We are excited to be welcoming Jesse Lund, Vice President of IBM Blockchain, to the State of Digital Money 2018. We had an opportunity to ask Jesse a few questions and talk more about his work at IBM Blockchain and his thoughts for the future of digital money:
SODM: You cut your teeth at Wells Fargo for almost two decades – What is the single largest truism about the financial sector that the lay person like me wouldn’t know about or consider?
Jesse: As consumers we’ve grown accustomed to banks being the intermediaries for payments. That is, we don’t really think twice about the requirement to have a bank account in order to receive our wages from our employers (e.g. via direct deposit) and to pay our bills (which uses ACH). Most of us would attribute those functions as the primary motive for having a bank account at all! But Blockchain and Bitcoin in particular have challenged this notion, such that younger generations (i.e. Millennials) are starting to rethink the need for bank accounts, and rightfully so! The historical role of banks is to gather deposits, pay interest to depositors, and make loans using those deposits, thereby creating credit to grow the economy. But banks have increasingly become dependent upon payment fee revenue as a large portion of their income and are not providing the customer experience that new, mobile-minded, Internet-savvy people expect. Blockchain and cryptocurrencies are bringing disruption to banking. My hope is we can bridge the legitimate function of banks with the high velocity and mobile friendly experience that digital currencies promise to deliver.
SODM: What comes to mind when you hear “digital money”?
Jesse: If you look at the money supply today, most of it (like over 90%) is “digital”. Only a small portion of the money supply is cash. So money is already “digital” insomuch as it’s represented by numbers in bank ledgers that we see in our browsers when we log on to internet banking. But when I think of digital money, I think of a new denomination— a new species of money— a tech-enabled currency that moves freely and without friction. One that can be safely stored in places other than traditional bank accounts. Again, Bitcoin has already demonstrated this is feasible. So I think of a future where banks and/or central banks begin issuing “tokens” that represent a claim on fiat reserves, which can be freely exchanged on open interoperable networks, enabling all sorts of efficiencies and new applications, operating on a global, rather than a national scale.
SODM: How has the landscape of #fintech (technology behind finance like mobile payments, etc) changed in your time working in the industry?
Jesse: It has changed dramatically! I came out of college at the time when the Internet was just becoming mainstream for applications like email. I can remember the debates within the banks as to whether this “new Internet thing” was really here to stay. People were actually debating the merits of how banking could benefit from the Internet (before online banking was even real). Ironically, the debate sounds a lot like the one we are having with digital currencies and crypto assets today. I don’t think I’m really that old. I’ve only been working for 20 years or so, but it’s beneficial to have the hindsight I do, which makes it easier to predict that cryptocurrencies and “digital money” are going to have a profound and lasting impact on the financial services industry worldwide.
SODM: How did you or your company get into Blockchain/crypto space? And how has it changed since being in the space?
Jesse: When I left Wells Fargo I was running the Enterprise Innovation Lab, which afforded me great access to emerging technologies and tons of innovative projects across a wide range business divisions. It also afforded me portion of the company’s R&D budget to spend on the strategic priorities assigned to my group, which included Cloud Computing, Blockchain, and Digital Currencies (like Bitcoin). We actually bought a few Bitcoins in the early days (2014) to experiment and quickly saw both the merits and competitive threats of this emerging phenomenon we call “digital currency” today. Most of the senior executives dismissed it quickly and turned their backs. A few senior executives saw merit in continued investment. The further I dug in, the more I realized the transformational potential this had for banking and financial services. I realized I wanted to focus on this full time. That’s what led me to IBM. It was (and still is) the only global company of its size and credibility saying, “we’re betting a significant part of our future on this disruptive technology”. It’s been a wild ride but I see a tremendous future.
SODM: How is IBM Blockchain different for others/competition?
Jesse: First and foremost, IBM is a 107 year old company with the largest patent portfolio in the world. There are more smart people here than I’ve ever encountered before in such a concentrated area. When you combine that with IBM’s relationships with virtually all major banks in the world, in more than 160 companies, and its credibility and track record for technology and delivery, you don’t really have a credible corollary anywhere in the world. You have a lot of innovation happening in smaller firms, and tinkering happening with the banks, but IBM has involvement across all major industries. IBM has more than 1,000 people working on Blockchain solutions, not just for Banking. We’ve done more than 600 projects and have fielded production systems that are moving real money. When you take the long term outlook, I don’t think there’s a more credible player than IBM in the industry today.
SODM: Can you tell us more about IBM Blockchain and what problems is it trying to solve?
Jesse: At IBM, speaking just to our financial services segment (which is the area I’m responsible for), our blockchain strategy is built on the assertion that financial assets of all types will ultimately live as digital tokens on openly accessible and interoperable networks. This will allow instruments like stocks, bonds, loans, commodities, cash and other asset classes to be divisible, transferrable, traceable and redeemable at high velocities, without friction or intermediaries. We are working closely with financial services firms, banks and regulators all over the world to transform the very infrastructure of the global financial system. Our platform supports this vision, providing functionality to create private blockchain networks using Hyperledger Fabric and Composer, and ensuring direct interoperability with public networks like Sovrin and Stellar, which are also now under the technical governance of Hyperledger (“Indy” and “Starlight” respectively). We are future-proofing our client’s investment in the platform through interoperability standards like Hyperledger Quilt and IBM Conductor so that future public networks and protocols will also be supported and easily adopted by our clients.
SODM: What are some resources interested parties can use to educate themselves?
Jesse: Visit www.ibm.com/blockchain — there is a wealth of resource, customer testimonials, and proof points of our market leadership and dominance.
SODM: Big picture – Any predictions for 2018? and beyond that?
Jesse: In the past year I’ve met with C-suite executives from major banks around the world, and senior officials from global regulators and central banks. The one theme I’m hearing, whether expressed as enthusiasm or concern, is that crypto assets are here to stay and will have enormous impact on the global financial system and money transfer infrastructure. I believe you will see central banks taking a more active role in the issuance of their own digital currencies, which will have a profound impact on commercial banks. But more importantly, it will create some very interesting global-political dynamics among G20 nations. We are finally seeing Internet technology-led disruption coming to banking as it has already hit other industries like retail.
Catch Jesse Lund on the “Evolution of Blockchain” discussion on May 5th at the State of Digital Money 2018 Conference in Downtown, Los Angeles. Hope to see you there!