Welcome to the Finextra Future Money liveblog where we'll be keeping you abreast of all the news and views as leading figures from the fintech world gather at Level39 in Canary Wharf to explore the new wave of innovation sweeping across the financial services sector.
That's it for today. We'll be back tomorrow to talk collaboration and competition, apps and APIs, and attracting VCs.17:13
Audience Q: could banks let customers see where their money is going to so that there is a personal relationship as there is with crowdfunding platforms? Panel think its an interesting idea but aren't sure how you can make it happen.
Zubairi suggests that most people don't really care where their money is. Notes that the big 5 still dominate UK market despite the new switching service and record low trust in RBS, Lloyds etc.17:00
We're onto the bad boys of alternative finance: payday lenders. Shrier says Wonga serves a need and Roche-Saunders thinks that the industry will be cleaned up by new regs. Hileman reveals he knows an investment banker who refused to invest in a payday firm for ethical reasons...16:52
Zubairi asks if there's a danger in letting people invest their own money? We have experts to do it on their behalf for a reason. Is it sensible for punters to allocate their own capital?
Panel seem fairly relaxed about people taking a DIY attitude and thinks they must be trusted to do what they want with their own cash. Innovation has big rewards but it comes with risks. If a few doctors lose money, that's a price worth paying for exploring a new form of financing.16:44
Shrier says that crowdfunding lets investors cover their bets by spreading investments across several firms in the way that big players do.
Roche-Saunders says that investors know that most bets will fail and returns may not be great but people like to have an affinity with companies that they believe in. 16:35
After a quick coffee break, we're back for the final session of the day: New model finance. Nasir Zubairi from New Buckland Financial Services Consulting is moderating and is joined by Garrick Hileman from the London School of Economics, Gillian Roche-Saunders from Bovill and Barry Shrier from Liquity.
Zubairi asks audience if they've invested through crowdfunding - about 10 have, more than have lent through P2P lending platforms.
Zopa's been around for some time, why is P2P and crowdfunding really taking off now? Shrier says that it's just the nature of exponential growth, we're only now seeing it reach a tipping point.
Roche-Saunders says that interest was tentative until recently because of regulatory uncertainty. That's changing in the UK thanks to the new FCA and its more friendly attitude. Says it took up to 18 months to get through reg process before, now it can be done in four months.
Our academic, Hileman, says the alternative finance industry is exciting and 'disruptive' and expects banks to make acquisitions to "cover their bets".16:02
Audience member notes that we're hearing from the labs/accelerators, not from the entrepreneurs. He asks if all these labs give false hope because vast majority of startups will fail.
Liolios says that he recently told someone at a pitch day that they should probably call it a day. Cockerton says Level39 rejects most applicants but when one is accepted you have to give total support.15:52
What will accelerators look like in five years? Masood says that they will not be shiny and new, they'll just be a part of how you do business. Navarro says that he wants the whole bank to act as an accelerator. Liolios still thinks that is a need for independent outfits that help bridge the gap between entrepreneurs and big biz.
Audience Q: are bank labs just PR exercises, a way of saying 'we innovate'? Unsurprisingly, Navarro says no. Masood says PR is in everything. It's not such a problem. How much is Future Money a PR exercise for Finextra? [How dare he?]15:46
Whatmore asks for success stories. Cockerton talks about how firms can graduate from Level39 to Level42, which is for startups that graduate and grow beyond the lab. Masood says seven participants have raised more than $10m between them and seen revenues grow substantially.
Navarro defines success in terms of how the programme has changed the bank's mindset, with senior execs getting involved with young, innovative startups.15:36
On to mentoring. Masood says that one accelerator had a thing called 'death by mentorship'. Most relationships won't work, there will be conflicting advice so you have to have a mentor test. Liolios agrees - sometimes mentors are the best thing about a programme, sometimes the worst. You need mentors who have altruistic attitude. Startupbootcamp has startups publicly rate mentors. Navarro says that mentors are most use on the commercial side, helping firms take their technology and sell it.15:26
What is a good lab/incubator? Masood says it's important to have a fixed time - eg 3 months - to focus minds and keep the participants hungry. Cockerton adds that as these things mushroom, they're becoming more focused, so rather than industries some are concentrating on tackling specific problems.
Liolos says that you have to focus on the participants. Startupbootcamp has sponsors but they don't get any say in how things are run. Masood notes that Startupbootcamp takes a stake in startups, unlike the programme he runs at Accenture. 15:13
OK, we're moving on to our next session, which is on labs, incubators and accelerators. This one features Claire Cockerton from Level39, Nektarios Liolios from Startupbootcamp, Samad Masood from Accenture and Pol Navarro from Banco Sabadell. Applied Creativity's John Whatmore moderates.
Navarro begins by admitting that it's difficult to innovate in a big bank with the compliance and regulatory constraints. Running a lab helps to tackle this and also provides an ecosystem for entrepreneurs without stifling them.14:57
Audience Q: what's the difference between developed and developing world. Wylie cites the use of social media data for credit checks in developing countries (something Finextra covered
earlier this week). In the UK, people are less willing to hand over their Facebook details.
Taylor draws another distinction: between Gen Y and the rest. Young people are far more willing to share their social lives - whatever works.
RBS staffer asks for examples of where big data is being used well - where is the magic happening. Wylie says there are plenty of egs outside of FS industry. Infact, firms have got so good, it's a bit creepy. He does almost all Web browsing in incognito mode now.14:39
Which brings us on to regulation. Worthy has a Q for the audience: do you see regulation as a good thing? Audience asks back: for who? Wylie admits that it's always good for him and other vendors but for banks the answer is less obvious.
Worthy, a lawyer, notes that the European Court of Justice has just thrown out data retention regs on privacy grounds. Also mentions the recent ING mess, where the bank had to pull back from plans for targeted ads based on spending history14:30
Audience point from BAML staffer: panelists talk about using all the data but for banks so much of this data is sensitive and there are lots of rules.
Wylie says it scares the bejesus out of him that anyone person in a bank has access to all the data. As a consumer I don't want anyone being able to pull up my account data because they feel like it. You have to have silos and Chinese walls.14:17
Taylor says that bank technologists are resistant when we come in to help with big data. Says recently went to a meeting with a new bank client and the technologists were there to scupper her. So we have to build at the side of the bank.14:12
Time for some big data talk. Unfortunately, plane issues mean that Sberbank's Mircea Mihaescu couldn't make it over from Russia but we still have Jacqui Taylor from FlyingBinary and Kirk Wylie from OpenGamma. Field Fisher Waterhouse's John Worthy moderates.
Wylie begins with a bang: "there's no such thing as big data". By which he means that it's just a nice catch-all term for a range of different issues. 'Big data' isn't going to solve all your ills.
Taylor agrees to some extent. Banks and other firms just need to make sense of their data and work out how to use it.13:41:
During lunch we grabbed Richard Brown and asked him about bitcoin and, in the wake of the Mt. Gox disaster, trust:12:45
Lunch time. We'll be back soon for the big data debate. Here's a flavour of the discussion so far:12:28
On to investment, Rosenberg says that there is huge interest in bitcoin from money men but there are actually very few companies worth putting money into. Argues that firms who want to change the world are not interesting, he wants small practical uses such as POS sales.
Our first audience Q is from a man from Barclays, an "evil incumbent", who asks the panel to convince him that there is actually something inherently bad about the current payment systems that bitcoin fixes.
Brown, Farid Khwaja and Rosenberg all agree it's just about being cheaper and faster than current options - the tech, the lack of a third party is irrelevant.
But, as a tweeter notes:12:13
We're jumping all over the place here...now Stalnaker is talking about the industry body Data which has just had a meeting with US regulators who have changed their attitude to importance of bitcoin in the last year. People from FinCen now think that bitcoin could be one of world's top 20 currencies within 20 years.12:08
Brown says that bitcoin is bringing together people from different worlds - technologists, bankers, economists etc - trying to work out what it means.
Rosenberg says that bitcoin is two things, one is payments but one is currency. Its great value as a currency is that it's truly scarce.11:59
Ali Farid Khwaja adds that this move from a proprietary system to an open one has a huge impact on costs. Which may hurt Visa etc but benefits merchants and customers.
Stalnaker talks about the value of data, of running new types of assets on new rails. Bitcoin is a rail that will let any 'train' run on it so has a a value for all assets. So coloured coins mean that you can assign bitcoin 'dust' to anything with value (houses, shares) and trade them on the blockchain.11:50
Liz begins by asking how many of the audience have a bitcoin wallet - about a dozen, half of which have actually made bitcoin payments.
We begin with Brown, who says that the media has missed the real point of bitcoin. He says that what bitcoin has in common with cash is that it is a direct transaction which needs no intermediary (remittance network, bank etc). That is bitcoin's value - it taught the world how to transact value at a distance independently.
Why is this important to the man on the street? Because, like the graphical browser, it destroys islands and creates an open platform for exchanging value rather than a currency.11:35
Time for the bitcoin economy panel, which features Richard Brown from IBM, Ali Farid Khwaja from Berenberg, Nadav Rosenberg from Taboola and Stan Stalnaker, founder of Ven Currency and Hub Culture. Finextra's Liz Lumley moderates.
Finextra's interview with Brown last year caused a bit of a stir in the bitcoin world, racking up more than 100,000 views of YouTube and even inspiring a t-shirt:10:54
That's a wrap for this session. We'll be back after a coffee break for the bitcoin panel.
In the meantime, a metaphor?10:50
The panel seems to agree that cash is here to stay but there's less enthusiasm for coins, which just aren't worth the effort (or in the case of pennies, the cost).
Audience Q: have we learnt from problems rolling out contactless card payments where shops were poor at explaining the technology to customers?
Keenan says that the big challenge is a lack of standards. Thomalla says that the big threat is that mobile payments is just another part of the retail experience that can go wrong. Notes that his iPhone fingerprint reader doesn't always work. If that happens with a payment, won't people just say forget it, I'll use my card.10:39
We have a new panel member. ACI's Paul Thomalla has made it through the traffic to join us and sums up what convergent commerce is:
Q from the audience about cash. Keenan notes that projections are that cash usage will remain flat and it's not dying anytime soon. This is partly convenience but also cost - card payments still expensive for low value transactions.
Keenan says that mobile can change this by changing the fraud approach, using tokens etc. He says that Zapp is talking to a well known firm that gives people a chance to win prizes thanks to spinning balls (who can he mean?). That company is dominated by cash at the moment because payments are only a couple of pounds. But if you bypass expensive cards, would people rather pay through an app? 10:28
Bareisis asks audience will cards still be dominant in 5 or 10 years? Most say yes.
Keal thinks that the thing that will challenge cards is the UK's Faster Payments system. Argues that regulators around the world will one day be looking into the fact that Faster Payments is too dominant. Can rule the world.10:23
Keal has bad news for the telcos, he thinks that they're the cog in the ecosystem that is least needed and faces being left behind. [HCE again?]
Glendinning agrees and says that merchants are increasingly confident about building apps etc themselves. Tell his firm, thanks for the idea but we can take it from here - they don't think they need outside help. [How about MCX in the US?]
Keenan asks how many payments apps will a customer download? Maybe if it's really good (eg. Starbucks) but suspects most people only want 2-3 apps. So you need something that's 'open loop'. That's where Zapp thinks it can win with the backing of banks - scale, becoming ubiquitous.
Anderson backs Keenan up. Says we like having control of our app but we don't really care how people pay - we'll accept bitcoin if customers want it - so if something is popular we want to accept it. 10:12
The rest of the panel are now joining the conversation. Danielle Anderson from coffee chain Harris and Hoole doesn't come from a payments background. For her, convergent commerce is only about making it easy for customers.
IBM's Eddie Keal contends that it's actually all about Anderson and her fellow merchants "stupid". They're the people who IT vendors need to serve and whose perspective they need to understand. 10:06
Keenan says banks need to innovate to boost revenues because they're facing increasing competition from outside rivals like PayPal and because they're about to lose 15% to 20% of interchange fees thanks to European regulatory changes.10:02
Now we have our first panel, which is on 'convergent commerce' and features Danielle Anderson from Harris and Hoole, Arun Glendinning, from Birdback, Eddie Keal from IBM and Peter Keenan from Zapp. Our moderator is Celent's Zilvinas Bareisis.
First up Keenan will give us the perspective from the much talked about Zapp. Keenan says everything - business, entertainment etc - seems to be converging on the smartphone. Has the FS market embraced this?
Payments still rooted in analogue world. 95% of payments still cash and card - no different to 40 years ago. But, Keenan says pace of innovation will now begin picking up. He tells banks that they need to take more advantage of the Faster Payments infrastructure (cites Paym).09:52
Final thing from Hatami: his new boss, Lloyds' head of digital, is the first person with digital in his title to have a place on a major bank's board. 09:46
We're onto questions. What will digital mean for branches? Hatami says branches will be around for a "long time" but their role will change, more about advice than transactions.
Next Q: What did regulators think about Lloyds using customer data for offers. Hatami says that watchdogs looked at it very carefully but reassured because it was an opt-in service.
Interesting Q from my neighbour: why don't banks offer to vouch for me online? Banks know me better than LinkedIn, they've done KYC checks. Hatami says good point, notes that govt is looking at this.09:36
And now its mobile NFC payments. Hatami is fond of the US telco-led Isis project. Nice interface, nice offers system. One problem (kind of a big one) is the mobile NFC bit. About 6 people in an audience of fintech nerds say they use mobile NFC payments. Like many, he thinks HCE could help address this.
Now Hatami says that "fraud is good":09:30
And now we're onto the use of big data for offering customers retail offers and rewards. Asked if they're happy with their data being used for targeted offers, the vast majority of our delegates say yes.
We're rushing through the topics here...now it's biometrics for instore authentication. In the future will cards and even mobile phones be redundant, where we pay with out eyeball. Hatami says this is possible but the biggest stumbling block is the level of cooperation between industry players. 09:23
Now we're onto the meat as Hatami explains the importance of trust in banking and how technology is changing it. And it's not taken long for bitcoin to make its first appearance of the day. Hatami says that bitcoin is an interesting experiment in trust. He asks the audience how many would sell their house for bitcoin. The answer is very few. Nevertheless, he thinks that some form of crypto-currency - if not bitcoin - will prove valuable in the future even if it will be niche for a long time.09:17
Some stats: Lloyds has more than 10 million active digital users, 1.2 billion logins. Launched mobile app in 2011 and already have 4 million active users and 30% of logins are now via mobile. Every 60 seconds 2000 digital logins, and 250 bills paid, worth £100,000.09:12
Hatami begins with a timely subject: the Paym
P2P mobile payments service, which launched yesterday. He asks the audience who has signed up so far. Despite the fintech-loving nature of the audience, only around 10% - 20% raise their hands.09:10
Finextra's Liz Lumley is welcoming the delegates before handing over to Alessandro Hatami, digital payments and innovations director at Lloyds Banking Group who will give our keynote 'From crisis to disruption to revolution'.08:53
Whether you're with us here on the 39th floor or stuck in your office, we want to hear your views and questions so feel free to comment on the article or tweet using the hashtag #FutureMoney
While we wait for everyone to get their caffeine fix, here's a video in which we spoke to Erik Van der Kleij, head of Level39, about the value of occasions such as this.08:36
More than 400 people have signed up to attend the first Finextra Future Money conference and the vast majority have defied the London Underground strike and made it to Canary Wharf and Level39, Europe's largest accelerator space for finance, retail and future cities technology companies.
We've a packed two day agenda which will be kicked off by Alessandro Hatami, digital payments and innovations director at Lloyds Banking Group, who will give our keynote on how people will save, spend and invest in the future.
From there, we'll have panels on convergent commerce, the bitcoin economy, big data, labs, incubators and accelerators, new model finance, collaboration and competition, the banking app store, and VC investments. Finally, tomorrow afternoon we'll hand over to Swift's Innotribe Emea start-up challenge.You can read the full agenda here (PDF).