Big Data: Have You Carved Your Dugout Canoe?

Technology pioneer George Dyson spoke to the Long Now Foundation this week in San Francisco about “The Digital Universe And Why Things Appear To Be Speeding Up”.

His first nugget was that at the dawn of the digital universe over 60 years ago it was all of 5 kilobytes in size. In todayspeak that’s about half a second of MP3 audio! It’s purpose was as far away from making music as you could imagine. It was set up to design hydrogen bombs.

Fast forward and as the digital footprint expanded exponentially, its acceleration became reflected in the self replication of computers: the pace today is 5-6 trillion connected resistors being added per second.

George used a brilliant analogy, that as a long time waterman resonates with me – as a kayak builder, he initially emulated the wood-scarce Arctic natives to work with minimum frame inside a skin craft. But (today, we are) in the tropics, where there is a surplus of wood, natives make dugout canoes, formed by removing wood.

According to George, “We’re now surrounded by so much information we have to become dugout canoe builders. The buzzword of last year was ‘big data.’

Stewart Brand, from the Long Now Foundation, defines the situation today as: Big data is what happened when the cost of storing information became less than the cost of throwing it away.

Have you started carving your canoe yet?

The Future of Financial Services Through An Entrepreneurial Lens

Last week I gave a talk at one of Australia’s leading banks on the future of financial services. I wanted to share the core of this talk:

I  dived into a number of comparative startup activities in the broader banking arena, but first set the context –

 

Bestselling author Brett King’s thesis is that banking today has shifted from being a noun, a place you go, to a verb, something you do.

The gap between customer and financial services players is rapidly growing, leaving massive opportunities for new, non-bank competitors to totally disrupt the industry.

 

So let’s look at what is happening in this area:-

 
Blueleaf:

Blueleaf is a start up based in the Bay Area.

They are focused on wealth management as a service platform and they are building a product that is designed to improve transparency and reduce costs for the current low return environment.

Their view is that wealth management infrastructure is broken. Client account data is as scattered as people’s money. Clients expect service across all their assets while the enterprise needs a uniform platform.

Blueleaf consolidates all client account and asset data delivering consolidated info to clients, simplified workflow and monitoring for advisors and comprehensive data access and analytics for the enterprise.
They’ve raised $2m in funding from Fred Destin, a partner at Altas Venture, Stewart Alsop, a partner at Alsop Louie Partners, Dave McClure at 500 Startups and others.

 

 

Wallaby Financial:

Wallaby Financial is another Bay Area start up.

Their slogan is “One card to rule them all”. The Wallaby Card brings together a cloud-based virtual wallet with an intelligent, connected physical credit card that can be used at any location where major credit cards are accepted.

They maximise credit card rewards earnings based on your cards, your preferences and where you are shopping with a real-time algorithm. They also connect you to marketing offers from merchants and banks with social mechanics.

They’ve raised $1.1m from Peter Thiel’s Founders Fund.

 

Lendfriend:

Not all the companies I’ll mention are based in Silicon Valley, but this one is.

Lendfriend is “Helping you lend to your social network”.

They are building an online platform for friends and family loans. They assist with the legal and tax docs, influence credit and repayment of the loan.

In their view friends and family have become the lender of last resort for many individuals. This is accelerated by the overall decline in lending by traditional financial institutions.

Their vision is to make friends and family the lender of first resort.

 

Crowdtilt:

Crowdtilt’s focus is on “Simple, Social, Pooling of funds…for anything”.

This San Francisco based startup lets people organise things like group vacations with their friends and ensures the organiser is not stiffed when it comes time to pay.

They take a 2.5% processing fee if the crowd tilts a project.

They have raised $2.1m in funding and they are a Y Combinator graduate.

 

TransferWise:

Jumping continents, TransferWise is based in London.

Their tagline is “Crowd sourced online money transfer”.

They aim to help people save money and time on foreign payments online.

Traditionally you lose 5% when making an overseas payment – they do it for a fraction of that price.

They’ve raised $1.3m from Index Ventures and they are a Seedcamp graduate.

 

 

TrustEgg:

Madison-based TrustEgg is bringing “simplicity to saving for a child’s future”.

They provide a way to save for a child’s future that’s ultra-simple, gets a market rate of return and is accessible to families of all income levels.

A parent can set up an account for each child in minutes and start contributing immediately.  They can share the account with grandparents, aunts and uncles, anyone.

Suddenly you’ve tapped into a vast savings network that was just waiting for a simple and meaningful way to contribute.

They have currently raised $167k and are now raising $2m.

 

Simple:

The cherry on top of this whistle stop financial services startup tour is Simple.

Their aim is to provide “A worry free alternative to traditional banking”.

They started out life in New York, but then moved to Portland, Oregon.

They have raised multiple funding rounds. Seed of $190k in November 2009, a Series A of $2.9m in September 2010, and a Series B of $10m in August 2011 from Shasta Ventures, IA Ventures and NEU VC.

They are a classic example of knowing your market before building your product. After all, it’s better to find out the problem first and then create the solution.

When Josh and Shamir started Simple they put up a single web page and asked – are you dissatisfied with your current bank. If so, let us know?

Things exploded. The founders had 10,000 email conversations with people who responded and asked them what they really wanted from a banking relationship.

This taught them about all the problems people are facing today. And this informed their product design. For example they learnt that Americans really really want photo cheque deposit.

Before 2008, big banks mean safety to people. People thought they’d be around for 10 years, but the safety in the US right now is in the FDIC insurance. Trust is another big area of shift – will your bank fee you to death, or pull a bait and switch.

Simple points to the fact that today what’s important to banking consumers is who gives them the best experiences and services.

The new demographic is looking at other options in banking.

Big banks seem to still be building systems for people who balance checkbooks.

Simple aims to replace your bank.  The founders were frustrated with how complicated their finances has become and decided to start their own retail bank.

The problem they saw was that it was really hard to get the data that the banks had and get it into a format that would be usable.  Mint and such sites had to rely on screenscraping and you just don’t get good usable data that way.

Simple has gone out of its way to redesign banking. They do this by focusing on the customer experience.

They are not a bank per se, but have partnered with an FDIC insured institution. The partner holds the money, while Simple deals with the customers.

It took them 2.5 years to build and launch. They have only been launched for a few months and have 15,000 customers with about 160k waiting for an invite.

Think about it. There are 25 data points per financial transaction. Gmail gives you 10,000 emails searchable and all for free.

The message is that Storage is cheap, data is valuable. We should have more visibility on our transactions, be able to search across them easily using natural language search and also be able to see how much it would be safe for us to spend on a daily basis, set goals and tag our transactions above standard geotagging. This is where Simple is headed.

Facebook, Twitter and LinkedIn all help people engage with specific social groups. People CARE about their friends, their business contacts etc.

People are OBSESSED with their money. Yet right now banks don’t give people any easy way of engaging with their finances.

Maximise Impact: Forget Apps, The Future is Synthetic Biology

If you’re not yet totally buzzed about the future and how synthetic biology is going to change our worlds, then this video is totally worth watching. It’s time to forget the shiny, the easy, and work on things that really matter. Who cares about apps when you can create the next living platform!

Watch Jason Silva wax eloquent:

 

Living in a Post-Geographical World: Address is Approximate (Hat Tip to Steve Jobs)

My family has been travelling since the 1670’s when two Du Toit brothers left France as part of the great French Huguenot movement. They went to Holland, which had recently begun colonising the tip of Africa. Recognising opportunity, they led a movement of settlers and arrived in Cape Town in 1676. The result was a wonderfully rich cultural mix (and some great wines) in the Franschoek region of the western cape of South Africa.

Fast forward a few hundred years and we dispersed to the UK and Australia when crime became all too pervasive. I’ve since also lived in the United States, and regard Sydney and Palo Alto as the closest things to home.

Like many others who have had similar experiences I consider myself post-geographical. It’s not where I am physically that matters, but what my mindset is, who I am interacting with and what I am aiming to achieve.

That’s why this video by Tom Jenkins resonates so much with me.

I love the vision he portrays and his message also talks to what Steve Jobs said many years ago in an interview, namely that the world we live in is made up of man-made constructs and constraints. That the people who created them are no smarter than you are and once you realise this you need never be constrained by them – create your own world, wherever you are!

Address Is Approximate from The Theory on Vimeo.

Using Science Fiction Prototyping To Break Through The Consensus Innovation And Get Big Things Done Barrier

One of my favorite science fiction authors, Neal Stephenson, has written an article titled Innovation Starvation, in which he discusses how science fiction can be used to spur scientists on to make big breakthroughs. I want to extract a few comments from his article before exploring the exciting world of Science Fiction (SF) Prototyping.

Neal worries that our inability to match the achievements of the 1960s space program might be symptomatic of a general failure of our society to get big things done. My parents and grandparents witnessed the creation of the airplane, the automobile, nuclear energy, and the computer to name only a few. Scientists and engineers who came of age during the first half of the 20th century could look forward to building things that would solve age-old problems, transform the landscape, build the economy…

Yet fast forward to today and where are we? Neal uses the example of energy:-

We’ve been talking about wind farms, tidal power, and solar power for decades. Some progress has been made in those areas, but energy is still about oil. In my city, Seattle, a 35 year old plan to run a light rail line across Lake Washington is now being blocked by a citizen initiative. Thwarted or endlessly delayed in its efforts to build things, the city plods ahead with a project to paint bicycle lanes on the pavement of thoroughfares.

Frustrated by our far broader inability as a society to execute on the big stuff, Neal has turned to the tools of his trade – science fiction writing for a panacea. He believes that science fiction as hieroglyph-maker has relevance in this area:-

Good SF supplies a plausible , fully thought-out picture of an alternate reality in which some sort of compelling innovation has taken place. A good SF universe has a coherence and internal logic that makes sense to scientists and engineers. Examples include Isaac Asimov’s robots, Robert Heinlein’s rocket ships, and (another of my favorites) William Gibson’s cyberspace. As Jim Karkanias of Microsoft Research puts it, such icons serve as hieroglyphs – simple, recognizable symbols on whose significance everyone agrees.

Neal continues to define the problem and how SF can address it:-

Researchers and engineers have found themselves concentrating on more and more narrowly focused topics as science and technology have become more and more complex. A large technology company or lab might employ hundreds or thousands of persons, each of whom can address only a thin slice of the overall problem.

I agree that this ‘specialisation’ is an issue. However, I also believe that a culture of consensus is greatly affecting our ability to focus on and get big things solved. Much research is being driven by consensus innovation – academics are recognized and rewarded for publishing highly cited papers. Controversy does not increase citation count, nor does publishing in areas that fall outside the scientific vogue of the day.

Neal notes that many researchers and engineers have a fondness for SF, which reflects, in part, the usefulness of an over-arching narrative that supplies them and their colleagues with a shared vision.

The imperative to develop new technologies and implement them on a heroic scale no longer seems like the childish preoccupation of a few nerds with slide rules. It’s the only way for the human race to escape from its current predicaments.

This meme that we should all be working on solving big stuff that matters is something of a bug bear for me. I’ve written, for example,  about harnessing the power of social to solve big problems like the obesity pandemic. Others are echoing this – Tim O’Reilly recently tweeted:

…someone else makes the appeal for entrepreneurs to work on stuff that matters…

He pointed to an article in which Alyson Shontell picks up on the meaningful innovation meme over at Business Insider. She writes that young founders seem to be enthralled with building fun but meaningless apps. She quotes VC Mark Suster as saying, “The auto industry alone is a $1.6 trillion industry, and you want to f*ck with bars and restaurants?”

But how do we inspire researchers, engineers and entrepreneurs to break out of the consensus innovation mould?

This is where SF prototyping as a means of exploring Hieroglyphs and providing inspiration for big products to solve big issues can come to the rescue.

Just as Neal Stephenson is calling for SF writers to think big and bold and inspire generations of researchers, engineers and entrepreneurs to tackle projects that can allow us to escape our current problems, so SF prototyping provides a useful tool to harness science fiction, the playground of our imaginations, tethered to science fact to both imagine our future and enable the development of new technologies and products.

Intel futurecaster, Brian David Johnson, has written a book on the interesting arena of “Science Fiction Protyping: Designing the Future with Science Fiction” in which he explores the use of three publishing genres to create SF protyptes – short stories, movies and comics.

For anyone involved in exploring the boundaries of possibility and charting the trendmaps of the nextnow and the distant future, SF prototyping can be an extremely useful tool. I’ll be writing more on this area in due course.

Think big, think ahead and let’s solve for the future.

201x: Top Four Trendlines To Prepare You For The New Decade

As the decade draws inexorably to a close, it’s time to get contemplative. What patterns are forming out there in the ether that will set the pace for the new decade?

I’ve come up with four trendlines that I believe will significantly play out over the next ten years:

1. Post geographical means something

Borders may still matter (to politicians and politburos), but for the socially connected they will diminish in meaning. Collective ‘citizen power’ will grow exponentially in response to even crazier governmental crack downs on increased ‘wikileak-like’ transparency, the growing failure of infrastructure (hello heathrow) and wilder weather (increased chaos).

2. Augmented reality becomes, simply, reality

The current AR-hype will give way to pervasive augmentation via less articificial means than pointing your iPhone at something and hoping it translates (aka Wordlens). Reality will become more real, more information-rich through ‘it simply works’ means. Think of search pre-Google, and you’ll get it.

3. Social commerce grows up, vertically

The current group(on) collective buying mania will not settle down into its current all things to all people groove. Expect it to mature, vertically into specialist areas manned by experts in various domains who can ensure there are no daily deal overruns.

4. Transport electrifies

21 million electric bicycles were sold in China last year. This is a space that will grow rapidly in the years ahead. Our post geographical citizen power will flex its muscle to ensure infrastructure is altered to cater for silent, economical and environmentally-sound travel.

Bank 2.0: How Behavior Is Fundamentally Driving Change

Last week I had the pleasure of attending a session with some senior members of the banking industry. The key attraction was to hear from Brett King, author of Bank 2.0.

It was a really interesting discussion and I really enjoyed both Brett’s logic and the way he weaved a narrative around how the banking world status quo is rapidly shifting.

Much of what follows is word for word from Brett’s talk, so I give full attribution to him:

There is a feeling in the banking sector that to some extent banking is immune from the forces that affect other types of businesses because, after all, it’s banking and financial services, as a basic concept, hasn’t changed  since the ninth century A.D. when Persia first issued a check. So you could be forgiven for thinking that banks struggle with innovation.

And yet, there is innovation occurring today in banking. We have mobile phone and iPhone banking, we have Internet banking and we have other types of innovation as well like CFD’s.

Banking, however, is pretty much a utility. You turn the switch and the light comes on.  We don’t say wow the electricity worked today, and it’s the same when we go to the ATM and put our card in and cash comes out. We expect banking to work, we expect banking to provide us with that functionality. It’s when it doesn’t work that there’s a problem.

But just like other utilities, to play in the banking space, to own part of the wires, and to own part of the network and have access to this you need a banking license. So for a long time bankers felt protected by the fact that they have a banking license. So the competitive barrier to entry is there. How do competitors come in unless they get a banking license?

As a result, the meter, the traditional access to the customer hasn’t changed much because there hasn’t been a huge imperative to change. Why? Because banks define the rules. If you want a mortgage you have to meet my requirements as a bank. And if you’re not interested in doing that, fine, go find someone else. And that’s traditionally the way we have been treated by banking.

Banking has not so much been a service as such to its customers as a privilege and “we’ll charge you for the right to have that privilege”.

This is where things are changing, this is the difference that we face today as a result of three very strong disruptive behavioral changes.

Here’s an illustration of this point. In Hong Kong the Octopus card is a stored value smart card using contactless technology. It’s similar to Oyster in the UK. Essentially you cash up this card and use it like a debit card for transactions on the public transport system. You don’t need to swipe it or stick it in a point-of-sale [POS] terminal. You can actually have it in your wallet and just hold your wallet to the POS terminal and it works. This was introduced in Hong Kong in the late 90s to replace paper ticketing for the public transport system.

There is approximately a population of 7 million people in Hong Kong and there are over 12 million of these cards today. This means that not only does everyone in Hong Kong have one, but when you’re a tourist and you visit Hong Kong you also get one of these cards.

People began thinking as they used these cards every day, why can’t it be used to buy a coffee at Starbucks as well? And so very quickly after Octopus became ubiquitous, you started to see for example Starbucks put in a POS terminal and similarly for other products and services. The problem was that within nine months of this occurring, ATM cash withdrawals reduced by 13%.

The banks weren’t happy and they went to the Hong Kong monetary authorities and alerted them that Octopus was acting like a bank.

“They are taking deposits and you have to stop them.”

The Hong Kong Monetary Authority looked at Octopus and agreed with the banks–they then issued Octopus with a banking license for deposit taking.

So what is interesting is that this is not a bank but it looks like a bank and behaves like a bank and replaces some of the banking functions–sounds a little bit like PayPal.

In Kenya the big four banks have about 750 branches and the oldest bank has been around for more than 80 years. The mobile banking service m-pesa  was started in 2006  by Safaricom,  a communications company, which went to the banks and said we think this is a good idea and want to partner with you. The banks concluded that there was no money in this area and declined the offer.

A few months later those  same four banks went to the regulators and said you have to stop m-pesa–they are a threat!

“They are doing banking.”

M-pesa now has 11 million customers, compared to the 3 ½ million customers across the big four banks.They have 18,000 outlets and do 10% of Kenya’s GDP. Compared to Western Union, m-pesa does more business in a month than they do in a year. They started in 2006, they are not a bank– they look like a bank though, don’t they?

We are seeing the meter being reinvented, and it’s not involving banks.

The banks still have the backend wires and processing. HSBC is very proud of the fact that they act as the backend settlement process for PayPal. Wouldn’t it have been better for them is they actually were PayPal who have a market cap of over $40 billion?!

What is traditionally known as banking is under threat from non banks, from telecommunications companies, from Apple, Google, PayPal–from nontraditional competitors.

It’s hard for banks to really adapt. The last great banking innovation was the ATM. Because banks cannot claim that the Internet or mobile phones are a banking  innovation. All banks have done is adapt to other inventions. When we talk about innovation in banking, we tend to talk about innovation in financial instruments.

We don’t conceptualize innovation in the banking industry as innovative business models, innovating customer experiences–we think banking is an art, banking is a science and there’s no need to change the fundamental way we do banking.

Banks today are like a big ship, a massive supertanker,  that has been built up over a long time, big structures that barrel along at full speed–at full speed they take 14 km to turn around and get up to full speed again.

It’s very hard to get a change in philosophy–for example banks need to rethink their communication strategy, they need to rethink how they engage with customers in a multichannel way, they need to be customer centric in terms of the way that they measure performance in their business, they need to really invest more in the journey–it is very hard to get that ship turned around.

Let’s now focus on these three phases of disruption:

The first phase was the Internet – which provided us with choice and control as consumers. It gave us the ability to bank when we liked and how we liked. Prior to that there was a physicality to banking – we had to physically go down to the branch between 9 to 3, because that was when the bank was open for customers (banking hours, now there’s a term that has become an anachronism).

Internet banking gave us more freedom. In recent times we’ve had some new models come out here in Australia, like uBank. They are now the 8th largest bank in Australia in terms of deposits – they are only 3 years old.

Why have they been successful? Bankers usually answer that it is there good interest rate. However, there has been a 300% increase in Internet bank deposits in the last 18 – 24 months. Online deposits are increasing at twice the rate of deposits in the offline world. What has made uBank successful is not their interest rate, but behavior.

Behavior of customers are changing and this is the influence, this is what’s driving changes in this business. Our expectations are also changing.

Social media has given us further control. It’s given us power as consumers. Bank of America has 1900 fans on Facebook. I hate Bank of America has 32,000 fans. A customer put out a video on YouTube calling them out for increasing her credit card interest rate without consulting her and not letting her negotiate on it. Within 3 months she had over 500,000 views. Bank of America had to change their minds.

This has never happened before!

Those big ships are awfully hard to negotiate with when you are standing in their way, but social media has given the consumer that power. Banks are under the eye of the consumer these days – transparency is there. Some folks wonder about trust in these new technologies, but post the GFC trust in banking is at an all time low.

Trust and security are no longer the big issues.

Banks cannot control their customers, they cannot control their brand through spin in social media. The only way they can have any influence on customer perception is by being really good at serving their customers. If banks aren’t, consumers will punish them.

We have a different landscape in terms of brand management for banks today. Who do you think the consumer is more likely to believe – their friends on Facebook, their followers on Twitter or the bank’s full page ad in a local newspaper?

Within banks, legal and compliance are horrified at the thought of responding to a customer in real time. Their first response is to ban social media in the office, thinking it will reduce the risk. However, what they’ve done is just increase the risk exponentially, because unless a bank is willing to speak to customers in their environment then they are speaking about you without you in the discussion. You are exposed a lot more.

The perception that social media is risky is only the case if you are not very good at providing service to your customers.

The second phase of this behavioral shift revolves around mobility. When you first got your Blackberry, I doubt you realised how significant a tool this would be. Suddenly we’re doing 30-40% of our email on it. If I’d told you 15 years ago you’d be doing 30-40% of your email on your Blackberry, you’d have said what is email. Ten years ago your answer would be – what’s a Blackberry. So our behaviors have changed quite rapidly as a result of these new technologies.

And then the iPhone emerged in 2007 and we realised we could have a rich media experience. The screen is big enough for us to have useful content while we are on the move. This was a game changer.

Bank of America launched their iPhone app in Aug 2007. They have over 4m users of this app. Of these, 200,000 are new users who only came to BoA to get access to the app.

The same thing happened when Chase announced their no-deposit cheque service.

You’d think BoA has a really cool app, but it is only rated 1.5 stars on the appstore. All they’ve done is tap into an emerging behavior and insert themselves into the stream to fulfil or enable the behavior.

Why is it that less than 5% of banks in the US have a defined mobile play. Many of the bankers are still saying they are not sure if mobile banking is real, they are not sure which technology to use – iPhone, Android…or wait and see which is the dominant platform.

You have to be able to serve customers from a behavioral perspective. For example HSBC said they had a mobile plan – but it required users to go to a WAP browser typing in an endless string of commands to get access, but their customers didn’t do that, they went to iTunes and typed in ‘HSBC’ and determined they didn’t have an app.

The third disruptive phase is mobile payments. Remote check deposit capture is one innovation in this area. In every western economy checks are in decline. Our use of these physical financial instruments is reducing because our behavior is changing.

In the UK in 1996 there were 11 million cheques issued every day, increasing to 36 million in 2003. This year it will be between 7-800,000. The UK Payments Council has decided that 2018 is the year cheque settlement will cease. Many bankers in the US will say, “That will never happen here.”

But this is the thing – you cannot stop behavior change.

You might think that as a bank you dominate behavior. But we don’t change behavior as bankers, all we do is adapt to it.

Banker need to think more laterally where banking fits in the value chain.

Have you ever tried to go through the onboarding process for a merchant account with a bank – it is a nightmare. Say you want a credit card POS terminal in your business. You need to do a minimum of $100k, you need contracts from all the card companies as well as the bank. Jack Dorsey, one of the Twitter founders, looked at this and could see the pain. And so he created Square – an adaptor for the iPhone, which plugs in the audio jack and costs US$1. You load a Square app up on your iPhone and you become a merchant – instantly.

Think of it from the customer point of view – it would be pretty hard for a bank to sell them its merchant services when they can just go to Square.

The latest patents for the nextgen iPhone have contactless payment incorporated into the phone, including a biometric strip (assumed to be a fingerprint reader) and a near field communications antenna which is what makes contact with the POS terminal.

Would Apple not essentially become a bank if every iPhone user now had this built in payments method connected to the cash balance in their iTunes account?

To succeed in banking in the future it is going to be about reducing the friction and making it easier for customers in their whole life not just with respect to banking. Banks will need to take banking to them, where they need it.