In their historical-social debate “Cash, book money, cryptocurrencies and the digital euro“ on money in the digital age in the book “Praxisbeispiele der Digitalisierung” (Practical Examples of Digitalisation) published by Springer Gabler Verlag, the co-authors Jochen Werne and Johannes Winter use historical examples to show the interconnectedness of various actors in the cycle of our money today.
Read an excerpt of chapter 9.3.1. on the historical role of CIT – cash in transit here:
Making money available and the central role of cash-in-transit logistics
In the case of cash, the person concerned has direct, unrestricted physical power of disposal over his money in the form of coins or banknotes. However, the fact that this is not yet given when the money is minted or printed in bank vaults, but only when it is delivered to the owner, is of crucial importance. To illustrate the importance of this step and thus also the role of the transport of money and valuables, a historical event from the Rotschild Archives can be used.
„The Rothschilds supplied the Duke of Wellington with gold during the Napoleonic Wars and saved Wellington’s armies from almost certain defeat. Between 1793 and 1815, Britain was almost continuously at war with France, which placed an enormous burden on the British treasury. By 1813, Wellington’s armies had managed to push the French back as far as the Pyrenees, but the financial situation had become critical. Wellington desperately needed gold and silver coins that he could exchange locally to pay and feed his troops and thus maintain morale. J.C. Herries, the British government’s chief commissioner, was responsible for financing and equipping the British armies in the field. Herries was looking for a middleman who could secretly procure large quantities of gold without alerting the French. In January 1814 he officially engaged Nathan Mayer Rothschild. Over the previous five years Nathan had built up an extensive network of couriers, dealers, brokers and bankers to facilitate his gold trading activities. Over time, he had established a dominant position as a gold broker in the City of London. After receiving the commission from Herries, Nathan instructed his brothers on the Continent to buy gold wherever they could, secretly and in small quantities so as not to disturb the market. Once the gold was gathered, it was shipped and forwarded to Wellington in the south of France so that he could pay his troops” (Rothschild Archives 2021).
Alongside many small and medium-sized players, the three corporations Prosegur, Brinks and Loomis dominate the main part of the consolidating world market for cash and cash-in-transit. By supplying retailers, banks and private individuals via ATMs and branches, as well as repatriating funds, the industry ensures that the cash cycle is maintained and that each individual’s power of disposal over cash is upheld.
In the midst of these crazy times, most industries still haven’t gotten their shit together. However, a few bright minds managed to understand the paradigm shift, act accordingly and reap the rewards. So, Catharina van Delden and Bente Zehan talked to some of them! Join us on our learning journey over the next few weeks to see how completely unrelated industries deal very differently with the same challenges we all share – and let’s become better together!
Jochen Werne is Prosegur’s Chief Development and Chief Visionary Officer since 2019. Before that, he worked at different banks, most recently as a director of the German Bankhaus Lenz & Co. Since the beginning of 2022, he is also the managing director of Prosegur Crypto, which is applying for a crypto custody license in Germany.
The Madrid-based company Prosegur offers different security services worldwide. They’re most famous for their cash-in-transit services, with more than 50% market share in Germany. In recent years, Prosegur has explored ways to provide digital security services based on its long experience in a non-digital world.
How do you develop new business models and drive innovation within a company that makes its money with a very traditional business model like cash-in-transit?
I would like to jump right in with a personal example: Before I joined Prosegur in 2019, I had a career in banking. When you work in treasury, you have a lot of money you need to invest. As a bank, we were engaged in the investment business and in our case, most of the money had to be invested in the short term, unfortunately within a negative interest rate environment throughout the last years. So, the best solution would have been to put your money under the mattress instead of in a bank account. When I joined Prosegur, I explained this pain point and we discussed how we could solve this problem for treasurers. Since anything which has fewer costs than 0,5% is considered profit for a treasurer, we offered asset managers, high net worth individuals, and banks custody of short-term liquidity fully insured and compliant in our high-security facilities.
You’re in the security sector. From another conversation I recall you talking a lot about feeling safe vs. actually being safe – an image Catharina and I discussed before starting this series. Our example is a house standing by a cliff, with that a giant tsunami arriving. Instead of thinking about how to relocate, many industries seem to wonder about putting solar panels on the roof and perhaps repainting. Both are valid things to do – however, perhaps they’d have a different focus if they had zoomed out. Is that also a topic within your company, and how do you handle such problems?
This is how new business models and innovations can emerge: You have to take a different perspective, look at other people’s problems and find solutions based on your own experience and knowledge. That is an excellent picture. And if you take that into account, I think also from a psychological point of view, we live in our bubbles. Let’s take, for example, the phenomenon of social media: You “privately” click a like button, watch a video, or comment on a post without really knowing how much this very private behavioral data is influencing an algorithm (which in the best case just targets you as a potential buyer of a certain product). After all, you are only doing it “privately” – but you’re not! If you were to zoom out, you’re back at your tsunami example. It happens in everyday discussions, from climate change to energy crises. Sometimes, people take a point of view and go blindly in one direction. If you’re able to zoom out, you’re also able to change your behavior and find many more solutions to problems.
When making decisions and discussing innovations, it’s important to accept that you yourself are not able to see the whole picture. And based on that, you should go into discussions with an open mind – without thinking you’re completely right and cannot learn anything from the others. Innovation can only happen when people think outside the box, try to understand the whole picture, make new connections, and then act on their new insights.
Business leaders also need to ask themselves how they can innovate. Do they talk about the future, about what they need to create, and how it is no longer the same? Or are they just pushing to quickly return to their classic KPI models, missing the direction the rest of the world is moving in?
How do you take actions from the big picture and implement them? Basically, how do you zoom in again?
Prosegur works in an industry with low-profit margins. We can never sit back and say, “Yes, we have a wonderful company here, everything is going great!” It is labor-intensive work with – obviously – high labor costs.
So we can’t afford to be just visionary; we also need to focus on the essentials. We need justified results every month. Therefore, more than in other sectors, the rule is: if you deliver results, people will listen to you. It’s also part of my job to enthuse people and help them understand new concepts. But I wouldn’t say that’s purely related to my role; anyone in a leadership position should see it that way. Prosegur is a big matrix organization, so you have to use your network to move things forward.
In security, there are a lot of processes with rigid security protocols that won’t be changed in an agile approach quickly and easily. But with other and industry-adequate means the teams are improving efficiency every day.
How do you go about that?
People have to be trained. Otherwise, it won’t work. You have to get people to change. But don’t be surprised that the goal will never be achieved 100% because you will never get everyone to embrace change. Resistance to change within the individual is far too great and it’s very often just too convenient to stay in the comfort zone.
I would like to come back to your example of the house on a cliff. I have seen people who’ve ended up in a disaster professionally because they didn’t want to or were afraid to go into action. You have to be open-minded and sometimes even force yourself out of your personal comfort zone.
You founded Prosegur Crypto GmbH – a business model that to the untrained eye has little to do with your core business: cash. In convincing your board this is a relevant thing to do what are your learnings regarding the degree decision-makers need to understand new technology? Should everyone become a super tech expert?
I don’t ask the whole company’s management to be full experts on all technologies. That’s impossible. But please – as a responsible decision-maker – understand the leading technologies existing in this world! For example, as a banker, you should understand the concept behind blockchain. Of course, this is very technological, and most people can’t explain it in a good manner, but you must understand it. To better understand, decision-makers should have a “new-in-tech” training every couple of months, besides all the usual management training.
So, my appeal to every business leader is: Take your time and try to at least get the gist of things. You should understand what technology can and cannot do, and not just follow your daily headlines. The second part is to really listen to your existing experts whom you pay to know all the details. They need to be at the table and give their input to assess the next useful steps.
Lastly, we’ve talked a lot about networks. What are your best practices regarding this?
It is one of my favorite topics! First of all, you need to know that networks have not just existed since social media came into existence but have always existed. Network organizations have always brought – likewise interested – people together. Unfortunately, also on this topic, we do have to step out of our comfort zones to broaden our perspective. Otherwise, our networks take us as prisoners and we are as the known proverb says birds of the same feather who flock together.
There is very good literature on networks: like “The Square and the Tower” by Niall Ferguson or “The Starfish and the Spider” by Ori Brafman and Rod Beckstrom. Everyone should read these books.
Tl;dr for the lazy
• People live in their bubbles and make themselves too comfortable within them, even if it sets them up to fail. It’s important that companies (and we as a society) zoom out to see the bigger picture. • Innovation and new business development can only happen if you combine your own experiences and opinions with other points of view. • Companies need to go beyond just recreating and reusing what has already worked for them. They should start asking questions and finding solutions that truly bring them on the right paths into the future. Even or especially if that means that they need to get out of their “safe space” (which is not so safe after all). • Instead of judging ideas and innovations as being “good or bad”, look at what they “can and cannot do” • You need to train and communicate openly with people to overcome the resistance towards change.
28 February 2021 published in the current issue of the magazine gi Geldinstitute
For the trade magazine gi Geldinstitute, leading experts answered Stefanie Walter’s questions on the topic of “Process Mining at Banks”. Jochen Werne – Prosegur Germany, Gerrit von der Hardt – TARGO Dienstleistungs, Sebastian Hennerici – Aareal Bank AG, Gerrit Meier – Hanseatic Bank GmbH & Co KG, Thorsten Briest – PSD Bank Braunschweig eG, Christian Meusel – Berliner Volksbank eG, André H. Burger – Synpulse Management Consulting
Professional know-how and the right feeling for changing customer needs are essential factors in being able to innovatively develop needs-based solutions for our customers.
The entire roundtable talk in the current print edition or soon online at www.Geldinstitute.de
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
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”.
“It has been inspiring discussing with Katharina Schneider about AI and the future of the financial sector and being quoted in her article among other experts as Prof. Andreas Dengel (DFKI), Dirk Elsner (DZ Bank) and Nils Beier (Accenture) . Read the original article here“
Frankfurt The interplay between artificial intelligence and the financial sector in Great Britain will soon be very vivid: from 2021, the portrait of Alan Turing will adorn the new 50 pound notes. The scientist is known for his early research on computer technology. (translated with DeepL.com)
It has been pleasure being guest author for the DIGIPRAKTIKER, Finanz Colloquium Heidelberg.
What role does the human factor play in times of exponential technological progress?
Author: Jochen Werne, Director Business Development, Product Management, Treasury and Payment Services at Bankhaus August Lenz & Co. AG
The only constant in history was, is and remains change. Gutenberg’s invention of the printing press in 1450 was a milestone on the timeline of human development. Today we still take note of this invention, which was considered an innovation at that time, but we have long lived surrounded by smartphones and cloud applications, in which we can store the most private information and retrieve it from anywhere in the world. Today’s change is being driven by a veritable digital revolution.
Digital change already has fundamental consequences for individuals and their lifestyles, but it is developing its full potential when it comes to interacting with our social environment. In times of smart robotics and maturing systems in relation to artificial intelligence, the question arises again and again what role humans play on the stage of these technologies. Is he …
For the opening keynote of our ec4u virtual conference Digital Thoughts on May 23rd, Jochen Werne, Director Marketing & Authorised Officer at Bankhaus August Lenz, talked about opening up to the digital transformation. It turns out, what we associate with technology and what it actually offers are often two completely different things.
„Companies and people need to participate actively in the transformation. We need to move. It’s impossible to be a passive participant in the transformation.“