Brett King on how China, Kenya and technology are disrupting financial services

Brett King, host of the popular weekly radio show and fintech podcast “Breaking Banks,” has spent the past two decades focusing on how technology is disrupting global business and changing consumer and corporate behavior — particularly in the financial services industry. His work brought him from his native Australia to Hong Kong, Dubai and New York.

He dropped by the LinkedIn office in New York yesterday to discuss the future of banking, the rise of mobile technology and how developing economies in Asia and Africa are the new blueprint for the brave new world of mobile banking.

Early on, while he worked as a consultant to various financial services firms, pitching new business models was a hard sell, he said. “I kept hitting the brick walls inside big banks, because they didn’t get technology,” King said.

Today, companies in developing economies in China and Kenya, for example, “get it,” and are sparking radical change in finance.  

Here are some highlights from our conversation:

Edited excerpts:

Walden Siew: How did you make the transition from a career in financial services to become an entrepreneur and tech commentator?

Brett King: In 2006 I wrote probably my most important piece which was a 15-year strategy for HSBC’s board, which was called HSBC 2.0. I presented that to the board, and there were a couple of board members who got it.

But there was a lot resistance from the traditional guys. They thought it was ridiculous that I was saying that the web and mobile were going to be more important than branch. They couldn’t imagine that world.

I was basically saying, in terms of the retail bank, in terms of positioning, in terms of the way you acquired customers and captured revenue, that was going to dramatically shift over the next 20 years. My argument was that branch activity was going to decline to the point where branches were just going to be too expensive to do business, and that HSBC would have to be able to deliver excellence on first, the web, and revenue, and then on mobile.

WS: Did your argument work?

BK: It didn’t resonate strong enough. I had some very strong supporters but in the end, I just kept hitting a brick wall. What I decided was these guys are moving too slow. What I realized was that there wasn’t a champion of change for banking, so I decided to be that guy.

WS: How is technology transforming the financial services industry?

BK: There are still a few holdouts. But if you don’t step back from the channel or the product view of the world, then you won’t understand the gravitas of the shifts that are taking place. So if you look now in China, with Alipay and WeChat and how they are transforming payments, or you look at on a net basis the investment in fintech and how much investment has gone into fintech globally since 2010, how many assets have been captured through fintech, how many transactions that have been delivered through technology companies rather than through pure banks...

The fact is the way customers get access to financial services through technology has radically changed.

WS: What do you see as the top trends to watch in fintech today?

BK: If you want to look at where fintech is going, then China and developing economies in Africa are better templates for where the future of fintech will go than what’s happening in the U.S. or the UK, primarily because they don’t have legacy behavior or legacy architecture that restricts them in terms of what they can do.

So you want to introduce real-time payments in the United States… such as PayPal or real P-to-P stuff, then what you’re doing is competing with people who are using checks, credit cards or even cash. So you have to have a pretty compelling story as to why a mobile-based P-to-P system should replace checks. You have to get landlords to start accepting money by mobile instead of by check, and that takes some time to change that behavior.

WS: Can you give some examples of what’s happening in developing economies?

BK: Now in China, you didn’t really have a lot of checks, you certainly didn’t have much card network stuff. So when WeChat and Alipay came in, they’re able to capture the latent need for payments networks that wasn’t filled by legacy systems.

And it’s the same in Kenya. You have 80 percent of the Kenyan population, for example, that didn’t have a bank account. So they didn’t get access to a traditional banking system. So when M-Pesa (M for mobile, and pesa is the Swahili word for money) comes along and allows you to have a basic bank account on your phone, then suddenly 75 percent of the Kenyan population is using M-Pesa. 60 percent of Kenya’s GDP is going through phones — and that’s financial inclusion and lack of legacy behavior.

That gives them more flexibility, faster adoption, and the other thing that’s really radical about this stuff is that, you take someone like WeChat or Alibaba, is that they don’t have to try to take a bank product, like a savings account or a debit card and put it on the phone. That’s what we did with Apple Pay. That’s what banks are trying to do with their mobile apps. Instead they just say you can send money from phone-to-phone, right, and they create an account within the phone within the app, so it’s more akin to a PayPal but then they’re doing interesting stuff. Like M-Pesa has this product called M-Shwari, which is a savings account effectively. But it takes you 10 seconds to sign up.

WS: You haven’t mentioned Silicon Valley or developed markets much.

BK: Well, for most of the Kenyans, they’ve never walked into a bank, and this is the first time they’ve ever had savings. And they’re not doing it through a bank, they’re not doing it through a card, they’re not doing it through a passport, they’re doing it through their phone. This is creating some very different design paradigms in terms of the way the financial system is being designed on top of mobile. It doesn’t necessarily need to be a conversion of the old system to mobile. It’s something new, and it’s based on behavior and experience.

This is why in terms of the experiences we’re seeing in these developing countries they tend to be better examples of where fintech can take us than in the U.S., which tend to be iterations on the existing system. If you like, it gets you back to first principles, right, Elon Musk, and Tesla and SpaceX, or Steve Jobs and the iPhone. Instead of saying let’s iterate on the existing banking system, how do we get bank product and services on the mobile channel, which is how banks do it, design by analogy is what we call that. Instead, it’s first principles.

We’re saying how do I send money by phone to you. How do we do it via the phone? How do I get money into the phone? How do I send you money? And that’s how AliPay, WeChat, TenCent, Baidu’s initiatives, M-Pesa look at this.

WS: What’s your best advice for traditional banks?

BK: The way HSBC and Citibank would look at this is they would say these are people we never would have been interested in anyway, from a banking perspective, because they don’t have any money. They’re not going to invest, they’re not going to get a mortgage, they’re very poor and that’s why we haven’t included them in the banking system to date. But we’re talking about 1.4 billion people who come into the financial services system through mobile phones now. So this is not a small group. We’re talking about a massive injection of banking behavior, but it’s mobile first, especially in places such as China, Kenya, Nigeria and Bangladesh.

It’s only a matter of time then before mobile becomes the dominant bank account in the West as well. Now, you’ll have it integrated into the banking system, but the experience will be owned through three core technologies: smart phone, now, smart assistants and voice, by early next decade, by 2022, and by 2025 you’ll start to see mixed reality glasses, augmented reality glasses, come into the mix as well. And these will dominate the way you transact and interact with the financial services system. And the branch will be a distant memory for most of the population.

To hear more or to continue the conversation with Brett, check out his latest show, which features a combination of fintech news, some breaking news from Monetise UK, and CES AR/VR and AI coverage.

Regarding CES, today’s show includes interviews with:

Robert Scoble – well-known West Coast tech commentator, and bestselling author

Guy Kawasaki – New York Times bestselling buthor, speaker, evangelist

Michael Hafner – Head of Mercedes Benz autonomous and assisted driving systems

Melissa Cefkin – Principal scientist for Nissan Research Centre

Itoki Fujita – Mistubishi 3D point mapping technology

Headshot photos: shot by LinkedIn in NYC