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FINTECH 2017: Your Brain is Telling You Nothing Has Really Changed – It’s Wrong

Brian Baglow


RBS COO Mark Bailie

RBS’ COO Mark Bailie on the increasing impact of digital technology, queuing for shower gel, why nobody wants a mortgage and why products are not the future.

RBS COO Mark BaileyAt last week’s Fintech 2017 conference in Edinburgh RBS Chief Operating Officer Mark Bailie, gave delegates his vision of the ways in which technology is changing the world – and what it means for the financial services sector.

The title of Bailie’s presentation was Capitalising On The Fourth Industrial Revolution. Rather than leap straight into the fintech sector, he gave the audience a far broader picture of the ways in which digital technology is already changing the world, in many cases behind the scenes.

Showing an image of a driverless concept car from Mercedes, Bailie spoke of his horror at the idea of sitting passively in the front of such a vehicle at 70 miles an hour in Scottish rain.

Despite his reluctance at the idea, Bailie noted that the technology is evolving nonetheless and will be here soon, regardless of his misgivings. He contrasted his attitude with that of his 13 year-old daughter, who’s already considering not taking driving lessons, since in the age of Uber, apps and the dawn of Mobility-as-a-Service, there may be little point (but she’d still like the money they’d have spent on lessons, thanks).

Humans are prone to quantitive underestimation, said Bailie. We look out of the window our brains think that the world is still fundamentally the same. Little has changed. “It’s wrong,” said Bailie. We’re at the point where everything – everything – is about to be impacted by the rapid evolution of technology.

Amazon Is Changing The World

RBS COO Mark Bailey US Retail Closure GraphAn example of how this transformation is taking place comes from the retail sector. More specifically the number of retailers which are closing down. A graph of the US market shows significant spikes in 2001/02 and 2008/09 – both periods of recession and financial instability.

These periods however are dwarfed by business closures in 2017, thanks primarily to the success of online retailers, dominated by Amazon. Despite high consumer expenditure and confidence, more and more retailers are going out of business in the USA. “Amazon has changed a 50 year statistical relationship,” said Bailie. “Amazon is changing the world.”

Things are changing the media too, noted Bailie. Rolling Stone was put up for sale by its owner, Time magazine expects to lose 10% of it’s revenues. Everything is moving to digital – even secrets. Amazon’s AWS cloud service has just received authorisation to hold classified US Department of Defence data on its servers.

Anyone Invest in a Pension Company?

One of the top stories on the day of the Fintech conference was the news that Chinese medics had successfully recoded the DNA of an embryo to remove an inherited disease. This in itself is a remarkable feat, said Bailie, however one of the secondary effects of this research is that by 2029 it is estimated that human life expectancy will increase by a year for every year lived. “There are only 30,000 diseases in the world that kill us,” Bailie stated. “They think they can eradicate all of them.”

The corollary to that is of course the impact on human society – and the economy. “Are any of you invested in a company that offers pensions?” Bailie asked the audience of senior financial services staff.

Mark Bailie COO RBS

These Are Pretty Fundamental Changes

Moving back to electric cars (“Electrics cars are cool,”) Bailie stated that in California, the cost of solar power is on parity with oil and is falling by about 25% per annum, “So all cars in California will be electric soon.”

Pointing out that “oil’s not worth what it used to be,” Bailie asked, “What happens to the FTSE when 25% of the market cap is in natural resources companies? These are pretty fundamental changes.”

“The consequential effect of some of this stuff will fundamentally reshape the economy, fundamentally reshape the way businesses interact and where the economic value is in the world.”

What does it mean for Banks?

RBS COO Mark Bailey - Who Wants A Mortgage?“Who’s got a mortgage?” asked Bailie. Followed by “How many of you WANT that mortgage?” Nobody actually wants banking services, he said. “They want the stuff, they want the key in the door of their first home. The mortgage is a necessary evil in order to get the stuff you want.”

“The problem with the banking industry, is we have been entirely product-centric for a very, very long time. That’s not what customers need.”

Customer expectations are being driven by their experience with the online giants, said Bailie. He recounted being dragged into London by his (other) daughter. When confronted with a queue to buy shower gel, he described walking out. “That’s Amazon’s fault. Because I’m used to not waiting any more.

“I’m being so trained by the development of technology to value people who satisfy my need.”

“People would rather be running on the beach than sorting out a mortgage.”

What does that mean for the relationship with us?

These changing expectations and the increasing ubiquity and capability of technology are why RBS is putting so much effort into Fintech Scotland, said Bailie. The bank is looking for the next generation of ideas and is very specifically searching for two key solutions:

  1. Something to help drastically simplify the business
  2. People who can help navigate this new world which is focused on customer need not product

“Its hard. It’s hard not to think about mortgages and savings accounts and current accounts and start thinking about homes and optimising expenditure,” said Bailie.

Collaboration is the key, said Bailie. The bank is looking for people who share the same fundamental values: “Thinking about the long term and doing the right thing.”

“We think we can build it here,” concluded Bailie. “We can build a really, really good Fintech ecosystem here. Life is good.”

Movers and shakers

Brian Baglow


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