What's changing our world and why is this a threat to banks? >>Right. As I said, right? Once with the open APIs, right? >>Right >>All these banking applications are in the control, so-called end-user computing So, whoever is doing the computing can extract the data out of the database so that basically you- >>So I get more control >>Yeah, you get your control. And basically if you'd still use the traditional model to analyze it it's like the bank is in my mobile phone it's on my smart phone With that app, you could even call the app as a bank It's providing all these banking services and then you have control of it and it's mass customization You could customize it to your need So it becomes a module so that all your personal data all your financial data are residing sitting in your smartphone and you could use it to whatever purpose For example, let's say, you want to apply for loan So it's no longer that you need to go to the bank and say that "Oh, give me all these past record of my payroll transaction, all my spending transaction, all these." It's all in my control and I could send it to the lending institute Or, I could even upload it for property >>So because the user gains control and gains data >>Right >>Also, new entrepreneurs can start up and provide services that are- >>Yeah >>Creative, innovative, useful, and by-pass traditional blocks >>Yes, exactly. Bank doesn't have money It's the people that deposit money and they lend it out to me Now, why would I need to go to that intermediate person Why can't I just go to the public and say that "This is my transaction record and that's my payroll. That's how I spend my everyday life. Do you want to lend me some money to buy this house?" Now, obviously, for that particular house I could even have a lot of the tools to assess the value of it And people think, "Oh yeah. It's a good bargain. I shop for a good house to buy. It's a good bargain." People can assess that and say that "Okay, why not? Oh, Hilton, you have stable income? Your spending is quite healthy. I lend it to you at that particular interest rate." >>Here's something I'm thinking about with house I bought a house not too long ago >>Right >>In the USA. And when I bought the house I was able to use a lot of online services, apps, features And I also, was able to negotiate the commission down on buying the house to half what the commission would have been a decade ago >>Right >>So I was able to save a lot of money by using an online app and negotiating, and saving fees Do we see fees dropping a lot in banking as a result of this openness and new apps and new competition? >>Yes, definitely. I could see the fees definitely going to be lower >>Okay. So one banker said at a conference "Every year, we as bankers are spending more on technology. And every year, we're making less money." >>Yes >>Why don't we all just stop? Stop spending on tech and we'll be much better off >>Yeah, I recognize this is a problem I mean, when I talk to the bankers These always have a headache to maintain an IT team >>Yeah >>The turnover of IT team >>They spend more, and more, and more >>Yeah >>And they're making less and less money >>Yes, one of the reason is because they do not know how to manage IT people They know how to manage finance and banking colleagues But as to IT, you see Google, right? You see other IT Cisco, IBM's, right? The way they manage IT people is totally different and suddenly, that now >>So, they don't know how to manage some of these techno geeks >>Right. Right >>Do they know how to manage customers? >>Look at it. If you even interview any graduate from university, right? >>Right >>If they want to go for an interview for banking job suits, ties, go to the central in Hong Kong It doesn't it feel like Silicon Valley >>Exactly >>Yeah >>For IT people, right? I mean, it's like Silicon Valley, right? People could be in jeans could be kind of, you know still- >>I'm wearing a tie I seem to be like a banker I'll better take my tie off >>But, you can see the culture is very different So that's why, it's very difficult to hire talented IT people and retain them in the bank And the whole culture and environment does not fit them So, you can see that now A lot of people wants this API be opening now Of course, I could see the bankers are also very smart. They are changing as well They offer a lot of these open innovation labs around the world They want to collaborate They attract people that put in money to fund the FinTech startups So instead of having their own IT people instead of they calling the IT people and say, "Okay. Join us. We'll give you training. We do all this," and this is that "Okay. Please present me good ideas. I'm willing to fund money to your startup." So if you have a good digital wallet apps or if you are really good Algo trading app if you have a very good robo-advisor app please show me and I'm willing to do it And now, with open technology, that could be done So that means if I go for an interview, instead of for example, in the old days, I interview a job No, I interviewed to present a portfolio with a prototype of what I did It's a banking application So in fair from the bank's point of view the risk is lower, right? And also, that the bank just say that okay... >>So you mean >>They should be thinking differently about innovation, differently about technology >>No, I think they already are thinking differently I talked to a few of the senior bankers, right? In Asia, in America they always say that it's the open innovation concept Why should we need to spend money hire people, going through the whole recruitment exercise? Whereas, there's a lot of startup they are willing to spend the first year going through that tough period >>On their own? >>On their own. Take the risk Keep them going >>Yeah, exactly. Maybe not even able to- >>Succeed or fail >>To get the minimum pay Not even the minimum pay >>Right >>To start it off and it come up with a prototype come up with something that they truly believe they have a passion for >>Which is different from the culture of banks which are risks at first >>Yeah, exactly >>Yeah >>In the old days, the banks- >>So paid startups are different >>Right. Things are very structured, very stringent and then you have to comply with A, B, C, D, E And it's not good for innovation Now, after the system >>Okay >>Now for the back-end operating system, yes that's fine Because for transaction system, you need that >>Right, right >>Because there's a lot of all the compliance >>And you need the security insurance, and make things really work But what we are talking about is the front-end user experience >>Which is where the innovation comes >>That's definitely the innovation >>Okay >>And then obviously, the front-end innovation also impact on the back-end infrastructure And Obviously, if at the back-end, right? If the API is not ready the fast payment is not ready the clearinghouse, the back-end to clear all these transaction in split seconds, right? If that's not ready obviously front-end come to anything Now, the banks are also competing Yeah, one of the bankers could say- >>So one of the issues is bankers are not keeping up with the level of innovation of IT creative Silicon Valley apps new creation of products They're not able to keep up with that high-tech world >>Yeah, I think some of them are very difficult >>What about keeping up with customers? Because some people say bankers they talked about know your customer but they don't have a clue They don't know their customer They may know some things about security >>Right >>But they don't really know what drives particularly young customers today >>Now, you bring in a very interesting topic, not just bankers If you talk to people across the industry nowadays, right? They find it very difficult to understand the consumer nowadays because the millennial because some of them are disconnected from TV It's not like in old days, right? Everybody watch TV and we know that they're all watching the same episode or whatever >>Right >>The media is so diversified now >>Yeah >>And the behavior, the way they prefer to even click There's so many research study on one click to two clicks, or three clicks, or whatever It's because they're also diversified They are the exposed to so many different things Okay So it's hardly like in old days, right? Remember, when I was a kid, studying high school >>So, more market fragmentation >>Yeah >>Which is part of the challenge >>Yeah, exactly. When there was a TV episode The Six Million Dollar Man, you talked to your whole classmate Everybody watching the same TV episode, right? >>Right. But today, it's not everybody's watching the same cats on YouTube >>When they discussed together, right? They would discuss different things >>Right >>All right, watch this and I'll watch that >>Okay >>It is so different. And also, look at it All these successful video that they watch, right? It's one to two minutes and most three minutes. It's all short >>Yeah, some are ten minutes I mean, this course, we try to keep things with ten minutes >>Right. Right Okay. Yeah, but I hear what you're saying. It's got to be shorter
