The Digital Disruption Of Financial Services


I’m lucky to have a job where I have the opportunity to meet a lot of innovators in financial services and fin-tech. As a consequence I build up a sense of the state of the industry and the key trends ahead, and I love to share these insights on this blog.

Of course, I had the finger on the pulse of the fin-tech startup community in my Innotribe job in the last 4 years. Now, working for the Bill & Melinda Gates Foundation, I focus on building financial payment platforms for the poor people and thus meet a wide range of stakeholders – governments, banks and central banks, telcos, mobile money operators, technology giants and startups. I can tell it makes for a very wide perspective and I do spend considerable time thinking and integrating this rich input.

I love doodling as well, so when inspiration comes I take my iPad and my faithful Jot pen and I try to capture this in a drawing. Here’s the latest one – a cartoon depicting in a funny way what I think is the state of the consumer financial services industry.

Image

I’ve posted it on Twitter and it generated an incredible amount of interest, so I thought I’d share some more about the underlying thinking, and also some additional insights coming from the numerous comments on Twitter.

philip1 Well, optimist that I am, I really thought of my drawing as a cartoon, exaggerating a situation to make a point. Philip rightly points out that sometimes real life is itself an exaggeration!

jorge

Indeed, I don’t think someone will acquire a global bank with 2 trillion US dollars in its balance sheet. But the point is not about acquisition, it is about who will eat these bank’s lunch if they don’t pay attention. Telcos are tempted to provide financial accounts, even though it makes them getting into the murky (for them) waters of financial regulation. In fact, in my focus countries (Nigeria, Indonesia, India, Pakistan and Bangladesh), telcos are probably best placed to reach out to poor people in remote, rural areas.

By delivering financial accounts and person-to-person payments, telcos and other mobile money operators are developing the next generation of low cost payments platforms. My belief is that these new platform will simply prevail in the traditional financial system (often referred to as “the rails”) – why in the world would we continue to use more complex and costly variants? In other words, if banks don’t embrace these new recipes for lower cost rails, they will be in dire straits. The readers of my book (“The Castle And The Sandbox”) will recognise this argument – banks will need to step out of their established “castles” and innovate and experiment in “sandboxes” to understand and adopt these new platforms.

The bounty, the vision, is the volume that will be brought in the system by the 2,5 Billion people who are currently out of any financial system.

alexey

nacho

Agreed, the predators are everywhere. Just to prove the point that banks can indeed step out of the castle, Simple was recently acquired by BBVA. I knew this when I drew the cartoon, and voluntarily included Simple in the “startups” cloud, just to show that nothing is really simple in the fin-tech eco-system :-)

benjamin

daniel

There is a show on French TV (“On n’est pas couché”) that used to start by introducing who is NOT invited to the show. Similarly, I’ve had a number of comments about who is not shown in the cartoon, and notably Paypal, Visa and MasterCard.

For me, the core business of these companies is really part of the current “rails”, so in my mind they are included in the “banks” cake in the cartoon. I know this is a big shortcut, and I can hear all the objections coming. But hey, as the author of the cartoon, I can choose who to invite in, right? ;-)

More seriously, I do think Paypal, the card companies, and indeed many banks do have innovative products and services “on the rails”. If you are following my blog you know that I’m a big fan of Paypal for international payments.

Now, on to the “hot” topic!

philippe

tomasz

I hope Philippe will comment on this post and explain more. I love the way Tomasz has captured my meaning – “Bitcoin slowly but surely heats up the pan”. I’ve written here why I think Bitcoin is important for the fin-tech industry – in a nutshell it’s not about the Bitcoin currency (which may or may not become one of the trading currencies on par with the RMB or the USD) but about the bitcoin (lowercase) inspired technology: the bitcoin blockchain and its massively distributed architecture. I believe this architecture will influence how the financial transactions are performed in the future. I used the opportunity of this post to add Ripple to the cartoon – I’ve also written about how this company uses the bitcoin blockchain architecture to perform very low cost international money transfers.

gigi

Gigi has the last word on bitcoin – financial technology, all electrons that it is, needs to contribute, as all other industries, to the massive ecological problem we are facing as a civilisation.

daniele

sam

Danièle, Sam, and all the numerous others who have retweeted and favorited my tweets – many thanks for your kind words!

And I give the final word – pardon, picture – to Jorge. And Jorge please comment below and tell us more on your thinking!

jorge1

 

Bank Innovation 2014 In Seattle


I had the privilege to be invited to the Bank Innovation 2014 event in my home town. I 2013-09-09 at 07-41-17loved the theme – “The future, in focus”. The theme was beautifully illustrated by a photo of Seattle’s Space Needle partly in clouds (the photo is mine, albeit similar to the one of the conference). I found it very catchy – now that I’m used to the weather of Seattle, I know that very often a day may begin in fog and end up in bright sunshine: Good metaphor!

The organiser and host of the event was JJ Hornblass. JJ has been a longtime follower of Innotribe, and we maintain over several years a dialogue about innovation in financial industry.

JJ invited me to come over for a “fireside chat” – a relaxed format where we indeed talked about a wide range of subjects and also invited questions from the audience. I loved the format. We did prepare for it but we also let the inspiration of the moment prevail, so the result was, I think and hope, entertaining and fresh.

I was very honoured by the way JJ introduced me – he retraced briefly my career at SWIFT, and emphasised the Innotribe experience. He then briefly explained my current job at the Bill & Melinda Gates Foundation, and wanted to explore the perpectives on the financial industry from these radically different perspectives. Thank you very much JJ!

Here are some links resulting from the fireside chat -

The event was very well attended (my estimate was about 250 people), very rich in topics – I appreciated a lot the focus on the fin-tech startup community. It was also very lively on Twitter (#BI14) and I made a lot of Twitter-friends.

Finally, it was also a  pleasure to meet Matteo Rizzi, my fellow Innotribe co-founder and dear friend. We haven’t seen each other since we took off on our respective ways after SWIFT, and it was such a thrill to have him visit my new home town!

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All Hands On Deck For Financial Inclusion!


I was recently in Nigeria, researching the state of financial inclusion in this country. While Nigeria is still in nascent stages of mobile money, I was impressed by the great willingness and energy to adapt and innovate.  There certainly is no lack of interesting ideas, which inspired me to write this post.

I’ll start with some background.

The ultimate goal of the “Financial Services for the Poor” team at the Bill & Melinda Gates Foundation is financial inclusion – enabling everyone on the planet to have access to safe and reliable financial services. It is an ambitious endeavor, considering that in excess of 2.5 billion people on the planet are excluded from such services today. The financial services I’m talking about range from basic account management and payments to insurance, savings and loans.

The excluded people tend to be extremely poor and have thus been overlooked by traditional financial service providers such as banks.  In many African and south-east Asian countries, cash is still king.

The key enabling technology to help achieve the financial inclusion goal is the mobile phone. It is a fact that a very large proportion of the financial excluded population does have access to mobile phones, making it natural to think of “mobile money” as just another use of the mobile phone – like making a call.  The well-known and documented example of mobile money is M-PESA in Kenya.

Established in 2010, bKash is amongst the fastest growing mobile money deployments in the world, serving millions of customers. bKash is a grantee of the Bill & Melinda Gates Foundation.

Another great example is the success of bKash in Bangladesh.   In both cases, these companies have overcome the many hurdles of deploying mobile money and making it a business for them.

Indeed, and this is of great importance, financial inclusion is not a charity affair – it must be a sustainable business. And while these two examples are great, there are many other countries where success is still far off because of the many hurdles in the way.

In this post, I want to focus on one particular hurdle for financial inclusion: access to mobile money. I will use the example of Nigeria I have visited recently and am thus more knowledgeable about the situation there. It is similar to that of many other countries.

In order for mobile money to work, it is necessary for people to have access to locations where cash can be exchanged for electronic or digital value, and vice-versa. In the developed economies, this is of course the domain of bank branches and ATMs. The problem though is that the financially excluded people we are looking to empower live in rural areas far from the cities, where the nearest bank branch or ATM could be hours of days walking or driving away.  The equivalent of a bank branch in a mobile money economy is an “Agent” – typically a small shop owner that provides cash-in/cash-out (CICO) services among other goods,

Here’s Harry (in white T-shirt), a shop owner and a FirstMonie agent that I met while walking the streets of an open-air market in Lagos, Nigeria. FirstMonie is the mobile money company of FirstBank in Nigeria (and a grantee of the Bill & Melinda Gates Foundation)

Here’s Harry (in white T-shirt), a shop owner and a FirstMonie agent that I met while walking the streets of an open-air market in Lagos, Nigeria. FirstMonie is the mobile money company of FirstBank in Nigeria (and a grantee of the Bill & Melinda Gates Foundation)

such as scratch cards for mobile phone airtime. It is estimated that 100,000 of such agents would be necessary in Nigeria to provide a sufficiently dense CICO network covering the entire population.

Now, who can provide mobile money services? In the case of Nigeria, there are 18 companies which have the necessary licenses. These companies are either emanation of banks, or standalone and often startup companies. Currently, telcos are not permitted to provide mobile money services. Each of these providers is seeking to build their own CICO network. The largest agent network is estimated to be 7,000, while the total number of agents across all providers is estimated to be 16,000 - far below the financial inclusion goal of 100,000.  In addition, these networks are more concentrated in large cities, far away from the rural population.

Looking at this very fragmented situation, one can easily understand the market dynamic – each mobile money provider is looking to build their own business in this rather fierce competitive environment. But, looking at it from the financial inclusion perspective, it’s very far from success.

One possible trajectory is for one or a few of these players to grow into the next M-PESA or bKash and exponentially grow the agent network on their own. This trajectory could be made more solid if the large telcos in the market are allowed as well to provide mobile money services, possibly then at the expense of the smaller players

Another possible trajectory could come from answering the question: is there value in considering a shared agent network, serving all the players on the market and, at the same time, serving the financial inclusion goal? Coming from a long career at SWIFT – a shared utility in the banking sector – I understand deeply how utilities work and I look very positively at this idea of a shared agent network.

Building a dense, 100,000 strong, CICO agent network in Nigeria is deep, sustained infrastructure work akin to building a physical highway. Each and every agent needs to be –

  • Found, verified and enrolled
  • Equipped with the right tools to provide the service (at minimum a smart phone)
  • Upgraded with premises security
  • Educated to understand how to provide the service
  • Supported by a readily reachable support hotline
  • Supported by a readily available and controlled supply of cash (for cash-out)

There is a lot of merit considering  the agent network to be in the collaborative rather than competitive space. Every mobile money provider needs to have these capabilities, but having them doesn’t, in the medium and long term, offer a true competitive advantage. It may be counter-intuitive, as it is natural in the short-term to think of infrastructure as a key competitive asset and key business enabler. The longer term economics of infrastructure favor sharing because the cost of maintenance and improvement of infrastructures accumulate over time and drag the margins down. This is true in the digital world as it has been true in many large projects in the brick & mortar world (think highways for instance).

I mentioned SWIFT earlier, because it is a good illustration of digital infrastructure. In a different domain and for different capabilities, the banks around the world have followed the same reasoning: why spend time and resources in building, over and over again, something that ultimately will become a commodity (in this case – a secure, reliable, world-wide inter-bank network). SWIFT celebrated their 40th anniversary in 2013, demonstrating how a shared utility can be a strategic tool.

So, a shared agent network could provide, in Nigeria, a strategic resource enabling the industry to save costs by rationalizing infrastructure and allowing each and every player to compete in the value-added services space (to name a few – end user pricing, service levels, additional services such as savings, insurance and loans).

It makes sense. However, it is a novel concept and as such needs much better understanding – questions of governance (who owns the shared network), economic and business models (how to price the shared network services), and reliability and safety of the network are all to be examined. It seems that the industry in Nigeria is willing to go a step further in refining this concept, and I certainly look favorably in participating in these exploratory efforts.

Ultimately, financial inclusion needs to be the business of all the stakeholders in the industry – all hands are needed on deck. And as my colleague Vincent Kiyingi of Pride Microfinance in Uganda says very vocally in this video (see clip from 5min 10 sec): “If cash is king, then the king is dead!”

The Next Billion People


In the recent months, since I joined the Bill & Melinda Gates Foundation, the word “billion” has acquired a life of its own in my mind.

More than one billion people live in extreme poverty.

There are in excess of 2.5 billion people who have no access to a financial account.

More than half of the world population (more than 3.5 billion people) live in Asia (source: Washington Post).

population-map

By 2030 there will be billions of people who will have been lifted out of extreme poverty.

One percent of the U.S. budget is about $30 billion a year.

And more and more. The word “billion” keeps coming back in many conversations.

Sometimes it sounds ominous or daunting – what can we, what can I, do about these billions?

Most recently, in Bill and Melinda Gates Annual Letter 2014, the topic is more factual and optimistic – we should not be daunted by the task of helping these billions of poor people, and we should not be afraid of the billion-surpopulation.

You will know me as an optimist, and I whole heartedly subscribe to the positive view. In fact, I got thinking – what will  the next billion people bring to this planet?

The next billion people, in my opinion, will be connected people – connected to the internet and connected to each other and a billion devices. A great majority of them will still be poor, but they will be able to make a difference by being connected – they will have a voice they don’t have now. So they will make more of a difference than now.  My job is to help them make this difference.

Here is my attempt to describe this new generation.

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How do you think about the next billion people?

The “Why”, The “What” And The “Where” Of My Job


Since I took the new job at the Bill & Melinda Gates Foundation, I get many questions from family, friends, ex-colleagues about it – what is it about, what are my responsibilities, how does it fit with other Foundation initiatives, etc.

I’ll get to write about it on this blog shortly – I’m still surfing the information and network waves and it takes a lot of my time. Meanwhile, an interesting thing happened – I was invited to a radio show where I shared verbally many of these answers. So, if you have an hour to spare, you can listen to it here! (suggestion: listen to it while working out)

The show – Breaking Banks on VoiceAmerica – is run by Brett King. Brett asked me to join him and Jennifer Tescher, CEO of the the Center for Financial Services Innovation, to talk about financial inclusion. Jennifer covered the subject from the perspective of “developed” countries, while I covered the situation in my focus countries (Nigeria, India, Pakistan, Bangladesh and Indonesia). It was very enjoyable and informative for me.

Listening at the show again, I realized I describe the “Why”, the “What” and the “Where” of my job. So there it is for you!

(Hint to Brett – next time we can talk about the “How” and the “When” :-) )

Brett is an innovator, author (best-selling book “Bank 2.0″ and the just published follow-up “Bank 3.0″), banker (but not your traditional kind, he’s the founder of MovenBank) and speaker whom I met while working at SWIFT. He was often a partner in Innotribe events and projects.  He’s like a missile, disrupting the traditional and established banking. He’s very knowledgeable and connected. He writes superbly. He doesn’t hesitate to share and advise (he was one of two people who convinced me to write my book, and helped me find an editor). And he’s fun!  I hold Brett in great esteem.

On to preparing some great projects for 2014. More on that soon.

Imagining The Future With “Shift 2020″


I’m excited to announce my contribution to a new book project - shift 2020: How Technology Will Impact Our Future. It’s a self-published book curated by Rudy De Waele which includes foresights on how technology will impact our future from some of the world’s leading experts.

The idea of shift 2020 is based on Mobile Trends 2020, another collaborative project Rudy launched early 2010. It’s one of the highest viewed decks on Slideshare (in the Top 50 of All Time in Technology with +320k views). Reviewing the document a couple of weeks ago Rudy realised that many of the predictions were becoming dated, and asked the original contributors for an update on their original predictions and for new foresights for the year 2020.

Rudy broadened the scope of the new book and asked new contributors to give their vision and foresights on a number of additional topics, including 3D Printing, AI, Apps, Biotech, Cloud, Connected Living, Crowdfunding, Data, Education, Entrepreneurship, Enterprise, GreenTech, Health, Hyperconnectivity, Maker Movement, Media, Retail, Robotics, Sensors, Smart Cities, Social Media, Society, Surveillance, Transport and Wearables.

shift 2020 is designed by Louise Campbell, an award winning UX and design technology professional.

The book includes 80 pages of original content, featuring most of the original Mobile Trends 2020 contributors in addition to some 40 new contributions from around the world – prominent futurists, trend-predictors and industry leaders. There are also opportunities for companies to personalise the cover of the book with their name and logo.

shift 2020 includes quotes, paragraphs and essays from confirmed contributors, such as:

Neelie Kroes (VP of the European Commission), Douglas Rushkoff, Salim Ismael (Singularity University), Loic Le Meur (LeWeb), Shannon Spanhake (Innovation Officer San Francisco), Adeo Ressi (The Founder Institute), Boris Veldhuijzen (The Next Web), Saul Klein (Index Ventures), Aubrey de Grey, Sunny Bates (Kickstarter / Jawbone), Carlos Domingo (Telefonica Digital), David Rowan (Wired Magazine), Laurent Haug (Lift), Martin Recke (next), Will Page (Spotify), Scott Jenson (Google), Gerd Leonhard (The Futures Agency), Yuri Van Geest, Russell Buckley, Russ McGuire (Sprint), Kwame Ferreira (Kwamecorp), Delia Dumitrescu (Trendwatching.com), Georgie Benardete (Shopbeam), Hans-Holger Albrecht (Millicom), Tariq Krim (JoliCloud), Dr. James Canton, Andrew Hessel (Autodesk), Christian Lindholm (Korulab), Eze Vidra (Google Campus), Harald Neidhardt (MLOVE), Raina Kumra (Juggernaut). Robin Wauters (Tech.eu), Nicolas Nova, Gianfranco Chicco, Shaherose Charania (Women 2.0), Ken Banks, Marc Davis (Microsoft), Felix Petersen, Kelly Goto, Erik Hersman (Savannah Fund), David Risher (Worldreader), Glen Hiemstra (Futurist.com), Jessica Colaço (iHub), Mark Kanji (Apptivation), Rohit Talwar (Fast Future), Priya Prakash (Changify), Andrew Berglund (Geometry Global), Alan Moore, Martin Duval (Bluenove), Maarten Lens-FitzGerald (Layar), Andrew Bud (mBlox/MEF), Andy Abramson, Fabien Girardin, C. Enrique Ortiz, Raj Singh (Tempo AI), Inma Martinez, Robert Rice, Ajit Jaokar, Jonathan MacDonald, Tony Fish, Dan Applequist, Redg Snodgrass (Wearable World), David Wood, Mark A.M. Kramer (razorfish Healthware) , John Kieti (m:lab), Aape Pohjavirta, Kosta Peric, Blaise Aguera y Arcas (Microsoft) , Michael Breidenbruecker (Reality Jockey), Tricia Wang, Louisa Heinrich (Superhuman), Mike North (UC Berkeley), Mac-Jordan D. Degadjor, Kate Darling, Simon White, Chris Luomanen (Thing Tank), Ariane Van De Ven (Telefonica), Ed Maklouf (Siine), and many others.

The eBook version is now available and the printed books most likely in the new year. Check the shift2020 website for latest updates and additional information.

Baggage of Understanding: Women’s Groups in India Managing Money And Health Care


(cross posted from my blog at impatientoptimists.org)

I’m back from a field trip in India (Delhi and two cities in the Uttar Pradesh state – Agra and Mathura). I’ve visited the slums and I come back with a baggage of understanding, compassion and hope. Despite the poverty and the difficulties of living in the slums, I have seen extraordinary courage in people. In some cases I have seen smiles, showing how resilient and resourceful the people in these slums can be. I understand better how the Bill & Melinda Gates Foundation helps and how I can contribute to that endeavour with my “Financial Services for the Poor” job.

I have been several times to India in my previous careers, visiting the large financial or technology centres such as Mumbai, Chennai and Bangalore. While I did see of course poverty in these previous trips, it was always from a distance, from the air-conditioned cars and vans.  So, this trip, align with several of my colleagues, was about getting closer and understanding better the people in the slums we at the Foundation are helping. Seeing for my self, not by watching movies (I did love the “Slumdog Millionaire” movie though)

The first experience on the ground is getting the sense of abstract numbers. Uttar Pradesh (UP), just one of the 35 states and territories in India, has a population of 200 million on a surface of about 240,000 sq kilometres. In other words,  UP has about five times the population of California on 60% of the area. UP has three times the population of France on half the area. Bihar, the other most populous state of India, has two times the population of France on 20% of the area.

You can see and feel this reality very fast. The best illustration is the crazy traffic in the cities. And, on the outskirts of the cities, the slums. The population migration trend in India is very much like in most other countries – people tend to move to the big cities. Delhi and its surroundings is a city of 22 million people  (more than the population of Belgium and Portugal together; three times the population of the state of Washington).

The slums are (sometimes vast) cities within the city. They are not necessarily characterised by poverty. There are many poor people in the slums, but what really defines the slums is that they grew out of nothing to accommodate all the people and migrants, and thus everything is haphazardly cobbled together, from water to electricity to other basic services. And, most noticeably, the open sewers as there is no other evacuation of the used waters. The issues of poverty, health, hygiene, infant mortality are huge.

The Foundation has a number of programs and initiatives to help the poor in the slums of Bihar and UP.

An NGO worker explains family planning techniques to rickshaw pullers (at their tea break, in a street in Agra)

One of these, and the focus of my field trip, is about family planning – empowering families to decide when to have children. Taken for granted in many countries, it is essentially unknown in the slums. There are many reasons for that, going from the lack of education to deep cultural roots.  As a result, it is very common to see families with numerous children, 3 to 8 or more. With very few means to support these children for basic food and health food, not mentioning education later.

The Foundation supports UHI (Urban Health Initiative) in India and other countries to co-ordinate the access to the poor in the urban slums. UHI reach out themselves in some cities, and co-ordinate with a number of other NGOs in larger cities with many slums. They educate the families about the tools available for family planning (such as contraception) and direct them to appropriate private and government providers of health services.

It is an enormous communication campaign – everything is used, from state wide TV and radio information, all the way to street level information.  And it is very important that the information be clear, concise, understandable even by people who can’t read well.

The patience, perseverance and passion of UHI and the NGOs on the ground is an amazing thing to see and experience.

But the most inspiring for me was to meet the women self-help groups. Encouraged and supported by UHI and the NGOs, courageous woman get together to help each other in many domains – going from protection from domestic violence, advising and supporting, domestic tasks. They also manage an elaborate system of saving money in the group, in order to be able to provide loans to the women in need (such as for mariages, deaths, schooling).  This last activity of course has triggered my attention, as this is what my job at the foundation is all about – empowering the poor, and these self-help groups, with access to safe and reliable ways to manage their money.

A colourful and passionate group!

These women are extraordinary.  An example of courage, as getting together was not something seen as positive by their husbands and in fact the ancestral culture. They are enthusiastic, passionate, resilient, full of initiative. And, despite everything around them, they smile. They tell me there is hope. They give sense to the Foundation’s efforts.

I will remember them forever.