18 April 2014

Elizabeth Lumley

Elizabeth Lumley - Finextra

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The future is LEGO!

21 November 2012  |  6873 views  |  5

This post was originally called Atheists versus Evangelicals...then I walked away from it. Then I toyed with the idea of 'Battlefield Payments'...but what I really wanted to talk about was more than payments and I'm really not that big a John Travolta fan anymore. 

Then two (well, really three) things happened at Sibos in Osaka this year. (Yes, I know it was three weeks ago, but a 20 hour journey via planes, trains and buses, plus jet lag, plus 24 hours in Tokyo that ended with tequila and karaoke...takes a while to recover from, awright?)

Anyway...at Sibos I moderated a panel with Vocalink and Earthport looking at payments utilities. 

No wait, let's back up bit. Someone sent a Tweet, from Innotribe at Sibos, which said something along the lines of 'The bank of the future will be a technology company with a banking licence!'

Oh boy

Why? Why exactly? (Never mind the jokes from the peanut gallery that the world already has a technology company with a banking license - it's called HSBC)

Ok, why?

Let me rephrase - Why is that Tweet ridiculous? (Seriously, it is as ridiculous as me saying 'The future of money is LEGO! - *more on that later)

How many of you work at a bank? (I see a lot of raised hands)

How many of you would choose to start a bank - with all that mish mash of regulations, compliance, processing, and customer service issues…et all? (Hmm, not too many hands, I see)

There are a lot of very smart people who work at places like Google, Apple and even *gasp* ...Facebook. Do you think any of them would want to be a bank or start a bank?

Don't get me wrong...Do they want all those yummy dollars, pounds, euros and renminbi rattling around in customers pockets (and smart phones)?

Hell ya!

Do they want to influence how those customers spend that money and on which virtual premises they get rid of all that dosh?

Can you spell 'shareholder wet dream'?

Do you think they want all of that to happen while dealing with complicated and boring shit like Basel III, Dodd-Frank and the minefield that is cross-border payments? 

Ummm.....

You have hit (what I have decided to trademark) the Reality Wall. 

Technology companies are not becoming banks – not real banks anyway, that are subject to all that regulatory oversight.

They're just not. This is not an argument or a discussion. It’s like dealing with a right-wing American politician 'Women's bodies DO NOT DO THAT, they don't. End of story, no discussion. You're opinion has been fact-checked and found lacking. You have hit the Reality Wall(TM).'

Wouldn't it be smarter to say something like 'The bank of the future will be a shifting ecosystem of partner banks, APIs, start-ups, global telecoms, alliances and technology behemoths?' (is that too long to Tweet?)

If I wanted to drive from New York to the California in the US, I would take Interstate 40. I wouldn't wait for a band of 'disrupters' to design, dig and pave a new road that 'promises' a better ride. Never bet against the path of least resistance.

Getting back to that session I moderated at Sibos Changing market opportunity for payments utilities. The session looked at how banks can take advantage of existing infrastructures, such as the UK's Faster Payments or UK mobile phone numbers, and use that to explore new markets and foster innovation.

Quite the opposite to, that overused word, disruption. 

I'd take this even further - industry darlings like, merchant payments dongle provider, Square aren't disrupting anything. Cash, maybe. But banks? No. Card companies? Certainly not. The customers or the merchants? If anything it's decreasing disruption to those groups. 

I went to (should we say Square-clone for the sake of shorthand?) iZettle’s launch in the UK the other week and MasterCard and Amex were jumping over each other to snuggle up with iZettle on stage. Do you think card companies are afraid of this new technology? Not likely. MasterCard even introduced iZettle to their UK distributer - EE.

So what point am I actually trying to make? Maybe it's because I'm fed up with the word 'disruption' as a byword for anything that is cool or innovative.

Maybe it's the knee-jerk assumption that it's the banks that are the sole problem and if we could just eliminate the evil banks from the payments equation everything would be simple, clean and efficient (I think the world and the industry are a lot more complicated than that)

#legotothefuture (with co-founder Trevor LaFleche of Dovetail)

Let me propose a future for you all. A future I discussed at length during the end of Sibos party (a hotbed of alcohol and sushi-fuelled intellectual thought). A truly 'disruptive' future where there is no need for banks or money as we know it today. That future, boys and girls, is *LEGO.

(stay with me)

There are at least (subject to fact-check) a billion children on LEGO right now. Your future customer base already uses LEGO - they use it, build it, trade with it, lose it - every second of every day - right now.

That's right, ONE BILLION children, today, already use LEGO.

Wait, until they grow up.

Is your firm ready for the LEGO generation?

WHAT is the ROI of doing nothing in regards to LEGO?

Look at the facts:

  • Ask any mother, there has to be at least 100 trillion LEGO pieces in existence. 
  • They are indestructible - they can survive any vacuum cleaner, any dust pan and broom, any canine digestive system.
  • Unlike the cash in your pocket - LEGO regenerates
  • It is recognised globally, adheres to global standards – it is the only object that could possibly be ready to serve as a the new single global currency
  • I give you the Single LEGO Payments Area (SLPA)

Is anyone going to join me on my crusade to make LEGO the currency of the future?!

No?

OK, substitute LEGO for ‘Facebook’ or ‘smart phones’.

When people debate and discuss the role social media and social business will play in financial services, the answer is not ‘there are a billion people on Facebook!’ (whoop-de-do, there are a billion people in China – they’re still not buying my chopsticks)

When banks start looking at the future of their customer outreach, the answer is not ‘there are more smart phones than toothbrushes!’

The questions for payments and for the banking industry are: ‘How do we make payments processing faster and more efficient?’ How do we fit our services into the changing lifestyles of consumers in a seamless way?

The strategy should be ‘how do we do this in the most non-disruptive way possible?’

This is done by re-using existing banking infrastructure; by building partnerships between banks and providers of innovative technology; by taking advantage of the fact that banks are already compliant with global regulations.

Because if your only answer is ‘banks will be destroyed and the disrupters will take over’ you might as well be saying:

 ‘The future is LEGO’. 

 

The customer of the future is already here TagsPaymentsSibos

Comments: (6)

Nasir Zubairi - The Currency Cloud - London | 21 November, 2012, 13:54

Interesting piece. I know that some of the firms you speak of are indeed considering entry into banking services, leveraging their brand and distribution to penetrate the market. 

As for Lego being the future of Finance - indeed, I could not agree more. Virtual Banks can be created by bundling services from a variety of specialist and hi-tech service providers that excel in their niche. See the last slide: http://www.slideshare.net/currencycloud/the-fintech-revolution

Tim Tyler - Misys - London | 21 November, 2012, 14:11

Before adopting the world of LEGO, we would be first forced to adopt Duplo. It's a bit clumsier, but we're assured it can do everything we want, even though it can't. Then we make the miraculous leap over to LEGO. Now we really can do all that we want, utilising the global brick standard. But just as we are all consumed within our LEGO world, we get forced down the Meccano route. Essentially does the same, but in a slightly more complicated way. Publicly we will rave about Meccano, but privately with our confidantes we will talk about our preference for LEGO. Ultimately it is about what most satisfies our demands - our demands, not demands artificially foisted upon us, but our demands. LEGO has managed to do that over the years, from basic LEGO sets through to Technical LEGO to Robot Mindstorms LEGO. Fundamentally the same, maintaing the underlying user experience, but evolving with the times, keeping up with our demands. Which I think, Liz, is saying pretty much what you are.

Chris Thorpe - National Savings and Investments - London | 22 November, 2012, 10:32

Funny, and insightful. I wonder if (and I'm aware I'm over-generalising here) we are moving from a world where banks begged tech companies to sort out their data processing, to one where tech companies beg banks to guide them through the compliance maze. Maybe we'll see the launch of a startup bank that exists only to be a white-labelled back-office service, and whose sales pitch to partners would be, "Innovation? we leave that up to you".

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 22 November, 2012, 10:45

@ElizabethL:

Great post. You've hit the nail on the head so many times that I lose count but I specifically wanted to call out your points about (1) elimination of banks from the payment equation and (2) SQUARE / clones since they also happened to be the key focus of my opinion article titled "Impact of Regulation on Financial Services Providers" appearing in the Aug. 2012 issue of  The Journal of Internet Banking & Commerce.

Far from disrupting banks, most of the payment startups will vanish overnight if banks stop operating the banking rails.

SQUARE / clones expand the use of cards and thereby enlarge the interchange pool for banks. So, they're allies – not adversaries – of banks and your observation that "MasterCard and Amex were jumping over each other to snuggle up with iZettle on stage" just proves the point.

Elizabeth Lumley - Finextra - London | 22 November, 2012, 10:56

Thank you, Ketharaman. Yes, I agree. Products like Square are bank allies.

I think we have hit a change in attitude from banks. It would be hard to argue that most banks are ignoring mobile or social or improving customer interactions.

The financial innovations and projects that keep banks in the equation, will have the longest shelf lives.

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 22 November, 2012, 11:48

@ElizabethL:

You're absolutely right. I've written a couple of posts on Finextra about how customers wanting quick resolution to their issues from banks should ping their banks on social media. I got a taste of what's happening on the other side when I met this bank yesterday. It already a team of people to spot and respond to every tweet sent to it. Over the past few months, it has witnessed a surge in volume of messages over social media and has recognized the shortcoming with its labor-only approach of responding to them. As a result, the bank has decided to adopt a realtime social intelligence solution that not only overcomes these limitations but also enables it to respond to social media messages at the 5-minute speed and 24 x 7 X 365 working hours of the Internet.

On the other hand, I've logged complaints with many "disruptors" like PayPal over six months ago. I'm sure I'll get a reply within my lifetime.

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name

Elizabeth Lumley

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Multimedia and Special Projects Editor

company name

Finextra

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2009

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London

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I am the multimedia and special projects editor at Finextra.

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