future of banking presentation
TRANSCRIPT
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Center for Future Banking
Is this a reactionOR
a strategy?
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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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Innovative Products and Services
Banking Innovation
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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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Center for Future Banking
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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Center for Future Banking
Questions?
Get Involved
Panel: Jeff Carter, Deb Roy, Ray Garcia
cfb.media.mit.edu