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NextBankUSA - Ramez Naam, Science Fiction Writer, presentation

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NextBankUSA - Ramez Naam, Science Fiction Writer, presentation

  1. 1. THE DISRUPTED FUTURE OF BANKING RAMEZ NAAM @ramez
  2. 2. [TEXT HAS BEEN ADDED TO SLIDES TO MAKE THEM USEFUL WITHOUT A SPEAKER] DON’T USE TEXT IN PRESENTATIONS
  3. 3. WHO AM I?
  4. 4. SCIENCE FICTION AUTHOR
  5. 5. 14 YEARS IN TECH
  6. 6. HELPED LEAD INTERNAL STARTUP DOING HIGH SCALE, DISTRIBUTED SYSTEMS, MACHINE LEARNING, INFORMATION RETRIEVAL
  7. 7. LEARNING FROM A DISRUPTIVE ADVERSARY
  8. 8. NOW TEACHING IMPACTS OF EXPONENTIAL TECHNOLOGIES
  9. 9. SCIENCE FICTION IS HERE
  10. 10. 1 MILLION MILES DRIVEN ZERO ACCIDENTS
  11. 11. SEES THINGS YOU CAN’T SEE REACTS FASTER THAN YOU CAN DRIVES BETTER THAN YOU EVER WILL
  12. 12. 30,000 US ROAD FATALITIES / YEAR 1 MILLION /YEAR GLOBALLY 50 BILLION DRIVING HOURS / YR IN US ~8% OF GDP LOST TO DRIVING TIME
  13. 13. “DRIVING” WILL GO AWAY HUGE INDUSTRIES DISRUPTED YOUR LIFE CHANGED
  14. 14. IBM’S WATSON
  15. 15. TROUNCED TWO BEST HUMANS TASK RECENTLY CONSIDERED IMPOSSIBLE
  16. 16. IBM’S TARGET MARKET: MEDICINE 16% OF US GDP A BETTER DOCTOR, BETTER DIAGNOSIS
  17. 17. MEDICINE A LARGE TARGET X-PRIZE TRICORDER PRIZE MOBISANTE ULTRASOUND
  18. 18. $35K DEDICATED ULTRASOUND -> $500 ANDROID + TELEMEDICINE AND ALGORITHMIC MEDICINE Mobisante mobile ultrasound
  19. 19. SENSORS EVERYWHERE EVERY APPLIANCE, VEHICLE, DEVICE, CONNECTED
  20. 20. SENSORS FOR THE BODY THE INTERNET OF US
  21. 21. iPhone vs. ENIAC Michael O’Donnell $10 TRILLION TO BUILD IPHONE 5 WITH 1940s TECH
  22. 22. COST OF COMPUTING GOES TO ZERO {AND OF STORAGE, BANDWIDTH, COORDINATION, DISINTERMEDIATION, ETC..}
  23. 23. WINNERS AND LOSERS
  24. 24. PHOTOGRAPHY AT AN ALL TIME HIGH KODAK CRUSHED
  25. 25. $18 Billion
  26. 26. $10 Billion
  27. 27. $9.5 Billion
  28. 28. $18 Billion
  29. 29. $23 Billion
  30. 30. AIRBNB HAS NEVER BUILT A HOTEL… BUT HAS A HIGHER MARKET CAP THAN HYATT AND LIKELY TO PASS HILTON < 3 YEARS
  31. 31. AIRBNB vs. HOTEL CHAINS (MARKET CAPS) • AIRBNB: $10b • HYATT: $9.5b • STARWOOD: $15B (LIKELY PASSED IN 2015) • MARRIOTT: 18B (LIKELY PASSED BY 2016) • HILTON: $23b (LIKELY PASSED BY 2017)
  32. 32. WANT TO BE A WINNER? OR A LOSER?
  33. 33. DISRUPTION STARTS AT THE EDGES THEN HITS THE CORE PAYMENTS ARE THE EDGE
  34. 34. 20% BANKS EARN UP TO 20% OF REVENUE FROM NON-INTEREST SOURCES: ATM FEES, CREDIT CARD FEES, ACCOUNT FEES, ETC..
  35. 35. 3% CREDIT CARDS TAKE 2-3% OF EACH TRANSACTION
  36. 36. SQUARE WOULD LOVE TO REPLACE VISA AND MASTERCARD
  37. 37. BUT DOES THE WORLD EVEN NEED SQUARE?
  38. 38. MOBILE PHONES PER 100 PEOPLE Cellulari
  39. 39. UBIQUITOUS SMART PHONES WILL ENABLE PAYMENTS WITHOUT ADDED HARDWARE
  40. 40. $1.6 TRILLION
  41. 41. CHINA $1.6 TRILLION IN MOBILE PAYMENTS IN 2013 317% GROWTH FROM 2012
  42. 42. VISA AND MASTERCARD WANT TO OWN THIS SPACE TOO
  43. 43. BUT 3% SKIM CREATES AMPLE INCENTIVES FOR MERCHANTS & RIVALS
  44. 44. ANALOGY: MOBILE SOCIAL & MOBILE MESSAGING UBIQUITOUS HARDWARE LOWERED BARRIERS TO ENTRY ALLOWED MULTIPLE NETWORKS TO SOAR RAPIDLY TO HIGH SCALE
  45. 45. MONEY WIRING ESPECIALLY VULNERABLE
  46. 46. DEVELOPING WORLD MAJOR GROWTH AREA DRIVEN BY ‘REMITTANCES’ FROM EMIGREES
  47. 47. $500 B Transfers
  48. 48. $528 BILLION IN REMITTANCES IN 2013 8% YOY GROWTH >10% OF GDP IN 20 COUNTRIES $50B IN MONEY TRANSFER FEES
  49. 49. 10% FEES AVERAGE 10%. CAN BE 12% OR HIGHER. $200  KENYA = $24 IN FEES. OUTRAGEOUS.
  50. 50. 0%? BITCOIN AS A TRANSFER PROTOCOL INHERENTLY GLOBAL AND INSTANT
  51. 51. 80% THE REAL MONEY FOR BANKS IS LOAN INTEREST 80% OF REVENUE: LOANS & SECURITIES
  52. 52. BANKS DEPEND UPON DEMAND FOR THEIR LOANS
  53. 53. US INDUSTRY IS LESS AND LESS CAPITAL INTENSIVE. A LONG TERM NEGATIVE TREND FOR LENDING.
  54. 54. RECENT EXAMPLES
  55. 55. $280 million funding $22 BILLION exit
  56. 56. $800 million funding $10 BILLION value
  57. 57. AIRBNB NEVER BUILT ONE OF THESE
  58. 58. BUT AGAIN: NOT JUST RECENT. A LONG TERM TREND TOWARDS INCREASED CAPITAL EFFICIENCY OF PROFITS
  59. 59. PROBLEM 2: COMPETITION IN LENDING
  60. 60. PEER TO PEER LENDING
  61. 61. “AIRBNB FOR LOANS” CONNECTS BORROWERS TO LENDERS DISINTERMEDIATES BANKS
  62. 62. LENDERS GET HIGHER RATES THAN BONDS BORROWERS GET LOWER RATES THAN CREDIT CARDS LOANS OFTEN PAY DOWN CC DEBT
  63. 63. LENDERS BUILD PORTFOLIOS TYPICALLY COVER ONLY FRACTION OF A BORROWER SPREAD & SHARE RISK
  64. 64. 188% YOY GROWTH
  65. 65. P2P LENDING STILL TINY VS $1.8T US LOAN MKT BUT DOUBLING EVERY 9 MONTHS 2/3 NEW LOANS FROM INST. INVESTORS DEFAULT INSURANCE NOW AN OPTION
  66. 66. GOOGLE LEAD $125M LendingClub ROUND
  67. 67. OTHER COMPETITORS BEYOND P2P PRIVATE EQUITY FIRMS 
  68. 68. $70+ BILLION IN LENDING IN 2013 UP FROM $50B IN 2012 SHIPYARDS, HEAVY INDUSTRY, ETC..
  69. 69. NIGHTMARE SCENARIO: LARGE ASSET HOLDERS MOVE INTO LENDING ASSISTED BY ALGORITHMS THAT VET LENDERS & NETWORKS THAT DISINTERMEDIATE BANKS
  70. 70. TRILLIONS IN AVAILABLE ASSETS
  71. 71. ?
  72. 72. WHAT SHOULD BANKS DO? 1. MOVE FAST IN A FAST CHANGING WORLD 2. KEEP YOUR CUSTOMERS HAPPY! 3. UNDERSTAND YOU’RE NOT THE ONLY GAME IN TOWN 4. KNOW YOUR ADVANTAGES: – FDIC, PERCEIVED STABILITY, CONVENIENCE, RELATIONSHIPS 5. DISRUPT YOURSELF BEFORE SOMEONE ELSE DOES
  73. 73. THE DISRUPTED FUTURE OF BANKING RAMEZ NAAM @ramez

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