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“The concept of money is changing”

Technology can only deliver better financial services if concepts of access, ownership, trust and identity are revisited and updated

There’s a future for money that puts the financial services industry right at the heart of everything. And another in which we’re all completely irrelevant. If we want to get to the bank-friendly future, we have to start challenging our assumptions – now.

“Money today works for everybody, rich or poor. When we talk about the future, we make an assumption of access. But for everybody who’s on the internet, there’s somebody not on the internet,” Carlos Menendez, president, enterprise partnerships at Mastercard, told the 1,000-plus delegates attending this year’s ‘Future of Money’ session in the plenary room at Palexpo. Money today works, and because it works, it can be resistant to change, panellists observed. The further issue is that money today is not a fit platform for all the tech-enabled services, cost savings and efficiencies that the financial services industry could deliver to a networked world.

We could do so much, but today’s money users are either happy with the status quo, or they can’t connect to the future, or both. The first challenge, then, is not just to evolve our service provision, nor merely keep pace with emerging technologies, but to ensure that what we offer tomorrow is as readily accessible – and easily acceptable – to the customer as today’s cash. Money has to fit into the human world, and it has to remain simple.

Not so simple?

Keeping it simple is a challenge when we are anticipating disruption to the financial services industry (and many others) from the internet of things (IoT), which will effectively link everything to everything else via the internet. This will impact our homes as well as our work. “I shouldn’t have to be a system administrator to live in my own home,” said Amber Case, cyborg anthropologist at CaseOrganic.com, and a fellow at Harvard University’s Berkman Klein Center for Internet and Society. “We are no longer dealing with finite systems,” Case added.

Increasing interconnectedness is already providing challenges and opportunities. Both human:machine and machine:machine interactions generate highly personalised and actionable data that can be used to fine-tune financial service provision. The ‘Future of Money’ session began with a brief animation, in which the all-wise ‘Mr Sage’ floated with ‘Mr Money’ on an ‘ocean of information’ generated by our interactions with technology (and those between our various gadgets); in the animation, the two protagonists delivered an optimised, data-driven ‘Future of Customers’.

Already, telematics enable car insurance quotes to be tailored to our driving skills. And just as soon as somebody perfects the necessary cranial sensor, we will only need to have the thought ‘pizza’ to prompt a drone to drop our order through the sunroof of our self-driving car. “Everything talks to everything, and end-points make their own decisions,” observed moderator Udayan Goyal, managing partner of Apis Partners and founding partner of Anthemis Group.

This might be fine if you still want the pepperoni that was your first thought, but a range of more serious issues arise. “In the centre of interconnectedness is data,” said Doug Shulman, senior executive vice president and head of customer service delivery at BNY Mellon. But whose data is this? What if something in our personal data reveals us to be uninsurable? What if the machines get it wrong – or worse, get hacked? Where does the liability fall? “We are going to have to rethink the notion of ownership,” said Goyal. Later, Case argued for personal ownership of data, with limited authorisations for use by other parties. Rather than financial institutions having permanent access to the client records, “I should have my data stored with me at all times, and I should allow them to have access to it for a period of 24 hours to add data to my file,” she said.

Trust and identity

Goyal raised an issue dear to the hearts of many in the audience: regulation. “How do we regulate a world in which all the rules have changed?” he asked. In this current period of transition, the panel’s interim answer was that we must build trust into everything we do. “The whole reason money has worked is that there is trust,” said Mendendez. “But the concept of money is changing,” he added, referencing the ability of money to ‘carry’ valuable data rather than just enable a transaction. Already, we carry cards that validate our identity, providing additional data – for example, our home address – without question. This is a very basic first step towards a future in which our whole digital identity – our personal data set – is present with us in any experience. “It’s important that the digital identity is kept secure,” said Menendez. “If the data, the money, is not kept secure, it doesn’t scale, because there’s no trust. It’s the trust of consumers that will drive acceptance.”

How do we build that trust? For many, technology is the answer, in part because of the transparency it can bring to service provision, but also because of the convenience and added value of more personalised services. Jon Stein, CEO and founder, Betterment, cited his own company’s recent survey of consumer sentiment around the most and least trustworthy industries. “Number one was technology, and the last one was financial services. People inherently distrust financial services, and technology is an answer to that. Technology brings trust,” said Stein.

Certainly technology-led firms such as Betterment – which Stein refers to as an online investment advisor rather than a ‘robo-advisor’ – have forced traditional financial institutions to re-examine their service delivery models by providing retail customers, especially young ones, with a new kind of solution to a problem (future financial security) that was otherwise looking increasingly intractable.

Building symbiosis

But we’re not ready to hand over the future of money to machines; not yet, and perhaps never entirely. “What happens when automated systems go wrong?” asked Goyal, who answered his own question by showing a clip of the S&P500’s fluctuations during the ‘flash crash’ of May 2010, complete with screaming (human) traders on the audio track. As more recent incidents have shown – such as the British pound sterling’s 6% drop in value in Asian trading in early October – automated systems can be vulnerable to positive feedback loops that create instabilities and inaccuracies. This can affect our personal credit files, for example, as well as major financial markets. How do we address that risk? Answer: by letting machines be machines and people be people.

“We forget that technology is really good at noticing patterns over time and humans are really good at understanding the context. The more we automate systems, the more important our human experience becomes,” said Case. We should aim to build a symbiosis between ourselves and our machines; if we get that right, we’ll become smarter because our machines will be supporting our decision-making. And when we get to that point, our customers will trust us even more than they do now.

This discussion on the role of machines and humans in financial services found echoes throughout Sibos 2016 – and not just at Innotribe. However, there was a particularly neat twist in the session, ‘Emerging Technologies for Financial Services’, moderated by Michell Zappa, founder, Envisioning Tech, immediately after ‘Future of Money’.

Zappa outlined a number of principles underlying the emergence of new technologies; among them “centaur thinking”, whereby a human:machine combination outperforms either a human or a machine acting alone, derived from a form of chess, in which a human/AI combination (a ‘centaur’ player) will beat a chess machine or a grandmaster. “You need to combine the consistency, the speed and the precision of a computer with the creativity, the adaptability and especially the intuition of a human,” said Zappa. Do that successfully, and the future of money may be yours.