8 things you need to know about the future of finance

You may not have been able to attend our third annual WIRED Money event, but we wouldn't want you to miss the key insights and inspiration from almost 40 entrepreneurs, incumbents, startups, activists and evangelists who spoke from our two stages. Here's our guide to WIRED Money 2015, Together With BBVA. Studying these pages would be a wise investment...

David Rowan Editor, WIRED

Build a new world bank

Executive chair of the board, Kiva; US Presidential ambassador for Global Entrepreneurship

Peer-to-peer lending has created connective capital, a whole new class of capital, and is well on the way to founding an alternative to the World Bank, Julie Hanna told WIRED Money.

Kiva -- and its 1,500-odd competitors such as Zopa, Lending Club and Kickstarter -- has created a default "world's bank", she argued. "The World Bank itself is a top-down mechanism that funds institutions," according to Hanna. "The world's bank is a bottoms-up, nimble, person-to-person network that funds and gets money into the hands of entrepreneurs where they need it the most. Connective capital has some unique characteristics. It's patient, it's risk-seeking, not risk-averse; it's accountable, it's transparent. It's allowing us to bring business to all of humanity and humanity into the way that we do business."

Kiva was founded in 2005. Its total loans have grown from $5 million (£3.2m) in 2007 to a total of $1 billion projected by 2017. The network now has 1.3 million lenders across 190 countries investing an average of $400 each, funding 1.6 million entrepreneurs across 86 countries. About 98 per cent of loans are repaid in full. "Somewhere along the way, Kiva became the largest funder in post-conflict Africa," Hanna explained. "Every one of our 1.3 million lenders has made a loan in sub-Saharan Africa." Kiva's borrowers range from solar businesses in New Orleans to young women rescued from sex trafficking in Cambodia who were looking for capital to start a sewing co-operative. Women make up 80 per cent of the borrowers. "The power of the wisdom of crowds is the fact that people can qualify and connect and vote with their dollars in a way that no amount of loan officers ever could," according to Hanna, whose inspiration came from her childhood experiences as an immigrant. She was born in Egypt and her parents then fled from Lebanon for the US, but found it hard to get access to resources there. "It's character-based lending as opposed to collateral credit-based lending. In essence, it's rehumanising banking."

Global payments work if treated hyperlocally

Chief commercial officer, Adyen

Success is about thinking globally but acting at a very personal level, Roelant Prins of Dutch payments giant Adyen, advised the room. "We went global from day one and that made the difference," Prins explained. "Our first customer was German, not Dutch. But using big data we can understand the behaviour of individual customers -- and understanding cultural differences is a huge opportunity." Adyen positions itself as a single global platform processing £35bn annually. It employs 300 people and raised £250m last autumn against a £1.5bn valuation -- with Spotify, Airbnb, Dropbox, KLM and River Island as customers.

The key number is the 250 payment methods Adyen supports worldwide, bringing them together into a single system. Using big data, Adyen can create a broad picture of a shopper -- connecting behaviour and choices with ID to reduce risk, but also allow personalised relationships on the high street. "All the data on mobile and online is super-valuable, but if you look in-store there's nothing," Prins explained. "You walk in to a store, they don't know who you are. We can now combine point-of-sale payments with the online infrastructure so you stick your card into a terminal and we can tell the retailer, 'This guy purchased online over the past few months for a lot of value.' That's retail gold."

Consumers make banks extinct

Co-founder, TransferWise

Banks are in for a hard time and will be replaced with something more user-centric, warned Taavet Hinrikus, co-founder of the London currency company valued at more than $1 billion. "Bill Gates once said, 'Banking is needed but banks are not,'" he told the audience. "I'm convinced tech companies will own 40 per cent of banking in the years to come."

TransferWise, he explained, was born of personal frustration. As a Skype employee in London he was paid in euros, and his now business partner Kristo KККrmann was paid in sterling, but needed euros to pay a mortgage. Fed up with losing money in bank fees, KККrmann put pounds in Hinrikus' British bank account, and Hinrikus put euros in his friend's Estonian account. The idea for TransferWise was born. Launched four-and-a-half years ago, the peer-to-peer company now transfers around £500 million a month, saving, Hinrikus claims, £22 million in banking fees for customers every month. "In the UK today, TransferWise is about five times faster and about ten times cheaper than your bank," he said. "But more importantly, it's about transparency. It's about not hiding any of your fees, not having a mark-up on the exchange rate and being brutally honest about what you're doing for the consumer."

His vision for the world of banking was for TransferWise and others at the conference -- such as GoCardless and Funding Circle -- to replace key banking services. However, fintech companies needed to focus more on the consumer. "Consumers drive change in fintech but, really, consumers don't care about it," he argued. "Don't do innovations you think are cool, do what consumers think is cool. And as a consumer, I'm waiting for what's going to come after banks."

Innovators come from the East

Director of digital currency, MIT Media Lab

Bitcoin -- and its fellow blockchain cryptocurrencies -- will do for payments what email did for communication, argued Brian Forde, MIT Media Lab director of digital currency. The technology, he said, could even foment a new global capitalist revolution. "When we started out with email, you could only get mail from other people on your platform," he explained. "It wasn't until we had the open protocol SMTP that we could start sending emails to Hotmail and Gmail. Cryptocurrencies are the open protocol of payments -- the SMTP of money."

Forde compared eBay to AOL: "What's the eBay stack? The transfer of money, your identity as a buyer or a seller, your reputation as a buyer and seller and then the marketplace," he said. "Suddenly you have these open protocols so you're no longer stuck on eBay and you're dealing with everyone. People talk about Uber and Airbnb as disruptive - but they're intermediaries just like the incumbents. This open protocol actually disrupts the disruptors."

Forde is investigating the security, stability and scalability of the blockchain, ways to spread the system to increase diversity and its possible impact on the developing-world economy. "Capitalism took off in countries such as the US with most small-business owners borrowing against their home," Forde argued. "Where people don't have a formal property title, like in Egypt, all this capital is tied up. If you have a property title put on the blockchain, even if there is then a government that no longer respects the title, it's on the blockchain: the government can't say you never owned it. In Egypt, that unlocks $400 million in capital."

A few months ago, Forde gave a workshop on Bitcoin to more than 30 Iraqis with non-technical backgrounds. They started sending money to one another and coming up with ideas he couldn't have foreseen. "We're going to see innovations come from nations where financial infrastructure isn't strong - rather than from the west," he argued, predicting a revolution in financial services by and for the millions who've had no such access to date.

Financial literacy should be a habit

Co-founder, BillGuard

In a room full of VCs, founders and entrepreneurs, the warning from Raphael Ouzan, of personal-financial-security firm BillGuard, that fintech is in peril gave the conference an electrifying start. "Many industries have taken giant steps forward but we have not," he argued. "Blaming regulation is an excuse for now but won't hold for much longer. We need to learn from services like Uber."

Ouzan's experience launching BillGuard -- an anti-fraud service which scans users' credit-card accounts for questionable transactions -- helped him understand the problem because BillGuard was launched to huge acclaim and then almost vanished. "We designed a service that is very simple to use. Thousands of people got into the service, the press and social media lit up and the technology actually worked," he explained. "But people stopped using us. We focused on the function and saved people money, but one key element was missing: engagement. If it doesn't become a part of your daily life it doesn't matter. It was not relevant... This is what's wrong with our industry. A lot of our products are just not relevant for our consumers."

That's the Uber lesson, he insisted: "Instead of focusing on the payment, they reshaped the experience so we use it over again because we love it. PayPal, MasterCard and Visa have put so much investment into mobile wallets - but it was the Starbucks app that made mobile payment work because the whole experience of getting your coffee in the morning was improved."

The problem is people's "traumatic lack of financial literacy", he suggested. "My father performs open-heart surgery and doesn't know the difference between a bond and a stock. Donna Haley, a prominent behavioural economist, calls it the 'now versus later': if you walk into an Apple Store you can literally feel what a $1,000 Apple Watch would feel like on your wrist. That's a very clear benefit. But what would that $1,000 look like in 30 years from now if you invested it?"

He and his team asked themselves how to create an app that would get people to check bills. This led to an app that turns your bank accounts and services into a list of items that reinforce the habit of paying attention to your money. "If you run this loop enough times you get a habit. A habit makes a service relevant," he said. The app hit the top of Apple's finance charts in several countries, and was one of the best of 2014 on Google Play. Other fintech companies take note, he urged: "Make financial services relevant so we can save consumers from financial illiteracy."

Credit scoring is outdated

Founder, InVenture

With 2.5 billion people in the world lacking any financial identity, prevented from borrowing money and unable to build businesses to drive economies, the question from Shivani Siroya, CEO and founder of InVenture, was simple: could we build that identity for people by looking at their data? InVenture has gone some way to solving it in Kenya with an Android app called Mkopo Rahisi -- "easy loan" in Swahili -- which gathers an average of 10,000 data-points per user, including financial transactions, social-media accounts and web searches, to build a rich personality profile. It can deliver instant credit access in less than a minute direct to a user's mobile money account. Kenya's mobile-money market interested a number of conference speakers - there are over 26 million mobile-money accounts in the country and 43 per cent of Kenya's GDP is said to flow through mobile money. Mkopo Rahisi has loaned $1.5 million with an 85 per cent overall repayment rate. "Our customers use our product more like a revolving line of credit, more like a credit card than the traditional loan product," Siroya explained. "Over 60 per cent of our customers use it for working capital." She cited one of her Nairobi-based customers -- Brenda -- who sold curtains door to door. After struggling to expand her business, she used Mkopo Rahisi's loan, initially for inventory, but she came back every month. Brends has now invested in a store front, taking her off the city's streets.

Siroya aims to be in two more countries by the end of this year. "Beyond credit, we've built more meaningful pictures and financial identities for the newest and most overlooked consumers - those who are incredibly profitable and valuable customers," she explained. "We've given them the power of choice to build better financial futures."

Try to cater to all, not just the millennials

Executive director, innovations partnering, Visa Europe

On a day when speaker after speaker warned of a gloomy future for banks, Jonathan Vaux was in agreement: financial-service incumbents needed to guard against complacency, he said. But he also warned that many fintech startups needed to do some basic homework if the promised revolution is ever to come. "I see a lot of startups who want Visa's brand, money and distribution," he explained. "You'd be amazed how few give me any sense of what's in it for me as the provider of that service. One of the top three pain points that I have working with the startup community is getting them on to our books so that we can pay them for the services they're providing. Most won't pass the credit check that's necessary to be a supplier -- a problem some simple preparation would overcome."

His dream, he explained, was to disrupt the usual narrative of startups taking on giants of payments such as Visa and stealing chunks of their business. Instead, intelligent firms on both sides should learn to work together. "There are people who say that startups and incumbents can't work together -- but I think, like peanut butter and jam, there are combinations that shouldn't work but can," he insisted.

Visa, he explained, is talking to startups in areas such as identification, device fraud, cloud services taking some of the pain out of online payments, digital receipting and even Bitcoin. "The smart players are taking all those elements -- what I call the LEGO-fication of payments - and choosing and building solutions that are fit for purpose and variable."

He had a final plea: "Every solution I see is looking at millennials -- many are so specific and focused on the millennial that it may be hard to appeal to anyone else," he explained. "But these won't be most organisations' best customers."

Payments need to collaborate

Founder & CEO, Leetchi and MangoPay

The fintech world isn't ready for the collaborative economy, Céline Lazorthes warned the conference -- and it stands to lose out on millions of pounds unless it understands the needs of crowdfunding platforms and the like.

Lazorthes, who launched e-wallet provider Leetchi back in 2009, was stunned when a friend who ran a crowdfunding site explained how difficult PayPal payments were proving. "The user experience that PayPal provided him meant payments went directly to the project owner - so they didn't know who was paying and who wasn't paying," she recalled. "PayPal wasn't made for a collaborative economy. It was made for retaining, it was made for e-commerce, but not for this kind of platform."

Crowdfunding sites also suffer when pledges are made before payments are needed -- all the site can do is authorise a credit-card payment at the time of the pledge. "You can't store the payment while the project is collecting -- so you make an authorisation and maybe two or three months later you try to debit the card and 20 to 30 per cent of transactions are rejected," she explained.

MangoPay is her solution. Launched in 2013, it combines the e-wallet know-how of Leetchi with an API that allows customers to hold an e-wallet of pledges and transfer them to the project owner on completion -- or back to the pledgee if the project fails.

Six hundred crowdfunding sites, marketplaces and collaborative-consumption platforms in 22 countries use MangoPay. In 2013, the system collected €45 million; in 2014, it took €100 million and is on course to reach €200 million this year. Pressed on the risk of copycats, Lazorthes was sanguine. "Building technology like this takes time and money," she said. "It took us four years. So we have a head start."

The BBVA Ventures Startup Stage

Representatives from 18 fintech companies spent nine minutes pitching to the WIRED Money audience of experts and investors:

Michael Madon RedOwl Bastien Bourdon edgefolio Emily Mackay Crowdsurfer Daniel Gandesha Property Partner James Smith Elliptic Andy Goldby The Floow Gonçalo de Vasconcelos SyndicateRoom Lúí Smyth CoinJar Nikolay Storonsky Revolut Julian Oehrlein Oradian Kerim Derhalli invstr Alon Feit PayItSimple Mark Lamb Coinfloor Gerald Eder CompareAsiaGroup Aron Rissman ThetaRay Dylan Bourguignon Syndico Ami Daniel Windward Kaylan Tildsley Triton Research

You can see and hear the speakers from the main stage at wired.co.uk/wired-money-2015.

This article was originally published by WIRED UK