2019 Conference

Watch Video

Banking Transformation 2.0: Time to Get Real

Presented By:

Leda Glyptis - Chief of Staff, 11:FS

Download Slides

Watch the Video "Closing the Gaps to Happiness for Your Customers and Your Bank"

Watch Now

Description

Trying to drive innovation in a bank can often feel like a lonely, daunting task. It doesn't have to be that way - as Leda Glyptis will show. In her role as Chief of Staff at the fintech consultancy 11:FS and previously as the Chief Innovation Officer for Qatar National Bank, Glyptis has pushed counteless transformation projects across the finish line. She'll share her tips on how to focus on the right type of innovation and how to find the right path forward.

Transcription

I work for 11:FS. 11:FS is a challenger firm. We do things a little bit differently, which means I'm allowed to give some examples that while I was working in a bank I wasn't allowed to share. I'm allowed to share some dirty laundry and talk to you about some of the work we've been doing and the things we've been seeing in this space. 

I have about eight million things to tell you and not enough time to say it in. So, I'm going to be going through quite a lot of material quite fast. Thankfully people who went before me touched on some of it so I can skip over it.

It's a bit of a whirlwind tour of what has been an ongoing process of transformation that has lasted between 10 and 15 years for most organizations. And what I want to do is flag a few common mistakes that we're spending a lot of time and money on, and what we can do to stop them.

What I'm hoping for is that one or two things will really resonate with you, and you'll come grab me afterwards and we can talk about what it really means. So, here goes.

We are in the land of plenty. And those of you who are going to conferences a lot will have a million futurists talking to you about the things you need to do to stay abreast of change. Every single one of the consultants who's out there has an app that allows you to look at the landscape, and you log on in the morning and you see there are about 45,000 different companies presenting themselves as fin techs. So, you have to hire a few people to tell you what it is they do, what you need to be afraid of, what it needs to mean to you. It's overwhelming and it's really not helpful.

There is so much stuff coming at you. I was at a bank not so long ago and they had a report sitting on the desk, somebody forgot it, I don't think I was meant to see it. And it was about spectral endoscopy. My first question was, "What on earth is that?" And the second question was, "What are you going to do with that? And why are you spending time and money on that?" And it was a genuine question, I was not dismissing. I genuinely wanted to understand. But there wasn't a real answer.

They had spent a lot of money for a consulting firm who had given them had a landscape of the future that included some technologies that were purely terrifying. And people spend time to understand, that's what we've done over the last 10 years, spend time to understand.

What I've got there, I don't know how clearly you can see it, is an infographic taken from The Financial Brand. It was published in November 2018 so not so long ago. Very well-established publication. And it's the sort of thing that it's meant to make it easier for CEOs and decision makers to figure out where to place their bets, particularly when you don't have a massive R&D department, a massive R&D, you need to understand all these things, build all these things. Where do you begin? So, it's helpful to have these simplification tools that say, "Well, this thing you have to do soon, that thing you can wait on."

But the reality is that if you look at it you will probably disagree with some of it. I know that I do. I think that Hybrid Cloud is more contentious than APIs and robotics. Now, you disagree with me and someone over there might have a third view and a fourth view. The reason I'm pointing it out is we're consuming these things that are a single person's view. We're trying to turn them into gospel. And my question is why?

So, you'll consume this, you'll challenge it, you'll spend some money figuring out what the best version of the future is, what those 85 emergent technologies mean to you. Why? Bear with me.

The things you see there did not exist in 2006. None of them. Not only did they not exist, we couldn't even imagine them. I was speaking to a person who had been pivotal in setting up the London Olympics marketing capability and I said, "What was the biggest challenge in doing the job?" And I actually thought it would be working with the public services and trying to bring private enterprise pace to the government. No. It was Instagram. It was the fact that Instagram became big on the run-up to the Olympics in a way that they had not anticipated, they were not ready for, they did not capitalize on it, they absolutely blew it.

So, my question to you is, if all the things you see there that have completely transformed the way we live and work did not exist in 2006, if you project the same amount of time roughly into the future, do you really feel that you're in a position to tell me what will be the things that will have transformed our lives? I'm going to go with no.

I'm also going to go with it doesn't matter. Because if you go to this spectral endoscopy slide, there's a bunch of stuff there, including APIs and Cloud and robotics, that has landed and we still don't know what to do with it.

So, how about we start looking a bit closer to home on the technology that has landed, that is being successfully used outside our industry and increasingly inside our industry, and try to figure out what it is we can do with it. Because the reality is we haven't worked it out yet. After anything between 10 and 15 years, depending on your organization, and hundreds of millions of dollars of effort, we haven't cracked what is here.

First takeaway. Stop looking down the horizon. We don't know what's coming down the pipe.

Now, the good news is nobody knows. This is taken from an IBM and it has been quoted back at me by a number of CEOs. And I love it, because it's quoted as a source of authority. It's got numbers, it's got statistics, it's got charts, it must be true. And then if you look at the little box, essentially what a lot of these reports do is they come to us, they ask us questions, they aggregate those and then they pass them back to us. And we consume them because we don't know the answer. This is an endless loop of trying to find an answer to a question that ultimately cannot be answered. 

The good news is we know some stuff. We have gone through this journey. We've got some cuts, some bruises, some scars, but we have learnt a bunch of stuff.

What I want to do with the time we've got today is focus on the stuff we know, because some of it doesn't feel significant but it is, and focus on the options we have. Because naval gazing and trying to figure out what the future is 10 years down the line is actually not an option, it's a waste of time and money.

What do we know? We know that the world has changed, definitely in my time in banking over the last 15, 17 years. And there are a few things that have landed that we don't necessarily like very much, or we like a lot, depending on the organization, but they have become building blocks of change.

When I first sat in these transformation functions before innovation was in vogue, none of the banks I worked for wanted to take the significance of the smartphone seriously. It felt frivolous, it felt irrelevant. And yet the processing capability of that little thing sitting in your pocket has transformed our lives, not just for retail banking but for corporate and institutional banking. You cannot ignore it. You cannot ignore the fact that people want interactive services delivered on the go.

If you are a retail banker you have worked it out long ago. If you're a custodian or a fund accountant you still struggle to understand what that looks like. But we know beyond a shadow of a doubt that this is a building block of change, and rather than looking down the line of what will come when artificial intelligence takes off or when quantum computing changes the world, one of the biggest challenges is how do you deliver in a competitive manner, as Kurt said, in a crowded landscape?

The second thing is Cloud computing is here whether we like it or not, and most jurisdictions don't like it at all.

I do business currently all over the world. I'm lucky enough to have clients all over the world. And you see some really enlightened bankers sitting there with their regulators going, "Please, please, please, can we?" and the regular saying, "No."

I also see a lot of regulators saying yes and the banks saying, "No. On-prem only. I need things to belong to me, I need things to be inside my control. I need you to deploy this magical thing that you have built in a way that lives in my basement."

Well, you may want that, but it's not going to happen. So, before you spend billions of dollars looking at what quantum computing can do for you, I suggest you spend some time with your risk and compliance department figuring out how you're going to crack this.

The third building block of change is data. If I had a penny for every time I've heard data is the new oil I would be a rich woman. I would not be here now, I would be on a beach. It is not the new oil. All is finite. Every day you have more data, that is a problem. Oil, for all its problems, you know how to use and make money from. Data? Not so much.

So, you have this thing that is constantly proliferating that you can barely control or understand and haven't worked out how to make money from. We like to tell each other data is valuable. We have a lot of data. We have data. Data is valuable. Sure. Work out how to make money from it. That's what valuable, working out how to make money from it.

What else do we know? We know that we all feel on the back foot. We know that disruption was a conversation 10 years ago, now it's personal. We have all felt it. Price point has gone down, regulatory pressure has gone up, jobs have been cut or hiring has been frozen, the pressure of creating capability that will take us into the future is extremely real.

But it's a personal journey. And for those of us, I mean, almost every hand went up when Kurt asked how many of you have been in banking for longer than 10 years, you all know that this journey was personal. We talked about change being the new normal 15 years ago but we didn't believe it until it hit our organizations. 

And when does it become personal? When it touches your bottom line, your profitability, or your relevance? So, rather than looking a hundred years into the future, bring it much closer to home and say, "Okay, I know these things are changing. Where does it touch me? Where does disruption touch my organization?" Because when it gets personal you can start solving for things.

Now, I'm going to pick up on something Kurt said because it resonates. We are so comfortable these days as bankers, spending time feeling sorry for ourselves. A lot of the sessions we attend, both with clients and at conferences like this, are about all the things that these pesky start-ups are doing to us and the regulatory pressure. This unbundling and this intermediation, it almost feels like the world is out to get us. But it's actually incidental.

The building blocks of change that I talked about are there and available to everyone, us included. The fact that we haven't worked out how to use them yet but third parties have is not personal, they're not out to get us. They're using the art of the possible to create business viability for themselves. If that takes them in a different direction, they will be soon disrupting a different industry.

But the point is this is incidental. And we have spent a lot of time trying to figure out who has cracked it, who's got the secret sauce to things, who's got the secret that will allow us to essentially navigate all of this with the least possible pain and the least possible effort? Some sort of magic bean that will make it all go away.

Before I tell you why that can't happen, I want you to take a moment to think about value. Kurt did a great job of talking about value in terms of not just what we get paid but in terms of what the client gets out of it. I want to add an extra layer, and I haven't practiced this, although we should do this again.

There's a third layer to value, and that is what is being affected by the technology that is currently available. It's not just what the client gets out of what you do and what you do, it's also the understanding of how much effort what you do entails. If you think about traditional banking, for a very, very long time it was very manual, very labor-intensive, pen and paper and abacus and spreadsheets. Now, quite a lot of the technology we have removes the human and reduces what we do to processes that are quasi real time, almost impervious to error, extremely fast. And although the customer sort of understands, particularly in institutional banking, that there's an upfront cost in building these things, there's an expectation that at some point the fact that you do less will be reflected in the price. Not because it's not as valuable to the customer. The value extracted remains, they use the thing you do to get on with their lives and their business. But they know that you're doing less to produce it and it is a matter of time before that comes back to you as an ask for price reduction.

We're seeing this across the board, but we're seeing it particularly in corporate and institutional banking where the other side is implementing the same systems. And it's like, "Well, okay, so we connected. We're consuming your APIs. It's been three or four years. Let's talk about your fees now." And that, let me tell you, is an unpleasant conversation if all you've done in the in between time is drop your old service into a new way of delivering.

And the reason we've done this across the board is because we have spent time, as I've said before, looking into this disrupted ecosystem to find the answer. We have wasted a lot of time and money. 

What you're seeing there is the attack on the homepage. I'm sure you've seen it before. One is HSBC's homepage and a bunch of start-ups that are attacking a specific piece of what the bank offers. The other one is a hotel chain.

What do you see there? You see some familiar names. Airbnb is there. We love to talk about the Airbnb of … It's irrelevant. It's irrelevant to what we do and it's actually distracting. And what I want you to take away from this is a lot of companies on there are not profitable. A lot of companies on there are living off investment. It is unclear whether they will break even. Some of them will vanish. But even though they vanish, they will have transformed the industry they operated in. While we wait for them to emerge out of a fight that almost doesn't concern us, to be picked out, to be copied or bought, we are wasting extremely precious time.

I have spent most of my career in banking having these conversations with executives about who's winning, who should we be looking at, what is the thing that is being cracked by someone else? And at first I thought, "I'm missing something," but increasingly it became apparent that the dangers of doing and not doing were heavily misunderstood and waiting felt like a safe option.

But what we're seeing, particularly with these companies that come in, potentially fail but still transform the way our customers expect us to serve them, what happens is waiting becomes extremely dangerous. Because pieces of the business are either transformed or taken away from us, we are risking to be left with the bit that nobody else wants.

Our core should not be what no one else wants to pick up. It should be the thing you choose to take into the market. And the waiting and seeing has not worked out for us. 

What do you see here? This is online banking 2018. It's a bunch of screenshots from high street banks, current accounts. This is 1993. Can you spot the difference? Boom, boom, boom, boom. Do you want to guess what the difference is?

This is the difference. £250 billion was spent on high street banking digital transformation in that period of time.

You tell me we got value for money, because I don't think we did. £250 billion spent on nothing, because most of it was spent on trying to figure out what these pesky little start-ups were doing, and what these technologies that are 10 years down the line might do to us, and most importantly the reasons why we can afford to ignore it because it will hit after we retire or it will hit others first or the regular will stop them.

And now we know that's not an option. And the first thing we did to make up for lost time is feature parity, and Kurt touched on that.

We saw a thing, we copied the thing, we made sure the thing worked. We're seeing it in the UK a lot. There's a lot of challengers out there, and as Kurt said they're doing an excellent job.

What happens is that a challenger will come out with a feature like you freeze your card if you lose it, and then if you find it in your girlfriend's handbag you unfreeze your card. But six months later all the high street banks had copied that feature.

There was a gambling block on Starling accounts, but six months later the banks copied that feature. Great.

The good news in that is that it took six months and not the two years it would have traditionally taken. But you're on the back foot. It is not enough, and it is not enough because you don't know why you're doing it. You don't know why that bank did it, you don't know what customer segment they were serving. You're just hoping that the PR and the customer satisfaction will be enough until you work this thing out.

But as we often say in the jobs to be done space, putting on a pilot's outfit is not enough. Why is that? 

I'm not going to spend much time on this because Kurt did a great job explaining it, and also because this is really something that you should deep dive in if you're trying to do this for your bank.

You're not necessarily serving the same segment in the same way. This is a jobs to be done example around lawnmowers. You can produce a better lawnmower or you can really talk to your customers whether their keen gardeners, in which case they care to have real grass growing naturally, or they're just restaurateurs who just need this thing to look pretty and be durable, so maybe a durable, hybrid grass that doesn't grow very tall is a better solution for them.

If you're Barclays and copy Starling's every move, including stealing their chief platform officer recently, you will never know if you're solving the job to be done. Because humans are not the same, and digital consumers are not the same, and the feature might be great or it might be not. And you will never know because you haven't done the work.

Let me give you an example of a customer we worked with a while ago. They produced this feature called Get Cash. The idea was if you lost or forgot your card, you should have a feature on the app that would allow you to have a one-time code, get money, and off you go. You're not stranded if you can't get access to a bank or a card over a weekend or a holiday period. Great.

There was an expectation that that would reduce costs because call centers are expensive and producing a replacement card is expensive. But what happened is that there was a massive, massive spike in usage over weekends in the north of England. Insane spike in usage. It was actually making it interesting for a big bank to send a few researchers out there.

And what they found was that young women were using it as a budgeting tool, and a way of keeping themselves safe. So, they would budget what they wanted to withdraw. They wouldn't take a wallet with them, they wouldn't spend any more than that. There was no danger of losing their wallet at the end of the night.

There was a choice at the end of that. The bank could limit how much you could take out and make sure the feature was used for the purpose it was intended, or they could learn from their customers and create richer features that would allow someone to actually have access to the bank account without having a bank card. Thankfully they chose the latter. 

But it was not an obvious choice. Because although we have learnt to say to each other people don't want a mortgage, they want a home, we don't necessarily know what that means when it comes down to the detail. And it takes spending time with the customer, not time looking 10 years down the line about what technology might come to us, but time with a customer today to find the gap between the commodity product we traditionally sell and the customer jobs. Because the reality is we have businesses to run and customers who rely on us. We cannot scrap everything and start with a blank sheet of paper.

We have to find a way of bridging the gap between what we have and what the customer does with it. And the way to do it has no shortcuts. We spend way too much time and money looking for those shortcuts. There aren't any. There are no magic beans and shiny things are distracting.

But let me show you two things that are very shiny and actually very meaningful. I don't know how many of you are familiar with Monzo. Monzo is a challenger bank in the UK. I am personally a big fan. I wish I had invested in them when it was cheap to do so. They recently integrated with If This, Then That. Are you familiar with If This, Then That? Well, it's my gift to you. Don't pay attention to anything else I say. Go figure out out If This, Then That.

If this, Then That allows customers to create functionality on top of their account. If I buy a milkshake, then don't permit junk food transactions for two days. If my balance goes under X, send me a text. If my balance goes over X, sweep some money into my saving pot.

It gives immense power to the customer, but it also gives amazing ideas to the Monzo team without actually having to leave their office. Because what they can do is take those features that the customers create, provided the customer is willing to produce it for the community, and open them up to everyone. 

You use it, you don't use it, it's there for you. What they learn from this exercise is invaluable because it empowers the customer to tell you what their job to be done is.

The second example is something we worked on. It's a small and medium enterprise bank with RBS NatWest in the UK. It's called Mettle. It's in beta now so you can go play with it if you want.

What we found when we looked at the customer job to be done is that if you are a small and medium enterprise you don't log onto your bank account almost ever. You don't look at your accounting software almost ever. You look at the calender all the time, and you have either a notebook or a spreadsheet that tells you when money's going out, when money's coming in, whether you need to chase, delay, or get bridging finance.

So, we built a bank account that is built around a calendar, with projected payments in and out, and optionality to chase, delay, or get bridging finance. It was the simplest solution. If we had looked at what the competitors were doing, we would just have produced a cheaper corporate account.

We did not look at the technology. The technology underpinning Mettle is a series of simple APIs and Kubernetes. We spent all of our time talking to customers. We spent all of our time driven by our clients' very, very real need to be seen as a champion of the SME. That was an emotional ask and it really supercharged the solution differently.

The technology is actually there. Even though the financial brand, app, says it's experimental, we all know that APIs are not experimental. They've been with us a long time, they're safe, you can use them.

What do you need to do in order to figure out what technology to use, what to focus on, and how to spend, wasting your money where you can't get value, and spending it on where you can?

You need to really focus on the bottom line. Not because we are heartless, heartless people, but because the ROI of the effort we have made so far is just not there. Have you thought about the fully-loaded cost of experimentation in your organizations? It's eye-watering and it doesn't necessarily deliver value.

I worked on a project a few years ago that took a client problem and turned into a prototype in about six weeks. Then we spent six months with compliance. We spent about three months fighting a code freeze and then about two months in daily meetings with lawyers to validate what it is we had built with the customer. A year and a half later we were ready to go live. It was considered a massive success. But if you take the time, cost and money, the fully-loaded cost of this experiment, chances are it will never pay for itself.

Trying to build those capabilities around technology without pausing to say, "Okay, what is it I do? What is it my customers are willing to pay for? Where will I make money? And how will I create a capability that ultimately doesn't keep me at play but keeps me in the game?" That's the real question. That's the question we have been trying to answer all this time. And sending people to fin tech conferences won't solve it.

Having breakfast with the CEO of challenger banks and Revolut and this and that won't solve it. It all comes back to, "What is it I do for a living? How can I use what is available out there to deliver to my customer?" I would wage serious money that you can do that without an artificial intelligence solution and without a formal position on quantum computing in your bank. 

Because the reality is if you're a banker you only have three options. That's it.

Option one. Carry on. There is a market for what we currently do. And by market I don't just mean people are willing to pay. I mean people need it. People need pensions and mortgages and loans. And in a lot of the world they're happy to continue consuming what you did the way you did it. Carry on. It's profitable and you know how to do it.

There's only one catch. The regulator. Not so much in the US, but I think it's coming because it seems to be a wave in the rest of the world. Europe has transformed radically, Asia is following suit, Australia is transforming. The regulator is coming in and saying, "I've been paying attention to the art of the possible over the last 15 years. I think it's time you changed how you do things. And not just how you do things, but how you make money."

The regulator doesn't come in to prescribe technology. They don't say, "Oh, you know what? You should use APIs." But they come in and say, "We know what is possible, and therefore we know what we should be looking for you to do." And if you remember that unraveling slide at the beginning the regulator says, "Well, there is technology that allows you to do that stuff cheaper, so come on."

So, you can carry on making money the old way, but the new regulation means that that will be under strain and under stress and potentially not as profitable, and you will still need to change. The reality is that most banks are playing in this space, even though they pretend not to. When they come into any meeting about transformative work, the question that is really being asked is, "How much change is enough? How little of this can I do? How much of myself can I bring into the future?"

The answer is you can choose that, but choose it consciously because the money and time wasted pretending to be doing something else could be spent doing more of this while you still can.

The second option is my favorite, and you cannot believe how many frowning faces I get when I talk about this. And I will have this conversation with payments providers or custodians, which is my old world, and fund accountants. And it's like plumbing guys. "Plumbing is amazing." It's like, "No, no, no. We need touchpoints with a client."

Why? Who says, "You know what I'm going to do this weekend? I'm going to do my banking, because it's fun." Nobody. Not even people who deal with banks for a living ever said, "Banking, yay."

Banking is always in the way. It's in the way of life and it's in the way of business. We have a choice to be an enabler or a pain. We are trying to hard to be an enabler, but we have to move away from the view that the more the customer looks at us, the more time they spend knowingly interacting with us, the better it is. It isn't.

We are there to provide a utility. Those of you who are big enough to actually own the expensive pieces of the infrastructure can invite others to play on top. You can spend your time and money doing this well. It's not sexy, but it's useful, it scales, and at the end of the day the service we provide lives or dies by the usefulness it brings to the client.

The third option is the stuff we've been trying to crack for the last 15 years. It's the new money.

This is a goat. It's a baby goat, but it doesn't have to be. The story works with any type of goat. Have you heard of Stella? Have you heard of Ripple? Yeah? Couple of hands go up.

Okay, so Ripple is in the DLT space. Stella is the other Ripple. Stella is a team that ripped apart from Ripple and said, "We want to create not a challenger to Swift, we don't care about banks making money, passing money back and forth to each other. We care about solving real problems, using [inaudible 00:31:30] technologies to actually take the bank out of the equation." So, they've created a way to collateralize commonly-held assets. This, my friends, is a collateralized goat.

If you commonly own a goat in a village in Nicaragua or Angola, both are countries on the Stella network, you can go on the network and borrow against that goat. Your part of the goat, because it's not your goat, it's commonly-owned.

Collateralizing a goat is so obvious once you've heard it, and actually extremely easy to manage, because once you've put it up on the system it behaves like any other asset. But what it allows people in unbanked and underbanked communities to do is bypass both the bank and money and manage relationships between villages and providers that don't have to be based on trust anymore.

Stella is profitable enough to be expanding. It isn't not-for-profit, but it's presenting us with a genuine new asset. You can borrow against your future crop without a broker in the mix. You can have coffee futures on the Stella platform without a broker in the mix.

They have created new value, they have created new money. The reality is that we have spent billions as bankers trying to find this idea. We're not very good at it. It's okay, but we're not very good at it.

If you're going to go down the path of trying to find new money, you need to be prepared for two things. One is it might not look as profitable as you want it to, because quite a lot of those new ideas cut out the way you used to do things. The second is this is not our superpower. We've spent 10 years and billions of dollars trying to do it and nobody has cracked it.

So, if that's the path you want to do, is utility's not good enough for you and doing the old thing isn't good enough for you, then you will have to do things very differently. And that by I mean not only do you need to stop looking into the future for the answer to emerge out of the water, you're going to need to do things closer to home much differently because there is no silver bullet.

We've tried to do things the easy way and that has come at a heavy price. If you look at the partnerships most banks have announced over the years they've been on the surface, they've been good PR. They don't transform the technology and they don't transform the business.

If you want to take everything I've talked about into account, the hard choices are made when you want to make the new money. If you're playing with old money and maybe a bit of utility function and a lot of PR, you can have a lot of on-the-surface partnerships that don't transform your business, don't make you a lot of money, don't future-proof you, but they're extremely easy to integrate, extremely easy to talk about.

The more meaningful it is, the more complicated it is. Now, the irony there is that if you do the hard stuff, the hard conversations, the hard integrations, the harder spend, your debt, and I mean technical debt, and waste of time is lighter. 

Let me give you an example. Eight years ago four banks did smart bonds at the same time. It wasn't integrating into any core banking systems. It wasn't actually integrating into anything. It was great PR. It never saw the light of day. A lot of money was spent, a lot of time was wasted. Years later, none of those banks have brought a real challenger in the bond space and sort of vanilla asset base to the market. Sure, they had a few front pages in the FT, and then what?

Now, there are some other banks, a couple of them actually in the US, that spend most of their time playing with middleware companies. More expensive, trickier, absolutely no PR. But it's transforming their core, it's allowing them to stand up digital propositions faster, it's allowing them to get better, it's allowing them to learn.

Because what we have learnt in the last 15 years is that most of the partnerships we came up with while kissing strangers, to paraphrase Kurt, have fallen into one of those two categories. They've either been vampires … A vampire is after your blood. So, a start-up that makes money by taking a cut out of your profit margin and then does what you do better is not your friend.

I had this conversation with Mastercard when they first partnered with Revolut. Revolut now has a banking license, but at the time they came in and took a chunk of the merchant fee. But Mastercard were like, "No, it's brilliant. It's innovative, it's fresh, it allows us to access a new bunch of customers." If you are not aware of Revolut it's an FX player, it does spot effects, much, much cheaper to spend in different currencies, extremely easy interface.

What happened of course is that Revolut was not used by the students. It was used by corporate travelers who left their corporate Mastercard in their pocket and used Revolut instead. It was amazing PR and Mastercard defends it to this day, and maybe it's worked for them, but from a monetization perspective it's vampiric.

So, when you're looking at solutions, the first question is not, "Would my customer use it?" It's, "Will my customer use it in a way that makes sense to my ability to survive financially?"

If things undercut your price point in a way that makes it untenable, it's not a good idea, be it a partnership or a solution. You have to stay alive in order to continue servicing your customers.

The second type, the cheese sandwich, comes from a story a boss of mine told me and I've been dining out on it for the last 20 years.

He was a rower, and his coach used to time the boat with all the rowers in, big, brawny boys, then he would swap each of them out and replace it with a cheese and pickle sandwich. Very often the boat was faster with the sandwich on board. Because it doesn't matter how hard you work, it matters how well you work in sync with others.

Quite a lot of the partnerships we see, quite a lot of the technological engagements we see, are not aligned with business purpose. The most heartbreaking story I have been involved in was a five-year, $242 million program that was killed even though it was successful and profitable, because it had not been politically aligned within the organization. Oldest story in the book perhaps, but ultimately that is your cheese sandwich. It doesn't matter what it takes, you need to align the organization, face the same way, solve for the same problems. You can't hope that these things will magic some solution for you. The hard conversations need to be had first.

Now, this is blowing my own little trumpet a little bit, but we as a start-up have a partnership that is neither a vampire nor a cheese sandwich. We are building something for DNB, the biggest bank in Norway, that is meaningful, differentiating, and hard. And that's how you know the partnership is meaningful, it is bringing something neither party had before and it's hard because we're trying to do something for the first time in a new way. And it's not just about PR, although it's great to smile and hold your thumbs up. It is hard and it takes commitment. And the hardest piece of this is the constant discussions our partners have to have internally with their control functions about their levels of comfort with the rate of change.

Now, looking into the future for the magic bean has been awesome and great fun, and it taken people like me to some very obscure places to see some awesome technology. But the reality is even if you found the silver bullet, and you won't because it doesn't exist, you have to get the hard stuff right. You have to clean up your data at home. And that may mean to accept that you're not going to use any of what you have, and you're going to move to a go-forward data architecture starting tomorrow. That means that you will know nothing for a while, but when you start knowing things it will be meaningful.

These are hard decisions, but they're not technology decisions, they're business decisions. 

You need to figure out what it is you need to be and do. I'm often invited to speak about interoperability. Interoperability is not hard. With the exception of systems that are older than me, and most banks run a few those, systems today are designed for interoperability.

That thing up here, it's not hard to do. What's hard to do is the delivery piece at the other end, because the business logic of moving data from here to there so that, the system won't do for you. It's a business decision, and it's a business decision that entails talking about departments in a way you've never done before. It's a business decision that entails talking across budgets in a way you've never done before. It also entails your traditional business folk coming down to the basement and talking to the techies about, "What exactly do we have, so that I can understand what we're buying and how it affects my world?"

The reality is we have spent a lot of time and money building, particularly in Europe with regulations like PSD2, the payment services directive, and GDPR. We have spent a lot of money on API infrastructures, on data capabilities, massive. Hadoop is like the new word for everyone now. But the reality is you build it and then the world is the same. Nothing very much changes. Building it is not enough.

And I know that I spent the first 20 minutes of this presentation telling you that looking into the future is not enough, now I'm telling you that even after you make some choices on the technology side that's not enough. And it's true, I'm telling you that, it's not enough.

It's not enough because you build it, it doesn't do anything until you feed it business purpose. And in order to feed it business purpose, you need to make some decisions. To make those decisions, you don't need to go back to school and become a computer scientist. You don't need to know what Kubernetes is, although it's actually quite interesting. But you need to know what it's capable of.

Let me give you an example. Traditional core banking vendors take two years to stand up a fully-regulated instance of a new bank. Foundry, our system, can do it in 10 minutes 40 seconds.

The technology can do it in 10 minutes, 40 seconds. It's not us being awesome. It's a little bit of that. But it's the technology allowing us to actually build the capability that can stand up a fully-functioning, regulated, vanilla current account with its onboarding and KYC and bells and whistles, in under 11 minutes. The traditional technology we use in our core banking infrastructure will take at best two years.

I don't need any of you to know what Kubernetes is. I need you to know that what we accept inside our house is not good enough anymore. So, if your 10 years and multiple billions of dollars of gazing into the future has taught anything, it shouldn't be to look for the start-up that has the answer, it would be to come back and demand more and better from your own technology teams.

And more and better looks a bit like this. We call it the minimal lovable product, and we have tee shirts that objectify us quite nicely calling us minimum lovable products. Put in your requests, I can send you some.

But the reality is we spend a lot of time talking about MVPs, right? Get to the minimum feature complete product. Why? Because we know that the way we used to develop software didn't work. It was slow. It meant that by the time we went live everything that we had built was obsolete, it was three years ago. But there was no other way of getting there. And we said, "Okay, let's get an MVP out there. Let's learn how to do a minimum feature complete thing that can go out into the market."

But what we're seeing is that while we have spent 10 years looking out there looking for answers, the people who haven't done that, the challengers, the technology companies, have developed an ability to blow MVPs out of the water. Because they use this technology that is now available to think about scale from day one.

As you come back into your shop and say, "Okay, we're done looking out. We're now looking in. We're going to make some hard choices about the technology we build. We're going to build technology that delivers to our purpose. We will have the hard conversation. Are we a utility? Are we a bit of a dinosaur? Are we going to go for new value?" All of those things will need new infrastructure. And that new infrastructure can be as big and expensive or not as your aspiration takes you. But no matter what happens it will entail some hard choices.

To make those choices slightly easily obviously jobs to be done helps. Figure out what you're solving for. But the other one is build for scale. No matter what you do build for scale, both because that's the name of the game, and because at the end of the day that's the differentiator you will have against the challengers. You're in a position where you can scale.

So, when you go into your teams with your brand-new commitment to which of the three paths you're going to use, and your brand-new commitment to build technology that delivers against it, don't be trapped into an MVP story. Think ambitiously, think about scale first. Think about, "What is the thing I can take into the market that the customer will love and I can take that love and stretch it out to something meaningful, scalable, and profitable?" Because without that profitability we won't be here to have this conversation ever again.

I've said a lot. If you're going to take just the one thing away, it's probably going to be the cheese sandwich story actually, but if you can take a second thing away it's that it doesn't matter what the hottest new technology is. Because it's one thing today, and it will be a new thing tomorrow. Higher engineering teams that know how to learn, higher business folks that are good with being taught stuff, and the rest will come.

Have the hard conversations inside your organization. You need to decide on your brand permission and your appetite. 

I have these workshops with executive teams a lot to establish their digital strategy, and the hardest thing to articulate and agree on is not the optionality, that is pretty clear these days, it's your own appetite. But the reality is once you get down this journey, your appetite is the thing that's going to hold you back or propel you forward. And there is no way anyone can have that conversation with you, and there is no way looking outside into the world will substitute that conversation.

But as you're having these hard conversations, I think that the thing to remember is that all of that technology out there, and all of those challengers out there, have actually changed the market.

They have changed the market in a way that doesn't necessarily translate on ability to go out and buy a thing and fixed your problems. But they have changed in a way that you can now digest and replicate. 

And it's that very simple line. It used to be that we built the thing, we sold the thing, we got paid. If the customer didn't like the thing they didn't buy it again. It was a problem for future you. Doesn't happen anymore.

The way value travels in a digital economy has changed. You need to put the thing out there. You need to make the upfront commitment, both to the narrative of what it is you represent but also the actual solution. It has to go out there first. You have to put it in the hands of customers and let them play with it. You have to get feedback, you have to be seen to be responsive. You need to get validated by the customer. You need to get a medal.

It is not until the customer has used your product, kicked its tires and found it adequate, that you will generate value.

And what we're seeing is that where banks have tried to replicate what the start-ups do, or what new technology allows us to do, but overlay a traditional monetization model which essentially flips that to I put out the thing, the piggyback comes first, whether you like it or not is a conversation for another day, they fail. When banks go for feature parity as a knee-jerk reaction and expect instant recognition and reward, they fail.

Now, what every banker sees in this is risk. It's also a stretched out reward window. Yes, there is no way around that. But if I am right in what I have said so far, and obviously I think I am, then there is way too much out there for you to spend all your time looking at it, and there is way too much inside your organization that will need to change anyway for you to be able to play in this space. And there's some really hard decisions about your business that have to be made because of the change out there but won't be answered by a simple like for like pick of what's happening out there, these are decisions for you internally, that's going to be hard. And then you're going to have to go back and build and rebuild because doing things for the first time is tricky. 

And in doing all of that, you're going to need to work to a different economic model altogether, priced differently, have a set of different expectations about when your customer will recognize you as valuable and give you that validation and repeat custom. If you have to do all of that then it's time to stop wasting time and time to stop wasting money, because what's left might not be what you want to be left with.

It is extremely overwhelming to look out there and see how much is happening in our space. Disruption is now an industry in its own right. None of them are you, and you need to make those decisions for yourself. 

So, I'm going to leave you with a question, because I get to do what I like up here. What are you going to do next?

If what I say is true, what are you going to do next?

Thank you very much.