.jpg&imgrefurl=http://blog.califaudio.com/2008_04_01_archive.html&usg=__Vg1qvHEcCkgTrkO189HXxslrS3U=&h=251&w=400&sz=18&hl=en&start=1&sig2=XZ_JSGEe5KJ4KJWi5Q1IgQ&um=1&tbnid=E94jLJsrhVEviM:&tbnh=78&tbnw=124&ei=_D8wSc3ZC4fOeYr_9bsE&prev=/images?q=speechome&um=1&hl=en&rls=com.microsoft:*http://images.google.com/imgres?imgurl=http://www.lings.nl/weblog/images/siftables.jpg&imgrefurl=http://www.lings.nl/weblog/pivot/entry.php?id=866&usg=__kxb7IiOg8e8cRfeP_M9uiVRnJ68=&h=213&w=320&sz=57&hl=en&start=19&sig2=2gcienC-VuwuMdDml6DD2g&um=1&tbnid=VwaQbCTtV1e10M:&tbnh=79&tbnw=118&ei=vT8wSYetKIaQeoGtkcIE&prev=/images?q=siftables&ndsp=20&um=1&hl=en&rls=com.microsoft:*&sa=N


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Research Conceptual Structure

Value

Creation

TACTICS TODAYNow 12 months

STRATEGIC HORIZON1 3 years

RESEARCH FUTURES+3 to 10 years

VALUE

CREATION

SERVICE

SCIENCERESEARCH

Data

HumanInteraction

EconomicModels

Information Behavior

SystemDynamic Knowledge

NetworkRelationship

s

FinancialEcology

TECTONIC SHIFT


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The FUTUREis here

Its just not

widely

distributed

yetWilliam Gibson


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Research for the Future

Understanding Health, Wealth and Happiness

How do we support a Billion people?

Everyone, Anytime, Anywhere, communications

Re-conceive the physical space

Life logging and the new deal on data Information as the new currency of knowledge

Real-time human behavior segmentation

Models for social and economic networks

Nationwide living lab of Networked Relationships

Redefine the Risk Models for a Financial Ecology

Revamp technical infrastructure of large scale systems


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Questions?

Get Involved

Panel: Jeff Carter, Deb Roy, Ray Garcia

cfb.media.mit.edu

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