Brainmail

Couple of entries from the February issue of brainmail, which will be out very soon.

With the possible exception of cigarettes, no openly declared war on a large-scale social problem has ever resulted in defeat for the enemy.
Ref: Foreign Policy magazine

A study of 52 depictions of the Last Supper from the sixth century to 1996 discovered that the main dish has grown in size by 69%
Ref: International Journal of Obesity

http://brainmail.nowandnext.com/

How many friends are to many friends?

It was interesting to note that the word of 2009 was ‘Unfriending.’

Are we finally waking up to the fact that when it comes to friendship it’s quality not quantity that counts? My friend Matt recently sent me a note about something called Dunbar’s number. This is a theoretical cognitive limit to the number of friends that one can realistically have. How large is this number? I was rather surprised to find out that it’s somewhere between 100 and 230, with 150 being a commonly agreed figure.

This seems too high to me, although the average number of confirmed friends people have on Facebook is 120, while a few years ago the average number of contacts (not friends) on linkedin was 60.

Clearly there is a big difference between digital and physical friends, although I’d be really interested to know what the crossover is. What percentage of these 120 friends do Facebook users see in person and how often? It would also be interesting to research the definition of ‘friend’. Interestingly, a University of Arizona study recently found that 25% of Americans have no really close friends at all (friend being defined here as someone that you can talk to about your deepest hopes and fears).

Ref: http://en.wikipedia.org/wiki/Dunbar%27s_number

Save the date

The world’s population hits 7 billion on 26 August 2011. That seems very precise to me. Is there some kind of digital scanner hooked up to pediatric departments globally? Maybe we should have countdown clocks displayed on the bodies of pregnant women. Reminds me slightly of the reverse – the death clock www.findyourfate.com

The Future of Money

Like predictions about the paperless office, forecasts about a cashless society have been around for a while. For example, six years ago AC Nielsen said that only 10% of transactions in the US would be cash by the year 2020. Logically this makes perfect sense because electronic commerce is at it’s most powerful in data processing industries like financial services.

The idea is obviously that notes and coins (let’s not forget bills and cheques) are hugely inefficient and will be replaced by digital money, which is easier to process. Governments love the idea of eliminating cash because up to 25% of cash in circulation globally is used for illegal purposes (in the US, a staggering 20-25% of people still don’t use bank accounts).

Companies also love the idea of digital money because electronic payments are faster and much cheaper, although this doesn’t necessarily mean that they, or the retail banks, will pass on any time or cost savings to their customers. And as far as multinationals are concerned, the sooner there’s a single global e-currency the better, because volatility in currency markets is yet another uncertainty to contend with.

From a technological point of view, the cashless society is already here. PayPal has 150 million accounts, which makes it bigger than most national banks. In South Korea, four million banking transactions were carried out via cell phone way back in June of 2004, and hundreds of thousands of people have now bought cell phones into which you can plug a memory card securely encrypted with financial data.

In Finland and Japan, you can pay for train journeys and restaurant meals by simply waving your phone in front of a payment terminal and in other countries you can pay for a parking space using your phone. In fact you can find a car parking space with your phone or even the location of rental cars that can be unlocked and paid for with a phone. No paperwork required.

Hello mobile retail, micro-payments, peer-to-peer lending, stored value cards, micro-philanthropy and private currencies. Bye-bye coins, notes, paper statements, paper bills and perhaps even the banks themselves.

Back in South Korea, more people own cell phones than computers and globally smart phones will outsell PCs by mid-2012. So it’s pretty easy to see why phone companies could be the banks of the future. Or, as Bill Joy has pointed out, your phone will become your wallet, and a bank or credit card company will give it to you for nothing.

There are already 4 billion phones worldwide, 80% of them in developing economies and companies are starting to wake up to the thought that they can pay their employees wages straight into mobile phone accounts, from which money can be instantly transferred elsewhere. But it won’t necessarily stop there. If a job can be advertised, applied for and then completed using nothing more than a mobile phone, why bother with offices or fixed employment contracts at all? This is already happening in parts of Africa.

Another implication is that many phones are GPS equipped, so this opens up a whole host of other profitable opportunities.

For example, products like motor or holiday insurance could soon be sold by the minute on a pay-as-you-go basis. How? Because the insurance company – or holiday company – will know where you are in real time and will calculate risk and payments accordingly.

As for retail, the scene with Tom Cruise in Minority Report suddenly becomes very real with the prospect of retailers (including retail banks) knowing who you are and what you’re worth (or at least what you spent last time) the second you step into their store.

Add analysis of social networks embedded in your phone, records of digital payments and analysis of voice or text conversations and the future is very open and transparent, with organizations able to predict the wants of individual customers. DM or CRM heaven. Or hell, depending on your point of view.

So could a totally cashless society really happen? Yes, if the fact that 14% of Britons regularly throw away coins because they can’t be bothered to carry them around is anything to go by. In the U.S., electronic payments (including debit and credit cards) surpassed check payments seven years ago, while back in the UK many people aged under-twenty-five have never even seen a cheque let alone written one.

Recently there were rumblings in the UK about some retailers refusing to accept cheques. How long, I wonder, before some retailers start to refuse cash?

However, 1/3 of payments in the UK are still made in cash and it is the older generations that have all the money. Therefore, things may stay the same for quite a while yet.

Moreover, all but the most geeky of Generation Y and i would, I suspect, have to admit that there is something inherently substantial and emotionally reassuring about paper money that’s difficult to replicate in cyberspace. Logically, paper money, paper books and paper newspapers should all be extinct year by now but they’re not. And they won’t disappear any time soon either. Not entirely.

Years of tradition, human nature, and practicality mean that when it comes to the impact of things like social media on financial services the hand brake will be left slightly on. And this is the inconvenient truth that many futurists and technologists forget. Yes, technology is a powerful force for change, but so too are history and psychology.

Then there’s the issue of trust.

There are lots of trends that can be used to support a scenario where retail banks become extinct – product convergence, convenience, new channels to name just a few.  And remember: Most people don’t just dislike banks. They hate them. They hate waiting in line, they hate paying fees, and they hate the lack of any meaningful choice.

If Toyota branched out into financial services (as they’ve done in Japan), the UK retail banks could be in for a pretty rough ride. And that’s before Apple, Google, Facebook or Vodafone offer banking services based on emerging technologies like digital signatures. But would you trust a phone company or a supermarket with your pension?

In the U.S., there were more physical bank branches in 2008 than there had been a decade earlier. Meanwhile, in the UK, pure online banking plays are struggling because all of the major physical banks now offer online channels. The big banks are consolidating too. They are getting bigger and they are getting richer, so they have the ability to crush small, technologically driven, competitors.

Meanwhile, local community banks (and, conversely, private banks) have been booming. Seems that when it comes to money, especially decisions relating to large amounts of money, many people still prefer the physical to the virtual.

So what does the future of financial services look like in the UK? The Market itself will almost certainly polarize between low-cost providers and premium suppliers offering personalized solutions.

Cheap Internet banking via a phone will happily co-exist next to physical branches that feature people who offer advice on big-ticket items like home loans.  If you’re rich, you can have the best of both worlds: phone banking with instant access to a personal assistant and swipe card entry to flagship branches offering great customer service. And somewhere in the middle you’ll probably find 7-Eleven or McDonald’s with 24-hour bill pay kiosks.

But let’s go back to trust.

Tesco has successfully offered basic transactional services like cash back, car loans and pet insurance, but its credibility is somewhat strained when it comes to more complex matters like wealth management. This may change, but it may not.

The ATM has been around in the UK since 1967 and people now think nothing of using them. However, whilst we happily take money out of ATMs, only 5-10% of us are happy to deposit any money back in.

There’s also the issue of identity theft, a multi-billion dollar problem in the U.S. and a growing problem in the UK too. ID theft is a problem so big that could bring the cashless society to its knees, but even ID theft is also spawning a number of innovations like identitytheft911.com (Citibank) and ID theft insurance (progeny/AIG).

None of us can be really sure what will happen to financial services in the future. Indeed, the only thing we can say about the future with any degree of certainty is that it will be different. However, it’s a fair bet that some significant change will happen, so here are a few ideas you can bank on:

1. The technological explosion will benefit new entrants.
2. Mobile micro-payments will revolutionize retail.
3. Physical banks are not going away any time soon.
4. If cash did disappear, barter would flourish.
5. Money will eventually be embedded in everything.

It’s life Jim, but not as we know it

I heard this on BBC radio a few days ago. It can’t be true. Can it? Apparently, more people have attended Star Trek conventions in the US than have given blood.

While I’m on the health and medicine theme, Boots the Chemist has announced plans to sell a £30 (USD$50) paternity kit. The simple “peace of mind” test will allow partners to check whom a child belongs to. Just watch the nuclear families explode.

Day in the Life

On the basis that one in a thousand people might actually be interested here’s my day. Got up and read the papers. Particularly taken with two stories. The first one was about ambulances being fitted with wider stretchers and lifting equipment because patients are becoming so fat. Second, a story about a four-year-old child that had been killed in a road accident because her father had been blindly following false instructions from his satnav.

Then a visit to Clydesdale Bank in Regent Street. Four tellers but one was reserved for Yorkshire Bank customers, of which there weren’t any. After a five-minute wait I attempted to pay a bill in Australian dollars via electronic transfer. I had the bank name, account name, sort code, SWIFT/IBAN code, or whatever that thing is, but not the bank’s postal address. They couldn’t do it. They needed a postal address to do an electronic transfer. Go figure.

This actually turned out to be good news because if they had been able to do it I would have been required to fill in a 2-page form and it would have taken five workings days. How is it possible for this to take five working days in an era of digitalisation and instant connectivity? (Clue: They are greedy and want to hold on to the money for as long as possible so that they can lend it to someone else).

Fed up. Asked to see the manager. He wasn’t in. Then asked for a list of their bank branches because I wasn’t satisfied with how this branch was being run. “You’re in it sir”. “What do you mean I’m in it…is this the only branch in England?” “Yes”

Gave up. Walked to the Royal Bank of Scotland in Mayfair. This time the bank was experiencing a power cut and couldn’t do anything. Nothing. Not even paperwork. Never mind weapons of mass destruction, all you need to do these days to get Britain on its knees is cut the electricity for half a day.

Then things started to look up. Got an email from Chris at Lucid Futures with some very helpful suggestions about a presentation I’m working on for EDF energy. I must meet up with him because he has some interesting ideas, especially the thought of energy converging with data.

Next a step back in time. A trip to the blacksmith to collect a bit of metal. This is when it hit me. Those people in the bank. The person driving the car. The oversize people in the ambulance. They are all connected by a simple thought. They have all surrendered their lives to technology. They can’t live without it. Sometimes they die because of it. A blind faith in technology that creates learned incompetence.

This might be pushing things too far, but I suspect that in our frantic rush towards the weightless economy we are creating a generation of people without dignity, resilience or purpose. We invent facile degrees that equip people for meaningless jobs, which, after a time, create a deep sense of worthlessness.

OMG, I think I’ve just written my speech for the Future of Social Media in Financial Services event in London next week 😉

From the internet to wine and ideas

I was struggling with The Future of the Internet last night (it’s a book) so I returned to Liquid Memory: Why Wine Matters by Jonathan Nossiter. The start of this is tedious, but once he gets going it’s great. I especially like the thought that Robert Parker (The American wine critic) has replaced one kind of tyranny with another in Bordeaux. What matters now is sweet, alcoholic, overly ripe and generally infantile wines.

Anyway, point of this is he has a nice line in the book, which relates to innovation and scenario planning (keep with me on this it’s worth it). He says that: “No idea exists until it is verbalized. If an idea is badly verbalized it continues not to exist.”

That’s why how people describe new products, services or scenarios is so vitally important. Indeed this is why the naming of a scenario is so critical.

Scenarios for the future of pensions in the UK

Here’s the pensions scenario set. It was broadly agreed that the state will move away from pensions provision and so will employers – which leaves things firmly at the feet of individuals, most of whom seem to ignore the issue until it’s too late. Delayed gratification is obviously saving and instant gratification is obviously spending. Lots wrong with this but it did create an interesting conversation. Takeaways? Key one is the importance of seeing the difference between a driver of change and a consequence. Another takeaway is the critical role of assumptions.

What assumptions have been made here? One assumption could be that societal ageing and a declining birthrate are fixed trends. What if they aren’t? What if people start dying really young again due to diet/lack of exercise or people suddenly decide to have lots of children again (to care for them in their old age)?

Another assumption might be that people are saving right now but not in ways that pensions experts recognise as saving.