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Banking Product Innovation: Today’s Opportunities & Tomorrow’s Possibilities

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Future product ideas in the banking and financial service world. This article analyzes current product gaps and some of the trends that will create new product opportunities. This type of ideation is crucial for banks to build an innovative environment.

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Banking Product Innovation: Today’s Opportunities & Tomorrow’s Possibilities

  1. 1. © 2018 Reverse Tide LLC Banking Product Innovation: Today’s Opportunities & Tomorrow’s Possibilities 15 product gaps / opportunities for the modern financial world By Dan Perry
  2. 2. © 2018 Reverse Tide LLC 2 Introduction I spend a lot of time thinking about the future. What trends are emerging in technology and business? How will these things affect society? And when I consider my predictions and whether the financial services industry is responding accordingly, the answer is “no” more often than I wish. Neither the current product/service mix, nor how banks are investing seem aligned with the future. And that’s an opportunity lost given the rapid pace of innovation, fintech investment, and changing trends. This article is a long ideation list. Not every product idea will be suitable for every bank. Some might not be as profitable as others. And some might not work at all. None have had the appropriate level of product due diligence done. But my objective is to help banks adapt to the future. All the additional market research, financial modeling, and product development can come later. This is a brainstorm to get that process started. At the end of the document, I’ll propose how financial institutions can engage me to dig deeper into these products, additional ideas I’ve developed, and other innovation trends within the financial services industry. I pride myself on ideation and trend-spotting but also being capable of leading the journey toward successful implementation. Thanks for reading! Dan
  3. 3. © 2018 Reverse Tide LLC 3 Table of Contents Introduction 2 Today’s Product Opportunities The products that have a strong market today 1 – Venture Capital Product Diversity 4 2 – Better Bank Startup Capital 7 3 – Freelancer Financial Products 9 4 – Borderless Banking 11 5 – Microfinance 13 6 – Student Lending Product 2.0 15 7 – Automation Protection 17 8 – Global Health Insurance 19 Future Product Opportunities The products that will have a strong market in a futuristic world (5+ years) 9 – Sharing Economy Products 21 10 – Biotech Covered Health Insurance 24 11 – New Age Retirement Products 26 12 – AI Credit 28 13 – Digital Asset Finances 31 14 – Virtual Asset Financing 33 15 – Futuristic Products 36 Building a Modern Product Successfully 38 How I Can Help 39
  4. 4. © 2018 Reverse Tide LLC 4 - 1 – Venture Capital Product Diversity As a society, we are expecting unprecedented technological advance over the coming decades. We plan to automate our current world, build new virtual ones, and expand lifespan far beyond today’s possibilities. And yet the vast majority of startups are funded through a single venture capital product. The approach is almost always the same; find highly scalable ideas and exchange capital for equity in the hopes of a 10-100x exit event years down the road. While this works for many business types, it also excludes many others. There are countless products, services, and business models that can’t fundraise today. And if venture capital diversifies in offering, there is significant profit on the table… Product Opportunities Organic growth businesses There is no product for a firmthat wants to grow based on fundamentals rather than subsequent raises and an eventual exit. It’s a huge product gap. Almost everyVC runs on the same model; they need a unicorn (>$1B valuation) to offsetthe 9/10 startups that either fail or don’t exit to outsized returns. This is problematicas they force ALL startups to aim for that unicorn level value. No fundamentals, only mass growth! But why can’t some VCs adjust their business model? If they target 20% as a minimumacceptable return, can’t their investment companies just earn 20% per year on initial capital?For example, if they invest $1M, can’t that startup earn $200k/yearand distribute profits? Obviously, there are hybrid models. Young companies want to reinvest profitsand grow. So maybethey distribute30% and reinvest the remaining 70%. Investors get a growing cash return PLUS the appreciationon companyvalue from reinvested growth. Most the biggest companies didn’t achieve 100x return in 5-10 years. They grew organically. And the early investors certainly reaped the rewards. Think Wal-Mart,Coca Cola, and McDonalds as just a few of the many examples. Imagine that those companies couldn’t receivefunding today! 1
  5. 5. © 2018 Reverse Tide LLC 5 Service startups While Softwareas a Service(SaaS) companies tend to be VC darlings, other service models are almost completelyignored. If your service doesn’t scale, it doesn’t even get consideration. But that is very flawed reasoning. The margins on a good service business are tremendous. Think aboutthe size and earnings of consulting firms, law firms, medical providers, etc. Should they get no VC consideration? Is a bank the only possiblefunding source for them? Again, the economics of such a product are different. You can still evaluateon growth. A good service firm can expand quite quickly too. But your biggest earnings will come from the cash flow of big margins and good utilization.Managed well, this can be a very lucrativeinvestment product. 2 Real estate startups Many VC funds refusereal estatestartups as funding applicants. It’s understandable, as real estatefinancing is fundamentally differentfrom the averagetech startup. However,there is also substantial opportunityto treatreal estatebusiness models more like startups. Since real estatehas a more localized business model, it hasn’t seen innovation on the same scale as other industries. That can change with aligned investment vehicles. A few examples: • Hotels, large officebuildings, malls, and large condos are all scalable. There is no end to the repeatablerevenue that can be housed within the real estate’swalls • Real estatecan be the conduit to starting other business models. For example, you can forego fixed rent and instead take revenue-share or equity stake in the activitywithin your property. 3 Non-tech startups Almost all the major VCs require technology to be a fundamental aspectof the startup. Afterall, this is what achieves scalabilityand market access to achieve outsized returns. However,there are many business models that are quite lucrative, scalable, and mass market OUTSIDE tech. A few examples: • Perhaps a VC food and beveragefund that immediatelyfunds a franchise model for scalable expansion. • Or how about a VC focused on creating repeatableapproaches to manufacturing, logistics, or other process-centric industries. Portfolio companies can createshared services or share in capitalexpense investment. Innovation is key. With the right funding, non-tech businesses can scale and thrive! 4
  6. 6. © 2018 Reverse Tide LLC 6 Concluding Additional Reading Any of these VC models are potential gold-mines. And there isn’t much competition. Today, capital is allocated into the same business model types: technology businesses based on digital products, platforms, and subscription services. But that excludes the vast majority of business types. Venture capital needs to diversify and innovate. Very few will invest in the next Facebook or Uber. But VCs can earn outstanding returns searching for the next Marriott, Accenture, or Caterpillar. And anyone can form these products. Existing VCs can create secondary funds. Private equity can enter the startup capital world with a more business fundamental approach. Banks or other large corporates can form investment entities. Or finance and business savvy individuals can raise funding to start their own fund. The opportunity here is immense. The meeting that showed me the truth about VC’s https://techcrunch.com/2017/06/01/the-meeting-that-showed-me- the-truth-about-vcs/ The growing funding gap https://medium.com/swlh/the-growing-funding-gap- 8ebd30225fb3 Why Venture Capital wasn’t right for me and 15 alternative funding sources https://www.fastcompany.com/3036130/why-venture-capital- wasnt-right-for-me-and-15-alternative-funding-sou Why we need an alternative to venture capital https://medium.com/the-mission/why-we-need-an-alternative- to-venture-capital-30eb9d59981b
  7. 7. © 2018 Reverse Tide LLC 7 - 2 – Better Bank Startup Capital Banks have largely stayed away from the startup scene to-date. It goes against their typical business model, which exchanges term-based financing with risk mitigated by collateral. Startups fail too often to price a viable debt product, lack of early revenue inhibits any repayment frequency, and there is often little/no collateral to possess upon default. But venture capitalists found a way to make the industry worthwhile. So why not banks too? Product Opportunities Deferred lending1 Banks offer student loans, which give borrowers the option of deferring payments until after graduation. Startupsaren’t so different. You are investing the money with an expectationof futurereturns but not necessarilypresent ones. What’s to stop a bank from exploring a similar product?Regulation might pose a challenge, as might liquidity risk concerns. However,it’s an innovative way to think aboutsmall business lending. Of course, other deferred loan possibilities exist. Zero interest financing, for example. Or interest only loans. The fact is, banks can get creativeabouthow to fund startupsin early stages. Collateralization This would be innovative. Typically, amortizing loans are the ones that get collateralized. This might be difficultin startuplending where the business doesn’t generate immediaterevenue. However,synthetic finance often has a solution to such issues. Perhaps debt from profitablebusinesses are pooled with risky pre-profitstartups as part of a CDO. Or perhaps theyare pooled into a single risky security. Hypothetically,this might not work. But in our lowinterest rate times, there are many investors chasing yield. It’s not inconceivable that banks can use their loan origination infrastructureand pass off risk. Well worth investigating for banks seeking to enter new lending opportunities. 2
  8. 8. © 2018 Reverse Tide LLC 8 Balance sheet loans Banks might lend directly or take equity stakes themselves. Invest some of their own capital or client capital.Or maybe they form their own innovation entities to fund business ideas they would be interested in somedayacquiring fully. The counter to this is that it is risky lending that cannot be hedged. But with perpetuallylow interest rates and low lending default rates, they can afforda bit of balance sheet risk as a means of chasing yield. 3 Additional Reading Fintech startups look to displace banks in the SMB lending market https://www.digitalistmag.com/finance/2018/01/29/fintech-startups-look-to-displace-banks-in-smb- lending-market-05793652 Why this ambitious startup isn’t going public– yet https://www.inc.com/maria-aspan/kabbage-expansion-plans.html What we can learn from Softbank’s Masayoshi Son — the ‘Warren Buffett of the web’ https://www.smartcompany.com.au/business-advice/strategy/learn-from-softbank-masayoshi-son-the- warren-buffett-of-the-web/ Concluding Startup lending or investment should never be the core activity of any bank. But it’s becoming an increasingly demanded financing segment and banks have largely stayed away from it. Even if your traditional banks avoid these product types, there is opportunity for asset managers, wealth advisors, and fintech firms to create funds for this type of financing. Startups shouldn’t be restricted to equity financing. The debt markets ought to provide adequate products as well.
  9. 9. © 2018 Reverse Tide LLC 9 - 3 – Freelancer Financial Products The gig economy grows by the day. Businesses understand that the combination of deploying variable skill-sets and de-risking their hiring strategy can be a wise. At the same time, workers crave flexibility. They want to change companies, functions, and locations more than prior generations. Many choose and end up liking the freelancer work arrangement. Product Opportunities Insurance1 Freelancers have uneven income, as they are forced to frequently sell their services. While freelancers can budget to smooth income, insurance is often necessaryin case of illness, injury, or prolonged gaps. Likewise, freelancers ought to have an indemnity insurance for their offerings. But they’re too small for typicalproducts, while having an ever-changing business model. Between both of these, there is a product gap waiting to be filled. Small lending The freelance business model is atypical from most small businesses. Lenders don’t have the credit tools to assess it, as freelancers lack collateraland often generate an uneven and unpredictable income flow. But that doesn’t mean there isn’t a lending opportunity.Good freelancers do earn regularly and often, quite high rates. Credit models ought to be adjusted and a custom product availablefor this business type. 2 But this is a relatively new development. And there isn’t much financial support for this large and growing class of worker. What type of product might they be interested in?
  10. 10. © 2018 Reverse Tide LLC 10 Smart contract payments The biggest issue plaguing freelancers is receiving payment. Late payments have a sizeable impacton their cash flow. And they are too small to take legal action if their clients refuse payment. Plenty of platformshave emerged to issue invoices and receiveonline payments. However,the next step is tying it to enforceablesmart contracts. Banks likely won’t play this role but the fintech world certainly will. And it can be quite useful for freelancers and small businesses around the world. 3 Additional Reading Independent work: Choice, necessity, and the gig economy https://www.mckinsey.com/featured-insights/employment-and-growth/independent-work-choice- necessity-and-the-gig-economy Freelancers predicted to become the U.S. workforce majority https://www.upwork.com/press/2017/10/17/freelancing-in-america-2017/ Concluding Freelancers compose a large and growing percentage of the economy. Polls always show that the majority are doing it by choice and many are earning better than permanent jobs. Which means this demographic needs attention. Employers typically have a benefits package that offers employees health insurance, life insurance, disability insurance, retirement products, and automates payroll/taxes. Freelancers get none of this. They need the financial services industry to take notice and customize products toward them. As the world continues automation trends, this segment will also continue to grow.
  11. 11. © 2018 Reverse Tide LLC 11 - 4 – Borderless Banking This one is already on the way. Large, global corporations have always been capable of solving the global banking question. The biggest banks adapted to their international needs and provided services accordingly. But there remains very little on the market for smaller businesses and individuals. It’s a huge product gap in our global world. Product Opportunities Deposits1 We’restarting to see this emerge a bit. Transferwise, one of the biggest fintech companies, offers a borderless banking product for managing deposits across multiplecurrencies. But most other banks do not, despite being chartered across several countries. That’s a gap that isn’t aligned to our global world. This requires a big investment in compliance and the infrastructureto manage multi-currency transactions. But it’s a core banking product that most large banks should be offering in today’sage. Commercial lending Business banking is a very profitable segment for most financial institutions. And it’s a competitivemarket. Given that a large percentage of new startups seek to be global from Day 1, this would be an outstanding differentiator. There is absolutelydemand to get multi- currency loans. Global businesses open offices,launch products, and invest all over the world. Similarto deposits, there is a challenge around regulation and infrastructure.But isn’t it a worthwhile investment to attract global businesses as customers? 2 This is something that banks need to address, as there are looming threats to their entire business model if they continue ignoring it. We are trending toward diminishing borders in all aspects of life; it’s time for banks to catch up and service it accordingly.
  12. 12. © 2018 Reverse Tide LLC 12 Additional Reading TransferWise Borderless Banking Bonks Blistering Bank Fees https://www.forbes.com/sites/curtissilver/2018/04/18/transferwise-borderless-banking-bonks- blistering-bank-fees/#63da547e15b0 THE IMPACT OF BLOCKCHAIN IN THE FINANCIAL SECTOR https://www.chambersandpartners.com/the-impact-of-blockchain-in-the-financial-sector Blockchain based financial case analysis and its implications https://www.emeraldinsight.com/doi/full/10.1108/APJIE-12-2017-036 Concluding Globalization hasn’t extended to the financial services sector at the level one might expect. A large bank can offer all their products cross-border if they chose: commercial lending, insurance, capital markets, etc. A lot of these services are available but only to the biggest banking clients but at substantial fees. That is inconsistent with the many businesses that seek global reach. Banks are in danger of losing this market. Cryptocurrencies and various blockchain based startups are rapidly building presence and obtaining investment aimed at building a globally distributed financial infrastructure. We can already transfer money anywhere in the world with Bitcoin. And Transferwise will hardly be the only fintech player that sets up a global infrastructure for traditional banking products. This ought to be a big investment point for the banks that already have charters around the world and the technology to quickly enter the market and offer competitive products. If startup players conquer the global markets, they will inevitably make inroads in the domestic ones.
  13. 13. © 2018 Reverse Tide LLC 13 - 5 – Microfinance Amazingly, the majority of the world’s population lack basic financial services. Whether because they lack the assets, income, or geography to access banking products, it’s an unacceptable reality of our industry. I have heard many people say microfinance isn’t profitable. That may have been true before the internet and mobile age. But mobile penetration is continuing to grow, enabling most banking services to be delivered regardless of circumstance. Product Opportunities Deposits1 Microfinance deposits should be a simple product. Access to a checking and savings account should be the norm. Being able to transact with them – cash depositing and withdrawals. Perhaps a debit card. And basic online banking functions. Banks alreadyhave this infrastructure. They offerit free without minimum deposits today. So how about we make a few modifications and extend them to remote and impoverished areas? Basic lending Many successful lending practices have been established in microfinance. Going back to Grameen Bank in Bangladesh, they discovered that lending primarilyto women and grouping loans across small communities was critical to avoiding default. Since then, microfinance has grown and new best practiceshave emerged. Lending is no differentthan any other loan, just on a smaller scale and directed at the smallest businesses. Again, it can scale digitally. 2 Now is the time to make microfinance a priority. And not just as an act of charity but as a profitable endeavor. While each individual account may not be profitable, combining them over millions of accounts and scaling the product is bound to tell a different story.
  14. 14. © 2018 Reverse Tide LLC 14 Additional Reading Microfinance Barometer 2017 http://www.convergences.org/wp-content/uploads/2017/09/BMF_2017_EN_FINAL-2.pdf Revolutionizing Microfinance: Insights from the 2017 Global Symposium on Microfinance http://pubdocs.worldbank.org/en/332301505318076916/GSM2017-Synthesis-report-draft-August-9th-2017- Final.pdf Best Practices in Mobile Microfinance file:///C:/Users/dsper/Downloads/Grameen%20Foundation%2016%20- %20Best%20Practices%20In%20Mobile%20Microfinance.pdf Shifting Trends in the Microfinance Ecosystem https://www.pwc.in/assets/pdfs/publications/2016/shifting-trends-in-the-microfinance-ecosystem.pdf Concluding Microfinance is notoriously difficult. Most of the underserved populations lack awareness and knowledge of how banking works and can help them. Therefore, many don’t seek it out even when available. But a model exists to make this successful. It was built in an era prior to online and mobile banking. Building awareness, reaching these areas, educating the population, and putting forth a viable product shouldn’t be as difficult.We no longer need an army of people physically extending these products. Technology can finally replace it. And as mobile penetration increases, delivery drones are able to handle physical depositing and lending, and AI can optimize the process… microfinance can become a profitable product. Today, microfinance exists through not-for-profits, government programs, and unfortunately usurious banking models. But with technology enabling potential profitability, banks ought to start exploring this product. It’s not often that a business can find tens of millions of customers with little competition. And these smaller customers might just grow into big ones with a bit of opportunity. That’s what microfinance potentially offers.
  15. 15. © 2018 Reverse Tide LLC 15 - 6 – Student Lending Product 2.0 Student lending is a scary market today. It’s a dire picture when looking at the debt ratios that kids accumulate, their job/income prospects upon graduation, and the non- performing numbers of these loans. Most of their loans are government backed loans and non-dischargeable in bankruptcy, so bank balance sheets are reasonably safe. But too many students aren’t Product Opportunities Fully underwritten suite of student loan products1 I’m veryoutspoken that the university system has to change to meet modern realities.We can’t sustain continued tuition increases and see half of students graduating to jobs that don’t require a degree. Likewise, universitiescan’t keep offering an education not aligned to the world’s necessary job skills (at those lofty tuition prices). Modern higher education fits the definition of a bad product and like any bad product, better alternativeswill inevitablyemerge. Financial institutions can help facilitatethis by ignoring government guaranteed loans and only offering loans that meetstringent underwriting standards. This means offering loans to attendees of the highest performing education institutions. It means offering betterterms for majors or training tracks that fit the job market. It means tracking grades and other activitylikely to facilitaterepayment.And it means obtaining co-signers for the highest risk loans. Other products are possibletoo. It’s a tremendous opportunitybeyond just the initial loan. Most studies show that consumers prefer doing business primarilyat a single bank. And banking relationships are sticky; consumers are reluctant to change their primary banking institution. Acquiring customers at an early age is a wise move for any bank. Their lifetimevalue far eclipses the value of a student loan. So even large banks should consider exiting guaranteed lending and offering more favorableproducts to students. This is especiallytrue of the ones likely to be high earners. actively paying their loan and seem to have little prospect of doing so. There has to be a better product out there that fits our modern realities. Products in any market should fit customer needs and give them a positive outcome. That’s not happening today and ripe for change…
  16. 16. © 2018 Reverse Tide LLC 16 Non-university lending2 Additional Reading University Costs and Student Loans: The Dismal Current State http://www.reversetide.com/university-costs-and-student-loans-the-dismal-current-state/ The looming student loan default crisis is worse than we thought https://www.brookings.edu/research/the-looming-student-loan-default-crisis-is-worse-than-we-thought/ Concluding Student lending needs products aimed at modern realities. Government guaranteed loans have helped many get to university. But it has simultaneously saddled children with a lifetime of debt before they lacked the maturity to make such enormous financial decisions. And it has enabled universities to put forth a terrible education product at obscene pricing, as financial products enable anyone to borrow what it takes to pay for it. Financial institutions can do better. They can help kids make better financial decisions and build a lifetime of trust. And they can offer products to students beyond the young adult demographic, as learning is a life-long endeavor in our modern world. Private student lending ought to expand beyond accredited university programs. What aboutadults using coding bootcamps?They are quite pricey but youare acquiring modern, highly demanded, and high-income skills and gain access to their career placement services. There should be a lending product to payfor such valuable training programs. What aboutcertificationprograms aimed at other lucrativejob types? For example, financial licensing, softwarepractitioners,project management certifications,and others? The irony is that these training and certificationprograms are vastly cheaper than a university degree and much more targeted at high-earning open jobs than say, a liberal arts degree. But financial products are only aimed at the latter.That’s what you call a flawed current state and an opportunityfor wise banks to enter a lucrativemarket!
  17. 17. © 2018 Reverse Tide LLC 17 - 7 – Automation Protection One thing that policy-makers, technologists, and economists can agree on is the future threat of automation. I believe automation trends will shift jobs substantially but not eliminate them. Others disagree and see widespread employment issues. Regardless of which occurs, a large percentage of today’s population will need re-training and new skill acquisition. And that guarantees a lot of people need to take time off to make that happen. Ideally, the populace would recognize the coming automation threat and proactively do this while still earning. But in reality, many will face layoffs and be forced into difficult situations. Banks ought to take notice. In addition to having a product opportunity, automation inevitably affects existing banking. Current loans are at risk from income disruption, while other products lose demand. So the question is, how can they respond? Product Opportunities Employee Benefit Insurance1 It would be nice to see employers offer employees an insurance product aimed at protecting their income from automationdisruptions. In addition to being a valuable employeebenefit,it might actuallyhave a positiveROI in the long-run. If jobs shift, current employeescan be retrained via this product and then shifted into a new job as the need arises. This gives employerstwo options. First, they might offeran automation re-training insurance product as an employee benefit.And then give their employeesthe chance to add additional coverage for more substantial training program investments. Employers pay unemployment insurance, worker’s comp, and many offer tuition reimbursement.This idea is similar. Alternatively,they can choose an investment product enabling them to put money aside on a per employeebasis today(tax free), and offera savings account valid exclusively for futuretraining. Think of it like a health savings account. Doing it this way defers training costs to when needed and enables an intra-company job shift rather than an entirelynew recruitment. Insurance and/or employeebenefits companies would need to underwrite the terms and conditions of such products and work with employers to instituteit as partof benefitpackages. They also might offerit direct to consumer.
  18. 18. © 2018 Reverse Tide LLC 18 Additional Reading A FUTURE THAT WORKS: AUTOMATION, EMPLOYMENT, AND PRODUCTIVITY https://www.mckinsey.com/~/media/mckinsey/featured%20insights/Digital%20Disruption/Harnessing%20 automation%20for%20a%20future%20that%20works/MGI-A-future-that-works-Executive-summary.ashx Will Automation Eliminate Our Jobs? https://medium.com/our-future/will-automation-eliminate-our-jobs-b3ab77fc29d7 Concluding While automation protection products are likely to be highly demanded in the coming years, it is also a harder product to develop than others. It’s questionable whether there is demand for a future scenario that few can predict or really want to think about. More likely, products will need to be aimed at reacting to new economic realities. But the point is, about half of all today’s jobs are at risk. That is an unprecedented shift and will affect the financial world in profound ways. Innovative banks ought to start preparing a product response today. Training lending2 In the prior product idea on student lending, I proposed an educationproduct outside the typicaluniversity student loan program. Automationfurther accentuatesthe need for this. There are many current options for training and certification. However,lenders can start establishing partnerships with learning institutions to solidify their loan products ( like theypartner with university financial aid offices). That enables more customproducts in training lending. They may also choose to fund retraining directly as a hedge against futurebank losses. Universal basic income While I personally disagree with the economics of a universal basic income program, it is gaining traction in technology, economic, and politicalcircles. Inevitably, various governments will experimentand implement such measures. Given that UBI would affect all people,it’s an incredible product opportunityfor banks. Establishing the product and infrastructure todaysets them up well for futuredelivery. They may also establish resources for recipientsto optimizetheir new guaranteed income. 3
  19. 19. © 2018 Reverse Tide LLC 19 - 8 – Global Health Insurance Living in the United States, it has long been clear that our health insurance system is broken. We pay an excessive amount for health care, as there is misalignment between the consumers, payers, and providers. While I can write an entire essay on why health costs are uncontrollable, let’s just allow the facts to speak for themselves. US per capita health spending is more than twice that of most other developed countries. There are two major issues for the consumer. First, if you have health insurance, you’re still paying obscene amounts for coverage. Most policies have significant monthly premiums and then significant deductibles should you require care. Second, if you lack health insurance and need any procedure, the costs will likely exceed what the average person can afford. I’ll stay away from the sensitive politics of US health policy. However, there ought to be products that address the gaps faced by certain demographics in this system. Product Opportunities Global health insurance1 Minimum health coverage is currently required bylaw in the United States. But it’s problematicfor frequent travelers or expats in keeping minimum coveragefor something they don’t need. If I spend 6 months abroad, I won’t go to in- network or to any US provider for health care. I’ll use the much lower cost locals. Global health insurance exists but is inconsistent with US requirements. There ought to be a product that meets US standards and provides coverage while out of your policy’sjurisdiction. Medical tourism Many consumers take advantage of the lower health care costs (and equal quality) in other countries. Cosmetic surgery, dentistry, and other essential or electable health care is often availablein other countries at a fraction of the US price. Fly to Thailand or Costa Rica, stay 2 weeks, and pay out of pocketfor health costs and still pay much less than in the US. Why not offer a health policyincentivizing policy-holders to choose care abroad (for discounts). Dittofor pharmaceuticalsthat are often a fraction of their US price. 2
  20. 20. © 2018 Reverse Tide LLC 20 Additional Reading Overview Medical Tourism Today http://wp.globalhealthequity.ca/wp/wp- content/uploads/2013/07/Medical%20Tourism%20- %20Chapter%202.pdf Top 10 common international health insurance mistakes for expats https://expatfinancial.com/top-10-common- international-health-insurance-mistakes-for- expats/ Concluding Health care is a tricky topic. While I have focused on the United States, other countries have their own challenges in providing outstanding access and care, while keeping a cost-efficient system. Amazon, Berkshire Hathaway, and JP Morgan have declared their intent to solve the health care issue. While it’s a noble gesture, they wouldn’t dedicate such resources without forecasting the gargantuan business opportunity of this investment. The product suggestions I made are only touching the edges of health insurance needs. What is really required is massive reform across the health industry. And there’s no reason that it should stay local when there are outstanding health resources available around the world. This is a space that banks should follow closely. JP Morgan is taking leadership but there is plenty of room for other participants to find their niche. Health insurers have long faced a favorable market. But the current products are neither consumer-friendly nor sustainable. Better will inevitably emerge. I see opportunity for current health insurers to reform their product, new ones to enter, and fintech companies to partner with biotech companies toward an all- encompassing health solution. While my examples address small markets, solving the big health care market is possibly the largest of any in this paper’s list.
  21. 21. © 2018 Reverse Tide LLC 21 - 9 – Sharing Economy Products The sharing economy has boomed in the past 5-10 years and is far from finished growing. We share everything: housing, autos, offices, bicycles, furniture, and much more. Many also extend the definition of the sharing economy to include the platforms that enable on-demand usage of products and services. This would include entertainment, software, communications, and more. The financial services industry has barely played a role in the sharing economy. That’s logical, as sharing is the opposite of asset ownership. But that’s where innovation comes in. Financial products are needed in this sector. Let’s examine a few trends and the potential opportunities… Product Opportunities Ride-share products1 There is very spotty availabilityfor Uber or other ride-share driver insurance. Even when available,it often conflicts with personal autoinsurance or has noticeable gaps. Likewise, there isn’t a good lending product for peoplethat want to buy or lease cars to start this type of business. Home-share products The exact same commentary can be made for Airbnb and other home-shares. There are few products offering liabilityand homeowners insurance. Similarly, lending products don’t consider income generated from your personal residence. Innovation is needed here. 2 Business Opportunities3 Sharing economy business models have unlimited potential.The core idea of WeWork, for example, is making officespace more variableand flexible. However, despitethe officesharing intent, they can build unlimited business models within their confines. Build it, generate a loyal customer base, and cross-sell opportunitiesexplode. That same line of thinking ought to be considered for other sharing businesses. Not everything needs to be a huge platform. A single mall, hotel, or transportationvehicle can generate a lot of business for their owners. WeWork is done through leasing and a mix of equity and debt financing. But banks can help underwrite smaller sharing economy businesses that bring consistent revenue streams plus the potential for additional future streams. Those product lines are needed.
  22. 22. © 2018 Reverse Tide LLC 22 Concluding The sharing economy is both a threat and opportunity to today’s financial products. Societally, the sharing economy makes sense. It makes for productive use of large and pricey assets. And platforms have emerged to facilitate small businesses and great customer experience. Banks need to consider these trends today and take the opportunity side of the equation. Self-driving cars4 There are enormous financial services implications as self-driving cars emerge. First, auto lending and insurance as we know them today will significantly decline. In the future insurance world, there are many open questions. Who accepts liability?The AI that powers these cars? The auto manufacturer?The companythat mobilizes them? The city?The driver that serves as a backup to the AI? Or what if I buy a self-driving car. Do I need to buyauto insurance? What if I turn off the self-driving features and drive under my own control? And what will lending look like? Will we each own a self-driving car?That will be very expensive compared to today’s vehicles. Financing terms would likely need adjustment. Or perhaps most of us share our vehicles in a pay-per-useor subscription typeservice. Lending would then be more geared toward a B2B typeproduct. Replacing asset ownership and financing5 What happens in a futureworld where households and businesses forego asset ownership en masse? In other words, we don’t own homes, cars, or other large assets anymore. Instead, we opt for sharing. We might accumulatemany subscriptions to sharing businesses as a replacement.Or we might co-own assets with a large group of other people. Financing should respond. Banks can’t lose the majority of their mortgage and autoloan population.They have to adapt. They might createunsecured lending products to handle subscription services. They might develop secured lending products for co-ownership. Or they might build products that mutuallyconsider personal and business use of assets.
  23. 23. © 2018 Reverse Tide LLC 23 Additional Reading WeWork’s $20 Billion Dream: The Lavishly Funded Startup That Could Disrupt Commercial Real Estate https://www.cbinsights.com/research/report/wework-strategy-teardown/ The Current and Future State of the Sharing Economy https://www.brookings.edu/wp-content/uploads/2016/12/sharingeconomy_032017final.pdf Insuring the sharing economy https://www.aig.com/content/dam/aig/america-canada/us/documents/insights/aig-insuring-the-sharing- economy.pdf
  24. 24. © 2018 Reverse Tide LLC 24 - 10 – Biotech Covered Health Insurance While health care has made incredible leaps in the past few decades, we still have a reactionary system instead of one built upon holistic and preventative health. But with major biotech advances imminent, the health industry simply can’t ignore them. It’s likely to overhaul the entire system. Patients will demand new preventative health opportunities as they become aware. Providers will scramble to understand the latest developments and implement it into their practices. And insurance companies will be forced into providing coverage. The interesting part will be how this materializes. Health care is a difficult industry to enact change. It is decentralized by geography and highly regulated. Integration is difficult despite its necessity in a tech-driven system. As technology outpaces the industry’s capacity for change, what will happen? I predict innovation wins and we’ll see significant disruption. Financial services will be at the heart of it all… Product Opportunities Global health1 What happens if local health authorities don’t allow certain advances but a neighboring jurisdiction does? Will patients settle for subpar treatment?Think stem cell science or new pharmaceuticals. Or perhaps roboticprocedures. Privacy concerns of ingestables. Ethical dilemmas in genetic engineering. The list is long. This further encourages medical tourism and global health insurance. Regulationis very necessary in health care. But advances will start outpacing and likely overwhelming regulatory capacity.With your health on the line, will you wait? Custom health plans Today’s health plans see young, healthy people subsidize the cost of the sick. But that’s at risk when data comes into play. Will a 25 year old accept today’s premiums when they can say with absolutecertainty that they are healthy based on ingestable diagnostics, custom genome readings, and AI data modeling that says they are 99.9% certain of being healthy? Their needs change in this new world. Same with every other health care segment. Health plans will likely becomemore a la carte. Which changes everything about today’s plans. 2
  25. 25. © 2018 Reverse Tide LLC 25 Additional Reading The future of healthcare: Finding the opportunities that lie beneath the uncertainty https://www.mckinsey.com/industries/healthcare-systems-and-services/our-insights/the-future-of- healthcare-finding-the-opportunities-that-lie-beneath-the-uncertainty Seven visions of the future of healthcare https://www.telegraph.co.uk/wellbeing/future-health/healthcare-predictions/ Concluding Our health care industry may change more than any other over the coming decades. We’ll have real-time monitoring of health. Better diagnostics and treatment options. Pharmaceuticals that can target the worst diseases. A comprehensive understanding of the human genome, how it changes over time, and perhaps how it can be altered. And then what happens when we have robots performing more precise medical procedures than humans possibly can? Or when nanotechnology changes the game completely? This is all on the way. Insurers need to adapt. Big data health3 Both providers and insurers will be inundated with health data. And AI will discover incredible things. The entire actuarialprocess will change as the data tells new stories aboutpatient risk, health treatmenteffectiveness, and more. As an example, let’s say that data shows that traditional cancer treatmentslike chemotherapyand radiation are counterproductiveover the long-run and actuallycreatemore malignant cancer cells than they destroy. Will health insurers shun these treatmentoptions on data alone? What if instead, natural diet remedies prove more effective?Might your health insurance policy radicallychange? Big data and AI will change everything we know todayabouthealth. Liability insurance Significant advances in both biotech and medtech will also have a profound impact on medical liability. A few examples. What is the liability situationon our prior cancer example? Would a doctor face liabilityissues for going with data and treating cancer with natural remedies?Likewise, would a doctor face liabilityissues for ignoring the data and sticking with chemo? In a medical world where data guides decisions, it makes judgment a tricky proposition. What aboutroboticprocedures?How does a health provider insure liability?Is the manufacturerliable?The user?Both? Again, nothing but big changes are ahead. 4
  26. 26. © 2018 Reverse Tide LLC 26 - 11 – New-Age Retirement Products This is an appropriate topic to discuss after the health advances I described in the last section. We are going to live significantly longer lives in the not too distant future. Global demographics are already showing an aging population and in most of the developed world, birth rates are below the population replacement rate (guaranteeing that continues). So how does that affect the financial services industry? Greatly. Most products strongly consider age and lifespan. This is especially true of the many retirement products. And it can be an outstanding opportunity for those that anticipate what changing demographics will do to their product suite… Product Opportunities Life insurance1 Average lifespan is a huge part of life insurance actuarial models. Does life insurance become a more attractiveproduct?Does that mean lower pricing? Might life insurance be more closely tied to health metrics? Probably yes to all. Health insurance This can be quite the windfall for the health insurance industry. Certainly if lifespan increased drastically, social programs would be actuariallybankrupt. Taxpayers can’t fund 35 years of senior expenses. Retirementage will climb. And now people aged 60+ will seek health insurance. 2 Retirement savings3 The products and policy surrounding retirement savings is interesting. Should a kid start saving for retirement in their 20s when retirementmight be 70+ years away and we’ll probablyhave anti-aging remedies by then anyway? Howwe earn, save, and retirewill change substantiallywith longer expected lives. Lending Lenders virtuallyignore the retirement crowd. After all, they have accumulated assets and are in preservation rather than growth mode. But the 55+ demographic might look more appealing if that’s halfway through life. Lending models will need to account for a larger lifespan and new customers. 4
  27. 27. © 2018 Reverse Tide LLC 27 Additional Reading World Population Ageing 2015 http://www.un.org/en/development/desa/population/publications/pdf/ageing/WPA2015_Report.pdf THE IMPACT OF AGING ON FINANCIAL MARKETS AND THE ECONOMY: A SURVEY https://www.brookings.edu/wp-content/uploads/2016/06/20040722survey.pdf Concluding A longer lifespan is highly likely to occur. This changes everything about society. It’s a net positive for most economic measures, as we have a larger workforce and consumer base. But financial services need to accommodate. This might seem futuristic but it’s actually right around the corner. We are a rapidly aging society and demand by 55+ demographics will outweigh those from other generations. Longer lifespans only extrapolate these trends even further. Finance companies have an incredible opportunity to service this crowd. While we often talk about innovation via technology, this demographic will require product innovation. Pensions5 While they have decreased in popularity, privateand public pensions are still widespread throughout the world. Products will need a massive rethink. We already have funding issues but imagine how exasperated they would be if lifespan grew even further. Replacementproducts need to be considered in today’s world but much more so with longer lifespans. Financial planning The financial planning industry is big and many products are aimed at retirementas life’s largest financial event. These models and their products need a rethink. At what age should we consider retirement?What product gets us there? What do we do in the meantime?This industry needs a viable answer. 6 Post-retirement products For people that are already retired, we need betterproducts. Our current financial system assumes that age 65+ is in a very conservative,fixed-income type product becauselifespan will be short. But maybethat’s no longer the case. And even if it is, with demographic spikes in the 65+ age bracket, we need betterproducts in deposits, annuities, and other conservative financial categories. The demand will soon skyrocket for such products. 7
  28. 28. © 2018 Reverse Tide LLC 28 - 12 – AI Credit Products For a long time, lending decisions were primarily made on three factors: your credit score, your ability to service the debt (via income), and the loan/value ratio relative to collateral. Unsecured loans only consider the first two. Some banks or loan types might go beyond that but it’s rare. Fintech companies are starting to change that. Using big data and AI, they are finding alternative sources of establishing creditworthiness and then pricing the loan. This is quite new. Many of the financing companies doing this are quite young. It will take many years to assess whether their new credit algorithms perform better than more established ones. I won’t comment on what factors should be considered in new-age credit risk assessments. But as established practices change, new products will emerge. Product Opportunities AI Lending1 Since AI can assess unlimited quantities of data sources, while learning and refining their credit risk algorithm, banks can introduce more variableproducts. This is especiallytrue in the commercial world. Risk profileschange regularly. Industry conditions change, borrowers statefinancials, deals are made, etc. An AI-based product can respond to those changes by optimizingthe lending agreement real-time.This might be repricing the loan or expanding/tightening the credit line. The AI should be programmed to optimizethe chances of repayment. This automaticallyand simultaneouslyconsiders both bank profitsand giving borrowersthe financial product needed to be successful. It is superiorto a human-driven product for many reasons. First, it assesses creditworthiness using more than the 3 traditionalsources. Second, it updates creditworthiness without going through the lengthy underwriting process for credit line increases or repricing. And finally, it considers what conditions will make the loan most successful. That is a win all-around if done correctly. AI is already being deployed but needs to be intertwined with the product itself.
  29. 29. © 2018 Reverse Tide LLC 29 AI Business Tools In taking AI to the next level, banks can also deploy products to help their customers sound financial decisions. This gets banks into technology products rather than exclusively finance products but theyserve a similar purpose. For example, theycould develop a home-grown AI platform that helps businesses automaticallymanage all aspects of their finance department (accounting, cash management, debt, payments, etc). Then they provide a SaaS service to borrowers in all these areas. The advantage for a bank is keeping track of their loans and ensuring their customers are steered toward appropriate 2 Subprime products Consumers without a credit history or those with low credit scores lose access to the credit market. Or alternatively,they get offeredproducts that don’t suit them (as seen fromthe moral hazards we saw in the 2008 financial crisis). But subprimealways manages to make a comeback. It’s a highly profitablesegment during good economic times or if managed well. But it’s incredibly risky as we often find out. AI changes the game in subprime.If the AI-based alternative creditworthiness measures turn out successful, it opens a world of possibilities.Subprimeas terminologygoes awaybecause these other credit measures supersede FICO scoring. And the new “risky” class of borrowers can be given custom products (based on AI recommendations) that mitigaterisks automatically. As noted, we are still years away from perfecting alternate credit scoring algorithms. In the meantime, banks can start formulating the products that will come out of such changes. 3 financial management. Many small businesses lack this financial sophistication and would welcome the advanced resources. In addition, the banks gain even more data from borrowers that can be used in cross-selling or advanced analytics. The advantage for loan customers is access to modern AI financial management. And maybe banks offer a few points of pricing incentive like insurance companies did for utilizing auto- monitoring devices. If deployed well, it’s a win-win for both sides in the banking relationships, while giving banks a new revenue product.
  30. 30. © 2018 Reverse Tide LLC 30 Additional Reading Artificial Intelligence Applications for Lending and Loan Management https://www.techemergence.com/artificial-intelligence-applications-lending-loan-management/ Artificial Intelligence in Finance and Banking https://www.mindtitan.com/case/artificial-intelligence-in-finance-and-banking/ Getting Bank Automation Beyond the Pilot Phase https://www.bcg.com/publications/2017/financial-institutions-technology-digital-getting-bank-automation- beyond-pilot-phase.aspx Concluding Artificial intelligence is a game-changer in the lending world. By fundamentally altering the basis for offering credit, we can build better products for both lender and borrower. Variable products are on the table like never before.New borrower types can be automatically segmented into custom products. And borrowers can be given automated tools to manage their banking relationship and other financials. This is just a start to optimizing what banking can offer. AI is being actively implemented across the banking world today. But we ought to be cautious. By turning over transactions to automated decisioning machines, it can have unforeseen consequences. Machines can optimize for what happened in a past world. But it can’t necessarily predict what happens as the world evolves and new variables come to light. It is dangerous to build an entire business model around an AI that isn’t programmed to consider new variables, irrational human decision- making, or a world that changes rapidly. I believe AI has a bright future in the industry. But it should be deployed through years of testing and with humans able to QA and override decisioning. Likewise, AI shouldn’t comprise 100% of a bank’s activity or anything close to it. Program it incorrectly and the entire business fails as a result. Lending is still fundamentally the same as always. We just have new tools to optimize it. AI should be a single optimizing tool rather than the core management of all lending activity.
  31. 31. © 2018 Reverse Tide LLC 31 - 13 – Digital Asset Finances Whether you’re a believer of bitcoin and other cryptocurrencies or not, it’s here to stay. The valuation is certainly debatable (and I’ll admit both advocates and detractors make good points). But the underlying technology that blockchain enables in terms of payments, decentralization, and democratization of finance are hard to ignore. Consider: • While ICOs will inevitably be reigned-in by regulators and investors that demand superior fundraising standards, it’s a revolutionary way to raise money. • Tokens are actually quite valuable in certain scenarios. In the gambling, gaming, or virtual reality world, having a native transaction medium is quite efficient. • The auditability of the blockchain and low likelihood of fraud makes it a trustworthy medium. And for people that have seen currency manipulated via inflation, poor government policy, corruption, and unstable markets, it stabilizes financial services. The benefits of blockchain and cryptocurrencies are too numerous. Consolidation and better capital allocation will likely occur. And cryptos will inevitably mature via price stability, regulatory clarity, scalability, transaction cost declines, and universal payment acceptance. This sets up well for significant long-term growth. So what happens to traditional banking? New products will need to emerge. Product Opportunities Bank accounts1 Banks will inevitablyneed to accept crypto-denominatedassets. They will need the infrastructureto identifythese assets and offerlow-cost conversion. Likewise, innovative banks will consider bank accounts denominated in the crypto currency customers prefer depositing in. Payments Cryptopayments offer something that bank payment systems don’t. It’s cheap, easy, and auditablewithout intermediaries. Banks will need to build the payments infrastructureto support incoming and outgoing crypto payments. 2
  32. 32. © 2018 Reverse Tide LLC 32 Additional Reading How Blockchain Could Disrupt Banking https://www.cbinsights.com/research/blockchain-disrupting- banking/ The Future of Money https://www.ey.com/Publication/vwLUAssets/ey-the-future- of-money/$FILE/ey-the-future-of-money.pdf White Paper List - CoinLauncher https://coinlauncher.io/white-papers Concluding It’s a bit strange when so many prominent finance experts have blasted crypto as a fad (Jamie Dimon, Warren Buffett). While detractors do have good arguments, they fail to understand that crypto/blockchain’s emergence is due to inefficiencies and dissatisfaction with the status quo. This technology will be disruptive; the only question is how much. Banks have to invest in understanding the trends here. At a minimum, blockchain offers interesting back-office technology potential. But more likely, the industry is a threat to banking as we know it. Like other trends, it is better to find the opportunities within and innovate accordingly. Full-service banking3 Banks have the existing infrastructureand scale to provide full-servicebanking. This is something most cryptofinance companies lack today. This includes payment guarantees from fraud, deposit guarantees, customer service, AML/KYC, budgeting tools, and more. Banks ought to provide these services as part of their own crypto accounts or as complementaryservices to the fintech companies that do. Blockchain technology Blockchain is an importanttechnological advance that has many competitive advantages. Banks are investigating blockchain uses todaybut are implementing slower than fintech players. This means banks ought to invest in implementing blockchain as part of internal infrastructurein lending, deposits, insurance, asset tracking, back office processing and settlement,financial intermediation,capital markets, and more. 4
  33. 33. © 2018 Reverse Tide LLC 33 - 14 – Virtual Asset Financing As this is a more theoretical and futuristic concept, I won’t discuss specific product ideas but the concepts underlying this opportunity. Virtual reality is primed to be the most impactful technology to the broad population over the next 10-20 years. It will change everything: entertainment, communications, social interactions, education, e-commerce, and more. VR will eventually be capable of doing all that screen technology (mobile, PC, and television) can do but better. It is fully immersive and realistic, while you can simulate anything. As much as we currently use screens, we’ll use VR even more. We’re still 5-10 years away from the technology to make this possible. But it’s being heavily invested in. At some stage, VR will be so advanced that it will replicate every aspect of real life. One area will be the physical spaces we know today. And our real physical spaces have value depending on various factors. For example, if you have property in the center of Times Square or on South Beach Miami, it holds immense value. Why? They are world famous places that draw millions of people every year. You can create valuable residential or commercial endeavors from such real estate due to its popularity, foot traffic, and usage opportunities. Now let’s go back to the virtual world. Let’s assume someone creates an incredible virtual city. All the VR users want to “walk” down its streets. In this example, someone with virtual real estate in a prime section of that city would have incredible value. Since this is hypothetical today, it’s difficult to imagine what you’d do with it. But perhaps you create a virtual “room” or “experience” that now generates incredible attention and you monetize it accordingly. Or maybe you offer businesses a billboard to advertise someone’s product to all the virtual beings that will walk past it.
  34. 34. © 2018 Reverse Tide LLC 34 It’s much the same as having a high SEO position on Google for common search terms. Or having millions of social media followers. Or being a company like Facebook that controls what happens within its “digital real estate”. All these examples have significant value. But it would have been difficult to understand that value in the ‘90s before the current internet age existed. It’s no different with VR. When this is the dominant computing medium, new things will have value. And since VR creates a physical world over a digital medium, this concept of having a “virtual asset” can emerge. - You could own a storefront asset with dominant positioning in an Amazon or Alibaba virtual mall - Or maybe you own a dominant social space that others pay a fee to interact in (a virtual nightclub or stadium) - You might own the advertising rights to a popular VR simulation All these things have commonalities. They are virtual assets. You own the space, can contract with others based on that space, derive income from it, rent it, sell it, etc. This is less the case in the digital world because nothing occupies physical space. Not so in a virtual world that replicates physical reality (where you can walk around, interact with others, etc). Now go back to financial services. What if someone wanted to buy the real estate in a virtual city or mall? There is no financial product for this today obviously. But could a bank even envision offering this? Imagine trying to underwrite a virtual mortgage or a virtual property insurance policy. But if this example holds true, that’s exactly what they should do.
  35. 35. © 2018 Reverse Tide LLC 35 I’ll stop there. This is a mind-blowing concept because it assumes a lot. But this is how I predict things will materialize. At a minimum, there is a financial product need for digital and virtual assets. Assessing and storing their value, lending against them, facilitating their trade, accepting payments off them, and providing insurance. Sound interesting? It does to me! And its reality is closer than many might assume. Additional Reading Why Virtual Reality is the Most Impactful Emerging Technology https://medium.com/our-future/why-virtual-reality-is-the-most-impactful-emerging-technology-f208ab0f14fe Why Businesses Should Be Investing in Virtual Reality Today https://www.linkedin.com/pulse/why-businesses-should-investing-virtual-reality-today-dan- perry/?published=t
  36. 36. © 2018 Reverse Tide LLC 36 - 15 – Futuristic Products Predicting the future is difficult and especially when there is so much research, development, and investment across so many technologies. Even a professional futurist can find it difficult to keep up! But banks ought to have R&D efforts looking into all areas of emerging technology. There will be fantastic opportunities to deliver new products, optimize existing ones, and gain market share. Likewise, fintech will have some fantastic opportunities to innovate and build share of their own in coming years. The following products can’t exist with modern technology yet. They are entirely theoretical and contingent upon certain advances coming to fruition. But they are well worth monitoring and developing if certain predictions come true… Product Opportunities Smart contract banking1 Most banking products are nothing more than financial contracts betweenbank and customer. With blockchain capableof automatingthe executionof contracting, we can largely automatemost financial products (insurance, lending, etc). Drone banking Many banking requirements are physical in nature. Depositing cash, physical signatures, safe-depositboxes, etc. With delivery drones on the way, any physical transaction can be done via drone. And banker interactions via VR/AR. Branches may finally be eliminated with futuretech. 2 Robotics financing3 As AI and physical roboticsbecome possible, it’s conceivablethat businesses and households will own robots to automatephysical tasks. Financing and insurance will need to keep pacewith these new products. Space travel With SpaceXand Blue Origin innovating space, might we somedaysee banking needs arise beyond Earth?At a minimum, we’ll need propertyand personal insurance for space flights. But what if we colonize Mars? An entire new world of banking needs will arise! 4
  37. 37. © 2018 Reverse Tide LLC 37 Concluding I have written about the benefits for all firms of having a Chief Innovation Officer,Futurist, and full team of innovation specialists. Look me up on LinkedIn or Medium for details on how to tangibly hire and position this team for success. Banking needs this innovation commitment more than most industries. Finance is the fuel for all industries to grow and thrive. Keeping up with the most modern trends and matching them with useful products is critical. Advanced crowdfunding5 Crowdfunding has become big business. But it is still niche in terms of total equity or debt financing. Legal policyneeds to change here as well. However,we can offermore sophisticatedways for the average investor to be part of startups, real estate, international markets, and other investment types. Innovation has been interesting here but can be enhanced as more professional finance firms enter. ICOs are an interesting first step. Value-based government At some stage, government will need to innovate along-side the rest of the world. Might we see corporations launch government-like policy?Or perhaps they will competewith governments in delivering services? What aboutthe concept of cross-border government? Or virtual realitygovernment? All this is very theoretical.But as AI, VR, and other technologies dominate, it’s not as far- fetched as it seems. 6 Beyond core banking7 Banks have been reluctant to go beyond core financial services. But there are so many additional opportunitiesto grow. I mentioned it in the AI post about sharing AI SaaSfinance tools with their borrowers. But there’s more. Banks can get into privateequity. Accounting. Tax. Technology. Healthcare. The list is long. Every business requires strong financial management and tools. Expanding outside financial services would be a pseudo type of vertical integration. Since banks control capital,it would be interesting to see this happen.
  38. 38. © 2018 Reverse Tide LLC 38 Full Product Management This article is only the first phase of good product management. I exclusively focused on financial services product ideation. The next step is always conducting a full analysis of market fit, demand, competition, profitability, and other important factors. And then good product management takes over in designing, building, and managing that product. If any of the ideas in this article sound interesting, you’re devising products I haven’t considered, or optimizing existing products… I’d love to discuss further. Here’s how I approach product management more comprehensively… • Market gaps • Opportunities • Trends • Brainstorm • Feedback • Competition • Industry analysis • Feasibility • Profitability modeling • Marketing / PR • Distribution • Service • Continuous improvement (versions, upgrades,etc) • MVP • Assessdemand • Feedback • Revise strategy • Better plan launch • Develop full prod. features • Sales, service & support functions • Distribution • Shared services • Integration strategy with other products • Org. training • Features • Pricing • Customermapping • Requirements Of course every product is different and will have its own unique management approach. Some things maybe added/subtractedor ordered differently.
  39. 39. © 2018 Reverse Tide LLC 39 Engage Dan About me: I have spent my career in financial services and want to help forward-thinking banks thrive in the modern world. I have worked directly in banking and as a management consultant at PwC and independently. My work spans almost every banking product, 13 large companies, 20 projects/roles, and geographies all over the world. I pride myself on building innovative strategy and implementing to outstanding ROI. Among the services I offer: - Transformation leadership and program management - Product strategy, implementation, and management - Chief Innovation Officer or Futurist roles - Chief of Staff to the CEO or COO - Implementing strategic and cultural innovation - Process assessment and improvement consulting - Fintech executive management If you’re interesting in discussing further, I’d love to hear from you! dperry@reversetide.com +1 (312) 957-5705 The topics of this article are only a few of my perspectives and offerings. I’m interested in helping your bank or fintech organization. I prefer consulting engagements but am open to the right full-time senior management position.

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