An interview with EFMA about the realities of digital for good

I just had a nice interview with EFMA (now Qorus) about the new book Digital for Good (available here), and thought I would share the interview here. Hope you like it.

Qorus- It is not always easy to distinguish genuine leaders from clever communicators. How did you select the different people you gave the floor to in this book?

First and foremost, the book is not about green. Green is part of the content, but the book is more about ESG, inclusion, purpose-driven finance and more. The reason I make that point is that one person I approached about the book said that they would not contribute because it was promoting the green agenda. I countered that it was more about biodiversity. In other words, the basis of the book creates an argument up-front.

What is the basis of the book? The aim is to look at how finance and technology can make a better society and a better planet. The sub-theme of the book is that if you don’t stand for something, you will fall. You need purpose in finance and technology. You need to stand for something. And then, what you stand for must relate to making a better place for people and planet. In other words, return to stakeholders, not just shareholders.

All of that sounds laudable except that, if Chris Skinner is the one saying this, it is easy to argue back. The book creates an argument up-front. Therefore, I wanted to reach out to others who believe this who, in my view, were credible commentators. I hand-picked them to represent every part of the world and every view. That’s why you have everything from Extinction Rebellion to the Bitcoin Foundation; from Rabobank to Discovery Group; from Ant Group (Alipay) to Monzo. The key was to find people who could understand the issues in-the-round from purpose-driven finance to ESG to renewables to financial inclusion.

And I think that’s the most important point: it’s in-the-round. It’s people from all five major continents giving the same message: we can use technology and finance to make the world a better place.

Qorus - There is a lot of talk about tech/digital for good. How can new technologies, such as blockchain or artificial intelligence, which are most often cited, save the world? Do you have some examples?

There are a few great examples. My favourite are things like Stable, created by a farmer to hedge the risks of crop failures; Ant Forest, a gaming system within the Alipay app, that encourages people to buy and save in a carbon-neutral way; Alandsbanken who created a climate-based payments card scoring system that is now used by over 100 million people worldwide; Meniga who offer services to analyse accounts in real-time for their carbon impact; and more.

The list is actually pretty long and, citing the two technologies you mention, AI is the ability to analyse in real-time and blockchain is the ability to provide transparency of the supply chain. What this means in practice is that you can have fishing and food supply chains that clearly demonstrate, when you stand at the supermarket, you are buying sustainable, environmentally-friendly produce. You can then link that to when you checkout in the store, that you chose a carbon-neutral basket of goods. That can then be linked to your financial service provider who can show you how ESG-oriented you are, and reward you for buying sustainable products by planting trees on your behalf. It's a virtuous circle.

But what gets most interesting is when you link these different ecosystems. What if you could link FarmTech to InsurTech to FinTech to RegTech to GovTech to HealthTech and so on. It’s going to happen. That’s how we can build a better world, by integrating markets through technologies. It starts with finance and technology, but it’s rapidly going from there into all spheres of life, driven by open systems that are network-based.

Qorus - Offering green finance products has become necessary for banks. what will be the next step? Green bonds only? And when do you think banks will stop financing climate-damaging projects in parallel with their green projects?

As mentioned, ESG is not just about green. In fact, it’s interesting that Tesla recently dropped off S&P’s ESG300 because their social and governance areas were failing to meet the standards set, even though their green credentials as an electric car firm stand high.

Equally, the most important point here is stopping financing climate-damaging projects. Banks are currently saying it’s ok to finance a new fossil-fuel firms’ fracking project, as long as they offset. That’s not the answer. The answer is to not finance a new fossil fuel fracking project. That’s what the rebels are asking. No new fossil fuel projects. The only way you can stop that is by blocking the financing of new projects. That’s why the financial system is at the heart of this.

I quote these figures often now. 71% of all greenhouse gas emissions from 1988-2016 were created by just 100 companies. They’re the fossil-fuel firms and more, but the fossil-fuel firms are at the core of this as half of all emissions are created by just 25 companies. The issue is that banks make profits from financing these firms. Since the Paris Accord of 2015 through 2021, USD$4.6 trillion of funding was given to these firms by the top 60 banks of the world. European banks make 14% of their profits from financing these firms is a strong reason for why. We need to stop that.

But then I come back to the comments of Ana Botin, Executive Chair of Santander, who made clear that you cannot do this overnight. She cited the fact that Santander are active in Poland and, for those who are not aware, I live in Poland. Poland is the most polluting country in Europe, because it depends upon coal for energy. That needs to change but, as Ana Botin made clear, you cannot do this overnight. You cannot turn off coal in Poland today. It would mean the country would hit the wall. Therefore, you need a plan. You need a plan to convert countries off their coal and fossil fuel teats to convert to hydro, wind and solar.

Financial institutions can do this. They can encourage that rapid conversion by saying no to any new climate-damaging projects and yes to any conversion projects. The trouble is that they don’t do this today, because investing in fracking and other projects make profits. The thing is that this will change as, for all the grand-standing about being green, banks will lose trust if they are not. This was evidenced just the other day by Deutsche Bank’s asset management division being raided by German police over their ESG lies. If you claim ESG, you must be ESG.

Qorus - In one of the texts that make up this book, you imagine the world of 2030. Your vision is very positive. Do you consider yourself an optimist?

I’m always optimistic because optimists live longer. Having said that, I spent most of my life being a child-denier. There’s lots of background there but, basically, most of my life I did not expect to have a son or daughter for various reasons. I ended up justifying that by saying who would want to bring a child into this horrible world? Then I had twin boys who are now six, and my perspective changed. Maybe that’s part of what inspired this book, but I want my children to have a good future. I don’t want them to be forced to live on Mars because Earth is no longer inhabitable.

So yes, I am optimistic. At the same time, I’m realistic. We have huge issues in our world and a key driver for me is biodiversity. When I was a kid, I wanted to be a vet because I love animals. Now that I’m grown-up, I find it shocking that most animals are dying.

By way of example, over 60% of Africa’s gross domestic product is in some way dependent on nature, the World Economic Forum estimates, whilst the continent’s population of mammals, fish, amphibians and reptiles fell by 65% between 1970 and 2016, according to the WWF.

That’s pessimistic.

But then South Africa’s biggest bank by market value, FirstRand, leading Nigerian and Kenyan banks, Access Bank and Equity Group, Togo-based Ecobank Transnational, Standard Chartered and South African insurer Sanlam are founding members of The African Natural Capital Alliance. Launched in June 2022, their aim is to mobilise the financial community to respond to the risk of nature loss in Africa.

That’s optimistic.

For every problem humans create, we try to create solutions. You can focus on the problem and be a pessimist, or focus on the solution and be an optimist.

Qorus - In this text, you imagine the acquisition of Deutsche Bank by Revolut. Does this mean that you expect changes that are hardly imaginable in the next ten years? Can traditional banks disappear like the dinosaurs?

Jeff Bezos recently made a comment: “Let's say a junior executive comes up with a new idea that they want to try. They have to convince their boss, their boss's boss, their boss's boss's boss and so on—any 'no' in that chain can kill the whole idea.” That's why he claims the most important word at Amazon is yes, and why nimble startups easily slaughter hidebound dinosaurs as, even if 19 venture capitalists say no, it just takes a 20th to say yes to get a disruptive idea into business.

This resonated with me, as most banks do seem to be a little constricting in attitude and behaviours. The organisation either wears you out or waits you out. We cannot live that way anymore. When networked behaviours work in real-time, we cannot work in analogue. When companies can grow from zero to hero in a matter of months, we cannot work in years.

To reinforce this point, a recent research report from CFTE showed that the FinTech industry was valued at 3% of all finance in 2010 but, by 2021, was worth 38% of the markets. Companies like Stripe are valued at $95 billion (Spring 2021) whilst old banks like Deutsche were valued at less than $25 billion at that time. Today the numbers would be $200 billion or more for Stripe, according to my estimates, whilst Deutsche is $20 billion.

In other words, those who dismiss start-ups as noise are disillusioned. Much of that noise is a reality that could take-over the old system, and my key comment about Revolut buying Deutsche Bank is that they won’t buy them to be a bank. They would purely buy them to get their customer base. That’s feasible in the next few years so watch that space.

Qorus - What must banks do now to survive and still be strong in 2030?

The most critical factor is to be digital, not to try. Companies born on the network are taking over the world. They were born digital. Most banks were born in a century or more ago, and were born physical. They are trying to add digital to their physical roots and it ends up with what I call Bankenstein. A bank that has stitched itself together with a lot of dead parts that are purely kept alive by adding a bit of new electricity. You need to undo the bank, reinvent it, make it truly digital, born on the network and stop being in a constant circle of denial.

Digital is where we are – it’s why the FinTech world is worth 38% of all finance last year – and to continue stitching more digital bits to the organisation to provide the electricity to look digital, when you’re physical, just won’t wash it anymore.

I could give you so many examples of what I mean by this, but the clearest was when the pandemic hit. As offices shut down, banks were forced to move to cloud-based services. But question what went into the cloud and how? Did the bank reinvent its business model to be cloud-born or did they just move existing structures and processes to be cloud-based?

To survive and be strong in 2030, banks need to be truly digital, to be born digital, to be truly digitally-based and not digital-on-top … to be digital-first and not a Bankenstein.

Qorus - There is also a text in this book that imagines the bank in 2040 and wonders about the expectations of customers with regard to their bank. In your opinion, what innovative products and services will banks offer in the years to come?

The key is that it starts with customer. The customer is not waking up in the morning thinking I need to bank or I need to pay for something. The customer is waking up and thinking that they are looking forward to getting that thing or receiving that service. We call this customer journeys and most financial firms think they have cracked it. They haven’t, as so much of what I see in traditional banks is built from an inside-out view.

An inside-out view is where we talk about omnichannel. Channel is what we stick on the old physical bank. It’s the Bankenstein accessories. Omniaccess is what customers want. They want consistent access to a digital core from whatever they’re using, whether it’s from their car, television or refrigerator.

Equally, they want it to be their advisor and intermediator of trust across many platforms. For most banks, we may have lost the plot when it comes to cryptocurrencies, alternative and decentralised finance. Why are people moving to these services? Because banks don’t offer what the customer wants … but they will. Give it ten years, and neobanks, challenger banks and traditional banks will all be offer democratised, decentralised and open platform services, which bring together all the things customers wants in the way the customer wants it.

If you can do that, then yes, in 2040, you’ll still be around.