16:56 GMT18 January 2021
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    Radio Sputnik has spoken with Chris Skinner, an independent commentator on the financial markets and fintech through his blog, the Finanser.com, and author of the bestselling books Digital Bank, ValueWeb, and its new sequel Digital Human.

    Skinner is Chair of the European networking forum The Financial Services Club and Nordic Finance Innovation, as well as being a Non-Executive Director of the Fintech consultancy firm 11:FS.

    Sputnik: In the annotation to your book "Digital Human: The Fourth Revolution of Humanity Includes Everyone", you said "We live in the fourth age of humanity". Could you describe in more detail, what you mean by that?

    Chris Skinner:  So, I've been travelling nonstop across all of Europe, Asia, America, South America, and Africa. Normally, when I end up in a city like Moscow, I end up going to see the churches, the history, the museums, and learning. One thing, I learnt is that humanity, well Homo Sapiens are 200,000 years old, but humans are around 7 million years old based on the fossils they found in Africa.

    The key reason why Homo Sapiens dominate Earth rather than the other forms of humans, of which there were seven when we appeared, we have a voice and a larynx and communicate and the others didn't do so in the same way, which meant that we lived in communities that were larger than the other communities of human form.

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    So, when Neanderthals attacked Homo Sapiens we won, because there were more of us, not because we were stronger. The first revolution of humanity was becoming human and actually creating shared belief structures. The only reason we believe Russia exists is because we're told Russia exists. The borders are invented by shared beliefs. The same with Britain being part of Europe. We only believe it once we're told that Britain is part of Europe. Equally, Sberbank or VTB, or Yandex doesn't exist. We just believe they exist, because of contract structures.

    Roscongress Foundation’s Innovation Project Management Directorate’s Business Breakfast
    © Photo : Roscongress
    Roscongress Foundation’s Innovation Project Management Directorate’s Business Breakfast
    So, shared beliefs was the first revolution. The second revolution was then thousands of years later when we became civilised. So, money was invented, because we became civilised and mainly because 4 out of 5 people were no longer working at finding food. They were actually because we were farming, able to do something else. So, open bars, restaurants, and nightclubs. You need money for that. Then the third revolution was becoming industrial. Whereas part of the Industrial Revolution we became global, because we could travel on steamships and steam trains around the world.

    As we became cross-border and global, we needed to have some new form of value system. So, we invented banking. Now, we're in this fourth revolution, which is digital, where everyone on Earth can get access to the network and therefore trade and transact one to one in real time across the whole world. We need a new form of structure to do that, which is digital currency and that's what's now coming through. The main differences and the reasons why I call them the revolutions of humanity is the first revolution, we lived in small groups. The second revolution, we lived in small cities. The third revolution, we lived in large metropolises. The fourth revolution, this one. We actually have no barriers globally. We're just all connected.                 

    Sputnik: In your book you also mention that "Soon, not only will everyone on the planet be connected digitally, they can be raised out of poverty through inclusion", could you please explain your vision of how inclusion can help lift people out of poverty and how long will it take to achieve such success?

    Chris Skinner: In the Industrial Revolution, when we created banks, they were distributing paper and managing everything through localised networks of buildings and humans. As a result, only one in three customers could be served, because two-thirds of the planet up until ten years ago were unbanked, or underbanked, because it was too expensive, to serve those people, because, they didn't have much savings, investments, or trade to offer.

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    But in a digital world, we can service everybody, because it's cheap. Processing one cent on the digital network actually is the same cost as processing a million dollars on the digital network. So, we're seeing now across, Africa, South America. Asia, in particular, 2.5 billion people, who had no banking, becoming banked. Digital inclusion and financial inclusion offers everybody the access to trade and transact to become entrepreneurs.

    Sputnik: To your mind, what is the most successful financial service that helped people to be included?

    Chris Skinner: It's the case study in Digital Human, I wrote around Alipay. Alipay was invented by Alibaba in 2003 in China. Now it's run by a separate company, called Ant Financial, which is a spin-off of Alibaba in 2015. Ant Financial is now valued as one of the biggest banks in the world. I mean, it's a world bank in the top 10 evaluations of banks across the world, but they're not the bank, they're technology company.

    What they're doing is taking the technology that China processes truly as if dollars and exporting that to markets, where people don't have bank accounts, but could have financial inclusion, if there was a right platform to do that. So, what they're doing is they're providing the technology platform for financial inclusion globally, but run by local partners.       

    Sputnik: You have been voted one of the most influential people in banking by The Financial Brand, as one of the Top 40 most influential people in financial technology by The Wall Street Journal's Financial News. How would you describe the digital evolution in banking? What kinds of obstacles are banks facing?

    Chris Skinner: Well, I've been involved in technology and banking for a long time and for a long time the same messages have been shouted by the technology companies, which is: you need to rationalise, produce better data, cleaner data, be more intimate with the customers, digital lifestyles and digital structures and start to offer consistent, consolidated capabilities to customers, rather than fragmented legacy structures.

    What's happening today is we still have those challenges for a lot of banks, particularly in Europe, America, Russia, where the structures have been implemented for many years, because technology changes so quickly. I've mentioned Alipay. What they do is they actually change their technology structure every three or four years. Most of the banks, I deal with in Europe, haven't changed their technology structures for 30 or 40 years. 

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    That is the biggest problem, which is if you have 30-year or older structures running the bank then they're just not fit for the real-time digital 21st century. Most banks are running technology that was implemented before Mark Zuckerberg was born.

     Roscongress Foundation’s Innovation Project Management Directorate’s Business Breakfast
    © Photo : Roscongress
    Roscongress Foundation’s Innovation Project Management Directorate’s Business Breakfast
    Sputnik: You said that banks must become digitised and demand new services be focused upon 21st-century technologies. What services do banks need to provide and why?

    Chris Skinner: What a lot of what banks offer today is being taken over by the internet giants and fintech startups. Banks traditionally made money out of payments and credit. Those two areas, in my view, are going to completely disappear from banks over the next decade, because payments and credit is sort of thing that can be done much more easily by a technology company, like Amazon. If they take all that business off the banks, what will banks be left with? They will be left with deposit accounts, savings and investments. I think, the real battle is going to be around customers' data, because banks have the customers' data.

    They know their financial, digital lifestyle. If the bank can become really good at proactive, predictive, personalised service of customers' data, then I think they can stay incredibly relevant, particularly as they have a number of roles, I think they can perform around life events management, digital asset management. Because right now I have lots of digital assets, but why do I trust Facebook to store my memories, when they actually if they deleted them, I'd have no comeback. I'd quite like to store my memories with someone who manages my digital assets. So, I think it's a strong role for the banks in the future. They can get data fit.        

    Sputnik: What is your forecast for the future of the banking industry in terms of going digital?

    Chris Skinner: Going back to where we started our conversation around the revolutions in humanity. The third revolution was the Industrial Revolution that created banks. In each revolution, what was there before doesn't disappear, or gets wiped out, it still exists, but in a different form. What we gonna see is a movement towards this digital transformation journey. As a journey it doesn't have a destination, it just is a continuous march of change and we gonna see banks still exist for the long term.

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    They're not going to disappear, but they just gonna be completely different in how they're structured and operated. One of the things that really annoys me is so many people say that banks are stupid and they are dinosaurs and they're gonna disappear. My answer is they won't, as long as they adapt to survive. Those are adapting and doing pretty well. In fact, there is quite a few here in Russia that I deal with that are doing really well.

    The views expressed in this article are solely those of Chris Skinner and do not necessarily reflect the official position of Sputnik.


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