On Oct.30th, We had a fascinating one-hour-long conversation with Mr.Richard Turrin ,the Author, Fintech, AI and Innovation Consultant,talking about his more than 20 years experience in fintech innovation and deep insights on the uncharted waters associated with the latest cognitive technologies.
Innoverview: How would you describe yourself in three words? What’s your motto?
Richard: That’s a great question. Let me answer the part about the motto first. When I was a young boy my grandfather who lived until 95 always said in Italian “sempre avanti” which means “always go forward” I think it’s simple and works perfectly for everyone. No matter what life throws at you it’s important to “always go forward.” Thanks Nonno! (Nonno is Grandpa in Italian).
The three words that describe me: 1) Curious, 2) Adventurous, 3) Outgoing
These words nicely describe me and my life. I am really curious and always want to know why things work the way they do. This inevitably leads me to want to fix things and make them better, just like in my book about Innovation Labs. The adventurous side of me moved to China with 2 duffle bags and a dream. I thought that if China is going to shape the world’s future, I want to be a part of it. So I moved to Shanghai and never looked back. The outgoing part of me is the part that wants to share what I’ve learned with the world and make lots of friends doing it. I’m a LinkedIn addict because I get to make new business friends all over the world and share with others. It’s the ultimate manifestation of my being outgoing! Hey by the way do connect with me on LinkedIn!
Innoverview: Can you please share more about your educational and professional background? And we’d love to hear what brought you to Fintech.
Richard: I will openly confess to being a complete science and math geek that loves Star Trek. I got into banking in the late 80’s when finance was going digital and Wall Street was hiring engineers like me right out of grad school. I like to call this the second wave of computing in banking. The first wave happened in the early 1960’s when mainframes were used by banks to send out statements and keep track of accounts. The second wave of computing in banking happened when we had computers on our desks that we could write code for to calculate the value of newly designed financial products.
Before PCs everything had to be coded on mainframes which took forever, so it was hard to design new financial products because you couldn’t price them. I worked in and eventually lead teams that innovated new traded bond products that solved customer’s risk management problems. It was fun because I worked with mathematicians, coders and lawyers all to innovate new financial products. I eventually went to IBM where I was a natural fit because I had been working on software used for financial products for my entire career. At IBM I specialized in AI and the software used in banking and fintech to help finance move to the 3rd Wave.
In the 3rd Wave of computing we’re using computers to make banking completely digital. For example, the bond trading teams I used to work with are all gone now and have been replaced with computers. It’s the same with retail banking where we can now bank on line without human interaction. “Digital transformation” is a huge undertaking for banks and China is leading this effort.
Innoverview: With the rise of mobile and shift to online banking, today's banks need to be more innovative than ever to compete with the growing number of digitally sophisticated fintech banking companies. How will technology, finance, and regulation come together to impact innovation of retail banks? How will, AI change access to financial markets from your perspective?
Richard: Mobile is helping to push the digitization of the entire financial system. This means that banks, brokers, and insurers are all changing their companies and products to become digital. It’s a natural progression and is the driving force behind these companies’ digital transformation and innovation programs. The problem is that it’s hard work and many companies have to learn how to go digital since they aren’t tech companies at heart. This is why so many companies are adding on innovation labs. These labs help the company understand how to use digital technology and provide a place to centralize digital resources within their company.
Fintechs are digital experts. In fact they are so good at digital that they are actually able to challenge some of the larger banks because their ability to make compelling digital services. In China Ant Financial is the best example of this. Ant’s ability to master digital allows them to compete with banks who are much bigger and older. So digital is leveling the playing field and taking away the advantage the incumbent financial institutions have. That’s not to say that incumbent banks are going to go out of business, they won’t. But their role in the financial system will change.
AI is a major part of every digital transformation program I know. The reason is simple, AI gives us a way to communicate with clients digitally through chatbot and voice recognition software. I’ve been watching people talk to computers on Star Trek for a lifetime and we’ve finally got the technology to the point where we can do it for real! That’s one reason it’s so important. The other is that AI can help predict our needs so that a digital company can provide us with the right kind of service when we need it.
Innoverview: You won the prestigious “Risk Technology Product of the Year” award when you worked at IBM China. As a way forward for risk analytics computation in banks, how would you predict the future of cloud adoption for risk management?
Richard: That’s a really interesting question. Adoption of cloud for financial companies is now normal, it’s not a big deal. Five years ago it was a different story, and financial companies were questioning whether or not to put their systems on the cloud. It was new and quite a challenge for many financial companies. Working for IBM, where you’ve got access to the world’s greatest technology, made using cloud services nothing more than a natural, or a logical progression in computing. So I confess it wasn’t me predicting the future! Instead, think of it as me transferring technology from IBM to a client and using it in a new way.
It was great to be a leader for IBM in cloud here in China, but as I mentioned now cloud is no big deal, everyone’s using it for risk systems and for retail banking. Major banks in the West are moving their entire computing platforms to rented cloud systems provided by the major tech companies. It took a while to catch on, but financial companies are now moving so quickly onto the cloud that it is the new normal. Note also that cloud computing is critical to their digital transformation plans because it allows for faster deployment of new software and services.
Innoverview: Why did you write your book “Innovation Lab Excellence: Digital Transformation from Within” and who did you write it for?
Richard: I wrote my book as a way to give back to a younger generation of innovators. When working at IBM Singapore’s innovation lab I had the pleasure of meeting a lot of other lab heads who were interested in IBM’s technology. What I found when talking to them is that many had the same problems that I faced earlier in my career as an innovator and that most labs shared the same problems. So after seeing the same problems over and over again I had the idea of writing about them as a way of using my experience to help others.
The book focuses on the three primary innovation lab stakeholders: 1) The lab employees, who need to bring innovation to their company; 2) The company senior managers, who pay the bills at the lab and need innovation to modernize their company; 3) The people within the company who have to work with the lab and have no clue what labs do, or how to work with them. The book lays out “best practices” which can help all three of these stakeholders get more out of their innovation labs and make the lab experience less painful for everyone.
Innoverview: Digital innovation laboratories are everywhere — and observant onlookers have had a few years to evaluate the results. Why are most innovation labs failing from your perspective?
Richard: The biggest cause of failure for innovation labs is a chronic problem that insiders commonly call “innovation theater.” This problem happens when companies make a big show out of innovating while being far less effective at producing results. Companies that do this tend to get headlines for a series of breathtaking innovations that make competitors green with envy, then do nothing to actually implement the solutions that are flowing out of their innovation ecosystem.
Lab staff stuck in an environment where “innovation theater” is a problem quickly become disheartened. They are doing their best to bring innovation to market but the company is simply not willing to implement any of their solutions. So after a while they lose their sense of purpose and start looking for other jobs. With innovation theater the problem usually rests with the company managers who resist change. I outline solutions to innovation theater in my book, but if senior managers don’t want to change a lab usually can’t force them.
Another problem that causes labs to underperform comes from the lab itself. Some labs don’t communicate well within the company to learn the real problems of the business. While lab staff may be digital experts, they are by no means experts in banking and have to learn from bank staff what problems are important. If the lab doesn’t invest time in learning about the business, they can develop innovations that aren’t suitable because they don’t solve real problems.
Innoverview: We’ve noticed that your next book is entitled “China’s Digital Currency Revolution: Profit from Banking Innovation that will Shape our Future” and will be available in early 2020. Could you disclose the unique opinions on opportunities and challenges for China’s digital currency revolution especially the Central Bank Digital Currency?
Richard: My next book is all about China’s use of digital currency and how it is used in banking and finance. We’ve already lived through the first generation of digital currency brought to us by WeChat Pay and Alipay. When these companies launched in 2014 everyone in Shanghai was using cash, a mere 2 years later in 2016 almost everyone had switched to electronic payment. These companies helped China go cash free and fundamentally changed our relationship with banking and investing. They helped China leapfrog the West in fintech development by 5-7 years. This means that if you live in the West, you should be learning from China so that you can understand how fintech will disrupt your local markets when it eventually arrives.
China’s Central Bank Digital Currency (CBDC) is a great example of how China is taking the lead in using fintech. I call the CBDC the second generation of digital currency in China as everyone here already has electronic payment of some form. With the launch of the CBDC people will be able to use a digital currency that is independent of these payment platforms that will function every bit as easily as cash does. It is a major advance and empowers people to use money as they wish without the need to use either of these two platforms. That’s not to say that either Ali or WeChat is bad, they’re fantastic, but now you will have additional freedom for your money. It is a -massive- change in how we use and store money and will contribute to helping China build a new digital economy.
Many other countries are also considering launching CBDCs but China will be first and they should watch and learn from China’s experience. This is a great example of how the West is now copying China’s technology. In fact if you look at Facebook’s Libra coin you can say that the project copies China’s technology in two distinctive areas. First it is copying WeChat’s model of adding a payment system to a social platform and second it is copying elements of China’s CBDC in the way the Libra coin will be centrally controlled. China’s financial technology lead over the rest of the world is really amazing and what inspired me to start writing this, my second, book.
Innoverview: Today, business innovation and artificial intelligence (AI) seem to go hand-in-hand to improve many areas of a business. From your perspective, how Artificial Intelligence Is Changing Business?
Richard: Great question and I can’t possibly write enough about how AI is changing our world and how China is the leader in AI implementation. There are essentially two areas where AI is going to fundamentally change most businesses. First customer service though robot powered communication systems and second through analysis of big data to predict you needs.
The first of these is the most intuitive. Think about how much you can do with digital without speaking with anyone. Quite a bit right? So we’ve got many of your basic needs covered but the problem remains how to talk with someone when you’ve got a problem or need service beyond the digital platform. That’s where these communication bots will make themselves useful. They are already so well developed that a Chinese insurance company executive boasted that their conversation bot can have a client chat for about 5 minutes without the client knowing they were talking to a robot! So that’s a great example of Star Trek coming to life! : )
Now onto the second point. As it stands now you open your app on your phone and it doesn’t know much about what you need or why you opened it. This is where AI is going to go to work. AI on you big data stream will not just know what you want when you open your app but help you make decisions. That’s the magic of this technology and why it’s going to be built into everything digital that you come into contact with. Someday soon your bank app will not only know your spending patterns but advise you how much, where and when to invest. AI will make your banking app a partner in your financial wellbeing.
Innoverview: The future of fintech in 10 to 15 years relies on security and improving authentication methods for companies to ensure users’ identity across their online service offerings. What will fuel the future of fintech?
Richard: There are two questions here that are really important. The first regarding digital identity is really interesting and a prime use case for blockchain technology. China just announced a huge new government effort to develop blockchain technology to make sure China remains a technology leader. Using one of the newer blockchain digital identity systems you can store your data on a blockchain that is -private- and not controlled by any individual company then open it to companies that need to know who you are. We’re not there yet but it’s coming and will be a big benefit for financial service companies globally as they’ll know without any ambiguity exactly who they are doing business with. These solutions are referred to as Know Your Customer (KYC) solutions and are critical to anti-money laundering efforts globally.
The second question is a tough one, I’m not sure if it’s technology that will fuel the future of fintech so much as regulation and breaking down established ways of doing business. Let me explain. The problem with the use of AI or blockchain technologies isn’t rooted in the technology itself but it human’s ability to cope with the changes these technologies will bring. So let’s go back to the above example of a blockchain identity verification system. With current technology I can build this in a year….give it to Ant Financial and they could have it done in 6 months! The problem is that the laws allowing the use of the system have to be written and this will take a while. At the same time the financial companies have to change their internal process for using this data. That means getting people to change what they do….that’s harder than you think! Think about the use of a digital identification system in international banking. Who would approve or disapprove China’s blockchain identity system when used with a Chinese banking customer in Singapore? So the fuel is not more revolutionary technology, sure we’ll get lots more, but getting it approved by law across multiple jurisdictions. In fintech this is especially difficult because -everyone- wants a say in what you can do with your money!