A rapidly changing financial landscape

November 2014

If the rate of change on the outside (of an organization)

exceeds the rate of change on the inside, the end is near....

-Jack Welch

Then…

Thx to R. Wieselfors, Ericsson for photos

…Now

Thx to R. Wieselfors, Ericsson for photos

Accelerating pace of change

Ray Kurzweil, Singularity Institute

People• High internet penetration• “Net generation”• 24x7 “mobile” workforce• Knowledge via MOOCs• Sharing not consuming

Technology • Broadband access• The cloud• Mobile phones• Internet of Things • Big data• 3D printing• Robotics/AI• VR/AR

Open Source• Software

• Hardware• Physibles

Convergence of…..

Finance• Microlending/microfinance • Crowdfunding/equity/P2P• Non-fiat cryptocurrencies• Mobile money/payments

In just a few years in Sweden…

Company Founded Business

Klarna 2005 E-commerce payment services

MyLoan 2006 Loan broker

Trustly 2008 Online payments

TrustBuddy 2009 P2P lending

iZettle 2010 Mobile payments

FundedByMe 2011 Crowdfunding, crowd equity

Kivra 2011 Digital mailbox

Tink 2012 Personal finance

Safello 2013 Cryptocurrency exchange

KnCMiner 2013 Cryptocurrency mining equipment

Toborrow 2013 P2P lending for companies

The genie is

out of the bottle….

New developments like crowdfunding and cryptocurrencies (e.g., Bitcoin)

have let the genie out of the bottle…..

All our basic assumptions about money and financial services are now

being questioned.

What is Crowdfunding?

Accumulation of small investments in individual projects by large number of individuals (the

“crowd”) via or with help of Internet and social networks (De Buysere et al., 2012)

Picture: FundedByMe

Local Stockholm success story: Flippin’ Burgers

Money raised:

SEK 36,502 /

€4,000

Number of

investors: 186

Date funded:

September 2011

Sector: Food

Enabling local, small-scale solutions

http://travel.cnn.com/best-americana-restaurants-europe-023346

How big is crowdfunding?

FundedByMe raised USD 10.5 mln to date

Swedish market to be SEK 100 mln in 2014

Global crowdfunding almost doubled 2012 to 2013 to USD 5.1 bln

March 2014 Kickstarter passed USD 1 bln in total pledges

By 2025 global crowdfunding could reach USD 90 to 96 bln (1.8 times today’s global VC industry)

Growth potential greatest in emerging markets?

USD 50 bln in China by 2025?

Four forms of crowdfunding

Form Benefits for funders

Donation-based Donation Intangible benefits.

Reward-basedDonation or pre-

purchaseRewards in addition to intangible benefits.

Equity-based InvestmentReturn on investment if company does

well. Rewards sometimes also offered and intangible benefits may motivate too.

Debt-based LoanRepayment of loan with interest.

Alternatively intangible benefits if loan given interest-free.

Ingram & Teigland 2013

Crowd equity taking off

Toborrow.se

One step in the financing chain

Nesta

Women in USA<30% of business owners

<15% of angel investors

<10% of venture capitalists

But…Women on Kickstarter 35% of project leaders

44% of investors on platform

>40% of projects women invested in had female project leaders

Marom, Robb and Sade 2014

Democratizing innovation through access to capital

“Made in Africa” 3D printer (Togo)

Winner of International Space Apps Challenge

http://www.engineering.com/3DPrinting/3DPrintingArticles/ArticleID/5712/E-Waste-3D-Printer-to-Mars.aspx

In just a few years in Sweden…Company Founded Business

Klarna 2005 E-commerce payment services

MyLoan 2006 Loan broker

Trustly 2008 Online payments

TrustBuddy 2009 P2P lending

iZettle 2010 Mobile payments

FundedByMe 2011 Crowdfunding, crowd equity

Kivra 2011 Digital mailbox

Tink 2012 Personal finance

Safello 2013 Cryptocurrency exchange

KnCMiner 2013 Cryptocurrency mining equipment

Toborrow 2013 P2P lending for companies

Cryptocurrency mining equipment

http://techcrunch.com/2014/09/04/kncminer-raises-14-million-to-take-bitcoin-mining-to-the-moon/

Bitcoin = The power of community + open source + internet + CPU

Developed by self-organizing community of thousands of “strangers” across globe

Not one but many motivations (intrinsic, extrinsic)

SEK 91 bln in circulation vs SEK 38 bln of Bitcoin in five years

Approx USD 5.2 bln in circulation (Nov 2014) and 70,000 daily transactions

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2263707

What is a cryptocurrency?

Digital

Decentralized, peer-to-peer (P2P), i.e., no central, third party

Uses cryptography to validate transactions

Also uses cryptography to generate currency itself

How does Bitcoin work?

Screenclip from: How Bitcoin Works under the hood, by “Curious Inventor”

Block chain • Shared public ledger • All transactions ever

made available• Chronology and

integrity enforced by cryptography

Mycelium Bitcoin Wallet

Bitcoin – one of many cryptocurrencies

Currency CodeYearEst.

Founder(s) Active Website PoW PoS

Bitcoin BTC or XBT 2009Satoshi Nakamoto (pseudonym)

Yes N/A Yes No

Ripple XRP 2013Chris Larsen & Jed McCaleb

Yes ripple.com No No

Litecoin LTC 2011 Charles Lee Yes litecoin.org Yes No

Peercoin PPC 2012Sunny King (pseudonym)

Yes peercoin.net Yes Yes

Dogecoin DOGE 2013Jackson Palmer& Billy Markus

Yes dogecoin.com Yes No

Namecoin NMC 2011 N/A Yes dot-bit.org Yes No

Mastercoin MSC 2013 J. R. Willett Yesmastercoin.org

No No

Primecoin XPM 2013Sunny King (pseudonym)

Yes primecoin.org Yes No

Rise of local currencies

A vocabulary list of currencies

Fiat currencyNational currency

Alternative/complementary currencyBonus points/vouchers, e.g., frequent flyer miles

Digital currencyIn-game currencies, e.g., Stardollars, Farmville cash

Virtual world currencies, e.g., Linden dollars, PEDs

Mobile currency, e.g., M-pesa

Cryptocurrency, e.g., Bitcoin

From Africa to Eastern Europe to ?

Real cash economy in Entropia Universe

http://blogs.forbes.com/oliverchiang/2010/11/13/meet-the-man-who-just-made-a-cool-half-million-from-the-sale-of-virtual-property/

•GDP >USD 440 mln•PEDs <--> USD, Euro•Record virtual good: USD 625,000

The future?

Facebook + banking license?

What does the future hold?

• Will we see a parallel to other industries, e.g., music, software, newspaper, books?

• Will “trusted” third parties no longer be needed since trust can be mediated through networks, which are self-regulating?

• What basic assumptions will no longer hold, e.g., do we need money?

”The future is already here, it’s just not very evenly

distributed."

- William Gibson

Robin Teigland

robin.teigland@hhs.se

www.knowledgenetworking.org

www.slideshare.net/eteigland

www.nordicworlds.net

@RobinTeigland

If you love knowledge, set it free…

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