 June 25, 2019 For those of you who were able to make our inaugural Brainstorm Finance conference in Montauk, NY, we hope you enjoyed it as much as we did. For those who weren't in attendance, here's just a sample of what you missed. ▪ SEIZING THE FUTURE OF FINANCE Earlier this month, we brought together established Wall Street titans and new leaders of fintech, blockchain, and venture finance to exchange ideas about the way forward and the exciting potential and challenges ahead. Among topics discussed: the breaking news that a Facebook-led consortium hopes to introduce Libra, a new digital currency; value creation with blockchain; and the balancing of new technologies with traditional expectations in banking. ▪ 22 INSIGHTS 1. Even banks want to get rid of cash. Bank of America is committed to serving customers of all ages, operating 4,300 branches but also investing heavily in digitalization—which has cut operating costs. "We want a cashless society," said BofA's CEO. We have more to gain than anybody." 2. Libra is already shaking things up. The announcement of Facebook's digital currency project sent Western Union shares tumbling. But Libra is not a "last-mile" solution like his company, said the CEO of Western Union, which took many years to build a massive global network. He also defended the company's own innovation, including an Amazon partnership. 3. Cryptocurrency could ease cross-border transfers. Among those excited by the potential of Facebook's Libra are firms doing mobile transactions internationally, who are challenged by building connections and handling regulatory requirements in multiple countries. "It could accelerate our ability to go horizontally very quickly," said mobile lending company Tala's CEO.  4. Boomers and Gen-Xers are still driving business models. Millennials comprise a large share of Charles Schwab's new business, said its CEO, and embracing change to serve them is vital. But echoing other panelists, he acknowledged older customers are still key, "for the time being." 5. Cybersecurity spending hasn't slowed attacks and breaches. While companies are devoting $120 billion annually to secure corporate networks, employees are still vulnerable to phishing attacks—and 'vishing' attacks, via phone—which are growing more sophisticated. Ongoing employee training to recognize such threats is essential, said security experts. 6. Amazon's world domination won't include banking—yet. The vice president of Amazon Pay said the company has no plans to follow Facebook in taking on big banks. It's "too speculative," he said. Amazon's decisions are driven by data and the solutions it provides must address identified customer needs and have the ability to scale. 7. Millennials want money to be simple. They keep their funds in banks but want automation. They're sensitive to both price and quality. They're savvy and they really value simplicity. When targeting this cohort, advised the CEO of Wealthfront and the general manager of Venmo, be very specific and emphasize trust. 8. Do Slack and Spotify signal a trend? Both came to market with direct listings instead of IPOs, but not every unicorn is right for that route, said a panel of funding experts. The group also noted that instituting "grown-up controls," internal audits, and other disciplined vetting separates the winners from losers. 9. Next up: third-generation blockchains. Bitcoin led the first wave of blockchain, iterations like Ethereum drove the second, and the next will feature massive, decentralized infrastructure with seemingly endless applications. Whether or not Facebook's new Libra currency will lead this revolution, decentralization is the future, said mobile payments firm Circle's CEO. 10. Facebook won't have total control over Libra. Regulators here and abroad are already worried about the new digital currency. But the 28 founding consortium members, each with an equal vote, will be exercising oversight with consumer protection in mind, said Kathryn Haun, general partner at consortium member Andreessen Horowitz. 11. Expanded financing options for entrepreneurs. More venture capital firms are offering financing at the seed stage. Banks are willing to look at a wider range of factors. And one newcomer, Bex, offers immediate access to high-limit credit cards to startups that provide real-time access to their accounts. 12. "Break the wheel" to increase diversity. Edward Jones has instituted a new policy increasing compensation to retiring advisors if they refer clients to women or people of color. It's controversial, but panelists agreed that bold action is needed in financial services, where women occupy only one in five C-suite positions. 13. Plan for tech that doesn't yet exist. Congress may be concerned about regulating Facebook— and its Libra project—but a Madagascar-born 17-year-old cryptocurrency engineer emphasized the need to formulate regulations for the future: "It's important to predict where the technology will go and adapt our systems for that." 14. Beware the noise around blockchain. The CEO of banking software and cryptocurrency startup Ripple said that while the technology is revolutionary, it's not the best approach for all use cases, since it tends to be slower and more expensive and is often invoked simply "as catnip for investors." 15. Security tokens: the killer app of cryptocurrency? Speculative trading has been the primary purpose of cryptocurrencies, but as their utility phase develops, Overstock's CEO said that security tokens—which are tied to real-world assets such as real estate—will be increasingly important. He also hinted at an upcoming Overstock security token project. 16. Never mind the hype—focus on blockchain's value. JPMorgan and IBM are among Fortune 500 companies deploying B2B blockchain networks to ensure privacy and security and to reduce friction; clients include governments, retail, and health care. The networks' capabilities are almost limitless, and multiple open protocols are expected to play nicely together. 17. Transforming the diamond market with blockchain. In 2015, Everledger began using blockchain to grade, certify, and track diamonds for end-to-end identification useful at retail and for insurance claims. Providing trust and transparency, the techniques can potentially redesign sourcing of a wide variety of products. 18. Goldman jumps into the consumer market. With the ambitious goal of doing for financial services what Amazon did for retail, Goldman Sachs has created Marcus, named after the 150-year-old company's founder, to provide no-fee digital banking and issue a credit card co-branded with Apple, which is set to debut this summer. 19. Wall Street wants to be start-up world. Plaid is a fintech start-up working with 15,000 banks on back-end development of apps. It's just one example of how traditional banks are emphasizing innovation, whether with Silicon Valley—Morgan Stanley is evaluating 1,000 potential partnerships a year—or in-house. 20. Regulators prepare to push back on Libra. From Congress to the Federal Reserve, Facebook's new digital currency is being met with skepticism about its purpose and privacy implications. But some blockchain proponents warn that failing to nourish a regulatory environment favorable to innovation could push the U.S. further behind other nations. 21. A double whammy for millennials: student debt and housing costs. While millennials are fueling housing growth, the lack of home affordability is adding to their crushing debt burden. Better education can help: learning about mortgages will help them purchase within their means and refinancing student loans can save them money. 22. Balance traditional with cutting-edge. Citigroup CEO Michael Corbat says in an age of fintech disruption, big banks should emulate superstar companies' customer service—and cater to all generations by combining a broad branch network with a robust digital presence.
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Sunday, June 30, 2019
What Happened at Brainstorm Finance?
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