A Conversation with Tim Sloan and Ajay Banga at 2019 FinTech Ideas Festival

Thank you again for having me and thank you both for being here to have a conversation from your perspectives about the world of fintech. I like talking to you by Scott Ubiquiti. Well, yeah, I asked him to paint a picture of what the 5G world look like and he he really did paint it a pretty interesting picture what that world. Looks like. I want you to paint a picture of what you think both of you think the fintech and banking World's End payments world look like at 10 years out live differently

both on the consumer end of it on the beat Abby end of it on the lending and the what's it look like Don't start. I think that the biggest difference will be the internet of things and I think that if they're going to be 20, 30 40 billion connected device in 5 years time and they're all April to operate through Randall 5G system at lightning fast speed with small processing units are going to have a completely different relationship with consumers and businesses true that internet of things. If your car when you drive up in your car to a gas station, you can

fill gas. You can pick up a Coke in the convenience store and take your car for a car wash all seamlessly done with your identity passing from one to the other payments be made simply that's the kind of world that is in 20 years with its 5:17 years. I don't know where the fire is the right answer but it's not funny. So that's one. The second is the amount of data that's been generated out of that world and we'll be having way more than we understand already mode. Has been generated every year then was generated from years back and all these connected device. Frame data. And I want that

data than you are. The funny thing is oil is finite Infinity fact, I wish that we would like that how you can make a lot of money for a long time but it's finite and this thing is infinite is going to just keep coming at you from everything you're using your glasses to your watch to your shoes to your car. The second thing I know who's going to collect it all people who are interacting and it should be long action point of view that it should belong to the consumer whose data it is and they should be in charge of it and they should have the right to use it and they should have the right to

be able to be to use it for their safety and the chameleon and it should be done with very open standards. And so the data is the second part of the third part connected is the world of cyber security and safety will multiply many times over because along without having this conversation that are people who are not such good people sitting and having the same discussion saying boy good When's it coming? I think we need to just be careful of our bed because you know convenience and security currently has seen as two sides of a coin and it's not fair. I should be able to get convenience and

security as a consumer and I think those are the three biggest things will change from this matter to that somebody else to figure out a new model somebody with price different things and good things that important things because private Enterprise should be devoted for Innovation. But to me, the big picture is these these iot lots of data cybersecurity that kind of stuff. I almost understand everything you just said, which is terrific, but I can talk about your Safety and Security

in the within the next five years. There will be no passwords. There's no sticky things. There's no guys. Do I remove my day tour? My wife's birthday or what the hell it is, but it is your body anyway, but but it's but but but that's going to happen. And I think that's really important because what it does is it means that the ability for impostor fraud to occur goes down significantly because your body is going to drive the security of your information and your and your

money if that's one I think and you think we really are closer on that I think about what we do today and you're doing the same thing and that is our commercial customers can log on using it and I think we can log on a mobile banking using your face right your thumb right or your voice now that the reason that this a little bit complicated is everybody interacts with Financial institution a little bit differently and has a different favorite device. But we're within five years we're done with that. That's I think that's really really exciting. And I think the other

big change will happen within the next 5 years is that all of the consumer's financial data is going to be in one place and again work we're doing that today. It's a little bit too complicated right now, but having knowing where all your data is having it in one place and then we develop something called control tower. And so we're doing that right now. I think that experience going to look like this idea that everything is in one place. It's all tokenize from all of these different Financial providers right to be happy

cuz it's right at home, right you pull it off you look at it, right which I could do in a second. Right and all of my financial data is going to be there. I'm going to be able to turn it on and off. However, I want to know where I am. have made connections to other providers it's going to be there and I can turn it on and off whenever I want it's going to be in one place today when you think about from a consumer standpoint, like well, some of my data might be here and then other day to might be in my laptop other made the data may be with my tax but whatever but it's all going to be in one

place and tell me about this world of lending huge business largest lender in this country was very and for the last decade but not more there was a view that the lending business the old line banking business was going to get disrupted by this new upstart peer-to-peer lending, but we're going to get there we're going to come up with all sorts of newfangled FICO scores that there was a revolution in the world of lending you say There is no revolution revolution. I think what we've seen is what we seen in this country in every cycle. And that is there always non-bank lenders.

They interact with customers in a different way. I think this cycle has been fascinating because they've been really interesting fintech lenders that have come up with different algorithms. Now, they haven't been tested in a recession will be interesting to see how they work. I'm not saying they will work it won't work but they haven't been tested. But in addition to way that they they access customers has really improved a lot and the in the speed at which they make decisions has improved. I think that's all really positive because it's meant that we've had to make the same changes that's

good from a customer standpoint. But but in terms of is there some new algorithm with information that nobody's figured out that's going to absolutely change Linden. I'm not a believer in that. Past behavior and attempt to predict future Behavior based on that and differential crisis prove that all that is wrong because somebody who are the FICO score of 780 went from 780 to 5:17 to go see two days by losing their job today is to use other data to be able to be more thoughtful but what the real risk of value of this customer is going forward transaction data

of the type that he's referring to Capital One. Please don't need data. He can see about a consumer to make sense of our business to make a stencil Alone 2 based on transaction knowledge will beat any of the traditional scoring letters Halo. The single biggest difference that's coming out when we make a small business loan decision for Wells Fargo customer that we know cuz we know about that customer. We know what the inflows and outflows in their accounts. We can make that credit vision and Alex Make it in three seconds. Would you be happier if you were Square we could

actually see sku-level data. You both of you have talked a lot about how technology is going to end in fintech itself is going to create a more inclusive world that you can actually be able to lend to people and end Bank people that historically happened. Did you going to be able to finance people in and get people to the credit cards or access to Credit in ways of them? What is that look like Chihuahua so count product called Greenhouse in seven states right now and what it

is is it's it's an all mobile debit card in the in the account. You can't overdrive and it it it it comes with budgeting capabilities that it's it's it's almost as if it's a force Budget Inn capability, but that's what consumers really want because it helps them educate themselves into the how to manage their finances. What's great about that. Is it because you can overdraw the account it's going to be available to sell many more. Because a reason that we might turn a customer down in terms of a new account is because

we're concerned about their credit because they might have an overdraft. We taking it off the table and guess what is free? Set a timer for the bank meeting that I would find a way to reach 500 million people and get them to be financially included and there was no sign of Vegas odds for the scientific basis to the let's go try and make it happen to have to go. I just signed a contract in Mexico with the new government for Distributing 20 million benefits to the population to

a State Bank on 25th at 445 to 503 samples the truth. I think technology and data have made possible that didn't happen earlier small micro business and mostly done by women outside their homes for a few hours. You can outside the banking system in mostly countries. Nobody can lend you money because you don't know how to undry glue for risk. And by the way the Central Bank of that country apply. The higher is committed Capital cost to that kind of loan. Do you double dipped in Central Bank? For doing

that you can go to that thing as the supply chain and Unilever comes at 10 every morning on a Monday and Leslie at 2 and some water company at 3 to get that you know exactly what that person is buying provide that data to a bank like his off Bank locally make an underwriter person much better than you can underwrite with any other method. You can reduce the cost of lending. You can get them back by the distributor who's actually providing that product to get a much better output the results of everybody you leave us sales and distilled it up 30%. All

of them are paying back everybody's happy the government can declare Victory on SME lending. That is the kind of thing that could not have happened without the technology and data that today you can work with you can do the same thing for getting power to the bottom of the pyramid. You don't need to provide a power grid connection to every last house. It's really expensive to put a solar battery connect the stealth today. Does the battery itself to the internet of things for the QR code on it pay what you need to use use it for 8 hours at night. There are so many things you can do with

everything that too by the way with a company called lamb Coppa in Africa. We drink Farmers networks where they no longer need to go to the physical location to buy fertilizer to buy feed to sell that product. You can connect into Cooperative to phone that's so much that I'm going on with technology and data that people like us could not have done five seven years ago. That's all Financial inclusion best technology for inclusion. And I think we can do with the beginning of a revolution in that face. When I asked you about that topic in the halls and pasta

Randall about his relation with the Apple, but are you I do not have a big relationship with apple your cards are also on Apple, but this is this is a separate issue. Apple obviously announced this major major new credit card that rhymes with a MasterCard on the go over Goldman Sachs and who the hell knows our keeping Apple ID within the ecosystem write him and they decided they decided rather than trying to build their own system. If you feel okay to the launch Apple pay on the light. It's tough was an indicator that

I think most companies understand that in today's world to succeed rather than trying to control everything yourself the best way to work it through part is you can build the right Partnerships and get the right stuff from guys like Ryan on us on the one hand and get the right stuff from banks in the other and you do what you do. Best fish is Apple's kid is good for you. IMDb connection to the consumer end that have anything to be done for all of us provided you live because you're that that's not going to work you add value

for whom the customer for the consumer and other companies Banks cards Etc going to have to create new laws that provide more information about the merchant than historically have been provided me. That's one of the things that Apple's trying to provide some of the privacy concerns and issues that they are trying to contend with velocity and commitment to certain aspects including private sleep. Then the other team has been out there publicly discussing it so he did those features and factors. Into that product, how is it going to thunder Quincy,

It's a digital first card in the mail. Info on things that are the physical card that goes with it in case you're somewhere where Apple pay is not accepted which has a lot of places when you need your physical to work digital Security in built into it a police flight number to security and privacy. So every transaction is tokenize card numbers that organized as a whole lot of factors between two that we talked about the consumer has experienced if you

happen to be using that card in your phone at a place where Apple pay is accepted either with the top or online wrap-up is expected accepted. It would be a very seamless 16 and it'll be a typical Apple experience straight through very simple, but this is not accepted. Where to go on Google go to Mountainside you're going shopping. They're going to have to go find whatever they've done is going to push you and others and and MasterCard and others to provide a more extensive not that you are more information to the extent that they're going to have more information

right on the app about the merchant. I don't know if they're provides fuel level data for for for for for products that are being in that way more information than they would give anybody else. Is that a bug or a feature? No, no really be because you're right just to level data doesn't go down go down the network. But it is that is that a feature or is that a bug in in a in a fully transparent world back to the customer? I've actually thought about this when

I've gotten my credit card statements. There's sometimes when I look at the merchant, I don't really know who the merchant is is one of them. Is it Apple turn address, but then I kind of want to know what did I buy from them and carry all the receipts. Do you think the five years from now spending so much money? I had a joke, that would that would know it was a family joke. Anyway, yes, we're spending too much but Lucy be able to remember those things the fact that you don't remember what you bought from a much and I think I should

change the topic and move on. So I think this is really interesting because apple is offering additional convenience of service to their customers and they have their customer on the phone. I think that's great. I don't think it necessarily means that it's going to fundamentally change the way people make credit or how they how they buy. I think it's going to provide some convenience for Apple phone customers, but that's it. That's great. And at the end

of this one about the international landscape China in particular and one of things that I've noticed at least in New York, and it might be here to I don't know. Is that a Lipe? Now in the back of taxi cabs in New York City and internet or places you're seeing it more and more in the United States typically around cities and places where there are consumers who are Taurus and the like but the larger question in part of the regulatory question as well as do you think that

that is just the front end of a larger move by by Ali pay and perhaps other Chinese Rivals and things to come to the United States and eventually provide credit and provide other meaningful banking products Chouteau. And if I'm Ali pay and I look at the opportunity that I have in China and I think about population growth and I think about about concentration I think about penetration and I think about the US why would you want to do that in the US when the reggit when the regulatory environment is much more complicated

that the customer is much more complicated to to obtain. And you almost have a monopoly in China. Where are you going to be extra money? I think they're doing it for convenience for students to us as we were talking about earlier today. I don't think it's going to fundamentally change the landscape. But I think the following to reduce the following students Theft Auto business in the Chinese model has done that very systematically over the years and you should expect them to do that. That's why it's showing up over that. I think the bigger question. That is

well that mean to be combined cuz here yeah when they're going to have to go get license plate going to have to be regulations are going to have to be managed the way he is and he was introduced toughest job in America. Well, I'd love to see a Chinese Bank on having that job in America. That would be interesting. That's simple one to the way that the Chinese Banking and famine system is perfect has evolved has been created by a very specific set of circumstances where people like us for locked out from there for the past and the local card

Association China unionpay wasn't keeping Pace with these kinds of developments and I think companies like Alibaba and constantly charge of the fabulous job of building outstanding community-wide. Rick like the Apple you I really simple really easy to use and abuse links to all the banks the Chinese government assistance began to change the rules on the ground and it's created a clearing house in the middle to which all these digital tears need to connect. That's like us Life Church on even pay the changing what products go through they won't approve the pricing setting the market is

changing for them in China as well. I think that's part of the reason why they're expanding outside because they need to get the next flick of growth computer. Do you have any expectation the five or ten years from now? It will be an open market in you'll be there or you'll be there. I'll be willing to Hazard that because who knows but I would love to be I've made no secret of the fact that I have attempted to be a part of the local Chinese market for all

my 10 years to see you. I hope it's not three thousand years. But if you know that you text on just so briefly that I wanted to come back to is the issue of privacy and also identity and the role that both of your firm's and the fintech world. If you will May ultimately play in the idea that I have one identity. We were talking backstage about the idea that you have 70 80 million customers and you right there and if you put the top four Banks together, they pretty much know everybody and so all these questions

that we have in about identity whether it's on social media or elsewhere. If you were to try to use all these other information you have with other information date of the doubt there you can actually probably solve this problem relatively quickly. Is to make sure that we know who our customers are and they're legitimate customers and they're following the rules and regulations is country. Absolutely because the standards that we have to operate in which are appropriate they are pretty high and they're different from a lot of other

Industries and I think that's the question if the standard if if everybody wants them to play by those same standard then I think the likelihood of there being a lot of confusion as to whether or not these are legitimate customers goes down significantly, but that's pretty expensive to do it in and also makes it is a much higher function right now so many other services that aren't Banks correct. The onboarding process is a lot easier. overtime because of this issue I could but I think it's a question of what probably want to solve. I think if they if what you were trying to do

is give consumers the ability to own their own data and to be able to control that data and not share it if we were just talking about that we talked about a lot but I think that in that internet of things of you were talking about at the beginning of the conversation take that example of the carpeting up to a gas station. And so I can Car Wash Andrews identity has to pass seamlessly from the guy was in the car filling the gas to the gas pump to the guy who bought the coke to the guy who what is caring for a car wash in simply without you having to take out anything to prove who you are

or let's say You Want To Hide A Car? You don't want to give your driving license to somebody? The Hiding dust by the way your photograph, right they have which car are you allowed to drive in some countries even New York national ID number that is exact birth date with they don't need and of course the airport residential address which they don't need to him to a car to access to the belt on providing more information than is required for the actual use for with that digital identity in the future is required to answer is greater than 21 years of age and his license to drive.

That's all you need to rent a car why you getting all the other stuff and if all you need is to say that I'm old enough to buy alcohol in the web. So when it comes to delivery, I'm more than 21. I don't need to give you my driving licence to some kid in a brown uniform from hopefully you'll never see me again and he takes a photograph of your identity on the phone. Not on his phone is all that information. I think it's just a mess with you if you're going to do this properly to wear that doesn't happen and instead. Mckenzie was privacy is better protected by didn't yes or no answers to

parties who can go and pull the yes to information from distributed databases putting all the information together is like painting a bull's-eye on your forehead and telling those other guys to come see later so that it like he's got great information information other Bankers your people around Olympia information in AT&T of are you off in a geolocation sense? Let that be what it is but using tokens and triple damn protective systems. Can you bring yes or no answers to satisfy the need and actually give the consumer back bed right to privacy. That's what I'm just

develops. Product if you even just I don't think I would want to manage cash back to a point about but why Apple pay developer why there's a credit card now and Apple pay that you're involved in and that is that we all bring capabilities to the table and it's it it's going to be much more cost-effective and much more convenient for customers if we work together, correct. So it's got to be a Consortium using amount of work and information collection and I think that's a great

starting point back to your first question, but it's not the only piece of information you need to do what I just described as a bunch of things that I can do my live through everyday so bad should be the Cornerstone of it in many ways for others need to be there at 2. So the richness of information is available that can help meet with me. Relax in the process of doing something like this with Microsoft as a partner in a bunch of Banks and other than one country overseas, which shall remain unnamed the back like The Secret locations of people go to but the thing is that that that idea

it comes to this distributed identity align the consumer to be in control on a secure element on the phone to be able to say yes, please go and collect the yes, no information that I'm up waiting and give it to this guy looks like I'm going to need to be very comfortable with everybody else's cyber security capabilities going to leave. This is the financial service industry it is it is it a Consortium or do you think that we're going to get to a point where? A government player says you know what? We we agree. We want

this kind of identity situation. You're going to be plucking tokens from from 12 different places. And ultimately this is a regulated agency in America. Look we don't have a common driving license across 50 states. I really don't see us getting to the stage where you will we wait for that on there or in yarrow plant matter that people don't want the government knowing everything you're doing and I believe that Gatsby peanut body of privacy data cap distributor. It's probably the best way for this to happen the most

efficient way for her to have a totally different question multiple times during this conversation. We haven't really dive deep into that topic and I was just asking as a Layman, what do you think the chances that I will wake up one morning? And I will get up my phone. I will look at my bank account and not because of my overspending then I don't remember about but I will look at it and it will all just zero out protons. I think it's more likely that somebody can steal your identity and could go into your account and empty it out because somehow they've taken it because

you accidentally given it to him or they be I give you share a shared it in a in a in and out of way or whatever that's more likely cuz you know what that happens all the time and that's why we've got to get back. We got to convince the American public that it is, okay until we get to the ability to authenticate them by some part of their body that two-factor Authentication. Is worse because it does if it's a problem is it takes 5 10 15 additional seconds. So that's what if I were you that's what I would worry about the way we think about it is how do we get customers

Choice Medicaid or then? How do we use the data that we have a use artificial intelligence to scan across transactions that look odd. I'll give an example of one that happened over the weekend. We have one of our Middle Market Commercial customers. Somebody had gone in and had stolen their identity they changed and they sent $5000000 to a bank that that company of never sent $5000000 to what we do is we look at those types of situations. So anytime there's a change in any of that the

information and and the authentication then we look at the next few transactions and if all of a sudden there's a new transaction it does. Makes sense a red light goes out. We call the customer and say you know what? I think we got a problem here. We were able to stop it and get the money back for them. That's where we can add value to prevent what you just described. That's a commercial customer. We've got a lot more work to be able to do that for Consumer customers, but we'll get to that point. What's the weakest link in this whole system that you see right now? The weakest link is either

the small business or the individual consumer? And the reason for those two choices small business cannot afford to spend that kind of money that seems to be required to keep yourself up-to-date with the tools. You need to keep updating for inside a number of us in the banking and payments industry have discussed ways to get small businesses to have access to tools that allow them to raise level of water in the river to the teeth concern is easily and consumers because you must seem to choose convenience and conveniences everything from not changing your password. I mean the most

common password in the United States and password. And the second most common is 1 2 3 4 5 6 7 none of it separately and then it gets crazier because they think you're smart password is you know Wells Fargo one, that's not and if you think it's Wells Fargo hashtag one. That's also not everybody all my passwords. Will you stop that please? Because most 10 year old kids with a computer can break all that. So I think that's why when he started out saying password to be gone when you go to something else. That's the right way

to go. But the weakest thing today is the day and the Kazuma and the small business. 3 year old having a drink for a while. I believe they need the equivalent of a food nutrition label for the gadgets to buy but the food food nutrition label is a cybersecurity level level seven given example than the other TV. Do you have to be a cyber-security geek to read comprehension and figure out the den actually isn't worth the extra 200 that's unfair. If you want

to make this happen probably for the American population. You should have the equivalent of a food nutrition label for like a restaurant grading system abcdf while back TVs and Beam distillery today, then consumers can choose what to buy based on knowledgeable consumers as compared to non religious book until we have to do in our country in the next 5-10 years if the internet of things and go to become a reality. Otherwise, it'll be a nightmare. Neither of you have mentioned the word blockchain during this conversation and that often gets introduced when people talk about privacy

when they talk about security all of his head and think how does that play into this conversation in your mind? I think it is. I think it I think it may overtime play. I think personally think blockchain has been way over sold in terms of how quickly people with me to say out loud that they think this whole thing type technology right is very very interesting. I think it's been very slow right to roll out and we've got a number of pilots and then we just did a pilot with

Commonwealth Bank in Australia related to using distributed Ledger technology for trade transactions. And we got lots of Consortium. So we got partnership together individual overtime. I think it will have an impact but we turn the clock back a few years ago by now. It should have completely changed the interest rate and that's just not the way it works in this this digital identity distributed system may be blocking and help with option could be very interesting. I just think the business model is not yet proven and that's what I was getting

at and I think the second issue. Is there going to be a few infrastructure. That means I have to get resolved. I mean if he gives me a mortgage and up and I just got out of the face of me is Haji credit. We have to work through right come back and I would dispute of them to leave system. I can go to court for a job for those documents to say I bought the home blah blah. What if I go there and say I did all this on the blockchain in the dark sensor? Can you give me proof and it's 50 My best friend is anonymous names and I don't know who they are. But I did buy the house. That's not going

to work today broke a lawyer who could show up. I think a lot of this has to improve and change over time with the third largest number in the world as a company. We are deeply restaurant in a few ideas. And I don't know how the business model what proof of problems could be one. We're working with Pharma companies to figure out if people can take bottles thrown away from my home and repackage them withdraw drugs. You can use the blockchain to provide a tenth of Citigroup at each link of the supply

chain Sonu views that bottle of second time it lights up and you don't you that's interesting but I use it to prove that this diamonds on a blood diamond all of these days Diamond can be manufactured in Laboratories, but it's on a blood diamond or could I use it to prove that the big show that you made from Egyptian cotton and that particular bale of it. What could I use it for a food company to allow them to ship the product in advance why the testing is going on because I know exactly which truck to drop milk from that Village ended up being contaminated sign of which

three cases of milk powder need to be recalled. Possibilities with blockchain and I think it to ignore that would be a bad idea. That's not what you think. We just saying you don't know the business appointment for me and it's a very practical one and maybe everyone in this room is suffering from the Tuesdays. I try to live a cashless life. I really do even though it's Working Families over spending as easy as we've discussed. And so here's a picture of here's the problem

if you have to be at the door or wherever it is or if you're going to greet somebody at the at the maitre d or whatever it is that you do. How will we all going to die though? You don't do that ok packages at the time at the hotel and I'm saying that I'm really sorry, but now To the point where I where we can live in a cashless world and went in last week create a more inclusive environment to allow everyone at every income level to be have the same accessibility differential Services

because you could do that, right? Mr. PayPal over there still. Okay. Thank you. Okay all that to happen because the valet right or the bellhop may not have a bank account until we do that a few weeks ago in water because it down to 5% of of cashews and Retail. I mean even to use a public toilet in Sweden give garlic in a send a message on the phone and gives you Code. The code entry keypad on the damn bathroom open cycle that tap and go. That's about to

be over the top fan. The issue is to 5% Then that's a problem because older people may not feel comfortable. People want Bank as much may not be comfortable and you shouldn't take cash this to mean zero cash in cash for the role to play in inclusive Society unless we can do with them said 85% of the world's retail transactions Austin and cash. That's a lot. Please join me in thanking.