Friday,21 June 2024

"Let's ban the word 'Fintech', its not a panacea"

5 min read

By The Asian Banker Live

Emmanuel Daniel, chairman of the Asian Banker, outlines the challenges and impediments that confront and hold the industry back in this period of digital disruption and transformation, in his opening speech on the second day of the Future of Finance 2017 in Singapore

Here is the transcript:

Emmanuel Daniel:      The new format conference that we’ve put together and that we will be building on for the next few years as we define and redefine how the industry should evolve or take stock of how it is evolving and in a real and credible manner. I made some comments yesterday at the opening keynote – no use of the F word. There are green bottles that you are welcome to find each other and just donate into it. And the reason we don’t use the F word at this conference is not because technology is not central to a lot of the evolution that’s taking place in the industry. The reason we don’t use the F word is because we don’t want you to use phrases without thinking about what it actually means. And worse than that, by taking it for granted that the person you’re speaking to actually understands what you’re saying. So, very often we degenerate into clichés and phrases that make presumptions about how we understand industry and what’s shaping it. And by, renewing that word, I am also asking you to then replace it with words that are closer to what you want to say.

So, if you are raising funding, then you’re raising funding. If you are introducing a disruption technology, then you’re introducing something that’s a disruption. And if you are just an IT vendor, a new age IT vendor having developed something on Java, then that’s all you’ve done. And so, we will make a distinction between the boys and the men – between the leaders and those who are run-of-the-mill. We want to avoid what happened during the dot-com era where everyone who thought that just because you are a dot-com you are entitled to large amounts of funding so that your parents will think that you’ve got a career or a calling that is bigger than the job. And then it trickles out in a few years. And perhaps most important of all, it never added to your understanding of how the industry is evolving into the future. Today, we have two components to the summit. We have the main tracks, which obviously this is one. We’re also running something called Future Wealth and it’s a little seed that were planting.

The moderators for Future Wealth are not bankers. They are people taken from the street. All right, I’m sorry. That didn’t sound about right – the people who understood the industry as man-on-the-street. That’s what I meant. And the reason is that increasingly this industry has to be understood in a personalized matter in the same way that we understand ice that we pull out of the refrigerator and we don’t need to understand the business of the ice merchant. So, please do tweet and introduce the Future Wealth conference to any of your friends who might be working in this area. The conference will be starting later in morning, and there are all of the issues that we’ve been discussing from the industry perspective, Blockchain or Bitcoin, managed investing versus indexed funds, roboadvisors are all discussed from the customer’s  perspective looking back. And we need to be credible in the way in which we give customers a reason to believe in how we are leading the industry and not make it a suspicious back door for us to sell more and be more productized as we always have been. Because over time, through all of these technologies, the customer is going to be increasingly in charge of the personal investments and personal wealth. And we need to redefine ourselves in terms of how we want to be relevant to the universe in which we serve.

Please use your apps well. In fact, we subscribe to this app platform. I know that yesterday we had some problems don’t give up on that. I think it stabilized today. It gives you a possibility to meet each other. It also gives us a possibility to put out tweets and messages so that people who are not here can follow what’s going on. In fact, the opening keynotes for yesterday and today are on Facebook. So, if your colleagues are watching they can go onto Facebook now. And the closing keynotes will also be on Facebook. We are recording all of the sessions and making them available on the website in about two weeks’ time so that it becomes a good record of the conversations that we’ve had at the summit. And in this way, we have lain the groundwork for the summit to become a repository of knowledge and of learning that we can build on in the years to come and becomes a resource to the industry.

Yesterday we had a number of keynote speakers who helped us think through where legislation is today and how it’s evolving and what about current legislation is core to the evolution of industry going forward. This morning’s keynote through our keynote speakers as well as through the panelists that we’ve invited from out of box thinking, PayPal grab and so on, organizations that we never previously imagined were part of financial services or had any relevance to financial services. We want to understand the answer to one question. That question is, what happens when the financial services industry finally loses its intermediation role? The world moves in phases. And in one thought leadership idea that I subscribe to, the world moved from a tribal phase to an institutionalized phase, and from an institutionalized phase, it. Moved to a markets phase. And now, from a markets phase, we are on the onset of moving into what is called the network phase.

Tribal, we all understand is primordial, it’s family, friends, people we are familiar with, village and so on. And when we moved to the institutionalized phase, that’s where many of you belong to. You’ve got jobs, you go in the morning to an institution, it’s a predictable experience. You are brought together not because of your tribe but because of your learning and because of your skills and it’s something that we understand today. I have a theory that the reason the financial services industry had these problems in moving from tribal to institutional is because that whole process was not narrated well. So, if you take libor for example and the crisis that ensued, libor you can argue was developed in the tribal phase of the European evolution of the financial services industry and UK were it was a gentlemen’s club. People were familiar with each other. When they institutionalized it, it had to have practices that had nothing to do with familiarity with each other.

And then when they moved into the markets phase, I remember when the libel crisis was erupting in 2010, I was constantly called by some of the international media because the denouncements were made in London and in the media needed to pick it up in the morning and Singapore and have it as a soundbite to the day when it reached back to London the next morning. One question I was always asked was, “So, what happens to the responsibility that the libor market had to the trading flaw and $5 trillion in FX trading?” And I said to them, “Actually, the problem was that libor didn’t owe a duty of care to the $5 trillion market.” And I maintained that view for a long time. And if you know, finally the UK courts were able to prosecute individual liability seven years later to make that connection between an institution and the markets that trade on it. And as we know, markets go around looking for indices to trade on, of which libor was only one of them. And increasingly as we become more indexed, there will be under indices that the markets will look for. It can be indices of the value of durians, it can be indices of the value of coconuts and so on. So, it will get more and more ridiculous as we go along.

 But now, we’re moving into another phase which is from markets to networks. And the big difference between markets and networks is that in the network space, there is no broker. So when we think about Blockchain and all of the new technologies that are coming on in the network space, we are disintermediated from playing a central role. And for that reason, I’m a big critique of any financial services initiated by Blockchain that keeps the bank in the center of the relationship. In fact, the validation comes from the fact that there is no center – that all of the parties interact with each other and validate each other in the process. So, I want you to have this thought in the back of your mind as we start this morning’s keynote session. We are very, very pleased to have two giants in the industry: Ron Suber, who is the president of Prosper and Soul Htite, who is the founder of Dianrong in China. But, both of them share history and that they were pioneers in the peer-to-peer lending business in the US and then they started globalizing what they did. So, with no further delay I’d like to invite my erstwhile co-moderator with whom I’ve moderated the Asian Banker Summit for nearly 20 years and with whom I unfortunately don’t share any view in common despite our efforts to prepare for sessions together. And so, I will now leave it to him to tear down everything I have just said to you and build his own proposition.

Keywords: Marketplace, Technology, Fintech, Partnerships
Country: Asia Pacific
Region: Asia Pacific
People : Emmanuel Daniel
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