nextbankusa - ramez naam, science fiction writer, presentation
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THE DISRUPTEDFUTURE OF BANKING
RAMEZ NAAM@ramez
[TEXT HAS BEEN ADDED TO SLIDES TO MAKE THEM USEFUL WITHOUT A SPEAKER]
DON’T USE TEXT IN PRESENTATIONS
WHO AM I?
SCIENCE FICTION AUTHOR
14 YEARS IN TECH
HELPED LEAD INTERNAL STARTUP
DOING HIGH SCALE,DISTRIBUTED SYSTEMS,
MACHINE LEARNING,INFORMATION RETRIEVAL
LEARNING FROM A DISRUPTIVE ADVERSARY
NOW TEACHING IMPACTS OF EXPONENTIAL TECHNOLOGIES
SCIENCE FICTION IS HERE
1 MILLION MILES DRIVEN ZERO ACCIDENTS
SEES THINGS YOU CAN’T SEE
REACTS FASTER THAN YOU CAN
DRIVES BETTER THAN YOU EVER WILL
30,000 US ROAD FATALITIES / YEAR1 MILLION /YEAR GLOBALLY
50 BILLION DRIVING HOURS / YR IN US
~8% OF GDP LOST TO DRIVING TIME
“DRIVING” WILL GO AWAY
HUGE INDUSTRIES DISRUPTED
YOUR LIFE CHANGED
IBM’S WATSON
TROUNCED TWO BEST HUMANS
TASK RECENTLY CONSIDERED IMPOSSIBLE
IBM’S TARGET MARKET: MEDICINE
16% OF US GDP
A BETTER DOCTOR, BETTER DIAGNOSIS
MEDICINE A LARGE TARGET
X-PRIZE TRICORDER PRIZE
MOBISANTE ULTRASOUND
$35K DEDICATED ULTRASOUND -> $500 ANDROID
+ TELEMEDICINE AND ALGORITHMIC MEDICINE
Mobisante mobile ultrasound
SENSORS EVERYWHERE
EVERY APPLIANCE, VEHICLE, DEVICE, CONNECTED
SENSORS FOR THE BODY
THE INTERNET OF US
iPhone vs. ENIAC
Michael O’Donnell
$10 TRILLIONTO BUILD IPHONE 5 WITH 1940s TECH
$0
COST OF COMPUTING GOES TO ZERO{AND OF STORAGE, BANDWIDTH, COORDINATION, DISINTERMEDIATION,
ETC..}
WINNERS AND LOSERS
PHOTOGRAPHY AT AN ALL TIME HIGHKODAK CRUSHED
$18 Billion
$10 Billion
$9.5 Billion
$18 Billion
$23 Billion
AIRBNB HAS NEVER BUILT A HOTEL…
BUT HAS A HIGHER MARKET CAP THAN HYATT
AND LIKELY TO PASS HILTON < 3 YEARS
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)
WANT TO BE A WINNER?OR A LOSER?
DISRUPTED
DISRUPTION STARTS AT THE EDGES
THEN HITS THE CORE
PAYMENTS ARE THE EDGE
20%BANKS EARN UP TO 20% OF REVENUE FROM NON-INTEREST SOURCES:
ATM FEES, CREDIT CARD FEES, ACCOUNT FEES, ETC..
3%CREDIT CARDS TAKE 2-3% OF EACH TRANSACTION
SQUARE WOULD LOVE TO REPLACE VISA AND MASTERCARD
BUT DOES THE WORLD EVEN NEED SQUARE?
MOBILE PHONES PER 100 PEOPLE
Cellulari
UBIQUITOUS SMART PHONES WILL ENABLE PAYMENTS WITHOUT ADDED HARDWARE
$1.6 TRILLION
CHINA
$1.6 TRILLION IN MOBILE PAYMENTS IN 2013
317% GROWTH FROM 2012
VISA AND MASTERCARD WANT TO OWN THIS SPACE TOO
BUT 3% SKIM CREATES AMPLE INCENTIVES FOR MERCHANTS & RIVALS
ANALOGY: MOBILE SOCIAL & MOBILE MESSAGING
UBIQUITOUS HARDWARE LOWERED BARRIERS TO ENTRY
ALLOWED MULTIPLE NETWORKS TO SOAR RAPIDLY TO HIGH SCALE
DISRUPTEDMONEY WIRING ESPECIALLY VULNERABLE
DEVELOPING WORLD MAJOR GROWTH AREADRIVEN BY ‘REMITTANCES’ FROM EMIGREES
$500 B Transfers
$528 BILLION IN REMITTANCES IN 2013
8% YOY GROWTH
>10% OF GDP IN 20 COUNTRIES
$50B IN MONEY TRANSFER FEES
10%
FEES AVERAGE 10%. CAN BE 12% OR HIGHER.$200 KENYA = $24 IN FEES. OUTRAGEOUS.
0%?
BITCOIN AS A TRANSFER PROTOCOLINHERENTLY GLOBAL AND INSTANT
PROCESSORS BIDDING AT 1% CHARGES
DISRUPTED
80%THE REAL MONEY FOR BANKS IS LOAN INTEREST
80% OF REVENUE: LOANS & SECURITIES
BANKS DEPEND UPON DEMAND FOR THEIR LOANS
US INDUSTRY IS LESS AND LESS CAPITAL INTENSIVE.
A LONG TERM NEGATIVE TREND FOR LENDING.
RECENT EXAMPLES
$280 million funding
$22 BILLION exit
$800 million funding
$10 BILLION value
AIRBNB NEVER BUILT ONE OF THESE
BUT AGAIN:
NOT JUST RECENT.
A LONG TERM TREND TOWARDS INCREASED CAPITAL EFFICIENCY OF PROFITS
PROBLEM 2: COMPETITION IN LENDING
PEER TO PEER LENDING
“AIRBNB FOR LOANS”
CONNECTS BORROWERS TO LENDERS
DISINTERMEDIATES BANKS
LENDERS GET HIGHER RATES THAN BONDSBORROWERS GET LOWER RATES THAN CREDIT CARDS
LOANS OFTEN PAY DOWN CC DEBT
LENDERS BUILD PORTFOLIOSTYPICALLY COVER ONLY FRACTION OF A BORROWER
SPREAD & SHARE RISK
188% YOY GROWTH
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
GOOGLE LEAD $125M LendingClub ROUND
OTHER COMPETITORS BEYOND P2P
PRIVATE EQUITY FIRMS
$70+ BILLION IN LENDING IN 2013UP FROM $50B IN 2012
SHIPYARDS, HEAVY INDUSTRY, ETC..
NIGHTMARE SCENARIO:
LARGE ASSET HOLDERS MOVE INTO LENDING
ASSISTED BY ALGORITHMS THAT VET LENDERS
& NETWORKS THAT DISINTERMEDIATE BANKS
TRILLIONS IN AVAILABLE ASSETS
?
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
THE DISRUPTEDFUTURE OF BANKING
RAMEZ NAAM@ramez
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