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
