Welcome to Breaking Banks, the number one global fintech radio show and podcast. I’m Brett King. And I’m Jason Henricks.

Every week since 2013, we explore the personalities, startups, innovators, and industry players driving disruption in financial services. From incumbents to unicorns and from cutting edge technology to the people using it to help create a more innovative, inclusive, and healthy financial future. I’m J.P. Nichols, and this is Breaking Banks.

Welcome back to Breaking Banks, the number one global fintech and banking podcast and radio show. This week, we got something really special for you. Of course, I’m your host of Breaking Banks, but we also have here two other great hosts.

I’ll let you guys introduce yourselves. Yeah, so I’m Dave Wallace from the number one fintech podcast, Dave and Darm Demystify. And yeah, that’s me, Darmish.

I am the other half of Dave and Darm Demystify podcast, Darmish Mystery. It’s a pleasure to be here. That’s great.

Now, we like to do these mashups, right? So, you know, this is a double branded podcast, and we’re going to get into some interesting debates that we’ve been having a bit online and sort of bring that into the public sphere. How long have you guys been going with your podcast now? So it’s about four years now, so we’re over 100 episodes, and yeah, we just had a lot of fun doing it and met some incredible people along the way. Yeah, and I just think it sort of really helped us in terms of having a sort of, I think, well thought through point of view on the marketplace.

So I think, you know, one of the things we started to do is started branching out into other places. So we sort of are starting to appear on places like TikTok, and I think TikTok is where you We got into it. Yeah.

Yeah, we got into it because we had a bit of a debate on how long FinTech had been going. So it’s kind of interesting. I think that TikTok seems to be, it seems to be a channel that more and more people are kind of engaging with, particularly around the topic of FinTech.

So Darmish, I mean, why don’t you take us through your position that you put out on TikTok, which is what got my response. And then I can talk about why I think the definition is a bit fungible. Look, yes, so the question was, what is FinTech? And my response was really basically that FinTech is a movement of a financial product, or it’s the creation of a financial product that’s purely technology enabled, right? And so, you know, these days we might think, well, that’s actually an account.

An account is, you know, a FinTech solution. Well, not really, because accounts were possible on pieces of paper, because before I got involved in, I guess, the technology side, then, yeah, pretty much a long time ago, banks had paper ledgers and that’s how they were created. Off the back of that, they had loans, et cetera, et cetera.

So a lot of the products could be facilitated in a manual way. My definition is very specific to the Internet. It’s, you know, it’s using the Internet to create and distribute financial products.

OK, so that I think that position is slightly different from the way I recall it. But I’ll give you give you my position. And we’re actually we’re probably more aligned on this than I expected.

But the first, you know, again, I’ve done some research on this. The first appearance of the word FinTech in the modern press was in the early 1990s. I don’t I don’t have the guy’s name, the journalist’s name now.

But Liz Lumley, who obviously I’ve known for many years, now works with the banker in London. I’m sure you guys know Liz. Liz talked about the fact that.

This journalist sort of called that out, but having said that, the word FinTech wasn’t in the common vernacular until 2012. And if so, if you do Google Trends search, for example, there was just no activity search on FinTech before 2012, just spattering. But then it shoots up and and goes radically ahead.

Now, what the industry tries to do is take certain infrastructure companies like Visa and MasterCard and so forth and position them as FinTech companies. And in those earliest definitions of what the industry called FinTech, then that’s fine. But this is not how people talk about FinTech today.

So if you’re talking about if I ask someone in the UK who’s aligned with the industry, give me the name of the top five FinTechs that you know in the world, Visa and MasterCard would not be among them, right? Because that’s not how we use the word FinTech today. Of course, you know, if you were to put Visa, you know, particularly in the rankings of FinTechs using the older definition, then they would be one of the largest FinTechs in the world today. You know, not as big as some of the FinTechs that we have like Alipay and so forth, but still still up there.

But I think when you look at it as a sector now and how the industry analyzes as a sector, they’re generally using that definition you’ve talked about, which is Internet based organizations that deliver, deliver their business and. Well, hang on, it’s not just the Internet based businesses like I, I sort of feel like when I was at the end of the 90s, we were working with companies like BroCat who were solving specific problems. Oh, is that how we first met through BroCat? Well, I don’t think so.

No, we met through HSBC. No, we met through HSBC, right. But yeah, so man, I my first gig in Hong Kong was working for BroCat.

Wow. Wow. That’s insane.

Sorry. Sorry, folks. I mean, you understand.

So BroCat were a business. He was solving a very particular problem around encryption, but primarily for the banking industry. Now, I would argue that they were very much a fintech company.

And, you know, so what they were doing, very Internet related. But then we were then working with people like Co-Optive Bank on launching Smile, the Woolwich Open Plan Services. So these were sort of traditional banks, but they were delivering kind of new propositions.

And I think those are very much fintech propositions because, you know, like as Darmish says, they’re sort of… Especially I think if they change the customer experience, as you say, if they moved if they move the technology of the industry forward, I’m happy to make that concession. Right. And it’s not that it’s not that that definition isn’t correct, Dave.

It’s that it’s just sort of more the industry term and how that’s used today. So technically, yeah, you’re correct. But if I was to talk to a VC about their fintech investments, you know, they’re going to be identifying these highly scalable, you know, they want 20x multiple things like this type things or, you know, next generation infrastructure and things like that.

Now, it would have to include artificial intelligence in the definition, as well as obviously Internet based companies and, you know, AI companies may train data, you know, using the Internet, for example, but they’re not necessarily Internet companies. So, you know, already I think that definition is sort of going to be morphing anyway. But, you know, I don’t know if it matters in 10 years, you know, we’re not going to use the term fintech again, right? Because you’re not going to call Revolute, you know, a fintech bank.

It’s just going to be a bank. You know, it’s interesting because there’s a whole there’s a bunch of people just saying fintech isn’t a relevant term now. Yeah.

Yeah, I think that’s just going back to the breakout point quickly, Dave, is that they were very much a technology company. They didn’t actually have a financial product. And so, you know, the differentiation I’d make further is that there has to be a financial product as part of the proposition.

So it’s either it is a Internet, you know, delivered account, loan, buy now, pay later capability, et cetera. It’s not an ATM. It’s not a POS terminal.

It’s not telephone banking. It’s not telephone banking. Yeah, I mean, so it is a class of it.

It’s a class of technology, right? Yeah, but it’s a class of financial product delivered through the Internet. And that’s that’s my definition. OK, all right.

Well, otherwise, it’s too broad. You know, we get a lot of if you’re listening, if you’re listening to this debate, then, you know, tell us what you think the definition is. So, you know, on LinkedIn or X or whatever platform you use and just link to the the the podcasts, you know, there I know for for us, it’s Provokecast on on Insta and on Twitter, on LinkedIn, of course, you can find it as Provoke Media or Breaking Banks podcast.

What about you guys? So the best place to find this is Dave and Dom, Demystify on LinkedIn. So, you know, that’s that’s our hub at the moment. Cool.

Awesome. Well, I’ve got a question, right? So in the future, if financial services is not only driven by just technology, but is driven by AI, so fundamentally decisions aren’t coded anymore, they’re not parameterized as such. Then, you know, decisions are made through an analysis of data and interpreted into a result.

So the AI driven, will we have some new terminology like fintech to say, oh, these businesses are AI businesses? So I think the way I think about it today is we will be taught, we will define economies based on their level of artificial intelligence in in the economy. So a economy with a high level or high degree of automation, automation or semi-autonomous industry will be known as a smart economy. And this will be next generation smart infrastructure to run that economy.

So in the banking space, as we talk about that, one of the biggest changes, you know, potentially the biggest element of where banking meets AI in the smart economy is agency-based payments and smart contracts that run those agency-based payments. So AI agents that can execute payments on your behalf. So you’re not having to enter an app and punch in, you know, I can say to my AI, I’ll send Dave that 50 pound IOM and bang, you know, it does it from from that sort of a prompt.

Or I can build a business relationship between two legal entities, corporations that are AI run, and we can implement a smart contract in terms of how each party gets paid or treated in that process. And that would be automated infrastructure, you know, et cetera, et cetera. Right.

The hectic, heavy personalization of individual interactions with your bank and with your money, you know, and indeed on things like health care data and so forth. All of those aspects. So in that light, then, you know, you have to understand that banks in the future have to fill this role of automating those smart elements of society that are going to bring that those efficiency gains and productivity gains that we’re going to need, plus, you know, the transformations around climate and so forth, you know, certainly in terms of portfolio and so forth.

But so so will we start talking about smart finance companies? Yeah. Is that is that really? I think so. A smart, smart bank, smart, smart infrastructure.

I think that’s probably the way we’ll term it. And if you think about it, there’s almost nothing in a bank today that could not be automated, right, using this type of technology. So if if I just take the definition of what a bank is in 20 years time, then if you are going to try to launch a bank and you’re going to the regulator to get a banking license, the banking license would define you as a technology company that’s part of national financial infrastructure using artificial intelligence, not the way we think about it today.

Your asset size, your ROE, none of that is going to matter. In the world of the future. I mean, it’s it’s fascinating, isn’t it? Because banks will change and the consumer is going to change.

And like how much of what we do now is relevant to banking in 10 years time. So I’ve got an article being published tomorrow and it’s about kind of the credit. People dropping out of the credit sort of industry because they don’t have credit history because, you know, our kids are staying at home.

They’re not getting credit cards. They’re not doing all the things that we kind of used to do. But the question posed at the end of it is in a in a world where you have agents which are sort of interceding on a customer’s behalf in terms of their finances.

Where does the credit score lie with the individual or the agent? So if it’s with the agent and you go, well, the whole credit industry is a is kind of not fit for purpose for this future. No, it isn’t. And it’s all going to have to be contextual and it’s going to be based on behavioural elements and cash flow.

You know, it’s going to be based on data. We are already seeing some of this. So I’ll give you one example.

40 percent of the SME lending market in China is run by Alipay and my bank. Right. So they own 40 percent market share.

Their NPL ratios, I think in 2022, they lent to 54 million companies. Their NPL ratios are half that of ICBC, Bank of Communications, Agricultural Bank and so forth. Right.

The biggest guys, they’re half. And there’s two elements as to why that is. One is obviously algorithmic capability in their tech stack and their ability to get data, their ability to manage engagement and relationships.

That’s all there. But it’s the key, really key part of it is the cash flow data they get from Alibaba merchants, right, because that gives them a very, very good modelling. And, you know, if you’ve got a traditional bank still asking for three years of financial statements, they just won’t be able to compete with that type of smart infrastructure.

You know, it’s like they can’t compete. We used to think that traditional banks would be better at managing risk than the new entrants. You know, this was something that the industry said, oh, you know what? They might be able to make nice apps and be good at, you know, getting people online, but they’ll never be good at managing credit risk as we will.

They’ll never be as they’ll never be profitable. Right. And, you know, and the only reason they’re growing at the rate they are is because how small they are.

We now know all of that is false. Right. And that credit risk management is a key, just a key data thing.

So, yeah, it’s it’s it’s from a credit perspective, it’s going to be data driven. It’s going to be contextually driven. If you, you know, if you’re still thinking in the base, like credit cards, well, in 10 years, most people won’t use a plastic card at all.

Certainly you can’t have a, you know, even if you try to replicate a credit card product in a wallet, you know, there’s much better ways to deliver the benefits you get from a credit card, you know, rather than having actual credit card product. And how many banks are ready to sunset credit cards? Yeah, not many. But, you know, I think there’s a there’s also a different problem here that the banks face, and that is the traditional segmentation model is based around a geographic reach.

So, you know, in the past it was service through branches and then maybe call centers and now the Internet, et cetera. But fundamentally, they’re still targeting customers on a basis of, you know, their mass market. Now, if we go back to that SME thing.

Most of the big banks will have two, three thousand barbershops, they’ll have two, three thousand hairdressers, two, three thousand butchers, bakers, et cetera. Each of these lines of business are very different. But when they do their credit risk, they treat them as an SME and it’s a macro picture of all types of businesses.

It’s not specific to your line of business. Right. So the difference with the likes of people like Alipay is their finance segmentation allows them to analyze individual lines of businesses better than traditional banks do today.

I mean, there is fundamentally no reason why a bank couldn’t do that today with, you know, the existing data lakes and maybe some of the technology is a little bit old hat, but, you know, they could easily shift the data to a better warehouse technology or whatever. But the thinking around re-looking at how to do business is the thing I think that holds them back and keeps them back in their legacy way of servicing the SME market. Yeah, I mean, I think if you look at where SMEs need help, you know, so one of the key areas for them is going to just be simplifying banking, you know, so think about think about an AI based bank for business as a platform for SMEs and you log in and instead of just seeing your balance sheet, you know, your account statement, you know, you’re actually now seeing your accounts that are processed in real time using artificial intelligence.

Your tax is automatically done, you know, et cetera, et cetera. This is not this is not impossible. Even with the current technology today, we could probably deliver that experience for SMEs.

So, you know, the ability for banks to extend to become a platform for business, you know, that is that is obviously a really exciting opportunity. But you’re not going to run AI based smart contracts on current core systems. So it’s all net new technical stack capability.

And that’s the real question. Are any banks there yet? The only two banks in the world right now that are working on this from a platform perspective, JPMorgan Chase and ICBC, they’re the only two that I know of. Right.

And that’s crazy. I mean, in terms of post quantum encryption, no bank I know is working on this. So JPMorgan again, they’re working on it.

But, you know, it’s like that, you know, just I don’t just say I don’t look, how is it how this is what I was talking to you guys about before the show in terms of, you know, who’s going to make it through this and who’s going to be part of that smart infrastructure as AI based banks? Well, if I ask you today, which of your, you know, your current banks in the UK most likely to be, you know, early in on integrating artificial intelligence into the generative banking experience type thing? Who do you think? I would say it’s going to be a Revolut or a Monzo. So exactly. Yeah, exactly.

Because their tech stack is going to allow them to adapt to that much faster and easier. And you’ve got the legacy infrastructure thing that is always going to be a problem. And you can’t like that’s like the real thing is, you know, none of the traditional players could become a truly digital bank without essentially sort of like replacing everything, you know, and I just don’t see anyone willing to go to that level of transformation.

Right now in the traditional space, it’s still augmentation. They’re trying to copy, you know, trying to put a new experience layer, for example, on top of, you know, their existing tech to sort of mimic what say a Revolut or Monzo is doing, right? So do you not think though that the legacy banks will become increasingly manufacturers of products and they’ll not worry too much about the distribution? So one of the paths they could take is like, let’s somebody else handle kind of the customer experience. But what we will handle is the product, the product definition.

You know, if you’re going to be a smart business, you need to have scale. And, you know, I would say the technology in order to be able to kind of do and I would question whether some of the neobanks have that scale at the moment in order to be able to do that. So, you know, I guess the point is, if I was at HSBC, then now is the moment I might be saying, well, look, our strategy in the future is going to be about manufacturing.

And, you know, to your point around changing cause, and I don’t think they need to change their cause. They just need to find technology which they can sort of wrap their cause around, which will enable them to get there. But I so I don’t think that the big banks are going to disappear.

They’re just going to change. What they do and how they do it is my view. You know, they also have a balance sheet to get them out of jail, really, because if in doubt, then you just buy, you know, one of the new players.

Yeah, look, the reality is that the amount of time it’s going to take for these big guys to dwindle and collapse is probably in the order of a decade or two. Right. There’s going to be a lot of consolidation in the market.

We’ve already seen significant consolidation in Europe and the US. You know, the US has consolidated half of the industry in the last 20 years, you know, so it is a continuous process that’s happening. But I do think there’s going to be sort of that stark element.

And how many of the current incumbents have deep enough pockets to make enough of a digital transition or transformation to be relevant in this new banking world? That’s sort of really the question we’re saying. And, you know, I think I think JPMorgan could make it. But I’m not sure about, say, HSBC.

You know, look at HSBC today, 38 million customers, Revolut just passed 40 million. Right. I mean, that’s if you’re going to ask which bank is going to be bigger in 10 years time in Europe, HSBC or Revolut, who are you going to say? But is that is that based on numbers of customers or amount of profit and cash in the hand? Yeah, but so the profit, here’s the thing.

The profit and cash in hand, they are not going to help you to transition to this new state of banking. Your asset, your asset size, your return. You know, all of those traditional metrics, unless you are digital at heart, unless that is your, you know, the persona of the business, you know, and it’s from the ground up, your mission is digital.

Then whether you’re a wholesale bank, you know, being a manufacturer or whether you’re in the retail and commercial banking space, it really doesn’t matter. It’s all still going to be about your ability to integrate. Technically, yeah, I mean, I guess on the bad side of things, banks have already started to acquire new platforms to do that rather than, you know, if you take Westbox, they bought Vodina as a as a new microservices based architecture platform.

We’ve already seen, you know, other people on Vodina’s platform by Ion Bank, you know, innovating financial services through embedded finance. So so I think, you know, there’s always the option of buying somebody, right? Yeah, and look, JP Morgan Chase has done as a quite 40 fintech companies since the since Covid. They have partnerships with over 1600 fintechs right now, you know, so, I mean, most most people wouldn’t believe there are 1600 fintechs in the world, but there’s probably at this point probably about something like 70 to 80 thousand fintech companies globally.

So but still, that’s impressive. It is impressive, but I mean, there’s still a big multi siloed organisation where things take hold. I mean, I think this but, you know, it is impressive.

I think what their attitude to the fintech community is good. All right, well, I think, guys, let’s take a quick break for our listeners and then, you know, let’s go a bit more futurist. Let’s talk about the next few years in terms of who could be the interesting players.

And I’d really like to talk about how you would envisage the AI experience in banking for, you know, an individual as well. Sound all right? Yeah, fantastic. All right, so you’re listening to this mashup podcast between Breaking Banks and Dave and Dom Demystify.

We’ll be back in a moment. This show is brought to you by Alloy Labs. As much as we love talking on the show, we believe that action is more valuable than talk.

Alloy Labs is the industry leader in helping fearless bankers drive exponential growth through collaboration, exclusive partnerships and powerful network effects that give them an unfair advantage. Learn more at AlloyLabs.com. Alloy Labs, banking unbound. Welcome back.

And it’s Breaking Banks and Dave and Dom Demystify. So before the break, we were talking about AI and I think what we want to do is push that conversation forward into, you know, what is banking in the future, perhaps not even the distant future, look like with sort of AI as the kind of key tenant to it. So Dom, I know you’ve done some thinking around this and even done a video, haven’t you? Yeah, I did a video quite some time ago and it was really kind of portraying what I guess what embedded finance feels like.

It’s, you know, that you don’t notice the transactions going on in the background. It’s much more about, you know, your foreground experience. So, for example, there’s a girl talking to her AI and in one of the opening scenes, you know, the AI is giving her some advice and she says, so where have all the banks gone? And the AI says, I am your bank.

I just don’t, you know, I just don’t do just transactions anymore. I help you with the rest of your life journeys. And that’s the scene for the three or four mini scenes that we had after it.

One of them was another girl walking down the park. She sees a dog. She wants to buy a dog.

I’m thinking of buying a dog. Speaks to the AI and the AI says, well, look, it will cost you extra because you’ll have to buy the dog insurance. You’ll have to get the, you know, the health care, blah, blah, blah.

Right. And but you could manage it if you do these things. So, you know, the idea was that it was very much, you know, like we’re seeing today with generative AI.

And by the way, these videos were like, you know, almost a decade away ago. But but it was very much the idea that, you know, most financial decisions aren’t just like a single point transaction. It’s like there’s a whole load of other thinking that goes around it that helps you to get to a decision point.

And most likely these key decision points is something that you don’t just want to make on your own. You actually do want to discuss. Right.

And that’s really where the talking AI came from. It wasn’t a gen AI kind of ripoff type thing. But that’s really how I see it is that much more of it’s blended into your lifestyle and that a premise there is that AIs learn how to interact with each other.

So, you know, we still have, you know, application specific AI, but we now have AIs that bridge the gap between, OK, I need to get to my AI that understands my home. I need to get to the AI that understands my bank account and then the AI that understands my lifestyle before I can work out whether I should do a home improvement or go on a better holiday. Sure.

Yeah, I think that makes sense. You know, I, you know, I laugh sometimes at the way Hollywood depicts banking in the future. They’re not very creative in that.

You know, so I don’t know if you what was the show with Schwarzenegger on Mars? Total Recall, right? Total Recall. Yeah. And they remade it with Colin Farrell.

And in it, at some point he gets this, you know, he finds this safety deposit box number in a bank, so he goes into the bank and inside his box is paper money with Obama’s head on it, you know, and for a British currency, which is crazy. But anyway, and, you know, and paper passports. Right.

And it’s like, yeah, like this is supposed to be in the mid 2040s or something like that. It’s like, no way we’re going to be still using cash, you know, no way we’re going to be using physical passports, you know, that’s all going to be digitized. So I do sort of laugh at that.

And, you know, when we have the debate today, you know, about cashlessness, for example, or, you know, keeping branches open for those socially impacted, particularly in places like Britain, you know, in Australia, Canada, this debate rages on all the time. And it’s like in 20 years, no one will think about banking that way. Right.

It’ll just be a function integrated into your life. You just you won’t even if I ask you, you know, if I ask my grandkids in 20 years, you won’t really understand the question. But I but I think it’s already happening.

Like I like we we held banks in such high regard. Like if I asked my kids, like when we were younger, you’d sort of look at your Barclays or your HSBC and there would be some degree of reverence there because they were everywhere. Like, you know, their presence was felt like we met in Hong Kong.

You couldn’t move a bank branch on every corner. Yeah. Now those things have disappeared.

Like the interface to the bank is increasingly Apple. You know, Android and people aren’t sort of going to their apps, they don’t hold these banks in the same reverence. So no, I think there’s a functional utility.

It’s just function utility. So, you know, and I think that that is a massive change sort of psychologically. So people are kind of there already.

So, I mean, I completely agree. Like we’ll live in a cashless society. I think the whole notion of bank like we’ve been talking about will have just kind of change.

So if the interface to your finances is a is a agent and the agent is whatever you want it to be, that’s almost your bank, isn’t it? You know, because all they’re doing is facilitating all the other bits and pieces which kind of comes by. So the UX of banking is that’s just it’s an almost an irrelevance now, you know, the UX needs to be that sort of AI interface or increasingly being thought about as that AI interface. And like what Dhanush says is like increasingly finance is going to become more and more embedded, more and more invisible.

So, you know, you’ll talk about it with your AI or, you know, whatever it is. And, you know, it will things will just sort of happen and often they’ll happen on your behalf. So, yeah, I mean, it’s interesting because one of the things that Dhanush and I had a chat with somebody who heads up a team looking at AI for a very data intensive company, like one of the world’s most data intensive companies.

But he’s also looking at quantum as well. And, you know, this sort of going back to the speed of decade, a decade for these things to happen. What you kind of see is that quantum and AI, although they’re not related directly, they’re sort of like AI is helping to develop quantum and quantum can sort of speed up AI as well.

So that sort of vision of the future, once kind of quantum gets there into a state and, you know, we can talk about Q day as well, because that sounds very, very terrifying. But, you know, once quantum gets there, then this whole world of kind of AI agents really has the potential to kind of change everything. Yeah, absolutely.

No, not only, you know, in sort of functional areas you’re talking about, but, you know, new application, new sciences, new understandings of the universe, unlocking, you know, cancer treatments and all this sort of stuff. It’s just new compounds like longevity. You know, I could go on and on, you know.

But, you know, here’s the thing, if like quantum, you know, apparently is very good at optimising portfolio. So if a algorithm can optimise your portfolio and then it underlines, it sort of optimises all the bits which sort of sit underneath it, you end up going, well, surely this sort of means that the whole investment just sort of ceased to be relevant going forward. So if investments cease to be relevant, then you’ve kind of got the whole unwinding of the financial system.

All right, so let’s talk, we can go there, but let me talk about Q-Day first and then let’s go there, right. But so Q-Day is, or Quantum Day in its long form, is the time at which a error-correcting quantum computer will be able to unlock or undermine existing RSA encryption, right, which powers most of our online security systems that we have and other encryption technologies, right. So essentially a supercomputer that can sort of crack any current encryption.

And we are, according to the CEO of IBM that I met at Leap, which I wish I’d been able to record the conversation, but he wasn’t willing to record it. But he said five to seven years before IBM has a 100,000 qubit error-correcting quantum computer, which is what we’re talking about. So five to seven years before you have a quantum computer that can break all existing encryption.

Now, if you are listening to this and you have your doubts, and you may have heard me talk about this already, so if you have, I apologize. But if you have your doubts that this is really going to be that bad, let me give you a data point. In August of 2022, the US Air Force sent up an F-22 to shoot down a Chinese weather balloon over Alaska.

You guys remember that? Yeah, yeah, yeah, yes. What was the Chinese weather balloon doing? It was collecting signals intelligence, encrypted military and government signals intelligence, both on the Internet and on radio. And it was capturing that.

Now, the Chinese government cannot decrypt all of those communications today. With quantum, they can. And that’s the only reason that they were collecting that data.

And last year, China spent 19, the Chinese government spent 19 billion dollars on their quantum efforts. So if this is how state actors are thinking about quantum, that these opportunities exist, then you need a post-quantum strategy, which is you need security that’s going to be able to protect you from other quantum computers. This is what we call polymorphic encryption and or post-quantum encryption, if you want a broader class, because there’s other protocols.

But the US government, the US military is spending about a trillion dollars on post-quantum encryption. Both Microsoft and Apple have very big post-quantum practices. So we must assume that these big cloud providers and so forth will integrate quantum security into the cloud.

And so if you’re in the cloud, you’re probably just going to be able to plug in quantum encryption when it’s available and you’re going to be safe. But no existing bank will be safe. I think the scary thing for me is that people can harvest data today and have been harvesting data today and it’s all encrypted.

They can’t read it. But on Q-Day, they’ll be able to read everything from the past. And everything, all of the past will be decrypted.

Yes. And you don’t miss anything, like government communications, communications between heads of state. So yeah, I think radical transparency, radical transparency, that’s going to be the result.

Yeah, it’s going to be like the Panama Papers on steroids, isn’t it? But I mean, it then speaks to actually you need a pre-Q-Day strategy as well. So, you know, what are you saying now that you wouldn’t want people to find out in 10 years? Or put everything on the cloud, right? That’s I mean, that’s essentially the that’s essentially, I think your only protection is if you’re in the cloud, you’re going to get access to the new encryption technologies and your previous data would be encrypted by that new tech. So, you know, any bank that’s not on the cloud or any telecoms company that’s not on the cloud is going to have to develop a pretty strong strategy on this front.

Hospitals, look at the ransomware attacks we’ve had on hospitals, right? Imagine that with Q-Day. So do you do you think there’s going to be an industry which is created around it’s like the conversation we had this week? It was like Y2K, there’s going to be a Q-Day sort of strategy that company would have to do. That makes sense, like like like the back in the Y2K days.

Yeah, this is a lot more realistic. Yeah, this is a lot more realistic. But the reason things didn’t fall out of the sky on Y2K days.

Yeah, we were successful at that. Yeah, yeah, yeah, yeah. So it’s it’s kind of interesting and fascinating, quite scary, because, you know.

I guess if the wrong wrong actors sort of got the information, yeah, they sort of crack the crack, the crack, the sort of quantum computer, then bloody hell, you know, what could happen? I’ve got a different question. Well, not a different question. Another question.

What comes first, singularity or Q-Day? Q-Day, yeah. You think? Yeah, because I think we’re going to need we’re going to need quantum to get to the last piece of singularity. So, you know, the really, truly superintelligent stuff is, you know, at this at this stage what we’re learning about AI and obviously this is up for debate.

But if you listen to Yann LeCun and Geoffrey Hinton and so forth, the biggest ability that AI is showing us right now, yes, pattern recognition, but it’s compression of intelligence, right? That’s the massive advantage that they have, that they can compress, compress intelligence. But there’s not, you know, it’s it’s not new intelligence necessarily that’s that’s emerging from that. It’s more efficient intelligence.

And eventually, you know, that’ll be more efficient at problem solving and communicating and all those other things than than humans from our cognitive capacity. But in terms of coming up with massively new concepts and, you know, like new scientific breakthroughs and things like that, we’re going to have to rely more on quantum. So if you want the singularity where it’s not just technology is on that exponential curve, but intelligence is on that exponential curve, you also need broader, broader consciousness.

And that’s where I think quantum comes in. Because I think Kurzweil predicts that it’s going to happen sooner than he said before, which is before 2030, it’s going to happen. So, literally in the next… Well, I mean, I think, well, it depends.

I think he, you know, in the last conversation I saw him talking about it, I think he was more specifically talking about AGI happening before 2030. I still think his predictions for the singularity are out in like late 2030s. But I’m happy to, I’ll go and check that after our conversation.

So I think we’ve got a few minutes remaining. So, Brett, you and I, we were lucky because we met in Brooksy’s office and we talked about… 2004, we talked about this thing called the Internet and experience and how it would change HSBC. And, you know, largely we’ve seen that change happen in the last 20 years.

Imagine you and I are sat in Brooksy’s office right now. What are the things we’re telling him that he needs to, he really needs to get on top of? So it sounds like AI is one of them. And, you know, would we be saying like quantum’s the other one? You have to move the entire operation on the cloud.

You can have an integration to the core system still, but all of your customer facing, all of your integrating tech has got to be on the cloud, right? Because that will provide you security and the flexibility to deploy AI for better integration. You know, you can’t integrate AI with on-prem solutions, right? Yeah. I’ll just qualify that because some banks think putting all their old software in a container and then running it on the cloud is moving to the cloud.

That’s not what you’re talking about. You’re me, you mean… I’m not talking about Kubernetes containerization. I’m talking about all of your key infrastructure that allows integration.

Now, it can be a hybrid cloud, you know, public-private, but ultimately, if you want to use AI for greater capability for the bank and, you know, that’s going to have to be the infrastructure play, right? And for that, you are going to have to be in the cloud. How can you be technology based infrastructure on-prem, you know, just for other organizations? You know, they have to come to your building to operate their app? No, you know? So that would be, that’s the no-brainer. And also the other thing… Everything onto the cloud.

Sorry? So everything onto the cloud. And then the other thing… Cloud, AI and quantum, three. Yeah.

And the other thing that I’ve been saying for 10 years is you have to have every single product and experience that you have optimized for digital first, right? If you need a signature on a piece of paper for any of your products or services, you’re already out of business. You just don’t know it. That makes a lot of sense.

Do you? I mean, one thing that I worry about is if we look at the recent, some of the recent outages that we’ve had is that we, you know, do we need to have a manual back stop, as in, if it’s the fan and we have to go, you know, full, you know, film transcendence. Yeah, no, I understand that. So I mean, I think there may be, you know, emerging barter economies and things like that, particularly with, you know, high surveillance societies and things.

However, having said that, you are going to have to be a part of the digital economy to survive in the future. Access to the best healthcare is going to be digital. Access to the best education is going to be digital, right? Access to the best personal, you know, AI, it’s all going to be based on that.

So that’s the directionality. And we are just going to make, you know, we’re already looking at, you know, retail CBDC that can work offline and so forth. We are, we are looking at infrastructure that will be able to survive under outages.

But then again, at the same time, if the whole world is going smart, then you’re just not going to have outages, Dharmesh, you know, that’s not, that’s not a reasonable position. How often does your electricity fail in your house? You know, what, maybe once a year, you know, where the power goes off for a bit. So it’s not, you know, yes, we have to make infrastructure more robust, but I don’t think it’s realistic to say, yeah, we could have massive cyber attacks and that could be a reason for outages.

And that is a weakness, but it’s not a weakness just in banking or transactions. It’s a weakness in utility companies, you know, electricity and stuff. You know, we could have got into that with Q Day as well.

Ninety percent of the top 20 electricity companies had major hacks last year. Yeah, yeah, yeah, yeah, it’s amazing. Can I ask one final question? If you had to choose one film that predicts the future accurately, which one would you choose? I ask this same question of my guests when I do the Futurist podcast.

It’s like, you know, which version of science fiction best represents the future you hope for, right? And I would say, you know, I would say Star Trek most likely, not the militarized version of Star Trek, but the exploration type, you know, Star Trek, you know, the expanding human knowledge type and the fact that all of a society is built towards this pursuit of advancement as a species, you know. And I think that’s, but if I look at it from a, not that’s from, you know, media, but from a book perspective, I would probably say Iain Banks’ Culture series is what I would see. I see sort of different classes of human based on integration of technology.

So culture, you know, really the, you’ve got the homo deus, you know, the advanced humans that have all this tech integrated into their body can control down to the molecular level and things like that. You know, you know, that sort of stuff I think is probably possible. But I think we might have a fork in humanity, you know, with people, some people saying natural humans and others becoming cyborgified.

Yeah. We could have a whole show on this. Look, I love the culture books a lot, primarily because the AIs are all called random names.

So I think. Just read the instructions, the starship, that’s what Elon named it. Well, yeah, and meet Ether and all the other things.

So, yeah, look, I think they do. I mean, I think, sadly, Black Mirror is so spot on in terms of it’s what it predicts in the future that it’s become almost like a documentary. So, yeah, I mean, you know, there is there’s a bit of bit of truth to that.

But but look, I think I think we, you know, this moment in history, I mean, we’re very privileged to be witnessing it. But the integration of artificial intelligence and these technologies to take humanity to the next level. The biggest thing that I think is going to change everything is we the philosophy of what it means to be a human is going to radically change with these technical capabilities.

That’s what the singularity will really do. You know, the singularity will change what it means to be a human. It’ll change what, you know, change our very understanding of consciousness.

I mean, you know, we are we are about to take it to the next level. But there’s a lot of people that don’t want that, you know. And they want to stay in the past.

And so the transition is going to be messy. No, definitely. My answer is none of this matters.

None of it matters because none of it is real. We’re already in the matrix. Yes.

Well, you know, what does Elon say? There’s about a one in a billion chance that this is base reality. So we’ll leave you with that thought. Thanks for listening to Breaking Banks this week.

Don’t forget. And of course, Dave and Damesh Demystified. If you want to check out some of our other episodes, you can find us wherever good podcasts are sold or presented.

So Spotify, iTunes, Stitcher, et cetera, et cetera. Dave and Damesh, you know, where can people follow you for your stream of consciousness? Thank you. So, again, on all the good podcast platforms, we actually are hosted by FinTech Futures as well.

So people head to the FinTech Futures website. They will find our back catalogue of podcasts there. Fantastic.

So, yeah, it’s great. It’s great for us to do this mashup. Let’s see how it goes.

I think we were going to have a lively debate, but it sounds like we agree on many, many things. And, you know, it’s always been that way, Brett. So, yeah, it has, brother.

All right. Thanks. Thanks, guys.

And we will see you on the next episode of our respective podcast. Thanks for joining us this week. That’s it for another week of the world’s number one FinTech podcast and radio show, Breaking Banks.

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