2019
TECHNOLOGY REPORT
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2019
TECHNOLOGY REPORT
2
TECHNOLOGY REPORT
PREFACE
T
he Technology Report is issued at the end of the year and investigates the technology trends expected to be on the rise in the next years. When doing research to prepare the report; > The related reports from the world famous research companies are scanned, > The Internet literature is reviewed, > Related academic articles are read, > Developments in the world and Turkey are watched, > Analyses are performed based on data available on various websites. According to the results of this research, the titles in the technology trends are decided. This report primarily aims to set forth the impacts of technology trends on banking, finance and financial technologies industries and evaluate their areas of use. While doing this, the advantages and disadvantages, legal restrictions, etc. are taken into account from a well-rounded perspective. The report also includes predictions, evaluations and suggestions about when the technology trends of the future will be caught in the “radar” and how much impact they will have.
Quote “If you do not think about the future, you cannot have one.”
Henry Ford
TECHNOLOGY REPORT
CONTENTS
CONTENTS 5
RADAR
198
APPENDIX
6
INTRO
199
ECOSYSTEM REPORT
13
HIGHLIGHTS FROM 2018
215
SUGGESTIONS FOR TURKEY OF THE FUTURE
19
ARTIFICIAL INTELLIGENCE
227
COLLABORATION MODELS OF THE FUTURE
33
CONVERSATIONAL SYSTEMS
240
WORKFORCE MODELS OF THE FUTURE
39
COMPUTER VISION
258
RESOURCES
45
AUTONOMOUS VEHICLES
59
ROBOTS
67
CLOUD
77
INTERNET OF THINGS
90
AUGMENTED AND VIRTUAL REALITY
101
XAAS
109
BLOCKCHAIN
128
OPEN BANKING
141
DATA SECURITY
149
CYBERSECURITY
155
INFORMATION TECHNOLOGIES OF THE FUTURE
163
FINANCIAL TECHNOLOGIES
187
AUTOMATION TECHNOLOGIES
4
TECHNOLOGY REPORT
RADAR
IGEN
CE
AU G
Humanoid Artificial Intelligence
New
ME N
TED
RE
AL
Digital Reality
IT Y
AR
TI F
A ICI
LI
LL NTE
IN
Quantum Artificial Intelligence
ET
D IA TIO
RN
N
TE
Edge Artificial Intelligence Conversational Systems
New
Blockchain
5G
Smart Houses
N GS
NO N
Autonomous Vehicles
THI
-ME
OF
Advanced Conversational Systems
API
2048
2028
DIGITAL REALITY ERA
2023 TRANSITIONAL ERA
2021
2018 MOBILE DEVICE ERA
5
2021
2023 TRANSITIONAL ERA
2028 DIGITAL REALITY ERA
2048
TECHNOLOGY REPORT
INTRO
Lean Customer Experiences and Design-oriented Thinking will keep standing out
For example, companies which digitalize all their processes and change them in comparison to e-commerce will stand out rather than those that transform their existing models to e-commerce. We observe that companies which focus on customer experience, plan and design their infrastructure from marketing to order, storehouse management to delivery, according to this are more successful. In banking, a similar transformation is taking place thanks to more flexible regulations around the world. Companies focusing on customer experience stand out in terms of cost, speed and customer satisfaction.
With the advancements in technology, banks try to adapt their current systems to new channels to keep up with the technology. They have started to attain a place in these new channels with their current services instead of getting into new industries. For instance, banking industry has focused on internet banking instead of developing prevailing products or establishing companies in e-commerce industry after internet. The usage rate of mobile devices significantly increases around the world. Therefore, the present era is called “mobile internet age”. In this era, banks prefer to develop mobile banking apps instead of mobile apps appealing to the daily lives of users.
In the following period, banking will be smoothly integrated into human life with technological developments. For example, today people have to go to banks and undergo a complex and frustrating process to get a loan to buy a house. However in the future, customers will move towards an integrated process in which they prioritize the payment terms in their buying options. We are now heading for a period in which banking rules are rewritten in a plain and efficient way required by the customer experience, and this approach is supported with regulations.
We estimate that we will switch towards the “digital reality” age within the next 5-10 years especially because of the advancements in augmented reality products, computer vision and audio artificial intelligence technologies. Once this transition occurs, the channels of access to humans will be diversified, even the smart glasses will be an alternative access channel. In this new era, we will start seeing that products not integrated in human life will be used less frequently. Once we come to that point, it will be more important for banks to change their former approaches and produce customer-oriented products in order to reach their customers.
Augmented reality will come late but with a tremendous effect The augmented reality glasses, Magic Leap released in 2018 with a big expectation is far from being a device that is convenient to be used by end users in spite of the investments. Similarly, highly expected Vuzix Blade glasses cannot be delivered and the company is dealing with so many court cases including Fraud claims and
Digital workplace definition is beyond the fact that works are performed through mobile or digital channels.
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TECHNOLOGY REPORT
INTRO
Artificial intelligence remains as the main trend while the humanoid artificial intelligence continues to be a remote possibility. The world is undergoing a big change under the leadership of artificial intelligence. Today, almost all technological developments center around artificial intelligence, and it is also expected that this trend will keep on going in the following 30-40 years. However in the following 10-15 years, artificial intelligence will be trained to be specialized only in certain fields due to technological constraints. But still, this will not prevent the artificial intelligence from being used in various fields. Similarly, the robotics is also getting specialized only in certain fields. In recent years, robots from Boston Dynamics have been developed to be specialized in movement and balance. Robots like Pepper, on the other hand, were designed to establish empathy with people, as well as simple and specific communication. Robots from Boston Dynamics continue to build on their current limited capabilities, and now they have added new capabilities such as opening doors and passing though the door in a coordinated manner in 2018. When adapted to real-life scenarios, banks started using these robots for activities such as helping customers at the banks to relieve customers from unpleasant experiences like waiting and getting in line.
many other allegations resulting in disqualification from being listed on the stock exchange. However we maintain our expectations about this trend, we think that it will take 5-10 years for the augmented reality devices to be significantly developed considering that especially hardware technologies are developed at a slow pace. We observe that many institutions particularly focus on creating content, and experience content management with augmented reality applications on mobile phones with weaker revenue models. We see that the depth perception being critical to the augmented reality is tried to be developed in all flagship mobile phone models released in 2018. We know that companies like Apple and Google continue their works in this field rapidly.
Likewise, conversational systems can be trained only for specific subjects right now. For instance; people can carry out basic banking transactions using their voices.
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TECHNOLOGY REPORT
INTRO
Conversational system-supported smart home assistants used in recent years have reached sales figures far beyond the expectations in 2018 in America, confirming our estimations about conversational systems. However, these devices are not even at the beginning level in Turkey due to the lack of Turkish language support. While Amazon entered the Turkish market, it has not yet opened the smart home systems for use in Turkey for the same reason.
reminded us that the future might not be that far. We realized that capacity increases in edge systems play a crucial role in this structure. A great number of mobile phone brands started to give place to artificial intelligence processors in their last versions. We maintain our expectations that specialization of artificial intelligence in various fields just like humans will become a reality in the longer term. We also observe that the robotics industry and other industries requiring hardware support progress more slowly than expected.
In the next 5-10 years, it is estimated that conversational systems will be increasingly used once autonomous devices and smart home assistants become widespread around the world. The reason behind that is that mobile phones were first used in automobiles. So, we can say that the next decade will witness the transition into an age in which augmented reality and conversational systems will dominate the market with the rise of this technology and decline of mobile phone use. Developments in artificial intelligence will support this trend. Technologies that can only be used for recognizing plants, faces and objects right now will be more successful and integrate more into our daily lives thanks to augmented reality devices.
Autonomous vehicles passed the security perception test In 2018, studies on autonomous devices gave quite successful outcomes. Studies led by the US, China, Germany and Israel progress faster than expected. China makes a remarkable transformation on electrical vehicles and speeds up the trend of transition to autonomous vehicles. Increase in Tesla’s car delivery speed is becoming noticeable.
Cyber security continues to be a national security issue Especially in cyber security field, systems about face recognition, emotion recognition and description identification were put into practice under the leadership of China and Israel in 2018. The social credit system affecting the scores according to the behaviors of citizens in society was put into effect in China in 2018, and this
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TECHNOLOGY REPORT
INTRO Invested for years, SpaceX has started bringing results. We think that R&G studies will eventually reap the fruits even if there is a possibility that these investments will fail. The impact of the first fatal accident due to the error of autonomous vehicles on society disappeared rapidly. Thus, autonomous vehicles passed this important test in terms of social impacts. We think that we should bring our expectations about autonomous vehicles a little forward in the light of this information.
of dollars into artificial intelligence. None of 100 million citizens of any country on earth has the potential of gaining this high economical status and power in the next twenty years, and we have not seen socioeconomic mobility in such an extent previously. China is taking right, strong and fast steps into the future. We observe that products are not protected only with regulations and Chinese start-ups understand the cultural differences better and so they are rapidly achieve retention in the market. We also see that the innovative payment systems are rapidly put into effect under China and Singapore’s leadership.
As artificial intelligence becomes a mainstream, sound scenarios will stand out.
FinTechs will globalise and continue to grow strongly and consistently
We can say that artificial intelligence has created some hype in 2018. We observe that a great number of companies have done experiments under the name of artificial intelligence technology due to the hype. With the decrease of the hype, artificial intelligence will stand out as a must-have feature for every solution. And, it will enable clear and mature solutions with stable revenue models and stand out among others. We think that this hype has more than what it just shows, thus artificial intelligence will continue to be the main trend based on these scenarios.
Trust on financial firms started to be shaken especially with the financial crisis that arose in 2008. Also young generation has had different expectations from companies for a better customer experience due to changes in technologies. The startups working in the financial technologies field appeared to fulfil these expectations and managed to reach a regular growth. In 2018, FinTechs continuing to receive robust investments confirms this trend. Considering the investment figures and the market, we think that FinTechs will keep on growing.
The Far East exhibits a higher performance than expected in both technological and financial start-ups under the leadership of China.
Open banking trend goes on improving thanks to the support from regulations.
China’s capabilities of progressing rapidly is supported with high volume of investments, therefore, China exhibits a performance higher than expected. Chinese government is investing millions
Corporate firms start to cooperate with new start-ups in order to improve their services and not to lose their customers.
9
TECHNOLOGY REPORT
INTRO
The most effective method of an interaction between the startups and big companies is achievable through the financial institutions opening their service interfaces (API). In order to encourage this trend, governments have now started to support institutions. England, European Union and Australia started to force financial organizations to open their APIs thanks to the new laws enacted. For such reasons, Open Banking will be the leading technology among others that will directly affect the financial industry.
ciently thanks to the “robotic process automation� (RPA). With the decline of cryptocurrency hype, more sound and mature solutions will emerge in blockchain technologies. In addition to open banking, decentralization is at the forefront in ecosystem interaction. The advancement that supports it the most is the Blockchain technology. With blockchain, it is possible to establish decentralized but reliable business models. Bitcoin is one of the most effective examples of using blockchain as a digital monetary system.
In 2018, the first samples of Open Banking applications were put into practice at institutions like HSBC. We expect that this trend will speed up towards 2020 because of safety standards to be set until the last quarter of 2019 and the deadlines given for some institutions. We estimate that especially the US, China, England and Singapore comprehend the balance of regulations and innovations here and will keep on taking the center stage in terms of regulation technologies and financial technologies.
Even though the block chain technology does not stand out due to the Bitcoin wave, we observe that the block chain experiments are increasingly continuing as of 2018 apart from crypto currency. Following the remarkable decline in the Bitcoin price, we estimate that this wave will switch from cryptocurrency to the distributed ledger technology and maturely head for consortium-based businesses which are more sound.
In addition to financial technologies, another main topic is prevention of money laundering and fraud. There are strong differences hard to accept between the amounts spent and the cases caught regarding prevention of money laundering and fraud with today’s technologies. England and Singapore are the leaders in terms of providing environments where entrepreneurs experiment with regulation sand boxes and regulation technologies supported with artificial intelligence and blockchain technologies. It is possible for particularly big organizations to open API rapidly, increase the process efficiency and simplify the process more effi-
10
TECHNOLOGY REPORT
INTRO
We think that these experiments will form new business models in the next 3-5 years. We estimate that cryptocurrency experiments will keep on going in countries with having global financial systems such as Singapore in particular and Far East as well as Switzerland. Blockchain technologies have the potential to be actively used particularly in digital identities, tracking and ownership of any kind of commodities and assets, management of inter-institutional and inter-personal agreements, international trade and money transfer, etc. Block chain comes to the fore in subjects like proper implementation of the laws such as GDPR and KVKK and leaving the data confidentiality to the startup of the person. Transition to more dynamic structures for managing cooperation models and manpower will speed up. changes during this timeline. We are moving forward to an era in which it is getting harder to find skills, it is more important to build different cooperations and, additionally efficiency continues to earn significance.
We are at the onset of an era in which institutions making fast cooperations with Fintech startups and investing in decentralized systems will beat the competition. We observe that foreign institutions invest in new generation banking start-ups or carry their operations to other countries as well through their investments they received in 2018. It is observed that countries are trying to be influential in payment systems available in other countries with both acquirements, investments and partnerships through Fintech. Investing in startups is an important opportunity for those who desire to enter foreign markets. Today, the strategy of many startups and funds for using their investments is to establish a company dominating a certain domestic market and then sell that company to a related global company.It is unavoidable for institutions to undergo some organizational and bureaucratic
Institutions will start opening up their internal competencies in order to increase profitability and efficiency. For decades, a great number of companies have tried to enter new markets. A method for achieving it is to acquire a process or data from a company with a great competency and skills to manufacture a product. However, this method historically resulted in failure for many companies. Companies will try it again in the cloud computing age.
11
TECHNOLOGY REPORT
INTRO
The underlying reason is the convenience of distributing cloud services to large masses when entering new markets, provided by cloud computing. Transforming internal capacity into revenue-generating and globally deliverable external digital products validates the transformation of investment into a digital activity. Data security will be Highlighted as a strategic issue by governments With laws such as GDPR, PDPL relating to the protection of personal data, we will continue to see data confidentiality and its effects in 2019, as well. We estimate that penalties will be activated with enactment of such laws. However, our opinion on data security and confidentiality getting more important has added another aspect with Facebook data scandal this year. Latest news show that people were affected by these scandals, updated their security settings, but they did not delete their social media accounts. We observe that people give less importance than expected to the use of their personal data in return for a benefit and that they are more sensitive about the acquisition and use of these data by governments and political bodies. Public institutions and governments passing laws on data security impose penalties on private companies due to data security. On the other hand, companies such as Apple reject the governments’ data request by paying regard to customer rights. We think that social media scandals and data leaks will become widespread and normal, thus gradually losing media coverage.
12
TECHNOLOGY TREND
HIGHLIGHTS FROM 2018
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TECHNOLOGY REPORT
TECHNOLOGY REPORT
HIGHLIGHTS FROM 2018
N26 Mobile Banking Application transfers from Europe to USA
Sharp Drop in Bitcoin Price The worldwide hot topic, drop in cryptocurrency financial market, keeps going on. The total loss in cryptocurrency stock markets has reached 700 million dollars since Bitcoin rose up to 20 thousand dollars level at the beginning of the year. Bitcoin has dropped under 5 thousand dollars for the first time since October 2017. Given the coinmarketcap data, it is possible to see that the first 100 cryptocurrencies also had a dramatic drop like Bitcoin. The biggest factor in this decline is said to be the forking in Bitcoin Cash and mining wars. We will see the future of cryptocurrency in time; but for now, it is thought that the reasons are political rather than technical.
Berlin-based N26 transfers from Europe to USA with a 160 million dollars fund in collaboration with Allianz Group and Tencent Holdings Inc. The Company stated that it has more than one million customers and has doubled its customer base in the last nine months.
Rise of mobile payment and automation in China Unmanned operation race in China started to gain a heated condition last year. Store owners wishing to bring down costs began to use automatic systems and mobile payment methods. In China, companies like Alibaba is leading a revolution in retailing industry through their mobile payment systems available everywhere. Unmanned systems help enterprises decrease labor costs.
Brexit and Ireland border issue Brexit negotiations between European Union (EU) and England are coming to an end. Michel Barnier, Brexit negotiator of the EU, says that the agreement is 90% ready. The border between North Ireland - Ireland is at the top of the issues that cannot be agreed on. May, who continues to defend the agreement, repeated his showdown by saying “you either accept my agreement or separation without agreement, or I fully crash Brexit deal” to those who criticised his agreement, and added “Some people in the parliament are explicitly trying to discourage the country about Brexit deal”. The latest developments indicate that the agreement in its current state will not be approved by the parliament.
Google announces its new processor Bristlecone with 72 qubit power The goal of Google Quantum AI laboratory is to develop a quantum computer that can be used to solve the problems in the real world. This “gate-based” super-conductive system aims to provide a test environment in order to research quantum simulation, optimization and applications in machine learning as well as system error ratios and scalability of qubit technology.
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TECHNOLOGY REPORT
HIGHLIGHTS FROM 2018
Facebook data scandal starts a new age in the global confidentiality application
The biggest energy company in Japan invests in an Ethereum blockchain startup
50 million Facebook profiles were accessed to be used for election campaigns. The data analysis company called “Cambridge Analytica” turned out to acquire 50 million Facebook profiles and predicted the votes of people and used them in an algorithm that might affect the voters.
Tokyo Electric Power Company (TEPCO) is one of the biggest energy giants with its revenue over 456 million dollars. In addition to energy services in Japan, the company also has subsidiary companies in 8 countries. TEPCO declared that it invested in London-based Electron, a startup working on Ethereum blockchain in the energy industry. Their partnership with Electron aims to develop new methods for transition from central system in energy distribution to a blockchain based-anti central system.
Huawei’s heiress arrested in Canada Meng Wanzhou, CFO of Huawei, China’s and the world’s one of the leading technology companies, and Huawei’s founder and CEO Ren Zhengfei’s daughter, was arrested on Saturday, 1st of December 2018 in Canada. Based on the information reported, Huawei’s CFO Meng Wanzhou was arrested because she violated sanctions of the USA on Iran.
2020’s Digital World EMC announced the results of EMC Digital World Research, the seventh of which was held this year. According to the results, the digital world will grow 10 times by 2020. EMC Digital World Research is the only research that measures the amount of data produced every year and makes predictions based on the results. The study of this year titled “Digital World of Opportunities: Increased Value of Rich Data and Internet of Things” includes research and analyses by IDC. It sets forth the importance of wireless technologies, emergence of smart products and software defined-enterprises and excessive increase of data amount throughout the world. The digital world doubles its growth in relation with the Internet of Things every two year. It is expected that the digital world will rise from 4.4 trillion gigabytes to 44 trillion gigabytes between 2013-2020 with a 10 times growth rate.
Hundreds of ATMs are shut down as England switches to contactless payments Every month, 300 ATMs are shut down in England. 1500 machines in the link network were shut down between November 2017 and April 2018 and it results from the need for less cash due to the increase in contactless payments.
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TECHNOLOGY REPORT
HIGHLIGHTS FROM 2018
Amazon Outpost brings cloud technology to conventional data centers
The giant factory only has robots as workers The e-commerce company JD.com, which we can call the Amazon of China, has only 5 human workers at its storehouse in Shanghai. The storehouse would have employed 400-500 workers in traditional conditions. All remaining works are performed by robots. All works that need to be performed at a storehouse are done by robots including packaging, stacking, labeling and loading products for shipping.
Amazon Web Services will offer AWS branded servers to work with existing cloud services. AWS supersedes the conventional hardware vendors with its internal services. With this expansion, AWS has entered the hybrid cloud market. Amazon will deliver Outposts to premises of customers and install them with its own hardware, then maintain them and repair the hardware and update the software automatically.
Face recognition startup gets 600 million dollars investments
Elon Musk: There is 70% chance I will move to Mars
SenseTime as a China based-artificial intelligence startup received a fund of 600 million dollars from Alibaba. The Chinese company is specialized in various areas about artificial intelligence like facial and image recognition, autonomous drive, medical imaging and deep learning hardware optimization.
Elon Musk has very important works with SpaceX, and he says that he may probably live on Mars. Being a guest for Axios program broadcasted in HBO, Musk said that this journey might happen in the following 7 years and hopes to move to the red planet. CEO of SpaceX reminded that it would cost “only� a few thousand dollars to go to Mars but those going there would spend most of their time to survive and return to the Earth could not be guaranteed.
Drone that can pull 40 times weight of its own weight Developed by the roboticists from Stanford and EPFL universities, FlyCroTug is both able to fly and pull 40 times of its own weight despite its micro size. FlyCroTug project of the research team was published in Science Robotics journal. The team explained that they were inspired from gecko, a reptile, when developing this mini drone. FlyCroTug can hold on to even smooth surfaces without any problem thanks to the adhesives and nail-like limbs in the lower part of its body. The drone can also hook and pull objects 40 times of its own weight.
Tesla now delivers faster The company delivered 83,500 vehicles in Q3 and doubled the total amount of the previous three months. It is estimated to take two or three years for the factory to reach the production capacity of 500 vehicles per year.
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TECHNOLOGY REPORT
HIGHLIGHTS FROM 2018
The world’s first artificial intelligence newscaster
China’s artificial Sun
The world’s first artificial intelligence newscaster began to work at the Chinese news agency, Xinhua. Thanks to the artificial intelligence that can present news both in Chinese and English, a major part of our life has been further digitalized. The voice and image of the digital newscaster were developed on Zhang Zhao, who was a real newscaster at Xinhua news agency, and the images are quite realistic.
We approached to a clean and limitless energy coming from nuclear fusion a step further thanks to China’s Experimental Advanced Super-Conductive, Tokamak (EAST). During four months of experiment, “China’s artificial sun” reached a core plasma temperature over 100 million centigrade degrees (six times hotter than the Sun’s core) and a heating power of 10 MW. As in many other fusion experiments, the final goal is to produce a practical nuclear fusion power unit.
Nubank reaches 4 billion dollars value after Tencent’s 180 million dollars investment
NASA’s spacecraft InSight lands on Mars NASA’s spacecraft called InSight smoothly landed on Mars surface. This craft is interested not only in the rocks on the surface of Mars but also what goes on in the internal surface of Mars. Tanya Harrison, NewSpace Startup Research Manager of Arizona State University said “InSight is the first mission taken for examining the internal surface of Mars. There are so many unanswered questions about the internal surface as we could not find the opportunity to examine this part so far”
Nubank, a Brazilian financial services company, collected 180 million dollars from Chinese Internet giant Tencent. This investment made Nubank one of the most valuable companies in Latin America with a valuation of 4 million dollars. By the reason of that the obstacles against banking industries are higher, it is seen that the chance that financial service startups reach remarkable scales is higher in developing markets like Brazil comparing to the developed markets.
Driverless taxis are coming
China started the World Data Project China aims to establish an open international hub for major world data through its cloud service platform project. The project tries to mark a new epoch in world system sciences, life sciences and related disciplines. Big World Data has the advantages of being more accurate, more scientific and more on time. The aim is to increase the effective data in science and big data sharing.
According to the news from Bloomberg, the driverless automobile company, Waymo will start providing services with its first driverless taxis in December 2018. According to the news story, the first commercial drives will happen in Arizona, USA. Waymo has been testing its driverless automobile technology developed on Chrysler Pacifica in Silicon Valley and Arizona roads for a long time.
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TECHNOLOGY REPORT
HIGHLIGHTS FROM 2018
British police catch criminals before they commit a crime thanks to artificial intelligence
Oculus Quest wireless virtual reality headset was officially announced Facebook’s virtual reality platform Oculus announced new Oculus Quest virtual reality glasses. These glasses will be sold at 399 dollars. Zuckerberg said that Oculus Quest brings together all features of an ideal virtual reality system. Stating that these features are wireless design, virtual hand controls and full position tracking, Zuckerberg said “If we can bring together these three features in a single device, we think that it will signal the beginning of a new generation for virtual reality.”
In England, a program called National Data Analysis Solution - NDAS was initiated. Using artificial intelligence based-software and smart cameras, the system aims to identify people who tend to commit a crime. System collects and identifies the data and statistics of past crimes and brings together the data through machine learning algorithms. It scans smart cameras and tries to detect criminals. Criminals are ranked according to risk scores.
European Fintech companies are reaching the USA Market to become billion dollar companies
IBM acquires RedHat IBM, the information technologies giant, announced that it acquired Linux which is the first name to remember when it comes to the open source operating system, and Red Hat which is an open source software distribution company. According to the common statement of both companies, IBM will pay 190 $ for each share of Red Hat.
Financial industry has reached a globally large volume. The number of Fintech startups increases rapidly in the US and Europe. There are more than 237 billion dollars worth startups in the world, and fintech makes up 11% of this special group. Fintech category received 31 billion dollars investment last year thanks to the growth in the industry With support from the risk capital, accelerators and consortiums.
China activates the social credit system
First fatal accident of a driverless vehicle
The social credit system announced to be put into effect by China in 2020 has already started working. According to the news, millions of people having a “negative social credit” have already been imposed a sanction. In this system, every citizen has a specific score. These scores may be increased or decreased depending on the behaviors of a person just like credit rating.
A driverless auto caused the death of a pedestrian for the first time in Arizona, USA. A vehicle of Uber was involved in the accident; the car hit a woman crossing the street. After the incident, Uber announced that it stopped all driverless vehicle tests on public roads.
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TECHONOLOGY TREND
A RTI FI CI AL INTELLIGENCE A package of advanced technologies enabling machines to comprehend, understand, move and learn.
“Worldwide Artificial Intelligence revenue will rise up to 36.8 billion dollars by 2025 from 643.7 million dollars reported in 2016.� Tractica
TECHNOLOGY REPORT
ARTIFICIAL INTELLIGENCE
Artificial Intelligence is not only a specific tool, software or a speaking interface. Artificial Intelligence represents the era succeeding the epoch of (early-stage computers) and programmable systems. To sum up, Artificial Intelligence is a branch of computer sciences programmed to perform actions which normally require human intelligence. These include learning, reasoning, problem solving, understanding languages and perceiving a state or an environment. Thus, Artificial Intelligence is an extremely broad sphere which uses its own computer languages and even special computer networks modelled on human brain. In the past, such an invention was made into reality with rule-based data analysis programs, statistical regressions and early “expert systems�. But development of powerful and deep neural networks gives Artificial Intelligence a feature that no other programs have: doing the unexpected. This feature implies that enterprises should change their perspective on Artificial Intelligence: the learning systems vs. programmed systems. Education is not about teaching somebody how to do a work but rather about how to approach to problems and how to solve them. The researchers from Carnegie Mellon University developed an educational method that enables drones to recognize and follow a vehicle. However, the same method may apply for other tasks such as understanding customer Behaviors in a physical or digital channel.
Quote A baby learns to crawl, walk and then run. We are in the crawling stage when it comes to applying machine learning.�
Dave Waters
TECHNOLOGY REPORT
ARTIFICIAL INTELLIGENCE
01
02
Computer Vision
Conversational Systems
Image-Based Diagnosis
Natural Language Understanding
(Diagnosis of diseases in plants and humans)
Voice Perception
Emotional Analysis
Natural Language Processing
Behavioral Observation
Natural Language Generation
Object Recognition
Personal Assistants
Threat Perception
03
04
Data Based- Estimation Systems
Physical Systems
Trend Estimation (route calculation, work load estimati-
Autonomous Vehicles
on, number of customers estimation)
Robots
Risk Estimation Systems (fraud, credit rating, terror connection) Suggestion Systems (product suggestion, partner suggestion, financial consultant)
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TECHNOLOGY REPORT
ARTIFICIAL INTELLIGENCE
01
04 Transparency of Decision Mechanism
Prejudiced Artificial Intelligence
02
05 Understanding Non-Structural Data
Data Reliability
Fundamental Problems that Artificial Intelligence
03 Legal Liability
Must Overcome
23
Providing Tarining Data
06
TECHNOLOGY REPORT
ARTIFICIAL INTELLIGENCE
Prejudiced Artificial Intelligence
Even though this is statistically accurate, it may create discrimination problems. Similarly, the systems trained under human observation may contain some wrong patterns in their decision mechanisms because of patterns in the human mind. For example; some commercial software may determine a person’s gender from their photos. If a person in a photo is a white man, the software will give the correct answer with 99% accuracy. However, error rate for people with darker skin is higher (the success rate of women with dark skin may decrease to almost 35% according to a new research measuring how the technology works with human samples from different races and genders). In another study, scientists found out that machine learning algorithms collect racial and gender prejudices hidden and deeply rooted in language use patterns. These different results calculated by Joy Buolamwini, a researcher at MIT Media Lab, show how some of the prejudices of the real world can infiltrate the computer systems with face recognition feature.
Many researchers from Maryland University, Columbia University, Carnegie Mellon, MIT, Princeton, California-Berkeley University, International Computer Sciences Institute started discovering unplanned prejudices in algorithms.
Considering the developments in Artificial Intelligence in recent years, most of them show that data reflects only those resulting from the reality we live in. Susan Etlinger A part of this problem is about artificial intelligence; because computers are trained by using beginning data set and the educational programs are formed by humans. Most of the time, educational kits unveil the unapproved prejudice hidden inside ourselves. As our computer systems become successful in making a decision, we started to find ourselves as categorized by groups which do not make a clear sense for us but create a major reaction.
Data Reliability We will soon reach a point where we are not able to understand whether a dataset is changed intentionally or accidentally. Artificial Intelligence systems rely on our trust. If we don’t trust a result, research and technological advancements of decades will be wasted. industry leaders - governments, non-profit organizations and likewise- should rely on the data and algorithms used. However, reliability and accountability depend on the results of the work done.
You or somebody you don’t know may enter the wrong categorization algorithm and you may discover you are not qualified for a loan or a certain drug or renting a flat for non-transparent reasons or the reasons which are not easily understood. As Artificial Intelligence is fed with data; it may result in discrimination about sex, root, occupation, etc. with current statistical connections if it is used in suspect identification, credit scoring, etc.
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TECHNOLOGY REPORT
ARTIFICIAL INTELLIGENCE
Legal Liability
Transparency of Decision Mechanism
While artificial Intelligence and robots have been discussed from various aspects, it is more important to examine legal aspect of the artificial intelligence and machine learning.
We know that Artificial Intelligence is claimed to become a “black box�. (evenmore, it is described as such by researchers working in the field but not understanding how the new systems work). However, this is not exactly true. Computer and information scientists, investigative journalists and lawyers are concerned that the Artificial Intelligent systems should not be so disguised.
The systems discovered by Artificial Intelligence itself without the defined data and even where it can reach better data and variables itself have started to be mentioned. Thus ,Artificial Intelligence and robots are now discussed from a legal perspective especially based on will, consciousness, rights and legal capacity and liability, etc. Even for Artificial Intelligence solutions with a narrower scope, more serious legal and ethical issues are coming up. Diagnosis of a cancer patient, identification of a terrorist or use of artificial intelligence in autonomous vehicles will directly influence human life.
In addition, systems should be able to announce their decisions, present more transparency and be accountable for data users. However, the problem for offering such a transparency is to unveil the secrecy of commercial products generating high profits. Another challenge is the fact that asking systems to announce their decision making processes synchronously may reduce the output speed and quality. Imagine that you are with a genius mathematician giving you the right answers and you ask them to stop their work and show the results to you over and over again.
The first fatal accident with an autonomous vehicle in which an Uber vehicle run over a pedestrian Occurred this year. The aforementioned accident rapidly fell off the agenda and resulted in the way we expected in 2018. Since so many fatalities may occur due to human fault as well, we expect that the use of artificial intelligence will affect the reduction of errors and continue to be accepted by society.
Understanding Non-Structured Data The biggest disadvantage of Artificial Intelligence is that it does not have the ability to think and it does not have the integrated sensors like eyes, ears, etc. Therefore, different technologies are used for understanding videos, photos or printed documents and the success rate is far from humans.
We expect that we will keep discussing on issues such as identification of terrorist suspects, etc. where it is harder to measure results’ accuracy and train the artificial intelligence.
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TECHNOLOGY REPORT
ARTIFICIAL INTELLIGENCE
Providing Training Data
ded. Some startups are proud of the list of government customers who want to be a step further than hackers.
Artificial Intelligence may be as successful as the data used in its training. People receive multi-dimensional education for 16 years in order to make at least legally liable decisions. When there is a problem with the educational data, then people may make wrong decisions. When it comes to Artificial Intelligence, there is a limit in the size and diversity of data. As well as insufficient data, incomplete dimensions also cause wrong decisions. Artificial Intelligence may create serious problems especially when the accuracy of the training data is not clear. We should not ignore the likelihood of wrong data creation methods using cyber attacks to affect the Artificial Intelligence decisions.
Future of Defense is Artificial Intelligence Battlefields move to data centers. In 2014, Amazon created a special cloud computing system which can meet harmony and arrangement requirements for sensitive data for CIA. In the last quarter of 2017, it opened these tools to other government customers other than CIA. Amazon also acquired two Artificial Intelligence cybersecurity companies (Harvest.ai and Sqrrl) to protect sensitive data on the cloud. Aside from new startups providing services for Amazon or government customers, Artificial Intelligence promises to be the backbone of government-supported cybersecurity efforts.
Artificial Intelligence Race
In the Cold War period, governments used to talk about the disadvantages regarding their competitors or “rocket races� in terms of nuclear warheads. However, now governments evaluate their differences in terms of their ever-increasing cyber capabilities. As a result, cybersecurity and conventional defense realms are unavoidably uniting.
There are nine major technology companies, six of them American and three of them Chinese, which are responsible for the future of Artificial Intelligence. Last year, the corporate leaders of Artificial Intelligence ecosystem were racing to obtain Artificial Intelligence cloud sharing and become the reliable provider of the Artificial Intelligence in remote servers. Amazon Web Services, Microsoft Azure, IBM and Alphabet are offering new proposals and bundles to the developers, and ensuring the Artificial Intelligence startups to spread over a large area, thus making it easy to present their ideas. This is not only about providing services; we can claim that every company now offers Artificial Intelligence software.
We can say that development of Artificial Intelligence is the modern version of armament race. Today, China is paving the way for being the Artificial Intelligence leader of the world. In the USA, Trump government does not provide budget for fund increases for research and makes it hard for talented Artificial Intelligence researchers to develop their ideas, study and get education.
Artificial Intelligence Cyber Security market is getting more crow-
26
ARTIFICIAL INTELLIGENCE
Quote “I think the USA will continue to lead the artificial intelligence in the next five years but China will catch up so rapidly. We will probably be at the same level within five years. Even though the development rate is so impressive, it is very hard to see how China will leave us behind.”
Eric Schmidt, Chairman, the US Defence Innovation Advisory Board, Keynote Address at Artificial Intelligence & Global Security Summit, 11/13/17.
TECHNOLOGY REPORT
On the other hand, Chinese government published a three-year plan detailing the giant investments for the Artificial Intelligence from the government wealth fund. Also, a national Artificial Intelligence research center is searching for innovations in military applications and have made official their existing partnership with leading companies and research organizations, thus doubled their Artificial Intelligence training. Furthermore, China is planning to create a 150 billion dollars worth Artificial Intelligence industry by 2030. Most important and major companies focusing on the future, such as AI-Baidu, Alibaba and Tencent are based in China. China also has a great number of Artificial Intelligence patents. And, their academics have published more studies than those published in all EU countries. China is the primary investor of the USA and European Artificial Intelligence startups. China-based Artificial Intelligence startups make up 48% of the worldwide investments in this field. If data is the new oil, then China’s 730 million population makes the country the biggest natural resources owner. This means that it has not only the largest raw material supply to be used for experiments and R&D but also the confidentiality and security restrictions that may obstruct the developments in other countries. The best example of that is Alibaba. Regarded as Amazon of China, Alibaba announced to invest 15 billion dollars in seven cities worldwide in the next three years. China uses its Artificial Intelligence weapon quietly. People’s Liberation Army of China keeps up with the USA when it comes to military applications. For example, Artificial Intelligence is used
TECHNOLOGY REPORT
ARTIFICIAL INTELLIGENCE
We can say none of the other countries forges ahead in the same speed and intensity as China does. China’s outstanding investments in Artificial Intelligence might be signaling the fundamental changes in the geopolitical power balance for the following years.
Cross-border Artificial Intelligence investments are increasing Investment agreements, 2013 - 2017 31
Commentary 19
Artificial Intelligent is not only a trend. Considering Artificial Intelligence, many organizations and leaders in the world have developed misleading optimism or fear (sometimes both). It might be a problem about the future of humanity; but not for a long term. Machine learning bubble will burst. Machine learning will become the new normal soon. Normalization of machine learning will cause investors to be picky about the Artificial Intelligence companies they invest in. More than 1100 new Artificial Intelligence startups founded after 2016 will need sound business models to survive.
20
14
5
6 3 0
2013
4
2014
2015
2016
2017
Investments in China-supported USA startups Investments in USA-supported Chinese startups
for identifying hidden images in drones. The Chinese Army is achieving a phenomenal success in technologies including the “creep intelligence” test which can automatize dozens of unmanned aircrafts. Furthermore, the army equips the helicopters and jet motors with Artificial Intelligence technologies. On the other hand, the government has established a very confidential military laboratory and is building national laboratories of Artificial Intelligence that cost billion dollars.
28
01
Specific Artificial Intelligence
02
Auxiliary Artificial Intelligence
03
General Artificial Intelligence
04
Super (Post-Human) Artificial Intelligence
05
Trans-Human Artificial Intelligence
TECHNOLOGY REPORT
ARTIFICIAL INTELLIGENCE
Artificial Intelligence has 5 possible stages Specific Artificial Intelligence, Auxiliary Artificial Intelligence, General Artificial Intelligence, Super (Post-Human) Artificial Intelligence, Trans-Human Artificial Intelligence. But still, it is not guaranteed that we will pass through these stages.
01
Specific Artificial Intelligence
Scope
Impacts
Effective for
It is able to do certain tasks; however, it is not able to carry them onward beyond the taught scope and not able to develop new functionality on its own.
It increases efficiency of repetitive activities and cannot be scaled without human support.
Blue-Collars
02
Timing
Today and up to today
Auxiliary Artificial Intelligence
Scope
Impacts
Effective for
Artificial Intelligence that supports and speeds up human activities in business and daily lives.
Artificial Intelligence that increases people’s productivity in business life and enhances competition with each other and general artificial intelligence that might be introduced in the future.
All people
29
Timing
Today and the next 20 years
03
General Artificial Intelligence
Scope
Impacts
Effective for
Ability to fulfil more general functions and self-develop by learning in various aspects.
Exhibiting performance close to humans in art, law, mathematics, science, etc., competing with humans in white-collar works without getting support from humans.
White-Collars
04
Timing
2045 and after (Computers will reach the processing power of a human brain in 2023 at the earliest, and then, General Artificial Intelligence may be developed in 20 years.)
Super (Post-Human) Artificial Intelligence
Scope
Impacts
Effective for
Artificial Intelligence which progresses out of the perception limits of humans in terms of speed and outputs is able to learn and implement the decisions they take.
Artificial Intelligence that has a say in business life and communication except for technical topics, and can deactivate people and companies that do not use artificial intelligence, when required.
Managers
05
Timing
Unforeseen future
Trans-Human Artificial Intelligence
Scope
Impacts
Effective for
Artificial Intelligence that is able to acquire capital ownership or create structures that can remove the dominance of capital ownership.
Artificial Intelligence that can change all experiences from business life to international politics.
All people
30
Timing
Unforeseen future
TECHNOLOGY REPORT
ARTIFICIAL INTELLIGENCE
We can say that one of the best examples on the limits of Artificial Intelligence is its failure to estimate the World Champion. If 100 world cups had been played, it might have been right in its estimations, but we see that it does not have an ability to estimate beyond human abilities where only 1 world cup is played. The inference might be seen ordinary rather than stroke of a genius. So, the main benefit is efficiency. For example, if you have people to monitor phone calls, you can do that with limited number of people. However, you can reach a capacity to monitor all calls using Artificial Intelligence.
few questions to you and making an investment offer for you.Thus, although general artificial intelligence is specialized in a certain field, it will be structured so as to carry out multi-functions with little help, to establish visual or audio communication, and if necessary, to take startup or to consult with you. Post-Human Artificial Intelligence will be structured so as to make and implement decisions without human support; carry out the strategies, partnerships and agreements of the company; and achieve this with a trans-human success. Capital ownership, artificial intelligence ownership and government policies will determine human life. It is likely that people will work less or do not work at all but live in great prosperity and comfort as well as that they will make great efforts to generate revenue but not get any results. Lastly, the Post-Human Artificial Intelligence also contains a dystopia to occur in case governments and capital owners in competition loose the priorities about humanity and cannot fix and control the borders of artificial intelligence. It can be said that humans’ being super species on the earth is under threat by computers, which are our pets today.
As Artificial Intelligence is limited, it is supporter of an act rather than the performer. For example, we can prefer AI to leave the decision on suspects to experts instead of trusting it to directly understand people’s intentions. Auxiliary Artificial Intelligence includes an advanced version of Specific Artificial Intelligence to help people. Although it still has a limited area of use, it will have different impacts on society as the success of Artificial Intelligence increases in taking over some works from humans. For instance, the new conversational system introduced by Google can call a hairdresser to make a reservation for you. Similarly, it fulfils more interactive functions such as answering your calls, making reservations and taking notes. General Artificial Intelligence will be able to carry out all your financial activities; buy, sell and invest the instruments suitable for you; follow the changes in the industry and direct to different banks and institutions on behalf of you and when necessary; consult with you or keep your accounts on behalf of you; communicate with artificial intelligence; and report your taxes and manage your payments way far beyond asking a
Suggestions We think that we should give more priority to two different points. > Efficiency-Oriented Narrow Artificial Intelligence Technologies in Business Life: We are moving into an era where Narrow Artificial Intelligence and Artificial Intelligence Assistant works will stand out. Therefore, we should evaluate the use of artificial intelligence
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ARTIFICIAL INTELLIGENCE
England is the first government to accept Artificial Intelligence Law 01
Artificial Intelligence should be developed for common interest of humanity.
02
Artificial Intelligence should work on understandability and justice principles.
03
Artificial Intelligence should not be used to limit data rights or privacy of individuals, families or communities.
04
All citizens have the right to be educated for mental, emotional and economical development besides Artificial intelligence.
05
A power that focuses on hurting, destroying or cheating people should never have an artificial intelligence.
Reference: https://publications.parliament.uk/pa/ld201719/ ldselect/ldai/100/10013.htm#_idTextAnchor152
TECHNOLOGY REPORT
in the intensive points of the operation intended for increasing the efficiency. > Any kind of service and operation industry that do not require any physical efforts can be considered within this context. Call Centers, Event Records and Problem Management, mediation transactions such as real estate, tourism, financial products, and activities based on written and audio communication like reservation transactions can be included in this context. We also believe that any kind of writing recognition technologies such as document recognition, classification, directing and planning at operation centers will maintain its importance. > We think that it is important to focus on Auxiliary Artificial intelligence and concentrate on technologies intended for speaking, hearing and seeing senses of humans to produce solutions under digitalization. It is obvious that technologies such as face recognition, image-based behavior comprehension, intention and emotion analysis, object recognition will stand out in this context. For computer vision, speaking and written communication, quite successful solutions are found especially in general cloud environments. It is observed that large corporations invest a great amount in this field. In spite of that, we believe that this field can still be invested in since governments direct the usage of domestic private cloud instead of international general cloud due to the security regulations. Local language use especially in voice and written communication maintains its significance. At this point, it is still possible to create local solutions. Computer vision technologies are affected by local data, but not as much as voice communication. Even mimics, perception of situations creating a security concern and face recognition technologies need local data.
TECHONOLOGY TREND
CONV E RS AT I ONA L SYST E M S
Artificial Intelligence implies the automation of user or customer-oriented tasks in customer-oriented scenarios. The final goal has two ways: increasing customer satisfaction and decreasing the load of human assisted-service providers.
“For humans and machinery to work together, they need to interact with each other naturally and speaking is the way for information exchange.� Murray Campbell, IBM Distinguished Reseacher and architech of DeepBlue
TECHNOLOGY REPORT
CONVERSATIONAL SYSTEMS
Conversational AI Artificial Intelligence implies the automation of user or customer-oriented tasks in customer-oriented scenarios. The final goal has two ways: increasing customer satisfaction and decreasing the load of human assisted-service providers. Communication obstacles between humans ad machinery decrease each day. Institutions may use this connection in order to automatize basic customer tasks and improve experiences for customers and users. These developments simplify previous user interfaces and go beyond removing them completely. Smart machinery learn to live in our ecosystem and speak our language properly.
Conversational AI Types 01
Natural Language Understanding
02
Speech Recognition
03
Natural Language Processing
04
Natural Language Generation
05
Personal Assistants
Quote “75% of the institutions using Artificial Intelligence increase customer satisfaction by more than 10%.”
Capgemini Digital Transformation Institute, “Turning AI into concrete value: the successful implementers’ toolkit
TECHNOLOGY REPORT
CONVERSATIONAL SYSTEMS
We are surrounded by unstructured texts in the real world; from our social media posts, blog main pages to company web sites and government digital records and many other places. NLU ensures the researchers to sort out concepts, map relationships and analyze emotions, and learn the texts by measuring the whole of them. NLU will broaden the studies of professional researchers working in science, medicine, law and politics, infrastructure, agriculture, transport, education and any other fields so as to make them give deeper implications.
Artificial Intelligence institutions that have increased the following benefits more than 10 percent 74%
72%
70%
68% 66%
Speech Recognition
64%
The researchers at MIT CSAIL examine how children learn new words in order to train the computers on automatic speaking recognition. As human beings, we can learn a new concept only in one or two examples, but it is harder for machines when it comes to language. The researchers also train computers to watch the videos and to estimate the sounds about our physical world.
62%
Reduced customer churn
Reduced customer complaints
Increased customer satisfaction
Source: Capgemini Digital Transformation Institute, “Turning AI into concrete value: the successful implementers’ toolkit�
Natural Language Understanding (NLU)
Natural Language Processing (NLP)
Natural language understanding or natural language interpretation is a sub-branch of natural language processing in artificial intelligence that deals with understanding what is read. Natural language understanding is accepted as a difficult problem in artificial intelligence. There is a significant amount of commercial interest in this field for features such as answering, news collecting, text categorization, voice activations, archiving and large scaled-content analysis inquiry.
Natural Language Processing (NLP) is a subfield of artificial intelligence (especially of the programming using computers to process and analyze the big amounts of natural language data) that deals with computer sciences, information engineering, the interaction of computers and human natural languages. Challenges in natural language processing include speaking recognition, natural language understanding and natural language
36
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CONVERSATIONAL SYSTEMS
generation. Thus, NLP addresses a general structure covering other chat-based systems.
Number of Amazon Echo Sold in the USA
Natural Language Generation (NLG)
$8B
$6B
Natural Language Generation (NLG) is used by media companies and marketing firms to generate a content based on large data sets. NLG is quite a strong field; because it can integrate key words, develop search engine optimization (SEO) and be personalized.
$4B
$2B
0
Personal Assistants
Q2
Q3
Q4
Q1
2015
Two important companies dominating the smart home speakers are Amazon Echo and Google Home. They will soon start supporting non-English speaking markets.
Q2
Q3
Q4
2016
Q1
Q2
Q3 2017
Source: KLEINER PERKINS 2018 INTERNET TRENDS
Amazon Echo has reached a wider area with its conversational system solution in our houses. The product is not yet available in all countries, But it is intensively used in the countries where it is available. Since they do not serve in our country, innovative users can reach limited amount of products only for the experimental purpose.
Number of Amazon Echo’s Abilities 30K
20K
10K
The second obstacle for this product for becoming widespread is the lack of language support. Devices can be adopted among English speaking users through local applications; but it is more common for users from many countries to use their local languages.
2915
2016
Source: KLEINER PERKINS 2018 INTERNET TRENDS
Diction and pronunciation problems also obstruct smooth use of
37
2017
2018
Q4
TECHNOLOGY REPORT
CONVERSATIONAL SYSTEMS
The estimated number of worldwide digital assistant users (Million)
English. Even so, it is expected that certain home assistants will keep becoming widespread in the next years.
2000
1800
Emotionally intelligent assistants Global survey of smart phone users
1600
1400
1200
How can I help you?
1000
69% People thinking it would be so good if the technology could get
800
back to them
600
73%
400
People wanting conversational 200
systems to understand them correctly and answer just like
0
humans do 2015
2016
2017
2018
2019
2 0 20
2021 Source: mindshare futures
Source: Statista, “Digital Assistants – Always at Your Service”
TECHONOLOGY TREND
COM PU TE R V I SI O N
It is a science which aims to equip a machine or a computer with the ability to see just like humans do.
“If you trust your life to an autonomous car, then you’ll probably trust artificial intelligence for almost everything”
Dave Waters, Department of Earth Sciences, University of Oxford Associate Professor
TECHNOLOGY REPORT
COMPUTER VISION
COMPUTER VISION Biometrics and Face Recognition Emotional Analysis
Computer vision science aims to equip a machine or a computer with an ability similar to that of humans. Computer vision deals with analyzing and understanding the information gained automatically from a single image or a series of images. In the last five years, the increased popularity of Artificial Intelligence techniques (especially machine learning and deep learning techniques) has facilitated the growth of projects carried out at a great number of institutions worldwide. Particularly, China aims to solve the technology under its own country’s conditions and its security, and invest a great amount in Computer Vision startups instead of using general cloud solutions.
Biometrics and Face Recognition Image-Based Diagnosis
(Diagnosis of diseases in plants and humans)
Behavioral Observation Object Recognition Security and Video Tracking
Biometric technologies and face recognition work with support from infra-red sensors, etc. in addition to computer vision. We think that an effective face recognition will create an advantage in the industry particularly in applications like payments where the smoothness of customer experience is critical. Emotional Analysis Emotional analysis can be used especially in security scenarios in order to measure abnormal intensities such as anxiety, fear etc. in the environment. Also, measuring customer experience finds place in fields like automation of satisfaction surveys. In China, an emotional analysis solution is used to measure the interest of students in lessons.
TECHNOLOGY REPORT
COMPUTER VISION
China is investing a great amount in computer vision startups
2.37 Billion $
Number of investments
Amount ($)
74
Total investments since 2009
Agreements since 2009
71.8 Million $
20 Million $
Average size of investments since 2009
Median size of investments since 2009
CBInsights
2009
2010
2011
2012
2013
2014
Behavioral Observation Even though behavioral observation technology is developed especially for security tracking, it can also be used in various fields ranging from “do shopping and go� model experienced by Amazon to measuring behaviors of users in stores and branch stores thanks to the object recognition feature. Although success rates of the works at the R&D level are high in certain scenarios, they seem far from having self-reasoning abilities.
42
2015
2016
2017
2018
TECHNOLOGY REPORT
COMPUTER VISION
Object Recognition Object recognition technologies become meaningful when brought together with other computer vision technologies. There are scenarios with narrow usage such as learning plant species. Image-Based Diagnosis The USA authorities are considering to approve Artificial Intelligence for use in clinical environments. What artificial intelligence promises in diagnosis of diseases is early diagnosis and augmented accuracy. Machine learning algorithms can compare a medical image with those of millions of other patients and reveal the nuances that the human eye might miss. It can complete an examination in one second which would take hours for a human. The consumer-oriented artificial intelligence tools like SkinVision are already available. The tool tracks suspicious skin lesions. Medical service artificial intelligence applications will institutionalize machine learning capabilities at hospitals and clinics.
“Number of missing persons will decrease by 80% before 2023 compared to 2018 thanks to face recognition technologies provided by artificial intelligence.” Gartner Strategy
Security and Video Tracking In the future, it will be possible to solve more extreme scenarios through Computer Vision. MIT scientists have discovered how to use computer vision to track the data called “accident cameras”. Windows, mirrors, corners, home plants and other common objects can be used together with Artificial Intelligence in order to track minor changes in lights, shades and vibrations. Also, this technology can be used for the benefit of journalists in investigations. The Result? We may all have X-ray vision soon.
These solutions can be generally used for security purposes in identification and tracking of suspects using facial and emotional recognition and identification of suspicious behaviors on cameras, as well as finding missing persons or understanding customer behaviors and improving customer experiences. For non-security usage, data should be recorded as nameless and tracked non-personally for data security reasons.
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TECHNOLOGY REPORT
COMPUTER VISION
SenseTime
Quote
SenseTime is an artificial intelligence company that focuses on innovative image processing and deep learning technologies. Being the most valuable artificial intelligence company of the world, SenseTime focuses on image processing and deep learning.
“It took a few years to learn what I really enjoy doing at MIT. Then, an intensive 20-year of working period took place. And then, we started to see some real industrial applications and impacts. Nothing is achieved in one night.” Xiao’ou Tang, Co-founder, SenseTime
SenseTime Motto Artificial Intelligence Innovation for a More Powerful Future Location China Year of Foundation 2014 Investment 2.6 billion dollars
Website www.sensetime.com Category Artificial Intelligence, Computer Vision
TECHONOLOGY TREND
AUTO NO M O US V E H I CL E S
Smart vehicles can move without the need for a driver using online sources. There are versions that can go on air, under water and on land.
“After solving the technological and legal issues, 15 percent of automobiles sold in 2030 could be autonomous.�
McKinsey
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
Automotive manufacturers have been investing in equipment, sources and workforce to meet changing consumer preferences to have their competitive edge in the market. It is a nice first step to be aware of technological trends redefining the automotive industry. However, knowing them is not enough for companies; they need strategic investments to lead changes.
will play a crucial role in providing these technologies to customers; therefore, all members of the automotive industry have to work together to be successful. (It is seen that unmanned vehicles are still “at the top of inflated expectations� at the end of 2018. At this point, studies for smart and semi-autonomous vehicles are still going on and they are now manufactured. Also, it is estimated that 5G is a critical technology for autonomous vehicles to move with less error and in more harmony.
Electric vehicles (EVs), autonomous driving, Internet-connected vehicle software and shared vehicles are only a few of the main trends requiring remarkable capital investments from automotive firms. Suppliers and original equipment manufacturers (OEMs)
Automation Levels
01
02
03
04
05
06
No Automation
Driver Assistance
Partial Automation
Conditional Automation
High Automation
Full Automation
Zero autonomy; driver do all
Vehicles are controlled byd-
Vehicle combines automa-
A driver is mandatory but
Vehicles can fulfil all driving
Vehicles can do all driving
driving.
rivers, but some driving sup-
tic functions like speeding
they do not have to watch
functions under certain con-
tasks under any condition.
port features may be integ-
up and steering, but a driver
around. A driver should
ditions. Drivers may have
Drivers may have the option
rated in the vehicle design.
should always do their dri-
always be ready to take
the option of controlling the
of controlling the vehicle.
ving duty and watch around.
control of the vehicle anyti-
vehicle.
me they are notified.
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TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
How many cars will be autonomous by 2040? Two different scenarios New vehicle market share of autonomous vehicles (%) 100 90 80 70
Conditional autonomous¹
Commercial Commercial promotion by new technology
promotion
Full autonomous²
by collective market leaders
players and
Availability
premium equipment manufacturers
60 50
in popular Gradual increase in
consumer
manufacturing capacity by
models
technical players
Value or negative promotion that Technical/ legal obstacles
causes low consumer perception following critical events
that delay
40
Conditional autonomous¹
commercial 30
promotion
20 Full autonomous² 10 0 2020
2025
2030
2035
2040
Factors affecting disruption scenarios
High Disruption Scenario
Low Disruption Scenario
Legal challenges Secure and reliable technical solutions Consumer acceptance, eagerness to pay
Fast Extensive Enthusiastic
Gradual Uncompleted Limited
¹ Conditionally autonomous vehicles: The driver may take control depending on situation. ² Fully autonomous vehicles: Vehicle is fully in control. Source: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/disruptive-trends-that-will-transform-the-auto-industry
48
Source: McKinsey
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
Tesla’s Free Cash Flow
Source: arstechnica
Q4 2010 – Q3 2018
1200$ 800$ 400$ 0$ 400$ 800$ First Model S
1200$
First Model X
deliveries
First Model 3
deliveries
deliveries
1600$ Q2
Q4 2010
Q2
Q4 2011
Q2
Q4 2012
Q2
Q4
Q2
2013
Q4 2014
Fully autonomous vehicles will not be commercially available before 2020. However, advanced driver assistance systems (ADAS) will play a crucial role in preparing the regulatory authorities, consumers and companies for the middle term reality of vehicles getting the control of drivers.
Q2
Q4 2015
Q2
Q4 2016
Q2
Q4 2017
Q2
Q4 2018
assistance but eventually, drivers should have the control. Fully autonomous vehicles, on the other hand, are expected to be completely independent from driver controls. Vehicles equipped with advanced driver assistance systems may have complexities at varying levels; but starting full autonomy will be so hard and take 10 to 15 years.
Fully autonomous vehicle technologies must have more than advanced driving systems. It must integrate the Internet-based vehicle technologies and use new estimation analysis software that detects accidents and other potential problems before they occur. Advanced driving assistance systems may provide limited
Even though ethical issues about autonomous vehicles are still on the agenda, it is predicted that the number of accidents will significantly decrease if all vehicles are autonomous. Considering the current studies and the money spent by large institutions, we be-
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TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
lieve that the unmanned vehicle concept will eventually become a part of our life. We no longer whether the technology will become widespread or not, but when it will be available. The biggest reason of that is the share reserved by automotive industry for R&G works.
It gradually takes shorter to sell one million electric vehicles Global cumulative electric vehicle sales (Million) 6 Monhts 6 Months 5.1 10 Months
Tesla provided cash for the company for eight years through radical marketing methods (sending spacecrafts to space, selling flame thrower, etc.) in spite of negative cash flow, and achieved positive cash flow finally in 2018. It is rumored that the company received a large investment from Saudi Arabia, and there are speculations on share price centered especially around Musk. Even in case that the current figures are wrong and Tesla goes bankrupt, we think that the outputs of these R&D works are now very close to yield results.
4.0
3.1
17 Months 2.2
60 Months 1.1
0.01
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Bloomberg NEF
hours, and provides discounts through options such as subscription.Most of the vehicles remain in parking areas most of the time during the day.
While Tesla is being criticised about sales and deliveries, it has achieved a logarithmic increase in the final figures and started to exhibit a performance that reminds of the days when iPhone was criticised by Nokia.
Thanks to the efficient use of vehicles by many people, it is predicted that the increase in amount of vehicles will slow down and service-based use will ascend with more reasonable facilities.
With the increase of autonomous vehicles, it is estimated that people will switch from vehicle ownership to transportation service ownership.
Although there is a shift towards shared vehicles, unit sales of vehicles will continue growing; but probably at about 2 percent lower rate.
After removal of the driver cost, it is expected that driver taxi services like Uber will now be superseded by a much more economical model which is available and used for 24/7, has different pricing models for short and long distances and at rush and non-rush
Automobile sales in the world will keep growing; but it is reckoned that the annual growth rate will decrease from 3.6 percent in the
50
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
last five years to 2 percent by 2030. This decline will substantially result from macroeconomic factors and the rise of new mobility services like ride-sharing and ride-calling. As people become more dependent on the Internet to guide their daily life, it will be a sophisticated feature to be able connect to the Internet while driving. Vehicles connected to the Internet will help drivers entertain, be more productive all day long and feel safe; that’s why this trend attracts great attention.
Automotive revenue pool will significantly increase and diversify optional mobility services and data-oriented services.
High disruption scenario - Billion $ Permanent revenues from new services
-6700
85% of managers totally or partially accept that the digital ecosystem will generate higher revenue than automobile equipment. I absolutely agree
3% 1%
Shared vehicles - ride sharing, ride
calling etc. (except for conventional taxis and car rentals)
>
Data connection services - mobile
applications, remote access services,
36%
I partially agree Neutral
1500
>
1200 49% 30
11%
-3500 720
I partially agree I don’t agree at all
software updates, etc.
4000
After-sales
>
Growth gained from increased sales
of vehicles
2750 Source: mentor-works-automotive-tech-trends
One-time vehicle sales
However, vehicles connected to the Internet offer new sources of revenue and opportunities to develop favorable driving platforms. Automotive companies may equip their vehicles with suitable software products to improve driving experience and build high brand loyalty in customers.
>
Annual 2% increase directed by
macroeconomic growth in developing markets
2015
2030 Source: McKinsey&Company
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
These features will include mobile applications and remote services, etc.
60% of consumers take into account how they will enjoy their time in the car when buying an autonomous car.
Shared vehicles, new business models mobilizing with the Internet connection services and feature upgrades might increase automobile revenue pools by approx. 30 percent and reach 1.5 trillion dollars.
I absolutely agree
I partially agree
Hence, many companies, in addition to Tesla, make substantial investments in autonomous vehicles. Apart from automobile companies, Silicon Valley companies also invest large amounts in autonomous vehicles. Both conventional and unconventional companies struggling for market share will crowd the autonomous vehicle market. Silicon Valley companies like Google, Uber
Neutral
7%
Neutral
5% 1%
I partially agree
I don’t agree at all Source: mentor-works-automotive-tech-trends
and Apple work to develop fully autonomous vehicles with excellent security records. It will motivate original equipment manufacturers to develop their own technologies for competitors or buy technologies and integrate them in new vehicle models.
37%
I partially agree
42%
18%
15%
82% of managers absolutely or partially agree that a Silicon Valley company will manufacture a car in the following four years. I absolutely agree
18%
California Department of Motor Vehicles (DMW) gave permission for testing self-driving vehicles without any driver on public roads on Tuesday, 30 October 2018 for the first time.
45%
12%
I partially agree
The autonomous driving affiliate of Alphabet has already had the permission to test autonomous vehicles with security drivers since 2014 but now, the company can reach agreements with people to test three dozens of vehicles in its fleet.
I don’t agree at all Source: mentor-works-automotive-tech-trends
52
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
The USA: 33 states have autonomous vehicles on public roads. Sweden: Last December, Volvo initiated Drive Me project offering autonomous vehicles for many people. England: The Government approved a draft law to prepare responsibility and insurance policies on autonomous vehicles. China: Shanghai issued the first autonomous vehicle driving licenses in 2018.
Singapore’s recently approved law stands that motor vehicles don’t require a human driver.
Arizona: Governor Ducey gave a green light to self-driving vehicles to be on public roads starting from 2018.
South Korea: K-City is the biggest city built for autonomous vehicle tests.
New Zealand: The country does not have any laws that require drivers to drive vehicles.
The Netherlands: The Council of Ministers approved self-driving vehicle road tests for the first time in 2015.
California: DMV allowed self-driving, fully autonomous vehicles to be tested on public roads in 2018.
Germany: Last May, the Parliament put into effect a law that allows companies to test their autonomous vehicles on public roads. Graphic: Tony Peng - Synced
53
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
China hosts the rapidly growing autonomous vehicle industry together with a great number of technology companies including Baidu, Tencent and Didi Chuxing. Chinese government designated the first test field of the country for autonomous vehicles in Shanghai in 2015. Automobile manufacturers and IT companies, 60 domestic and foreign companies rushed to Jiading because Jiading is said to be the most advanced test field of the world for their products.
will reach a valuation about 57 trillion yens (500 billion dollars) in 2030 and it is highly likely that China will lead the global market for the technology. Electric Vehicles The global share of battery electric vehicles (BEVs) and plug-in hybrids (PHEVs) keeps increasing each year. China has the leading position in that trend in terms of both figures and growth rate.
Meanwhile, various European automotive companies are also taking some steps in this field. German automotive giant Daimler was the first international automobile manufacturer allowed to test self-driving cars in Beijing. Volvo Cars and Chinese Internet giant Baidu came together in China to develop and mass-produce autonomous electric automobiles. In 2009, China defeated the
China continues to be the leader (EV & PHEV) Annual change (%) 72%
34%
33%
33%
108%
75%
700
“Shanghai will speed up the test, implemen-
600
tation, research and development processes
500
of smart and connected vehicles.”
400
2,3%
1,4%
National market share 1,1% 1,4% 1,7%
300
Huang Ou, Vice-chairman of the Shanghai Municipal Commission of Economy and
200
Informatization
100
United States of America, becoming the world’s largest automotive market and now increased the sales of new automobiles by 1.7 times in the US. McKinsey & Company, a consulting company from the USA, estimates that the autonomous vehicle market in China
0
1,3%
0,9%
1,0%
China
Other
Europe
Source: Macquarie Bank Research, January 2018
54
1,1%
The USA
0,5%
Japan
0,9%
0,5%
Canada
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
Quote “Our analysis concludes that Tesla will not create a competitive impact until it reaches beyond the mass that prefers electric vehicles over fuel vehicles. If it could expand the target market by producing more diverse (SUVs) and more reasonable vehicles, then its impact on automotive market could be intense.”
Considering the tendency in the last couple of years, investors ask themselves “whether the sales of EV will become a larger market power”. Analyses and technical achievements show that particularly the acceleration in China will maintain the progress.
Rise of Electric Automobiles BNEF foresees a sales figure over 20 millions by 2030. By 2040, the EV penetration will make up 35-47% of new vehicles. 25
Tom Bartman, Research Fellow HBS guided by Clay Christensen
20
15
10
5
0 2016
2018
Rest of the world
2020
2022
Japan
Source: Bloomberg New Energy Finance
China
2024
2026
The USA
2028
Europe
2030
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
Impacts on Insurance industry
In the recent past, UAVs were mostly associated with the army; they were first used as anti-aircraft target applications, intelligence collection and more controversially, as weapon platforms. Drones are now used in civilian roles in a wide range from videography to agriculture and even distribution services as well as search and rescue, monitoring, traffic tracking, weather forecast monitoring, fire fighting and drone-based photography. Commercial drone deliveries were started towards the end of 2016.
> Automobile insurance industry might shrink down to 40% of its current size by 2040. > Autonomous vehicles may prevent 90% of all car accidents in the USA. > Tesla already applies pressure on insurance companies. Source: KPMG; McKinsey & Co
UPS, Amazon and DHL tested their own drones. The legislation will catch up with the technology soon. We anticipate that aviation authorities will take action between 2019-2020; at this point, there will be a significant amount of orders for commercial planes. This amounts to so many new stories for business logistics of reporters. This may also mean the end of newspaper delivery by humans forever. When drone delivery services will take off, there will be questions mostly on legislation and corporate development. If the number of patents given to Amazon or technologies about drones in 2017 is regarded as an indicator, we can say that retailers are waiting for the government’s consent. While Amazon obtained a patent for a drone which self-destructs in case of emergency, Walmart took a patent for a drone that deprives its products of shelves when doing shopping.
Drones A drone is technically an unmanned plane. Drones are officially known as unmanned aerial vehicles (UAV) or unmanned aerial systems (UASes). Essentially, a drone is a flying robot that can be remote controlled or systematically controlled with system-controlled software.
Regulations The growth in commercial and private aircrafts created security concerns: aerial clashes and loss of drone control. Specific concer-
56
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
taking permission from member countries at the time they were issued. Canada, United Kingdom and International Civil Aviation Organization actively introduce new regulations. The results of this pilot program will determine drone deliveries in 2020 and later.
ns about drones flying very close to commercial aircrafts required to introduce a regulation. Even though a number of countries composed UAV regulations, most of them don’t have such regulations. As the use of drones become more popular, laws are continuously changing. Before using a commercial or personal drone, it is so important to check the laws of the country where you use it. For example, you have to get a license from the Civil Aviation Administration of China (CAAC) for any drone flying higher than 400 meters in China. The drones that weigh more than 6.8 Kgs also require a license and prohibited areas for drones should be avoided.
On the other hand, we are very close to having air traffic jam. You may expect to find invisible drone lanes soon. Amateur drone pilots continue to create problems for commercial and private airline pilots. Currently, FAA does not allow drones to land near airports. Researchers in Singapore research on sustainability of different options such as “air ways”, “air blocks” and “air barriers” to manage the traffic. NASA and FAA are working on projects planned to be completed in 2019 and 2025 to present national solutions to manage the drone traffic. When the sky infrastructure is designed and developed, we will start searching for a potential market for monitoring the friendly sky based on infrastructure management and artificial intelligence.
In the United Kingdom, the Civil Aviation Authority (CAA) restricts drones to fly at maximum 500 ft. Additionally, any drone heavier than half a kilogram should be registered at CAA. The institution also issued a “drone law”: > Don’t fly near airports or airfields. > Remember to keep it 400 fit away from people and buildings and remain under maximum 150 meters height. > Always observe your drone. > Don’t fly near any aircrafts. > Be responsible.
Mini-Drones and Drone Packs Industries started to use smaller and rough drones with an artificial shield in order to access hard to reach dangerous areas. Drones are used to examine underground mines, ballasts of tanks and interior of nuclear plants. Home and building inspectors have also started to use drones to examine roofs and sides of buildings. The adoption of drones for such purposes may decrease the risk of human fatality and provide cost-saving thanks to shorter delay pe-
Trump administration announced to authorize three pilot programs to test the drone traffic under different conditions in “innovation areas” towards the end of 2017. The administration temporarily decided on the regulations which were still at the stage of
57
TECHNOLOGY REPORT
AUTONOMOUS VEHICLES
riods. AT&T’s successful use of cellular signal drone in Porto Rico and Facebook’s launch of the Internet connection for drones give additional signals that drones might become a widely used and practical vehicle in providing basic services for regions without fundamental infrastructure. Hundreds of micro drones can be instantly deployed and now, they can move as the only technological organism in the sky. Since they are too fast, cameras have difficulty in catching them in real time. The technology developed by the army was used for dazzling light shows at Disney parks and Super Bowl race. Packs of drones are not always favorable. A pack carrying explosives controlled by the Syrian rebels attacked two Russian military bases at the beginning of 2018.
What is next for drones? As drones start to work with other technologies and other drones, more opportunities will be created. For example; using drones and 3D modeling software may help highway and railway operators at the design stage. Bringing there technologies together, precise geographical data can be obtained by readjusting the plans and designs, and limiting the need for cost reduction.
Trends in drone technologies Drones change the way the companies do business in all Industries. We think there are four trends to affect your company’s strategy. Drones are getting more automatic. Drones begin to fly on their own without remote control, some of them can even climb, crawl and catch. These abilities will lead to development of new applications
01
for drones and drone services.
Drones will transform data collection industries. Agricultural and infrastructural industries may turn into activities having the ability to make a decision based on the data collected by unmanned aerial
02
vehicles. Drones present a cost-efficient way that has never existed before to collect high quality data.
Solutions working with drones will supersede certain services and workforce. Drones will eventually decrease or remove the need for examination, delivery and dangerous maintenance works but we
03
do not know when.
Drone technology will be used together with other technologies. As drones gain new artificial intelligence features (data processing and analyzing, sensors and drone-to-drone network connection
04
abilities, etc.), robots will be able to work with 3D printing and other technologies. Source: PWC
TECHONOLOGY TREND
R OB OTS
Robotics is an engineering discipline containing design, production and operation of robots. This discipline intersects with electronics, computer science, artificial intelligence, mechatronics, nanotechnology and bioengineering.
“The world of the future will not be a hammock where we lie down and wait for our robotic slaves but rather a place where we will push the limits of our intelligence.�
NORBERT WIENER, The Human Use of Human Beings: Cybernetics and Society
TECHNOLOGY REPORT
YAPAY ROBOTS ZEKA
Modern robots first appeared as industrial robots at the factories. They were just simple and stable machines which need less human assistance. The digitally controlled robots using artificial intelligence have been continuously produced since 2000s. Robotics is the convergence and development of two technological disciplines: autonomous machines and automatic cognition. Autonomous machines represent another industrial revolution that may stop the undesired activities of humans. Robots can perform repeating monotonous activities that require highly physical efforts. Automatic cognition and Robotic Process Automation (RPA) appeals to an extension of human mind. Ever-increasing datasets require outsourcing for machines that can better respond to certain calculation transactions. The purpose is to free humans from repeating, rule-based or dangerous tasks. These tasks may represent physical tasks and business processes including recruitment or processing of payment accounts or lifting heavy loads, inventory management and entering dangerous places. Even though the purpose is to replace human power at duty level; the purpose at business level is to increase human performance. We think robots will be mostly used in factories and for commercial activities, but today, they play a crucial role in children’s education. When Finland, South Korea and America in particular announce that they will invest in coding in education, the importance and the investments in this field keep increasing.
Quote “We have proved that current technologies can automate 45 percent of the activities paid to be performed by humans. Furthermore, we can automate 30 percent or more of activities of 60% of all occupations.” McKinsey & Company, “Where machines could replace humans and where they can’t (yet)”
Technical potential for automation in the USA
Technical feasibility
Many types of activities in industrial industries have the technical potential required to be automated, but this potential significantly differs by activities.
% of the time spent for activities that can be automated by adapting the current technology
0
9%
GENERAL AVERAGE
3
INDUSTRIES
1
MANAGING OTHERS
EXPERTISE
2
5
SHAREHOLDER INTERACTION
5
13
3
5
Transportation and storage
4
8
Retailing
3
6 11
8
7
12
Construction
5
10
Vehicles
7
14
Wholesaling
5
12
Finance and insurance
6
19
17
13
7
12
21
Administration
6
13
14
Health and social benefits
8
Information
5
25 27
7 10
Education
22
24
17
16
12 12
11
14
17
8
13
10
13 16
21
20
6
16
2
19
23
5
16
3
17
24
5
10
LESS AUTOMATED ACTIVITIES
20 7
10
3
21
11
29
19
13
23
25
11
34
15
20
25
13
16
19
17
11
23
<1
14
17
8
13
10
7
MORE AUTOMATED INDUSTRIES
10
24
15 19
13
12
15
11
Real Estate
9 14
41
23
33
28 21
13
24
48 11
22
24
13
2
10
15
78% PREDICTABLE PHYSICAL WORK
11
5
8
69% DATA PROCESSING
22
14
8
14
DATA COLECTION
51
14
7
2
64%
8
8
26
Mining
Professional
UNPREDICTABLE PHYSICAL WORK 5
7
Other Services
Management
25%
22
Agriculture
Art, entertainment and leisure
20%
100
LESS AUTOMATED INDUSTRIES
Accommodation and catering services Manufacturing
18%
50
MORE AUTOMATED ACTIVITIES
In practice, automation will need more than just technical feasibility. There are five factors: technical feasibility; automation costs; relative scarceness, skills and cost of workers able to perform the activity; benefits of automation beyond the substitution of effort-cost (i.e. superb performance); regulatory, social-acceptance issues. 1
Decision making, planning and gaining expertise in creative duties.
2
While unpredictable physical works (physical activities and machine operation) are performed in unpredictable environments, environments can be predicted in predictable physical works.
3
They include Agriculture & forestry, fishing and hunting; real estate and rentals; administrative government management; health and social aid includes private, state-government and local government hospitals; professional scientific and technical services; educational services include private, state-government and locally-administrated schools but other services do not cover federal, state and local administration services. Source: McKinsey AutomationPoster
TECHNOLOGY REPORT
ROBOTS
The robot called V-Go is a system specially designed for patients who cannot participate in class education or disabled students or students who require distance education. A similar robot is used for education of children with autism.
“Robotic systems based on artificial intelligence are thought to make up 30 percent of the total employment by 2030.”
The robotic kits designed by Lego are among the most desired products that will expand children’s imagination, thanks especially to development of “do your own robot” concept.
PWC
The robots of 2018 do not perform the structured duties or calculations like regular movements, but they perform in dynamic environments. Robots continue to work in an isolated way to work with humans. Robots are evolving from programmed and learnt behaviors into artificial intelligence (AI) and machine learning (ML).
mines complex cases and makes the final decision. Advanced robots will expand the number and types of works suitable for mechanization and digitalization. It may decrease the number of personnel needed to operate a bank. A new generation of emotionally intelligent robots may take the place of a branch officer of a national telecommunication retailer having the cognitive data processing technology. Humanoid robots will present services in branches offering expanded transactions such as multi-language skills and fast approval to improve customer experiences and reduce costs.
The robots replacing jobs of employees is highly likely to be affected by regulations. In fact, some countries have already begun discussing about collecting taxes from robot workers. The increased robotic complexity ensures machines to work with humans but not take their place. New opportunities to increase human performance mean that enterprises may use the technology to benefit from human capital.
To sum up, robots have entered the last front line; our living rooms and workplaces. Working, interacting and living with robots have become inevitable.
The purpose is to enable employees to be more productive, safer and busier by automating a part of their work. An example is that a machine learning system like Watson reads radiological images and makes suggestions to a human radiologist who manually exa-
63
TECHONOLOGY TREND
CLO U D
Information and data can be stored on physical or virtual servers operated and controlled by cloud information providers like Amazon AWS products. As a personal and corporate data processor, you may access your information stored via your Internet connection over the â&#x20AC;&#x153;cloudâ&#x20AC;?.
â&#x20AC;&#x153;Business leaders exclude the IT departments in order to receive applications from the cloud (also known as service or SaaS) and make payments for example, magazine subscription. Therefore, they can cancel subscriptions without having any unused equipment when the service is not needed.â&#x20AC;? Daryl Plummer, Managing Vice President and Distinguished Analyst at Gartner
TECHNOLOGY REPORT
CLOUD
Internal
Cloud Computing
9%
68%
Software Licenses
Subscription Fee
Customization and Application
Implementation, customization and training
Hardware IT Personnel Maintenance Training
Current Costs
Current Costs
> Corrections, patches, upgrades > Deduction > Performance adjustment > Customizations > Integrations > Slave application upgrades > Ongoing load on IT > Hardware maintenance/upgrades > Network maintenance/upgrades > Security maintenance/upgrades > Database maintenance/upgrades
> Subscription Fees
66
TECHNOLOGY REPORT
CLOUD
6 advantages and benefits of the cloud computing
Cloud Computing is based on the shared data processing sources instead of having local servers or personal devices to run applications. To put it simple, cloud computing services (“cloud services”) move these needs out of an organization’s firewall.
Reserve commercial capital for variable costs Instead of intensively investing in data centers and servers, you pay as-yougo.
Benefit from large-scale economies By using cloud computing, you can have a variable cost that is lower than what you would have to bear on your own. Since hundreds of customers are gathered in the cloud, providers like Amazon Web Services can get higher scale economies and offer lower prices.
Cloud Revenues Increases Again Cloud Services Revenue Amazon + Microsoft + Google $10B
$8B
Stop making estimations for your needs of infrastructure capacity. When you make a capacity decision before making an application widespread, you often keep dealing with expensive idle resources or limited capacity. You’ll never have these problems with the cloud computing. You may access information as much as you need or very little information and scale up and down in a few minutes.
75%
$6B 50% $4B
Growth
Global Revenue
End of estimation capacity
100%
25%
Increase speed and agility
0%
In the cloud computing environment, new IT resources reduce the time required to make resources usable for your developers from weeks to minutes as these resources are just a click away. This causes a sharp increase in agility for organizations because the time and cost required for experimentation and development become significantly lower.
$2B
0 Q1
Q2
Q3
Q4
2015
Amazon
Microsoft Azure
Q1
Q2
Q3
Q4
2016
Q1
Q2
Q3 2017
Q4
Q1 2018
Google Cloud
Stop spending money on operation and maintenance of data centers
Source: Kleiner Perkins 2018 Internet Trends
Focus on projects that differentiate your work, not your infrastructure. Cloud computing ensures you to focus on your own customers instead of storage and enhancement servers.
Developments in the cloud ensure users to release their own applications. It does not cause data loss due to hardware errors and network-connected backups. Cloud computing also uses edge resources and decreases server and other equipment costs of organizations.
Go global in minutes Distribute your application to various regions of the world only with a few clicks. This means you will simply offer your customers shorter delays and better experience at minimum cost. Source: Amazon
67
TECHNOLOGY REPORT
CLOUD
Choosing the right public cloud provider is turning into an ever-increasing discussion. We all know the big cloud players - AWS, Google Cloud Platform, IBM Cloud and Microsoft Azure - but how to use them depends on what your organization needs.
Competitive Positioning of Cloud Providers (IaaS, PaaS, Embodying Special Cloud â&#x20AC;&#x201C; 2018 Q2)
100%
Cloud Services Adoption 94% of companies use cloud services to a certain extent.
Only private cloud
5%
Advantages
Disadvantages
Most used
More control / customizable More flexibility and reliability Advanced security High scalability
Higher preliminary investment IT expertise
Confidential, critical business operations
Winning the market share... but it is a long way to go... Annual Growth Rate
Alibaba
Microsoft
Only public cloud
Amazon
IBM Rackspace
General Market Growth Rate
Salesforce Oracle
Powerful niche players
0% 0%
Worldwide market share
22%
Advantages
Disadvantages
Most used
Low cost / no preinvestment Per use payment model No Maintenance Unlimited scalability
Ever-existing security concerns Surprise costs Reliability
Insensitive, public operations and unpredictable traffic
35%
Source: Synerov Research Group
Hybrid Not all clouds are the same and the same kind of clouds may not be right for everyone. Various models, types (public, private and hybrid, etc.) and services are developed to help find the right solution for your needs.
67%
Advantages
Disadvantages
Most used
Control Flexibility Cost effectiveness Ease of Use
More complex infrastructure management It may be more expensive than using only public cloud
Mixture of each
Source: RightScale
TECHNOLOGY REPORT
CLOUD
Private Cloud
5G
Private cloud refers to cloud information resources used only by a single enterprise or organization. Private cloud can be physically found in the data center within a company building. Some companies make extra payments to third party service providers in order to host their private clouds. Private cloud is a structure where services and infrastructure are kept in a private network.
The next (fifth) cellular technology generation promising to improve speed, coverage area and responding ability of wireless network is 5G. What is the speed range? Imagine a network 10 to 100 times faster than your typical cellular connection and this is faster than what you can get by a physical fiber optical cable going into your house. (We are talking about downloading a high resolution video within seconds.)
When GDPR (General Data Protection Regulation) was put into effect on May 2018, hundreds of legitimate news websites were blocked. Internet searches are controlled by a few American companies. On the other hand, there is no international organization other than the United Nations having the power to introduce standards, norms and regulations recognized by everybody using the Internet. The use of cloud in finance, health and military industries due to the strategic approaches is set by various regulations issued by governments. For these reasons, the use of private cloud especially stands out in these industries.
Advanced Mobile Broadband Capacity Expansion
Gigabytes in seconds 3D Video – 4K screens
Smart city cameras
Working and playing in cloud Augmented reality
Voice Sensor NW
“It is expected that the hybrid cloud approach will grow in 2019 with more companies
Big loT Giant connection
that understand the efficiency and effective-
Industrial and vehicle automation Mission critical broadband Autonomous Vehicle Low delay time Ultra high reliability and low delay time
ness of the cloud solution.” One of the most important advantages of the cloud is low delay time. Delay refers to the time spent waiting for a response from a network when you send your request to the network by clicking a
Source: Forbes 69
TECHNOLOGY REPORT
CLOUD
connection or starting a video on your phone. It is the time between sending your request and getting the response and opening the web page or playing your video. This delay time may go up to 20 milliseconds with the current networks. However with 5G, this delay is reduced to 1 millisecond. This sensitivity is critical for operations like playing a virtual reality video game or a control of remotely operation conducting robotic devices by doctors. However, delay will be still affected by final range of the connection.
Important 5G Features High efficiency Reduced delay time Ability to operate time-based traffic for applications with low tolerance of VoIP, video flow and delay time.
The general growth capacity is increased for higher number of individual users peak points, but more importantly, for the growth of users, devices and the resulting traffic demands Advanced management and OSS
High Mobility Ability to support users in fast moving transport modes
Financial Use Scenarios
Reduced operating costs for operators and mediator
Multi-Layered Biometric Authentication and Payment Systems Biometrics refers to the general naming for the whole physical features or individual features relating to behaviors of an individual and features allowing us to distinguish individuals from each other. Today, biometric applications have already started in various fields. We are already using some biometric applications, such as T.R. Identity Card, authentication systems at hospitals.
Enhanced security Always required New Spectrum Use of millimeter waveband, radio carrier aggregation Technologies providing opportunities
Universal applications support Support for every application from low data ratio / high delay to challenging, real time graphic applications
Source: Farpoint Group
Massive MIMO, small cells, SDN and NFV applications, enhanced power efficiency
Once loT assisted devices become widespread thanks to 5G and the infrastructure supports real time access to a great number of devices, it will be possible for these devices to collect behavioral data of individuals. And, the generated biometric information will be used in authentication systems and integration with payment systems. For example, Amazon Alexa provides services such as obtaining information, purchasing, credit inquiry through voice command systems.
Industrial growth Provides new startups to attract customers and to increase revenues
70
TECHNOLOGY REPORT
CLOUD
Real Time and High-Speed Commerce
Customized Insurance Systems
It is expected to have a revolution in stock exchange transactions once the delay lasting about 50 milliseconds with 4G is reduced to 1 millisecond with 5G and eventually becomes real time.
Today, even though health sensors are not really widespread, it is expected that this will change once technologies make progress and 5G becomes highly available. For example; smoke detecting devices will warn and inform the insured person and this will affect insurance policy costs.
Today, brokerage firms buy and sell automatically through applications. These transactions will be able to be processed almost in real time thanks to the low delay time with 5G, and stock buying and selling transactions in which only seconds may create a difference valued at million liras will be handled much faster.
Insurance companies will be able to speed up insurance processes through mobile devices. For example, they wonâ&#x20AC;&#x2122;t have to physically visit their customers for medical examination to offer them life insurance. Instead, they will be able to remotely complete blood tests through mobile devices. This will make the process convenient for both insurance companies and insured people.
Personal Assistant Service Today, when connecting to Internet through the channels like Web and Mobile, the personal data of users are collected by applications, and the user experience is used by service providers for the purpose of targeted marketing.
Real Time Voice / Video Communication in the Context of Application (Financial Consultant and Customer Services)
Thanks to the reliable infrastructure, high processing power and application data (files, photos, documents etc.) of 5G, it will be possible to develop new financial products by blending the userâ&#x20AC;&#x2122;s information like userâ&#x20AC;&#x2122;s geographical position, information from payment systems, and personal information. For example; using such information, Financial Institutions can determine daily expenditure limit for users, thus more effective portfolio management and more effective use of investment instruments will be possible.
Making our payments on our mobile devices, controlling our accounts, withdrawing money from and depositing money in ATMs are standard services today. Now, we have a very few reasons to visit bank branches. Research shows that the ratio of customers who get frustrated/unhappy after every bank visit is ascending. Also the ratio for those making online transactions on mobile applications to change their bank is 40% less. The era in which mobile applications emerge from a channel for financial world and evolve into a hub position will be complete with what the 5G technology will bring. The effective speeds to be introduced by 5G will make it possible to have a video call with customer representatives and
71
TECHNOLOGY REPORT
CLOUD
personal financial consultants and simultaneously apply financial recommendations.
tems. Edge computing refers to an information topology where data processing and content collection and distribution are placed closer to resources and storages of these data. Edge computing benefits from networks and distributed computing. It tries to protect traffic and local processing to decrease traffic and delay. For many years, it has been proposed to present the edge content for host computers or central cloud services and decentralized ap-
Commentary In the following period, it is expected that the use of private, hybrid and public cloud technologies will dramatically increase and computing power will be enhanced in an integrated way at every point with capacity increases of IoT, mobile and other edge sysCloud and Edge Computing
The Internet
Complementary Technologies | IoT
CLOUD
Big Data Processing Working logic Data storage
LAN/WAN
EDGE
Real Time Data Processing Data Visualization at the Resource /Facility Basic analysis Data caching, buffering Data filtration, optimization M2tM comms
72
CLOUD
When Edge beats the Cloud
01
Low delay time: Put data close to devices in order to remove almost any delay and connection problem.
02
Flexibility / scalability: Benefit from the diversity of IoT platforms and devices (SBC, NUC).
03
Real time decision making / data access Make decisions with decidable data.
04
Sustainability: While reducing the TCO of your IoT, check, recover and manage your data using new methods.
05
Security: Deliver only the required data and keep all data safe in the edge.
06
Availability: Storing local data in a device guarantees 100% availability.
TECHNOLOGY REPORT
proaches (PCs and mobile devices). Challenges in connection and delay, broadband restrictions and bigger functions embedded in the edge support deployed distribution models. When operating power and low operating cost advantages in hyper scale are brought together with management and coordination of thousands of geographically separated edge points, they support a central model. The majority of current edge computing grows out of the fact that IoT systems are an obligation in certain industries such as manufacturing and retailing, and the need for presenting unconnected or distributed abilities to the IoT world. The introduction of 5G will fuel this trend by getting these systems closer to each other. Many people consider cloud and edge computing as competitive approaches. They think that general cloud distributions are integral part of balancing of hyper-scale economies, data centers, transactions to be transferred end to end. The reason for this is misunderstanding of these two concepts. In cloud computing, scalable technological abilities are presented as a service using Internet technologies. Cloud computing does not require centralization. Edge computing, on the other hand, transfers distributed computing to the cloud mode. We should consider cloud and edge computing as two concepts that complement each other, rather than competing. Microsoft Office 365 services can work in local internal clouds. Azure Stack is able to load a sub-set of Azure services to distributed cloud services out of Microsoftâ&#x20AC;&#x2122;s cloud data centers. In July 2018,
TECHNOLOGY REPORT
CLOUD
Artificial intelligence in edge computing decreases the response time.
Google pointed out the early versions of internal applications of Google Kubernetes Engine services. Amazon is expanding its services through AWS Greengrass in the IoT market. We expect that this approach will be adopted more often because it further pushes cloud vendors to the IoT market. IoT solution vendors prefer using cloud to effectively manage their solutions.
A few examples of developing Artificial Intelligence applications Smart home cameras may detect when a person enters an area.
Connection of edge devices with each other and back-end services is a fundamental characteristic of the IoT and digital twins. Millions of edge points and the potential need for Moving high amounts of data from periphery render 5G as a critical information technology for edge computing.
Example: Nest IQ cameras, AWS DeepLens
Face recognition and object recognition where user data is not separated from device. Example: Apple neural engine, Huawei AI processor
Until 2028, we expect a regular increase in equipping edge devices with sensors, storage, calculation and advanced artificial intelligence abilities. However, we can say that edge computing is a heterogeneous concept. Edge computing covers a wide range from simple detectors to highly developed peripheral devices like mobile phones and autonomous vehicles. Different types of peripheral devices used in different scenarios may have various lifetimes ranging from one year to 40 years. When these factors are combined to bring more functionality to peripheral devices, they cause a complex, continuous management and integration problem.
In-vehicle Artificial Intelligence makes instant driving decisions. Example: Tesla autopilot
Baby monitors, drones, robots and other devices which are able to respond to the circumstances without Internet connection. Example: Intel, Myriad X
Day by day, abilities and capacities of edge devices broadens. For example; industrial devices, speakers, displays, smartphones, PCs, automobiles and power generators, etc. can be directly connected with hyper scaled back-end services.
The cloud stores big datasets, trains algorithms, collects peripheral data, requires Artificial Intelligence model updates.
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TECHNOLOGY REPORT
CLOUD
Conventional Cloud-based AI systems Works on the Cloud
Requires expensive hardware
Causes confidentiality and delay problems
Complex: requires AI expertise to install and train AI models
Edge AI Vision Independently works in Edge devices
Works at every device and everywhere
Data never abandons edge, thus confidentiality is maintained
Designed for everyone, easy to deploy and train
Quote â&#x20AC;&#x153;We like saying that the Cloud is a way of scaling Artificial Intelligence; but I think, the Cloud is a barrier for Artificial Intelligence. There is no cloud that can digest such amount of data.â&#x20AC;? Ali Farhadi, Xnor.ai chief and co-founder
TECHNOLOGY REPORT
CLOUD BULUT
iguaz-io
Quote
iguazio Continuous Analytical Data Platform redesigned the data stack in order to increase performance in big data, IoT and cloud-based applications.
“Iguazio widens cloud experience to edge... While the market starts to use its power for technology, data science and education, it also prioritizes the real time decisions.” Asaf Somekh, CEO, Iguazio
At A Glance Motto A Platform Without any Server from Data Science to Production Location Israel Year of Foundation 2014 Investment 48 million dollars
Website www.iguazio.com Category Analytics, AI, Big Data, Cloud Data Services, IoT
TECHONOLOGY TREND
I N T E R N E T OF T H I NG S Communication among devices we use in our daily life is called the Internet of Things.
â&#x20AC;&#x153;The Internet will disappear. There will be many IP addresses, many devices, sensors, things that you wear and even you interact with. They will always be an integral part of your being. Imagine that you enter a room and the room is dynamic, you interact with the things in the room with your permission.â&#x20AC;? Eric Schmidt, Google chairman, on a panel at the World Economic Forum
TECHNOLOGY REPORT
INTERNET OF THINGS
Data Collection
+
Sharing
+
Optimization (2006 -->)
=
Sensor Activation with Prevalence
Sensors + Data = Available In More Places
MEMS (Micro Electric-Mechanic Systems) / Processor Posts
Global Posts
15M
Visual Navigation (Google Maps)
Shared Transportation (Mobike)
Home Temperature (Nest)
Maintenance Estimation (Samsana)
Fitness Tracking (Motiv)
Precision Cooker (Joule)
10M
5M
0
2012
2013
2014
2015
2016
2017
In many industries, the Internet of Things enables devices to be connected to each other. It is expected that the number of things
connected to the Internet will keep increasing in the next years.
Installed Internet of Things (IoT) devices worldwide, 2015 - 2025
Source: IHS and pwc
(billion $)
75.4
15.4
17.7
20.4
2015
2016
2017
23.1 2018
26.7 2019
30.7
2020
79
35.8
2021
42.6
2022
51.1
2023
62.1
2024
2025
TECHNOLOGY REPORT
INTERNET OF THINGS
The sensor market is also growing in line with this communication network. It is foreseen that approximately 1 trillion sensors will
join the network in the following 10 years and approximately 45 trillion sensors will be connected to the network in 20 years.
Growth in the Internet of Things
2020
50.1B
Number of Connected Devices in 2020 will be 50 billions 2019
42.1B Devices (Billion)
2018
50
34.8B
2017
28.4B 2016
22.9B 40
2015
18.2B 2014
14.2B
30
2013
11.2B 2012
20
8.7B 2003
1992
0.5B
0.1B
10
2009
1B
Beginning of Internet of Things
1988
1992
1996
2000
2004
80
2008
2012
2016
2020
TECHNOLOGY REPORT
INTERNET OF THINGS
Benefits of Internet of Things IoT generally starts on the 12th month of deployment. Most organizations report that they have gained scalable business advantages from IoT projects within 12 months following the deployment. At least 1/3 of enterprises participating in the questionnaire reported a scalable improvement in their KPIs regarding some or whole of the following fields:
Effectiveness or efficiency
Physical Payment Methods
Remote Controls Physical Entertainment
10 issues to disappear soon thanks to IoT
Keyboards Keys External Storage Devices Service Personnel
More assets / performance analysis
Personal Cars Saving
Enhanced customer satisfaction
Printed Documents
Agriculture Instruments
TECHNOLOGY REPORT
INTERNET OF THINGS
Smart Cities
Smart cities create big business opportunities with a market value of 1.5 trillion dollars in 2020. Smart city market by segments, 2020
Smart cities represent the most extensive example of transition from isolated systems to smart environments. The vision behind smart cities is to ensure transparency in the city life quality and encourage citizen participation and self-development. Smart city is not a series of technologies or a business strategy but a frame for collaboration. It defines the cooperation and ecosystem surrounding the development of contextualized services in an urban environment. Well-designed smart cities aim to reach integrated goals and focus on smart urban ecosystems.
10,21% 20,93% 15,26%
14,11%
In urban revitalization areas, industrial areas and brown fields, smart ecosystems are developed. In this examples, new life experiences are targeted regarding the status of enterprise or user/ use, real estate development or hybrid society and social network purposes. Developing economies build industrial parks that unite business, residential and industrial societies and public-private partnerships to lead the technology and experience development by using smart city ecosystem frames.
9,09%
4
Smart Infrastructure
All industries are connected to social and community collaboration platforms through IT and shopping. Smart cities and neighborhoods with green fields, partnerships of city and real estate developers who desire to develop digital and smart city projects are attracting more attention. These smart cities with green fields will include a city vision in a design and implementation route map in order to present a smart area.
5
Smart Transportation
6
Smart Healthcare
7
Smart Building
13,75%
16,65%
Smart Governance and Smart Education
1
Smart Security
2
Smart Energy
3
Source: Frost & Sullivan analysis.
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Smart Cameras
“This digital twin is a live model that drives a work output and this model receives real
Cameras become smarter and now they have artificial intelligence abilities. They can listen and watch what’s happening around and then make a decision depending on the collected information. These decisions may include locking the door, saving the conversation or following a robber while running in the street.
time operational and peripheral data and continuously updates itself.” Colin J. Parris, VP of GE Software Research, GE Global Research
In late 2017, Amazon Web Services announced an artificial intelligence assisted camera called Deep-Lens (250 dollars) equipped with optical character recognition features as well as visual and object recognition. A smart camera enables companies to remotely control and track their storage stocks. They may allow conference organizers and Hollywood film studios to measure the level of emotions during performances. (So they won’t have to beg for more focus groups or beg participants to complete questionnaires after a conference!) Google released AIY Vision Kit, a smart camera kit working with Raspberry Pi. The company hopes that DIY fans and developers to develop smart camera applications.
mous decisions - able to determine when to lock the doors, whether or not to close the bridge access and which flatmate to take the last slice of pie.
Wearable Technologies “At the end of 2019, 360 million wearable devices will be sold around the world. More than half of them is dedicated to fitness or biometrics. Others are designed for games, business and medical tracking. In the next year, 39 billion dollars revenue might be gained with global sales.” The Future Today Institute
Yves Béhar designing August smart lock created a new home security camera called Hive View. When Hive View detects an extraordinary movement or sound, it automatically sends smartphone notifications. Progresses in the smart camera technology are critical for the future of our artificial intelligence ecosystem. These cameras will be able to see in the dark soon.
Wearable technology is a term used for electronics that can be attached to the body as an accessory or as part of the material in clothes. There are a great number of wearable technologies, but the main ones are the one found in most popular devices and they are activity trackers and smart watches. Wearable technologies are particularly used for medical or healthy life purposes. That’s why, the wearable technologies are used by specific groups but
Recognition algorithms will do more than just identifying people and pets; they will contact with other IoT devices, make autono-
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TECHNOLOGY REPORT
NESNELERİN INTERNETİNTERNETİ OF THINGS
Wearable Healthcare Technologies
The most popular healthcare applications
Virtual doctors
Phobia therapy Stress-relieving headband
59%
Fitness
52%
Diet / nutrition
36%
Symptom navigator
28%
Patient portal app
25%
Health / coordination tracker
12%
Medication tracker / reminder manager
10%
Chronic case / disease manager
Artery obstruction Smart contact lenses
Wearable ECG Smart thermometer
Smart insulin plasters Blood pressure monitor Irregular heartbeat control
UV sensor Wearable devices that can be embedded in body
Smart tattoos
Source: Raconteur
62%
58%
60%
Agree that wearable devices will enable the people to control their health.
Agree that wearable devices will provide customized maintenance through feedbacks and notifications.
Agree that wearable devices will pave the way for a healthier lifestyle.
90% Eager to share personal data from a wearable device or application with a doctor.
84
63%
0.9 Billion $ 17.8 Billion $
Eager to share data with a health insurance provider.
Global wearable device healthcare market of 2017.
Estimated size of wearable device industry in 2021.
TECHNOLOGY REPORT
INTERNET OF THINGS
they are not adopted by large masses. Wearable technologies present important opportunities for both new markets and enterprises in terms of data collection. Retailers may benefit from wearable technologies to determine what sections of a store a consumer visits, advertisers may target consumers according to the type of apps using location and device info, and information on a website belonging to the device may provide certain information for marketing professionals.
Embedables Biotechnology and body transformation enthusiasts try to directly embed in their bodies a technology called “grinders” which is an extreme point of wearable technology. It covers a wide range from implants and decorative LED lights to Bluetooth biometric devices. To unlock the electronic doors, RFID chips underneath our hands can be used instead of key cards. The fact that implant technology embodies health risks for human body makes it unlikely for embedable devices to go mainstream in near future.
How companies use the data they receive from wearable technologies will change based on how regulators and individuals deal with privacy in the Internet age. However, the fact that there are so many people eager to use this technology shows that such electronic devices are, and will be, popular.
Thinkables Thinkables are not part of science fiction anymore; they are now a part of wearable categories. These devices act as an interface between the mind and technology and allow users to control designated devices with their own thoughts. Neurable, a startup from Boston created a VR game controlled with a thought interface. This helped them get an A series fund in order to proceed with researches. 4DForce can transfer brainwaves to the earphone which is an application intended for game, health and entertainment. It is estimated that Neuralink, a neurotechnology company founded by Elon Musk and developing a “corroded” bio-adaptive neural network to human brain will directly connect the brain to Internet and help the neurological diseases treated. Facebook also actively works in Thinkables field and endeavours to develop a tool which can read the brainwaves and detect what the brain thinks.
Hearables / Earables A new area of wearable technologies is ear computers known as “Earables”. Equipped with voice commands, biometric tracking, selective noise prevention, music and data storage and software integration, etc, these devices are basically earphones with a more advanced functionality level. The future versions of Apple’s popular wireless EarPods will track temperature, sweating and heartbeat during exercises or sports and these earphones will be used to control other devices, such as our mobile phones. Bragi Dash reacts to sound as a personal assistant and KUAI’s multi support, waterproof earphones can be used while swimming. Moreover, news organizations should start tests with sound applications designed for earable interfaces.
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Benefits of Wearable Technologies
Leaders in IoT
IoT goals vary by country 1st goal of corporate IoT distribution by country Reduce costs
Cost-saving and business process improvement are IoTâ&#x20AC;&#x2122;s primary goals, but 1/3 of participants have attached substantial importance to using IoT in order to enhance competitive power and customer experience at the same time. It is also important to create new revenue streams from IoT.
44%
Reduce general costs
37%
Improve business processes Increase personnel efficiency
33%
Enhance competitive power
33%
Improve customer or citizen experience
30%
Increase revenues from current products / customers
30%
19% 18%
USA ENGLAND
16%
FRANCE
15%
AUSTRALIA
Increase competition 23% 20% 19% 17%
CHINA ITALY SOUTH KOREA MEXICO
Improve business processes 21% 20%
CHINA ITALY
18%
SOUTH KOREA
18%
MEXICO
Further goals
17%
ITALY
> > > >
16%
SOUTH KOREA
Develop new revenue streams Continuously collect data for future use Switch to a service or usage-based business model Use environmental or energy resources better
(sustainability)
15%
MEXICO
Offer better customer or citizen experience 18%
SPAIN
TECHNOLOGY REPORT
INTERNET OF THINGS
Commentary Challenges for Internet of Things
We think that IoT solutions will offer more integrated experiences and create smart life experiences at every area of our lives in the following years. The smart area is a physical or digital environment where humans and technological systems interact with more open, connected, coordinated and smart ecosystems. People, processes, services and things come together in a smart area to create more immersive, interactive and automatic experiences for a series of personal goals or industrial scenarios.
Biggest challenges in IoT IoT deployment by companies poses challenges in terms of security, costs and integration.
44%
25%
Data or network security
Integration with business processes
28%
24%
Expected ongoing costs
Need for pre-capital investment
This trend has focused on smart cities, digital workplaces, smart homes and connected factories, etc. for some time. We believe that technology will be integral part of everyone; employees, customers, consumers or community members or citizens, once sound and smart areas get into the process of fast delivery. Trends in Artificial Intelligence, expansion of IoT connected edge devices, development of digital twins for things and organizations, and maturation of blockchains increase opportunities to produce more connected, coordinated and smart solutions in target environments.
26%
Smart areas will be developed in a way to offer smart environments where multi-assets coordinate their activities and send usage status or contextualize certain service experiences in digital ecosystems in the long term. Consequently, we will see diversified digital twin models of humans, processes and things in a city. Event-driven structures will
Integration with current ICT structures
87
TECHNOLOGY REPORT
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take the place of pre-defined stable encoded integration points. Virtual assistants and independent representatives will track and coordinate activities in more than one system within an organization or government institution or among more than one organization. Use of open data exchange and block chain will decrease the friction between diverse players in the ecosystem and the systems they use.
IoT will create a potential economical impact between 4 trillion dollars and 11 trillion dollars in 2025. Nine regulations to increase value
Size in 2025 Trillion $ 1.2 - 3.7
Factories Cities
0.9 - 1.7
Human
0.2 - 1.6 0.4 - 1.2
Retailing Outside World
0.6 - 0.9
Workplaces
0.2 - 0.9 0.2 - 0.7
Vehicles Houses
0.2 - 0.3
Offices
0.1 - 0.2
Underestimation
Meanwhile, individuals working in smart area ecosystems will take advantage of ever-expanding IoT devices and more impressive experiences. Technology will turn into a background surrounding them. Rather than using a computer, the world around them will be their computers. This long term smart area, smart environmental model will not become a reality before 2028 at the earliest. However, organizations can make it happen faster through a series of targeted persons and processes in more narrowly defined industrial scenarios. We can say that individual elements will be rapidly evolved with the emergence of these new smart areas in 2023.
Overestimation
Smart areas are a natural evolution from isolated, independent systems to smart, inclusive environments. Creating an experience for targeted persons or industrial scenarios brings together many technologies and trends. Smart cities, digital workplaces, smart factories, smart agricultural hospitals are an appearance of the concepts on the horizon. Smart areas are the conclusion of the trends that cannot be ignored. We need to get ready for smart areas that are able to spread out a wider area by Developing connected, interactive and smart environments.
Source: McKinsey Global Institute analysis
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TECHNOLOGY REPORT
INTERNET OF THINGS
Sense
Diyor ki...
Sense is a home energy monitor which enables the householder to know how much energy is consumed by each device. Sense is installed in the distribution board of your home and provides information about your energy consumption and domestic activities through iOS, Android and web applications.
â&#x20AC;&#x153;Every electronic device has its own signature and voice.â&#x20AC;?
At A Glance Motto Power is knowledge.
Website https://sense.com
Location USA
Category Consumer Electronics, IoT
Year of Foundation 2013 Investment 38 million dollars
Sense
TECHONOLOGY TREND
AU G ME N TE D AND VI RT UAL RE ALITY VR (Virtual Reality) and AR (Augmented Reality) are different but interesting technologies. However, MR (Mixed Reality) expands both approaches in order to integrate the physical world in the virtual reality.
â&#x20AC;&#x153;AR will take some time, because it really has technological challenges. But it will happen with a tremendous impact and we will wonder how and when we could live without it. Just like we wonder how we used to live without mobile phones today.â&#x20AC;? Tim Cook
TECHNOLOGY REPORT
AUGMENTED AND VIRTUAL REALITY
other sensory models like touching (tactile feedback) and sound (spatial sound). This creates MRs where users can digitally interact with things in the digital and real worlds while existing in the physical world. Mixed reality may cover virtual reality, augmented virtuality and other mixed configurations. The most popular hardware for MR is probably Microsoft’s Hololens. It is a system that brings together the physical and digital worlds. It is defined as the “first independent, holographic computer” and allows users to interact with digital content and holograms in a hybrid reality.
Augmented Reality (AR) refers to the integration of digital data with the user environment in real time. Unlike virtual reality creating a totally artificial environment, augmented reality uses the current environment and places new data on it. Virtual reality (VR) allows Users to experience a realm which does not exist in reality. Virtual reality is created with devices that allow users to experience and interact with an unreal 3D world with the help of special earphones or smart glasses and some input tracking forms. The screen is typically separated between eyes and creates a stereoscopic 3D effect with stereo sound, and offers an impressive and convincing experience allowing users to explore the virtual reality created by the device through input tracking.
VR provides a 3D environment created by computers, surrounding users and responding to users’ actions naturally. This is achieved through an impressive “head mounted display” (HMD) blocking users’ field of vision. Movement detectors or hand controllers track hands and bodies, and may feature a touch sensitive feedback. Positional tracking allows one or more participators to enter a room. Room-based systems offering an immersive involvement feeling stimulate a 3D experience or a person’s access to a room for multi-participants.
Mixed Reality (MR) also known as hybrid reality aims to combine the best aspects of both virtual reality and augmented reality. Also, it refers to the range of all situations comprising the continuity between virtual reality and actual reality.
PERCEPTION
The visual aspect of the experience is important but also includes
Tactile Gesture Spatial Movement Voice Visual
REAL ESTATE NAVIGATION
FURNITURE DISPLAY
GHOST HUNTING
(Sothebys)
(IKEA)
(The Void)
Virtual
Augmented
Hybrid
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TECHNOLOGY REPORT
AUGMENTED AND VIRTUAL REALITY
AR is the real time use of information integrated with things in the physical world in text, graphic, video or other virtual development format. It is offered by using a HMD or a mobile device. Placing virtual world elements on the background in real world distinguishes AR from VR.
Possible areas for using AR are the following: Communication Education
AR aims to develop usersâ&#x20AC;&#x2122; interaction with the physical environment instead of separating them from it. This definition also applies to MR. In general, MR allows people to interact with virtual objects.
Entertainment Retailing Military
Immersive Experience: Perception of Digital World by User
01
Play a Game
02
Plan Your Project
03
Train Your Personnel
By 2020s, the market of HDM devices will exceed 35 million devices and generate a revenue of 75 billion dollars.
04
Explore a Target
05
Design Your Expertise
06
Hands-Free Access to Information
AUGMENTED AND VIRTUAL REALITY
Commentary The interest and enthusiasm about virtual reality applications are highly intense and this interest is supported with multi-VR applications. It offers consumer oriented applications and advanced entertainment facilities like video games and 360 degree global videos. For enterprises, it means that the market has emerged with the basic areas of use such as field services / remote workers, production / storage, education and design visualization, and providing hands-free information, etc.
TECHNOLOGY REPORT
New generation wireless earphones can perceive forms and track a userâ&#x20AC;&#x2122;s position in an environment and allow more practical and realistic applications. You may provide concrete business advantages with these technologies by examining and using only real life scenarios. Work Efficiency Applications of AR increase efficiency and reduce costs. Companies generally apply technologies most effectively and efficiently with critical resources and common goals that adopt AR systems and support related efforts. They develop infrastructure, operation, education and scenario simulations. Everything from collective product design to workplace emergency drills become less costly and more effective and general productivity is increased Smart Glasses are an important factor in AR / MR adaptation. For 7 years, Magic was financed with 2.3 billion dollars without any cash flow and the first glasses were produced as late as 2018. These glasses are not suitable for daily use. You can use them for entertainment purposes. Vuzix Blade is another producer of AR glasses. Although prototypes seem ready for adoption by masses, they have not made any delivery for two years. A lawsuit was filed against the firm in the US with the claim that the company deceived the public with false news. Google Glass was released much before and then withdrawn from the market because it could not meet expectations. But still, it is
TECHNOLOGY REPORT
AUGMENTED AND VIRTUAL REALITY
rumored that they fund glass research. We think that organizations that will eventually have access to smart glasses technology will have the communication channel closest to customers and this is indirectly a value far beyond billion dollars of revenues. We predict that practical glasses will end the mobile age and start a new age. At this stage, we observe that results obtained from all these three products did not meet the expectations. In spite of the examples from three companies, we think that the glass field will be adopted and funded by these companies or others even though these companies failed in R&D. Considering the development rate of hardware products, it seems likely that our expectation for smart glasses becoming widespread will happen in 10 years or later. However, we will see its impacts partially during the next 10 years period.
many human senses will provide a richer environment to present nuanced information. As technology grows mature, MR will be the most preferred user experience. MR offers a fascinating technology which enables humans to display their world and interact with it. The factors to affect rate of consumers to adopt these technologies are given in three items in the next page.
Towards 2028, user experience will have a remarkable change about how users perceive the world and how they interact with it. Chat-based platforms are changing the ways people communicate with the digital world. Virtual reality (VR), augmented reality (AR) and mixed reality (MR) differently shape how people perceive the digital world. This transformation in models of both perception and interaction will bring along the immersive user experience to realize in future. The model will evolve from technology-literate people to humanâ&#x20AC;&#x2122;s literacy technology.
Even though the potential of VR, AR and MR is impressive, there will be so many challenges and barriers. VR market is mature enough to be widely accepted but reasonable cost opportunities are limited because VR requires creating all environments in content generation. When wearing an HMD, we cannot ignore the sensation of nausea resulting from simulated movements. This has been proved by previous HMD users, and earphones producers have taken precautions to prevent this sensation.
The ability to establish communication between devices and so
95
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01
02
03
5G will increase the Internet speed and position accuracy which has a deviation of half meter. This will help offer fully positioned AR and MR experiences.
AR / MR glasses are both expensive and heavy. Also, it is impossible to use them on a daily basis. As better hardware emerges, this technology might become so widespread that it will replace mobile phones.
Having a camera as glasses might make you feel frustrated and socially uncomfortable with others. Camera glasses also jeopardize privacy.
Progress in VR in entertainment and game applications may pave the way for other industries to adopt them in the future. Key target people should be identify to explore targeted scenarios. For example; it is important to research the needs and business value for a target user in different environments like home, car, work, customer or traveling. In 2022, 70% of enterprises will test engrossing technologies for consumer and corporate usage and 25% of them will manufacture them.
This trend is being adopted more slowly than smart phones at the moment, but it is likely to have a cost reduction which would increase the development rate. Hardware manufacturers speed up the application performance and vendors develop collaborative tools and augmented reality operating environments at corporate level. For now, unfavorable mobility of current devices has been reduced and costs required for the adoption of content are slowly decreasing. Also cybersecurity and usage security still pose problems.
We think that the aforementioned issues will be solved in near future. We believe that usage will depend on how fast young generation adopts this technology. On the other hand, it should be noted that investing in this technology without a clear revenue might eradicate the possibility of earning money in the future.
Integration of VR and AR with more than one, wearable, IoT environments rich for sensors and chat-based platforms will expand the immersive applications beyond the single-person experiences. Rooms and spaces will be interactive and connections over the network will emerge in connection with immersive virtual worlds and work together with them. Imagine a storehouse that detects if there is any employee there, and help personnel understand
We will transform individually used devices and fragmented UI (user interface) technologies into a multi-channel and multi-mode experience over time.
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Surrounding Environment Computer
01
02
03
Virtual, Augmented
Chat-Based
Immersive, Surrounding
and Mixed Realities
Platform
User Experience
Perception and interaction with Services
Access and control services
Contextual perception and interaction
Starts visually and tactilely
Starts with Language
Multi-sensory channels and device modes
Content-oriented
Action-oriented
Sustainability between services and environments Facilitates human and machine collaboration Surrounding, invisible and natural
2019
2024
2029
Targeted Solutions - Isolated UX as Feature
Interlocking Solutions - Systems-Wide Fluid UX
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AR and VR Market Estimations AR / VR Increase Forecast, 2016 - 2025
Analysis of Creative Industries
Creative Economy + Other industries
Billion $, as of 2025
100
100 48
90
Revenues (Million $)
80 32
60
13
30
9
20
6
10
50 40
42
47
35
31
Video Entertainments
40 30
24
20
17
Retailing
10
12
1 2
2 5
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
68%
68%
66%
64%
64%
63%
59%
55%
52%
50%
Creative Economy
$9
Live Events
60
19
40
0
70
24
50
$27
Video Games
80
39
70
90
$8
$4
0
Other industries
Creative Economy
Source: World Economic Forum, Data courtesy Goldman Sachs
Source: World Economic Forum, Data courtesy Goldman Sachs
equipment status and visually specify parts to be replaced... that will come true.
Multi-channel experience will use all human and advanced computer senses (temperature, humidity and radar, etc.) in line with the universe of these multi-model devices. This multi-experience environment will create an environmental experience where areas surrounding us define the â&#x20AC;&#x153;computerâ&#x20AC;? instead of individual devices.
Multi-mode experience unites people in the digital world in hundred of edge vehicles surrounding them. They include conventional data processing devices, wearable devices, automobiles, peripheral sensors and consumer devices.
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Wayray
Quote
WayRay is developing the holographic AR technologies for the future’s vehicles. The real AR is a virtual world that changes around the vehicle synchronizing with the route. The information displayed in real AR is smoothly integrated with the real world so that it allows drivers to focus on road and have a safer driving experience.
“In the following seven years, it is likely that the augmented reality will not be mainstream in any areas other than automotive industry. For the real AR to enter the mass market, there requires a rich application and content ecosystem and device / devices to take hold of the industry.” Automobiles already have a transparent surface for becoming a hardware platform for AR on the windshield and the rise of self-driving cars will create such demand.
At A Glance Motto Experience the real augmented reality. Location Switzerland Year of Foundation 2012 Investment 108 million dollars
Website https://wayray.com Category AR, Automotive, Consumer Electronics
Vitaly Ponomarev CEO of Wayray
TECHNOLOGY REPORT
AUGMENTED AND VIRTUAL REALITY
Improbable
Quote
Improbable is a software company developing platform for third parties in order to build giant, virtual and simulated worlds. Improbable believes in a future in which new, virtual worlds will enrich human experience and they will be as meaningful, stable and rich as the physical world. Building new worlds does not mean escaping; rather it is about creating and realizing through new experiences, occupations, economies and societies. Games will allow to create these new worlds and enable people experience incredible moments and play a critical role in connecting people with new communities.
â&#x20AC;&#x153;The thing we are about to see is a transformation from video games we just play into worlds where we can create values. Or, that transformation may generate games that can lead to businesses and experiences that we can actually see. This can only blur the borders between passive consumption and meaningful experiences.â&#x20AC;?
At A Glance Motto Create previously impossible games. Location England Year of Foundation 2012 Investment 604 million dollars
Herman Narula, CEO of Improbable Worlds
Website https://improbable.io Category Artificial Intelligence, Game
TECHONOLOGY TREND
X AAS
Everything as a Service (XAAS) is the cloud computer system formed by a wide range of services and applications designed to allow users to access technologies over the Internet on demand, contrary to just allowing them to benefit from internal technologies.
“The reason why Everything As A Service is favorable for organizations is that it provides foreseeable operating expenses and access to technology on demand or “pay as you go” technology. Expertise from managed service providers is highly needed.” Robert Faletra CEO, The Channel Company
TECHNOLOGY REPORT
XaaS
Everything as a service has been established as software as a service (SaaS) and expanded to include services such as infrastructure as a service, platform as a platform, storage as a service, etc. There are newly-created operations such as desktop as a service, disaster recovery as a service, cybersecurity as a service and marketing as a service and healthcare as a service. Customersâ&#x20AC;&#x2122; ownership, service and access expectations are rapidly developing. With what is called the â&#x20AC;&#x153;Uberized economyâ&#x20AC;? by some, individual consumers and companies are adopting a new consumption model having very little or no friction between meeting desires and needs. For example, services like Uber and Lyft enable individuals to go from A to B fast, efficiently and maybe most importantly, without related operational expenses, while providing service as a service. With ride-sharing, secondary and complementary activities are transferred to someone else. Now apply the same model to corporate IT. For personnel, business partners, vendors and even their customers and everybody who want to easily reach a destination and access critical services supported by another person appropriately and without needing to drive. For IT, this may mean procurement of some features from cloud services vendors. Particularly, it may also mean that IT services are expanded to regional operations or newly acquired assets or beyond the corporate borders intended for use by customers, business partners and even competitors. With SaaS, service consumers check their data but all other things
Which one of the following technologies has a commercial impact on your organization? Saas
52%
Artificial Intelligence
42%
Internet of Things
41%
Robotics
19%
Blockchain
17%
Voice technologies (Alexa / Siri / Home, etc.)
17%
Wearable technologies
13%
Other
13%
Virtual reality
12%
Augmented Reality 10% Drones 7% 3D printing 7% 0%
20%
40%
55%
Source: Heavy Nash Technology Survey
TECHNOLOGY REPORT
XaaS
in IT stock are managed by a service provider. With PaaS, the application layer is activated, and IaaS consumers control everything from the OS layer. The difference of public cloud from the conventional internal (or private) cloud is obvious: Capital costs for physical or virtual providers, networking and storage, equipment and maintenance of data centers all become someone elseâ&#x20AC;&#x2122;s problem and they are giant service providers like Amazon. Microsoft and Google may sol-
ve this problem much more easily than average business units. As a customer, you only pay-as-you-go. We already see the usage of XaaS and success stories in various industries. For example, the retailer giant Amazon, expanded its own internal services to its customers out of Amazon organization to be used in their enterprises. It made its customer services, financial services, implementation, storehouse systems available for companies, customers and competitors or other third parties against a fee. So, Amazon earned money from widely used commercial services. It provides a basis for its own shipping business to compete with UPS, FedEx
Cloud Computing Service Categories
SaaS
PaaS
IaaS
(software as a service)
(platform as a service)
(Infrastructure as a service)
A software distribution model for which a third party service provider embodies applications and conveys them to customers over the Internet.
A model in which a third party service provider hosts application development platforms and tools in its own infrastructure and can offer them to customers over the Internet.
A model in which a third party service provider embodies servers, storages and other virtualized data processing resources and make them available for users over the Internet.
Examples Salesforce, NetSuite, Concur
Examples Outsystems, AppDirect, ServiceNow
Examples Datapipe, QingCloud, Faction
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TECHNOLOGY REPORT
XaaS
Many organizations re-direct business skills and enable their products, proposals and processes to be regarded as a service group that can be used both internally and out of organizational borders. However, this means IT may be required to revive the former core assets by switching to the latest ERP platforms or encoding the old codes. Even though there are strong startups, as this and other improvement efforts form a basis for wider strategic switches, they may also help provide short term efficiency gainings and cost-savings.
Future “Stack + Cocoon” . XaaS
Project Management
Consuming
Datacenter
ERP
Support
Some of today’s market leaders and others aiming to be the market leader are aggressively transforming to digitalization. Business obligations and rapidly growing technological environment led many CIO to revive the former core systems. Some of them offer new analysis and optimization application solutions generally presented as cloud SaaS in order to create new revenue streams.
Current “Towers” X
Security
Conventional organizations switch to digital commerce. For Gartner, a “digital business” is a unit within an organization or institution. Product set and business model have been made possible only with use of information and digital technology. This means that conventional organizations should add / expand business models and value suggestions using digital information and technologies in order to create a new value.
EUC
This is not limited to offering Amazon boxes, it may make available a B2B model that can be used by other retailers.
Stack of IT services will eventually collapse and get re-aligned to “result oriented” agility stacks / capsules.
App Dev
and USA Postal Services.
Service Consultancy Assistance Application Development ERP EuC Security Data Center
TECHNOLOGY REPORT
XaaS
Cloud economy (opex vs capex), flexibility of tools and scale (dynamic capacity) allow for transforming internal processes and data into products for foreign markets that will generate revenue. Conventionally, commercial off-the-shelf products (COTS) are valid for purchased and depreciable hardware assets in internal company activities. Selling the application means that external customers have to operate a solution in their own hardware.
This has been an economic burden for buyers. Also, supporting a wide range of data processing configurations among customers is an immense burden on application providers. End-user internal IT departments generally require additional support and additional hardware test environments, they are not ready to assume this burden.
Define what you do on the cloud Traditional Internal IT
Common Location
Hosting
IaaS
PaaS
SaaS
Data
Data
Data
Data
Data
Data
Application
Application
Application
Application
Application
Application
Databases
Databases
Databases
Databases
Databases
Databases
Operational System
Operational System
Operational System
Operational System
Operational System
Operational System
Virtualization
Virtualization
Virtualization
Virtualization
Virtualization
Virtualization
Physical Servers
Physical Servers
Physical Servers
Physical Servers
Physical Servers
Physical Servers
Network&Storage
Network&Storage
Network&Storage
Network&Storage
Network&Storage
Network&Storage
Data Center
Data Center
Data Center
Data Center
Data Center
Data Center
Self-managed
Supplied by a provider
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TECHNOLOGY REPORT
XaaS
As a result, it is hard to justify a ROI-based business. Its economy is generally not logical. International IT departments generally don’t have marketing, sales, pricing, distribution or customer services skills to support external software. Even though IT business partners have such competences, technical features of application
solutions make it quite hard to transfer responsibilities to companies. Cloud infrastructure and cloud service providers evolved these dynamics. The capacity to support application solution scale is the
Companies consider SaaS as a way of increasing agility and speed. “How important are the following advantages for your company’s decision to use SaaS?”
72%
69%
68%
Application speed and deployment
Supports enhanced work agility
Ability to concentrate our resources on more important projects
55%
Lower general costs
64%
57%
Support for business innovation with new skills
Faster distribution of new features and functions from SaaS providers
Possibility to substitute advance payments with regular monthly payments
41%
Source: Forrsights Software Survey, 2012 Q4
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TECHNOLOGY REPORT
XaaS
cloud provider’s responsibility. Market- dominant application stores handle distribution and marketing aspects. Easier, accessible cloud tools ensure applications to be supported and developed for SMBs more easily. And the cloud also shifts the impact on internal financial statements to fields underneath the line. However, transition process to XaaS model for a company will be likely to start on the organizational part and gradually progress in the following years. Thus, clustering application programming interfaces (APIs) will allow companies to reuse, share and make money from its main assets and data as they discover XaaS opportunities. As more aggressive companies transform internal processes and data into marketable solutions and start declaring revenues from the digital channel, other companies will act the same way. Beyond an additional and repeating revenue flow, this kind of software offers may balance the reasons of seasonality and other revenue fluctuations for many industries. These offers may enable the enterprise to be involved in the same industries from physical product and professional service markets.
Quote “Towards 2023, most of today’s special examples will be generalized and become widespread as more revenues are generated.” Gartner
TECHONOLOGY TREND
B LOCKCH AI N
Blockchain is a method of protecting identities and transactions cryptographically, sharing and storing information in a distributed ledger.
â&#x20AC;&#x153;I think blockchain will substantially change financial applications and leave its mark for the following 40 years. Blockchain and everything succeeding will shape this story more apparently than Bitcoin.â&#x20AC;?
Larry Summers, US Former Treasury Secretary (quoted in Guarda)
TECHNOLOGY REPORT
BLOCKCHAIN
In its essence, blockchain enables many parties to agree on a single resource without the obligation to trust each other. It facilitates agreement and arranges transactions by using reconciliation algorithms. In theory, block chain reduces the need for coordinating or verifying the mediators (like banks) and transactions. With this aspect, blockchain is separated from conventional approaches which are based on a single central main record and provide protection by using limited user permissions. Beyond cryptocurrency, the underlying technology (blockchain) is significant. Blockchain earns its value from its universality. It can be applied to any situation that requires safe recording.
“block” data is added to the chain. After adding additional blocks, it is almost impossible to change or remove them. Blockchain technology is now advanced, and experts are experimenting additional applications to increase its abilities. Smart contracts and betting proofs are new methods and two exciting developments in verifying transactions in blockchain.
Examples include post follow-up, asset owners’ records and legal contracts. There is not only one blockchain. It has different types like private, public, federal, etc. Individuals, companies or consortiums can start blockchains and they live in multiple machines simultaneously. So, we can say that there is no single place hosting the blockchain. As time goes by, distributed ledger technologies (DLTs) have transformed into a great number of permutations and applications in almost every industry. Previously, the focus point of blockchain was the distributed verification. Blockchain corresponds to a distributed ledger strengthening distributed consensus building process. Reconciliation is created by sharing with a computer network that operates the algorithms independently in order to verify that a transaction has been performed. After a transaction is approved by its network, a
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Benefits
Increased transparency and traceability
Removal of mediators
Faster transactions
Low costs
TECHNOLOGY REPORT
BLOCKCHAIN
01
Necessary reliability mediators
Stable
Encrypted
02
Digital foot print of transactions
03
Inefficiencies in data integrity protection
Transparent
Blockchain
Unmeasurable information makes blockchain a decentralization tool.
06
Only necessary information is shared, the rest remains encoded and inaccessible
07
Errors (intentional or otherwise) can be easily verified.
08
Information is secured using a cryptographic system.
09
Data is stored on a democratic network.
10
Source: PWC
04
Information security threats Distributed
05
Hegemonic monopoly on data
Programmable
Consensus
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TECHNOLOGY REPORT
BLOCKCHAIN
Blockchain eliminates business disagreements and adds a value to businesses. It achieves it by freeing accounting from human-dependent applications and participants. Everybody having certain permissions displays the same information at the same time. Integration is simplified by having a single shared blockchain model. Blockchain also provides a distributed reliability architecture that allows distrusted parties to carry out commercial transactions and create and change a value by using various assets. A part of all blockchains, consensus algorithms are, basically, real time auditors. Miners work in real time to verify outstanding transactions before adding them to ledgers. In the next years, we will use blockchain applications to better verify or cancel transactions. Using a public blockchain may remove the need for a reliable and central official for recording transactions and dispute arbitrations. It is because the reliability is placed in the model by stable records in a distributed ledger. Economic interactions of this technology and its potential of radical transformation bring up critical questions for the society, governments and companies but there is no clear answer to such questions yet. Blockchain is faced with other important challenges that prevent distribution of sound and scalable solutions at least until 2022. Blockchain technologies and concepts are not mature enough, and not comprehended and proven sufficiently in critical and large-scale business operations. This is particularly because it has complex elements to support complex scenarios. Many Distributed Accounting Technologies (DLT) are only proof of
113
Blockchain is a strong tool for digital works because of the following features:
01
Clearing business and technological
02
Creating local assets and activating their
03
Providing a manageable reliability
disagreements
distribution
mode
In addition, more dynamic behavioral and business models may provide the following: Smart contracts around blockchain Accessing and controlling certain elements of ledger Creating various reliability models
TECHNOLOGY REPORT
BLOCKCHAIN
Benefits from Various Features of Distributed Accounting Technologies 01
Know Your Customer Digital Identity
Prejudiced Artificial Intelligence
Digital Government Cross-Border Payments Transfer and Payments
03
Commerce Financing Commerce Commodity
02
P2P Money Transfers
Cryptocurrencies
Financing Factoring / Syndication
Interbank Payments and Reconciliation
Real Time Wholesale Reconciliation Interbank Payments
05
Closed Loop Open Loop
P2P Wallet Solutions Source: Capgemini Financial Services Analysis, 2018
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04
TECHNOLOGY REPORT
BLOCKCHAIN
01
02
03
04
Tracking goods and parts during their lifetime and when they are in supply chain in order to improve decision making in stock management and repairs.
Automatic, real time, three way match & invoicing and speeding up reconciliation period for cross-border payments and minimizing disagreements.
Customer data security automating contract conditions and organizing, faster copyright payments and activating subscription revenue agreements.
While increasing security of customer data, automating the previously set contract conditions and providing faster license payments and activating subscription revenue agreements.
05
06
07
08
Asset Traceability
Identity Management
Finance
Tax and customs
Digital currencies
Payments, licensing and customer loyalty
Contract management Audit and and records harmony
Verifying an identity on a blo- Allowing to make transactions ckchain and providing program with a cross-border, decentralimanagement. zed currency without a mediator.
Ensuring contracts to be perfor- Providing assurance in real time med according to the conditions transaction level and additional set and enabling customers to transparency for stakeholders. share records between multi-assets while protecting them. Source: Pwc Blockchain Survey
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TECHNOLOGY REPORT
BLOCKCHAIN
Factors Limiting Adoption of Distributed Accounting Technologies (%) 2018
85,9%
83,1%
77,8%
69,0%
66,2%
64,8%
Incompatibility with standards
Lack of clarity in regulations
Scalability
Time required to add a block to a transaction is high
Security
Application cost
Source: Capgemini Financial Services Analysis, 2018, Capgemini and BNP Paribas WPR Executive Survey 2018; A total of 101 responses were received.
concepts (PoC) largely due to research laboratories or interoperability, security, scalability, cost effectiveness and regulatory issues. The lack of interoperability between DLT systems and current banking systems prevents the application of scalable solutions. Multi DLT systems create a fragmented market having limited connection between solutions, leading to inefficiencies and limited adoption. Blockchains are flexible as proven by attacks to cryptocurrencies (like Bitcoin) but not immune against cyberattacks. It gets increasingly harder to operate blockchain applications particularly with public blockchain. Consensus algorithms used in DLT systems lead to delay in a system with cryptographic verification and, thus limit the number of
operational systems. As blockchain grows, it tends to consume more power. It is estimated that the power consumed by Bitcoin network was higher than the whole Republic of Ireland in November 2017. Regulatory legal atmosphere for blockchains and ICOs is still obscure. Obscure regulatory atmosphere and the absence of an official legal framework in many countries cause a risk for DLT technologies. In the USA, USA Securities and Exchange Commission, Financial Crimes Protection Network, USA Commodity Futures Commerce Commission and state governments all have different opinions and sometimes have conflicting policies regarding blockchain and cryptocurrencies.
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TECHNOLOGY REPORT
BLOCKCHAIN
The Financial Stability Board responsible for this regulation among G20 economies suggests a framework covering how the risk resulting from the cryptoassets will spread around other areas of financial system. Without such an intervention, progress towards new payment ecosystems will be slow. De Nederlandsche Bank (DNB), the central bank of the Netherlands, declared its test results with DLT a while ago and concluded that the financial market infrastructure could not meet its very high expectations. In spite of the important test with DLT, DNB set forth that the technology is an urgent necessity to focus on areas that can replace the current market infrastructure. For example; the industry should determine the goals like inter-bank agreement and cross money transactions and thus, can benefit from all the potential of DLT and the benefits will be more than the costs involved. Blockchain is still a developing technology and there are so many challanges to be discussed before its adoption by masses. The main challenges of blockchain are speed, scale and regulations. Decentralized systems are naturally less efficient than central systems and there should be a balance between security and scale. Bitcoin and Ethereum perform three to six transactions per second, on the contrary, Visa can process thousands of transactions in one second.
Commentary MSecurities, Asset Management and Commerce Financing, etc. rely on participation of many parties within and outside of banks.
For example, transactions at the Securities market include buying and selling by bankers, brokers, house exchanges and various central securities storehouses. Likewise; trade financing has activities with plenty of players (buyers and vendors, bankers, logistic companies, producers, certificates, etc.), more than one property and asset transfer and at least 17 document exchanges including related supply chains. There are so many usage scenarios with domestic and international payments. Due to the nature of trade and securities transactions, payments are realized instantly and all of them must be recorded so that they can be audited easily. For these examples, DLT’s ability to present parties a reliable and controllable “single point of view” now and at a historically high level is a crucial advantage. This eliminates the need for each party to keep their own records, reaches agreement for accounting records of all parties and removes any possible inconsistency. Singapore based-GeTS Open Trade Blockchain Platform focuses on cross-border trade among ASEAN countries and China. Some of other developments in securities industry are as follows: > Launch of DLT-based SIX Digital Change (SDX) by Swiss Stock Exchange > Some blockchain based-solutions applied for post-trade transactions by Australian Stock Exchange (ASX) > New platform of Stock Exchange Istanbul, one of Turkey’s national stock exchange markets.
117
TECHNOLOGY REPORT
BLOCKCHAIN
“28% of CEOs working for big American corporations spent 5 million dollars or more for blockchain technology. 25% of CEOs working for big American corporations aim to invest 5 million dollars or more in blockchain technology in the following calendar year.” DeloitteUS, “Blockchain survey 2017” We should not forget that the terminology regarding blockchain is variable. This ambiguity masks potential compatibility of these technological solutions to meet usage needs. As a result, you should be very careful in interaction with dealers offering poorly defined / non-existing blockchain proposals. It is important to fully define how the “blockchain” term is used by both internal parties and service providers. It needs to develop a consensus mechanism and follow up updates among distributed ledgers including related startups like side chains and blockchains. It will be correct to consider distributed ledgers as a proof of concept (PoC). However, you should make sure that your team has the necessary skills to understand what is possible before starting a distributed account project. Determining the integration points with current infrastructure is needed in order to determine the necessary investments and follow-up the evolution and maturation of the platform. Many technology providers and consortium startups present and
develop solutions that do not apply all features of blockchain. These offers “inspired from blockchain” generally rely on more conventional technologies not having a blockchain and substantially copy the current transaction messaging infrastructures or disorganized databases as a decentralized design principle without reproduction. Organizations focusing on solutions inspired from blockchain may address technological and business problems like reduction of fraud, reduction of agreement burden and more effective (reliable) information sharing, reproduction and distribution that cannot be addressed by former existing solutions. However, this kind of approaches cannot create disruption value of the real blockchain. Organizations tending for this option should understand the limi-
“In 2022, 75% of public blockchains will sufer from “confidentiality poisoning”; because personal data which do not comply with confidentiality laws will have been added to blockchain.” Bart Willemsen, Martin Reynolds, Fabio Chesini tations and get ready to fully switch to blockchain solutions over time. Various confidentiality regulations in effect and under develop-
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TECHNOLOGY REPORT
BLOCKCHAIN
ment contain restrictions on usage and storage of personal data including individual confidentiality rights such as “end of data lifecycle” requirements and the right to delete.
many ICOs could not generate revenues other than cryptocurrency channels, and the decline in Bitcoin and cryptocurrencies caused this bubble started to collapse.
Personal date may be entered into blockchain text fields accidentally or maliciously. As long as blockchain exists, these records can never be deleted, can be displayed permanently. Considering the average lifecycle expectation of regulations and worldwide fluctuations resulting from adoption of similar requirements, we don’t expect that these confidentiality restrictions will end within the next 10 years. We believe that it is critical to design blockchain projects by taking into account issues that are likely to arise out of GDPR (General Data Protection Regulation). Blockchain technologies had the sharpest rise last year. Because
How much do you agree with the following statements? Security
32%
Securities
33%
22%
Domestic Payments
14%
International Payments
43% 22%
26%
Commerce Financing 10%
20%
25%
21%
27%
25%
24%
27% 0%
23%
40%
50%
60%
8% 16%
18% 8%
45% 30%
8%
17% 8%
70%
80%
90%
100%
Change of blockchain searches in the last 1 year Google Trends
I totally agree
I agree
Neutral
I don’t agree
I don’t agree at all
99
51 53
Nov 17
36
Feb 18
June 18
Oct 18
With the collapse of the bubble, startups will try to focus on right business models and scenarios instead of blockchain technology. Complete blockchain solutions are faced with serious challenges that will weaken the production of strong and scalable solutions by 2023. Blockchain solutions and concepts were not maturated, comprehended and proven in critical big scale business operations. With the concentration and the progress of businesses in consortiums with lower expectations but firm steps, we think that the
119
TECHNOLOGY REPORT
BLOCKCHAIN
blockchain will start to provide outcomes in the following periods even though slower than expectations. We think that collaboration and tests with other organizations and consortiums are needed to find scenarios and be involved in
a more clear picture to appear after dust cloud disappears. In addition to focusing on Blockchain and Distributed Ledger terminology and technology, we think what really matters is decentralization and all possible decentralization technologies and mo-
Cryptocurrency regulations in various countries
Regulated Regulation at medium level No regulation
120
TECHNOLOGY REPORT
BLOCKCHAIN
Australia
The USA
It has been one of the first countries to introduce cryptocurrency regulations for making it in line with the AML / CTF directives.
In the USA, ICOs should get over government-based “Blue Sky Laws” considering them securities.
Russia
Avustralya India
The Russian federal law has regulations on creating, exporting, storing and circulating digital financial assets as well as smart contracts.
At the beginning, they were open to cryptocurrencies, but then, restricted their use and changed their stance in 2018.
Avustralya Cryptocurrency friendly
Cryptocurrency enemies
Canada, Denmark, Estonia, Iran, Italy, Japan, Mexico, Switzerland, Sweden, South Africa and Saudi Arabia appear to be the crypto-currency friendly countries.
Venezuela
Other APAC countries including China and Vietnam are among the countries which are cryptocurrency enemies.
Avustralya
Banned While the central bank of Nigeria prohibits Bitcoin, etc. completely, Brazil prohibits them generally.
Venezuela is thinking to issue an oil-supported “Petro” cryptocurrency and trying to regulate the cryptocurrency mining.
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TECHNOLOGY REPORT
BLOCKCHAIN
South Africa
No regulations
Apart from South America being a crypto-friendly country, other African countries, such as Gana and Kenya, are also at the stage of consultation.
England, France and Germany do not have any concrete regulations to consider them as crypto-friendly.
dels should be closely examined.
Malaysia, UAE
Avustralya
Malaysia and UAE also declared their regulations.
Introduction APAC countries including Singapore and the Philippines introduce crypto regulations.
Thailand Recently, the country declared crypto regulations and banned six crypto currencies.
In addition to cryptocurrency regulations, the real problem could be how effective these bans. For example; Venezuela banned cryptocurrency because it needed to increase supply of official currency to pay its debts. This excessive money supply means an increase in prices and therefore, most of citizens prefer using another exchange environment. So, it lowers the demand for the official currency and significantly lowers its value. The government declared it unlawful to use other currencies in order to struggle with the problem. As an interesting side effect, plenty of citizens tend to use Bitcoin as an exchange tool or turn Bitcoin directly into mining. A great number of citizens in Venezuela applied to Bitcoin mining to get rid of the inflation and meet their basic needs. Also, in the countryâ&#x20AC;&#x2122;s electricity market which is intensively subsidized, mining has become reasonable because costs are low. Bitcoin miners in Venezuela can gain 500 dollars monthly, and such amount is enough to buy imported diapers and insulin, etc. For many citizens, Bitcoin is an investment asset and a way to save from the devaluation of domestic currencies. In many developing countries, devaluation of currency, foreign exchange markets that
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TECHNOLOGY REPORT
BLOCKCHAIN
further worsen the current deficit create a new demand for cryptocurrency.
> The main player behind the special cryptocurrency, usage and foreign trade deficit, and impacts on monetary system
Another problem is that cryptocurrency could turn into an unlawful international money transfer market. As an exaggerated example; if the 3rd World War happened and a war code or a certain amount of cryptocurrencies would be used more to buy war machines and other necessary elements and the price of that cryptocurrency would be affected. Thus other countries would ban this cryptocurrency.
The last decision about the future of cryptocurrency will be shaped by global actors and in terms of its impacts on some certain cryptocurrencies. Therefore every country should make its decision by evaluating its economical and political positions strategically.
Unlike banknotes, cryptocurrencies are very easy to create but hard to regulate. They are naturally limitless in terms of supply and do not require any physical transfer. Central banks have foreign currency reserves to balance the monetary system, but if cryptocurrency was to be used, it is not clear how central banks would control the liquidity in monetary systems. If a cryptocurrency is banned and becomes an actual international standard, then that cryptocurrecy is left unprotected against liquidity attacks. Therefore, cryptocurrency is indeed a financial weapon among countries.
We think that we should participate or monitor cryptocurrency consortiums for international money transfers. Apart from the solutions bringing anonymity, we should focus on solutions that can be easily tracked by regulatory authorities. Although ICOs act as a funding mechanism for newly-founded startups, they could easily become a tool for gambling beyond trade due to lack of transparency and regulations. Demand is so high that some ICOs could be as big as IPOs without almost any regulations. The current situation requires us to avoid from joining ICOs that do not rely on any regulatory control and other cryptocurrency
Embracing or regulating cryptocurrencies (even banning some of them) is an international, economic and political decision rather than a technological matter. And this decision relies on two factors: > Anonymity and international money transfers, controlling power over AML and fraud activities
123
“I think that the Internet will be one of the biggest powers to undermine the government’s role. But what is missing and will be developed soon is reliable electronic money.” M. Friedman 1976 Nobel Eco. Award of Economics
TECHNOLOGY REPORT
BLOCKCHAIN
High
Trends in Blockchain Technology Bitcoin mining
Temporary
Necessary
Fiat-crypto exchange markets
Acceptance of the Industry
First money offers
Smart contracts platform
Monitoring
DLT in supply chain Consortia
DLT in liquidation and reconciliation DLT in IoT
Stable currencies Identity management
Bitcoin
Unchangeable tokens Decentralized currency conversions
Confidentiality currencies Reliability tokens
Data markets
Low
DAOs
Experimental
Low Bitcoin and cryptocurrencies
Threat
Market Power Usage of corporate distributed ledgers (LT)
High Decentralized applications Source: CBInsights
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TECHNOLOGY REPORT
BLOCKCHAIN
trade platforms or we can consider them Forex trade platforms and inform our customers about high risks and complications.
propose an unlimited legal system. In other places, blockchain-based networks create decentralized data processing and storage services. For example, Filecoin and Golem present peer-to-peer networks that pay users to lend their hardware in idle position for various duties.
Decentralized Autonomous Organizations (DAOS) “Blockchain companies only need an Internet connection and a good regulatory environment to found a community. There are open resource groups having open cryptocurrencies but not conventional bank accounts.”
IDENTITY MANAGEMENT With blockchain technology, users can control their own identity cards, not the Internet giants. The role of central Internet giants as a “digital identity commissioner” is back on the agenda. Ad-based Internet giants earn money primarily by collecting, selling and analyzing user data on behalf of advertisers. As these companies
Coinbase Executive Balaji Srinivasan Companies without owners could be possible with blockchain technology. In addition to transforming data and payments, etc. blockchain technology may also shake conventional corporate structures. Thanks to blockchain technology, Companies “without owners” may collect money without stocks, operate without conventional banking or financial infrastructure or pay their personnel without even knowing their names. Blockchain projects work on digital partnership concept. Companies aim to create a digital area of jurisdiction in which a community will act as an online court system for settling disputes and
125
What is ideal identity management like?
01
Personal User-specific
02
Permanent for the whole life of a user
03
Portable accessible anywhere user is present
04
Confidential only the user gives permission to use or display data
Source: CBInsights
TECHNOLOGY REPORT
BLOCKCHAIN
collect data, possibility of abuse increases.
DLT IN EXCHANGE AND AGREEMENT
Facebook’s “Single Login” feature, Facebook Connect enables users to login to other websites with the pre-existing Facebook login information. This nonstop user experience provides more user data for the company for targeted advertising.
After long years of experience, banks still want to decrease exchange and payment incompetencies through distributed ledgers. A mantra repeated among company managers has been “blockchain technology is not Bitcoin”. What is expressed here is the underlying idea that the distributed ledger technology is more valuable than cryptocurrency itself.
Blockchain technology may offer a better way to create an online identity. Identity can be verified in an open and global blockchain controlled and trusted by everyone. Users can control their identity information and take over the power and control from the company. On the other hand, there are some challenges for a blockchain based-identity system. Primarily, there are plenty of governments and organizations which do not want it. Identity systems like social security numbers help governments keep records of their citizens. Governments might be unwilling to abandon their role as an actual identity creator. The second issue is that central platforms are more suitable than blockchain technology equivalents due to the network effects and users do not show enough interest about confidentiality to overcome transitional costs. Even though confidentiality and inspection are ideal, users may not want to switch to barriers with limited network effects. However, in case a digital identity blockchain solution backed by important government organizations is supported by biometric environmental systems, human life and efficiency will be largely influenced. The basic component of being an e-government is to be evaluated digitally.
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Correspondent Banking Model Country A Debtor
Payment System
Country B Debtor’s bank (transaction fee)
Correspondent bank A (correspondent bank fee)
Creditor
Payment System
SWIFT Messaging infrastructure Source: Aite Group
Creditor’s bank (transaction fee)
Correspondent bank B (correspondent banking fee and exchange conversion commission)
TECHNOLOGY REPORT
BLOCKCHAIN
Financial institutions are in the first place to make an experiment with the distributed ledger technology. It is an area which is considered by banks when referring to the distributed ledgers and it improves the exchange and agreement processes, which normally take time. If banks refer to the same database, the exchange and settlement of transactions between them may happen instantly. An example to show the challenge in this process is that; a simple bank transfer from one account to another passes through a complicated system of mediators including correspondent banks before reaching the destination. Distributed ledgers may simplify all these transactions. Instead of relying on a network of monitoring services and correspondent banks, transactions may be directly recorded into open and transparent distributed ledgers.
DLT in supply chain Supply chains are complex and inefficient. Companies may use DLT in order to reduce time consumption and costs of moving products. Distributed ledgers might have a wide impact on supply chains beyond applications in healthcare services, real estate, banking and other industries. Todayâ&#x20AC;&#x2122;s global supply chain is highly complex and brings together farmers, storehouses, shipping companies, distributors and retailers. Involvement in many different parties covers different types of record-keeping from robust databases to e-mail chains and paper outputs. As products shift to sale from a supply chain or producer, distributed ledger technology (DLT) may be used to document transactions in an open, distributed and real time databases. Such a system may decrease delays, increase transparency and minimize human errors.
Complex global food supply chain Farms
Storage
Food Processor
Retailer
Distributor
Food Producer
Kitchen
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TECHONOLOGY TREND
O P E N B AN KI NG
PSD2 (second EU Payment Services Directive) / Open Banking allows bank customers to use third party service providers to manage their financial accounts.
â&#x20AC;&#x153;If we, as banks, cannot present anything more valuable than Amazon Prime, we are probably doing the wrong job.â&#x20AC;?
Bradley Leimer, Head of Innovation, Santander
TECHNOLOGY REPORT
OPEN BANKING
Open Banking
Closed Banking
Regulations put into effect issues, which we believe, to create a revolution in the United Kingdom retail banking - open banking. In this way, regulators aim to encourage increasing competition and innovation by disclosing customer data to third parties.
API (Application Programming Interface)
Bank
Customers
Open Banking and PSD2 PSD2 (second EU Payment Services Directive) / Open Banking allows bank customers to use third party service providers to manage their financial accounts. Upon request of a customer, it enables banks to access customer data through APIs of a specific third party.
Open Banking Customers
3rd party providers
Bank
PSD2 / Open Banking was started as a startup of the Financial Administrative Organization, Competitions and Markets Authority (CMA) in United Kingdom and European Banking Authority (EBA) in the European Territory. The ownership of data has enabled a competitive advantage in terms of pricing and risk scoring in the long term. A regulatory goal by both EU and the United Kingdom makes it attractive for new players in the market. This has led to two important regulations (AISP / PISP) that would open customer data kept by a bank to third parties (TPP-Third Party Providers).
130
Source Deloitte analyses
Price comparison websites
TECHNOLOGY REPORT
OPEN BANKING
These data can also be used potentially to offer innovative, value-added banking services for consumers.
application for all financial accounts). PSD2 will present a framework on how to access customer transaction history and account details of these organizations.
2 fundamental regulations of TPP (Third Party Provider): > Account Information Service provider (AISP): AISPs are methods that companies can use to obtain a 360 degree-view (a PFM
> Payment Initiation Service Provider (PISP): PISP is an organization that offers an online solution for companies, retailers and merchants to accept electronic payments.
An updated payment model including Payment Initiation service provider (PISP) for consumers Customer
An updated interaction model including account information service provider (AISP)
Merchant
Customer
AISP
PISP
I
AP
Card Network Receiving Bank/Processor Current Flow
Sending Bank
Customer Bank A
Future Flow
Current Flow
131
Customer Bank B Future Flow
Customer Bank C
TECHNOLOGY REPORT
OPEN YAPAYBANKING ZEKA
This generally uses software as a service (SaaS) connecting a vendor or a vendor’s Web page to an online banking platform of the person making the payment, thus they can make a money transfer.
Even with APIs, there are multiple security standards applicable to the secure data exchange between the stakeholders in the industry. These startups include the Berlin Group, STET France, CAPS, PRETA and NACHA.
Startup Calendar
Industry-level standards are being developed. However, standards may gradually be consolidated at regional levels over time. Lastly, a global standard, one with the highest level of access and the most robust network characteristics, may arise. With regards to the standardisation and security features of API, the true potential of routers such as RTP and DLT, which are based on APIs, will reveal itself.
PSD2 was announced in August 2016. It is in effect since January 2018. The pilot phase for banks begins in March 2019, while the deadline for going production is September 2019. Even though Brexit (29 March 2019) coincides with this calendar, both parties implement their PSD2/Open Banking deadlines competitively. There are no regulations and government tendencies in Turkey towards participation in PSD2 efforts. However, previous experience shows that these regulations may apply to Turkey in 5-6 years, following their counterparts in Europe.
As for security, several API standards, which are used by banks to securely exchange data with third parties, are being developed.
As these regulations are inevitable, the banks create various APIs to gain competitive leverage over other banks. It is safe to say that they are getting used to the idea of PSD2.
“Financial institutions must be capable of offering an easy way to browse through a digital platform without interruption instead of a miniature banking offer.”
Brexit and Its Impacts on Open Banking Challenges of API Some third parties follow the standards to securely share data via APIs, while some industrial stakeholders on the country level started cooperating to create standardized APIs.
132
Jim Marous, co-publisher of The Financial Brand and the publisher of the Digital Banking Report.
2007
PSD Announced
2011
EBA Established
2013
FCA Established
Regulation on payment
Financial risk management
England-based
services
Effective in Basel III application
Provides financial regulation
Effective in the EU
London-based
Authorized to perform audits
To increase
Moving to Paris
Regulates payment systems
2016
PSD2 Mandatory
2015
PSD2 Announced
2014
CMA Established
Mandatory for 9 major banks
Payment regulation
Competition authority
Time given until January 2018
2-year statutory time
England-based
An advantage for financial
Account information services
Autonomous institution
mediators
Monetary transaction services
2018
PSD2 in Effect
2019
Test and Pilot
2019
Open Banking
Five banks asked for additional
3-month testing
CMA9 open banking services are active
time.
Pilot program with customers
The deadline may be postponed
Security is becoming clearer.
for 3 months
Early adaptation possible
18-month transition time
OBIE audits
GPDR-compliant
133
TECHNOLOGY REPORT
OPEN BANKING
Open Banking European Union Masters of Openness
Rich API coverage
Innovators in Functionality
API standardization startup
Functional scope
STET France
Limited API coverage
PSD2 server startup for AISP, PIIS and PIS. REST, OAuth2, JSON and HTTP are used. ISO 20022 for the information exchange between TPPs and ASPSPs.
PRETA First Steps into Opening Fundamental experience
A fully EBA CLEARING owned subsidiary. Directory, testing and certification, help desk and discrepancy solutions are found at XS2A service building blocks.
Seasoned Leaders
Developer experience
Extensive experience
Source: Innopay Open Banking Monitor (OBM) 2.0 Developer Portal benchmark (update Sept 2018)
Commentary
Berlin Group APIs support PSD2 AIS, PIIS and PIS. It is based on RESTful, JSON and ISO 20022 standards. Open and royalty-free for data processes, interfaces and infrastructure.
Controlled Access to Payment Services (CAPS) The founders are Equens Worldline, NETS and other supplier affiliates. PSD2/RTS compliance, API collection and premium services for ASPSPs and TPPs.
NACHA USA is leading API Standardization Industry Group for APIs in the Financial Services industry. Developing standards to access account authentication and bank contact details.
The current banking operation models are mostly of a closed nature and banks have a customer interface where they offer their products. These interfaces integrate with services ranging from current accounts to savings accounts, lending and trust instruments.
persons or institutions. It is important that knowledge of these standards is obtained and the APIs we create are improved in this period of time.
In England, “Open Banking” and in Europe, “PSD2 standards” will go live in October 2019 at the latest. This means that nine banks and financial institutions in England and numerous banks and financial institutions across Europe will open their data to third
PSD2 offers significant opportunities for creating new streams of revenue, attaining customer entitlement and moving towards an ecosystem centered around “Everyday Banking”. However, the banks, which make the first move on these opportunities, will
134
TECHNOLOGY REPORT
OPEN BANKING
Beyond the Regulations Open Banking 01
Conventional Bank
Banks are adept at all channels and backend technologies. Banks own the technical infrastructure and the products Tech firms provide the fundamental instruments
02
Cooperating Bank
Ventures providing a portion of banking services. Guidance and services are provided in line with the agreements made between startups and banks Banks own the data Data exchange under limited agreements between startups and banks
135
TECHNOLOGY REPORT
OPEN YAPAYBANKING ZEKA
03
PSD2 (Currently only in Europe)
Moving forward according to regulation requirements Account details and account transfers are being opened to startups Any startup may use them without signing an agreement Account balances, transactions and payment details are thereby shared with startups
04
Open Banking Beyond the Regulations
Regulation-independent APIs are being provided. Any startup may achieve API integration quickly. The banks, which do not cooperate with startups and offer certain services cost-effectively, effectively and efficiently, lose their customer. Data ownership is shared by the bank and the entrepreneur. Revenue is obtained from services and data through the banksâ&#x20AC;&#x2122; APIs. The banks, which do not provide APIs or do not devise practical APIs, start to lose their market share. Should the banks do not implement user experience field applications or fail to provide competitive/quick services, they end up providing just a banking infrastructure and losing their revenue.
136
TECHNOLOGY REPORT
OPEN BANKING
05
Experience/Marketplace Banking
The banks and startups, which look out for their customers, offer services other than financial services, offer expert services such as financial consultation without any interruption or provide customer experience products, end up dominating the market. Various financial services from payments to loans are intuitively provided on customer experience applications. The startups and banks, which offer end-to-end solutions and vast experience through quick collaborations, share the revenue coming from customers. The banks, which fail to close quick agreements and to offer an intuitive and effective experience, lose their customer channels to experience applications. Any startup may achieve API integration quickly. The customer data is available on the applications providing the experience. Revenue is obtained from services and data through the banksâ&#x20AC;&#x2122; APIs. The experience applications redirect the customers to the banking products based on the benefits provided to the customers and API costs. The banks, which fail to provide API or suitable conditions, lose not only their customer channels but also their revenue model. Revenue is obtained from services and data through the banksâ&#x20AC;&#x2122; APIs.
137
TECHNOLOGY REPORT
OPEN BANKING
make off with the biggest share of the prize. PSD2 regulations are a method devised in Europe for the development of solutions to compete against payment services such as PayPal or Apple Pay. The regulation institutions, which realise that banks are unable to compete quickly enough, introduced the PSD2 regulations, which forced the banks into cooperation, and initiated venture support programs such as the regulative sandbox. Europe frankly believes in these startups more than it believes in the banks for financial service competition. It wants to stop the banks’ dominance in order to keep its hold over the world of finance. The banking industry in Turkey is safeguarded with intense regulations. It does not seem possible for these regulations to be made looser following the wind in Europe, while the possibility is quite likely for the medium and long term. If the banks make quick progress and startups making use of these services are established and cooperate with them in the medium term, risks will decrease in this highly volatile period. We strongly believe that the banks need to focus on models to convert the data they possess into money and on increasing the number of platforms where they acquire such data. The important take away is that the current regulations should make cooperations revenue-oriented, dynamic and flexible instead of free and mandatory.
The banks in Turkey offer most services to the customers more quickly and cost-effectively compared to the banks abroad. As a result, FinTech companies have a hard time developing products to compete with the banks in our country. For instance, Fintech companies abroad may offer wire transfer between user accounts or bill payment services using banks’ API to generate an revenue while these services and many others (tax payments, automated wire transfers, government portal login, etc.) are offered free-of-charge by the banks in Turkey. The experience in Turkey may be utilized through a FinTech startup to be founded abroad to use APIs to generate revenue. It is safe to say that becoming an organization which provides services, or rather API services, will become mandatory in the long run. Considering the habits of the new generation, just the mere fact that these services are not provided may result in a loss of customers regardless of the quality of all the other services that are provided. The current banking operation models are mostly closed systems and the banks offer their products via these interfaces. These services include current accounts, savings accounts, lending and trust instruments among others. FinTechs and “challenger bank” startups have started to move this model away from end-to-end (closed) systems and new players (such as TransferWise and Revolut) entered this niche field. A potential change in the market model, while not extensive, is also placing the customers’ needs at the heart of banking.
138
TECHNOLOGY REPORT
OPEN BANKING
6 Models to Make Money Off Data
Revenue-Oriented Interfaces
Data Growth
APIs
The bank perceives other institutions as sources of data and analyses and plans what it must do to create richer content for the bank’s customer data.
Bank as a Data Grower The bank becomes the grower of the data to be consumed by third parties. The direct sale or licensing of data creates additional revenue shortly.
Bank as a Product Developer A model where the bank may be required to pay a third party for “facilitation”. For example, it pays a third party to sell or advertise the products/services that help make a profit off the customers.
Bank
ue en ev R s t ec ice dir Serv ghts n I i tt/ ns ec uc y/I Dir rod ntr P E t rke Ma
Re P v Ma rodu enue rke ct/S tE ntr ervic e y/I nsi s gh ts
3rd Party/ FinTech
Fee/Revenue Share Solutions/Recommendations
Ma rke Pro t En du try/ In ct/ Se sigh Se rvi rvi ce ts ce s Fe e
Platforms
try En et k r nd Ma ema e Fe D ice v r Se
Insight Distributor The bank is not just a producer, but a distributor of insight where “insight” refers to the processed and Analyzed data.
Insight Distributor as a Service The bank develops a service providing platform as a facilitator or service provider in the ecosystem of third parties to define Customer Notification services. Through such platforms, banks pay directly to third persons for the consumed services.
Platform-Structure The bank develops a platform which will cooperate with third parties to renew and co-develop banking products/services which will be integrated into the consumers’ lives.
The banks will ultimately need to switch to either one of two models as their business model. The first option is to become an infrastructure/service provider which only provides banking infrastructure services effectively, cost-effectively and quickly and loses its customer channel; while the second option is to switch to a marketplace banking model and start to offer non-financial products by developing lifecycle applications. In this model, the bank may adopt an approach where it highlights not only its own services but the services that best suit the customer.
TECHNOLOGY REPORT
OPEN YAPAYBANKING ZEKA
Quote “With too little data, you won’t be able to make any conclusions that you trust. With loads of data, you will find relationships that aren’t real... Big data isn’t about bits, it’s about talent.” Douglas Merrill
Marketplace banking is becoming a data-intensive, platform-based market where various financial service providers constantly compete to provide the most cost-effective products to customers. As a result, traditional banking services are increased through a supplier ecosystem. In this model, the bank, depending on the matter at hand, may reveal itself as a service provider, as a mediator or as non-financial customer experience applications. We are assessing the necessity to take up this model.
TECHONOLOGY TREND
DATA SE CU R I TY
Personal data may be defined as private information which defines the identity of an individual. Therefore personal data, as well as the security and confidentiality thereof, has long been a topic of great importance.
â&#x20AC;&#x153;We are an idealistic and optimistic company. For the first decade, we focused on the goodness that brings people together. We now realise that we did not do a good job of it. We should have focused more on preventing the misuse of these tools to do harm.â&#x20AC;?
Mark Zuckerberg, Facebook CEO, 4/18
TECHNOLOGY REPORT
DATA SECURITY
Facebook-Cambridge Analytica data scandal was revealed in early-2018. The personal data from Facebook profiles of millions were collected without consent and used for a political agenda. This was defined as a milestone for the disclosure of personal data, causing a steep fall of the stock value of Facebook and calling tech companies to monitor the use of data more strictly.
Most online consumers protect their data when the benefits aren’t straightforward The consumes move to get a handle on the topics of data confidentiality. Deleted/Insignificant Applications
64%
Adjusted Mobile Confidentiality Settings
47%
Disabled Cookies
28%
Has not Visited/Closed Certain Websites
The private industry becomes increasingly more Dependent on confidentiality regulations, while the law enforcement and security services have less control. The police services use face recognition to identify targeted persons in real-time. They use Automatic Number Plate Recognition to monitor targeted vehicles. They also use the data from fitness trackers to determine the location and heart-beat rate of people in the event of a crime. They even used Face ID to unlock a suspect’s phone during an investigation. Billions of law enforcers, who collect data, may determine who you are, where you are, what you are up o and even what you are thinking about.
27%
Reading Confidentiality Agreements
In western countries, most people know what a credit score is. It is a score based on one’s assets, revenue and credit history. For example, banks issue an executive summary, which details how trustworthy you are and what kind of a risk you pose, when they decide whether to issue you a loan or not.
26%
Hasn’t Bought Any Products
9% 0%
25%
50%
Percentage of Participants Actions in the Last 12 Months due to Their Data Source: Kleiner Perkins 2018 Internet Trends
Digital ethics and privacy are increasing concerns for individuals, organizations and governments. An increasing number of consumers now realize that their personal data is valuable and that it needs to be under control. The organizations admit that the risks related to ensuring and managing the security of personal data have increased, while the governments adopt strict regulations to make sure that they indeed do so.
75%
The Chinese government decided to take credit scoring to a whole new level, turning into a so-called life score where everything you do is monitored. And it will become an integral part of the lives of
143
TECHNOLOGY REPORT
DATA SECURITY
Agency, it was revealed that tech giants including Microsoft, Google, Facebook, Skype and Apple were providing personal user data to the government rather than just reporting their users. People get increasingly more concerned about how both public and private organizations use their personal data, which will result in more hassle for organizations that do not tackle these concerns proactively. All discussions related to confidentiality must be focused on digital ethics at a greater scope and the confidence of our customers, their compounds and our employees.
all Chinese citizens by 2020. We hear tales of treachery about the devices that we welcome into our homes - smartphones stalk us, gaming consoles track every move we make, laptop cameras spy on us. Imagine a future where we affix these microphones, cameras and trackers onto our bodies, where we see the benefits they provide, but where we do not realise we are the subjects of highly-invasive surveillance. Let’s add in the possibility of biometric devices which establish a direct connection with our neurological and bodily systems. This may lead to entire populations being shockingly vulnerable to manipulation by forces beyond their control.
The modifications made to the data confidentiality regulation, also known as the General Data Protection Regulation (GDPR), will be brought into effect starting from this year in the European Union. While the USA is cracking down of virtual personal networks, the EU is discussing whether to allow ISPs to collect and sell subscriber data, meter access and throttled connection speeds. All these things point to a new way of bypassing traditional ISPs by utilising private and peer-to-peer networks. It is still unclear what will happen when our connected homes, vehicles and wearable
Let’s take the United States of America for example. With the scandals surrounding the PRISM program of USA’s National Security
144
Confidentiality Paradox 01 02 03
Internet Companies Low-prices services doing better than user data.
Internet Users Increased time compared to the perceived value in internet services.
Regulators They want to make sure the users’ data are not used “inappropriately”.
TECHNOLOGY REPORT
DATA SECURITY devices go online.
of the customer to share their information, while GDPR focuses on building the customer’s confidence about data confidentiality.
Country Policies Decentralization turned out to be a key theme in 2018. Some democratic governments across the world restrict access to the internet, ban certain content and effectively create tens of “splinternets” on the grounds of alleged security concerns and intellectual property violations. The regulation also involved PSD2 and open banking. By doing so, the regulators aim to open customer banking data to third parties and turn their attention towards the increasing competition and the innovations. The banks need to take this even further. They need to be more open if they want to be a successful platform. Therefore they have to cooperate to combine their strengths on the market and collaborate with FinTechs as well as other startups. Open Banking/PSD2 (second EU Payment Services Directive) allows bank customers to use third-party service providers to manage their finances. When requested by the customers, their bank allows selected third-parties access to customer data via APIs. Similar to the Privacy Act (KVKK) in Turkey, the General Data Protection Regulation (GDPR) makes data protection laws a standard and enforces new strict rules for the control and processing of data, which classify as personal, in the 28 EU countries. It may seem at the first glance that these two regulations contradict one another; however, PSD2 mostly deals with the willingness
EU/Asia/America = Increased focus on data collection + disclosure The USA
EU
1974 Confidentiality Act was brought into effect on 31/12/74.
The general data protection regulation was brought into effect on 25/5/18.
JAPAN The Law on the Protection of Personal Data was brought into effect on 30/5/17.
SOUTH KOREA The Personal Data Protection Law was passed on 30/09/11.
Data Confidentiality Laws Passed in the Last 10 Years
In Development (2018)
Many countries are in the process of developing or enforcing confidentiality regulations. This will continue to object to the evolution of confidentiality laws as well as to the interactions with organizations, customers, citizens and employees. The regulation also shapes the way judicial offices obtain information, including those in China, Russia, Germany and South Korea. Organisations need to
145
TECHNOLOGY REPORT
DATA SECURITY
consider the data residence requirements in the countries where they operate in order to devise a data residence strategy. Local data centres may be an option, but they usually come at a high cost. In most cases, the laws and logical controls in place allow secure, cross-border transfer of personal data. Cloud service providers establish data centres in countries where data centres are run by the legislation and the customers’ choices.
It removes highly valuable personal data which the institutions have been using for a decade as an effective leverage. Failure to adopt the strategy to personalise confidentiality may lead to a loss of customers, a lack of loyalty, insecurities and damages to the brand’s reputation. In some cases, where the customers feel that their privacy is at stake, regulative interventions may take place.
Commentary
Internet Companies = They Make Consumer Confidentiality Tools More Accessible (2018)
The tension between confidentiality and security will rise. In the end, we will see regulations, rules and legislations which are very restrictive and do not take into account that both science and technology is fluid. These tech giants may cause major issues for new-starters. People are rightfully concerned about how their personal data is being used.
“By 2020, we expect that the online revenue generated by companies, which are digitally secure, will be 20% higher than the online revenue generated by those which are not.” Gartner The right to data portability allows customers to easily take their personal data and business elsewhere. The companies are required to delete all data pertaining to the individual when requested.
The companies, which exploit personal data, will lose their customers’ confidence. Reliability is an important factor for revenue and profitability. It is highly difficult for an organization to give its customers confidence, while it is very easy to lose it. Only the organizations, which give their customers confidence and maintain it, will evolve. We believe that neither the budgets allocated by the companies
146
TECHNOLOGY REPORT
DATA SECURITY
for compliance nor the scope and possible costs of the regulations brought into effect by the governments are realistic.
The Internet Users in China (per GfK) are More Keen on Sharing Data for Benefits and Other Countries
We believe that this global trend will increase the rate at which data is kept locally. We believe that it will become a necessity for companies to offer cost-effective personal data protection.
Would you share your data (finances, driverâ&#x20AC;&#x2122;s records, etc.) for benefits (such as lower costs, personalisation, etc.)? 38%
China 30%
Mexico
Even the regulations on the use of cookies generated while surfing the web are expected to downsize the marketing industry. The aim of GDPR is not to combat advertisement revenue, to intervene or to protect individuals against targeted advertisement. GDPR created a step involving the content of personal data and how to approach individual profiling. The aim of GDPR was to protect the privacy of Europeans. GDPR addresses internet cookies directly and clearly. This requires any GDPR-compliant website to receive detailed consent from the related individual before using and possibly reselling personal data.
nue of five large commercial advertisement technology companies will decrease by 10%.â&#x20AC;? Gartner
28%
Italy
27%
Global
26%
Brazil USA
25%
South Korea
20%
Australia
17% 16%
England
16%
Spain France
15%
Canada
14%
Germany
12% 12%
Netherlands 8%
Japan
0
Neither the current nor any future legislation will impose a 100% ban on personalised advertisements. However, the current legislation cripples internet advertisement and the players in that field.
â&#x20AC;&#x153;By the end of 2019, the advertisement reve-
29%
Russia
10%
20%
30%
40%
Source: Kleiner Perkins 2018 Internet Trends
Individual users are particularly sensitive about their personal data being used against them by governments or regulatory authorities. Their complaints may focus on this idea; however, they are also very keen on not letting companies use their data for free. We see that users are flexible about the use of their data when they get a financial return. Consumers will no longer offer their personal data and activities for free.
147
TECHNOLOGY REPORT
DATA SECURITY
USA Consumers
79%
People seem to be posting a different kind of content even though they continue to use social media. Such effects may lead to longterm results. Social media platforms may lose their uniqueness and users over time.
Willing to share personal data for “clear personal gains”
“78.8 percent of people say that they are
> 66%
“very” or “a bit” concerned about the confi-
Willing to share online data with friends and families
dentiality of their information on social media, while 82.2 percent say that they self-cen-
Source: Deloitte (To share or not to share)
According to our projections, social media scandals and security breaches will continue in the next years ahead. It is safe to say that the demand for social media experiences will persist even after temporary falls despite this fact and their willingness to not give up data for free. We believe that as the number of incidents increases, this topic will no longer be news-worthy and the effects of the incidents on the society will lessen. Change Over Time 100% 75% 50% 25% 0
November 2017
February 2018
June 2018
October 2018
Source: Google trends Privacy
148
sor.” The Atlantic 2018 Facebook Research
TECHONOLOGY TREND
C Y B E RSE CU R ITY
It is a system of technologies which protect computer networks, computers, software programs and data against attacks, possible damages and unauthorised access.
â&#x20AC;&#x153;There are only two types of companies: the ones that have been attached and the ones that will be.â&#x20AC;?
Robert Mueller FBI Director, 2012
TECHNOLOGY REPORT
CYBERSECURITY
Total Records Stolen via Data Breaches in 2018-2023 will be 146 billion $
Cybersecurity involves various concepts from information security to operational security and the security of computer systems. What this means for individuals is feeling safe and protecting personal data and confidentiality. For organizations, cybersecurity means ensuring availability of mission-critical functions and protection of confidential data thanks to operational and data security. For governments, it means protecting citizens, institutions, critical infrastructure and state-owned computer systems against attacks and data theft.
North America Latin America Central and Eastern Europe Far East and China Indian Region Asia Pacific Africa and the Middle East
Security and Integration Concerns “Why is your firm not interested in Software as a Service?”
51%
Security concerns
40%
Challenges of integrating with other applications
34%
Lack of customization Total cost concerns (total cost of ownership)
33% 29%
Difficulties, migration or upload risks Application performance (disruptions, speed)
27% 21%
Complex pricing models
33 billion
Records stolen in 2023 through cybercrimes
18%
We are financially bound to our current vendor
I do not know
55% of All Data Breaches will Target the USA in 2023.
19%
We can’t find what we need
Other
15% 7%
(The software decision-makers from 211 organizations in North America and Europe participated in this survey.) Source: Enterprise And SMB Software Survey, North America And Europe, 2009 Q4
Source: Juniper Research
TECHNOLOGY REPORT
CYBERSECURITY
Digital businesses are event-centred, meaning they constantly perceive and adapt. The same notion is valid for the security and risk infrastructures which are focused on tricking potential unwanted visitors and anticipating security incidents.
a very common incident these days. Especially the widespread use of social media made the internet an important platform which shapes the political opinions and reactions of the citizens. The disputes among some European countries and between USA and Russia could serve as an example. As cyberwar is particularly potent on political propaganda, just the story or claims of cyber attacks are just as effective as actual
International Cyber Competition The use of cyber-attacks for propaganda and manipulation is also
Important Cyber Incidents The information on the graph is based on public information about cyber espionage and cyber war, excluding cyber crimes. The espionage campaigns that have been going on were considered to be a single case for the sums. These figures are somewhat limited as some states conceal the incidents while others fail to identify them. CHINA IRAN NORTH KOREA RUSSIA ENGLAND USA GERMANY INDIA AUSTRALIA JAPAN SOUTH KOREA UKRAINE ISRAEL FRANCE REST OF THE WORLD 175
150
125
100
75
50
25
0
0 Perpetrator
152
Victim
25
50
75
100
125
150
175
Source: CSIS (A USA Based Research Center)2018 report
TECHNOLOGY REPORT
CYBERSECURITY
attacks. It was pointed out that Russian operatives directed American social media users to their fake news sites using the fake accounts they created on social media to spread false news about the former President Barrack Obama and the presidential candidate Clinton. It was also claimed that Russia made similar attempts in England during the Brexit referendum and in France and Germany during the elections.
Commentary
10 Steps To CyberSecurity Risk Management Build Your Regimen Make your cyber risks an executive board priority Determine Your Appetite for Risks Devise supporting risk management policies
The increase in both cloud usage and IoT devices requires security to be enhanced day by day.
Network security
Digital assistants (DA) - Alexa, Siri, Cortana, Google - are now mainstream and targeted attacks are to be expected. Whether they actually target assistants or their hardware (Amazon Echo, Apple HomePod, Google Home) or not, it is clear that the next step of computer hackers is DAs and that this will be particularly focused on media companies.
User training and awareness
User privileges management
Malware prevention
Incident management
Removable media inspections
Monitoring
Secure configuration
Working at home and on the go
Many people browse the dark web, which contains secret websites typically not indexed by search engines and which offers anonymity, mainly for illegal activities. This is where people go to buy and sell drugs, weapons, ammo, security exploits (malware, ransomware) and your stolen data (passwords, credit card numbers and more) As cryptocurrencies are encrypted and virtually impos-
Source: National Cyber Security Centre
TECHNOLOGY REPORT
CYBERSECURITY
sible to track, they are used in the dark corners of the internet. You need special software such as Tor or Freenet to access the secret crime market. You’ll also need to know where you are going and to have some technical knowledge. Ever since cryptocurrencies gained popularity, we see increased activity in the dark regions. Activists, who have legitimate concerns, defend the adoption of new protection layers, while lawmakers will receive training on how to surf the dark web. The challenge with training for the sake of the government and law enforcement is that it is static. Those who access the dark regions are usually the ones that build them. We recently witnessed the spread of ransomware such as WannaCry, Petya and NotPetya. In England, WannaCry shut down the computers of 80 medical centres, requiring hospitals to redirect ambulances and 20,000 cancelled appointments. Hackers use malicious tools to effectively lock data, systems and devices until a ransom is paid. Sometimes until such ransom is paid, they don’t just hold you hostage, but they threaten you to upload everything online. As cash and wire payments are easily traceable, their preferred currency has been bitcoin, which moves on an encrypted system and is untraceable. The invention of blockchain technology and cryptocurrencies made this into a lucrative business. They launched DDoS attacks against governments, companies and banks.
Darktrace An AI company that develops cybersecurity solutions. Modelled after the human immune system, Darktrace technology is the world’s leading enterprise AI system with over 7,000 stations across the world. Protecting enterprise networks, cloud systems and virtual environments, IoT and industrial control systems, Darktrace autonomously identifies and fights against cyber threats occurring throughout the enterprise.
At A Glance Motto World Leader of Cyber Artificial Intelligence
Webpage https://www.darktrace. com/en/
Location England
Category Artificial Intelligence, Computer Vision
Year of Foundation 2013 Investment 2.6 billion dollars
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TECHONOLOGY TREND
I N FOR M ATI ON T E C H NO LO GIES O F T H E FU TURE
â&#x20AC;&#x153;Everything we will do in the future will be based on technology and if you become strong users of the technology that surrounds us, you shall benefit from it.â&#x20AC;? Justin Trudeau, Canada PM
TECHNOLOGY REPORT
INFORMATION TECHNOLOGIES OF THE FUTURE
Projections suggest that the increase in computing power will lay the path to a new transition across the world. While still +10 years away from becoming mainstream, quantum computing, neuromorphic hardware and computers promise to cross the restrictions of energy efficiency and create an unrivalled and unimaginable computing power.
“Computers are going to be a big part of our future... that future is yours to shape.” Barack Obama
Pioneers of Technological Disruption = Increaing and Cheap Computing Power + Storage Capacity $ 1,000 Computer Hardware
Storage Price and Hard Drive Capacity 10.000.000 $
1.E+10
10000 GB
1.E+09 Pentium II PC
1.000.000 $
1000 GB
1.E+07 1.E+06
100.000 $
Sun 1
100 GB
1.E+05
10.000 $
1.E+04 1.E+03
Price per GB
Computing Power Per Second
1.E+08
BINAC
1.E+02
IBM 1130
1.E+01 1.E-00 1.E-01
10 GB
1.000 $
1 GB
100 $ 10 $
0.1 GB
1.E-02 1.E-03
1$
IBM Tabulator
1.E-04 1.E-05
0.01 GB
Analytical Engine
0.1 $
1.E-06 1.E-07
1925
1950
1975
2000
0.01 $
2025
0.001 GB 1956
1987 Price per GB
157
2017 Computing Power Per Second
TECHNOLOGY REPORT
INFORMATION TECHNOLOGIES OF THE FUTURE
Artificial Intelligence Chipsets The standard CPUs on our desktop and laptop computers, tablets and mobile phones are now much stronger; however, we can’t really say that these devices were designed with machine learning in mind. Brands such as Huawei, Apple, Alphabet, IBM, NVIDIA, Intel and Qualcomm offer new systems. Their chips are AI-ready, but they still need to offer higher speed and more reliable data. Google Tensor Processing Unit (aka TPU) was developed with specifically the deep learning branch of Artificial Intelligence in mind.
Cognitive Computing Platforms with cognitive computing technology are typically based on the scientific branches between intellectuals. These platforms also cover topics such as learning, judgement, natural language processing, speech recognition and vision (object recognition), human-computer interaction, dialogues and speech generation in addition to other technologies. In short, Cognitive Computing uses natural language processing and artificial intelligence to understand us. We can say that the horizon holds cognitive systems built to assist data workers, law firms, hospitals, banks and other cognitive duties.
Natural User Interfaces Equipping information processing devices with more sensors, microphones, accelerometers and high-definition cameras opens up a completely new way of communicating with them.
This interaction changes the keyboard and the mouse through discussions that lead to touch, movement and natural user interfaces (NUIs). Made available to a myriad of platforms from mobile devices to vehicles and even living rooms, these systems provide rich data to NUI developers and become increasingly more common with their real-time net connection. The challenge with software programs that adopt NUIs is to provide increasingly smart and transparent answers. Considering the complexity of technology, this ability must be provided on the system level rather than separately for each application. Specifically, such software must integrate incoming data from multiple sensors, anticipate user input, adapt to context, understand the desired action, eliminate any doubts through dialogues and enhance the reality perceived by the users.
Quantum Computing Quantum Computing is a new kind of computing that is different from the currently available digital computers that utilise transistors. Quantum computers use quantum digits, which are not available in the binary system, and require different hardware and algorithms. Despite being a popular topic, “Quantum Supremacy” is yet to be proven right. Quantum supremacy means the hypothetical speed advantages a quantum computer would have in a certain field over a conventional computer. Both Google Alphabet (72 qubits) and IBM (50 qubits) announced that they close to achieving quantum supremacy. Microsoft hasn’t been able to create a qubit using a different
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TECHNOLOGY REPORT
INFORMATION TECHNOLOGIES OF THE FUTURE
Zapata Computing
Quote
A quantum software and services company. It develops quantum computer software and algorithms to tackle critical problems in the industry.
â&#x20AC;&#x153;We are working to develop artificial intelligence technologies using quantum computing. Quantum Artificial Intelligence will allow us to work on possibility distributions, which are typically impossible to tackle, in machine learning implementations.â&#x20AC;? Christopher Savoie Founder and CEO at Zapata Computing, Inc.
At A Glance Motto Quantum calculation algorithms Location USA Year of Foundation 2017 Investment 5.4 Million Dollars
Website zapatacomputing.com Category Quantum Computing
TECHNOLOGY REPORT
INFORMATION TECHNOLOGIES OF THE FUTURE
particle technology; however, they believe that their quantum computers will be 10,000 times more powerful than anything developed by D-Wave Systems Inc, which is the company that sells Alphabet, IBM and limited-implementation quantum computers when they achieve that goal. Despite these developments, there is still a large gap between the quantum designs in use and the algorithms to make full use of their powers. Quantum Computers will only be able to serve in limited scenarios at first. Once these problems have been solved, quantum machines will go beyond todayâ&#x20AC;&#x2122;s computers and conduct much more complex calculations in artificial intelligence, computer security, chemistry (by simulating chemical reactions) and other fields. Achieving high computing power in conventional computers is the biggest challenge of Artificial Intelligence solutions and the capacity of supercomputers still cannot compete with that of a human. Artificial Intelligence may improve dramatically once quantum supremacy is attained. The unimaginable power of quantum computing will have a major impact on big data, rendering the process of video and image analysis rather quick and cheap. Moreover, encryption technologies will become obsolete, urging banks to take new software security measures against these threats. Despite this major impact, we expect there to be an at least 10-year period before the technology concludes its research phase and comes into our lives.
Biocomputing The use of biomolecules in computers is a possible way of unravelling the limits of the current miniaturisation. Biologically produced molecules (such as DNA and proteins) are bio-computer systems, which could be used to perform, store, recover and process cognitive computing. Bio-computers are made possible by the new nanobiotechnology. Biological computing allows tiny sizes as well as quick and parallel computing, providing high accuracy and unrivalled energy efficiency. First DNA-based computer was introduced in 2002; however, the technology is still at a very early prototype stage. MIT is among the most productive research institutions in this field. IBM, Intel, Samsung, HP, Google and other companies utilize the concept of neuromorphology in order to develop energy-efficient networks inspired by biology. This concept is a rival of quantum computing and they both contain complications that could pose a threat. The current roadblocks, low accuracy, the need for new methods and compliance with other computing systems are yet to be tacked.
3D/4D Printing 3D printing (or contribution production in a wider sense) will continue its rapid growth in the following years as well. Low-cost 3D printers are the basis of the distributed network of small-scale manufacturers. Researches also use the â&#x20AC;&#x153;4D printingâ&#x20AC;? technique, which contains added manufacturing capabilities, in order to cre-
160
TECHNOLOGY REPORT
INFORMATION TECHNOLOGIES OF THE FUTURE
ate objects that change shape in reaction to heat, light, mechanical force or electrical signals. 3D printing also has great medical potential. 3D-printed prosthetics unlock a wide range for millions with disabilities who have no access to conventional prosthetics. In addition to cost-effectiveness, 3D-printed prosthetics allow fitting and functionality to be customised at a great scale. The next big step of 3D-printing in biomedical applications will possibly be printed organs as well as other biological tissue. It is highly probable for 3D printers to be made available with built-in electronic circuitry, batteries and other complex components in 20-30 years. People will be able to print tools, electronic parts, spare parts, medical devices and other devices customised to their demands and needs. It is possible for military logistics to become aerodynamic as equipment and consumables will be printed where they are to be used. Day by day, objects become information. This may lead to digital piracy replacing theft. The increasing number of low-cost 3D-printing technologies create potential threats. Terrorists and crime organizations may use raw materials, which are difficult to track on the open market, to print weapons, sensors and other equipment with the 3D-printers.
Human - Machine Convergence Also known as transhumanism, human ascendance, cyborging, hacktivism or cybernetics, human-machine convergence is a major science fiction theme.
At last, we stand at a point where the reality looks more like science fiction. It is now a great possibility for humanity and performance are in for a radical conversion on a multilateral, convergent and innovation path. AI-assisted health analyses will provide physicians with powerful new tools to develop a holistic image of the patientâ&#x20AC;&#x2122;s health. Wearable and ambient sensors will be integrated into mobile devices, giving patients and doctors an unprecedented capability to monitor health and to determine what interventions to perform before diseases even reveal themselves. The science of genetics will support the development of personalised medications which are adapted to the individualâ&#x20AC;&#x2122;s physiology, cause fewer side-effects and improve the results of treatments. We will be looking into new ways of cooperating with machines in the years to come. Brain-computer interfaces, while still mostly radicalised today, will be a step towards human-machine convergence. We use technology in our bodies through bionic hands and limbs, artificial skin and artificial retinas. Ideas, however, use intellectual and physical advancements integral to the human body and go beyond. The idea behind this is to permanently or temporarily integrate technology in order to eliminate diseases and shortcomings, improve mental and physical strengths, which is beyond what is humanly possible. Examples include increased physical strength with exoskeletons, better perception with sensors, built-in and smart technologies, brain-computer interfaces, artificial/robotic
161
TECHNOLOGY REPORT
INFORMATION TECHNOLOGIES OF THE FUTURE
“Every country needs a Minister of Future.”
body parts, skin manipulations as well as new drugs and genetic upgrades. The augmentation technologies may, in future, augment mental performance as well; however, developments on this front are vaguer than those in the physical domains due to the nature of basic neuro-cognitive research efforts. As wearable technology is miniaturised and stronger and hands-free applications are not accessible, non-invasive versions of this technology may be included in VR headset designs. Brain-computer interfaces have progressed drastically and may prove to be highly effective for human-machine communication. There are currently three methods, all of which require extensive education. > Electrodes being connected to the brain directly > Headbands which go into the skull but do not interfere with the brain The human brain is arguably the most complex organ in the entire universe, therefore brain surgery or even non-invasive neuropens may have unexpected impacts on the individual’s psychology and neurology. Biochips may identify diseases ranging from cancer to measles even before the symptoms start to show. These chips are made of a series of molecular sensors capable of Analyzing the biological elements and chemicals on the chip’s surface. While still being developed at laboratories, this technology may advance to make the external surface of the robot sensitive to the touch of skin and tissue. Exoskeletons may significantly improve the use of
Marc R. Benioff, Chairman and Chief Executive Officer, Salesforce tools, vehicle maintenance as well as duties involving heavy materials in the army. They may be used to improve the performance of infantry units and other frontline forces. The impressive therapeutic potential of genome engineering, combined with the exponentially decreasing costs of gene adjustment techniques such as CRISPR, lays the groundwork for rapid technological advancement in genetic engineering. China is at the forefront of most of these research efforts. Another possibility is that the advances made in understanding human genomes may enable “designer babies” who are designed to possess desired mental and physical capacities. Human-machine convergence will begin in works and activities such as military, emergency services and sports which are physically and mentally demanding as well as other areas such as art, creativity and deep thinking where people need to focus. This convergence will give rise to questions of ethics and we will need to decide on which upgrades to allow in the future. Should robots involve fewer questions of ethics and legalities, the scenario to be followed in the future might be to allow limited conversations.
162
TECHONOLOGY TREND
FINANCIAL TECHNOLOGIES Short for financial technology, FinTech is a wide field which makes reference to the innovative use of technology in the design and presentation of services as well as products. It is safe to say that FinTech is an umbrella term used for technologies that support innovation in financial services.
â&#x20AC;&#x153;Banking needs to work whenever you need and wherever it is required. The best recommendations and the best services in financial services are real-time and are based on customer Behaviors using Big Data, mobility and gamification.â&#x20AC;? Brett King
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
FinTechs and new startups have employed various experiences to get a big share in certain markets such as China. The products of these companies are fundamentally similar to those offered by traditional banks. However, the way they present their offers to customers is similar to the experiences offered by Apple, Amazon and other digital platforms.
FinTech startups started out from a few global technology and company hubs.
LendingClub Founded In 2006
ZOPA Founded In 2005
Customers are not happy with their banks The confidence of the USA consumers in banks 25% 20% 15%
FinTechs disrupted almost every bit of the global world of finance. Conventional banks objected when FinTech startups promised to redesign their operations. Then services such as Venmo, which is a peer-to-peer money transfer app owned by PayPal Holdings Inc., started to replace current banking products. This forced large banks to join the revolution. Many of them got together to offer Zelle, which is very similar to Venmo. Goldman Sachs Group Inc. published an app called MUCUS which currently serves 1.5 million
10% 5%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Gallup
Financial services managed to largely disregard the Silicon Valley until 2008 when the global financial crisis caused large banks and fund managers to lose their consumers. On the other hand, the Y generation welcomed FinTech startups. Starting from California, New York, Shanghai, London and Berlin, FinTech startups were soon everywhere.
165
Last investment received
14 B $ Investment
Date
June 2018
Ant Financial is an online payment services provider, which enables individuals and businesses to process online payments securely.
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
customers.
The growth of FinTechs is essentially based on four factors
right now. As FinTech startups don’t typically operate like a bank or an insurance company, they should not be expected to follow the same regulations as the more traditional players in the financial system.
> Technological evolution: The fast pace of technological developments combined with the decreasing cost of technology. > Increased customer expectations: Customers now demand digital services and experience similar to other industries. > Availability of finances and capital: The finances provided to FinTechs significantly increased in the last few years. > Support from governments and regulators: Both governments and regulators welcomed FinTechs as the evolution of financial services and proactively supported them. The topic of how FinTechs are and should be regulated is very hot
Comparison of Annual FinTech Investments fintechstartups.co 1929
2093
2127
1304
48
60
4.3M $ 17.3M $
5.0M $
22.2M $
2018-YTD
Customers have an increasing number of payment options including PayPal, e-wallets and phone-based systems.
1230
9
139
179
95
62
20.6M $
62 26.9M $
5.2M $ 6.9M $ 13.7M $
11.3M $ 3.8M $
2013 Angel & VC
2014 PE
2015 ICO
In principle, retail banks offer three main functions > They collect money deposits and provide their customers with a safe place to store cash and earn interest back by important regulations. > They facilitate payments with a series of systems such as cash, cards and wire transfers. > They lend money (loans). On the other hand, financial services may also be offered through technology-oriented “challenger” banks. From the perspective of retail banking, money could be deposited into prepaid cards, PayPal accounts, bitcoins or banks making investments through P2P lending sites. Loans could be taken out from challenger banks or alternative lenders.
1091
64
The industry-friendly regulators in the USA, England and Singapore have designed or recommended certain calls and programs to help FinTech companies develop new offerings with more enabling surveillance.
2016
# Angel & VC Rounds
2017 # PE Rounds
# ICO Rounds
While most of these options continue to use the infrastructure of
166
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
Source: CBInsights Payments & Payment Systems
Basic banking and infrastructure
Personal finances and savings
Insurance
Asset Management
Mobile Wallets & Money Transfers Mortgage Loans Legislation and Compliance Credit score and analysis
Retail investment and secondary markets
General lending platforms and marketplaces Digital Banking
Business Credit and finances
Points of sale and individual lending Real estate investments
Personnel and Vested Rights Capital markets and corporate trade
Accounting and Finances
Financial Services & Automation
167
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
the banking system, we may see payment and foreign exchange mechanisms that go beyond the established banking services. Industrial Segregation
Payments and Money Transfers
Loan and Credit
Asset Management and Brokerage
Neo-Bank
Multi’s
Regtech and Data Analysis
Large tech groups, which have used financial services for years, now take the activities in the industry further than ever. Amazon provided the merchants on its platform with payment services and loans. It also secured an electronic currency license in Ireland. Alibaba, Baidu and Tencent have become the dominating operators of China’s 5.5 trillion-dollar payments industry. China FinTechs continue to dominate the top of the FinTech list. Three out of the top five in “Leading 50” list are from China: Ant Financial ranks first, JD Finance second and Baidu fourth. As the number of users these firms serve increases at an impressive rate, they adapt their products accordingly. Earlier this year, Ant Financial provided funds to Yu’e Bao platform to increase the company’s pool of consumers. Moreover, Tencent Holdings recently invested 180 million dollars in the Brazilian FinTech Nubank.
Insurance
Neo-Banks, which are a subset of a wider category known as Challenger Banks, are digital platforms holding a banking license issued recently. They own a digital platform as the sole or dominant channel to interact with customers and query the products, user experiences or business models of conventional banks or other financial services organizations.
Brazilian Banks - Nubank Comparison Operating with a cost-effective digital structure and advanced loan modelling and
Multi’s are digital finance companies which offer an impeccable range of products and services to their most loyal customers.
judgement, Nubank offers an interest rate lower than current bank cards and offer consumers cost savings.
Source: Fintech 100 2018 Report, KPMG-H2 Startups
Amazon, Apple, Facebook, Alibaba as well as others now hold various layers of technology that provide experience and benefit. Banks need to follow the rules of the app market if they want to be a part of the ecosystem. If you are a bank that is making an agreement with an Uber driver or an Amazon small enterprise for the provision of a banking tool, you have the advantage of access and scale, but you don’t own the “customer” anymore.
168
APR: 400 + %
APR: 145 + %
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
Ant Financial
Quote
Ant Financial Services Group dedicated itself to the use of technology in order to provide the world with equal opportunities. Technologies such as blockchain, artificial intelligence, security, internet of things and computer use helped them offer low-budget services to customers other than banks.
â&#x20AC;&#x153;Eric (CEO) laid upon us a unique combination consisting of idealism, optimism and professionalism. He has big dreams but is still down to earth. He makes the most of every day, while always looking to the future.â&#x20AC;? Jack Ma
At A Glance Motto Bring small ve beautiful changes to the world. Location China Year of Foundation 2004 Investment 18.5 million dollars
Website antgroup.com Category Banking, FinTech
â&#x20AC;&#x153;2018 Fintech100 shows the increasing variety and scale of the global fintech market. While payments and lending continue to be dominant markets, asset management begins. There are 14 companies on the list and 12 companies have a strong position with insurtech. What stands out this year is that there are 10 new banks on the list with the new banks that are emerging. What this means is our belief that digital banking models will increase the speed of its growth around the world is coming true.â&#x20AC;? Ian Pollari, Global Co-Lead of KPMG Fintech
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
New Generation Banking The digital or “neo-banks” made way for the “Leading 50” with Monzo, Number26, SolarisBank and Starling Bank. The “neo-banks” in England and Europe, Revolut, Atom Bank, Nubank, N26 and Tandem received over 100 million dollars in investment in the first half of 2018. Without the constraint of old technologies, they moved faster with product innovation and customer gains. Companies engaged in financial services operate only in digital environments. “Marcus by Goldman Sachs” was founded in England with the 20 billion dollar investment it received merely 18 months following its USA launch. Challenger banks may be founded as medium or large scale enterprises that wish to compete with larger organizations. Neobanks have the tendency of becoming new and completely digital mobile tools; however, they do have things in common with challenger banks. These banks are free from the constraints of old technology, are not pinned down by the conventional infrastructure, and may break the status quo. All Challenger banks such as Starling, Monzo, Revolut, Atom and Tandem are digital banks without physical branches. They are more flexible with regards to user needs, quicker and more user-friendly and personal than conventional banks. Their major leverage is that they are brand new thanks to their digital structure and the use of the latest technology. Conventional banks typically are too slow to respond to the demands in the market and keep
“Banks charge you when you spend or transfer money abroad. We’re not about that and that is the reason why over 3 million people switched to Revolut.” Revolut Website up with technological developments. The shared characteristic of challenger banks is their capability to offer their customers lower fees thanks to their simple setup and low-cost structure. Challenger banks (and fintech start-ups in general) benefit from the perception that they look out for their customers’ interest rather than doing what is best and most profitable for them (at least not in the short run). However, these benefits that are provided to the customer makes it difficult to profit. The strategy employed by most challenger banks in England is to attain expedited growth and gain new customers while they try to figure out the business model and how profits could be increased in the long run.
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FINANCIAL TECHNOLOGIES
Challenger Banks
Headquarters
Durham, U.K
London, U.K
London, U.K
Berlin, Germany
London, U.K
London, U.K.
London, U.K.
London, U.K.
None
£4.95/month, select fees per transaction
NA
£0/month, (standard) £6.99/month (Black)
99p fees for select transactions
£0/month, (standard) £6.99/month (premium)
Pricing
No monthly/ ATM/foreign fees
No fees
Revenue (million)
FY18: £13
FY17: £1.7
FY18: £1.3
NA
NA
FY17: £12.8
FY17: £3.6
FY18: £13.2(1)
Gross Profit (million)
FY18: £(2.3)
FY17: £(1.9)
FY18: £(33.1)
NA
NA
FY17: £(6.6)
FY17: £(10.8)
FY17: £(10.4)
Net Profit (million)
FY18: £(52.8)
FY17: £(7.0)
FY18: £(30.5)
NA
NA
FY17: £(14.8)
FY17: £(10.8)
FY17: £(10.6)
UK
Europe
1 (U.K.)
Europe (17 Countries)
U.K
All of Europe
U.K. Ireland
U.K.
51k+
40k+
1.0mm+
1.0mm+
175k
2mm
NA
500k
Primary customer focus
Saver/Average Consumer
Average Consumer
Average Consumer
Average Consumer
Average Consumer
Average Consumer
Business Consumer
Fixed Saver/ Average Consumer
Banking License
✓
X
✓
✓
X
Applied in Lithuana
✓
✓
Issuing Cards
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Last Investment Series (million)
$207 March 2018
$60 Sep. 2018
$109 Oct. 2018
$160 March 2018
$4 April 2017
$250 April 2018
$70 Jan. 2016
NA
Total Investment
$468
$76
$243
$213
$6
$353
$70
$164
Post-Investment Valuation (million)
$593
NA
$1.300
NA
NA
$1.700
NA
NA
Survey Profile
View
View
View
View
View
View
Countries That are Covered Number of Customer Accounts
Source: Company websites, management projections and public information, FT Partners’ Proprietary Transaction Database, PitchBook, (1) July 2018 Run Rate
172
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
Revolut
Quote
Revolut is a digital banking alternative that enables its customers to transfer and spend money without additional fees using prepaid cards and a mobile app. The app also lets the users track their spendings and invest in cryptocurrencies and other financial products. It currently serves around 2.8 million users with 7 thousand accounts being opened daily. Revolut has a monthly transaction volume of 3 billion dollars. Last month, the company partnered up with Rakuten, a Tokyo-based e-commerce group, and announced its plans to expand into Asia through Japan.
“What we’re trying to do is establish a financial services company that is 10 times cheaper and 10 times better.”
At A Glance Motto Your digital banking alternative Location England Year of Foundation 2015 Investment 336.4 million dollars
Website revolut.com Category Payments
Nikolay Storonsky
FINANCIAL TECHNOLOGIES
TECHNOLOGY REPORT
Payment Technologies
The growth of e-commerce leads to â&#x20AC;&#x153;card-freeâ&#x20AC;? transactions to expand in response to the demand for private transaction security solution providers which play an increasingly important role in the Payments FinTech ecosystem.
The payments industry, which is one of the industries where FinTech is most active, reaches out to the end-user through a series of processes. The purchase of goods and services is based on elctronic payments. Transactions Made through Payment Channels How many of your transactions in the last 10 days went through one of the following channels? At Stores
40%
Other Offline
15%
60%=Digital
Purchase Buttons
Today, wallets such as Alipay, M-Pesa, MTN Mobile Money, Paytm and WeChat let you action instant transactions in China, India and Africa. They do not require cards or POS terminals. You also do not need to go to a bank branch to register. Venmo, PayPal, Zelle and others are their US equivalents. Most of these services allow you to connect with a debit card or a bank account, while your actions on these networks do not necessarily need to go through your bank account.
9%
Other Mobile Payments
8%
P2P Transfer
7%
Mobile Texting Apps
The payments industry also contains companies that offer loyalty, prize and online coupon solutions. This is because bonuses, miles, coupons, etc. serve as a digital currency of their own that need to be processed (sales or online) for traditional payments.
7%
Other In-App Payments
4%
QR Code
4%
Smart Home Assistants
3%
Wearable/Contactless Devices
2%
Other
1% 0%
10%
20%
30%
40%
50%
% of all responses (9/17) Source: Kleiner Perkins 2018 Internet Trends
Consumers, merchants, businesses, financial institutions and governments need special hardware, software and solutions to accept, approve and process electronic payments both online and offline.
The disruption in the payments environment gained momentum throughout the last year and multiple factors lead to a complex payment environment. These factors include open banking, new market participant ingression, new technologies and changing customer expectations. Additionally, backed by the capability to provide agile technology platforms and hassle-free user experience, BigTechs started to catch up with its stakeholders in terms of market share. Due to the current market conditions, the payments industry has not reached a point where the market is moved to a platform model just yet.
174
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
Grab
Quote
Grab is one of the most frequently used offline-online (O2O) mobile platforms in Southeastern Asia and is turning from a travelling platform into a super application offering consumers important services. Grab launched its digital payment platform GrabPay in 2016. This made ticket payments easier and expended into P2P fund transfers, commercial transactions, insurance and micro-loan services.
The digital economy of Southeastern Asia is developing rapidly and Grab is at a good position to be a partner and supporter to this conversion.â&#x20AC;?
At A Glance Motto Go cashless. Pay seamlessly.
Website grap.com
Location Singapore
Category Payments
Year of Foundation 2012 Investment 6.6 million dollars
Anthony Tan
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
Lendtech
Quote â&#x20AC;&#x153;The semantic web is everywhere has an informed and contextual structure at every step. These are the qualities that a semantic bank will have. It will prompt us for the screening activities that we need and protect us against things that will harm our health. It will be customizable, proactive, predictive, cognitive and contextual. After all, it means that the semantic bank and the web will take care of almost all bank functions -payments, control, settlement, monitoring- that we are thinking of. The basic benefits rendered by banking which is our financial advisor and an extension of our digital life, are a fact of our lives.â&#x20AC;? Chris Skinner, The Author of ValueWeb
Lending companies mostly use machine learning technologies and algorithms to assess credit facility. This includes insurance and lending platforms in addition to peer-to-peer (P2P) credit provision platforms. New leasing solutions are covered by the field of Lendtech as well. The scoring models of most banks are not suitable for certain products or segments and, more importantly, these models are primarily designed for and focus on retail/private industry. They exclude desired markets such as students and micro-, small- and medium-sized enterprises (SMEs). Moreover, most banks must integrate adaptable technologies such as machine learning into the credit scores. Nevertheless, many FinTechs have developed documentable and extensive scoring algorithms based on big data, artificial intelligence and unconventional information (such as network quality) in order to assess reliability and constantly process risk-related information.
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
SoFi
Quote
Social Finance company SoFi is an online finance company that provides credit products including student credit refinancing, mortgage and personal credits. The non-traditional approach of SoFi to finances creates a more holistic way of providing service to customers based on account rights, employment records and other important factors. Individual and corporate investors appeal to social groups and wider communities, achieving lucrative returns ratios. In June 2018, the company launched a new check account called SoFi money and a debit card for its customers.
â&#x20AC;&#x153;The growth was incredibly strong, demands were positively high and I want to make sure that we allocate resources for the next wave of growth and not just 2018.â&#x20AC;?
At A Glance Motto A finance company that can help you get ahead Location The USA Year of Foundation 2011 Investment 2 million dollars
Website sofi.com Category Fintech
Anthony Noto
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
ACORN Oaknorth Holdings
Quote
OakNorth is specialized in small and medium-sized business credits utilizing ACORN, a data and technology platform. The platform uses process perfection, machine learning and the technology to make judgements based on data throughout its lifespan and to help the automation of banking services. The company has loaned 2.2 billion dollars to businesses in England so far. ACORN machine repeats the success OakNorth had in England with banking partners in various countries.
At A Glance Motto Lending facilities for businesses. Location England Year of Foundation 2015 Investment 601 million dollars
Website oaknorth.com Category Credits
â&#x20AC;&#x153;Create an account in minutes, get a higher interest rate than banks and maintain the value of your money.â&#x20AC;? OakNorth
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
WealthTech
The (potential) users of Robo Advisors will be rich, city people.
Wealthtech is a new financial technology company which is slowly converting the investment management industry and offers digital solutions. It deals with both end-investors and the companies that serve them. It involves a series of operations and channels from business-to-customer (B2C) robo-advisors and micro-investment platforms to business-to-business (B2B) technology providers that offer software services to mediator institutions, asset managers and consultants.
USA
The demographical profile of Advisors
17%
These platforms tend to use standardized surveys to Categorize its customers under age, revenue, risk profile and revenue target. They may also provide 24/7 automated support, readjustments with tax advantages and, in some cases, access to advisors. While it is said that few matches the regulative definition of â&#x20AC;&#x153;recommen-
60% are men
42% live in high-end homes
38% live in an urban setting 83% 65% are between the ages 30-49
Wealthtech engages in the use of advanced technologies such as artificial intelligence and big data to offer an alternative to traditional asset management companies. Robo-advisors are specifically designed for retail investors looking for cheap recommendations. These platforms make recommendations more accessible and cost-effective and use technology to create scale economies which decrease account minimums as well as consultancy fees. It provides democratic access to asset management by enabling those who cannot benefit from the tried and tested, corporate-scale asset management technique of finance management, to benefit from these techniques.
Potential users of Robo potential users of Robo Advisors
No
Yes
Source: statista
dationâ&#x20AC;? and full-automation will not be possible for a while, these platforms, nevertheless, have an optional control over the investorsâ&#x20AC;&#x2122; funds. The assumption that the Y generation will be literate enough to both make investments and require human advisors is a big one. It seems more possible for the gap of skill and Behavior be filled with new automated investment tools such as Stash, Digit and Acorns, and new robo-consultancy tools. FinTech makes investment management systems available to individuals who currently do not possess a high net worth. Technology has the potential to expedite the processes around judgement, readjustment and monitoring.
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Other investment management abilities suitable for those using FinTech include asset selection, optional management and payment. On the other hand, it is a complete myth that only the Y generation or people with a low net worth will take an interest in robo-advisors. Robo’s first targeted the Y generation in 2008, but a lot has changed since then. Today, financial companies meet the demand among individuals with high net value and the X generation. Wealthtech won’t stop at robo-advisors. Micro-investment is another exciting field shaping the way retail investors record and plan the future. These platforms increase traditional investment applications and the frequency of investments and significantly decrease the contribution minimums, disrupting the traditional approach to savings. This helps customers save a fortune when they spend money. Micro-investment platforms offer a subscription model rather than transaction and management fees to make it into a sustainable business. One such platform, Stash enables its users to start investing for only 5 US Dollars. We may also mention Acorns, an investment app that lets its users buy and automatically adjust debt and credit cards. Both companies are USA-based. Thanks to the great interest in cryptocurrencies and other digital assets, digital mediation became another category of wealthtech that is strongly growing and taking the market share of conventional players.
In this category, platforms such as social investment, eToro stand out as a successful model, enabling beginner investors to follow the transactions of more seasoned traders. Other reputable digital Mediators are USA-based Interactive Brokers and Motif Investing.
The focal groups of asset management. Robo-advisors Online platforms and apps which provide fully automated, algorithm-focused investment and automated consultancy solutions to retail customers.
Digital mediation Alternative mediation platforms for retail investors and software solutions.
Investor tools and networks Research platforms and social networks which provide access to a network of experts, financial content created by the user and algorithmic technology for optional analytics in order to make investment decisions easier.
Portfolio management The bank is not just a producer, but a distributor of insight where “insight” refers to the processed and analyzed data.
Investment platforms Platforms that enable customers to invest in a wide variety of products. Professional assistance by adding conventional advisors and technology to the investment platform for a multilateral experience.
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
JD Finance
Quote
Company Description: JD Finance started operations in October 2013 as an independent company. It was positioned as a digital technology company that served financial institutions. JD Finance is dedicated to providing all digital, online and offline scenarios at three main points: data, user and connection. AI, cloud computing, blockchain and IoT. The purpose in doing so is to increase the efficiency of financial institutions, lower costs and expand scenarios, gain customers, increase the profits from fundamental departments such as operations, risk control and R&D, and to provide a driving force to move the industry towards the digital environment at a large scale.
“We would never ever harm our users, even if doing so would mean quick money, that’s the bottom line.”
At A Glance Motto Creating a Better Future with Technology Location China Year of Foundation 2013 Investment 4.9 million dollars
Website jr.jd.com Category Fintech
Shengqiang Chen
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
InsurTech
In 2017, the number of these so-called InsurTech startups skyrocketed to over 1,000.
InsurTech is the technology that created, distributed and manages insurance. Smartphone apps, wearable devices, claim processing tools, online policy management and automatic transactions... They are all insurtech. Insurtech is practical for collecting and Analyzing customer data to offer a better service. Insurtech will force the insurance industry to standardize customer services and offers. The challenge lies with ensuring that insurtech is appealing to consumers. This means offering personalised products rather than one, standard product. Consumers also want their insurance products to be delivered via their mobiles. Adapting current service offers to a changing market and using technology for disruptive startups are two different things. The connection in-between is the consumer who will mix and match these two things to chose from established players and their competition. Insurance companies are investing in startups to help them boost change and see it as an opportunity instead of a threat. The insurance industry had been doing its routine job for decades. In 2010, a technology company was founded in the vertical market, offering innovative and technology-based services to current risk-carriers, mediators and customers.
These start-ups may be divided into three groups 1. Startups developing customer experience 2. Startups enabling established providers 3. Startups starting out as risk-takers The disruption in insurance is going strong with 12 insurtech companies being listed among the top FinTechs this year. The conversion technology and the consumersâ&#x20AC;&#x2122; changing way of life lead to usage-based, optional and peer-to-peer (P2P) models which shape the way insurance is used and consumed. InsurTechs such as Lemonade and Metromile use automation, data analyses, connected devices and machine learning to develop holistic policies which can be opened and closed when desired, for consumers. Most developing countries canâ&#x20AC;&#x2122;t really say that technology is the most prominent feature of an old industry such as insurance. However, China may claim so with InsurTech. How did China turn into a quickly growing and dynamic InsurTech market? This is due to the combination of quickly developing factors in China for InsurTech. Examples may include growing online penetration, increased number of e-commerce platforms, increased impact of social media, cell phone market, over 50 million smartphone users in China, the rise of the middle class, mass urbanization, deregulation of the insurance industry and Chinese consumers representing a rather young generation.
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FINANCIAL TECHNOLOGIES
Trov Trov offers online, on-demand, single-product insurance. The company offers coverage for a wide range of products including cameras, watches, laptop computers and sports/music equipment. The coverage is intended for the entire world and the services may be turned on and off at any time using their mobile app. The app allows users to monitor their invoices and the current value of their belongings. Trov cooperates with partners to market various innovative insurance products which utilize its own special technology platform.
At A Glance Motto On-demand insurance for the things you love Location China Year of Foundation 2012 Investment 98.8 million dollars
Website trov.com Category Insurtech
TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
ZhongAn
Quote
ZhongAn is an online real estate insurance company specialized in the use of data to automate insurance and claim processes, design and personalized products, and to develop sensitive marketing campaigns as well as risk management strategies. It is a joint startup by Alibaba, Group Holding, Tencent Holdings and Ping An Insurance, and the first company to secure an insurance license in China. It appeals to a wide target market in all groups of economics.
â&#x20AC;&#x153;Our goal is to attain customer loyalty through better customer experiences.â&#x20AC;?
At A Glance Motto Private Insurance
Website zhongan.com
Location China
Category Insurtech
Year of Foundation 2013 Investment 842.7 million dollars
Chen Jin
TECHNOLOGY REPORT
FINANCIAL FINTECH -TECHNOLOGIES GENEL
RegTech Also known as “RegTech”, regulatory technology is a new field where information technologies are utilized to develop regulatory processes for the financial services industry. This field focuses on regulatory surveillance, reporting and compliance, and benefits from the finance industry.
“We see that, globally, it is standardising regulators and having them operate on a shared plane, as well as, creating a push towards innovation like a swinging pendulum.”
The purpose of RegTech is to boost not only transparency but also consistency, standardise regulatory processes, offer solid interpretations for vague regulations, offering higher quality with a much lower cost. RegTech has focused on Digitalizing manual reporting and compliance processes. We can take anticipating customer requirements for an example. It significantly lowers costs for the industry and regulators of financial services. However, an academic article from 2016 suggests that the potential of RegTech “helped achieve regulatory compliance more effectively, while it also possesses a potential that is close to a real-time and proportionate regulatory regime that identifies and tackles risks”.
Arif Ismail, Head FinTech Program, South Africa Reserve Bank Projections had shown that social media and biometrics would be used to change how “new approaches” to “facilitate AML controls” (which would let companies stand apart) and the customer situations were determined, how anti-fraud measures were taken, and how banks were filtered. Determination of situations utilising data that can be tailored to the risk-based approach of a company paved the way to the revolution that is RegTech. RegTech utilises Artificial Intelligence and machine learning to non-compliant and outdated compliance processes.
The expect the disruption in RegTech to contribute to organizing data gains of high proportions and the use of real-time data as well as the integration of algorithms and analytics. London stepped out as the capital of RegTech with a series of global RegTechs popping out. FCA has also recently pointed out the fields where RegTech could make a big difference.
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TECHNOLOGY REPORT
FINANCIAL TECHNOLOGIES
Nod
Quote
Nod is a natural language processing artificial intelligence platform which helps financial consultancy and accounting businesses convert how they help their customers. Software platforms help customers connect with their advisors wherever they are and issue documents that will help financial advisors and accountants offer their customers advice with maximum efficiency. Nod also developed an innovative advisor technology which also includes an AI engine that issues an automated situation determination process and compliant advice notification documents.
â&#x20AC;&#x153;We hope that we can decrease the costs and time associated with giving great advice and enable independent consulting firms to offer great advice to more customers.â&#x20AC;?
At A Glance Motto On-demand financial advice from an expert Location Australia Year of Foundation 2015 Investment 1.5 million dollars
Website nod.money Category Artificial intelligence
Joel Robbie
TECHONOLOGY TREND
AUTOM ATI ON T E C H NO LO GI ES
It is a package of advanced technologies which enable machines to comprehend, understand, move and learn.
â&#x20AC;&#x153;Any company, which puts large-scale effort into general studies where people carry out high-volume and high operational process functions, will boost its skills and save both money and time through robotic process automation software.â&#x20AC;?
The Institute for Robotic Process Automation
TECHNOLOGY REPORT
AUTOMATION TECHNOLOGIES
Software Automation Technologies Software Automation Technologies, especially in enterprise software systems, are specialised software which enables tasks that are repetitive, do not require any judgement, and are based on rules to be carried out through interaction with real humans
Smart Workflow Management Systems
rather than by them. The word robot in it is actually an analogy for the factory robots that assist humans. As these platforms require little to no coding,
Smart Process Automation Platforms
Machine
Low Code
Work Processes
Platforms
Management
Robotic Desktop
NEW AUTOMATION TOOLS
Learning
Automation
Workflow
Natural
Automation Software
Language Processing
Image
Processing Automation Level
Low
Medium
Robotics
Automation-Enabled
Rules
Process Automation
Enterprise Platforms
Engines
High
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AUTOMATION TECHNOLOGIES
they could be used not only by software developers but also business units and analysts.
“RPA is a new development which offers 30200% potential investment payback in the first year and offers promise with regards to business automation.”
Robotic Process Automation (RPA) Robotic Process Automation (RPA) is a software program that is based on rules and is easily programmable. It promises to eliminate repeating and easily automated tasks. RPAs are fully scripted. BT systems don’t require updates when modified. RPA is perceived as the next step towards a type of automation that does not
What is Robotic Process Automation?
McKinsey & Company, ”The next acronym you need to know about: RPA (robotic process automation)”
What isn’t Robotic Process Automation?
01
Configurations that automate manual and repeatable tasks
01
Humanoid robots
02
Algorithms solving certain problems
02
Something that could change humans completely
03
Software “robots” that sticks to and access current work software
03
Something that boosts the cognitive functions in humans
04
Workflow effective interaction
04
Just another cost game
Source: PWC
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AUTOMATION TECHNOLOGIES
ve widespread automation. RPA is a powerful tool that solves automation problems unsolvable merely with programmatic techniques and that does not require any modifications to be made to the current processes.
require machine learning. Smart organizations may connect machine learning to automate complex tasks and create. Robotic process automation (RPA) is one of the many tools and techniques that may be used by technical professionals to achie-
Most RPAs today are used for text analysis, computer vision, text query or optical character recognition. As RPA will soon be developed into smarter versions it will become critical for analyses. As we are moving toward an automated world, processes take longer and seem more complex than expected. Therefore RPAs may be a quick solution for processes that do not require complex algorithms.
They take on tasks that are carried out by employees 50-60 times a day
Periodic reporting, data entry and data analysis
RPA automation is utilised in scenarios where human interaction is required. It facilitates the creation of automated workflows; however, it does not democratise a naturally technical system. Technical experts must grasp the talents and restrictions of RPA.
Generating, archiving and exporting mass e-mails
RPA is practical in primitive scenarios; however, more robust automation almost always requires the direct manipulation of automation workflow modules. Success with RPA depends on correctly selecting which processes to automate rather than having the right technology.
Conversion data formats and graphs
ERP activities
Low Code Platforms Low code development platform (LCDP) is a software program that replaces traditional computer programming to provide a software development environment for software application in-
Process lists and file storage
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AUTOMATION TECHNOLOGIES
Benefits of RPA 01
Robotic automation tools run 24/7, roughly 3-5 FTE.
02
A software robot may make up for 30% and 20% of FTE costs at offshore and onshore respectively.
03
Increased productivity and accuracy, shorter cycle time and lesser need for continuous education
04
It examines human intervention and decreases human error.
05
Estimated savings of 25-50%.
06
Data and processes to be stored internally.
07
Increased scalability and flexibility in work processes.
Source: SAP, Uipath
terfaces and configurations. The platform may be focused on the design and development of databases, work processes or user interfaces such as web apps or other specific apps. These platforms can produce fully operational apps or may require additional coding in certain cases. Low code development platforms decrease the amount of conventional coding and enable expedited distribution of business applications. Their common benefit is that wider masses can contribute to the development of an application. Digital works mean different things for different AD&D leaders. However, they agree that quick and repeated delivery of a software program the customer faces help digital delays. Presenting new disruptive products, reaching out and responding to customers from different channels and accelerating current drivers by turning them into competitive leaders is the key. This focus on “digital speed” urge AD&D leaders to employ new approaches and platforms that will enable them to deliver new apps in days and weeks instead of months. This change also forces AD&D leaders to empower their coding in languages such as Java and C#/.net with new development platforms that underline notification and visual improvement. In 2014, Forrester started to monitor a rapidly growing category of software which we dub “low code platforms”. Low code platforms enable quick delivery of business app with minimum manual coding and minimum preliminary investment. Low code
TECHNOLOGY REPORT
AUTOMATION TECHNOLOGIES
Companies Prioritise Low Code Development Platform Startups Prioritising digital business goals as appraisers get accustomed to low code development platforms
DIGITAL CONVERSION
30% Critical Priority
46%
DIGITAL PROCESS AUTOMATION
32%
47%
High Priority
DIGITAL CUSTOMER PARTICIPATION
27%
45% Source: The Appian/Forrester survey
development platforms marketplace contains various vendors that offer application creation, distribution and management platforms through notification tools that support visual drag and drop composition.
Business Process Management (BPM) BPM is an effective way of monitoring and controlling the processes within an organization. It is an effective method as it will yield a better and lower-cost organization in order to make sure processes are efficient and effective at times of crisis. When cost savings used to drive BPM, the new target was digital conversion. As organizations move toward a customer-oriented
business model, all business functions need to be Digitalized. This means that AD&D professionals need to establish fundamental systems and processes also known as the â&#x20AC;&#x153;back-officeâ&#x20AC;? in order to generate data in moments rather than days to respond to insights and customer requirements. It will take time for BPM to focus on lowering costs and customer experience and to switch to digital conversion. The underlying factors behind these startups change as the journey goes on. Software is what makes a customer-oriented organization stand out. Quick, simple, elegant and with good taste, great; these are some of the possible reactions to the perfect customer experience. However, the fundamental processes of most companies and
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AUTOMATION TECHNOLOGIES
Keeping it simple
Security
(operations)
Data
Standardisation
(Business Processes)
Consistency (improving the process)
(operational)
Quality
Cooperation
Exposure
BUSINESS MODEL COMPLIANCE
CUSTOMER-ORIENTED
(information & business operations)
2014
01
02
03
Lowering the costs
Customer experience
Digital conversion
Led by BPM team
Business unit/Led by BPM team
Led by the business unit/Developed by the business unit
Work unit participation
First to design customer quality experience
Utilizes low code experience models
Employee quality experience
Cross channel
Early adopted disruptive effects such as artificial intelligence
Methodical/strict
Experimental/innovative
Designed to keep up with quick business modifications
2016
2018
194
Source: Forrester
TECHNOLOGY REPORT
AUTOMATION TECHNOLOGIES
Which technologies will have the biggest impact on finance? The relative effects of each technology at a typical business in terms of its finances
the BPM projects thus far have not been met with such reactions. Once manual transactions are Digitalized, they offer a starting point for your organization to expand and build upon.
Commentary Automation Technologies enable significant profits through efficiency gains in the short run. Robotic Automation is effectively used in industries such as finance and insurance where repeated operations are conducted through computers. Automation technologies are not to be adapted in the future. They should rather be actioned and invested in now.
Short Term Today
RPA Basic artificial intelligence Blockchain
Automation technologies may lead to serious reactions on employee-side as they increase traceability and automation and generate FTE revenue. The correct management of human resources also plays a critical role in the success of projects.
Medium Term 2-3 years RPA Basic to medium level artificial intelligence Blockchain
Uzun Dönem 3-5 yıl
Automation significantly accelerates systems and decreases errors. However, it does not necessarily eliminate the need for humans completely. Use of RPA should focus on matters of higher added value such as fewer occurrences of errors, increased efficiency and uninterrupted service provision instead of savings.
RPA Basic, medium and advanced levels of artificial intelligence Blockchain Source: PWC
One of the biggest advantages of robotic automation is that it can work with highly advanced technologies such as artificial intelligence and machine learning. As today’s narrow artificial intelligence is specialised in almost-standardised and repetitive load-intensive tasks, RPA stands out as a series of tasks which are
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AUTOMATION TECHNOLOGIES
FRONT-END Front-End
The user sees it
Of the total effort 20%
High value
Low repeated API
BACK-END
Back-End
The user does not see it
Of the total effort 80%
Low value
High repeated
highly compatible with AI support/implementation. Thanks to such compatibility, a significant increase has been observed in efficiency. Creation of joint work settings with RPA needs to be included in the strategy at some point when investing in Artificial Intelligence. Low coding platforms enable products with much higher efficiency and effectiveness compared to conventional methods when software programs requiring more intense functionalities and business logic are concerned. They enable us to focus on technical details rather than business details, better comply with standards
Source: Laserfiche
and have better protection against errors and to do all these on multi-platforms. Low code platforms may need to be supported with specific software for customer experience when the interface relies heavily on it.Process Management applications focus on the management and efficiency of current processes. The use of artificial intelligence for determining the workload distribution, manage the actions and tasks involved in the process and predicting optimal transactions will significantly boost the increase of efficiency.
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What makes process management applications different and more efficient than standard applications is that they coordinate systems and employees as part of the same process. It may be automatically processed at various systems following an action being taken by an employee. The system needs individuals to do their part when human interaction is required and has them per-
form controls and tasks which systems cannot perform. Performance will be much smoother when these tasks are performed by artificial intelligence tools in time. For instance, processes performed by humans such as fraud control, credit scoring, pricing and approval in credit procedures may be entrusted to artificial intelligence processes in time.
Fundamental Differences between RPA and BPM Software Technology Software bots are configured to carry out the routine and monotonous tasks which would typically need to be performed by an employee.
Holistic Technology
Technology
Manual Tasks Minimizing manual, repeated and rule-based tasks that do not involve complex judgements.
End-to-End Process Automation
Automation Focus
Low It operates amidst current processes and applications of an organization without any disruption and requiring coding or extensive training.
The process of re-engineering focuses on removing roadblocks, interconnecting systems, and increasing productivity throughout the organization. High
Distribution Efforts
Quick and Instantaneous Returns may be quick and instantaneous; however, applications may not always be able to tackle process inefficiencies.
Business analytics involve various software technology components in order to optimize business processes for a workflow infrastructure as well as maximum value and efficiency.
It is a long-term effort which may require specific technical resources depending on process complexity and depth integrations. Important and Transformist
Work Impact
197
Overall efficiency, agility, cost savings, efficiency and compliance may generate vast revenue.
TECHNOLOGY REPORT
APPE NDI X
APPENDIX
ECO SYSTE M R E PORT
TECHNOLOGY REPORT
ECOSYSTEM REPORT
FinTech Scores Lower score the better New York
14 46
Frankfurt Chicago
San Francisco
18
20
111
Shanghai Tel Aviv
70
Amsterdam
Singapore London
119
11
11
45
200
Sidney
TECHNOLOGY REPORT
ECOSYSTEM REPORT
London
City GDP
542 Billion $
England
Global Average: 267 Billion $
London, a fintech hub that is an established and global leader as home to the largest financial services industry in the world, is backed by the government’s flexible regulations. The “Fin” of New York, the “Tech” of the USA and the policymakers of Washington are 15 minutes away from one another on public transportation in London.
Investments VC Investments
Fintech Investments
59 Billion $ Artificial Intelligence 2.323 Million $
12,936 Billion $ Blockchain 447 Million $
Strengths Global Innovation Ranking
3
Global Financial Centre Ranking
1
Difficulty to do business
7
Fintech Score
11
FinTech Blockchain AdTech
Challenges Expensive office spaces Expensive living Expensive workforce
Cybersecurity 1.978 Million $
TECHNOLOGY REPORT
ECOSYSTEM REPORT
Singapore
City GDP
264 Billion $
Singapore
Global Average: 267 Billion $
Singapore is a leading international finance center. Thanks to the support of flexible regulations and the bold policies of the government, Singapore has a strong global competitive edge in FinTech.
Investments VC Investments
FinTech Investments
25 Billion $ Artificial Intelligence 252 Million $
2,573 Billion $ Blockchain 968 Million $
Cybersecurity 11 Million $
Strengths Global Innovation Ranking
6
Global Financial Centre Ranking
3
Difficulty to do business
2
Fintech Score
11
Fintech Digital Media Big data and analysis
Challenges Regulator vagueness Risk avoidance culture Underdeveloped start-up ecosystem
TECHNOLOGY REPORT
ECOSYSTEM REPORT
New York
City GDP
1,559 Billion $
USA
Global Average: 267 Billion $
With its high number of active investors and Wall Street institutions, New York is a global center and has a perfect technological position.
Investments VC Investments
Fintech Investments
144 Billion $ Artificial Intelligence 2.723 Million $
16,562 Billion $ Blockchain 424 Million $
Cybersecurity 747 Million $
Strengths Global Innovation Ranking
4
Global Financial Centre Ranking
2
Difficulty to do business
8
Fintech Score
14
Advanced production and robots Cybersecurity Health and life sciences
Challenges Expensive office spaces Expensive living Limited corporate sales opportunities
TECHNOLOGY REPORT
ECOSYSTEM REPORT
San Francisco
City GDP
867 Billion $
USA
Global Average: 267 Billion $
The Silicon Valley, the capital of innovation, is an already-established global FinTech center that is aiming for the FinTech industry. However, it possesses a large investment and technology ecosystem that is of a different culture.
Investments VC Investments
Fintech Investments
226 Billion $ Artificial Intelligence 10.946 Million $
8,917 Billion $ Blockchain 1.517 Million $
Cybersecurity 6.879 Million $
Strengths Global Innovation Ranking
4
Global Financial Centre Ranking
6
Difficulty to do business
8
Fintech Score
18
Transportation Game Environmentally-friendly technologies
Challenges Expensive office space Expensive living Expensive qualified personnel
TECHNOLOGY REPORT
ECOSYSTEM REPORT
Chicago
City GDP
612 Billion $
The USA
Global Average: 267 Billion $
Despite its low variety, it is a good fintech ecosystem with over 20,000 financial institutions and two out of the five best business universities in the USA.
Investments VC Investments
20 Billion $ Artificial Intelligence 428 Million $
Fintech Investments
4,893 Billion $ Blockchain 37 Million $
Cybersecurity 12 Million $
Strengths Global Innovation Ranking
4
Global Financial Centre Ranking
8
Difficulty to do business
8
Fintech Score
20
Fintech Artificial intelligence, big data and analysis AdTech
Challenges Risk avoiding culture Low level of information exchange Insufficient scale capital
TECHNOLOGY REPORT
ECOSYSTEM REPORT
Sidney
City GDP
349 Billion $
Australia
Global Average: 267 Billion $
Australia is a good fintech center which has good capital management and pension industry and holds the lionâ&#x20AC;&#x2122;s share to the customer base in the region. Numerous banks based in Southern Asia establish their headquarters in Sydney.
Investments VC Investments
Fintech Investments
6 Billion $ Artificial Intelligence 38 Million $
1,873 Billion $ Blockchain 83 Million $
Cybersecurity 6 Million $
Strengths Global Innovation Ranking
19
Global Financial Centre Ranking
11
Difficulty to do business
15
Fintech Score
45
Fintech Adtech Artificial intelligence, big data and analysis
Challenges Expensive living Small market size Limited corporate sales opportunities
TECHNOLOGY REPORT
ECOSYSTEM REPORT
Frankfurt
City GDP
156 Billion $
Germany
Global Average: 267 Billion $
It is a special fintech centre with over 300 banks in the city. It is backed by the regulatory support of the governments with its limited ecosystem and investment options.
Investments VC Investments
0,442 Billion $ Artificial Intelligence 115 Million $
Fintech Investments
0,128 Billion $
Blok Zincir 14 Million $
Siber GĂźvenlik -
Strengths Global Innovation Ranking
10
Global Financial Centre Ranking
19
Difficulty to do business
17
Fintech Score
46
Fintech Artificial intelligence, big data and analysis Cyber Security
Challenges Limited number of foreign VCs Limited international awareness Risk avoiding culture
TECHNOLOGY REPORT
ECOSYSTEM REPORT
Amsterdam
City GDP
321 Billion $
Netherlands
Global Average: 267 Billion $
Amsterdam, which stands out as a rising technology hub and is a fintech centre, possesses a limited market despite its strong talent pool.
Investments VC Investments
Fintech Investments
3 Billion $ Artificial Intelligence 75 Million $
0,452 Billion $ Blockchain 25 Million $
Cybersecurity 39 Million $
Strengths Global Innovation Ranking
9
Global Financial Centre Ranking
33
Difficulty to do business
28
Fintech Score
70
Fintech Cybersecurity Agtech and new food
Challenges Limited governmental support Small market size Limited corporate sales opportunities
TECHNOLOGY REPORT
ECOSYSTEM REPORT
Tel Aviv
City GDP
153 Billion $
Israel
Global Average: 267 Billion $
Tel Aviv is a leading technology center that is particularly specialized in cybersecurity and can be seen as a fintech center in development. While the ecosystem is small and the variety is limited, Israel favors high stakes with its bold startups and good investment support.
Investments VC Investments
Fintech Investments
6 Billion $ Artificial Intelligence 701 Million $
0,579 Billion $ Blockchain 259 Million $
Cybersecurity 401 Million $
Strengths Global Innovation Ranking
21
Global Financial Centre Ranking
38
Difficulty to do business
52
Fintech Score
111
Automotive CyberSecurity AdTech
Challenges Small market size Isolated market Government-focused cybersecurity technologies
TECHNOLOGY REPORT
ECOSYSTEM REPORT
Shanghai
City GDP
179 Billion $
China
Global Average: 267 Billion $
The largest FinTech market and the leading FinTech centre in the world, Chine has an ecosystem that is safeguarded by a determined government as seen by the total amount of investment, total addressable market and digital usage.
Investments VC Investments
Fintech Investments
64 Billion $ Artificial Intelligence 1.961 Million $
6,107 Billion $ Blockchain 64 Million $
Strengths Global Innovation Ranking
25
Global Financial Centre Ranking
16
Difficulty to do business
78
Fintech Score
119
Fintech Game
Challenges Regulator unpredictability Lack of skills â&#x20AC;&#x201C; technology Expensive living
Cybersecurity 24 Million $
TECHNOLOGY REPORT
ECOSYSTEM REPORT
Istanbul
City GDP
320 Billion $
Turkey
Global Average: 267 Billion $
Istanbul advantaged location, its close proximity to leading markets such as London and Dubai, its vision to become a regional financial centre in the next decade and its strong banking system are its advantages. With regulatory and technological support, Istanbul is an ecosystem that promises to become a global FinTech centre.
Investments VC Investments
0,761 Billion $ Artificial Intelligence 5 Million $
Fintech Investments
0,022 Billion $
Blockchain -
Cybersecurity -
Strengths Global Innovation Ranking
42
Global Financial Centre Ranking
57
Difficulty to do business
69
Fintech Score
168
FinTech Digital media AdTech
Challenges Regulatory roadblocks Difficulty to access capital Limited corporate sales opportunities
TECHNOLOGY REPORT
ECOSYSTEM REPORT
The countries with the most artificial intelligence patents in 2017
The countries with the most blockchain patents in 2017
China
China
USA
USA
England
England
Australia
Australia Russia Ref: Startup Genome 2018
Unicorn Technology Industrial Distribution Enterprise Software
15%
Hardware
50%
31%
45%
USA
0%
212
Fintech
63%
China
Europe
Consumer
20%
40%
60%
80%
100%
TECHNOLOGY REPORT
ECOSYSTEM REPORT
213
TECHNOLOGY REPORT
ECOSYSTEM REPORT
USA Easiness to do business
Establishing a company
6
49
Easiness to do business
Establishing a company
7
14 Germany
England Easiness to do business
Establishing a company
20
113 China
Turkey Easiness to do business
Establishing a company
60
80
214
Easiness to do business
Establishing a company
78
93
APPENDIX
SUG GESTIONS FOR TURKEY OF THE FUTURE
“Fate is in love with effort.”
İbni Arabi
TECHNOLOGY REPORT
SUGGESTIONS FOR TURKEY OF THE FUTURE
The information in this section is based on the knowledge that we surveyed and the report we issued for the Specialisation Commission in 2018. The Specialisation Commission Report on Financial Services Development is issued to provide an executive summary of the financial services industry in our country, to identify the issues to be prioritised and to propose recommendations with regards to these topics taking into account the international developments under the scope of the efforts for Eleventh Development Plan for the period 2019-2023 and the project Istanbul International Financial Centre (IFM). This section references our recommendations under articles 8 and 10 in the aforementioned report. Article-8 is on how FinTechs change the way the finance industry operates, while Article-10 is on how the Finance Industry offers a robust technological infrastructure for those who supply-demand products and services.
the rapid increase in the number of mobile device users, high Digitalization ratio and the younger population structure in Turkey.
FinTech funding in Europe increased by 120% in 2017. GLobal VC-backed fintech funding share in 2013-2017 (Million $)
4.127$
1.210$ -%10 YoY
5.794$
6.438$
1.262$ 1.065$ 801$ 377$ 2.583$
5.570$
8.281$
5.891$
7.837$
2013
2014
2015
2016
2017
North America
Target: Turkey Becoming a Global FinTech Centre Turkey is a global FinTech centre candidate thanks to its geopolitical location, its young and educated population and its successes in the spheres of banking and banking technologies. FinTechs rose to the spotlight when customers lost their faith in banks following the global crisis of 2008. In an environment of damaged faith, users have taken to care more for concepts such as user experience and mobile usage easiness. Turkey offers a safer banking environment thanks to the regulations enforced following the crisis of 2001. Nevertheless, FinTechs are expected to rise to the spotlight with
2.676$
+%121 YoY
1.765$
Asia
Europe
Africa
Australia
South America
”Developing a FinTech Ecosystem in Turkey” published by Melike Belli on BKM is one of the most comprehensive studies in this field. Working in a field physically is still a fundamental method of communication in today’s world. Due to its geopolitical position, Turkey is a bridge both between geographies and cultures. With its young population, Turkey is ahead of Europe and among the world leaders in terms of the demand for digital banking. The plans to educate the young population on the technological focus
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The strategic position of Istanbul
Do you use mobile banking? Percentage of those answering “Yes” and “No, but I hope to do so in the next 12 months”. Correspondents consist exclusively of people who own only one mobile device.
Helsinki 3.5 Hours Moscow 3 Hours London 4 Hours
Berlin 3 Hours
European Consumer Romania
Barcelona 3.5 Hours Istanbul Rome 2.5 Hours
Czechia Luxemburg
Cairo 2 Hours
Belgium Mumbai 6 Hours
Source: Istanbul development agency
increase in numbers day by day.
53% 25%
33% 39%
16%
41% 12% 43%
The intense demand for Digitalization and the inter-bank competition in Turkey is only one of the roadblocks in the way of offering this technology to the outside world. We believe that incentives for the sale of technology in the international market will increase the pace.
218
16%
Germany
47%
Australia
48%
14%
France
49%
14%
Italy
50%
England
With its young population, Turkey is a leader in the use of digital technologies in Europe and the Middle East. Customers prefer digital channels where they can take care of their transactions themselves to physical branches.
19%
47%
28%
54%
Poland
16%
57%
Netherlands
61% 10%
Spain
61%
Turkey
65%
Australia
54% 11%
USA
People Who Use Mobile Banking
22%
20% 20%
63% 10%
People Who are Considering to Use Mobile Banking
Source: ING International (2015)
TECHNOLOGY REPORT
SUGGESTIONS FOR TURKEY OF THE FUTURE
As FinTechs involve fundamentally technology-oriented startups operating in the finance industry, they require a robust technological infrastructure. One of the main reasons why FinTechs in Turkey cannot improve is that banks abstain from collaborations to eliminate any possible competition and work with their in-house teams on developments in fear of losing intellectual ownership of ideas to other organizations. Turkish banks are the pioneers of digital banking in Europe. Many financial technological improvements in Europe were first introduced in Turkey. > Turkish banks are leaps and bounds ahead of European banks with regards to the number of functionalities offered by and the usage ratio of Mobile Banking and Internet Banking. From investment transactions to bill payments, many services are handled digitally. > In Europe, contactless cards were first used in Turkey. > Turkish banks offer improved loyalty programs, campaign infrastructures and credit card instalment options. > They allow customers to handle many transactions from wire transfers to loans through digital channels online without having to actually go to a branch. > Developed by İş Bankası, Parakod is among the first uses of QR-Code payment infrastructures in Europe. > The ATMs commissioned by İş Bankası in 1982 revolutionised banking in Europe.
> İThe transition to biometric technology at ATMs, which was implemented by İş Bankası, is a first in Europe. > In Europe, Mobile Banking sign-in through iris recognition was first developed in Turkey. Turkey has been unable to prioritise opening up to international markets due to the intense internal demand and the inter-bank competition. With the increased integration capabilities thanks to FinTechs, the pace may be increased, demands supplied and the market may be opened up to the outside world. The regulations to be introduced for the pioneering structure in banking to provide returns for technology companies and the FinTech ecosystem must be balanced with quick development. The fundamental issues with the FinTech industry seem to be regulations, volatility of customer choices, adaptation to new tech-
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Main Challenges of the FinTech Industry
43%
Regulations Companies are reluctant to adopt new technologies Changing customer Behavior Access to funding
24% 18% 15%
Source: BI Intelligence
TECHNOLOGY REPORT
SUGGESTIONS FOR TURKEY OF THE FUTURE
nologies and access to investment. Our young and digitally-capable population enables us to see beforehand and adapt quickly to global needs.
cash-free society. Mobile payment service Swish, card-based mobile payments iZettle and real-time payment system BiR play an important role in the Swiss payments industry.
England prepared a Tech City project that would rival San Francisco in the field of FinTechs. This project has lead England to quickly increase its FinTech share in the world. Turkey has what it needs to position itself strongly in this field in the region.
Moreover, Swiss banks have long been collaborating to build shared inter-bank infrastructure and services. This collaboration
Evolution of the Regulatory Environment in Select Countries
England has pioneered banking and payments ever since FPS was launched in 2008. The regulators, Competition and Markets Authority Open Banking and Financial Conduct Authority (FCA) operate rather actively through their many startups including new rules on credit cards.
Swiss banks are open to innovation. The country became a champion of cashless transactions as it implemented its vision of a
Demand-Pull
Some of the reactive countries such as Brazil and Thailand have conservative regulators which do not introduce proactive startups or have introduced very few startups and have un-willing institutions. Proactive countries such as Singapore, Australia, England and Sweden, however, have proactive regulators which are ready to adopt regulatory startups as well as willing and demanding institutions. China is an intriguing case. Should the industry adopt the supply-driven pressure coming from the government it will fall out of sync from the industry just like India. It is safe to say that countries are in an ideal position when the regulators are proactive and the market participants are ready to welcome KRIIs.
Sweden The USA
Australia
Singapore England
France Thailand
China
India
Brazil
Supply-Push
Source: Capgemini Financial Services Analysis, 2018.
helped Sweden achieve the correct balance between the supply-driven push and the demand-driven pull. On the other hand, while the French banks and industry as a whole are ready for KRII, conservative regulators manage startups in a consolidated manner.
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APAC witnesses many disagreements in regulatory activities Australia’s modernisation projects and approach to open banking show that it can catch up with England in no time. Digital payments (including decreased use of cash and contactless cards), virtual bank licenses, FinTech development programs and open banking activities are the product of countless start-ups in these respective fields. In China, it seems that unless industrial associations or the government force the startups, Alipay, WeChat and other non-government and nonfinancial companies will enter and take over the market. In the Latin American market, Brazil relies heavily on its regulators to guide the innovations in the market with regards to technology and business processes. As the Brazilian Central Bank continues with its efforts on and backs extensive money policies and international standardisation together with its partner regulators, it faced a dilemma of efficiency and effectiveness management. While the competitive mobile payment market in Brazil is highly competitive, regulators are trying to introduce new technology to the old infrastructure which is the reason why the industry has such low demand. Granting flexibility to the startups and banks in Istanbul with regards to the regulations will systematically accelerate new enterprises.
financial technologies under state surveillance with limited users and limited periods of time will accelerate both new startups and banks, enabling the development and trial of products which may generate added value revenue abroad. In England, new technology such as fingerprint banking and blockchain money transfer may be tested out under state surveillance as part of the program “Regulatory Sandbox”. We believe that establishing a Technology Hub in Istanbul, as a Finance Centre, will yield great results. An Istanbul Finance and Technology Headquarters which would gather universities, FinTechs, banks, investors, and institutions offering incubation and acceleration programs at one place constitutes the backbone of our proposed strategy. The Tech City in England could be taken as a model for it. The “World Retail Banking” report by Capgemini and Efma suggests that 91% of the banks and 75% of FinTechs will cooperate with others. Tech City London has an infrastructure which offers physical office space and seminar space, brings ecosystem stakeholders together and provides state-backed consultation services. Universities, the private industry and the public facilities may be gathered at a center to support startups.
Establishing legal regulations allowing quick trials of innovative
221
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Hosting international financial technology events will make Turkey a centre of attention and turn it into a centre of attraction. Its dominant position in the Middle-East, Europe and Asia, as well as its touristic structure, make Turkey a hub candidate. Hosting international events such as Finovate and Money20/20 and supporting these events through local organizations will help us build global relations. Finovate held its first even in the Middle-East in Dubai. It is very important in terms of how we are perceived that we take our place among central countries such as New York, Las Vegas and Singapore. We believe that enabling citizenship services such as e-Identity and e-Residency, and processes such as establishing a company to be handled fully digitally will make Turkey a center of attraction for startups. We see that Estonia has become a hub of start-ups as it employed this model, offered tax benefits and allowed quick and affordable citizenship. We believe that a similar model could be considered for Turkey. Offering FinTechs flexibility with regards to company organization and bureaucracy will enable on-the-record and quick startup startups. Offering FinTechs startup assistance at Istanbul Technology Centre, free set-up and consultation services, alleviating the bu-
reaucracy to attract entrepreneurs will help us achieve a strong position in the region. These supports and state-controlled regulations to be provided in the limited region will be flexible to gain speed. Expanding the Inosuit program carried out by the Turkish Exporters Assembly (TIM) in collaboration with universities and offering startups bureaucratic consultancy and facilities with help from private industry mentors and public backers will turn us into a center of attraction. Introducing financial advantages and tax advantages for FinTechs is a topic deeply cared about by investment companies. Providing FinTechs with incentives and investment supports, presenting these to international investment companies and investment capital managers, providing tax advantages at the beginning and during the development phase are of critical importance for startups. England offers tax deferral and discount advantages called EIS and SEIS and provides startups free consultation of these advantages. International partnerships must be backed to provide foreign capital flow to FinTechs. We deem state-backed steps to attract foreign capital from especially the Middle-East to Istanbul Technology and Financial Centre and to provide startups with an initial capital to be of critical importance for the center to be successful. The most important and shared quality of centers such as New York, San Francisco, London and Singapore is that the investment environment is suitable for
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SUGGESTIONS FOR TURKEY OF THE FUTURE
who do not. As per the Privacy Act (KVKK) and BDDK regulations, banks cannot utilise cloud technologies in their primary or secondary systems.
The cloud creates a measurable impact on the business world.
20.66%
Average improvement in the market
16.18%
Decreased average operational costs
19.63%
Increased average company growth
15.07%
Decreased average CT expenditure
20.66%
Increased average process efficiency
16.76%
Decreased average CT maintenance cost
The reasoning behind this prohibition is that no major cloud producer has invested in our country due to high costs. The use of foreign cloud systems constitutes a risk with regards to data security and audits. Source: Vanson Bourne “The Business Impact of the Cloud”
İş Bankası commissioned cloud services aimed for ten premises with the Pacific datacenter. This is an important step toward the
startups. We believe that if a state-audited international cloud provider were to be incentivised to providing services and collaborating in Turkey, the digital transformation would accelerate. Cloud systems are designed to efficiently, quickly and effectively meet the technological requirements of all companies, particularly banks. The use of the cloud offers such great advantages in terms of speed and costs that startups utilizing cloud technologies gain a significant competitive edge in the market over those
use of the cloud and efficiency. Moreover, a more global cloud system offering international technological competencies is also needed. One of the most funda-
223
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The Strategy of FinTechs and Banks for the Future, 2017 The Strategy of FinTechs for the Future, 2017 Collaboration with banks
The Strategy of Banks for the Future, 2017
75,3%
91,3%
Acquisition by banks Competing with oneâ&#x20AC;&#x2122;s self Merger or acquisition with a FinTech
18,5%
Collaboration with FinTechs
4,3%
Acquiring FinTechs
4,3%
Competing with FinTechs Collaboration with other banks on technology
6,2%
Source: World Retail Banking Report 2017
mental infrastructure needs of Turkey is an international cloud service which will be authorized to perform audits and controls when necessary and serve organizations established in the country. We believe that handling banking transactions via standardised interfaces open to everyone will boost digital transformation through the mutual interaction of technology companies. Our projections show that both banks and FinTechs will establish close relations in the near future. We believe that collaborations will yield the advantage of efficiency for banks and flexibility for customers.
Due to their current architecture, banks keep customer data on their own systems. Customers must use the channels of their banks for information such as account balance and transactions such as wire transfers and loans. API structures that would allow banks to exchange data based on a common standard will allow FinTechs to achieve much faster and cost-effective integrations with multiple banks. Such flexibility will enable customers to switch between banks and even FinTechs faster. Amending the regulations to expedite and facilitate the creation of such APIs by the banks will accelerate the provision of API support. FinTechs will gain speed with the PSD2 standards which will eventually be introduced in Europe. Building upon this standard and supporting it in Turkey will enable us to develop international
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TECHNOLOGY REPORT
SUGGESTIONS FOR TURKEY OF THE FUTURE
communication security, efficiency and strategic technological advantage. It is vital for all research and development activities on artificial intelligence are backed. We believe that incentivising cybersecurity and biometric authentication systems is of both critical importance in terms of both
The use of artificial intelligence around the world is increasing rapidly. Many countries now see artificial intelligence as a strategic technology.
Cybersecurity spending in the USA, the percentage of GDP and US Dollars (billion) 2009-2017
During a speech broadcaster on TV on 1 September 2017, Vladimir Putin said: â&#x20AC;&#x153;Whoever takes the global leadership on artificial intelligence will rule the world.â&#x20AC;? China increased the pace of its artificial intelligence efforts and aims to be the global leader in artificial intelligence by 2030. In 2014, it replaced the USA as the leader in academic publications.
70
0.4
60
0.35 0.3
Billion $
50
0.25
40
0.2 30
GDP percentage
products and gain international customers in the field of FinTech. We believe that it is not too late to focus on Artificial Intelligence and Turkish Natural Language Understanding technologies and that creating domestic technologies with the help of incentives will prove to be both strategically and economically beneficial.
A branch of artificial intelligence technology is Natural Language Understanding technologies. Chatbots, mobile voice-activated assistants, any robot capable of speaking, smart household appliances and speech-based household devices that will soon enter our homes, and vehicle voice command systems, which will go under the spotlight as autonomous vehicles become popular, all require this technology. The use of voice-activated assistants around the world is increasing rapidly. Both Google and Amazon base their fundamental strategies on voice-activated assistants.
strategy and security.
Developing artificial intelligence techniques specialized in the Turkish language is of critical importance for national wealth,
All technological developments and the high-value transactions arising therefrom bring cybersecurity to a very fundamental point.
0.15
20
0.1
10 0
0.05 2009
2010
2011
2012 Finalised
2013
2014
2015
2016
2017
0
%GDP
Source: TIAâ&#x20AC;&#x2122;s 2010-2017 ICT Market Review and Forecast
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TECHNOLOGY REPORT
SUGGESTIONS FOR TURKEY OF THE FUTURE
Backing cybersecurity tools and R&D efforts in this field is a strategic matter for our country to advance in these technologies. The budget allocated to Cybersecurity in the USA increases year by year. Authorizing the use of biometric authentication systems and backing the efforts in having these systems used in security will enhance our countryâ&#x20AC;&#x2122;s knowledge in this subject. We believe that supporting the decentralization technologies to eliminate mediators will contribute to the countryâ&#x20AC;&#x2122;s digital transformation and efficiency. Blockchain technology enables accurate records without the need for central registry organizations or data providers. If such an infrastructure were to be used, the government would only need to audit how companies used the technology and public services could be offered electronically and without the need for public infrastructure. This will boost the efficiency of both the public industry and the private industry that utilizes those services. For instance; if title deeds were kept on a blockchain, any firm that is authorized by the government would be able to process title deeds while the government or the government-approved institutions would only act as the validator. This would allow title deed transactions to be handled more quickly. Many banking transactions require similar public validation systems.
homes and firms. We believe that the communication technologies post 4.5G will be the highlight of the next 10 years and that the countries to develop 4.5G-specific solutions will gain significant benefits, post 4.5G technologies mean a holistic technology to create new business models and not just increased speed, and that the government has an important role in supporting these technologies with a guiding hand. We believe that the rapid spread of the use of digital technologies among SMEs, as well as announcing supporting and incentivising programs, will contribute to the digital transformation of Turkey. Today, business, which make effective use of information technologies, get a competitive edge. We believe that Turkey has a solid background with regards to SMEs and that pushing this background forward with technological supports will yield returns for the entire country. Therefore, we believe that the scope and effects of incentives must be increased.
Effective, reliable and accessible broadband communication networks and services must be made a common practice and new generation infrastructures must be developed to include all
226
APPENDIX
COLL ABORATION MODELS OF THE FUTURE
â&#x20AC;&#x153;Getting together is a start, staying together is progress, and working together is a success.â&#x20AC;?
Henry Ford
TECHNOLOGY REPORT
COLLABORATION MODELS OF THE FUTURE
01
07
Application Programming Interfaces/Sandbox
Startup/Startup Product Purchase
02
08
Internal Hackathon/Innovation Contests
In-House Entrepreneur/Startup Laboratory
03
09
Open Innovation
Joint Startup
04
10
Startup Acceleration Programs
Capital Investment in Startups
05
11
Startup Product Integration
Startup Acquisition
06
12
Startup Product Partnership
Hybrid Models 229
TECHNOLOGY REPORT
COLLABORATION MODELS OF THE FUTURE
Collaboration Models of the Future
Application Programming Interfaces/Sandbox
If we consider innovation to be the use of new market-leading technologies in order to make the lives of consumers and the operations of businesses more efficient, cost-effective and safe, the best method will be partnership models.
Contract-Based API Banking APIs (application program interface) help third parties develop new products and services to drastically improve customer experience. This ensures a closer collaboration between conventional financial institutions and FinTechs, making APIs the most sought-out feature from banks by FinTechs.
By their nature, partnerships can and should help create scale economies which many small firms cannot effectively create on their own, but could contribute greatly alongside other businesses. From a global standpoint, international partnerships and communication may help businesses decrease their R&D costs. In terms of costs and time, R&D is a vital component of innovation and increased output. Therefore, the size of the global network could be increased through improved data transfer, provision of the best applications with the widest coverage, and partnerships. Around the world and especially in Europe, the risk and revenue distribution in bank-FinTech collaborations continue to improve, because the current profit to risk ratio is not favoured upon by the banks, which must be addressed for long-term sustainability. While banks cover the largest portion of the risk in any collaboration, the profits are shared equally by banks and FinTechs.
Financial institutions create APIs following traditional methods due to security concerns. Therefore they prefer to clearly specify who can use the API and how through mutual business agreements and mutual security infrastructures. Commentary > As the work is kept under control, banks may take measures to limit the loss of the channel to the customer. > Both the scope of the collaboration and the provision of the technical infrastructure is costly and complex and takes a long time. > FinTechs which start out small but grow quickly may take too long to be noticed and partnerships may be lost to other firms. > As efforts usually involve one or, sometimes, a limited number of FinTechs, the success of these FinTechs has no impact on the outcome. > As the basic purpose of APIs is gaining speed and multiple quick collaborations, this structure wonâ&#x20AC;&#x2122;t yield the entire desired effect.
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> The growth of the FinTech may provide indirect benefits and should the FinTech integrate with other institutions in the future, these indirect benefits may be lost to other organizations, resulting in a loss of profits. Open API/SandBox With this model, companies provide FinTechs with limited access to a part of their infrastructure and services through public APIs and virtual development environments or Anonymized customer data samples. For the company, this means an approach that is somewhat closed to innovation, through which FinTechs may produce and test out new products and services without affecting the company. Open APIs are becoming ever more common in financial services, especially in Europe. Indeed, when the EU introduces the Revised Payment Services Directive (PSD2) in 2018, third persons will be allowed to manage financials of banking customers who will not be required to quit their current banks. The model of an API or a virtual environment doesnâ&#x20AC;&#x2122;t typically involve a commercial agreement about how a product is to be used or who owns it. Commentary > It possible for some APIs to be free-of-charge and for others to be charged for. > As services such as ATM Lists and Branch Lists will increase flows to banks, they could be free and public. > Some APIs may be subject to approval and charges. They may be implemented digitally with fixed packages to quickly form com-
mercial and technical business unions. > Open APIs will allow for the customer channel to be shared with startups. > Opening the first API and having it used in many places may increase banking profits. > In an environment where all banks open their APIs, the channel will be shared with the enterprises. It will cost the banks, which are currently in a leading position, efficiency and profits in competition-oriented pricing. > In an environment where all banks open up their APIs, not opening an API of the same flexibility may lead to serious market and profit losses. > Considering the game theory, APIs will eventually become common practice. > The matters of data security and regulations need to be carefully monitored.
Internal Hackathon/Innovation Contests Hackathons are limited-time development events where organizations present a business or technology problem and invite FinTechs to find a solution for it, typically with a team specifically put together for the project. Having gained popularity recently, hackathons focus on quick innovation and prototyping in order to test out early concepts rather than to produce an attractive product. Idea contests are typically carried out digitally and over a period of time. In idea contests, ideas are taken further with mutual assessment and in-house mentor support in a digital environment. The
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primary objective of such efforts is to launch a product, while the expectation should not be so. The current duties of the in-house employees, their inability to move freely and whether they possess all qualifications required to see the job through should not be too much of a concern. Commentary > Due to their time limitation, hackathons typically yield good results for the identification of software, technology, presentation and marketing qualifications. > Idea contests are highly effective for the enhancement of qualifications such as creating, assessing, enhancing and field-testing innovative ideas. > In events, which are inward, the team may not be equipped with the necessary qualifications to both come up with and implement ideas. > Typically great success is expected from these events which are very productive for improving the perspective of people with different focuses, which leads to the disappointment of both the participants and the managers.
Open Innovation In this model, all or a part of the team comes from outside the company. Both hackathons and idea contests could be held in this context. The institution provides participating teams with access to internal expertise and resources. Questions may be asked on intellectual property rights and solutions are devised during these events. Institutions must determine how to utilise their in-
tellectual properties as part of the hackathon. FinTechs or resident developers must eventually make sure that they hold the rights to the products or services that are developed. Commentary > Hackathons and idea contests that are open to the outside world are effective to attract talent from outside the company to inside. > Being open to the outside world allows various ideas, including those from outside the industry, to be developed. > As individuals with the sole purpose of being an entrepreneur may also participate in such events, the probability of getting results is higher. However, as participants are not yet entrepreneurs, the probability of success is low.
Startup Acceleration Programs This model usually directs many FinTechs to the institutions when support is required for a product or service they are developing. The institution selects a small subset of the applicants to determine and benefit from the most promising innovations. The shortlisted FinTechs may access expertise, support and a customer base. Two fundamental models are employed. The first model yields no investment or shares, while the second model yields shares from the enterprise proportionate to the benefits provided. Corporate Acceleration programs are typically based on equality
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agreements rather than simple business unions, with the institutions getting a share from the FinTechs they select. This means that FinTechs should be made open and comfortable about the number of the shares they offer and their conditions. As shareholders expect a higher level of control and commercial partners, administrative rights and exclusivity, legal agreements will need to be executed in early stages to prevent FinTechs and institutions from operating under other commercial models. All parties must be made aware of the rights of the other party under such regulations and must be notified beforehand when necessary. Commentary > It is a good model to increase the interaction with and experience the entrepreneurship ecosystem. It gives startups the opportunity to obtain detailed information about the work models. > Startups solely hold the intellectual property rights. The effects of the benefits provided to enterprises on the network require more attention than the effects on the company. > Matters such as exclusivity are important in partnerships. > The cost in this model is low as no direct investment in enterprises or employees is concerned. However, the low costs yield low returns.
Startup Product Integration With this model, the product or the service is completed and ready to be launched into the market. The institution will choose a prod-
uct developed by a FinTech company to test limited sections of the customer base as a white-label or shared brand product. Should the test succeed, the institution will then determine at which scale to use the product, which enables the institution to test out new propositions and products not wasting any of its capital or development time. This is a commercial model where each party share risks and growth opportunities equally. Moreover, the main areas of focus could be intellectual property rights and exclusivity. As FinTechs wonâ&#x20AC;&#x2122;t be able to sell the product to other companies should they sign an agreement for the use of their products with an institution, negotiations will need to be held beforehand. The concern of exclusivity may affect the institution as well. It will need to determine whether to be bound to a single provider and whether to take the relevant operational risks relying on a single product. Like most such models, the legal ownership and control of intellectual property call for discussions as well. Commentary > Such efforts, which are based on API usage, are subject to a profit distribution model. As the product needs to be set up inhouse to be utilized, API-based efforts may prove to be insufficient. > With such understandings, the institution receives all of the profits and pricing is typically based on a licensing fee or Service fee model. > As the startup is not focused on profits, the main focus may be something other than how much profit the product will net the
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company. > The institution should assume the risk for all profits or failure to gain any. > As this model doesnâ&#x20AC;&#x2122;t typically involve exclusivity, the competencies the product gains throughout the process may offer advantages to other companies as well, resulting in an inability to profit from these advantages. > Solutions requiring high amounts of data and screen integrations may lead to integrations taking long and costing much due to the regulations and the features which the startup may rapidly provide externally in a cloud environment not being provided with the desired quality, speed and costs.
Startup Product Partnership With this model, the companies may partner with startups for a specific product based on a dealership or joint development scheme. They may utilize a mediator technology company or a mediator firm to that end. The sales, development and marketing costs of the new product are covered equally. This model may be followed in cases where an already needed product has the potential to become a global player to solve an important need in the market. The product may be developed through joint efforts starting from the initial development phase. Commentary > As products involving technical details (credit scoring, fraud detection, etc.) are also used with this method, it may be possible to generate profits beyond the benefits provided by the product.
> As ownership of the product will be shared between the parties, the product may gain effective features through joint efforts. > When the partnership only concerns product(s), the focus of the startup may be shifted towards other products. Investments, sales and profit distribution must be specified clearly and in a way that both parties will keep their eye on the target.
Startup/Startup Product Acquisition With this model, the product and usually the startup itself is acquired rather than integrating and partnering on an already developed product. In such arrangements, it is usually arranged so that employees are available at the company for a certain period of time. It may be utilized in cases where the institution acquiring the startup contributes to it greatly and the need for the startup to expand the business is low. Commentary > It is particularly effective to gain technological competency or to access a certain customer portfolio. > If the employees of the startup are needed for the success of the business, this model will prove to be difficult for success. > As the entrepreneurial spirit will fade when how the application will be scaled is not determined for sure, the probability of success is very low. > Switching from an entrepreneurial spirit to a corporate process may field positive results particularly for scalable efforts.
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In-House Entrepreneur/Startup Laboratory With this model, while entrepreneurs are chosen internally, the main objective is to recruit individuals with high entrepreneurship characters into the company on a contract or for the long run. The entrepreneur works within the company as an entrepreneur independent from other departments and is provided with facilities such as innovation, R&D, sales, legal and accounting, available within the company. The entrepreneur may work on a product or under the business model it prefers, or the entrepreneur may focus on the business models or products developed within the company. Even though the in-house entrepreneur is the one to come up with the idea, company departments and senior management must greenlight the idea to move forward. With this model, the work of the in-house entrepreneur is optional, and should the work be successful, spin-offs may be devised on condition that the work is maintained successfully. Commentary > This model is one of the most effective ways of corporate innovation. The institution oversees the copyrights and the distribution of profits. > It enables projects to be developed in line with the companyâ&#x20AC;&#x2122;s strategy and competencies. > These profiles may prove to be difficult to find as entrepreneurs whose main source of motivation is success, who have a lower risk perception than external entrepreneurs, who care so deeply about the corporate advantages provided to the entrepreneur that they can waive their right to the profits to be generated
in the end, and who have strong communication skills, are hard to come by. > Trying out a large number of ideas with this model may lead to fewer trials compared to the VC (Startup Capital) model due to control mechanisms and processes. > Startup resources and collaborations are easily accessible thanks to corporate processes. However, the processes may very well slow down progress at any time. > Quick progress is possible when neither the in-house entrepreneur and the institution are not concerned regarding the sharing of profits when devising projects
Joint Startup With this model, an institution launches its own startup to address a niche in the market rather than recruiting or acquiring one. This company shares common ground with the main business channels and could be a separate brand. It establishes it together with a FinTech or a Startup Builder, which may grand institutions special skills and investments backed by shared equity. The main legal concern for the joint startup is concerned with ownership and control of the new company. The questions of who owns the new products and whether the agreement is exclusive must be cleared at the very beginning. It is also of critical importance for stakeholders to agree on the value to be offered to technical expertise in exchange for financial investments.
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Commentary > Specifically, when the collaboration with the startup is made clear, it is an effective method to form a complete partnership. > This method could be followed when doing business not only with startups but also with large-scale companies. > It is an effective method of collaboration to organize a structure that has more freedom in terms of marketing, branding, legal and regulatory responsibilities and financial management. > It may call for an extremely costly process. Partnership ratios and the exit strategy must be made clear.
Capital Investment in Startups
Commentary > Large amounts of investments are provided to one or more startups at certain ratios. The risks will decrease as the amount and number of investments increase. > It is an effective method when a lot of investment is to be made. > Share ratios and output strategies will need to be studied and managed meticulously. > The process may be slower for focused acquisitions with a clear strategy and a target startup. Offering flexibility may not be possible with the agreement.
Startup Acquisition
This one of the most straightforward models. An institution acquires minority shares in one or more FinTechs to get insider access to innovations when they surface. As a simple investment, most of the legalities herein are standard practice for most large businesses. The institution needs to appraise the risk profile of the investment and the value of the FinTech. In this context, exclusivity only means whether the service-in-development will be offered to the investing institution exclusively or not. As a very high amount of investment is required, a jointly-managed startup capital fund could be established to distribute the risk among many startups.
Acquiring a significant portion of a startupâ&#x20AC;&#x2122;s shares without merging it into its body. This model is among the most complicated models in terms of practicality and legal procedures. Institutions acquire certain FinTechs to provide access to innovations or expedite strategic transitions through acquisition deals. Commercially, though, the key item is appraisal. Both the institution and the FinTech need to agree on a value. When an institution acquires a FinTech, which owns a ready-product, it will have vague growth expectations. Under these circumstances, appraisal could be carried out with payments being made when certain milestones (generating profits) are crossed. This could also incentivise the selling of the owners in order to the FinTech in a good situation
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or to continue to grow the business.
matters to address and tackle. In time some hybrids could be standardised and easily copied and reproduced by other companies.
Commentary > It is particularly suitable for startups which are already established and possible future competitors or for entering a new market. > The legal and financial details are complicated. > The exit strategy needs to be understood clearly.
Hybrid models are observed more often in group companies than others. While a group company provides the startup with a payment infrastructure, another group company could provide technological assistance. Funds could be secured from another institution. This would increase the profitability for everyone.
Case Analysis: ATOM In 2015, BBVA acquired some of the shares to Atom, the first mobile bank to be licensed by the Prudential Regulation Authority. By doing so, it underlined the fact that the English market had great potential for growth and that digital banks would be the first to attract the customer. BBVAâ&#x20AC;&#x2122;s first investment of 45 billion pounds secured 29.5% of the shares of Atom. BBVA gave a signal of confidence with a 32.4 million pound increase in early 2017.
As the FinTech market evolves and advances from the disruptive phase in the beginning into a more mature and diverse market, new models should be expected. Making the business practices and the legal structures of a company open to future innovations and flexible could help provide a competitive edge when the growth is high.
The investment enabled BBVA to be a part of the first digital platform on the market while working with Atom to offer customers new technologies, products and services.
There are certain legal matters to consider before starting on a project or new partnerships. The legal matters for Institutions and FinTechs to consider (and maybe seek expert advice) prior to a new partnership are outlined in this section.
Hybrid Models
Other Concerns
Intellectual property
It is possible for institutions and FinTechs to agree to an agreement which could be a hybrid of the aforementioned models. This could provide higher flexibility and enable the partnership to offer a wider range of benefits. This could naturally lead to more complexity unlike this approach and to a higher number of legal
Intellectual property is one of the major concerns FinTechs have. When it comes to working with much larger corporations, having a clear understanding of and clearly specify how the two businesses will collaborate is very important due to legalities.
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> What intellectual property is currently available? > Who owns the intellectual property? > What are the conditions at which each party may use the current intellectual property rights? > Who will own the new ideas that emerge as a result of the collaboration? > How can intellectual property be merged when necessary?
Compliance Institutions are subject to industry-specific regulations that are constantly reviewed and updated. On the other hands, there isn’t any “FinTech regulating environment”. There are certain regulations instead. These depend on the activities carried out by any given FinTech. In response to the growth of the FinTech industry, certain changes such as special regulations for loans, certain modifications such as crowdfunding and certain amendments were introduced with the possibility of further changes. FinTechs usually operate at the edge of the financial services industry. Therefore, products may be subjected to legal reviews before they are introduced to the market. However, FinTechs and their institutional partners may have a complex understanding of the regulations. They must ensure that legal requirements applicable to FinTechs are taken into consideration. It is important for the FinTech to understand the possible concerns of the institution and the institution must be clear about what it requires from the FinTech and address the regulatory concerns early into their
relationship. In the context of Mergers and Acquisition, the joint startup regulations may need to be adjusted in line with the rules regarding regulatory approvals and/or notifications or the use of external resources. Despite being a slow process, it is integral to offering the FinTechs products to the market.
Data Protection and Privacy Data processing is a fundamental function for many FinTechs (and institutions). The Privacy Act (KVKK) which was announced in 2016 and BDDK’s regulations for banks are among the main items of consideration for collaborating with startups. In conclusion, FinTech-institution partnerships must carefully look into matters related to data protection. Cybersecurity protocols will need to be introduced when personal and private data is altered between the Institutions and FinTechs. This will not only protect data while it is in transit but it will also clearly define how data is to be accessed, used, processed and protected throughout its lifecycle. Institutions and FinTechs will need to consider what are the possible data breaches, how a business will contribute to the identification and reporting of breaches, and obligations relevant to disruptions in data confidentiality and security controls.
Exclusivity FinTechs are independent businesses which are not a part of any
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given project and which have or develop their own products.
Exit Mechanism
The question of whether the FinTech will work on a single project with the institution or on multiple projects simultaneously must be cleared early into the collaboration. Both parties need to determine whether the resulting product may be sold to other institutions whether the FinTech may work on independent projects with other institutions (during or after the collaboration).
They must agree on an exit process for the conclusion of the project. The exit mechanism shall be organized based on agreements.
Growth and Risks New products and new businesses are inherently risky; however, should the project be successful, it has the potential to bring additional profits and capital. Institutions and FinTechs need to determine how each party will benefit from increased value and who will assume the responsibilities of risk exposure.
Costs and Control The development process of new products must be planned beforehand. Both the institution and the FinTech, as well as those responsible for funding the research and development efforts throughout the project, must agree on a number of matters. Both companies must agree on who will run day-to-day operations and the broader strategic aspects of the project. They must determine whether the FinTech will operate independently or under the control of the institution, whether the institution requires oversight, and whether the parties will have access to private property details.
> New and current intellectual property rights > Ownership of joint assets > Responsibilities of the parties for compliance While they are merely a starting point for legal and commercial discussion, clearing and having an understanding of these fundamental matters at the beginning of the collaboration will enable a successful relationship to be established between the companies on the long run and a smoother exit whenever it may be. While institutions do have their legal departments, it is important to see that not all FinTechs will be involved in an agreement with legal representation. Due to the inherently complicated nature of collaboration agreements, we recommend FinTechs to seek suitable legal precedents in the initial stage of the discussions.
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APPENDIX
WORK FORCE M O DELS OF T H E F U T URE
â&#x20AC;&#x153;One of the outcomes of technology is that it destroys professions, not businesses.â&#x20AC;?
The 1960s, US President Lyndon Johnson
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The technological advancements lead by artificial intelligence are changing how the workforce is used. “By 2034, 47% of the jobs in the US will be
The world is going through a big change under the leadership of artificial intelligence. However, instead of redefining current occupations and job categories, technological disruptions such as robotics and machine learning replace certain tasks instead of becoming a part of them, which will lead employees to focus on new tasks and new and rapidly-changing skillsets to emerge in these professions.
1920
replaced by robots and other computer systems. As a result of the robots, 58% of the CEOs intend to decrease the number of personnel within the next 5 years.” PwC, “Pulse on robotics”
1960
2000
1940
1980
242
2020
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Similar transformations were observed throughout in history, such as when transitioning from an agricultural society to an industrial society and from there to an information society. What will happen during the next transition?
Distribution of the workforce by industry 1840-2010 90 80
Even today, we are witnessing the signs that we are at the beginning of the transition of our information society to a post-information society. As information is now accessible to everyone and the speed of this access is rather high, the real wisdom is how one uses it to make judgements to solve today’s problems. Well, how does making judgements come in to play with Artificial Intelligence?
70 60 50 40 30 20 10
Shortening the Time Jump Before Mass Adoption of New Technologies
The Web
Long
Short
Compact Disk
B&W Television
26
Computer
Color Television 1926
An invention for the general public
1873 1876 Telephone Electricity
1900 1910 1920 1930
1951 1940 1950 1960
Agriculture
12
Industry
2000 2010
Services
Source: 1840–1900: Robert E. Gallman and Thomas J. Weiss. “The Service Industries in the Nineteenth Century.” In Production and Productivity in the Service Industries, ed. Victor R.
13
Fuchs, 287-352. New York: Columbia University Press (for NBER), 1969.
16
1900–1940: John W. Kendrick, Productivity Trends in the United States. Princeton: Prince-
18
ton University Press (for NBER), 1961.
1975 1983 1991 1970
1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990
7
Mobile Phone
1880 1890
10
Smart Phones
Time before mass use
1870
0
1980 1990 2000
1950–2010: Bureau of Economic Analysis, National Revenue and Product Accounts.
2010
1897 Radio
31 35 45
The time needed for a quarter of the US population to use an invention (year)
Source: European Environment Agency (EEA), The European Environment – State and Outlook 2015: An Integrated Assessment of the European
The technological transition is getting faster The impacts of technological, demographical and socio-economical mishaps on business models will be felt in transitions aimed at the employment sphere and skill requirements, which will lead
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to difficulties with recruitment, training and talent management. Some industries may find themselves in employment demand scenarios for challenging professions requiring expertise with simultaneous skill imbalance between various roles. The main reason why is considered to be the increasing speed of technology development.
or rather in the very long term, unless we develop skills, which we cannot begin to imagine now, to get our place in this work setting, we will eventually lose our place as the workforce.
People need to adapt to technological changes.
As people continue to live and work longer, all employees force corporations to look at hierarchical and traditional employee training differently. Workers from different generations incentivize a culture of personal development based on their own experience. Today’s workforce consists of five generations. The employers, who incentivize inter-generation learning startups among their employees, are optimizing the value of these five generations.
The latest discussions about the impacts of the disruptive change on employment are divided between the expectations of unlimited opportunities in the new emerging job categories and increased employee efficiency, saving the employees from routine jobs and large scale worker procurement and job replacement. The discussions center around the notion that artificial intelligence will replace humans. The important thing here is not what the outcome will be, but rather for which period of time the result will come. It is a fact that getting a job will only get more difficult for the current generation. We believe that in the next generations,
Learning speed is becoming one of the most fundamental characteristics of the workforce.
“The illiterates of the 21st century won’t be those who cannot read or write; they will be those who cannot learn, unlearn and relearn.” Alvin Toffler
“Many members of the global workforce won’t be able to keep up with the change in the skills required for jobs.” Allen Blue, LinkedIn Product Management and Co-Founding Vice President.
New jobs requiring skills currently not available are emerging. Companies need to increase the pace of gaining skills again. They position their organizations and people to win in this revolution. Without workers, all generations or their skills to attain them constitute a risk resulting from the Destabilization of the lives of individuals and society.
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Companies need to position their organizations and people faster to win in this new and ever-developing business environment. Only digital technologies can make this possible. Digital technologies are not just good teachers. They also offer various digital tools to equalize conditions and environment through how workers learn. They are used in various settings from MOOCs (Massive Open Online Course) to wearable technologies that allow on-demand real-time learning.
“My best skill was that I was coachable. I was a sponge and aggressive to learn.” Michael Jordan
The focal point of HR is moving towards personalised and agile solutions to digitally transform the business. It creates intriguing workforce experiences while responding to the business’ needs.
With artificial intelligence today and who knows whatever technology tomorrow, it is getting increasingly more difficult to train new talents. The speed of the transition is exceeding the speed of new generations to catch up. Moreover, employees are expected to stay in the workforce for longer in the next years, which means that workers of five generations, all with different histories, will be on the same collaborative teams. The future of the business world will require employees to be agile and to hone their skills in time.
In order to support this new way of working and the improving and different workforce, HR must have key strategies planned out to contribute digitally as a driver of skills and to the business agenda.
“No economy may succeed without a high-quality workforce, particularly in the era of globalisation and technical transformation.” Ben Bernanke
65%
65% of elementary pupils will find themselves in positions that do not currently exist. Source: WEF Future Jobs, Jan 2016
Until new graduates step into AI roles, most companies may focus on retraining their current employees. A Forbes survey shows that 63% of the companies now offer in-house data analysis training.
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Following a plan devised by the central government to include lessons on Artificial Intelligence into the curriculum of elementary and secondary schools, China published its first Artificial Intelligence coursebook for high school students in 2018. The Chinese technology company Tencent confirms the shortness of supply in this field. According to a survey by Tencent Research Institute, there are roughly 300,000 “AI practitioners and researchers” around the world with millions of positions available for these qualities. Despite having the world’s largest population, China is trying to increase the number and acquisition speed of these talents. China believes its population advantage to gradually fade, taking very urgent and quick measures.
“The AI industry is faced with a global shortage of talents. The publication of this book is a step towards saving AI technology from ‘the ivory tower’ and integrating it into high school education.” Lin Dahua, Professor at Chinese University of Hong Kong
The companies’ expectation from blue-collar employees is shifting from “doing the job” to “managing the job”. The Chinese t-shirt producer Tianyuan’s factory in Little Rock Arkansas is making use of sewing robots developed for Adidas by Georgia-based SoftWear Automation. These robots show that it is possible to perform most of the heavy lifting performed by human workers, who undertake high-level jobs including robot maintenance and operations. Moreover, human participants will take remote vehicle driving tests to assess and adapt passenger and road challenges by using the automobile’s cameras. State safety regulations require autonomous to be supervised by humans at all times. The job titles of these professionals may range from “robot processor” to “safety driver”. However, they have the same responsibilities: monitoring robot Behavior for safety and performance. In a broader sense, the career options include automation efforts such as robot babysitting, engineering and programming. McKinsey Global Institute suggests that 20 million to 50 million new jobs are expected by 2030. Companies’ expectation from white-collars is shifting from “managing the job” to “creating new jobs” and “transforming the job”. White-collar employees including attorneys, advisors, financial
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advisors, journalists, merchants, etc. will face the effects of AI just as much as blue-collar employees.
Workers
In the near future, human workers and machines will work in harmony, complementing the efforts of one another in a cycle of efficiency. Whereas, HR organizations will start to develop new strategies and tools to recruit, manage and train a human-machine hybrid workforce.
Robots
The fear of losing their jobs to machines The need for highly trained operators. They may take on boring or unsafe tasks. They may allow humans to work on more creative projects.
Employees still havenâ&#x20AC;&#x2122;t lost their place in the workforce thanks to their multiple skills. Humans can contribute to the workforce both physically and mentally. The physical contribution is gradually replaced with automation, while the mental contribution is under risk by artificial intelligence in the long run. The jobs endangered in the long run are those requiring both physical and mental effort. It seems that artificial intelligence may snatch services such as elderly and child care involving emotional and, therefore, mental effort rather than physical effort from doctors in the long run. While the human factor seems to be a strength in constructs requiring both mental and physical skills such as driving, artificial intelligence has the upper hand as AI programs can communicate with another at high speeds and donâ&#x20AC;&#x2122;t crash the vehicle when switching tunes on Spotify. AI programs, capable of communicating with one another, may collectively enforce new rules instantly, minimising noncompliance-related errors.
Organizations The fear of falling behind in the global market Robots They may improve efficiency. They may lower business costs. They may fill in for undesired jobs.
The world of robotics will continue to develop; however, some unique tasks and roles be still left to humans. The adoption of the technology will surely lead to progress, including robots. Employees will need to make use of their competencies more and more. All organizations must address the challenges posed to the workforce by automation, AI and robotics and help human workers embrace their new helper pilot colleagues. Businesses will benefit from the adoption and use of the technologies introduced in the
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workplace. While automation, cognitive technologies and artificial intelligence take the spotlight, companies may need to switch to a hybrid model where technology improves human performance and redefine the roles of the employees. We will be faced with new challenges such as leading new HR processes to manage both humans and machines, simultaneously retrain the employees working at the human resources organization, and manage virtual workers, cognitive mediators, bots and other AI-oriented talents. As the need for competent and effective human resources increases in the coming period, global talent wars will gain momentum, rewriting the definition of competent and effective human resources. The need for profiles with high mental capacity, ability to solve problems quickly and emotional intelligence will soon be replaced by CQ (curiosity quotient).
tive and transparent. AirBnB, eBay and Uber are well-known examples of companies which do not own the supplied products and provide platforms to connect supply with demand. There is a trend called the “gig” economy where short-term contracts and freelancing is the status quo. As business economy may offer new ways of securing talented resources, it is a trend to be reckoned with by the HR department. Freelancing is becoming more and more popular as people look to avoid 9 to 5 work days. Many freelancers choose this employment model as its promises freedom. As being free also means
The potential profiles for this quality will be “learning agile” profiles who possess a key quality described as “the ability to determine what to do at times when one may not know what to do”. We need now more than ever for the right hemisphere to develop and curiosity and experimentality to be supported.
Platform work models help employees who can adapt to change shine Platform economies are observed in many industries. Connecting supply and demand directly on a digital platform, the platform eliminates the need for mediators, making services more effec-
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43% of the US workforce will be freelancers by 2020.
The US freelancers contribute 1.4 trillion dollars to the economy every year. Freelance software developers make up to 1000 dollars per hour. Artificial intelligence, Instagram marketing, Machine learning and Brand strategy were the most sought-out skills in 2017. Working home boosts work performance by 13%. Source: FreelancingHACKS.com
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possessing the latest technology, the advancement of technology is a helping factor. Freelancers are more willing and proactive in honing technical competencies and skills to be in higher demand. Platform technologies also offer the capacity needed by businesses to integrate their workforce needs with a qualified supplier that operates as required. Digital technologies and smart algorithms eliminate friction in terms of time, cost, location, quality and transparency when matching employees and employers. The leading global freelancing platform Upwork is only one example to platforms which significantly accelerate the long-term conWhen was the Last Time You Took a Skill Development Course? 75%
70%
ventional workforce of companies through skills and experiences borrowed by external employees. The freelance marketplace providers who developed these collaborative tools integrated online job management features into their services and created special corporate offers. These features offer companies powerful new talents of online working throughout the lifecycle of the project.
Institutions are starting to make use of platform work models. Companies must take the first steps toward a corporate market model today. Organisations will eventually use the lessons taken from on-demand workforce employment to incentivise larger transformations and create a company market. Freelancers may continue to increase the workforce; however, the key components of the workforce will also be transformed.
% of US Participants:
55% 50%
45% 30%
25%
0% Freelancers (In Last 6 Months) Source: Klenier Perkins 2018 Internet Trends
Non-Freelancers (Longer Than 6 Months/Never)
Instead of a traditional structure where individuals are hired for a singular position and work on fixed job functions, an approach resembling a market will support those working together dynamically based on the project, relevant knowledge and personnel needs. Organisations require a thorough approach to integrate new types of talent into the workforce, expand the collaboration and integration, and to provide a consistent experience.
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Creativity, critical thinking and empathy are now more important for all employees to work for change and to contribute to both the growth of their company and their personal satisfaction.
By 2027... 56%
Brand awareness is gaining importance in companiesâ&#x20AC;&#x2122; relations with their employees Personal branding is entering a new era and going under the spotlight as employers use the power of the personal brands of its employees for the good of the company. A world, where everything is connected, compartmentalized the society into small boxes: customers, employees and citizens.
56% of all institutions will be working more with freelancers.
Technological change is gaining momentum
74%
74% of institutions with freelancers will increase their usage.
It is getting difficult to access
38%
38% of full-time/permanent employees will mainly work remotely.
competent human resources
Platform work models are
3x
6x
Offices will become temporary connection points rather than daily destinations (The number of those who agree is 3 times higher than the number of those who do not). Dynamic and agile team structures will become the norm (The number of those who agree is 6 times higher than those who do not).
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emerging
Brand awareness is gaining importance
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Companies use increasing and built-in technological interactions to establish further partnerships with customers, employees, governments and the public and to have more partnerships. They position themselves everywhere around the society, blurring the lines between what is work-related and what is personal, and leaving a new mark for future growth. The technology is deeply rooted in our day-to-day activities; however, it has a much wider scope: it is reshaping the fragments of our society.
“The brand is a promise. A good brand is a promise that is kept.” Muhtar Kent
There is a reason why tech giants address social issues such as access and privacy more actively: actions define corporate impacts. Apple refused to give the US government the ability to decrypt data on iPhones and allocated a significant amount of time and resources to publicly announce its decision. The matter was forgotten as FBI cracked the encryption without assistance from Apple.
“You don’t just establish a business, you build people and, then, those people build the business.” Zig Ziglar
Corporate image, employee image and employee perception come hand in hand in the digital environment Organisations pushed carefully put-together marketing messages to impress potential customers; however, the impact of these messages could be affected by the experiences with individual employees. Corporate leaders may utilise social media platforms to incentivise positive Behavior and to dissuade bad Behaviors and employee defence programs in order to prevent actions that adversely affect the institution’s reputation. Cyberbullying is an international issue that is getting bigger. Companies, non-profit organizations and other groups are being harassed by cyberbullies. Cyberbullies or trolls are those who provoke others online or using an abusive language or who provide misinformation to get rid of an individual or an organization. In our “hyperconnected” world, it is possible to set up a Website and create a social media profile virtually free. However, just because we can create a profile on LinkedIn which safeguards over 467 million profiles (72% of which comes from outside the US) doesn’t mean that we know how to maximise the impact. People don’t know where to begin with or where to go on their own when they try their hand at Commercializing this open and conscious social interaction (and consciousness). Not happy with employees taking their personal brands into their own
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of believing their company to be more competitive.
75%
83%
69%
75% of candidates looked into the company’s reputation and the Employer Brand before submitting an application.
83% of employers say that their Brand as an Employer played an important role in their recruiting skills.
69% of candidates will not take up a position at a company, which has a bad reputation, even if they are out of work.
hands, companies are taking steps to merge and manage personal brands of employees at a corporate setting. Brand messages receive 24 times the more reposts when posted by an employee compared to when posted by the social media channels of the brand. The employees who take care of and value their company socially, have a 27% increased chance of being optimistic about the future of their company, a 20% increased chance of staying at their company, and a 40% increased chance
New approaches have an impact on the experience of employees in both physical and digital settings. As work and workforce become more complicated, it is clear that “Important Moments” don’t just occur during specific career stages. Employees experience critical areas all the times physically, digitally and on a human level. The “important moments” aren’t just limited to the premises of the organization. Personal events in the employees’ lives such as a child being born or an elderly parent being admitted to a hospital may lead to significant impacts on the employee’s work performance and productivity. These external factors should be taken into account when designing employee experiences. Therefore, how the employee feels when working as well as the experiences as the institutions and the employee part their ways is more definitive compared to the experiences created during recruitment and employee attracting activities in terms of the institution’s image on employee experience. Improving workplace experiences could entail introducing new services, procedures or workplace changes that have an effect on the workplace in any way. Design-oriented thinking defines first the issue (ie. employee participation, productivity) and the end-users (ie. employees, customers, visitors) whose experience
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Evolution of Employees Past 9-5 workday
Future Work whenever you want
Working at a corporate office
Work wherever you want
Using company equipment
Use whatever equipment you want
Focusing on input
Focusing on output
Climbing up the corporate ladder
Create your own ladders
Pre-defined tasks
Personalised efforts
Knowledge accumulation
Knowledge exchange
No audio
You can be a leader
E-mail-Dependent
Dependent on collaboration technologies
Focusing on knowledge
Stimulated learning
Corporate learning and teaching
Democratic learning and teaching
is taken into consideration. This approach calls for a deeper look into the experiences of the target group(s) through methods such as focus groups, interviews, road maps, storyboards, service plans and prototyping. With enough insight collected, solutions may always be developed and implemented in line with the requirements of user demographics at the center of the concept development process.
HR Analytics will become a priority, reshaping the expectations of the workforce. Global Digitalization processes will ultimately guide human resources reconfigurations. “Hello HR Applications” will ensure the advancement and handling of basic functions through technology, but changes with an effect on individuals will be the ones to go under the spotlight. Human resources teams, who will quickly adapt to the development of technology and artificial intelligence to improve the efficiency of the activities in the left hemisphere and the process itself, will improve human resources analytics to a point where it could track the steps employees take. They will need to transition to applications supporting decision-making mechanisms within the human resources in line with the company’s strategy. However, the main breakthrough here seems to be taking the next step further and scratching off data, and integrating the creativity, extension and experience aspect of the right hemisphere, which
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A new mindset for a collar-free workforce Humans and machines, each with their expert skills, may develop a symbiotic relationship which will offer the business world profound benefits. Humans
Machines Perception
Speech clarity
Coordination
Short-sight
Fine manual dexterity
Sensitivity
Speed control
Strength
Basic speech Audio localization
Selective attention Problem sensitivity Verbal and written narration
SMART AUTOMATION
Verbal and written understanding
Dynamic flexibility Night and peripheral vision Reaction times
Inductive and deductive thinking Creativity
Speech recognition
Regular object manipulation
Advanced role expertise
Category flexibility
Endurability
Scalable processing capacity Complex problem-solving Judgement Expertise Application Active Listening
Equipment Operation and maintenance
Ethics
Ambiguities Operational Analyses
Persuasion
Computation
Routine reading comprehension
Management
Critical thinking
Fact recall
Advanced decision-making
Pattern recognition
Increased productivity, innovation, efficiency
Empathy
Objectivity
Logic
System Design
allows us to delve deep into the spirit of an individual, into employee experience applications. HR groups may start to turn into better-positioned, agile, quick and dynamic organizations to support the talents of the future (both mechanized and human). The traditional border between humans and machines will fade in the growing workforce. Human and technology convergence is becoming an interdisciplinary task and HR is leading the redefinition of jobs and the education of the growing workforce.
Values that brought humans so far will shine We believe that, apart from physical and mental capabilities, the skills to support humans the most in the future will be the values and characteristics which were developed by humans themselves and took them this far. These values are already coming to life with startups and are integral to the corporate world. Unlike algorithms, humans are highly adept at taking unexpected actions for circumstances which cannot be foreseen based on previously available data or about which there isn’t sufficient data available, and at developing extraordinary techniques for the success of these actions. Many advancements from the invention
Innovation detect
Emotional intellect
Surveillance
Social perception
Configurated conclusions
Negotiation
Data exploration
“Imagination is more important than knowledge. For knowledge is limited, whereas imagination embraces the entire world.”
Talents Psychomotor, sensual, physical
Skills Cognitive
Content, process, system
Social
Source Deloitte Insights
Albert Einstein 254
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of nuclear energy to space technologies are the products of bold and, sometimes, not-thought-through decisions. Current competencies of AI are based on past data. Past data may prove to be statistically right on many occasions and even to be quite effective in making certain decisions. However, the future is always open to change. Past data is not a good prediction method, especially when humans who are susceptible to surprises and unpredictability are concerned. Sometimes magical moments and major gains are made possible by the determination of the unexpected. Goldman Sachs retrained the AI predictor it had tried for 2014 world cup and failed with more data and made another attempt. The AI algorithm of Goldman Sachs came up with a rather Cliché prediction, based on the development expenditure made prior to the tournament, processor power and data, that the final match would be played by Germany and Brazil with Brazil taking home the cup. It arrived at the most statistically and mathematically rational conclusion with a bit more effort. As Goldman Sachs did not bet on this prediction, it could be argued that they did not work as meticulously as they should have. The predictions of the betting websites prior to the tournament showed Brazil as the winner and Germany as the runner-up. Cro-
“It always seems impossible until it’s done.” Nelson Mandela
atia and France made it to the final match, while neither Germany nor Brazil could make it to the semis. Betting websites undoubtedly didn’t lose any profits due to the high number of bets being placed. This is a result of mathematics and statistics. It is obvious that AI will be able to perform foreseeable and predictable tasks without human-assistance. For instance, AI may simultaneously listen in on the conversations of all humans, view
“It is wrong to suppose that if you can’t measure it, you can’t manage it – a costly myth.” W. Edwards Deming of camera footage, monitor credit scores and make the expected predictions with an accuracy of up to 99%. However, this does not mean that it will not lose to thousands of human counterparts on matters, which are valuable on their own, similar to the example above. Therefore, the roles to be given to humans will be focused on the tasks that AI cannot perform. We believe that employees need to go back to the core values of humanity to succeed. We believe that characteristics such as curiosity, risk-taking, doing the impossible and sometimes doing it no matter the cost, going to that which is impossible and doing it fearlessly, collaborating even though there are sometimes no rational interests in
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“Passion is one great force that unleas-
“Space: the final frontier. These are the vo-
hes creativity, because if you’re passionate
yages of the starship Enterprise. Its on-go-
about something, then you’re more willing to
ing mission: to explore strange new worlds;
take risks.”
to seek out new life and new Civilizations; to Yo-Yo Ma
boldly go where no man has gone before.” 2009 Star Trek, Intro Text
question, pursuing mutual interests, trusting people one is collaborating with despite the lack of sufficient grounds for trust, sometimes trusting people just because they are human, being able to make and learn from mistakes, sometimes reaching previously-unavailable and brand new opportunities thanks to those mistakes, sometimes sacrificing everything or finding a shortcut to get results without considering whether it will be worth it and trying to attain goals in the simplest way possible, will shine as being unique to humans . Captivating the attention of sociologists for many years, this subject has been the theme of many works of art. For instance: in the series Star Trek, Vulcans have an algorithmic and rational characteristic devoid of emotions. They cannot comprehend the decisions human make based on their ambitions and emotions, but fail to catch up with humans in terms of the speed of development. Humans come in contact with alien Civilizations without taking the time necessary to tell if they are friend or foe in a search
of passionate curiosity in the depths of space, while the Vulcans, who exercise logic, rather monitor the Civilizations they will come into contact for 30-40 years and do so only if they see any rational benefits to it. The speed at which the Star Trek Crew adapt to the various scenarios they come across is what helps them survive in every episode. The engineering team takes high risks at any chance to improve the speed and capabilities of the starships in every episode, always questioning whether these capabilities will be fully required. Star Trek is a production where the fundamental values of humanity are praised even with the availability of space or another form of advanced technology. Star Trek is about people each of whom are an expert in their respective field, strive for constant development, incorporated simplicity and functionality into their lives, have the passion to ded-
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Quote “Fortune favours the prepared mind.”
Louis Pasteur
icate their lives to a shared goal together, bond with another as their confidence in one another solidifies with each episode and explore new planets and worlds. The story itself praises humanity. We see a similar approach under the names innovation and entrepreneurship at our business lives today. Quick decision-making, quick mistake-making and quickly learning from mistakes are already gaining importance in the business world. Quickly learning from both our and others’ mistakes and coming up with brand new solutions have become important elements of success. Learning not only involves technical competencies but also communication, collaboration and adapting to new circumstances as well as communication structures. It is clear that a very important change is taking place and that our actions will determine whether this change will result in the mass-replacement of workers or in new opportunities. Managing short-term transition and creating a workforce with the skills of the future is a responsibility to be assumed by not only institutions but also by individuals, the employees.
TECHNOLOGY REPORT
RESOURCES
• 2018 CIO Trend Report • Microsoft CEO Summit 2018 • Ministry of Economy, Development Plan • Accenture TechVision 2018 Tech Trends Report • CB Insights State AI China Briefing • CB Insights State of Artificial Intelligence • CB Insights Fintech Trends 2018 • CB Insights Tech Trends 2018 • Open Banking and PSD2 – Deloitte • Deloitte Tech Trends 2017 • Dataprotection / Data / PSD2 in Retail Banking - R. Hamers (Chairman of the Executive Board ING Group) • Deloitte TechTrends 2018 • A Tale of 44 Cities – Connecting Global FinTech: Interim Hub Review 2017, Published by Deloitte April 2017 • Digital Technologies and Economic Growth Report – TÜSİAD, October 2018 • 23 Recommendations for the Sustainable Development of the Turkish FinTech Ecosystem- BKM • Payments Transformation: JOSTLING FOR POSITION IN THE NEW DIGITAL LANDSCAPE – FINEXTRA • Forrester Technology Trends 2016-2018 • Gartner Top 10 Strategic Technology Trends 2017 • Gartner Technologies Hype Cycle • Bank 4.0: Banking everywhere, never at a bank • The INSURTECH Book: The Insurance Technology Handbook for Investors, Entrepreneurs and FinTech Visionaries • The FINTECH Book: The Financial Technology Handbook for Investors, Entrepreneurs and Visionaries • The WEALTHTECH Book: The FinTech Handbook for Investors,
Entrepreneurs and FinTech Visionaries • IDEX – Biometric Payment Cards, Where is the Market Today? Report 2018 • JOBS LOST, JOBS GAINED: WORKFORCE TRANSITIONS IN A TIME OF AUTOMATION – December 2017 – McKinsey • Seven Faces of Learning Agility by George Hallenbeck, Vicki Swisher, and J. Evelyn Orr - Korn/Ferry Institute • Learning Agility – Korn/Ferry International • KPMG 2018 Technology Insight: Tech Hubs Forging New Paths To Outpace the Competition • GLOBAL INNOVATION INDEX 2018 – Wipo • Tech Nation 2017 – TechCity 2017 Report • Global Startup Ecosystem Report 2018 – Startup Genome & The Global Entrepreneurship Network (GEN) • World’s Top 10 Innovation Hubs - Business Facilities Magazine • Tech Disruptors – KPMG • The Global Innovation Index – WIPO • World InsurTech Report 2018 – Capgemini and Efma • Where Fintech Lending Will Land – Accenture • The Future of Banking 2017 – KPMG • UK Banks Performance Benchmarking Report – KPMG • Challenger Banking Report 2016 – KPMG • Fintech Call for Input - Authority for Consumers & Markets • Value of Fintech – KPMG • The Intelligent Customer Experience: A new approach for banks – EY • Future of Fintech 2018 – BI Intelligence • Game Changers 2019 – CBInsights • The Global Financial Centres Index 23 – Long Finance
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• Global Innovation Index 2018 – Cornell SC Johnson College of Business • Doing Business 2018 – World Bank Group • Startup Barometer Europa – EY • Blockchain in Financial Services: Regulatory Landscape and Future Challenges for its Commercial Application – JAVIER SEBASTIAN CERMEÑO, BBVA • Artificial Intelligence Strategy for Europe 2018 – ASGARD • Germany Fintech Landscape – EY • Berlin Aktuel: Fintechs in Berlin – Investitionsbank Berlin • Business Incubators Accelerators UK Report – Department for Business, Energy & Industrial Strategy • Next Generation Mobile Technologies: A 5G Strategy for the UK - Department for Culture, Media & Sport • 2018 Tech Nation Report • Regulating Open Banking – Ismail Chaib, COO, Tesobe • The Pulse of Fintech Q3 2018 – KPMG • The Pulse of Fintech Q4 2017 – KPMG • Money Tree Q3 2018 – CBInsights • Fintech Activities Worldwide October 2018 – TEB Private Banking • Top Global Fintech Hubs Report | Deloitte UK • Fintech100 2018 Report – KPMG • FT Partners Profile – Nubank • FT Partners 3Q 2017 FinTech Insights • FT Partners Research – Global Money Transfer Trends • FT Partners Research – Insurance Technology Trends • FT Partners Research – WealthTech Report • Challenger Comparision - FT Partners Profile - Monzo Series E Round
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• https://techcrunch.com/ • www.theguardian.com • https://tr.euronews.com • https://gelecek.tech • https://www.raconteur.net/technology/emotionally-intelligent-ai-future • https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/disruptive-trends-that-will-transform-theauto-industry • https://qz.com/1444810/california-is-letting-waymo-test-selfdriving-cars-without-humans/ • http://science.sciencemag.org/content/356/6334/183 • https://www.theverge.com/2018/5/24/17388696/uber-selfdriving-crash-ntsb-report • https://publications.parliament.uk/pa/ld201719/ldselect/ ldai/100/10013.htm#_idTextAnchor152 • https://www.theglobeandmail.com/world/article-in-china-classroom-cameras-scan-student-faces-for-emotion-stoking/ • https://twitter.com/MikeQuindazzi/status/1056139497006604289 • https://www.mckinsey.com/~/media/mckinsey/business%20 functions/mckinsey%20digital/our%20insights/where%20machines%20could%20replace%20humans%20and%20where%20 they%20cant/sector-automation.ashx
A tale of 44 cities Connecting Global FinTech: Interim Hub Review 2017 Published by Deloitte in collaboration with the Global FinTech Hubs Federation, represented by Fintech İstanbul in Turkey “The Global Innovation Index 2018: Energizing the World with Innovation” in collaboration between Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO) as co-publishers, and their Knowledge Partners. “Measuring Business Regulations” by World Bank “The Global Financial Centres Index 23” report by Long Finance “Teknoloji Trend Raporu” by Softtech (www.softtech.com.tr) data provided by Crunchbase Investment figures were taken from the survey “Our Own Analysis for Tintech Trend Report by Softtech”. The baseline for the investments until 20 November 2018 in FinTech and other sub-categories was taken as 1.6 m $. All investment amounts for general VC investments until 20 November 2018 were considered and deducted. “The Global Startup Ecosystem Report 2018 Report” was referred to for the strengths, FinTech Score and sub-scoring of cities. The report “A tale of 44 cities Connecting Global FinTech: Interim Hub Review 2017” was referred to for the challenges of the cities.
The section “Financial Ecosystem Report” is based on direct or indirect quotes from the following sources. Global Startup Ecosystem Report 2018 Report, Global Startup Ecosystem Report 2017 Report published by Startup Genome LLC (www.startupgenome.com)
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