Data may have been the key buzzword at the Money 2020 Europe event in Amsterdam last week, but it was its constituent parts that were really vying for attention.
As many of the speakers at the event noted, and indeed as BBVA outlined here in March, the reason for this is that data by itself has very little value.
It’s what you do with data that matters, and here there were dozens of companies highlighting the innovations they were developing to make data deliver real, sustainable, value.
One of those who succinctly brought together the power of data and the way it will change banking for good, was BBVA´s New Digital Businesses CTO Carlos Kuchkovsky.
Giving a talk on the last day of the event entitled DeepTech Science and Business Models, Kuchkovsky – whose role is to help BBVA prepare itself technically for all the future products and services that bank will need – covered off his thoughts on a range of technologies impacting the industry.
A big area of discussion during Money 2020 Europe this year was around the potential impact of platforms and whether banks are heading down that path.
For BBVA its an area the bank has long discussed as one future direction of travel. One of the main emphases of the shift being from a linear production model – production, distribution, marketing and then into the hands of the customer – to an ecosystem model. With the ecosystem model it allows for both the bank to produce products and services, as well as elements like content, as well as third parties.
More importantly, it means the value creation is two-way and continuous, speeding up cycle times, increasing feedback times and enabling wider access to a more diverse range of products and services. As Kuchkovsky pointed out in his presentation, a quick look at the world’s most valuable companies shows that in 2018, seven out of ten were all platform-based businesses, including Apple (think the App Store), Google, Amazon, Facebook and Tencent and its all-encompassing WeChat super app.
The reference to WeChat here is relevant because another key topic at the event, and again covered off by Kuchkovsky, was the impact of a network effect. Put simply, the network effect comes into play when the number of people using a given service, product or platform begins to add significant extra value to both it, and its users including themselves.
For example, take Google Maps or route-finding service Waze. As more people use it, the more data it collects, and the better it is able to offer guidance around things like traffic jams and finding alternative routes, or predicting arrival times.
Carlos Kuchkovsky at Money2020
For the banking industry, the same is true, with increased levels of data – for BBVA always used with consent – enabling better insights to be drawn using another key buzzword, AI, leading to better products, leading to more users, and so the cycle completes.
But as many of those speaking at the event last week also noted, the network effect is not without its dangers too. There can be a tipping point where network effects lead to too much dominance in the market, and the creation of industry monopolies.
Here, though, the last major buzzword of the conference – tokenisation – was brought into play, both by Kuchkovsky and by several others speaking on related topics – including ING CEO Ralph Hamers and 11:FS’ Simon Taylor.
At its core, and as BBVA explained in this article two-years-ago, tokenisation is the process of substituting sensitive data with non-sensitive data – the token. The token itself has no real value, but allows someone with the right consent and authorisation to map back to the sensitive data through a tokenization system.
It’s uses are seemingly endless, anywhere sensitive information needs to be shared, tokens could, in theory, be used in the actual transfer.
In relation to pervasive network effects, tokenisation could be used, Kuchkovsky suggested, to facilitate a decentralised network, when the incentive for one ‘entity’ to own the network – and therefore derive sole benefit from it – disappears. Instead, the network’s value is held inside the network itself, through token ownership of all participants.
It was argued this could pave the way for a financial services ecosystem – although that also requires the opening up for data further – as BBVA Executive Chairman called for in an article in the FT last week here.
Another use highlighted both in sessions and across the exhibitor stands at the show was the potential tokenization has for positively disrupting the way identity is stored, shared, proofed and managed. Numerous start-ups had brought new solutions to the show demonstrating ways to substitute real sensitive data for tokens, allowing people to better control who can see their personal details, for how long and in what level of detail.
But to conclude, and as those watching Kuchkovsky will have taken away from his session too, perhaps the biggest trend seen across the event was the increasing ways in which the data-powered innovations described above are converging.
For example, as BBVA´s NDB CTO explain, if you take the analytic power of AI, combine it with blockchain-enabled tokenisation for protection, and add in the IoT for wider data gathering – and then process it using the emerging potential of quantum computing – what emerges is a whole new era of technology-powered business.
And it is here that the future of banking really lies – with technologies combining to deliver better products, insights, services to the customers and clients that fuel it.
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