The inaugural Fortune Brainstorm Finance conference was held June 19-20, 2019 at Gurney’s Montauk Resort in Montauk, NY

Brainstorm Finance 2019

Brainstorm Finance 2019: Bank of America CEO Brian Moynihan

Finance

A conversation with the head of one of America’s top banks about leading in uncertain times.


Brainstorm Finance 2019: Big Tech Takes Finance

Google Cloud's Technical Director explores all the ways tech trends are disrupting financial services. 

good afternoon. Here we are gathered to talk about the destruction of financial service is by technology. But imagine it's 16 19 and for centuries ago, and you are a bookkeeper with a Dutch East India company in 16 0 to the Dutch East India company issued their first shares in the world's first of first stock market in Amsterdam. The Dutch East India company was the world's first Cos I peel, but as the bookkeeper, this your most advanced technology, Napier's bones. When they're arranged in the right order, they helped with multiplication and division. In 16 42 along came Blaise Pascal, a French inventor son of a tax accountant. And he invented the past Colleen the past. Colleen could add, subtract, multiply and divide. And the 19 year old blaze was the world's first fintech disruptor. And today, in 2019 Google has a quantum computer. While it's very much early days, it's still it's no longer just a theoretical concept. The pace of technology disruption is increasing exponentially and cannot be ignored. Today's technology is everywhere, things like cloud and mobile and I, O. T. And big data and artificial intelligence, by having a profound impact on our lives on on business everywhere with cloud, we now have friction free access to technology, which means that whether you are a tiny little fintech startups or you are an enormous bank multinational, you have access to the same technology resources, and that has done something profound. Innovation has been democratized. A 20 year old, it's sitting in a cafe, maybe right here in Montauk, and she has an idea for a business. She goes online. She registered to it. Maybe in Delaware, she logs into her Google Cloud account. She spends up a few of'em. She buys data for Milton. It's data providers. She starts building her machine learning algorithms using tensorflow. And very ago, she has her fintech up and running, and she hasn't even finished her cappuccino. Technology is changing the face of finance tomorrow. Finance won't be about charging fees and holding onto Capitol for trust. It will be about a world where the cost of transactions air reaching zero and trust is established to intimacy and transparency and speed. Now imagine if all trading and payments of settlements and clearing we're done in real time. Imagine this company's balance. She's your balance sheets were updated daily rather than on quarterly earnings calls. Imagine if all the risks were being calculated by machine learning models taking into account live market data. Upstate Human behavior. Weather patterns. Today we're living through an explosion of data, and it's not just weather, and it's not just transactional data. It's things like search trends and commercial transaction. They'd a satellite imagery putting car traffic and shipping location. But where is all that data going? Nowhere. Unfortunately, it's sitting in for prize databases. It's locked up and spread sheets and documents and share Dr. But that data can enable you to do enormous number of interesting things. Know things like understanding customers, better building better product. Today, the biggest opportunity for most companies is to turn their data into insights and business decisions. And the next big frontier in data and insight is machine learning and artificial intelligence. Now, today, right now, financial service is from the possible of are using machine learning to do things like improve customer experience through chat box and multi channel customer insight and customized product recommendations in trading desk and hedge funds. They're using in my ML, increasingly for doing things like portfolio construction and hiding strategies. I'm pretty soon. Machine learning will be embedded in every aspect. Off. Financial service is reducing improving risk management and increasing and a Google we applied machine learning for data centers. Now data hunters are core to our business. They make up ah, healthy portion of our operating costs and environmental impact. But the equipment, how we operate, that equipment and the environment interact with each other in ways that are hard to capture in traditional, formula based engineering. I kind of like them by national market. Our deepmind researchers designed a neural network to look at things like sensors from the server racks, windows, chillers and cooling towers, and we were able to bring down our cooling costs by 40%. Now imagine if you could bring down your transaction costs by 40% if you could. If your client on boarding was 40% faster, if you could bring down the false positives and your fraud detection algorithms like 40%. But a I is not a crystal ball. It's a very powerful tool that gives us scale in solving the world's problems in a way we haven't been able to do before. But technology itself does not create new products, does not streamline your systems, and it does not address inequalities. Now the fundamentals of a I is training algorithms using back amounts of data. But the data that we have today could be carrying the biases of our history. And today, women don't have the same access to capital as men. Today, women on average have higher mortgage rates, man. And today, around the world, about 1.3 billion women are not even included in the financial markets at all. Now imagine that data training the algorithms of tomorrow aye, aye, gives us scale, and it allows us automate processes and take humans out of the system. But we do need to keep the human and the system we need to keep them in decision making, and we need to keep them in over trite, because the potential of artificial intelligence is that it's great when it's paired with human intelligence. That's how we can use artificial intelligence to generate genuine insight and genuine intelligence. Today, 2000 and 19 financial institutions around the world are spending billions of dollars on technology now, Unfortunately, much of that spending is maintaining their legacy system. Now the good news is, we now have technology that can help change that technology like clouds and artificial intelligence and for help wants. And soon. And now imagine. It's 21 1900 years from today. Have you been able to make the right technology investments to create platforms to give your customers to give them the intimacy and the transparency and the speed they need? And have you been able to serve those that you are not leaving, sir, today? Thank you.

Brainstorm Finance 2019: Will Banks Matter In The Future?

A discussion about fintech startups known as challenger banks and how these tech-driven, online-only upstarts will compete with big bank branches. 

Facebook obviously sought up a lot of the attention this week with the announcement of their crypto currency Libra. But a few months ago, JP Morgan had all the headlines when it came out it was JPM Coin. Tell us, what is the origin of that initiative. Sure. How did they come about? Okay. Just as Will has said, since it's a broad audience, has anyone heard of JP Morgan Coin here. Okay, cool. Everyone. Okay, great, everyone's, well, a lot of people have heard of it. Okay, does anyone actualy know what it is. Okay, great- Fewer hands. Two people. [ LAUGH ] Okay, let's just level set with what it is. So, basically the way that you can think about JP Morgan Coin despite the name is that it's just representation of fiat that's in your JP Morgan bank account. Represented on a permissioned Enterprise blockchain. Okay, so it's that simple like definitely not as exciting as like a cryptocurrency not as exciting as what you thought it was. There's no ICO etc. and the origin story for how we decided to build JPMorgan coin actually stems from one of the other blockchain applications we've been developing For those of you who don't know, we've been pursuing an agenda around digital securities, I guess what you guys would be calling security tokens or has been discussed as security tokens here. And in fact, last year we tested a 150 million dollar floating rate bond issuance. With an issue or National Bank of Canada and tested it in partnership with asset managers like Goldman Sachs Asset Management, Pfizer Treasury, Western Asset and another. And basically what we did was we modeled out an entire bond instrument end- to- end using smart contracts on block chain, right? And so this is the issuance process indication. The settlement, the interest payments and the pay down. And what we ran into is that in the settlement process you have this exchange of debt obligation for payment. How are we gonna do the payment? Were we gonna send like an instruction to send a wire and then confirm the wire and then send a message back into the block chain to say yes we received payment? And keep in mind the goals of enterprise blockchain. The goals of enterprise blockchain are creating its operational efficiencies, reducing reconciliations, and actually like in our investigations in the past four years or so, four or five years and in figuring out the pain points of of a bank A lot of the pain points were in the process of, I received a wire, what is this for? Why do I have this, is this the right amount? So it made sense, at that point, to say, how do we actually represent this payment on the blockchain, so that we can enable this use case, and make it more frictionless And then we realized that actually most other use cases that are in enterprise blockchain also have a payments leg. So then decided that we actually wanted to build something, not only for JP Morgan applications, but for other enterprise blockchain applications that required a payments leg. And the reason why we think this si important is because we actually have very strong conviction in the technology. Our CEOs actually said, God bless the blockchain, and the blockchain is real, despite what- Is that bless [ UNKNOWN ] comments about Bitcoin? Yeah, but on the technology he's very keen on. And there were Big believers from the top down but if you really believe in this technology then you really and you wanna enable its progress then you really need a foundational payments to make sure all these other applications work. It's kind of how you needed to have fully functional PayPal product to enable eBay or you needed something like square to really enable point of sale like commerce. mobile commerce so you need something like stripe to enable like web web credit credit card transaction, right. So we just think of JPMorgan coin project as basically that foundational payments rail for enabling enterprise blockchain applications. When JPMorgan coin came out and was announced. Jimmy made a comment. I think it was to CNBC and he said that maybe one day consumers would even have access to this. How far off might that day be? One step at a time, right, so right now, we're focused on getting into our wholesale clients. And, you know, I think what's important for this group to realize is that. It's really hard to do this, Right like. Thee technology is besides the point, there are a lot of technologies here and you understand, and some of you have to stable coins as well. But for the hardest part for us as a very highly regulated institution who is regulated globally, Is to do this the right way to do this the safe way to do this the legally legal and compliant way. And so we actually spend most of our time now thinking about how to do this in partnership with our clients. And so you know, one step at a time wholesale first. So let's hear about some of the work that's going on at IBM as well because you have a number of projects happening including partnering with a cryptocurrency company, Stellar. They've got their own, Crypto lumens that they use for remittances in Southeast Asia. So tell us about all the sorts of things that you've got going on there. Well, we really have been engaged at IBM and blockchain for almost five years now because we see it as a fundamental way to build trust and transparency and all types of industries. Finance being one of them. And in particular, related to finance, cryptocurrency isn't what our value proposition or what we think the real belief is. It's in creating a digital economy where you can link goods and information and transform these processes. But to have that exchange of value for all these different networks, You need a public network, you need a connection point for that exchange. So we've been operating when it comes to digital money, in three different areas. There are transactions occurring bank to bank, particularly central banks with the goal of digital FIAT currency which we think is the ultimate endpoint. And our work with CLS on payment netting for those top rails of all the currencies is a good example. We also see people going direct B2B. So we're working with visa on their B2B Connect and how they're using that for direct exchange between businesses For effects so you take out some of that friction in those transactions. And the most underserved, I think we all agree, are the consumer to consumer. Remittances, sending money back home to the Philippines or wherever you wanna do that. And in order to get that kind of value proposition We've invested in world wire, which is live with a test net connecting almost 50 different currencies so that you can, whether it's for a stable coin, or whether it's just as a bridge token between two currencies, get that friction out of the system and enable a real time clearing and settlement. You've had conversations with central banks as well? We do. What is their view on this? The idea of tokenizing [ UNKNOWN ] currencies? Well everyone is really look for digital [ UNKNOWN ] So how do you really have an asset backed exchange? So to me, it's not the speculative nature of a crypto- currency. is how do you actually have value back to eliminate the volatility to get greater transparency? And I think the big question now is more on the regulatory point of can the central banks and the financial financial regulatory bodies that govern those central banks. Keep up with the rate and pace of the technology. We know the technology can do that. We've proven it in every one of those layers. Can we get the regulatory compliance and the trust and transparency around KYC to be part of that, and that, in fact, is what I think is slowing us down right now. Yeah and I think it's important to note that commercial banks and central banks are working together. You would have seen in the past couple weeks there was the utility settlement coin fundraising that was announced 50 million sterling across 14 banks, NASDAQ, and Clearmatics, which is an Ethereum variant, a blockchain company. And that's focused on the tokenization of central bank risk level money. And then for us at JP Morgan, we've partnered very closely with the monetary authority of Singapore, who have a very progressive Multi- phase project around trying to bring blockchain and distributed ledgers to reality. And so we actually started them three years ago, and the first stage was actually tokenizing the Singapore dollar. We actually did this on quorum, we prototyped that and actually has like a similar model to How you would think about collateral- backed stablecoins, then we took it a step further with a multiple group of other partners to actually do stablecoin transfers with privacy, so actually writing zero- knowledge proof circuits, and actually- What is a zero- knowledge proof circuit? Okay, so zero knowledge proofs .>> At a high level. At a high level, just an academic technique for being able to prove some information without actually sharing the information. And the application as it relates to blockchain and value transfer is being able to send a payment Ensure that we actually had, whoever sending the payment has the balance to send without actually revealing the balance. So in public blockchains like public block chains are all transparent Ledger's. And that's how you can, you know, trust the technology and trust like the transfer institutional enterprise, the banking system obviously we need privacy, privacy is of the utmost importance The JPMorgan blockchain team has invested enormous amount of time and effort in developing blockchain technology that has privacy. So first we forked aetherium and added a private contract store. And Gabrielle day who was on the stage here who like obviously, as, driven that agenda, so you're here. And then from there we also partner the Zcash company. There was discussion yesterday about Barry talking about privacy coins. So we actually partnered with the Zcash company to pioneer private token transfer and actually also open source that work in the core on GitHub. And then most recently, we opened source Was either implementation, which is another variant of zero knowledge proofs, and private privacy for token transfer, and you can check that out as well. So privacy of the utmost importance for us. But anyway, back to the urban project .>> Well, hold on. Let me let me cut you off right there. Because you mentioned that your blockchain is based on a theorem, which is a public open blockchain, you made a permission for a variety of this Murray, you actually started dabbling with a theorem to begin with and then decided to go on a different route and created something called hyper ledger fabric. Why did you make that decision? Many of the same reasons we think enterprises wanna know who they're dealing with. And therefore, both privacy, security and the fact that you need to own your own data and have the right to determine who gets access to it is critical. That in a public aetherium context does not exist. And at the time we started, we tried to look at various other options and then we are really none out there. So together with a number of different players joined with the Linux Foundation to create hyperledger now 300 different participants. Just released our newest version, next gen platform for hyperledger fabric that allows you to build, govern and operate. We have 1300 people on it right now using it for various industries. Whether it's for finance but also for healthcare announced a project last week. With the FDA for how to handle drugs utilization and security, and that with Walmart Merck KPMG today we announced a new project working with our one of our Columbia accelerator startups IP we to create an intellectual property. marketplace how do you actually track across 200 different. Patent offices around the world for the innovation you create. How do you monetize it? How do you share it? How do you know you're not impinging on it either? They all require access to trusted information, and then exchange of value. And the combination of the two on digital money with permission data sharing is really what we think is causing a tipping point in the industry this year. And I think what Marie and I definitely agree on is that it's gonna be a multiple blockchain protocol world. And I think that we're already starting to see that there are certain use cases that may be better suited for Fabric or versus Quorum versus Stellar versus any other blockchain protocol, right? And The way that I think about it is like in today's world, you have Apple computers and you have like PCs. But the main point is that you can still send an email from like someone who has a PC to someone who has an apple, right. And that's what useful, right. And to the point of it being a multi blockchain world, actually one of the last stages of work that we did with the Monetary Authority of Singapore Was do a cross blockchain cross border cross currency exchange transfer asset transfer using hash time locked, smart contracts. And so I think it's interesting like you know, like where those that are working in the blockchain space both in enterprise and in public. Really trying to push the limits to like actually evolve the technology towards interoperability or some sort of like connection points between different block chains. So let's see, like a mesh network, I guess. And I would agree with that completely. I mean, we were also involved in that cross border exchange on the urban We just joined the enterprise etherium token initiative to focus on exactly these digitized assets and how do we have consistency across platform. And a hyper ledger burrow is looking in how you can take an existing etherium's smart contract and run in on a fabric network. So, you know, one network will not rule them all, and you want fit for purpose, but I think the principles of being open, having control of your data, making sure it is permissioned and that people have the right to use the data that is shared in the way that they think is important will accelerate the whole exchange of value. Excellent, let's give the audience a chance to ask a question or two. Is there anybody out there who has a burning question they would like to ask of our panelists? [ BLANK_AUDIO ] Anyone at all? All right, well, I'll toss you this question then, give your sales pitch to the people here, why should somebody use Hyperledger fabric versus Quorum? I'm gonna ask you the same question after this but from the Korean perspective, You're trying to pit us against enterprise blockchain friends, and we just said that they're going to be multiple washings connected with each other. I mean, we we think the most important point is participation. The real fundamental opportunity for blockchain in my mind is we are now creating the ability to transform processes. Everything that we've done in the internet has facilitated exchange of communication. But everything in business today is essentially a linear process. And you go from point to point to point whether I am doing a handoff from me to JP Morgan to you on a banking transaction. You now have the opportunity to have all the participants on one network and the ability to fold linear transactions on their side and make them a secular economy is I think is what really is fundamentally exciting about this. And my expectation is every single business process will be transformed by BlockChain. And that is not something we've seen since essentially the changes that you saw from the Internet or mobile. Now, when it comes to hyper ledger fabric, we built in many things that we think are important. For privacy, for consensus mechanisms, for security, for tokenization of assets. And those are all fundamental for speed and scale of doing this on a global basis .>> So what's so great about quorum ?>> I would say that it's, it's the developer community. Right. So Cora, as I mentioned before, is a fork of public a theorem And as we know that there's an extremely robust community of developers that are working on Ethereum today. They're working on Ethereum Core, they're working on the tooling. I think that most of the activity that we've seen in the past couple of years in the public block chain space has. Been on public Ethereum. So even some of like the services around like private key management and other trading related services already built on Ethereum. So I think that for businesses that are interested in having permission to enterprise Blockchain to solve their own problems, but want the optionality of connecting to the broader world of Blockchain that's evolving. And leveraging the robust community of developers and academics that are all have been studying this technology for some time. That's what I see as you the kind of the core of which point. Excellent. I mean, I think the most important point is what value will every participant get out of permissioned blockchains? And candidly, I will love the day when nobody talks about blockchain. And they just talk about the value creation that you know the 500 different projects that we've been working on around the world are really what you talked about .>> I agree .>> The benefits the value proposition and the participation that it is now bringing to the unbanked or the underbanked That to me is the real value and stop the hype of blockchain. Yeah, I mean actually when I talked to clients and even like internal stakeholders, like I try not to use the word blockchain. I'm like we're building this technology. We don't actually say it's blockchain. I mean everyone just knows because I'm the blockchain person. But like That's all we've got time for. But yeah, okay, so we will keep watching in the background. It's the technology, let's focus on the things that people are actually doing. [ CROSSTALK ] It's the problem that we're trying to solve. Yeah, exactly. Thank you both for joining me. Thank you. Thank you. [ APPLAUSE ] [ BLANK_AUDIO ]

Brainstorm Finance 2019: How JPMorgan and IBM Are Using Blockchain and Digital Currency 

A discussion with Christine Moy of JPMorgan and Marie Wieck of IBM. 

Brainstorm Finance 2019: Does Crypto Have a Place in Real World Banking?

Brad Garlinghouse, CEO of Ripple, tries to decipher all the noise surrounded around cryptocurrency and its future potential. 

So I got to start off with the fact that you're wearing your your banking tie and your banking suit. Um, and, you know, you're you don't look like your Cryptocurrency CEO. You know, I'm just gonna go back. Where is your tie? So, look, I took it because I didn't think you'd have one That happens to us, and it kind of answer your question. Look, as Adam introduced Ripples a company selling software, selling technologies into banks into financial institutions. And so we think about, you know, we are selling into an audience that, oftentimes, is wearing a tie humorously, there are times when we show up for a meeting and, you know, we show up in ties and they're starting to meet with us. So they were, you know, casual Silicon Valley. And we just missed each other on the other side. So obviously, this has been a huge week for news, and I speak not of labor, although we'll get to that. But on on Monday, right after the close, you did a massive deal with MoneyGram. That stock shot up 168% on the news. Uh, ripple is private, so we don't know what happened inside your your headquarters there. I assume there was some high fives, but but x R p, which is the currency or the digital asset that you have this huge word of just sort of barely moved. So what? What was the market saying there? Well, look, I think to be frank, there is a lot of hype and, you know, to be crash. There's a lot of bullshit in the Blockchain Begged to be craft, by the way, in our pre interview, I just think there's a lot of noise and it's really, really, really hard, I think, for people looking at these ecosystems to understand, like, what is real and what is noise. I mean, look, you know, I'm sure we'll talk more about Facebook, but one of the headlines I read about that was, you know, Facebook launches Cryptocurrency. That was on CNBC. Facebook did not launch a Cryptocurrency Facebook wrote a white paper about their intent and their plans that maybe a year from now we'll see a Cryptocurrency called Libra. So I think, uh, it's hard for the industry to separate what is real. I think the MoneyGram deal was a very big deal for Ripple. I think there's even a bigger deal for the crypto markets overall, if we go back in time, as we've heard from other Panelists, I do think the original use case for Crypto it was Silk Road, right? You know. Then about two years ago, it became about speculation, right? And I think what we're seeing in 2019, what we'll see going forward is there has to be utility. There has to be a problem. You're solving leveraging these technologies, or why Why do they exist? So in the sort of geological time scale, if you will, you know we have the error of scandal, then speculation scandal with Silk Road in Mount Jackson and speculative frenzy and then winter crypto winter. And so this next one you think, is utility. But a lot of people are saying, Well, what really is the utility here? Because you sort of pooh pooh the idea of block chains in general, sort of being used for, like food security and providence and things like that. I just think there's a lot of noise. Look, I think block chains are an incredible evolution, and I think many parts of the Internet. Many parts of how transactions happen will change because of Blockchain, period. I think there are a lot of examples that I see people talk about where I ask myself, and I would ask people to ask themselves, Why doesn't the database work better? Why isn't a database more efficient? You know, a Blockchain is kind of an expensive database. It's slower than many database technologies. And I think a lot of people that use the word Blockchain as frankly catnip for investors, right they want, you know, or for marketing that they want to get, you know, uh, consulting revenue. So they talk about Blockchain. Look, we have tried to be very, very focused on solving a specific set of problems for a specific set of customers, and that is around transaction banking and liquidity management. So that today, as you've heard cross border transactions, they are slow, they're expensive, they're air prone. And that one cost, I think, gets overlooked. That people don't fundamentally understand is the way correspondent Banking Works is pre funded capital sits in accounts around the world, and you have literally $10 trillion pre funded into other banks and other financial institutions in order to facilitate. It's it's the it's the oil in the engine that allows correspondent banks working. It's sitting there, and if we can reduce the amount of oil necessary in the engine, that's incredible efficiency for the global economy. That's good for everybody. If we can route 10 trillion to a lower number that stock buybacks, that's dividends. That's working capital for lots of other purposes. So this is key because, I mean, you really see the value in this as as in many of the sort of digital assets that we talk about when we think about the sort of cryptocurrencies. But as the value is in transferring value rather than storing value and in facilitating transactions and and talk a little bit about, you know the speed because X R P versus say, the way we do this now, why is it so much faster than the normal banking transfers through Swift, for example? Well, the first time I say, I don't think there's gonna be one crypto to rule them all, and I think there are crypto I own Bitcoin. I'm long Bitcoin. I think Bitcoin is a store of value and people hold it. And so I I don't I don't think it's gonna be one use case. Uh, we think about X r p as an incredibly efficient shuttler a bridge currency, if you will. And because it's extremely fast. So, uh, in contrast, even Bitcoin, for example, we can do a transaction for about 6 10 thousands of a sense, a Bitcoin transaction today costs about $2.30 per transaction. Now, that doesn't mean Bitcoin is going to fail or something. I think Bitcoin and X R p they don't view them as competitive. X r p is extremely efficient for that payment solution. That payments problem we're solving. And Bitcoins, I think, as a store of value digital gold As you heard from Barry Silbert up here yesterday, you know, uh, today gold is worth many trillions of dollars and Bitcoins worth you know something around 200 billion. So there are two protocols to, uh technologies that that ripple uses. One is that sells to banks. Basically, X current, which was the sort of Fiat currency that uses this, uses a bridge currency essentially, but it uses Fiat currency as as as the sort of Bridge. The new one is X Rapid, which is uses X r p. And the MoneyGram deal is important because it really focuses on MoneyGram is going to use x r p is going to use this digital asset. Is that exclusive or No, it's not an exclusive deal. Uh, certainly. I mean, look, we already work with lots of other money service providers, like none as large as MoneyGram. We are doing some tests, as from Western Union described yesterday. I've done some tests with them, but look, you know, we think fundamentally, uh, the entry point for us has been Let's go sell what we call X current, and this is a point to point Fiat Fiat, Bank of Cliff, the Bank of Brad. You do not want to leave that to the Bank of Cliff. Real time debit and credits so swift today, you know there's a series of hops, things go through, it is slow, it is expensive, and this is real time. But it's Fiat Fiat. It is necessary for that to work, to have that pre funded capital parked in the Bank of Cliff in the Bank of Brad. So you're right. I don't trust the Bank of Cliff. I don't want your money there. And so yeah, you have to say that, actually. All right, What ex rapid allows is for me to shuttle value in real time from, say, British pounds to Philippine peso in real time. And I have to pre fund into the Philippine peso. So getting back to where we are in this moment of time in this sort of crypto geological timescale, um, you know, the liberal deal. A lot of what we heard yesterday was that it's an inflection point that this was a sort of when you look at the players involved in it. It seemed to legitimize this idea of this sort of very big idea that's been around for a while. Uh, your MoneyGram deal where they are focusing on using this digital asset, X r p is another sort of legitimizing idea. Um, So what are we at the point? Because when I look at the banking clients that actually use X r p actually, that particular technology the ex rapid, they're not the household names. Yeah. Yeah. Look, I do think the Facebook announcement a whole bunch of examples. You're at a nascent stage of this industry. And you have, as we described earlier, gone from kind of, you know, illicit use cases to speculation to utility. You know, the ex rapid product. We've now had a market for about eight months. We've announced, you know, some between 10 and 15 production customers taking advantage of that product. You know, for a Silicon Valley startup to be able to go from, you know, a launch of a new product to 10 to 15 customers. Actually, pretty thrilled. Uh, but, you know, I think for a lot of banks that have a lot of liquidity parked around the world, they're evaluating. Okay, What does that mean? I was talking to the CEO of one of the largest banks in Canada and they were exiting their correspondent relationship in Brazil. It's expensive for them to hold Brazilian rials. And they're like, Look, we don't have enough demand. So now we're going to use a correspondent bank now if they could use X rapid into Brazil, they don't have to have the pre funded money. They have the expense and they can still solve their customers problem that need to do business in Brazil. So I think these are all examples of it is a journey. I think that, you know, it is nations. I will also say that I'm gonna send a case of champagne to David Marcus, the guy who runs the, uh The reason is this week this week will probably be the best week of signed contracts at Ripple ever. It has been a massive call to action because, you know, again, Facebook kind of came out and said we don't need Western Union anymore. Well, if you're a bank, if your Western union, you kind of Uh huh, that's interesting. And I think the banks realize that if Facebook is going to be a competitor in this space, they can't depend upon a technology like swift to compete in the marketplace. So I want to go to questions in just a second. So please think of that and, uh, hold up your hand and we'll get a paddle to, but, you know, so the banking legitimacy questions. So the Basel Commission just came out with a statement a couple a couple of months ago, um, in which they talked about a lot of the risk inherent in these These new Cryptocurrencies. And and it seemed like even there was a milestone that they talked about it. The message itself was pretty skeptical. It seems to me when my reaction to a lot of those statements is, you know, there are so many things lumped into one bucket when you talk about crypto yesterday, you heard up here on stage, you know, some advocacy for tokens, crypto, that is anonymous, that focuses on being anonymous, right? I don't think that's helpful to the industry, right? You know, we live in a world of governments. We live in a world of, you know, rules and regulations. They matter. And one of the very important bedrock regulatory frameworks around banking is K. Y. C. Know your customer anonymous transactions are not going to fly. And so I you know, when I see some basil commission come out and say something broad about crypto generally like Wait a minute. Let's understand how x R P is used. Let's understand what ripple is enabling. There are zero transactions enabled by ripple that aren't K Y c. So let's see if we have a question here. Anybody questions well, so this brings up the question. Do we have one. Oh, yeah. Right here. Thank you. When you said that is the best time is the best week for ripple contracts ever. Was that a factual statement? Are you just hoping No, that's a factual statement that the Facebook announcement has absolutely catalyzed contract activity. So we may have been talking to a bank. A payment provider for, you know, six weeks, six months about a contract. This has been a call to action. There's no question. Uh, you know, I was texting with our head of sales guy named John Mitchell. He flies around the world more than anybody I've ever met. And, you know, this is going to be a record week for Ripple. So, to my understand, the G 20 the meeting of the Global Heads of States Zeno Sock at the end of the month. To my understanding, the issues of digital assets are not on the agenda. What? What? What would you want them to address first, if you have to do one quick, uh, one quick topic for the lack of regulatory clarity is definitely holding back the industry. I think that I grew up in the dot com one point oh, era. And the fact that the U. S. Government provided some frameworks for how they were looking at the Internet, then health, investment and help clarity such that lots of companies could invest dollars there or whatever currency. I think the lack of that in the US the lack of that in some markets around the world is holding things back. You don't see the U S. Leading here? Uh, the UK, Japan, Singapore. These are central banks and regulatory governments that are there being proactive. And they're recognizing that not all crypto is the same, right? And just because some enable anonymous transactions doesn't mean we should paint them all with one broad brush. So regulatory compliance and regulatory ambiguous world. Okay. Thank you very much, Brad Garlinghouse. Thank you. That was great. Yeah.

Brainstorm Finance 2019: A Conversation With a Young Cryptocurrency Engineer 

Seventeen-year-old Ananya Chadha discusses  how she is using blockchain and her very own cryptocurrency to help people share their genetics anonymously. 

this interview might be subtitled A star is born. Uh, I was chosen, I guess, to do this interview because of my advanced age. And I guess my air of dignity, which you all know I don't really have, uh and anyway, But in reading about an on my first reaction was Is this person for real? As indeed she is better than for real, because when I watched her YouTube videos, I've never seen anyone who communicates better with less jargon. Makes things clearer, explains the most arcane technical issues and language that everybody can understand. So anyway, you're a pioneer. Also in the art of community are art and the art of communications. Um, and and I wanted to I know you have an unusual background, uh, born in Madagascar. Grew up in, uh, in Toronto. Um, when did you you know, you've hardly had a typical high school experience. And can you go into when you realize that whatever. 14. That your mission really was. Maybe not being in the drama society or being accumulator of being on the soccer team. It was pursuing big ideas. You had a real mission in life, right? Um, it definitely started very early. I I guess I've always had, like, a naive, arrogant to think that, like, I could do anything, Um, and it almost believing that it's definitely come true. When I was 14, I joined this program called the Knowledge Society, which is like a human accelerator, and it totally changed my life. I got exposed to a whole bunch of different excellent technologies tools. I realized that conferences are saying Uh huh. I just began to realize that young people have so much like potential and power. And if we if we believe we can do anything we legitimately actually can, right? And one of the early coups that you had was winning. I love this. This name the crypto Chicks hackathon, which involved applying genomics to the Blockchain, right? Yeah. So I started off doing gene editing research. I spent two years in a gene editing lab, um, working on the team that cured muscular dystrophy and most models another in clinical trials. But while I was there, I noticed that genetic data is so important. Everything relies on data. You have to know where to make your cut, how to program your CRISPR cast and I realized that there isn't a lot of good data, so I want to learn more about Blockchain. Went to a lot of meetings in Toronto, built a platform to allow people to anonymously upload genetic information to research data sets. And even though it was anonymous, they could still get paid for their contributions, ended up winning the hacks on, ended up working on it a bit more. It got moved into consensus where I worked at it after and yeah, that was definitely a moment where I was, like, weird In this world, it's crazy. I'm so lucky I can do anything right? So does that have implications for the pharmaceutical industry for new drug development? What are the implications, right? I guess it really showed me that Blockchain is so powerful for things that most people like forget about. And I think one of the biggest use cases of Blockchain will definitely be for things that couldn't have existed before. But now we can use by using the properties of Blockchain in the back end, for example, um like people think that in our near future it's very likely that we're going to spend a lot of our time in virtual reality, and it might seem far fetched. But if you have really good VR like with really nice haptic feedback, you get to live in a world where you don't have to pay expensive costs for housing. You don't have to pay expensive costs for education because you can like one Harvard profit and teach a billion people. You don't have to pay for transportation. So if we spend our time living in virtual worlds, for example, um, and we, like, spend all our real money buying a virtual world house and the gamemaker tomorrow, just delete your house. That would suck, but with something like block pain, where you can establish trust. Now everyone knows that you have your house over there and I'm getting excited. But it's like even in the real world, if we have things like digital identity. For example, if you're a refugee and you lose your papers, you don't exist. If someone else has control of your passport of your ID and they go into a bank, they create a bank account. They are you. And there are so many ways where Blockchain can also add value in terms of If I want to establish that I am myself, maybe it's like biometrics. For example, it tracks my brain waves. When I do a certain action, my e g signals my fingerprint. A combination of different things could allow the Blockchain to know that I am me. I own these stocks and I own this house and I have this passport and everyone knows that this is me or like there are so many but, um, like, using it for data attribution So, like there's a couple of access Copyright, which is the leading copyright organization in Canada, is looking into how we can attribute paintings and books to their rightful owners. So when they're used or when data is used, the rightful owner gets paid. And I guess overall, um, Blockchain adds value in a lot of really interesting places. And so, if I were to give you a $100 bill and I'm like, take this $100 bill and you're like, yeah, I'll take it and then you would take it because it gave you value. And if something can give you value and if you can create it, so if it's possible to create value. If it exists and it creates value, people will use it. And I'm almost entirely certain that Blockchain id value and it's possible so people will definitely use it, right? So your view also is the trust deficit in Blockchain, right? And that's the real issue, not the technology I know that you created to cryptocurrencies you went through a lot of steps. By the way, if you get to see this on YouTube the whole experience, that and then you went through creating what was impeached and profit. These two Cryptocurrency is one of the best educations I've ever read about the mechanics of creating a Cryptocurrency and the barriers involved. But you feel it's not. The technology is to trust so and you also say that the technology is going to advance much faster than people expect We've already seen. Libera right is at an inflection point. Where do we go from here? I think it was really cool before people used to have Bitcoin and you would speculate on it. You would try and make 500% by buying Bitcoin, and now you have something like liberal where you actually know the value of it so it's not going to be used for I want to make 500% off of Crypto Rather, you're going to use it for a lot of where, where Blockchain where crypto makes sense. So another thing I think is really important is the team behind. Labour is crazy, Uh, and if you look at the teams behind a Serie um, they definitely didn't have as much scale or network or reach as the people who are creating liberal. So it's definitely a completely new thing in terms of trust, ability to get it to a whole bunch of people. I think it's definitely it will be a lot more well accepted and play a big role. I know that since it makes a lot of sense since they'll be trusted, it's definitely going to happen. Well, maybe it won't be implemented because of regulation, but I know that in the future we're going to be crazy things. I guess what I'm saying is people were freaking out when Bitcoin came out, but then they kind of subdued themselves. They're like, Oh, we don't really have to worry about it. Then Ethereum came out and you're like, Okay, maybe We have to start thinking about regulation because there's two things. Then, um, Lever comes out after fun. But I was like, Oh my God, we have to start like worrying like crazy, like creating regulations that can take over the world. But we need to think about what's next, not about what's already been created. When I was in, like, the discussion room this morning and everyone was talking about regulation for what exists right now, that's wrong. You have to think about regulation for what will come in the next two years or three years, or it's already too late. Facebook reached a billion users, and like the shortest amount of time, things grow exponentially. And because things grow so fast and it's so hard to conceive of it, it's super important that we try and predict where the technology will go and we try and adapt our systems for where we think it will be, rather than for where it is right now, right? So you think that technology will just the speed of technological change will overwhelm any ability to regulate it or not, Or do you think the regulators can block or slow the progress in Bitcoin usage or Cryptocurrency usage. If you grasp most technology things like the cost of sequencing a genome or the number of people who have access to the Internet or the improvement in brain computer interface technology or machine learning capabilities, it's all been on an exponential curve and humans think linearly. We are programmed to think linearly so we can't even conceive of what exponential means. And because of that, I think it's super important to recognize that it moves fast. Incentives are misaligned. The U. S government is an incentivized to recognize another currency that's competing with the U. S dollar. Um, and but consumers are like they take whatever brings value and because things are misaligned, it's super important that we're cognizant about that in order to move forward, right? You're also dealing a lot with brain computer interfaces. Um, you are able to control cars with brainwaves. With toy cars, you're able to control prosthetics just briefly. What's what does the future hold there? It's crazy. Ray Kurzweil, who used to be the head of engineering at Google, thinks that we might solve brain ships by the 2030. And if you look at the research studies that have been done in mouse models. They've been able to get a blind mouse through the maze with a brain chip by, like giving it like downloading a virtual map or GPS almost. Or they were able to have brain to brain primitive brain to brain communication and mice. And also in humans. They played a game with like two. The technology is absolutely insane for brain computer interfaces, and it will totally change the way we live brain to brain communication. Maybe instead of me talking to you guys today, you would just already know or brain to Internet communication. It could be like me talking to Siri. Or it could be like something we can't even conceive of. There are so many tools that will totally change humanity. Bring Peter interfaces, genetics blocked a nanotech virtual reality, nuclear fusion, alternative energy, quantum computing. And I think it's so important that we're all at least aware of the different tools that we have available to us to solve problems, and also the questions that we need to ask when technology grows exponentially because there are so many questions like what if your brain could be happy Or do we want to spend our entire life in VR? Some people be like, Yeah, I'd have a blast. Some people like I value real life. I guess my last stop formula is I challenge you all today for, like, the next five days to try and learn something new about a new industry that you never would have thought to look into because I think the only way we're going to have the best possible future for humanity when dealing with Blockchain when dealing with finance and when dealing with all the other tools that will change our systems and our civilization for the future, as if we're all aware. Or at least you guys are all aware of the different things that will play a role. So definitely Google those things. I think it'll be super important. Thank you. I'm not going over there for questions. I selfishly took all this time to ourselves. Thank you very much. Thank you. And on you

Brainstorm Finance 2019: How to Diversify the Financial Industry 

A candid conversation about the economic case for women still representing fewer than one in five positions in the financial services C-suite. 

Thank you, Jen. Thank you, Mike. Welcome. Thank you E. It's great to be here. And thank you everybody for sticking with us for what has been such an exciting time. We've proven over the past two days that it's an exciting time in the banking and financial services industry. And we're pleased as punched that you could be here with us to bring us home. So, so I told you when we were coming up here a couple sessions ago, Adam Dell is now with Marcus the Goldman Sachs unit. He said there's only two kinds of banks those who are screwed and those who don't know that they're screwed. Which one is C? Well, it's a bit of a Hobson's choice, but I think you're screwed if you're in denial. And I would say, as an institution, we're absolutely not in denial. And to that sound bite that was just said, that the next chapter of banking's being rewritten as we speak. The next chapter is digitally lead The next chapter has a different set of expectations and for status quo, you know what we're dead, we're 200 euros institutions that's reemerged itself several times and we're very much in that process today. Great. I wanna start with the reimagining that you're doing right now. And that's your consumer banking strategy. You're in the middle of something interesting, and that you're you're trying to become a National Consumer bank again, after having retrenched from having being one. Explain how you're going about doing that. So we have a bank today, a depository bank today, about 700 branches across the US, that are predominantly located in six People in the United States that carry a Citi card. Only about less than 10 % of those are actually bank customers. So I've got roughly 25 million people in the United States who carry a piece of our plastic. We know who you are We know what you spend on. We know, by the way, who your bank is. We know what matters to you. And likely we've probably got some affinity reward program that resonates. It could be thank you points, could be American Airlines miles, could be double cash back. And so in there, how can I actually use That to convince you to be a bank customer. When you think of today's age, our ability to provide our branch, our bank mobily, probably never been a better time to be able to do that. So you have a very clearly defined, addressable market, and that's not all of it, you'll sell banking services digitally To the people who aren't current crappy customers- Absolutely. But how is going? You're, what, about a year into this? Yeah, we're probably about six months, really, into it. And we've been testing and piloting and trying different things. And we talked about the first quarter, really, from a standing start. We went out and digitally raised $ 1 billion of deposits without really having done much in that channel before. We had the head of Marcus from Goldman on on earlier and you he obviously is very proud of having no branches because that means he has no branch costs. Why keep the ones that you have versus emulating that strategy all in. It's a great question. And so when I talk about this, I speak to it in terms of my family. I've got a 26 and a 30 year old And they're always all the time saying, dad come on branches get rid of them. [ LAUGH ] You got free advisors. Free advisors but actually when you think about banking today and I look around the room, there's some other gray hair in this room, and that the expectation of a big percentage of our customer base today is to have the ability, to have two experiences. To have the truly digital experience when they want, to open their phone, to look at their balance, to move money, to use gel, to pay, to do what they want to do, but they also like having the branch and they like having a person to speak to. And if you actually look at the profitability of banking today, the Millenials are coming, they were surely certainly dictate the future. But the vast majority or the profitability of banking today is really driven by the worldwide Baby Boom era, that's coming but you can't forget about this. And so actually today what we're forced to run, You had some interesting statistics I told you my if I could grossly generalize, generalize about the people who've been with us the past couple days, there are sort of, you know, true believers for the future of cryptocurrencies, blockchain, etc. And then there are those who are, you know, I don't know the polite way to put it, you know, living in the I don't wanna say the real world, but living in the current world, if you will. I think that's fair, the current world. Yeah. And your reaction to that is what? I'm a true believer, but I think you've gotta set the time frame. I was telling you, Adam, that oftentimes in certain industries, things occur slower than people might predict. And the example I would use that we've lived, is the ATM today ubiquitous everywhere. You know we have 60, 000 of them in the United States, was introduced in 1977. People often say that Citibank invented it. We didn't we found it in a garage. In Stockholm, Sweden, we commercialized it. The first year in the United States that branch count actually went down, ie there were less branches in the United States at the end of the year than the beginning of the year, was 2018. And at the time people said listen, today I can take cash out of it, pretty soon I'll put cash into it, pretty soon it's gonna be able to do all these things for me, which today it can. Branch utilization has changed, but the demand around the branches are still there. And when I think of this move to digital, it's a continuum of what I described, those who expect the truly digital to those that are living analog with a big cohort in between and a continuum that will continue to move over time. And talk also if you would about cash because I feel like cash has been something of a dirty word at this event and you don't think so. Well, again, kind of going back to, things create their own pace. What's interesting if I ask the audience, and said that two billion people in the United States But- It's kind of embarassing. Last year there were almost 30 billion checks still written in the United States, and cash utilization continues to rise. So again, shifts are happening, behaviors are changing, but They're gonna come at their pace. And our challenge of running an established institution is we wanna stay ahead, couple steps ahead of our customers, but we can't get so far ahead we lose them. And so we wanna make sure that we're developing the right things along the way. But we can't get so far ahead that we lose them. I wanna know if any, yes, please stand up and introduce yourself. [ BLANK_AUDIO ] Tim Baker, I work for the TIF. Yesterday, we had an executive from Amazon here. And someone asked them the question, Pretty much are you getting into banking? Will you get into banking? And I don't think you really answered the question. Yeah. Do you fear either Amazon or one of the other big tech companies? Apple, you have a lot of data on all of us building a digital bank and competing with you. Yeah. It's a question we get asked frequently and what I would say I don't know there. Ambition or intentions per say. But what I would say, is we don't take anything for granted and we're not dismissive. We're not dismissive of the Amazon, I'm sure we'll get to Facebook. Anybody who's got a couple of billion followers users, I think you need to pay attention to but I think there's There's channels that people go after, and there's more broad applications. And what I mean by that, I think of what you've seen going on in banking today, in many ways, is the disaggregation of banking into certain channels. Payments, and I'm guessing payments to Amazon being very relevant, call it $ 150 billion of sales 2 % everytime somebody swipes a card or uses the card. You can run the math on what that is. I'm sure they'd like to get in there and figure out a way to disintermediatie and save that. Beyond that theres savings, borrowing, protecting, spending and those pieces. Does Amazon wanna get into the rest of those? I don't know. The trick is, can you disaggregate, create value, and then reaggregate? And as you reaggregate, the world changes because in order to take deposits and do certain things, you need to be a licensed Institution as part of that and I think that sometimes, is the rubicon that people need to decide if they're willing to cross. So, I think we're in the stage of disaggregation and we'll have to see what reaggregation looks and feels like. Mike, tangential question, assess the success potential for the Apple card. With Goldman. Again, never dismiss somebody like apple. I think in there it will appeal to a group. I think the question around the card is, is it really gonna be so called top of wallet or the thing that you use? All the time, right? And if you look at spending habits today different things drive people to make different choices. I'm sure there will be some that will love to earn their Apple Points, or whatever they're gonna be called, and to be able to have access to the latest and greatest new hardware. That will have applicability to [ UNKNOWN ] and it won't. So I don't expect it to kinda be the true currency of choice for everybody, I think. But for the Apple files, it'll be a good alternative. Please. Great, hi, my name is Nevid from the [ UNKNOWN ] Society. So speaking of Apple Apple made the decision to remove the headphone jack. In a lot of cases with innovation, it requires sacrifice. What do you think your version of removing the headphone jack will be? The what? The headphone jack, so you can't plug in anymore in the same way. And they were willing to really Hurt their product as people understood it to get to the next product and he's asking you would you do something similar for us? Yeah, for us maybe it goes back a little bit to the analogy. I'm not ready to do it today. We've probably done it more than others in our strategy of really going to a physical light and really forcing a lot more digital interaction. With our customers then probably some other national banks that are there. I think you'll continue to see but in there I'm not. I'm not prepared to, in essence pull the jack and lock all the branch stores yet, but there'll be a point in time where I think you'll, you'll see the nature of physical presence and branches probably changed materially .>> Please Hi Mike Ina from ripple, but I started my career at Citibank spent ten years at Citibank, and was part of the Citibank internet team. in Long Island City. I was employee number seven. So I remember when no one believed that we needed email addresses or that people would look at their statements online and getting getting yelled at. By the current Ceo Or the legacy thing Yeah which was not you by the way, it was someone else. But I guess my question is, we've seen a lot of innovation happen. We've seen the internet, we saw mobile, we saw app. We're now in this block chain, digital asset world. The world is changing. You've mentioned running two banks, an analogue bank and a digital bank. My question is, ten years from now, when you look out and Sally Krocheck was here earlier, we talked about leadership. We talked about leadership and banking, and the profile leadership in banking. And I'd love to hear from you as you looked ten years out and building the legacy of who's coming up next What do the bankers of the future need to look like? Are they going to look more like the grown up version of the FinTech, challenger bank CEOs today? Or are they going to look like a more innovative set of the banking skills that we have running the big banks and I care a lot about this because I've been in banking and financial services for a long time. And I just don't see the leadership profiles changing. And I'd love to hear from you what you think about that. So the challenge we give ourselves is, with all due respect to great banks, or great fin techs, or whoever they may be, our challenge, if we go back to where Adam kind of started this with these two questions. Your vulnerability comes or your vulnerability would come if you said you know what, what we're going to do is really to be strive strive to be best in class. And we're going to use banks as our benchmark. Right? What what we come to work and say is that we need to make sure that we're matching or challenging best in life experience because that's the expectation. Need is to be satisfying best in life. So one is that change of mindset from the and then I think the the second piece of that is to have the platforms and to have the flexibility. So as we think about Libras we think about. A lot of these new forms of currency and payment methodologies. By the way, today when you think of the world, we're the world's largest cities, the world's largest mover of money every day, about $ 5 trillion a day. We're the world's largest trader of currency. View a lot of these things that are going to come as our customers wanting to have those choices, not many ways dissimilar from what those choices today and our ability to make sure that we can help facilitate what end up you know, kind of ends up being multiple wallets are multiple ways. Of being able to express and use those alternatives. Mike, when you tried to put a point on this question, could you envision a day in the near future when the CEO of Citi does not have a banking background? Background [ BLANK_AUDIO ] Yeah, I could I you know, I think it depends what you describe a banking background because [ CROSSTALK ] if you think of what's going on is you know, clearly that you know, there are some basics to banking which help in the job. [ LAUGH ] There's clearly a big regulatory a safety and soundness angle of the expectations. Of the government. And by the way, I would encourage FinTech not to lose sight of that. And I think we saw a little bit of that coming out of Libra and some of the ->> Yeah. The conversations that are there. And clearly technology is a big part of it. So I think it's a combination of those things as we go forward. Did Facebook approach city about being in the new consortium? Nope, did not approach us. And to my knowledge, they didn't approach any of the big banks. If they were to or If however the governance structure works. If the governance of this consortium were to approach city would you be interested in joining it would take a look at it. And. I wanna touch, unless I have another question, I wanna touch very brief. Yes, I do, right there, please. Jeff Her, Fortunate, I just wanted to expand what you told Adam earlier. You described yourself as a true believer and then you said giving customers what they want, would that extend to Bitcoin and cryptocurrency in the next year or two? The challenges with, and we've talked publicly about it, Certain aspects of Bitcoin or Cryptocurrency is the opaqueness around the sources of the money. And as a regulated institution around US Bank Secrecy Act, anti money laundering standards that would be outside of our ability to actually take or send. Those monies on behalf of people who are in some of those instruments. Very last question, the city is the most global of US national banks. We're living in a time of more trade friction than we've seen, I think in recent decades. Yep. How does that affect your business? And how concerned are you about that tension? Well, I would say we're not just the most global of the US Bank Group, I would argue the most global of any bank in the world. And I would say today that our clients need us more than ever. When you think about the fact you've got trade routes, constantly rerouting themselves and whether it's China or whether it's Mexico or it's Canada. Clearly trade has become a foreign policy tool and at times weapon supply chain around our clients and what they're doing, obviously critical to their livelihood and our ability. So as an example, you end up getting Schmoyer. Basically terrorists from the United States, we were able to step in and get soil rerouted from Argentina and Brazil, from our sins. So as you think about that, and the flexibility and the the mentality of the just in time supply chain, there's not a better partner than us to be able to help you as an example. Navigate some of these challenges. Mike, again, on behalf of Fortune, we're so pleased that you could be here. The bad news is we're out of time. The good news, as I'm going to tell everybody in a moment, is hat Citi is hosting cocktails very shortly and we hope to see you there, thank you. Thank you very much. [ APPLAUSE ] [ BLANK_AUDIO ]

Brainstorm Finance 2019: A Conversation with Citigroup CEO Michael Corbat 

He discusses what the finance industry will look like in 2030.


Brainstorm Finance 2019: How to Regulate the Blockchain

Early blockchain advocates envisioned a technology that operated beyond the control of governments.


Brainstorm Finance 2019: How Big Banks Can Step Up Their Innovation

A discussion between a “unicorn” founder who counts top banks as clients, a Wall Streeter tasked with transformation, and the head of the personal finance startup so hot that Goldman Sachs bought it.


Let us start at the very beginning. It is, it is, it is unusual that Goldman Sachs has never been in the consumer business, and its entire 100 something year history. 150 years. 150, and now, you have only recently decided to do it. What is Marcus? So Marcus's Goldman's global consumer business. Our purpose is to disrupt the distribution and consumption of financial services. Pretty much what Amazon has done and is doing to retail Or what Apple did to the music industry? We believe we can do that and we are early days. This is our third year. We have 4 million customers. We have Close to $ 50 billion in deposits. In fact, we should be hitting $ 50 billion in the next few hours okay or maybe by tomorrow. We've announced as you said Eco Brand with Apple. We purchased clarity money. Which is a series of very forward leaning personal financial management tools to be the consumer's advocate which we are planning to rebrand into Marcus over the next few quarters. And all of this we have done without a single branch. 4 million customers 50 billion in deposits for 5 billion in loans. No branch. Now I want to make sure everybody heard something that hurt said and pause for a moment. You're you're starting a brand new thing and you're not merely hoping it's going to have some success. You're hoping that it's gonna do for banking. What Amazon did for retailing and what Apple did for Music Music. That is a huge aspiration. That is true. And as I said, our thesis is that true innovation is in the distribution and consumption experience. So for example, the diapers a mom buys from Duane Reade in New York City or the diapers she buys from Amazon are the same diapers. Or when iTunes started, now there's some original content. It's not that Bob Dylan started singing new songs for I tunes it's the same song yeah but the distribution and consumption expedience is different when you're buying from Amazon you believe you'll get value. It's easy it's simple it's transparent it's repeatable. And you do it from your living room or family room and you don't have to walk. Till just a few years ago, the peak shopping hour used to be four o'clock in the afternoon in a mall. The peak shopping hour now is At 9 PM, after the mom and dad have put the kids to bed and they are surfing the net. And your point is that people don't need to bank during banker hours either. Okay. You said you have no branches, which makes you a challenger bank which is the expression we've been using this morning. So, fascinating. Goldman Sachs is a challenger bank. And banks typically have many many products. Wells Fargo used to brag about how many different products it would cross- sell you. And until you launch with Apple you have one product. Tell everybody what it is, and why just one. Well we have more than one product. We have personal loans between where we give an unsecured personal loan from $ 3, 500 to $ 40, 000. We have savings accounts in CDs. We have a CDs of money management tools, what we call the person financial management tools. And now we have the credit card. But the important thing is, so when we look at the consumer financial services business We're very, very, very focused on making life easy for the consumer and building a business which is attractive for the shareholder. What consumers want is simple, transparent, not complex. That's what they get from the banking industry as a whole. And when they see complexity they lose trust. You know 70 % plus of millennials would rather visit their dentist than the bank branch. [ LAUGHTER ]. And that's a pretty low bar, okay? And it's actually sad. Those are the, 60 % of the consumers in America don't trust their bank or credit card company. What is your breakdown of Millenials versus Gen- X and Boomers? We've got it across the range, both in our savings and in our lending business. But I would say, typical customers are more in the 30- plus 30 plus years of age now trust is interesting your Goldman Sachs newcomer. You knew when you came in the Goldman had reputation issues in the general public and so trust is important. You created a new brand rather than saying Goldman Sachs your Marcus by Goldman Sachs. So we have a proud of our branding decision and it was led by consumer research before we had a single customer. We had spoke via. Got research feedback from more than 10, 000 consumers. And what we found was Marcus by Goldman Sachs was the best of both worlds. The new name, Marcus, denoted energy freshness, and by Goldman Sachs gave it gravitas because It's an online space, you're taking people's social security number you need trust. What we also found out is that yes, some people like Goldman Sachs, some people don't like Goldman Sachs, but almost everybody likes to do business with Goldman Sachs. So by Goldman Sachs is very important. So is Marcus now it so happens that Marcus was a founder. Marcus Goldman? Marcus Goldman was a founder. Not that we expect the consumer to know that, but that has also created a lot of emotional appeal inside the firm. That 150 years later, one of the most innovative things we do, and we go back and name it after a founder. I think that's pretty unique. Agreed, and you're being very open about this desire to be seen as a startup inside of this old, perhaps, [ UNKNOWN ] bank. You have a sign in your office by the snack bar that says, Goldman snacks. You threw out the Goldman dress code. Give me one example of how Marcus's culture is affecting Goldman Sachs's culture. So first of all we think of ourselves as 150 year old startup. And we are very proud of our heritage of being Goldman. We're also very proud of doing something new and innovative. So from a culture aspect there are lots of stories written about us on our floor. We wear jeans and all birds and sneakers and more and more floors are in the Goldman building, looking like that. But I think what I would talk about is Agile technology development. Everything we do is Agile. And that's something which the form has embraced and more and more technology development outside markets In the firm is now being done in an agile way rather than the old waterfall way. That I think is great. We've been very blessed also by, on the culture aspect, by the talent we have. And I do think, I know I am biased, we have the best talent in the industry. You're talking about at Marcus. At Marcus. And at Goldman, too. [ LAUGH ] Good save. In Marcus, a third of our team is from within Goldman. These are talented bankers, private equity investors, traders who raised their hand and wanted to be in a start- up One third of the normal consumer industry, AMEX, Discover, Cap One, Chase, Bank of America, etc. And a third are from non- traditional, or I would say Google, Apple, Facebook, Amazon, Victoria Secret, Michael Kors, Gatorade, etc. And the amalgamation of this talent Is what I think it's one of our special [ INAUDIBLE ]. Fair to say these are unusual people walking around the halls of Goldman Sachs, or would have been viewed as unusual earlier. They are very much Goldman Sachs now. [ LAUGH ] Okay we skipped over one important point, which is, talk about the fees that you charge customers and why the Goldman Sachs balance sheet is part of your answer to that question. So the fee we charge to the consumers is a big number called zero. So for example in our loans business, no prepayment fee, no origination fee, no late fee in our card that we've announced as Apple made the announcement in the features which are there on the site No fees. In deposits, savings accounts, no fees. The reason is we are a balance sheet player, as you said. In fact, some customers were so incredulous when we launched loans that there are no fees, we have a section on the side saying, how do we make money? How do you make money? We make money on net interest margins. And that's extremely old fashioned isn't it? It is extremely consumer friendly [ LAUGH ]. And the reason we can do that as Urightly said is, we have a unique structural competitive advantage. We're in a category of one, we're the only large bank. Which doesn't have a legacy consumer business, legacy technology, legacy branch network. We can start fresh. And unlike the fintechs, we have a balance sheet. We have a risk management DNA and we have a brand. And it is that duality which is very important. And then the trick is how do you translate that competitive advantage into consumer benefit. So to give one example, most places if you want a loan, they so okay this is the loan amount, this is the interest rate and this is the period of loan. Three year loan, five year loan. Consumer insights shows us that not how consumers think. Consumers think, I want a $ 10, 000 loan. I can afford to pay $ 300 a month. The period of the loan should be an output, not an input. To do that you'll have to have modern technology which the old banks don't have. But to do that you need to have your balance sheet so that you don't have to securitize loans into three year tranches and five year tranches, which the fintechs don't have. So that's a small example of using the competitive advantage we have towards consumer benefit. And so I just want to repeat a point to make sure I understand it, which is that on these up to $ 40, 000 personal loans. Which are primarily for people who want to, perhaps counterintuitively, reduce their debt, or they wanna do personal restructuring of their debt. Yes, correct. Goldman Sachs is taking all of the risk. Yes, we are in the lending business. We are taking risk The way you emphasize all, I don't like that word. I think we take risk in a responsible way. You're not securitizing it, and you're also not getting help from a government agency, to de- risk the loan- No. Which is what the banking industry does. Yeah, but they do that for mortgages, but most banks Take the risk themselves on the lending of unsecured personal loans. But I do want to point out we take a role of being a responsible lender very seriously. So it's no accident that we have $ 5 billion of loans, but we have close to $ 50 billion of deposits. And we're gonna end with Apple, but I wanna see if anybody has a question before I do? [ BLANK_AUDIO ] They are rapt by what you're saying, and that's fine. You and Apple Announced that you're gonna be partners on a credit card. Yes. Called the Apple card? Apple card. Apple card, and that it's going to be released in the summer. Yes. Harod, it is the summer. And it will be released this summer. [ LAUGH ] [ LAUGH ] You could have issued a credit card on your own at launch. You didn't? Why now? And with Apple, We are delighted to partner with Apple. We announced Apple announced the apple card in March. You know the feature Of the card there on the website. And just remind somebody remind everyone some of the unique characteristics of the features. I think the apple card is uniquely integrated into the apple ecosystem. It is the best card perhaps to use with the iPhone. It is a card which as Apple has said [ BLANK_AUDIO ] Helps consumers manage spending and borrowing in a far more responsible way. It has a ton of features. It is about ease and convenience and being on the side of the consumer. And we both have said we will launch this summer, as far as Last I heard, it's still summer. And we were launching the summer. Very last, very last question. Tell everybody briefly how you market Marcus. And I'm interested. I'm assuming that will inform at least a little bit of how you plan to market the Apple card. Yeah, it may or may not inform, but the way we are marketing markers is that it pretty much the way one would expect. Most of our marketing is digital. We are in most digital social media properties, all the way from a YouTube to an Instagram. And It's pretty much, the important thing is there is no face to face distribution and marketing. There's no branch based marketing and distribution. Therefore our cost structure is lower, and that gives us the ability to give better value for the consumer. Harry, given everyone that that we've had at this event, it is so important to us to have Marcus by Goldman and Sax's here. Yes. Thank you so much. Thank you very much. [ APPLAUSE ]

Brainstorm Finance 2019: Goldman Sachs Breaks Into the Consumer Business for the First Time

“Our purpose is to disrupt the distribution and consumption of financial services,” says Harit Talwar. 

Brainstorm Finance 2019: Everledger's Blockchain Diamonds

Everledger is transforming the process of selling diamonds with blockchain by making it faster and more secure. Leanne Kemp, Founder and CEO, explains.

1999. Pretty important year for the world. It was a year when Tim Berners Lee created H T T P. The protocol that gave birth to the World Wide Web and then in 2007 was another incredible time in the year in the world when, of course, we have the global financial crisis. There wasn't a person on the planet in the company and even a government that wasn't concerned when it came to the dissipation truck. And it was at that time, of course, the white paper appeared from Satoshi Nakamoto humor her a collective mind that created the big point protocol. That, of course, today has enabled incredible set of not any evolution, but one could call it a Revolution 2015 An incredible year for the World ever lead to began in the heart of London in April. I'm a software engineer. I've come from Australia. I spent the better part of my existence behind a keyboard. I know and understand technology incredibly well, and I've been involved in the diamond jewelry industry since 2007. I've had my fair share of being involved in innovation waves across the better part of the last 20 years of my career and when I saw an industry that I love so dearly 500 years in the making, the diamond industry having a desire and a need in desperation to transform truck the relationship they hold not only with the compatriots of the supply chain but with consumers. And it was at this point that I realized it was a time upon which we could combine the very best of emerging technologies to build a platform of Providence, a platform that had never been built before. Of course, we have seen procurement systems. Large enterprises like ASAP and Sales Force give two incredible enterprise applications. But no one really asked the question. Where did it come from? So we did, and we did something about it. So in 2015 we had a vision for every legend, and this is what it looks like with by the video. We created relationships with the major certificate houses around the globe, in America, India, Israel and Antwerp, where they grade and certify the diamonds. Now, not only do we capture the fourth seed, but 40 meta data points of that diamond, a digital twin to enable that to be No. One and saying and written into the bloc Chang. We now know where diamonds are being sold not only on online retail network like the Amazon and eBay, but we work with insurance companies to reduce fraudulent claims with banks so they could finance the diamond part line more efficiently. And we transcended all of our knowledge out into the consumer and retail network. In 2015 we had an ambitious plan to be ableto at least identify the diamonds at a scientific level and enable that to be made as part of a consumer consciousness decision at the retail outlets across the world. This was our vision in 2015 and as we stand today, ever Ledger has over two million diamonds on the platform. We've moved into colored gemstones, emeralds, Rubies and sapphires into fine art, and I'll talk a little bit more about where we're going after today. That's something about the reasoning behind why ever ledger has enabled a production platform in use now for over three years. Yet in 2015 it was a whisper on many people's lips. Sometimes it was hidden in a Starbucks Cafe. What's the true potential of this technology? The diamond industry? 500 years in the making, rough diamonds are extracted out of the ground event $15 billion annually, and it transcends across the world in a sewer rat. In one location in India, about 90% of the world's diamonds a cut and polished. And that's about 47 billion. And by the time it hits the retail network, not set in a diamond ring $73 billion. It's a rock. It's cotton polish. And yet, in the mid tier of the market, the diamond cutters and polishes survive on single digit 1% margins. At the time that every legend was created, we understood the challenges within industry. I'm an alumni with the G I. I'm not a gemologist, but I understand diamonds are more than just a full season color and clarity. They're already scientific methods that existed within the industry to capture the identity of the diamond as it was transforming across the pipeline, whether it be at the extraction point in mind, whether it be in the diamond manufacturers in India, where a C T, like the ultrasound of the baby, was effectively No. One by the manufacturers and retail network. We then are able to take the entirety of this information and produce it for a consumer to see not only where the diamond has come from but the hands that its path across the world. I've described to the future of Blockchain in so many different ways and one thing I'm very clear about is Blockchain alone will not solve the physical supply chain traceability. It must come together in a consortium of technologies a symphony of technology to enable the digital identity of a physical object have scientific certainty. And that is the work that we've done it every legend it can take into the forms of either machine vision, of course, which is largely starting to capture identity of people. But that could also be transformed into the identity of objects. Resident ultrasound. The sound waves of objects are also individualized in a thumbprint we're fortunate in. The diamonds are unique by their very nature there snowflake. So to capture that identity across scientific method enable that in a registry across the world so that certification, finance and insurance is able to be taken out at a trustful layer something that had not existed before today. Now there are 91 countries in the world that came together in the year 2000 after the United Nations said blood diamonds is no longer has a place in this world and it was because of the consortium that was already in existence, the partnerships across public and private endeavors that enabled an industry to come together to solve not only blood diamonds but now today adopt transaction and technologies like Blockchain. If we see what's happening in the industry, dubious has adopted it. Of course, we have the CEO of Tiffany's making very proud statements about diamond traceability being an incumbent responsibility of his tenure, Louis Vuitton on traceability not only within the diamond jewelry supply chain but out in the luxury goods. So it's pretty clear whatever ledger has achieved. We have two and 1/2 1,000,000 diamonds on the chain traceability, and some of the gemstone nations like Tanzania are well underway where we've supported in safe contractual spaces for 50 Tanzania and women to be, I would have finally trade colored gemstones in a safe contractual environment. I was probably appointed by the Queensland government last year the premiere of Queensland as the chief entrepreneur for the state under the minister for innovation. There's no secrets about the geological stability that Australia has. We, of course, dig the earth, and we provide that across the world, whether that be in coal based economies or whether that be in gold, cobalt and even lithium. And part of the work in my tenure has been to not only understand the mapping of natural resources, but to be very loud about what we need to be thinking about in terms of conscious consumerism, not just about where it's come from, but where will it go to next? There is mobile phone sitting in, probably in every person's hand in pocket. Some of you are looking at it right now, but what's inside that phone that counts? Lip Ian and Cobalt. We're talking about the battery supply chain. There is not going to be 1/2. There's not gonna be a building, a car or even a device that doesn't rely upon the battery supply chain Yet when we understand where the essence of the supply chains and rich from is the Congo DRC. For COBOL, what is happening with the tricks ability not only in its primary life but in secondary loss. How can we champion and redesign the way we produce products? But more importantly, how can we redesign waste in a way that becomes valuable del computing partners with the jewelry industry in the first of the world pilot to enable the stripping off rare earth metals and minerals to enable that to be reused into the jewelry industry? If there's something that will stand for is ever ledger, it is not only being able to answer the question, where did it come from? And every legend knows, but will also say no, that the humanitarian impact on the things that we are consuming is at a point where we need to stop the question. And so this platform has the answers. Thank you.

Brainstorm Finance 2019: Coinbase CFO Discusses Challenges Faced With Clients

Cryptocurrency’s rollercoaster volatility means new challenges for handling everything from payments to taxes, and more.

Alicia, I want to start with you. I think that most people in the room will be familiar with coin based. But for those who aren't, give us give us, like, one minute to help ground us in the conversation. What is coin based? Perfect clinical standard in 2012. To be the easiest and most trusted place where you can buy trade and store digital assets. We have over 30 million accounts that we steward assets on behalf of both retail institutions, business and a broad variety of customers. And we operate in over 100 countries globally. Okay, so by trade and store, my mind goes to the word brokerage. And is that the right word or not? We think of ourselves in the traditional vernacular as both an exchange, a brokerage as well as a custodian. So recently in the last year, we launched a qualified custodian. We custody assets on behalf of institutions over two billion of assets in private addresses, and I think you know, if there's two themes of our events so far. One is Facebook's Libra announcement, which you're intimately involved in, and we're gonna get to that and the other is this sort of very generic expression Use cases? Um, my assumption. And when you talk about 30 million accounts. Since there aren't many use cases for cryptocurrencies right now, these people are speculators. Yes. Will you address that? Absolutely. And as we just talked about, given the primary products that were operating in today our investment type products over 90 95 99. I mean, you can argue about the number of the use cases of digital assets, a speculative trading today, and that is where we see all interest and activity for most markets. However, in the last year, and I would say over the last 12 to 18 months we've seen tremendous development of the utility cases in digital assets, and there's a lot of promising new companies that are bringing innovative ideas and products to the table. These are all nation states were so early in the adoption of these utility phase of Cryptocurrency. But I think there's a lot of interest and excitement there. Good. I like the way you you know, you don't take speculation as an accusation. It's it's a fact, but it shows what the opportunity is that is that fair. That's right. And I think it's getting people educated on the various projects that are out there making sure we have broad consumer business understanding of the different digital asset projects that people have brought to the market and given the mark opportunity to interact with these. Good Patrick. First of all, uh, it's privileged to have you here as someone who was around for what Brad Garlinghouse just called Web One point. Oh, you have been around since Web one point. Oh, and and before that? Yeah. Yeah, well, you know, it's That's an accomplishment all by itself. Um, I want to read a line from From From your bio that you are a leading force in advancing Blockchain technology to democratize capital, eliminate middlemen and re humanize commerce. I particularly like the re humanizing commerce part. Um, how everybody briefly, as Alicia did briefly to set things up your journey from being a pioneer and e commerce to a pioneer in Blockchain technologies. Well, it's very common. It's an honor to be here, Adam. Thank you. Fortunate we were back in night in 2000 and 13. The largest company accepting Bitcoin was an $800,000 a year diner in Australia. And oddly enough, it was a conversation with the journal. I was I was getting into Bitcoin and a journalist asked me around December 19th. Hey, you think anything Bitcoin in the New War in the New Year? And I said, Yeah, yeah, probably by the end of the New Year. And she put that in an article, and what was interesting was that got reproduced all over the world. I got all these Google alerts in Swahili and Thai and Korean, and I realized, Wait, there is this late and there really is this global subculture out there waiting for it. 15 days later with coin base or January 9th we went, we went live. We took some coin based folks and some Overstock folks and put them in a room for 15 days, flip pizzas under the door, and we got live January 9th, and it really was not so, Anyway, that's that was the journey into it. But my real, uh, it's not Bitcoin and the Blockchain itself, and it was my ambition that our company would develop a lot of expertise with Blockchain so that we could then take it and do other projects. That was my journey, and I'm going to come to your other projects. But what I What? What's fascinating about your anecdote? Did you already consider yourself an expert on these topics or or was this more of an exploratory thing that happened in that interview? And then you said, uh, I better get going. I had for about three months been getting reading about Bitcoin. Oddly enough, I used to study the mathematics under cryptography. So when Bitcoin came along, I tuned in on it, but just from that sort of mathematical interest. And it was only in the fall of 2013 that I started really seriously, considering A from a business point of view. Fascinating. So, Alicia, you come from a traditional corporate finance background, and so you're now at this company that is on the cutting edge of whatever happens next, and so share with everybody. Two things, if you would. One is what you've had to do as chief financial officer of coin base to get coin bases, finances where they need to be, and then how that translates to the greater to the greater market. In other words, if this market is moving where we where we think it might. Every company will need to do what coin base is doing. It's true. So there's many commonalities between Coin Base and any other company I've worked for. So I first want to dispel the belief that this is so unique and different that we need to build different framework to think about accounting tax, et cetera. That being said, there is ambiguity underneath accounting policy underneath tax code that need to be resolved very much like the regulatory clarity that we're looking for that Brad spoke to you about in the prior panel. And so I do think that one of coin basis rules is to advocate and work with our industry partners to get to broad based adopted policies and interpretations under existing code, both in the U. S. And then globally. So leaving that aside the challenges that we face with our clients. So if I look at our hedge fund clients who want to custody assets with us or trade with us, some of their unique challenges are how do you reconcile assets to the Blockchain? How do I value these assets? How do I ensure the basic frameworks that we then hold with all of our other financial assets that are widely traded in the traditional markets and those I think we've made great strides on over the past year. I think that there's many of the Big Four as well as next year accounting firms who have pressed practices and procedures that they can audit these assets. I think firms are now getting unqualified opinions, and so I think that is moving very quickly, and I feel very good about that. I'm a church removing the traditional finance side that what I think is most interesting about the potential. Not today reality where most of our trades are speculative, Um, which I think we're addressing with these kind of bricks and mortar. Tackling things around policies and procedures is the opportunity to change our transaction flow. And that's something that is, Patrick alluded to. We did partner early through our commerce products with Overstock, and that's the ability and we're great partners. You are a great partner, were great. They were a great partner for us, and this allows companies to be able to accept digital assets and provide services to provide some of these services to you around. How do you confirm the transaction? And how could we provide reconciliation services, et cetera. Um but I think these accepting of transactions of different types for all traditional corporate finance functions and all accounts receivable and accounts payable functions, or something that we're really excited about helping move forward as an industry. A chief financial officer. Are these ambiguities stressful? You know, yes and no. I think that, like anything else, you have to take a position and take your own well, research well defined policy and move forward. We can't wait for things to be defined in order to move our business forward. So we take an educated view. We work with our trusted advisers, and I think that we have good reason to positions at this time. Great. Patrick Bitcoin ended up being a tiny portion of Overstock dot coms transaction business, but it led you to become an investor yourself, and particularly to found a company called T zero t zero. Tell everybody about it zero. Whose CEO Sam North holiday is right here? Is I Yeah. I think the killer app of this is going to be, uh, security tokens is my view and four or five years ago I made the decision to take this stuff and do a regulated version of it. I'm just kind of curious. Anyone? Anyone here old enough to remember a little, a little a little consultant? I got in with Wall Street 15 years ago. Raise your hand and some of you remember that. Okay, that at its core was all about settlement. It freaked me out when I understood the settlement system. I'm autistic and Asperger's. And you know, Asperger's kids can't play kickball with other kids because the ball hits the line. It's like, How can you play on it? Hit the line. If you ever find out how the settlement system actually works in America, it is so much slop you would freak out like I did in five. Uh, so to me, the in the last guest, you had made a great point. There is so much capital underneath the settlement system, buffering different points that we can liberate. So to me, the killer app is security tokens, and we built a system, spent a fortune, spent 200,000,150 million of shareholder money, but taking every step through because of that fight 15 years ago, I knew that I had to be like Caesar's wife above reproach that I had. I had to go right down the middle of the fairway up to the front steps of the SEC, and that is how we have done it or think we've done it. And I mentioned to you backstage that I stick with the commitments I made in my last earnings call that you will see some very interesting things announced this quarter. Okay, it's some very interesting things announced this quarter around security tokens, and the quarter has how many days left in it. Nine days. What I don't understand is with this fantastic audience and the livestream around the world, why don't you just make those announcements right now? Look at this. You even have enthusiasm for it here. Well, it's more, and I just want to point. There's no reggae FD issues. All I'm doing is reaffirming predictions. I made my own news call, and I need to wait the next week. There's things coming out in order to avoid having Regev Yes, legal issues and lawyer law firms ripping my head off. Okay, ELISA, Uh, we had Katie on on last night. She's, uh, Andreessen. Horowitz, and a founding member of the remind me of the right way to say it. The consortium consortium, the liberal consortium. So is coin based. Um, why let me start there. Sure. And I would like to also comment on Patrick View on security tokens, as Queen also believes that the security tokens are a future wonderful item will come to market. We think that there's supply. We think there's infrastructure and we think there's demand. And we don't think all those pieces are yet at the table where we're gonna see huge growth in this. But we think that the noise is there and the excitement there. And so we're starting to see building blocks to really bring this to reality and releases, right? They are not. All the building blocks are not there on the table. Stay tuned next week and to be and to be an, in fairness for a few of us in the room. And let me ask you something I didn't ask Patrick and should have. What is the security token? Oh, well, a security token is a security. So a registered security traditional security, but in a tokenized form. And Patrick And this gets to the issue that Katie and I were discussing that because it's a registered security, it's also a regulated. Absolutely. Okay, so please continue transitioning totally. Right now, we got involved with liberal for the same reason that we have coin basis. We believe there's a future of an open financial system for billions of people on a global basis. And libras ambitions are very similar to open up financial access through their coins. So we view this as an opportunity to generate awareness. I think by the level of discussion we've all had over the last 48 hours, it is definitely raising awareness and a lot of interest, um, which we think is a net positive to the industry. I think it also is going to show a lot of interest on behalf of global regulators that could then help bring regulatory clarity to it that we've all been seeking lacking. So I think that this was a project that coin baseball was very important for bringing more people and more interest to an asset class that we think has a huge potential. Um, why? First of all, there are no banks so far in the consortium. Um, do you expect that there will be impossible to say I have no independent knowledge? It's possible. And you heard Brad say a moment ago that it's been a that the announcement alone made for a good week a good week for Ripple because of inbound communication. Has there been any impact on coin base and on and on your exchange? Because of this, our products are very different than ripple. And so it hasn't had a direct impact on coin basis business. I would say that it has again the value of huge awareness and more people looking at all of these products and services offered in this space. But not a direct comparison to Ripple. And, uh, a similar version of something. I asked Katie last night. What was the what was the mood earlier this year in Coin base when, um, when the value of Bitcoin had gone down by so much, I assume correct me if I'm wrong. That trading activity also would have declined considerably during that time. Sure, there's obviously morale that occurs when you have cycles, and I came from a hedge fund environment. And I would say the same morale issues occurred in the hedge fund environment that I was in when you had markets up and markets down. So that is universal across volatile asset classes. That being said, what coin base was continually focused on through key one and continues to be is these new developments that we're seeing on the fears of the ecosystem. And so despite price being down, we've never seen more engineering talent going to these net new projects and to development of apps within Cryptocurrency that that generated a lot of excitement and positive morale boost to combat the price, we believe we're going to continue to go through these cycles and every cycle that you see prices up at the trough. So if you track the trough over periods of time, you see this long going trajectory of growth. However no denying it. This is a volatile asset class. Patrick, you told me that you haven't had time to pay much attention to the to the Facebook announcement. Um, given your enthusiasm for the field, I would have thought you would have been very enthusiastic about this. And so, you know, I I know you're busy. Yeah, but what do you think about about Facebook doing this in particular versus others that might have. It's great. We've gone from an $800,000 year diner to Overstock to, uh, Facebook in, uh, since 20 since January 2014. That's I think, in in December 2013, no one would have expected that kind of, uh, curve. And so I'm happy that they are about having studied Liber yet. I, you know, it's an endorsement and a validation that, hey, the $200 million A shareholder's money that we put into getting into this field and building out a bunch of stuff we picked, we picked the fertile place to be earlier today. We had a young entrepreneur from Brexit make a comment that all you really need to do to stay in business as an entrepreneur is raised enough venture capital. And, uh, and and then and then spend that venture capital. Um, one piece of advice for the room on being an entrepreneur, given your entrepreneurial history. Okay, start off. Do your models as carefully as you can figure out how much capital you're going to need, and then cubit and be prepared to kiss 5 to 10 years of your life. Assume you have no family knife for no real emotional private life for 5 to 10 years. Good luck. Uh, words of wisdom from Patrick Burns and Alicia. Thank you so much.

Brainstorm Finance 2019: A Conversation About Funding Startups and Entrepreneurs 

Discussing all options and risks involved when it comes to basic financial services and funding for startups and entrepreneurs. 

Brainstorm Finance 2019: When Will Emerging Markets Finally Emerge?

Hear from the financiers and businesspeople greasing the gears of social mobility from Latin America to Southeast Asia.


Brainstorm Finance 2019: Interview with Kathryn Haun

What does our financial future hold? Who better to ask than Kathryn Haun, Bitcoin’s top sheriff-turned-elite venture capitalist. As the first female partner at maverick Silicon Valley firm Andreessen Horowitz, Haun has been co-leading the most presti

Brainstorm Finance 2019: Blockchain VS Traditional Financial Services

New technology makes it possible to move money and assets without banks or exchanges. Does this mean massive disruption for the financial services industry?

Brainstorm Finance 2019: The Future Of IPOs

A long-anticipated stampede of unicorns rushing into the market has begun. Will this year’s jam-packed IPO calendar be a last hurrah for major market debuts?

Hey everybody. So I'm here with Amy Chang who deals in cyber security at America's biggest bank and Nikki Cosgrave, who does cyber security strategy for proof point, the world's premier email security company. And actually just two hours ago, I got an email from the editor in chief Fortune magazine. And it asked me if I could attend to a an important task. Cliff did you send this email to me? [ UNKNOWN ] Okay, I looked at the email address and it was from somebody called Zoonyjah99 @ zero. net. So Nikki, what does Zoo Nyjah want with me? You know what, it's almost what they want with. Every company that's getting a phishing email out there they want your money, they want your organisation's money and I think if we look at the threat landscape targeting financial service organisation today it's all about the bottom line. How can we trick someone into clicking on something giving up the username and password. They obviously have financial motivation to try to get user information, things like that. But from if you're talking about from the JP Morgan side, they might wanna get access to intellectual property they might wanna get access to financial decisions that people have may be making business deals, things like that. So it could also be espionage and reconnaissance on what The financial sector is doing as well. JPMorgan Chase spends more on cybersecurity than just about any company in the world it spends, I think its budget is something like $ 600 million. Right. What are you spending all that money on? We spend it a lot on defending our technology and ensuring that the people. At the firm understand and are protected so and it also helps us to invest into our corporate brands and things like that. So there's a lot of investment across the firm into like identity and access management to ensure that the wrong people are not getting access to our sensitive financial information. Like. [ UNKNOWN ] Yeah, exactly. [ LAUGH ] And also a lot of technologies that help us defend the firm. Okay, the spending on cyber security, as my colleague Jeff said at the outset of this is going through the roof. It's accelerating. I think it's at 120 billion dollars per year, the total globally. If we're spending all this money on cyber security, why are there still so many breaches [ BLANK_AUDIO ] Well, I guess I could start with that. You look at the data from most of the analysts, companies you look at Gartner research, for example, and they're tracking security spend and what security teams are spending their money on. And the vast majority of that spend is on network security. No longer exists, but we're spending 60 % of our budget on protecting that perimeter. But then you look at the threat landscape and where the threats are coming from and over 90 % of the threats come via the email channel. And they require somebody to do something. To click, to download malware to install something. Fundamentally, we're protecting the network when the criminals have pivoted because it's a lot harder for them to hack Microsoft or to hack Amazon because they put so many layers in place. They're targeting our people. And I think that's why we're seeing an increase in spend. And an increase in breaches because we're not investing in the places where potentially, criminals are targeting us from. So, that's amazing. 90 % are coming through email, that's a huge amount. Your company, not too long ago, bought a phishing training company called, Wombat. The thing about phishing is that you can train people all you want, it only takes one person to mess up and all of a sudden all bets are off, the attacker's inside your business. So how do you deal with that issue? Yeah, I think it's a later approach, right? A lot of again, security professionals and businesses have focused on implementing technical controls. We need technology to block as much as possible from reaching the organization and. Absolutely you need to invest in technology. But again, if the criminals are targeting our people, we have to make sure that our people are aware of the threats that are targeting them. And that's why we believe training and awareness is important because not only do you need to raise awareness, you also need to change those risky behaviors. Should you really be clicking on that link? Should you be giving up your username and password. To a website that looks like its Microsoft Office 365 when in reality it isn't. And there are little clues and checks that people can leverage to identify something's malicious. So it's a late approach, it's technology, you have to train your people, but you also have to implement process controls. Huge loses of revenue. What if you were to have over, go please ->> Well, I would say that to add on to that though. I think we're noticing a trend as well as they're adopting to th changing landscape as well. They know that these types are like proof points are in place to To prevent people from clicking on links and things like that. And the training is going across the industry to be able to train these people, but they're becoming more sophisticated. I think we had an event last year, not JP Morgan but another financial institution, Where they were vished as in there was a phone call. Vished? Yeah, vished. What does Vished mean? As in like 'hi I'm from this particular organization and I would like to get. I'm just trying to make sure you're an employee here. What's your user ID? Voice vishing? That's correct, yeah. And basically Guiding this person through, okay, I'm gonna send you this email, and then you're gonna click it, engaging them and to try to bind their trust. And then still getting them to be able to click on the link, and get access to that financial institution. So the evolution is definitely happening and they're incorporating a lot of new techniques So Nikki, have you ever had a situation now where like you're trying to teach an employee that they shouldn't click on these phishing emails, but somebody who's just unteachable, they won't learn. They keep doing the same thing. They keep opening the file. What do you do with that employee, you fire them? Like, Yeah, there's that debate that's going on right now. And I think especially in financial institutions or organizations that are highly regulated and Should we fire people that are risk to the business potentially right? Because that behavior is now risky. But let's do a poll How many people think that we should fire people who who are unteachable when it comes to fishing? Wow. [ LAUGH ] Merciless. Yeah. You know what I think I think it's too early to be at the point where we say we fire people, right because again, We've been so focused on technical controls, and not really invested in training our people and you know, doing a one hour video once a year is not training that's raising awareness, having those teachable prompts. Every time you do a simulated phishing attack that sent from the company, you identify the people that click. And you send them to dedicated training, but it's short, it's digestible, it's repeatable, it's something they can practice, doing that on an on- going basis is then, starting to change behavior. But I think the situation right now is, we're only doing annual training programs, and it's not fair to. Fire someone who's trying to do their job fundamentally. Annie, has anybody at JP Morgan and Chase lost their job because they continue to click fishing emails? Not at our organization, [ LAUGH ] Okay, wello, how do you limit the liability on an employee such that if they were to click on one of these emails that it doesn't totally wreck the organization? But it kind of contains the damage. I think what Nikki was talking a little bit about earlier in terms of having layers of controls in place. Not only do we have like perimeter protection so like preventing malicious emails from coming in but also preventing from malicious traffic from going out as well. And then additional controls and monitoring rules in place where if we know that a specific email address or a specific IP address is trying to like connect to our organization that we're able to kind of block that. And prevent that from even occurring or ending up in someone's inbox. So rank, for me, the threats that are facing the financial industry right now. What is at the top of the list and what's at the bottom of the list? [ BLANK_AUDIO ] I would say that, [ BLANK_AUDIO ] They nation states are ranking up there in terms of their potential for for leveraging the financial sector as a potential, you know, target for as a result of geopolitical action. your background is actually in studying Chinese military security related issues. Is that applicable? It is and it isn't. I would say that, you know, in any sort of nation states sense when you're looking at. A country's intelligence apparatus. Obviously the more information that they can get on their adversaries, and that applies for the United States looking outside as well as other adversaries looking into the United States as well. That's definitely a consideration for them, and I wouldn't say that there are, Laying implants or all the stuffs that's happening in the news with Russia and the United States. America is apparently putting backdoors all over Russia's energy grid, I think was the story in the New York Times recently. Right, but that's definitely a consideration for us. In terms of other priorities for us is also the proliferation of destructive malware, so the amount of malware that's proliferating across the internet now, and the ability for your. Average cyber criminal to be able to get that commodity malware and then buy and try to implement it. Not that it necessarily would affect a firm like JP Morgan. But if we have clients or customers who get affected by this, there could be some downstream effects. You cited some of the geopolitical tensions that are going on right now. There's the trade war with China. A lot of messiness going on with Iran. Are you seeing upticks or flare ups with respect to any particular nation. I think that whenever you do see a major geopolitical event between the United States and another country we expect there to be elevated behavior. And so every time that something major happens in foreign policy. We always make sure that we have people aware and watching, to make sure that nothing happens. So I'm gonna open up the floor in just a moment, but I've got one last question for Nikki. Which is that proof points of business has been about email security for a long time, but there are so many other social channels open now and people's communications preferences are changing. How is Proofpoint adapting to these new threats? Yeah, so actually Proofpoint is a cyber security company. Email is one of the channels that we protect an email fundamentally because that's where the vast majority of threats are coming from. So for financial services specifically, we did some analysis Over 100 organizations, financial organizations globally. And we identified a 69 percent increase, year on year from q4 2017 to q4 2018. of what we call business email compromise attacks. Again, those are pure social engineering attacks. There's no malware, there's no payload, there's nothing to analyze. It's an email pretending to be someone that's. It's trusted whether it's a third party or an executive internally, that email sent to someone junior in the organisation asking them to do something whether it's send the data or send the money. 69 % increase and that's 69 % increase in that threat and that's via the email channel. However some of the othe threats that we're seeing is via cloud applications. That's not email at all, but as we do business more leveraging these client applications, innovating and working with different partners, criminals are trying to get access to our credentials, that's the username and password to get access to those cloud applications to fundamentally download the data, sell it in the black market and make money that way as well. Over here. Hi .>> Please introduce yourself. Brad Garlinghouse from Ripple. I'm curious to hear you guys' thoughts about SIM hijacking, I'm kinda surprised it hasn't come up and in particular, I'm curious if you have recommendations on how people can protect themselves, and if and how, we as a community, can hold carriers accountable for their culpability in the problem. This is a great question. So that was Brad Garlinghouse CEO of Ripple asking how we can defend against sim hijacking attacks, which is basically where somebody steals your phone number. Which allows them to get into your email account and do a whole bunch of other insidious things, either. So I think it's down to authentication as well. Especially in this room, right? As we're leveraging mobile wallets, as we're leveraging new applications and trying to do more on a mobile device, we're seeing organizations using the device to try to authenticate. And so the criminals are trying to get access to those mobile devices, to the SIMs To bypass some of the authentication processes or to leverage the device for authentication. So I think the interesting thing might be, you know, identifying how we authenticate with the amount of information that we have. When we talk about two factor, do we want to send an SMS to a phone, or is there a different way that we can authenticate our customers and consumers? We haven't really seen two much in terms of SIM hijacking and SIM threats. But again, I think the example that we've seen is criminals trying to get access to money by leveraging those multi factor authentication processes. And also to Brad's point, you know, he was asking if we should be holding the telecommunications companies feet to the fire more. A lot of people blame companies like At & t for allowing this sort of stuff to happen. Is there anything that we can- well everybody's held accountable, right? It's about trust. It's about trust. It's about privacy. Several people this morning or this afternoon already mentioned trust. Competition drives that as well. If it's easier for me to change career, if it's easier for me to work with another company and I don't trust you or there's a breach, we've seen examples that consumers will actually move elsewhere. Do we have any other questions in the audience? One right over here. Please introduce yourself. Michael Wrightbut from Florida. Do you see finantial institutions cooperate with each other to prevent attacks together? Because one of the biggest advantages attacker have is they'll do the same thing to a thousand banks, five will hit and they'll just move on, do another thing to a thousand banks. There are a few pretty good information sharing mechanisms that financial institutions use to share information, whether it be indicators of compromise, like a malicious email or a malicious ip that the email is trying to connect to and things like that. There's the FS- ISAC, the Information Sharing and Analysis Center Then you have another one called the AFOsack which was established I think 2016 which was supposed to look at how the main, I think it's like 15 member firms that are including JP Morgan who come together to look at systemic threats to the financial sector. So I would say like, if North Korea didn't wanna just take down JP Morgan but they wanted to take down the entire financial sector We have those mechanisms in place to be able to kind of share that information and to look at it from a holistic viewpoint so that not any one of us are caught off guard. We've got just a minute left. I'm going to ask one final question, which is would either you'd be able to provide our audience with some tips they can take home to secure themselves or their businesses or their employees. To be able to help you defend your firms. And then the second one being that I understanding the geopolitical landscape and how the evolution of threat actors and, and and geopolitics kind of interact together to be able to influence what you see affecting your firm from from a cyber perspective. Yeah and and for us with the data that we've seen, and with some of the incidents and threats and breaches in most cases, the criminals understood and knew the business better than the organization did. So they targeted someone in a small department that's based in the middle of nowhere, but that has high access So I think it's important for all of us to understand our businesses. Who are our people? What do they have access to? Who's responsible for processing payments? Who's responsible for accessing customer data? Based on that insight, we can then implement appropriate controls to protect the data, and to protect, ultimately, our revenue bottom line from, ultimately, getting into the wrong hands. Excellent. Well, that's all we've got time for. I've got to go wire a bunch of money to Eastern Europe. So thank you all for joining us. Thank you. [ APPLAUSE ] [ BLANK_AUDIO ]

Brainstorm Finance 2019: How Financial Institutions Fight Cybercrime

Today the financial industry faces a diverse array of threats from nation states to cybercriminals. With limited resources and heightened risks, how can financial institutions protect themselves?

Brainstorm Finance 2019: Charles Schwab's Keys to Staying Competitive

CEO Walt Betting explains how the company stays relevant in the new world of banking.

I fit in really well, in my time, you should have come barefoot. We're right on the beach. I like that. I like the idea. I would feel more comfortable. Feel free to take him off. So you took over as CEO at Schwab October 1st, 2008. So this is right in the thick of the financial crisis. What? Looking back between then and now, what strikes you as some of the biggest difference is what's different about today versus then? Well, one thing that's different is, uh, I was able to successfully have the stock price my 1st 90 days, and yet I survived. So that's probably but, uh, no, the consumer has changed. Understandably, um, coming out of the financial crisis, there was a real loss of trust, and, uh, as a result, we see, we see trends across all of the investing industry that air still manifesting today, the the movement into passive investing in other words, the consumer saying, I want to understand what I'm putting my money into and what the likely outcomes will be. Ah, much greater awareness of costs and the importance of costs in the drag that they create on investment performance. Even even consumers diversifying away or believing that diversifying by putting money with a number of different providers is a form of diversification. At the core of really all of it is just trust and the impact that the financial crisis created in terms of lack of trust. One change that happened in the past few years. You've been in a bit of a price war with some of the other brokerages on the market. You've now cut Schwab's Trading Commission fee to $4.95. Some people think that you could cut it further is in the sea of Robin Hood, which charges zero trading commissions, have said that all commission fees might eventually just go away. Um, actually, we have a video, so let's take a look. There's a couple of things that are gonna happen when, uh, when the brokerages start lowering their prices, one is that they're gonna have to get more efficient, Um, which is is going to be challenging because they've been sort of operating under this principle that they can charge exorbitant fees for decades now, and that's just lead to not the same focus on efficiency that a tech company would start out with. What do you think? Is more likely? Will you go below 4 95? Or maybe Robin Hood will have to start charging commissions. Well, let's not kid ourselves. Everybody's paying. Nothing is free. Whether it's trading a stock or staying at this wonderful resort, nothing is free. It's just a matter of how you pay. Uh, and certainly if you are an account holder at a at a firm that is charging a zero explicit commission, you're just paying in other ways, whether it's in yields on cash, whether it's in the quality of the execution, we're all paying nothing free now. Granted, if you are operating under a model with venture capital subsidizing your operations, you can drag that out for a longer period of time in which you may be charged less. Uh, then then you need to be a profitable organization. But everybody's paying. I think the real question is, is the question of subsidization and you know, where will consumers go and where will innovation go in? The financial service is an investment space in terms of rooting out subsidization, and, uh, in many ways I think I think it would be healthy for subsidization to go away across our industry, and so the consumer would be in a better position to know exactly what they're paying, what they're getting in return for it. But today, the whole industry is rife with that. You know one thing I would just come in on you. There's certainly some validity to some of the comments from the gentleman from Robin Hood, but, uh, but ultimately, scale and efficiency do matter. And, uh, I'm assuming he's not necessarily referring to Schwab. When he talks about inefficiency, way run our firm in about 16 basis points of cost relative decline assets. That's about half our next closest, publicly traded competitors and about 1/3 of most of our more traditional competitors. So scale matters cost matter because ultimately it puts you in a position to have to subsidize less and leave in leaves more money back in the pocket of the of the consumer. But I think the real question is, where do we go? Subsidization, which is has always been a big part of our industry. One of that looked like a Schwab subsidization were to go away. Well, you just you just moved to a world where everything that the consumer does in every activity, every transaction, advice, counsel, financial planning, all of that is, is priced appropriately for the service they're receiving and nothing is overpriced, unnecessarily underpriced. Um, we're a long way from that in the industry. Overall, you know, I'd hazard to guess that that there might only be one firm who can do a trade at a lower cost than we could in the industry. Just based on our scale in size. Uh, and and even as large as we are, with almost $3.7 trillion in client assets, it's not a cost of zero to do a trade. I mean, there is a cost. So it's just a matter of house being paid. Which firm is the one that can do it cheaper? Well, TD Ameritrade has the highest volume of trade count, so I don't know their math, but I'm assuming that that they would have some very minor advantage of us in terms of the cost of trades. But again, we're caught. We're talking about very, very low numbers in terms of costs. We do, of course, tens of 1,000,000 to those of trades every year. So you're kind of at the floor then, where, you know, in terms of how much you can lower your cost, can you lower them further? Well, I don't think pricing is necessarily done explicitly on cost. Pricing is done based on market right. I like to say the market sets price. Whether we're talking about the cost of a trade, the cost of advice, you know your salary, I mean market sets price. And as competitors in the marketplace, we all have to respect and recognize that if we want to be successful businesses that we operate within that market. So I don't think a 4 95 price point, uh, is going to be driven purely off our cost of doing business. But it's going to be based on market forces thinking of some of the new fin tech companies that have come into the space. There's also robo advisers. Actually, in the next session will have the sea of well front row advisor that now competes with you. But you also have your own okay, but we also have your own. You have a robo adviser, Schwab intelligent portfolios. I think it's still about 1% of your overall assets and half about half of your assets or managed by human advisors. So in the end, who wins? The robots are the human. Yeah, So just just for clarity. Probably about half your assets under some former adviser relationship with all those are a mix of technology and people. None of it is pure people. Um, you know, I think the consumer probably wins a T. The end, uh, models like a well front or a betterment do better for consumers than many consumers could get from an investment advisory model in years past. Uh, so So I think the consumer wins there. I think programs like are intelligent portfolios do better than consumers could typically get in years past. It's amazing for me to think about the idea that somebody with just a couple $1000 could get a fully diversified portfolio, re balancing tax lost harvesting and have, you know, an all in cost, at least under our program. That's probably measured in, you know, a couple of 10 of a percent. That's amazing. Maybe it's just because I'm old and been in the business 37 years, but you couldn't even get that 25 years ago and 10 or 15 years ago, it probably cost you 75 basis points or maybe 1%. So So I think the consumer is the ultimate winner, you know, in terms of in terms of smaller firms starting up in the digital advisory space. This issue all just comes down to time frame. What is the time frame you're playing? It's not a matter of, I think, within the companies who wins and who loses. We're playing a long time frame. We bring in more money, more net new assets every month than those firms have in total. So it's just a different time. Frame it. If your if your business is is financed by BC, there's an exit strategy, and so the time stream might be until their acquired or and I'm not saying any of these firms are for sale. But until their acquired or until some other transaction takes place, that's not our time frame. We're playing a multi decade timeframe and investing and trying to build our business under that, but the ultimate winner and all this is a consumer, and frankly, that's great. That's how it should be in a moment. I'm gonna open it up for questions. So if you have questions, raise your hand, we'll get him like to you. But first, I mean, in terms of all the new assets that are coming in to give the Wealthfront CEO, he said. Before that, Schwab doesn't have any millennial customers. I don't think that's true anymore. But can you talk about how you're trying to win over millennials? Yeah, So about 53% of our new firm households are millennials. Uh uh, and we bring in a course close to 1/2 a 1,000,004 to 500,000 new households every year, adding to a base of that's measured in many 1,000,000. So the idea that we're not winning with Millennials, of course, is just factually inaccurate. But what's really important is it's not just any millennial. The average millennial that we're winning has a level of affluence that matches our existing client base. So our average retail household today has in the vicinity of $350,000 so the average millennial were winning has that level of affluent today already so in terms of winning with millennials specifically to your question. Our philosophy has always been that the winning strategy is one that works for all investors, that it's not a matter of saying we're going to just do this for millennials we have. We have many clients in all different ages utilizing our mobile app or mobile technology. Don't ever call in any of our service centers, but you do have to recognize that the world is changing. And if you're not changing your model, you will probably be in some challenge for growth out into the future. One last comment. The economics of our business are driven by Gen X and boomers, and we shouldn't forget that certainly for the next 30 years. That's where the economics will come from. Now, if you're over rotated to a shorter term time horizon, you could make a mistake. Which is why again, we're focused on multi decade. We need to win millennials. But the economics are driven by accident boomers. But I I think our successful millennials speaks, you know? I guess it just speaks for itself. I share with you. Metric. Did we have a question back here? There's one here. Could bring the paddle, please. Please tell us who you are. I'm sure gotem investor venture capitalists that investing in tech Do you see the products basically having serving a consumer that's going to evolve as in the customers are being served by some of the fin tex as being, um, less sophisticated if you made because of Lord Asset Sizes and that they would actually need different products as the graduate become more affluent as the girl. Yeah. You know, when I went to my first job interview that, um, that polyester leisure suit I wars really cool. It's probably not the same suit I wear today in the four door Ford Maverick. I drove his different car people. People's life changes. Needs evolved. That's not to say that that a company that works with a consumer as a millennial, uh, won't consider that company in the future. But I think that we're always constantly as consumers evaluating the range of options available to us. We're not just saying Well, I've always driven, you know, before I drove a Ford Maverick when I was 21. So I'm always gonna drive before you're gonna constantly look at your options available to you now I might have a particular affinity to the brand or something that I started with, and they might start from an advantage place. But I don't think it a sure success now. I will say the experience is something totally different when you move into the experience. If I have the experience of working, maybe with up with 100% digital model, I'm not going to probably consider another model that doesn't offer me comparable capabilities. But if they offer me comparable capabilities and then something in addition, that I think is going to be very appealing, and I think again the math proves that out, keep raising your hands if you have questions and we'll get the paddles to you. But, uh um, I have a follow up question in terms of the millennials who are coming in and this younger generation, Are they going into the robot advising product or they self directed or they actually often for human advice. So our research indicates when it comes to digital advisory that it's less an issue of age, then it is their prior form of investing that self direct investors who were previously self directed are much more likely to consider a digital advisory program then then it being defined based on age millennials. What they do with their money as they come into Schwab. If you were to map out and lay beside Millennials and Gen Y and Gen X and boomers, they don't look very different. Boomers are a little more dependent on a form of discretionary advice. But the behavior of millennials bear in mind we're attracting fairly affluent millennials is actually quite consistent with with other generations. They're not behaving in some dramatically different manner. Just question over here. Please, Please introduce yourself. Well, Scott Rattle with Accenture. So I'm curious what you talked about all these different trends and how your business has really evolved in terms of how you service clients. Have you thought about the Schwab brand and kind of both maintaining that and appropriately evolving it to some degree? Yeah, well, it's interesting. I mean, I think our view is that although brands are important on a relative basis, they probably never been less important. Um, and this probably all plays into the trust issue that we started off with thinking back to the financial crisis. Um, what you what we say about ourselves is not very important. What really matters is what others say about us, and the great thing about that is it means that if you're saying one thing in your business and doing something else, the marketplace will call that out, whether it's a combination of press, social media on and that's a good thing. So from a brand standpoint, I think what's most important for us the way we view it is we just need to ensure that we act in a very consistent manner in what's in the best interest of our clients. We have to make money. We all know that. But within the constraints of being appropriately profitable and able to re invest in our business, we just have to always make sure you do the right thing by clients. I think our viewers, if we do that, the brand will continue. Thio grow and be successful. And again, I hate to keep going back to it. But the math backs it up, bringing in hundreds of thousands of affluent millennial clients every year. One more question Over here. You got cut out, Adam. Yeah, by Brian two Main fortune. Are there any non traditional competitors that you worry about been globally. I think about Allie pay and they've got a money market fund. The small compared to yours. 200 billion or so. But is there anyone gonna come out of left field that might keep you up at night? I think I think we're paranoid. We worry about everybody. Uh, we try to pay attention, everyone. You know, certainly the regulatory environment here domestically creates a fair number of barriers for folks who want to go fully into our space. And, of course, I think we see that going on even in the moves today or they move. Announced yesterday with our friends and Facebook me, the the efforts today are largely to figure out ways to make the space more efficient without running headlong into the regulatory world that we live in. The U. S. Heard some of the comments in the last session about lending and how crazy it is that takes 60 days to a mortgage. All that well, so much of that is regulatory, uh, related, But But I think we pay attention to everyone, whether folks who want to go fully into our space, I'm not so sure, but they'll look to pick off places and that place back to the comments that made it the outset around. Subsidization, right? Technology, innovation, disruption, ultimately, attack subsidization. And so that's where we believe ultimately will head in our industry is that you just won't be able to subsidize one product or service with another. I mean, you were asked to join Facebook product liberal, but neither you or any other bank is doing it. Why not? Um, let's answer that question out in the future a little bit. Can you talk a little bit about, you know, just your view on crypto currency? I know there's been rumors that even TD Ameritrade might search rating it. Is that something you? Well, sure. I mean, I mean, you just You just want to make sure that if you're going to offer the trading capability to the retail investor, which is the majority of our clients retail end investors that you're doing something that will be consistent with your brand and not just about making money. Uh, could we make money doing that? Of course we could. But then again, I probably get four ideas a week of ways we could make more money, but that doesn't necessarily. We're going to do them. They have to be consistent with our strategy and consistent with what we want to stand for a company. And then that is an attempt to criticize crypto currency. It's just, uh it's just the philosophy that we have around, whether it's the right thing for us to be offering to our clients and in our business. Um Well, well, thank you so much for joining us, Jen. Thank you. Thank you.

[ MUSIC ] All right, welcome. Hi. Hi. Thank you for making the stage purple. [ LAUGH ] You're welcome. I wanna jump into it and talk about the news that's going on right now. Just this week we heard Facebook announced a cryptocurrency initiative. Investors got pretty spooked on the news for Western Union. The stock took a dive it dropped something like two and a half percent. What's your reaction to what's going on Hekmat? Well, it was only an announcement, right? I don't know how the business model looks like. We are I just sold a white paper this morning. Looking at it, it's definitely something interesting, something innovative. Many payments institutions are also part of it. But the question is are the people gonna use it? It talks about the inclusion, financial inclusion. I don't know you have to be in the streets of Cairo, streets of Nairobi, and acceptance of Libra there, or is it seen as a coin? I think and how is the wallet seen, that all these things is an open question. It's a long shot. I believe it took us, Not 168 years but it took us many, many years to build a global system which moves about $ 300 billion every year in 137 currencies with multi- settlement programs, 33 transactions every second. It's something and we have 150 million customers and our customers are financially included. They are not the Louis Vuitton users or they're not Ferrari drivers. They are real customers who are on the streets of Cairo, or on the streets of Delhi and Bangladesh and this support their loved ones, and they leave their countries go to Saudi Arabia hard earned money and send back real fear cash. So the kids can go to school have a better life than they have it. I think that that's financial inclusion. And we've been doing that for many, many years. So let's see how that works. But we are still studying the white paper. It's definitely some interesting idea. It's unclear about how exactly it's gonna be implemented, but the core idea of it, which is that they're going to basically reduce remittance fees to zero This must pose an existential threat to Western Union's business that's the core of the operation for your company. Well on our so if you move money around a billion dollars right every year it's only a part of our costs are moving money in two hundred thirty seven currencies. It's not the main costs we have. The main cost is really serving the customer in the last mile. I don't know many companies or many CEOs like me who took a plane went to touchy Kingston and, made a negotiation with the central bank, you have to do that. And then you have to really open the network you have to invest in the in the brand and the brand investment is all about trust. Somebody makes money in the streets of New York and sends money to Jamaica trusts that $ 500 that's sent to Jamaica is really built on trust. It's important that this money arrives in Jamaica in a trusted way with all the anti- money laundering checks and that money is delivered in minutes. And the right way. And that's the real cost. That's only one thing under cost. The regulatory costs to moving money in different currencies. I mean we are pretty much in master on that. We you know actually if you collect the money in dollars we give a 10 digit number called MTC and no. And do, you if you send the money to Philippines, we pay out the same number in MTC. No it's actually recreate the first digital currency because we turned the dollar to embassy number that's images of a senior coin stable coin and pay out in pesos. And we do that for 40 years. And that works and it's all done electronically by the way. We don't carry cash from one location to a location. And the settlement is done overnight where the banking fees are really not that high that we can replace with something new. The real cost of the remittances are really the distribution of that The regulation of debt and not the process behind that. For us, not. I mean, if you enter new to the market, there are some entry costs. : Luanne, I'm gonna pass it to you in just a minute, but I wanna just drill down just a little bit more on this. What do you think is the likelihood that Facebook's project succeeds at its stated goal? I gained 24 hours ago. David Marcus is a great guy. They you know, the people also supporting our little payments experts. I think when you talk again, when you talk about financial inclusion, you really have to understand the needs of the customer. This thing doesn't work in a corner office. FinTech is for me, FinTech 50 % Finn. 50 % tech. You have to combine that and two combination of that is really the needs of the customer. If you talk about one point seven billion underserved customers you have to really understand that. And we have customers from 200 countries. Hundred fifty million of them. And our biggest couple if you put us you know most of the revenues a person is out of the US. US biggest countries 5 % of our revenue. This number six countries already only 2 % of our revenue number seven is 1 % of our revenue that diverse we are that multi currencies we have. So that has to be understood by Libra and Libra is I believe more the payment system it's not the last mile How do you take that currency translate that translate to fiat currencies still, you need a system like Western Union and for that, alright, well, Lou and I've got some questions for you as well. You need no introduction Brian white hands on the stage earlier talking you up but Let's talk about mobile payments, there are a lot of different apps out there, a lot of different choices people have. Venmo came out in 2009, or it was founded in 2009, Square Cash came out in 2013. Zelle is two years old, you're a little bit late to the game, no? Well, I would say, look at our numbers. In first quarter, we had $ 39 billion transferred via Zelle, 147 million transactions We have about 94 million consumers who've registered tokens in our databases. So I think it just depends on your view of the world. Now, we have a long way to go, with only 400 financial institutions signed up to participate in [ UNKNOWN ], and only 160 of those Our live today. It's pretty nascent for us even after two years. So, you know, our goal is that we get all of those financial institutions participating in as l so their consumers can You've got a bunch of owners of early warning systems big banks, you're basically a servant of seven Masters. How does that go over when you're sort of taking orders from all these different big banks? Well in early warning wasn't a well know company until two years ago, we've always been in the background, past 30 years we've been a fraud and risk management company and our successes and the collaboration between financial institutions. We use you by the way. Sorry? We use you, we are a client of. ->> Absolutely and we're trying to increase our business as we discussed in the green room. But- Deals get made at Brainstorm Finance. But it is that, Hegmund uses that very traditional- I have a conflict here. [ LAUGH ] Hey, I thought it went the other way. Hegmund uses a very traditional payment fraud and risk management, so that's the basis that we were born on. And Zelle, too I think our financial institutions, much like you heard Bryan say, it's about taking checks and cash out of the system. And Bryan can't do that if others, banks, customers, are still writing checks that get deposited in his bank, so it's really about taking cost out of the banking system. So I mean, given the competitors that you have, that have been out longer, I'd like to know how you plan to evolve the product to kind of stay [ UNKNOWN ]. Stay agile, stay ahead of the others. Especially when you've got this weird situation where it's a very new product but you're coming from some very old institutions. Right, sure, and then that most of the customers Actually try Zelle for the very first time because it's offered by their financial institution. So over 70 % of customers- Has anybody used Zelle in the room? Yep, okay. About half. And about half of our new customers are Gen- Xers, older Gen- Xers and Baby Boomers. So a lot of the launch of [ UNKNOWN ] has been teaching individuals how they would use such a product, such as [ UNKNOWN ]. But we're not stopping there, right, I think [ UNKNOWN ] most recognized for our P2P service. But we also provide corporate disbursements, so home claims paid out immediately right into your checking account. Car claims paid out immediately right into your checking account. Financial aid, emergency funds for victims of storms paid through Zell. But where I believe some of the biggest growth is going to come is small business. 59 billion transactions a year to small businesses that are check and cash. And that's really our target, that's where we're going to grow. So let's shift that question to you, [ UNKNOWN ]. Your company, as mentioned, is 168 years young, as you like to say. What is your approach to innovation? Well, obviously we have a DNA, 168 years young DNA, which we Basic cannibalize our own business every time. We, you know, wait for 168 years. That's why we are such a resilient business. That's why we all still grow, right, you know? Unbelievable opportunity still. Our approach on innovation is very simple. We listen to the voice of the customers. They tell us. We don't develop on the corner office's innovation. We invite our customers to our, offices sexually and they attend management meetings. And they tell us because especially our color voice of our customers are not heard for many, many people. They're migrants. There are about 270 million migrants worldwide. They don't have any flag. They don't have any constitution. They don't have any voice. And I feel like kind of a voice for the migrant population. And we do listen to them and they tell us what the next need is. I tell you one thing they told us, that many customers they wanna use Amazon And so many customers can't use [ UNKNOWN ] worldwide because they don't have international cards, they have local currencies. So Amazon and we built this new product called Amazon pay by code, if you don't [ UNKNOWN ] name is a white label product. People buy from their phone in Philippines, globally via mobile phone shop online and pay locally with their local currency. We collect the money in our locations almost and sends them there and then the purchase is immediately sent to them. That's our innovation by listening to the Filipino customers. They told us, we wanna shop there, can you help us, so- You've dabbled with blockchains in your past, and cryptocurrencies as well. How did that work out for you? I think are still investigating, we have our own group invested only in the blockchain, and on the cryptocurrency. We did also a test with Ripple And we are still doing it and It's still ongoing Still ongoing. You know we are looking at it and we are really learning from people But a year or so ago when you were using Apple's product that it was quote, still too expensive you didn't see Yeah, I mean you know we we are in a different day just announced with monogram as you know yesterday or the day before. An announcement that they're investing there. They took an activist size investors' stake in Moneygram? Yes. Ten percent? Obviously, we are in a different position than Moneygram. You know, we have our own settlement system, because it's extremely cost- efficient. Today showed us, as we do in the test, it's five times more expensive doing it A cryptocurrency, a stable currency like Ripple, but it's others as well. For us it's different, but I just saw Brett before coming to this meaning, I said hey Brett, we are still in talking, I congratulate him to this deal with the Moneygram needed something and Ripple needed something, that sounds a good deal. But for us it's currently we are pretty much okay with our Settlement system, we can move money in a way that nobody can move it. So that so that works but, look, hey, I'm open. Any cost- savings, any innovation, I'm there. I have, you we can find a deal tomorrow. [ LAUGH ] In the annals of business history, if you look back in the 1800s It's been said that Alexander Graham Bell he wants to sell his patents at one point he was going to sell the telephone patents to Western Union Western Union didn't see the value they turned it down. Are we going to see something like that right now with cryptocurrency and blockchain? Is that what's happening? Well, I think we have to really deeper differentiate between cryptocurrency From consumer use cases and cryptocurrency as a payment stable currency. I think I really believe cryptocurrency and blockchain as a processing system doing the payments has future and we believe in that also, and I think our innovation guys really are excited about that. We're seeing definitely won't miss it [ LAUGH ] We believe that we are on the head of the innovation, otherwise we didn't grow, but I am not sure that any government, any central bank will wanna control their currencies. Look nations are here, they have their own constitution they have their borders, they have their own economies and they have their currencies. And I'm not sure if you want to issue a currency which is overruling the central bank currency will go forever. You have to work with the central banks. You have to understand that the European Union's central bank or you have to understand Indonesian central bank needs, Indonesian economy needs. Why do they wanna control their currency? I can talk all day about this, I wanna turn to the audience for questions. I'm gonna ask one quick question from our panelists before doing so get questions ready. Luanne make a prediction or us, next five years, how are payments gonna change? Wow I believe the combination of authentication and the payment writing together, which is an interesting thing when you think about blockchain technology. Always in the past, those two things have been very separate. If you wanna move money fast, they have to be at the same time and combined, and I think The way that we authenticate ourselves as consumers, as merchants in the process is going to change and enable even faster movement of money. Faster. All right. [ INAUDIBLE ], same question to you. Very quickly. Next five years, what happens in payments? I think the instant payment is something big. Which we do it. I think that you know not only dropping money globally on an account or on a cash. I think it's really also wallets, local wallets will be big. It's not about the international role, it's owned by big corporation. The local wallet issued by local people. I think you have to bring the connection. And have that instant payment and instant clearing an instant anti money laundering instant settlement is big thing. And companies who invest on that block chain could be one thing who invest in that and the technology will succeed. So the acceleration of everything. All right, I saw a question back here. [ INAUDIBLE ] Well let's keep it tight so maybe we can get into it. Yeah, understanding all the AML and compliance pieces but I was wondering why, if -. What's your name, by the way? Name and company? Hasley Stern. I was wondering why it's so much more expensive to send money via Western Union than via Bitcoin or some other cryptocurrencies. Did you try to send money to each of [ INAUDIBLE ] BitCoin or cryptocurrency, it's not possible. So you have paid, once again let me tell that. You're an end- to- end payment system [ INAUDIBLE ] you collect money in dollars from your mobile phone and I can drop money immediately in Egyptian pounds All the way it's done, collecting the funds, paying out and making the anti- money laundering descent site, understanding the customer needs, anti- fraud activities, paying out in pounds the less model in Egypt, and overnight settling with the bank. Is big thing so that costs money that's an operation behind that and doing that in 137 currencies and doing 33 transactions every second costs some money or prizes changes also to the customer needs, right, I mean, some you can send money to for instance here from your mobile phone to India in an economy zero fee will be only an FX It's because the competitive market but you can send money to some some somewhere else which is you know more rural areas you have to pay out in cash it's more it's more expensive. So it's really much cost related .>> You got a lot of regulations to comply with let's see if we've got one more question back here And give your name and company as well. Yeah Rene from Cello. Hey Matt a question for you, as you said one of your big assets are sort of having these storefronts in the streets of Cairo and Nairobi. And I wonder if think strategically about other use cases beyond sort of the Peer payments use case, I mean having that kinda network is powerful. Do you ever think about kinda other other industries? Renee has a cryptocurrency startup cielo. He's asking what else you can use your footprint your global footprint of retail stores for? I think that's, as you heard from Amazon. We collect funds for Amazon. I'm sure that there are other retail markets globally who want to collect funds. By the way, you don't have to collect in cash, you have to collect in local currency. We do also collect with cards, debit cards, let's say in Egypt, I don't know why today Egypt but, Egyptian pounds, issued Egyptian pounds, prepaid cards. We collect there. I think the collection of the funds is a big thing. So what we do is the C2C is our major business. We start to do C2B. Businesses want to collect international funds from consumers. It's a big business for us and we are investing there. Alright, well before we wrap [ UNKNOWN ] you've been all over the world and made it from different places, what is the most beautiful, most lovely location you've visited in all your [ UNKNOWN ] [ UNKNOWN ] in Greece, it's a small [ UNKNOWN ] just on the opposite side of [ UNKNOWN ] in Turkey. Where I was born and raised in Isamu, and it's a small island even there, there are about 10 locations there about I don't know, [ LAUGH ] 150 people but, I will say that I've been personally visiting about 89 countries my son and [ UNKNOWN ] On the map and I have to say that where our customers are, I love that, Africa is big for me [ UNKNOWN ]. Luanne, I know [ UNKNOWN ] is just US based, but what's your destination choice? I tell ya, there's nothing more beautful to me than the Carribean Islands, that's my dream destination anytime I get time off for [ UNKNOWN ] Excellent. Well, mine is Montauk. [ LAUGH ] Thank you all for coming. Thank you very much .>> Thanks .>> Thanks.

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