So thank you, Mike. And I think we'll see a lot of people traveling in over the next hour or so. I've learned that the travel railway is operating as normal, which means they have major issues on various tracks. And so I know that first one of my colleagues, the first train didn't work at all, the other one is rooted. So it probably will be one hour or so. I'll want to talk about what said why I believe the 2018 will be a year of disruption for the final industry.
Why there are so many things which will start or sometimes directly change that industry in a way, which means it'll never be the same again.
And so that's sort of the short as strikes. There are a couple of major changes. We have also meeting as a regulation. We have a lot of technology changes. Obviously blockchain is one of the hotpot things, and there are few thoughts. I have this customer contacts, this customers, we have the blockchain topic doesn't pop up into one way or another all the industries. So this is obviously one of the big changes.
So where I wanna start is if we can look at business drivers and, and business impact. So when we look at business drivers, so things which are driving this entire change, we are facing on one hand, that's the regulatory change. So we see these new regulations and we all know when we look at PST two, that's been a very hot topic at our last year. Initial finance conference, PST two in the introduction of S the target is to foster competition.
So there's something where the EU tries to change business. We have the technology change on the other side.
So we have a lot of changes in technology and blockchain is one, but not the only one we are facing here and we have on the business change. So what does it mean to the entire business and what are the new business models and new players coming in here and all this in fact, changes our business and has an impact. So we have the changes in the competition. So we have different competitors and we will see more of them. If you look at PSD two and third party providers, obviously there will be other layers.
And in many countries, more than in Germany, we are already seeing, for instance, apple pay, being a very relevant thing. So it's funny trust this morning had two quick conversations out there and both said, you know, in Germany, I usually still pay by cash, but I'd like to do it the same way.
I do it all where I don't need any British thought anymore. I don't need cash. And obviously there are other layer in, there are other business cases right now, things which can be done. There are also the change from the business model. So what can we do and how do we do it?
And there are, there's also the change in the margins. And I think from the business impact perspective, we see new business model business cases. What particular, when you look at what happens is around blockchain, but also when you look at third party providers in PST two, which have their own changing business models, which might have a different interest. And which also in some areas we see in pressure on margin. So we fit might potentially lead to some pressure on margins. When people see what is paid to whom in that process.
And obviously it's something which raises questions.
Having said this, what are in fact, these changes and why is it so disruptive? I already said, there are in fact the regulatory changes or technology changes, technology changes in the business changes. And some of them are, are very new, but others aren't.
Anyway, they are sort of culminating right now, which is something which leads to change. So when you look at this, we have, we fit two effective early January. We have two January GDPR may this year, we also had, which was not that much discussed. The end of net neutrality was end of last year, which might be not as relevant for disruptiveness for the finance industry, which is more relevant regarding the disruptiveness for other industries.
But again, also that, and for other industry three might be more GDPR and net neutral relative, which leads to this disruptive effect for the finance industries, obviously more also the finance regulations.
And we will definitely see, in fact, they have even some more here, but let's just pick these. On the other hand, we have seen a lot of technology changes and some of them date back quite a while, or the blockchain, in fact, date back to 2008, but it's like data internet. Most people first came in touch with the internet many years after the internet had started, we have to cloud.
So the term dates to 2006 when Amazon released the elastic cloud, but actually it started earlier. We have mobile going back to the eighties, social, oh, there's, that's the old slide deck. Obviously that's a pity. We have social, which is pre 2004 should. In fact should say, here we have the social, the, the, the, the smart mobile here, the smart mobile is something which we started seeing.
In fact, 2007 was the introduction of the iPhone. We just a different blade in sort of the traditional mobile thing, because it wasn't changed things like payment, etcetera, and this is starting to get effective right now. We have social for a couple of years. We have IOT for many years. So we have a lot of change here.
And IOT, for instance, is one of these areas, which is getting more and more important right now, when you trust red and used yesterday from the mobile world Congress, there was a lot of talk about 5g and how 5g networks. So the next generation of mobile networks will sort of triple in into a lot of sort of components daily life.
So that will be far more components, not only communicating, but also sort of doing actions, put this together with blockchain, smart contracts and other stuff that you will have more components, which sort of automatically order some services, which we will payment, which will lead to a change.
And when we look at these things here, it's so blockchain.
Yes, it's out for a while, but we are right now at a point, which I would say this is sort of reaching the critical mass or, or coming to a comprehensive effectiveness in the sense of right now, it's the point where we see the concrete business cases out there receiving concrete applications out, out there that starting, I think blockchain, we will see a lot this year. A lot of launches also powered by money through ICO. So through the initial coin offerings. So there's so much money in there will happen. A lot of stuff here. Cloud.
I had conversation with chief security officer of one of the large finance financial institutions over here in Germany, just a couple of days ago. And he said, right now we are the point that even the regulators are supportive or allowing us to make the shifted to cloud.
I think it's not that disruptive for the, for that industry, but it's anyway, something which adds to the entire picture, the, what should be here, that the smart mobile obviously will right now. I think I've just the number. So that last year, it was the first time that there were even in Germany that was more business done.
So we of what we had the internet done with traditional types of payments. And we will see, I think, you know, the younger generation.
So they, they are waiting for ICA pay the same way as I can. And it will happen even here, even for Germans, which are a little slower, the adoption of these new technologies. And if you go to Asia, it's a total different thing where it's absolutely common already. So we see this becoming trust at a level of critical mass. And as I said, the IOT thing as well.
And so even while many of these technology changes stayed back a couple of years, the essential point is that several of them particularly smart mobile blockchain IOT are in 2018, maybe 2019 leading to more disruptive changes in the context of new layers, new business models, new business cases. But also to some extent in the context of the regulatory changes, if you take PSP two, obviously PSQ opens the door. So party providers, the door to new types of smart mobile payments, and etcetera, you have the new layers, you have the effect here.
So just in fact at leads, the new competitors, graduate options, but also for instance, that's something which is, I personally believe absolutely underestimated. That's the part of the changing customer, a journey. Where does this come from? This comes on one hand from PSB two, a little bit, some information here, but PSB two, in fact, yes, you have the option right now with account information, service provider payment, initiation service provide to have a different front end, but it also comes with GDPR because GDPR means you have to inform your customer differently.
You have in some areas to consent, need for consent, unless you have a contractor or electric purpose. So in that space, it means the way also you interact and interface with your customer changing and changing customer journeys is something which is a really challenging thing. Because if the customer does like a new journey, you might decide to take a total different route, which doesn't include you anymore. And if the customer thinks, oh, there's someone who gives you a far better customer experience training. So the trust, the third party provider, you might end up with them.
So this is something which changes the business on the repair for it. You have the new business models. So particularly when you look at blockchain, there are a lot of things which are, which we can do today. There was the news that Amazon paid more 1 billion for a provider of electronic locks.
So take electronic locks, put it into the context of I IOT blockchain, smart contract. Then you can do some interesting things. You can kill Airbnb if you want could payment is inside cetera. There are new options. Obviously we have to increase the regulatory cost. It's a pain for everyone.
And I think we need to do it better. Trust being compliance is not enough in number. We need to look at what can we do better here? We have the it cost, which comes, which is changing, I would say in some way, but we also have that step. Other side of the story. We have also new opportunities because what we never should forget is that what others can potentially also the existing players can do it. So we have in fact, two groups here, which are the, the existing players and new players. So what you definitely should do is so just, we always look at the pride side.
So don't, don't be the, the rapid in front of the Umay, but, but really try to be, look at the positive things. Yes, we need to be aware. Regulatory changes are here to stay. I don't expect that we will see a, a broad deregulation. So some deregulation might come from the us. So triple to some extent, but not a broad sense. The technology changes are here to stay. And we have to think about what does it mean for our business. And when I look at the way I have to do payments with my folks bank, so I'm a little old school, so it's okay for me, but it might not be okay for many other people.
So it's really a little bit stone age, starting with the center I have here. Business changes are here to stay, including the change in competition. So this is something which will not go away.
We see this changes in competition and obviously a lot of players up trying to enter the market here. So there are opportunities for both the established and for the new players. And we have to be also very think that's important for both and you and the traditional players that so justly, nobody is perfect. Nobody's perfect. In the sense of look at established players, they have to friends.
So an established player, yes, there might be startups which have endless money, but you also know when we go back to the new economy, even immense amounts of start of money don't last forever. So I think established businesses have a different way of dealing with finance and probably little bit less focused on, on burning money. You have the customer relationship, you're an established business. So it's still your customer. And I trust believe it. Main thing to look at is how can you retain your customer relationship?
And how can you come to a point where you are, have still interfaced the direct interface to the customer so that you're not just the backend provider of services, but it's still your customer. This is very essential saying you have to knowledge about regulatory knowledge, regulatory processes around how to do this with regulations, but the other and the new entrance or speak.
And so the you in the sense of who is the new entrant actually innovativeness, that's where they come from a focus, which is easier because they only need to do one thing and succeed or fail and no legacy technical burden on the frequency in startups is that their software architectures are horrible and not maybe to last. So that's the other side of the story. Then you grow and you succeed and you identify or have to reinvent everything cause it's not good enough.
So having said this, it's important to do it, right?
So understand, build on your strengths and identify and address your challenges. Be realistic on that. That's true for both. It's true for established players. It's true for new entrance. Look at when interesting that previous slide look at, where are your strengths? Where are your challenges? And I wanna trust look at three main actions before I close smile speech, you should think about the first action is stop seeking inside.
Out, outside in. I recently heard from someone who that, okay, we have a bank customer that had a Vasco secure Vasco, OTP, token customers weren't normally happy. And they did a study on that. And I said, okay, you don't need a study because it's very obvious that most customers don't like it that way. And then they came up, oh, we do also outand SMS, but it's so old school.
There are so many different ways and more convenient ways right now to do the payments. They didn't really look at it from a customer perspective. What they did is they looked at it inside out.
So what works best for us regarding dealing with PII or regarding altercation to payment processes saying customer, you have to do what you want you to do. That's the wrong attitude. The attitude we have to have today is thinking outside in. So what works best for the customer? What are the ways they want to use today and tomorrow? How do we enable our business to support whatever authenticator is acceptable and good for the customer? How do we do it in a way which the customer wants to have the smart payment, etcetera, so that supporting a smart payment scheme, doesn't help the customer.
Then the customer trust go away. So there's no way to avoid it.
You have to do it. If you have to trust it in a way the customer needs do what the customer wants. So that's my first action item. The second one, ISS blockchain and T distributed lecture technologies. So understand the technologies first, understand the business model behind so coin offering and all that stuff, analyze the known use cases and sync beyond. So there are so many use cases proposed today. Look at these, understand the impact on your business model. So what does it mean?
And there might be also situations where you say, okay, this my business model, but you know, if you can't avoid that happening, then be part of the game, understand the ecosystem of partners and technology. So with who to work here, define your business case, decide and will. So there's no way to just ignore blockchain, to find out how you make the best out of it and how you don't end up in a looser situation.
Because I was doing, you don't do the third, the last few seconds do innovation, right?
So when I look at innovation, we have a lot of digital units and many of them are only young people. That's not the right way.
So what I, what is the right team here? You need to have actual team.
Yes, that needs the team needs to be agile. It needs to be innovative. No doubt about it. It needs to be openminded yes, they need to think beyond, but also you need experience and learn from previous failures, failures, learn about how some things must be done. So just being in a way, if is not enough, you also need to understand how to get power on industry. You need some tech savvy people who understand technology well enough, but not only tech savvy people. You need people who bring in the structure and you need people who understand the customer. You need to bring these things together.
So it's not one single thing. It's a mix of capabilities you need to have here. So having said this at the end of my presentation, slides will be all available for you for download. So here you go. I head over back to Mike. Thank.
