SAMI Consulting

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SAMI Consulting
In Safe Hands? The Future of Financial
Services
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Agenda

• Background
• Long Finance, long term thinking
• Global 2050
• What we can forecast
• Uncertainties
• What paradigm changes can we envisage?
• Forecasts and scenarios
• Four scenarios
• How might the world be?
• Financial services
• What institutions will there be and what will
  they provide?

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Long Finance

• Initiative set up in 2007
• Supported by Z/Yen and Gresham College
• Aim improve societys understanding and use of
  finance over the long term
• Tackled specific issues such as the future of
  mortgages, systems view of the credit crunch,
  history of money -----
• Long Finance Forum of Futurists (L3F)
• Project to develop rounded views of the future of
  finance
• Supported by Z/Yen, Gresham College and SAMI

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Long term change
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Global population
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Global 2050

• Global population will grow to 9 BN and get older
• Most of the additional people in Africa and Asia
• Turbulence as the world rebalances to new centres
  of economic power
• New centres may not share the value systems of
  the West, or the Washington consensus
• Washington consensus describes economic policy
  prescriptions for a market economy
• Technology (info, cogno, bio, nano) will continue
  to introduce changes in personal capacity and
  lifestyles
• Ecological, energy and environmental limits
  tested or breached
• Population increases
• Population lives in cities (70 by 2050)
• New middle class uses electricity, travel, eats
  meat

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Uncertainties

• Will our economy and society be similar to now,
• Will it implicitly follow the Washington
  consensus
• or
• Will there be a new paradigm?
• Does geography matter?
• If it does matter what sort of new paradigm might
  there be? City states?
• or
• If geography does not matter, will markets be
  global and so largely virtual? Based on affinity
  groups?

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Scenarios
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Scenarios for 2050
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Second Hand

• Capitalism, nation states, democracy and western
  value systems still dominant as concepts,
• though not all countries/regions are moving to
  embrace these
• Nearest to current paradigm but
• Degradation of state capability
• Technology has fed the population
• Systems in constant crisis
• But no new ways forward
• International institutions stagger on

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Visible Hand

• Capitalism, democracy and western values still
  dominant
• Significant stand-outs and international tensions
• Global markets
• National governments in retreat
• Evolution of Washington consensus
• Rethinking of taxation pensions
• Food revolution successful
• ICT underpins all
• Lack of diversity leads to break down by 2030
• Inability to handle systemic volatility
• Break down of international institutions

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Long Hand

• A crisis has caused the breakdown of the
  Washington consensus
• Society has re-formed around affinity groups
• Multiple value systems accommodated
• Democracy not seen as universal good
• Complex arrangements of nation states and
  communities of affinity groups
• How do international issues get addressed
• eg regulation
• eg systemic challenges?

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Many Hands

• A crisis has caused the breakdown of the
  Washington consensus
• Society has re-formed around city states
• Cities as wealth clusters brands
• Failure of nation states
• Democracy, capitalism and western values
  competing with other organising concepts, UN etc
  disappear
• Global commons abandoned
• Conflicts in values, fewer implicit norms

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FS in 2050

• Older population
• Risk averse
• Changing balance of power
• Globally away from West
• From country to cities
• Impact of ICT
• Reduce size of FS sector
• Insurance declines
• Retail banking automated
• Environmental and natural resources
• FS sought to shelter from volatility of natural
  systems

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Second Hand

• Ecology of FS more diverse than in 2010
• Investment across regions to shelter from
  volatility
• Ageing society means
• Pensions and security an emphasis
• Private insurance sought but often impractical
• Commodities and equity trading reduced
• Fewer larger corporates
• Singapore the most powerful FS hub

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Visible Hand

• Has disappeared by 2050 replaced by
• Long Hand if military and civil insecurity the
  main driver
• Many Hands if cyber-security the main perceived
  threat

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Long Hand

• 50 or so loosely coupled transnational systems
  with diverse regulatory regimes
• Investment outside home group discouraged
• Implications for traders
• Affinity groups across geographies
• Retail banking through intelligent Financial
  Advisors
• Trust within affinity group
• London and New York pre-eminent FS hubs due to
  diverse resident communities

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Many Hands

• 50 or so loosely coupled city states with diverse
  regulatory regimes
• Investment outside home city state discouraged
• Implications for traders
• Concern in wealthy city states around
• pensions and security of supply of resources
• Trust within geography
• Retail banking between individuals within city
  states
• No mechanism for handling global risk
• 5 pre-eminent FS hubs including Istanbul

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Some surprises

• By 2050
• Shrinkage of FS sector due to ICT
• Insurance basis in question due to ICT
• FS role in dealing with resources shortages
• Second Hand
• It may be as good as it gets!
• Visible Hand
• Homogeneity cause of volatility and break down
• Long Hand
• Best for London as FS hub
• Many Hands
• How real this one feels.

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Thank you!
The full Report In Safe Hands? The Future of
Financial Services is available in pdf on the
Long Finance web site www.longfinance.net and the
SAMI web site www.samiconsulting.co.uk. Members
of L3F are happy to work with organisations
through workshops or consultancy based on these
scenarios. For this, or any other query, contact
us at l3f_at_samiconsulting.co.uk.