Fin Tech – The $5 Trillion Disruption Case

According to Goldman Sachs, $4.7 trillion in revenue for traditional financial services is at risk of being displaced by new technology-enabled entrants.

By Anders Christjansen, Senior Advisor, Innovation Center Denmark, Silicon Valley

According to industry insiders, the changes in the financial industry over the coming 10-15 years are expected to be more profound than what has been seen over the past 300 years. As an example, it took a leading bank in Denmark ten years to get 1 million customers for its internet banking platform but only one year to get the same number of users on its mobile pay platform. Investments in Fin Tech are on the rise and peaked so far in the third quarter of this year.


Fin Tech


Silicon Valley is playing an increasingly important role in the changing financial industry. To provide some perspective on the area’s importance, in 2013 Fintech investments in Silicon Valley amounted to $4B. This figure grew to $12B in 2014 and is expected to reach more than $30B in 2015. To better get an idea of the potential of Fin Tech, its disruptiveness can be seen at work in the following four areas that impact not only people in the industry but everyone around the world:

  • Lending – New forms of lending based on peer-to-peer technology had a breakthrough with credit card loan replacement and are now moving into new segments such as auto and mortgage.
  • Payments – are being transformed impacting the entire value chain including devices, wallets, POS, transfers and remittances.
  • Personal Finance Management – This is an area impacted by developments in artificial intelligence and the enablement of so called robo-advisers. Brian Moynihan, CEO of America’s second-largest bank by assets, said that most of the robo-advisers are going after investors who aren’t rich enough for the bank to worry about. They are below the bank’s wealth “cut off,” Moynihan said on the bank’s quarterly earnings call, “for lack of a better term.” Over time we’ll see if this holds and if even America’s second largest bank will have to innovate in this space.
  • Bitcoin – investments in this field have been cooling off due to the drop in price since the end of 2013 and lately the interest has mainly focused on the underlying technology called block chain. Some analysts compare the potential disruption of the banking world coming from block chain with the revolution that TCP/IP spurred in the sharing of information and the creation of the Internet. A few weeks ago, Nordic bank Nordea joined the international partnership Distributed Ledger Group (DLG). The purpose of the partnership is to develop common standards and applications for using distributed ledger technology as the next generation financial services transaction network. 25 international banks, including Nordea, Citi, Deutsche Bank, HSBC and Goldman Sachs, are collaborating with the company R3 in this partnership.

Furthermore, the insurance area is expected to be an area of major disruption but is somewhat trailing behind the developments in the traditional financial sector.

Over the course of a year, multiple conferences have covered the Fin Tech disruption. The largest event of them all has been Money2020, which was recently held in Las Vegas, Nevada. The next event in this series will be held in Copenhagen Denmark in April 2016 so make sure to stay tuned.

Contact Anders Christjansen for more information.


A few fun facts on corporate innovation in Silicon Valley

One of the big clichés about Silicon Valley corporations is that they are extremely good at being innovative. They hire the best people, pay them the highest salaries and constantly launch new, cutting-edge products. But do these products actually come from in-house innovation?


Contrary to popular belief outside the valley, Google’s only original, disruptive technology is… well, Google! The search engine!

“But what about Android, the open-source, mobile platform that has disrupted the entire smartphone industry?”

– Acquired from someone else in 2005.

“What about Youtube, the personal video platform that by 2014 accounted for an astonishing 13% of all online video streaming in the US?”

– Acquired from someone else in 2006.

“What about Google Maps, the online map service that is thought to be so precise that in 2010, a Nicaraguan military commander invaded an island between Nicaragua and Costa Rica because Google Maps depicted that it belonged to Nicaragua (which later turned out to be incorrect)?”

– Acquired from two Danish inventors, Lars and Jens Eilstrup Rasmussen, in 2004.

Actually, Google has made 137 acquisitions since 2010 and 193 in total. And when open-source software company Cloudera strikes gold, Google executives applause based on their $900M investment in the company. $254M went to Uber from Google, the first of which is now valuated at over $50B.

On a similar note, Facebook is known for having acquired Instagram and Whatsapp, but the corporate giant has in fact bought 62 companies since 2007. This supplements various investments in e.g. Air B’n’B, which hit a stunning $1.5B deal with Facebook to support their global growth just a few months ago.

And the very old fish in the dam? Well, let’s just say that a company such as Intel is on the hunt. Their investment team in Intel Ventures has a total portfolio of 1509 investments.

So; if you are afraid that a large Silicon Valley corporation might suddenly decide to enter your business area and smash you off the field, do not worry. Chances are that they will acquire you and entitle your company “our own, precious innovation”.

Back to the Future II – a 26 year technology forecast?

How will the world look like in 26 years from now in terms of technology? If you let your imagination run wild, you might be able to come up with some quite adventurous and out-of-this-world ideas. However, a reasonable assumption would be that you – as most others – are wrong due to the complexity and acceleration of the global, technological development.

Now, one interesting shot at how a future 26 years ahead of time could look like was presented by Steven Spielberg and Robert Zemeckis in the 1989 Blockbuster hit “Back to the Future II” (BTTF). Here, the main characters Marty McFly and Dr. Emmett “Doc” Brown use a time machine to travel from 1989 to visit the world on this week’s Wednesday, October 21, 2015. Was the future they visited even remotely close to the reality we live in now?

The discussion is still ongoing. From a point of view of available, commercial products, BTTF got almost everything wrong. On the other hand, a wide range of the presented technologies are about to reveal their potential today. Wearing our futuristic, innovative Silicon Valley glasses, let us sum up a few of the latter for you:

Hoverboards. In the movie, Marty is chased around by a gang of bullies on a skateboard-sized hoverboard. The means of propulsion is still Marty pushing his foot against the ground or hanging on to other vehicles (so there has been no work around Newton’s third law). Although hoverboards are not commercially available today, quite a few companies are launching prototypes. In May, this year, Canadian Catalin Alexandru Duru set the Guinness World Record for “Farthest flight by a hoverboard” with a stunning 275,9 m flight on his propeller-driven board. On another node, California-based Arx Pax will demonstrate a hoverboard based on magnetic levitation, Mag-Lev, on Wednesday.

Drones. In BTTF, a drone is seen walking a dog on a leash. At this point in time, it seems like legislation is a bigger hurdle to this scenario happening than technology itself. Using drones for non-military purposes has been around for some years now with drones now being used for photography, land surveying, security patrolling etc. Even autonomous behaviour for drones is being implemented by companies such as Brain Corporation.

Interactive flat screen TVs. Even though BTTF did not foresee smartphones as the primary means of interactivity with media streams, it did present huge, flat screen TVs with voice control and multiple, eligible TV channels. Even BTTF’s 3D animation of a shark jumping out of a “Jaws 19” advertisement is no longer just a funny thought, but an actual option on today’s TVs – think e.g. on Samsung’s presentation of a 110” TV with glasses-free 3D effect on this year’s CES.

Biometric systems. To enter your house in BTTF, handles are superfluous. Instead, you would identify by your fingerprint (with the unfortunate side effect of having thumb robberies…). As well you can pay for the cab ride with your thumb. Have you seen such a system implemented recently? Well, actually you might. With the introduction of the iPhone 5s, fingerprint access became mainstream in the smartphone space. This same smartphone is granting you access to everything from credit card payments over personal health information to physical properties and your new car via smart locks. Think for instance of Danish Danalock that lets you enter your house via your smartphone.

Let us end on a less technological tangent. BTTF proposes Vietnam as a surfer’s paradise, which might have seen preposterous in the post-war age. Now, fueled by Ho Chi Minh City as one of the fastest growing metropolises in the world, the entire South-East coast of Vietnam with Da Nang and Nha Trang as frontrunners are common holiday and surfing destinations. Nike is today experimenting with self-tightening shoes and Pepsi celebrates BTTF with “Pepsi Perfect”.

… Oh yeah, and Chicago Cubs might win the World Series in baseball this year; just like proposed in BTTF.

The Corporate Garage: Getting start-up agility and spirit into the corporate world

By Henrik Bo Larsen, ICDK Deputy Director and Innovation Officer

How do corporates find innovation capacities?

During my time in Silicon Valley, I have experienced a large number of pitches from start-up companies. The story is almost always along the same path: After being inspired to develop an excellent business idea, an entrepreneurial group of very skilled and bright people decide to start a company. And then the problems ensue:

They need to secure finance, get an organization established, develop and launch products, perform quality control, manage HR and regulatory affairs… Just to mention a few. All these issues turn out to be skills and capabilities that larger corporations already know all about.

However, not only does the start-up need skills that larger company are good at: when looking further into the life of a start-up: as cheap and easy access to technologies means that as soon as a start-up gets a whiff of success, it has to race against dozens of copycats from competing start-ups, who try to get the same idea off the ground. This is also a challenge which is similar to what existing organizations face.

Combining the strengths of start-ups and corporations
This is a very interesting dilemma. As an entrepreneur you need your swiftness and courage to start a company, but from thereon you need the structure and processes of an established company to really succeed. On the other hand, the agility needed to get new ideas off the ground is not what you see most of in established companies.

This is clearly a dilemma for every organization: it being new or well-established, big or small. How do you balance the agility of a start-up to develop new businesses with the structure and processes to grow the businesses?

Many large corporations try to answer this dilemma by establishing what managing partner at Innosight, Scott Anthony, calls “The New Corporate Garagein a Harvard Business Review article. The popular perception is that most corporations are just too big and deliberate to produce new game-changing inventions.

Hence a growing number of large Silicon Valley companies try to attract entrepreneurial individuals, or “catalysts,” that can use the mother company’s resources, scale, and growing agility to develop solutions to global challenges in ways that few others can. Intel, Google, Cisco, and SAP are examples of such companies.

How to launch a corporate garage within your company?
The big companies need to carefully consider the implementation of such corporate garage models when inviting catalyst entrepreneurs. At Innovation Center Denmark we consider the following three innovation capabilities when planning for a corporate entrepreneurship endeavor:

  1. Business models: Most business strategies I have read either try to justify the current business model or defend it. The company needs to develop the capabilities to understand the business model options in a broader sense – even those models that eventually will cannibalize your current solid performance business.
  2. Technologies: The big corporate needs to know and understand the recent technology developments of its and similar industries and consistently scan and scout for potential technology development and ideas in the entrepreneurial underground. This scouting often needs to come from outside the current domain of the company’s expertise, and the company need to develop capabilities to gain new ground.
  3. Mindset: Corporate leaders must critically examine to what degree their organization and themselves are capable of working together with the incoming entrepreneur catalyst. How do you and your organization deal with change and new ideas? Is your current mindset ready to explore new opportunities and to exploit the current business model and technology paradigms? And at the same time apply the structure and processes needed but keep the freedom of the entrepreneurial mindset?

As Lewis Lehr, the former CEO of 3M, put it: Innovation can be a disorderly process, but it needs to be carried out in an orderly way. The truly good manager finds the means to manage a disorderly innovative program in an orderly way without inhibiting disorderly effectiveness.

The speed of world change? It’s exponential my dear..

Imagine how far 30 exponential steps can take you. photofrom the day.

By Jacob Hagemann, Senior Commercial Advisor, Innovation Center Denmark, Silicon Valley

How fast is your industry moving and are there any signals that it is to be disrupted by exponential organizations?

This was the key question in a recent Copenhagen event that I had the opportunity to participate in. Organizers were the Danish Society of Engineers, IDA in cooperation with Deloitte.

Driving Technology  was the main theme, which in this specific case not only refers to actual driving technology like driver-less cars and other inventions within the transportation industry. It most importantly also refers to keeping up with the technologies that will influence your industry.

Imagine how far 30 exponential steps can take you. photofrom the day.
Imagine how far 30 steps can take you – if they are exponential! Photo from workshop.

Singularity University representatives were the guides throughout the day, and Salim Ismail did an outstanding job in presenting their take on what the future will bring us. Singularity University is not really a university. At least not in the traditional understanding of a university and they will not become one any time soon, simply because of the way they develop their programs.

To be a real university the curriculum has to be approved and go through different stages which often takes 1-2 years, meaning that there is a high risk that the curriculum will be outdated by the time it finally reaches students. This is partly what Singularity wants to challenge. There is a need to study, investigate and get involved in not only the present, but especially the future.

3D printed cars and disrupted business models

The fundamental thing that is part of everything inside Singularity is the exponential growth. Technology has been set free and we cannot hold back the development. This will happen at an exponential rate – think of a curve with a steeper and steeper climb.

The exponential growth is something that we as human beings have to adapt to in many ways. And one of these is certainly how we set up our companies for growth and survival in a world where disruptions come from everywhere. No one is safe as a team of 2-3 young entrepreneurs in a garage can change business models everywhere.

AirBnB and collaborative consumerism. Photo from day.
Airbnb and collaborative consumerism. Photo from workshop.

An example of a complete change in industry is collaborative consumption and how Airbnb built the world’s largest “hotel” business without owning a single property.

One of the really exciting cases came from Local Motors, who were also represented at the conference by Damien Declercq, EVP for Europe, Asia and Africa.

Damien gave us a fascinating introduction to the work of Local Motors and the one thing that really caught my attention as the fact that they recently 3D printed a full car during 42 hours at a trade show. And then drove away in it :)

Altogether these impressions really make you think about where the future is going: How fast is your industry moving and are there any signals that it is being disrupted by exponential organizations?

Contact Jacob Hagemann for more info.

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