On Tuesday, November 5, 2019, Managing Director Dr. Stefan Hirschmann and his team from VÖB-Services organised an inspiring BANKENNETZWERK networking event “Digitisation and digital competence in banks” with an auditorium of 70 banking professionals.
Learning from history is crucial to understand the current societal changes triggered by technological progress. It‘s the basis to be able to make smart strategic decisions in a fundamentally changing business environment.
Some examples in the keynote referring to Professor Niall Ferguson‘s inspiring book „The Square and the Tower“. Enjoy some of his insights here
A crypto currency challenges technology, regulation and humans.
Author: Jochen Werne
“Money is perhaps the most concentrated and acute form and expression of trust in the social-state order.”
In this clarity, the German philosopher and sociologist Georg Simmel, born in 1858, formulated the value of a currency in his work “Philosophy of Money”. This clear and comprehensible insight also provides a simple basis for understanding why, for example, states rely on the independence of their central banks. And just as simply the question arises, which order do you trust when it comes to crypto currency?
Almost 4,000 of these currencies now exist worldwide. After Bitcoin, Ether, XRP, Litecoin and Co., Libra now wants to establish itself as a future heavyweight in the market – and with a noble goal. Libra is to become the cashless payment option “for mankind” and make international payment easier.
Libra Coin – the currency of the future?
No crypto currency received comparable media attention, triggered only by the announcement of the project. And the emotionality and toughness with which the discussion is already being conducted shows how seriously the topic is being taken. It’s about reputation, influence, control, responsibility and only in the last instance about technology. Central banks and government bodies are sceptical about the “currency of the future” on a broad basis, even though the advancing globalization could argue for a single currency in the long run. A currency that supports a consistent free exchange of goods and services. Also under discussion is whether Libra Coin could be the means of payment for the approximately 1.7 billion people who have no access to banking services and whether the familiarity and the large target group of Facebook, combined with the announced low transaction costs, could make it possible to reach billions of people worldwide.
Challenges at all levels
Technically, not all hurdles have been cleared yet: In order to make a stable coin possible, it is necessary to find the right technology. It is precisely this stability that is supposed to distinguish Libra Coin from other crypto currencies and thus also make it suitable for skeptical end consumers. Members such as Mastercard, Paypal or Ebay should also provide the Libra Association with their names and brand promises additional confidence for the end consumer. But already today the alliance is not as stable as the founding members had hoped and the exits of Mastercard, Visa and Paypal weakens the consortium.
The Libra Association has repeatedly emphasized that it wants to comply with all regulatory aspects, but there are voices at the political and banking levels that are extremely sceptical about the project. The new payment system raises many questions in monetary and legal terms. Central banks and supervisors want to keep an eye on the influence of the potentially new currency and usually share the view that whoever acts like a bank must be treated like a bank. In other words, comprehensive requirements must be met and regulations observed – especially at the international level. This is difficult because current regulations are designed for the classical financial system, with which the Libra system has largely no points of contact. The aim is to keep total regulatory influence and not to allow any possible loopholes.
Despite its American origin, the Libra Coin is to be administered from Geneva by the Libra Association. The idea here is to be regulated by the Swiss Financial Market Supervisory Authority FINMA. Although Facebook has paid a lot of attention to the underlying technology, the legal issues still need to be clarified. Especially with regard to money laundering, consumer protection and possible misuse of the currency for illegal activities. Within the Association, there will be no special treatment for the founder Facebook, but equal voting rights for all members.
Acceptance and European values
With regard to Germany, it can be said that its citizens are within the international average as far as their affinity for digital is concerned. However, a historical-cutlurell caution can certainly be observed with regard to the topic of money, which certainly explains the well-known love of cash. A more pronounced European awareness of data protection with the General Data Protection Regulation (GDPR) makes many people, especially in Germany, sceptical about the subject. The fact that Libra was launched by Facebook is hardly a confidence booster after the Cambridge Analytica scandal. The fear of the transparent customer meets with security concerns about one’s own savings. Every German knows the quote: “Friendship ends with money” and thus new things are always put test. Culturally different in Sweden, where sometimes it’s only possible to pay by card. The same in China, where WeChat Pay and Alipay are no longer just a trend.
As always, changes are taking place step by step. It remains to be seen whether Libra Coin in its current form has future prospects. In any case, any change can only work if it is accepted and used by the end consumer despite all skepticism.
And this stands and falls – also in the digital world – with what Georg Simmel already put in the centre in terms of money in the 19th century: CONFIDENCE.
Die Diskussionen führender Persönlichkeiten im Bereich künstlicher Intelligenz der deutschen Wirtschaft führten final zu einem gemeinsamen Nenner:
„Wer es schafft Vertrauenswürdigkeit in KI-Technologien und die damit handelnden Personen zu schaffen, wird sich einen wesentlichen Erfolgs- und Wettbewerbsfaktor sichern. Dies gilt sowohl auf Unternehmensebene wie auch im nationalen Kontext.“
Die Teilnehmer und Themen der PLS waren:
Panel „Forschung – KI für digitale Plattformen“ mit
Prof. Dr. Susanne Boll-Westermann | Carl von Ossietzky Universität Oldenburg
Ralf Klinkenberg | RapidMiner GmbH
Thomas Neumuth | Universität Leipzig
Prof. Dr. Volker Tresp | Ludwig-Maximilians-Universität München (LMU) und Siemens AG
Panel „Transfer und Anwendung – Digitale Plattformen für neue KI-basierte Services“ mit
Wolfgang Faisst | SAP SE
Olga Mordvinova | incontext.technology GmbH
Dr. Tanja Rückert | Bosch Building Technologies
Andrea Stich | Infineon Technologies AG
Moderiertes Gespräch „Vertrauenswürdige KI als Voraussetzung für sichere Datenplattformen“ mit
Prof. Dr. Judith Simon | Universität Hamburg
Prof. Dr. Wolfgang Ecker | Infineon Technologies AG und TU München
The “cobra effect” is a prime example of failed incentive structures. Good governance in banks and savings banks must serve stability and flexibility at the same time. Compliance with four principles is indispensable.
Well-intentioned is not well done yet. Science calls this the cobra effect. It goes back to an event when India was still a British colony. In order to control a cobra plague, a British governor placed a bounty on every snake that he killed. With the result that enterprising Indians began to breed cobras to collect the bounty. When the governor learned of this practice, he had the program stopped and the breeders released the snakes. Result: The problem had multiplied.
The Kobra effect is regarded as a prime example of failed incentive structures – and thus of failed governance. This word, derived from the French “governance” for government, is often used today, and with its almost inflationary mention, the blur surrounding it is also growing.
So let us recall: governance refers to the structures and forms of governance that exist in a society. This refers to the interaction between the state, the private sector and interest groups. The aim is to improve the management of an organisation or a political or social unit in order to achieve better results.
Stability as an objective of governance
However, it has become common practice to use governance primarily when it is not a question of state structures. For example, the term plays an important role in practically all companies that deal with the public in the form of customers or stakeholders. As a result of the blurred use of the term, case studies from politics are often used today to explain economic frameworks.
Undoubtedly, there are many parallels between the governance of states and the governance of private companies, in their structure and processes and thus also in their form of governance. The decisive factor for both is first and foremost stability and thus the ability to cope with major crises. For states, the core of stability is the constitution, which enables leadership during the crisis and at the same time serves as the basis for a way out of the crisis. A current example of this is the national crisis in Austria. The government has failed; until the next elections a transitional government of experts will lead the country and thus guarantee stability. Around this core, however, a state structure must also have a certain flexibility in order to be able to react to developments.
Stability plus flexibility
And this is where the differences to the private sector begin. States are not in competition with the private sector and generally continue to exist even after crises, even if in extreme cases the political system and its fundamental form of governance may change. The situation is different for companies. Of course, they also need a stable core. But they must be extremely flexible and adapt to market situations in order to survive in the long term. Their stability is based on the flexibility of the process organisation. When it comes to flexibility, smaller companies often have an advantage over large, difficult-to-maneuver corporations. We see this in the financial services industry with the example of FinTechs and InsurTechs. However, these relatively small companies often lack the stability they need to survive when consolidating.
Let’s take the example of the banking industry: It faces clear challenges – digitization, new competing business models, exponential technology leaps and ever shorter product cycles with lower margins and increasing regulation. Sustainable answers and the resulting strategies will only be found by those houses that are stable in themselves on the one hand, but are also capable of a degree of flexibility that has never been demanded of them in history on the other.
Four principles of good governance
But how does a company obtain the necessary stability? There are four principles for good, i.e. successful, governance, which must always be present:
Accountability: There must be an organization that is controllable and controlled. Accountability: The company as a whole and each individual employee are accountable for their actions. Openness: Only when employees, customers and stakeholders understand what is happening is transparency actually lived out. Fairness: Ethical conduct is one of the foundations for long-term value creation.
Governance must be lived
In order to achieve a satisfactory situation for both sides, the four principles of governance are indispensable. However, it is not enough to lay them down in statutes; they must also be lived by each individual.
In addition, the current major transformation issues, which not only the banks but also the entire economy have seized, should be seen as an opportunity for companies with a consolidated governance structure and remind us of a statement by the Roman philosopher Seneca, who said: “Only the tree that has been constantly exposed to gusts of wind is firm and strong, because in battle its roots are consolidated and strengthened”.
WHAT HAS IAM & CYBERSECURITY TO DO WITH A FAMOUS CAR CRASH OF A SOVIET LEADER ?
It was a perfect Friday morning over the clouds on the way to give a speech at the famous Steigenberger Hotels and Resorts Grand Hotel Petersberg. In 1973 the Soviet head of state and party stayed for a few days in the luxury hotel and the visit became legendary because Brezhnev had an accident with his guest gift, a sports car, on the curving driveway.
What could be a better place to discuss safety and security with thought leaders in a speech about “#AI and it’s impact on #IAM & #Cybersecurity” at the Executive-Insights IAM Exchange Conference
Identity Recovery Services – The smart idea in Cyber Security and Access Management: More to come on this topic soon
The Digital Summit (previously the National IT Summit) and the work that takes place between the summit meetings form the central platform for cooperation between government, business, academia and society as we shape the digital transformation. We can make best use of the opportunities of digitisation for business and society if all the stakeholders work together on this.
The National IT Summit was renamed the Digital Summit in 2017. This was to take account of the fact that digitalisation comprises not only telecommunications technology, but the process of digital change in its entirety – from the cultural and creative industries to Industrie 4.0.
The Digital Summit aims to help Germany to take advantage of the great opportunities offered by artificial intelligence whilst correctly assessing the risks and helping to ensure that human beings stay at the heart of a technically and legally secure and ethically responsible use of AI.
The Digital Summit looks at the key fields of action within the digital transformation across ten topic-based platforms. The platforms and their focus groups are made up of representatives from business, academia and society who, between summit meetings, work together to develop projects, events and initiatives designed to drive digitalisation in business and society forward. The Summit will serve to present the results of the work that has been done in the past, to highlight new trends and discuss digital challenges and policy approaches.
Looking forward moderating the Panel Discussion on “Digital Platforms for new AI-based Services”