Table Of ContentSOFIE BLAKSTAD, ROBERT ALLEN
FINTECH REVOLUTION
UNIVERSAL INCLUSION IN THE NEW FINANCIAL ECOSYSTEM
FinTech Revolution
Sofie Blakstad · Robert Allen
FinTech Revolution
Universal Inclusion in the New Financial
Ecosystem
Sofie Blakstad Robert Allen
hiveonline hiveonline
Copenhagen, Denmark Copenhagen, Denmark
ISBN 978-3-319-76013-1 ISBN 978-3-319-76014-8 (eBook)
https://doi.org/10.1007/978-3-319-76014-8
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Preface: Level the Field
We’ve spent most of our careers building banks, delivering business struc-
tures and technology to make them work better. As we did so, we observed
the industry, the technology, customers and economic changes both as insid-
ers and as customers of banks.
This book is about the future of finance, but it’s also about its immediate
past, and the things many people, including us, have done and are doing to
make finance fairer and more inclusive. It’s about the opportunities that are
now emerging for the billions of people who lack access to traditional finan-
cial services, to participate and thrive in the new financial ecosystem.
Financial services companies are trying to become more customer
focused, but struggling to help huge customer segments, particularly in
developing economies. Alternative financial models and tools are emerg-
ing, which are being embraced by consumers and incumbents. In large parts
of the developing world, alternative services are leapfrogging traditional
finance, meaning more and more people have access to finance without ever
needing a bank. Since we left the world of traditional banking to develop
new business models based on emerging technology, we’ve become deeply
involved with the effort to implement the United Nations’ Sustainable
Development Goals1 (SDGs), 17 targets we must meet as a species to create
a sustainable home for ourselves by 2030.
The SDGs are a broad-reaching set of goals covering everything from
poverty to water safety, gender equality to financial inclusion. Emerging
financial technology offers unprecedented opportunities for underserved
customers in both developed and developing economies, enabling them to
v
vi Preface: Level the Field
collaborate in global communities and rewrite global capital markets. The
way markets, work, supply and money works is changing fundamentally,
empowering smaller and traditionally underserved small and micro-busi-
nesses, alongside ordinary consumers.
Meanwhile, the barriers around financial services companies are crum-
bling, as they become more reliant on integration with new providers and
alternative types of service. Financial products can no longer be viewed in
isolation, but as part of a service landscape that supports how people “do
life”. This means rethinking how our businesses are designed, motivated
and organised, and letting go of the old ways of thinking about supply and
demand. There’s a new world on the horizon where mobile wallets, disin-
termediated payments, trustless trust, ecosystem identity and community
finance will transform the way we perceive and use value and trust.
We offer a practical guide to the evolving landscape of finance, high-
lighting how it’s changing our relationship with money and how financial
technology, together with macroeconomic and societal change, is rewriting
the story of how business is done in developing economies. We present the
practical steps businesses and, in particular, financial services organisations,
need to take to participate in a global service ecosystem, and how both cus-
tomers and staff will benefit from this. We show the critical role that many
technologies, especially blockchain, will have in contributing to these devel-
opments, drawing on our experience in both the old world of major inter-
national banks and the new world of Fintech, where, through our company
hiveonline, we’re building some of the solutions that will drive the Fintech
Revolution.
There’s a joke circulating on the internet: The world is full of two types
of people: 1. Those who can extrapolate from incomplete data. The joke is, of
course, that the data are always incomplete. The future is unknown, messy
and full of “no shit” moments. In Back to the Future, Doc asked Marty in
1955, who the POTUS was, and got the answer “Ronald Reagan”—every-
one laughs, it’s funny viewed from 1955. Today, we have Donald Trump, fly-
ing delivery vehicles (although no flying cars yet) and the sum of all human
knowledge accessed through your phone. Nobody knows what’s around the
corner, and however smart or expert you are, the future is too messy and full
of surprises to predict fully.
However, history also teaches us lessons, if we are humble enough to read
it with open eyes. Looking back over our lifetimes, there are very few occa-
sions when the world has been truly taken by surprise; there are, though,
many more where the signs and predictions were made, but ignored, for
short-term political, reputational or financial reasons or, more commonly,
Preface: Level the Field vii
because the people with the knowledge weren’t the people making the deci-
sions.
People making decisions are often ill-equipped to do so and surround
themselves by people who are equally poorly equipped. The nature of pol-
itics means that expertise isn’t that valuable an asset, while many experts
choose to avoid involvement in politics, so that they can get on with devel-
oping solutions. Human behaviour is often motivated by purpose and
value rather than by money; classical models of economics and society fail
to account for this and are proving terrible at predicting how our world
evolves, while evolving technology supports new types of interaction, lead-
ing to more “new normals” every few years.
For people like us at the leading edge of technology developments, it’s
very easy to appear to cross the line into the “tin-foil hat” brigade for some
observers, while appearing mainstream to others; what seems obvious and
the natural order of things to others looks crazy and suicidal to us. It’s a mat-
ter of perspective.
We are living in many stories. The ones we tell in this book are the story
of how financial services have evolved following the 2008 crash, how tech-
nology has helped change people’s interaction with financial services, how
global economic and societal change is needed and can be supported by
these changes, and how business and work is moving from a pyramid cul-
ture to an ecosystem, with the struggles that movement entails. We tell parts
of our own story of how we’ve both experienced and participated in these
changes, but they are everyone’s story today.
We’ve anchored our story in the observations we’ve made working in 12
of the world’s largest financial institutions, and the research we’re living as
we build a new sort of financial institution for the future. But the book isn’t
about banks. We tell the story of financial institutions, but we also tell the
story of an evolving world, where billions of people can grasp the opportu-
nity to rise out of poverty thanks to social and technological developments,
while at the same time trust in traditional institutions and nations is eroded
by scandals, spread by social media and the rise of fundamentalism of all
flavours.
We’ve arranged the book in two sections: the first half looks at how finan-
cial institutions and Fintechs are evolving, together with the opportunities
technology can present for sustainability, and especially for the many under-
served and unbanked people and businesses in the world, and the second
half explores broader societal trends in consumer behaviour, what this means
for consumers and financial institutions, and finally how financial institu-
viii Preface: Level the Field
tions can realign their business and service models towards the resulting eco-
system economy.
But we hope you will engage with the sections or chapters that interest
you, as you choose: treat it as a how-to guide to building a bank, or as a
guide to the evolution of alternative finance, or as a commentary on global
socio-economic change driven by technology. Each chapter is cross-refer-
enced with relevant chapters, so you’re not tied to a linear narrative; we’ve
found that life doesn’t work that way, so why should a book?
Copenhagen, Denmark Sofie Blakstad
January 2018 Robert Allen
Note
1. S ustainable Development Goals homepage (UN). https://sustainabledevelop-
ment.un.org/?menu 1300. Accessed 11 January 2017.
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Contents
The Un-bank, Part I Fintech for Financial Inclusion
What’s Behind It?
1 Ecosystem vs Egosystem and Revolution vs Evolution 3
2 What’s the Point of Banks? 19
3 The Death and Resurrection of Capital Markets 41
The Un-bank, Part II F intech for Financial Inclusion
What’s Going on?
4 New Payments Landscape 67
5 Central Bank Digital Currencies and Cryptocurrencies 87
6 Shifting Values in the Connected Economy 113
7 Leapfrogging Banks in Emerging Markets 121
ix
x Contents
The Un-bank, Part III Fintech for Financial Inclusion
Building the Future
8 Alternative Wealth: The Cow in Your Pocket 135
9 New Standard Models for Banking 147
10 The Money Revolution: Recycling Value to Drive
Sustainability 167
11 Green Fintech 183
12 SME Microfinance, Fractional Ownership
and Crowdfunding 201
13 International Sustainable Investment 215
Future Business, Part IV S ervices for the Ecosystem Economy
What’s Behind It?
14 Services and Demand 229
15 Platform Consumers 243
16 Technology vs Solution 261
Future Business, Part V Services for the Ecosystem Economy
What’s Going on?
17 Career as Microservices—Reputation-Based Skill Validation 275
18 Plebocracy Bias 285
19 New Approaches to Identity and Authentication 299
