New Industrial Revolution for Banking and Insurance
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My presentation on digitalization of the banking and insurance industry for a group of Chairmen within the industry in Sweden on January 31, 2017.
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New Industrial Revolution for Banking and Insurance
- 1. January 2017
- 2. Halloween in Nashville, 1974
- 3. If the rate of change on the outside (of an organization) exceeds the rate of change on the inside, the end is near.... -Jack Welch
- 4. Digital is the main reason just over half the Fortune 500 companies have disappeared since the year 2000. -Pierre Nanterme, CEO Accenture, 2016 Yet..Digital disruption has only just begun.
- 5. All our knowledge is about the past, but all our strategic decisions are about the future. What we don’t know we don’t know Most of what we need to know to make good decisions today is outside our comprehension: We don’t even know it’s there. What we know What we know we don’t know
- 6. Thx to R. Wieselfors, Ericsson for photos
- 7. Thx to R. Wieselfors, Ericsson for photos
- 8. “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” - Bill Gates, The Road Ahead, 1996
- 9. 2015
- 11. People • “Net generation” • 24x7 “mobile” workforce • Knowledge via MOOCs • Sharing not owning • Sustainability • Gigs and not jobs Technology • Broadband • Smart phones • Cloud • Internet of Things • Big Data • 3D printing • Robotics/AI • VR/AR • Holography Open Source IP • Software • Hardware • Physibles Convergence of….. Finance • Microlending/microfinance • Crowdfunding/equity/P2P • Cryptocurrencies • Blockchain • Mobile money/payments • M2M payments
- 13. • Launched June 2010 • 519 cities in >68 countries • Limited physical assets • USD 62.5 bln valuation (Ericsson – USD 18 bln; Ford – USD 47 bln; GM USD 50 bln) “Doing more with less” through a global platform
- 15. Sweden’s Gig Economy Age of Independent Contractors 68% Swedes are either making an income from online activities or buying labor from others 12% work for ‘sharing economy’ platforms, e.g., Upwork, Uber or Skjutsgruppen Types of Work in Sharing Economy http://www.uni-europa.org/wp-content/uploads/2016/03/crowd-working-survey-swedenpdf.pdf
- 16. Trading one job for a number of “gigs”…
- 17. Hoffice – a Swedish concept gone global
- 18. Knowledge through MOOCs (Massively Open Online Courses)
- 19. A system that activates the untapped value of all kinds of assets through models and marketplaces that enable greater efficiency and access. - Botsman The Sharing Economy Harvard Business Review, 2014 The Sharing Economy: Embracing Change with Caution http://www.slideshare.net/eteigland/sharing-economy-webb
- 20. LEARNING p2p learning open courses & moocs PRODUCTION co-design / co-innovationdigital peer production distributed fabrication (makers) FINANCE p2p funding p2p payments p2p insurance compl. currencies GOVERNANCE SWARM participatory organizations participatory government blockchain / DAO CONSUMPTION redistribution local food systemsproduct-service on-demand services COLLABORATIVE ECONOMY FRAMEWORK V0.1
- 21. Community platform Hierarchicalfirm VS Ford ~ Created by employees within organizational boundaries E.g., Local Motors ~ Created by community collaborators regardless of affiliation Teigland, Di Gangi, & Yetis 2012 The Flipped Firm: New model of value creation?
- 22. “Local Motors is the place for people to create influential vehicles together.” • 100xs less capital cost • 5xs faster production
- 23. Local Motors to print 3D cars in its micro-factories
- 24. Self-driving vehicle with IBM Watson https://localmotors.com/posts/category/press-releases/
- 25. Local and mobile factories Integrating offline and online communities Arizona Washington DC Tennessee Berlin
- 26. FIRM FOUNDED EMPLOYEES MKT CAP BMW 1916 122,000 $56B UBER 2009 7,000 $62B MARRIOTT 1927 200,000 $32B AIRBNB 2008 5,000 $21B WALT DISNEY 1923 185,000 $172B FACEBOOK 2004 15,000 $369B WALMART 1962 2,300,000 $206B ALIBABA 1999 36,000 $241B Adapted from Parker & Van Alstyne, with Choudary, 2016, and updated January 2017 Something fundamental is changing
- 27. Pipeline – Traditional linear value chain Supply-side economies of scale
- 28. Network Effects Value rises as more people use the platform Metcalfe’s Law Platform-based business models
- 29. Pipeline BMs vs Platform BMs Seller of products and/or services SMACIT to make linear process efficient Manager of firm with distinct boundaries First mover advantage Ownership of resources Supply-side economies of scale Destination for solving customer needs SMACIT to co-create value Leader of ecosystem with fuzzy boundaries First to scale advantage Access to resources Demand-side economies of scale (network effects) PLATFORM CONSUMERSPRODUCERS Elements of value exchange Adapted from Parker & Van Alstyne 2016
- 30. Platforms leverage Network Effects
- 31. “We want to help small businesses grow by solving their problems.” - Founder & CEO Jack Ma Expanding industry boundaries “to build the future infrastructure of commerce”
- 32. Alibaba Group – “Doing more with less”
- 33. TRUST: The prerequisite for scale and scope Third parties attached to platform − Fraud − Operational − Health, safety Payment systems − Functionality − Fraud Privacy of data − Cybersecurity − Ethical usage of personal data Trust in Digital Environments
- 34. The threat of the “Winner-take-all” Platforms http://www.the-digital-insurer.com/dia/zhong-an-chinas-first-complete-online-insurance-company/ https://www.ft.com/content/e76198d2-1b26-11e5-8201-cbdb03d71480 Moving into banking and insurance
- 35. Banking is essential, but banks are not. Bill Gates
- 36. LEARNING p2p learning open courses & moocs PRODUCTION co-design / co-innovationdigital peer production distributed fabrication (makers) FINANCE p2p funding p2p payments p2p insurance compl. currencies GOVERNANCE SWARM participatory organizations participatory government blockchain / DAO CONSUMPTION redistribution local food systemsproduct-service on-demand services COLLABORATIVE ECONOMY FRAMEWORK V0.1
- 37. From the north of Sweden
- 40. What is Fintech? Technologies for banking and corporate finance, capital markets, financial data analytics, payments, and personal financial management - Accenture/CB Insights Finance Technology Fintech
- 42. Moving in on traditional bank territory Inspiration from CB Insights, SEB base webpage slightly modified to make more room
- 43. Cheaper and easier international payments
- 44. Automated investing based on algorithms
- 46. Profits from non-mortgage retail lending, e.g., credit cards, car loans, could be reduced by 60% and revenues by 40% over next decade.
- 47. Benefits vs challenges - “Condemned to the freedom of choice” - “Freedom with responsibility” - Increased spending, overextending private economy - Loss of privacy and integrity of data - Risk of fraud - Cybersecurity - Difficulty in being a good citizen? - E.g., Income tax filing + Increased choice + Improved ease of transactions + 24/7/365 access + Reduced financial fees + Alternative investment possibilities + Lowered switching costs
- 48. Insurtech: Disrupting the insurance value chain Activity Examples Product Emerging needs (Sharing Economy) Changing behaviors AXA & BlaBla Car AXA Drive Coach AXA Health Keeper WeSavvy Service & Claims AI Drones Real time Fukoku Fluttrbox Rightindem Business model Peer-to-peer (P2P) Lemonade Guevara Friendsurance Pricing Usage-based (UBI) Metromile Smartride
- 49. New products due to Sharing Economy http://www.the-digital-insurer.com/dia/axas-digital-initiatives/
- 57. By 2020 there will be 5Xs as many connected devices as connected people
- 58. Many new industry data platforms are emerging https://www.siemens.com/press/pool/de/events/2016/corporate/2016-09-industry-analyst-conference/presentation-kayser.pdf
- 61. co al-
- 62. Exploitation Improving existing value creation activities Exploration Developing new value creation activities Adapted from March 1991
- 63. Future consequences of EU Payment Services Directive (PSD)? Payment Services Directive 2 (PSD2) passed on January 12, 2016 Must be included in domestic legislation by January 13, 2018 Among other things, requires that banks open up, through APIs Intention is to improve consumer experience Some precedent (e.g., Tink), but no longer discretionary What does this mean for FinTech and banks?
- 66. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance. WEF schwab The Fourth Industrial Revolution https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/
- 68. Exploitation Improving existing value creation activities Exploration Developing new value creation activities Adapted from March 1991
- 69. Enablers of a “true” Collaborative Economy? Blockchains and smart contracts Cryptocurrencies Sharing/ Collaborative Economy IoT/sensors P2P/M2M micropayments Big data
- 71. Robin Teigland robin.teigland@hhs.se www.slideshare.net/eteigland @robin.teigland If you love knowledge, set it free… If you like this presentation and would like to contribute to our research, we accept bitcoins: 14hs4JbnQLXE87GGzu84uXGaspmxmnLpwC. Thank you!!!!!