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If you are capable, please help us to create good quality subtitles: https://c3subtitles.de/talk/706 Thanks! 1 00:00:13,490 --> 00:00:14,750 Good, ladies and gentlemen, 2 00:00:15,890 --> 00:00:17,899 as you all experience in this caves 3 00:00:17,900 --> 00:00:20,779 computer labyrinth, this 4 00:00:20,780 --> 00:00:22,849 one can meet really interesting people 5 00:00:22,850 --> 00:00:24,829 here and you all did. 6 00:00:24,830 --> 00:00:27,259 Presumably what I did is actually 7 00:00:27,260 --> 00:00:28,519 meeting people with all kinds of 8 00:00:28,520 --> 00:00:30,649 Collard's hats. 9 00:00:30,650 --> 00:00:32,899 I see some hats here, a green, 10 00:00:32,900 --> 00:00:34,340 red, orange, whatever. 11 00:00:35,390 --> 00:00:37,369 But this is another kind of had this guy 12 00:00:37,370 --> 00:00:39,919 is wearing he's wearing the collar 13 00:00:39,920 --> 00:00:40,969 color of money. 14 00:00:42,040 --> 00:00:44,559 And money is 15 00:00:44,560 --> 00:00:46,659 evaporating quite rapidly in 16 00:00:46,660 --> 00:00:48,899 my pocket, sire, 17 00:00:48,900 --> 00:00:51,159 I experience, but he's going to 18 00:00:51,160 --> 00:00:53,889 show us how to trade places, 19 00:00:53,890 --> 00:00:55,139 so trading places. 20 00:00:55,140 --> 00:00:57,549 Sorry to introduce you like that, Mark, 21 00:00:57,550 --> 00:00:59,919 but is used to talk 22 00:00:59,920 --> 00:01:02,199 about block chain technology, 23 00:01:02,200 --> 00:01:03,759 bitcoin or whatever. 24 00:01:03,760 --> 00:01:06,279 And now he's helping banks 25 00:01:06,280 --> 00:01:08,409 to get an understanding about 26 00:01:08,410 --> 00:01:10,869 modern technology currently focusing 27 00:01:10,870 --> 00:01:12,489 on that kind of topics like block 28 00:01:12,490 --> 00:01:14,799 chaining. So we will 29 00:01:14,800 --> 00:01:17,649 explain is how international 30 00:01:17,650 --> 00:01:20,079 money transfers work. 31 00:01:20,080 --> 00:01:21,080 So in a way. 32 00:01:22,090 --> 00:01:24,399 Mike Funk is going to show 33 00:01:24,400 --> 00:01:25,400 us the money. 34 00:01:27,810 --> 00:01:29,579 Please give a welcome applause. 35 00:01:31,440 --> 00:01:33,579 Lit the Fuze, put it in place. 36 00:01:36,440 --> 00:01:38,149 Thank you, Peter, and also thank you all 37 00:01:38,150 --> 00:01:40,339 for having me and being here. 38 00:01:40,340 --> 00:01:41,869 One thing you said, the money is 39 00:01:41,870 --> 00:01:43,279 evaporating from your wallet. 40 00:01:43,280 --> 00:01:45,529 A lot of people are saying it ends up 41 00:01:45,530 --> 00:01:47,989 in banks and they take all our money. 42 00:01:47,990 --> 00:01:49,969 But this dog is not about politics and 43 00:01:49,970 --> 00:01:52,279 whether banks are good or bad or those 44 00:01:52,280 --> 00:01:54,199 things. We're going to look into 45 00:01:54,200 --> 00:01:56,419 technicalities now before 46 00:01:56,420 --> 00:01:57,379 I begin. 47 00:01:57,380 --> 00:01:59,599 Banks have departments and 48 00:01:59,600 --> 00:02:01,249 there are all different functions for 49 00:02:01,250 --> 00:02:02,179 departments. 50 00:02:02,180 --> 00:02:03,949 One of them is the payment department. 51 00:02:03,950 --> 00:02:06,049 But others are like lending, 52 00:02:06,050 --> 00:02:08,959 mortgages, foreign exchange, 53 00:02:08,960 --> 00:02:11,089 those I'm not going to focus on. 54 00:02:11,090 --> 00:02:12,739 I'm only going to focus on the payment 55 00:02:12,740 --> 00:02:14,169 department. 56 00:02:14,170 --> 00:02:15,589 Also interesting to think about it, 57 00:02:15,590 --> 00:02:17,539 different departments is that they have a 58 00:02:17,540 --> 00:02:19,759 different risk profile. 59 00:02:19,760 --> 00:02:21,439 And what I've noticed in the banks where 60 00:02:21,440 --> 00:02:23,539 I've been is all the payment 61 00:02:23,540 --> 00:02:25,519 departments are very risk averse. 62 00:02:25,520 --> 00:02:27,829 They rather make less money 63 00:02:27,830 --> 00:02:30,319 and not lose anything, then 64 00:02:30,320 --> 00:02:32,119 make a lot of money and put a lot of 65 00:02:32,120 --> 00:02:33,120 risk. 66 00:02:33,980 --> 00:02:35,359 There may be different in different 67 00:02:35,360 --> 00:02:36,799 departments. I've not seen them. 68 00:02:36,800 --> 00:02:39,109 I've heard a lot of stories both inside 69 00:02:39,110 --> 00:02:40,129 and outside banks. 70 00:02:41,720 --> 00:02:43,429 One of the things that was very 71 00:02:43,430 --> 00:02:45,529 interesting, very important when you're 72 00:02:45,530 --> 00:02:47,689 going to speak with people in banks is 73 00:02:47,690 --> 00:02:49,699 to understand the concept of a financial 74 00:02:49,700 --> 00:02:50,779 model. 75 00:02:50,780 --> 00:02:52,999 And if there is 76 00:02:53,000 --> 00:02:55,339 somebody here from a block start startup, 77 00:02:55,340 --> 00:02:57,259 try to learn those that will really help 78 00:02:57,260 --> 00:02:58,669 you connect with people in banks. 79 00:03:00,230 --> 00:03:02,179 So to introduce this concept, I'm going 80 00:03:02,180 --> 00:03:04,339 to look at the most simple kind 81 00:03:04,340 --> 00:03:06,229 of payment you can do, and it is called a 82 00:03:06,230 --> 00:03:07,909 book transfer. 83 00:03:07,910 --> 00:03:10,099 And this is happening when in 84 00:03:10,100 --> 00:03:12,259 one bank there are two clients and one 85 00:03:12,260 --> 00:03:14,359 want to send funds to another. 86 00:03:14,360 --> 00:03:16,459 Now I'm going to use real banks names, 87 00:03:16,460 --> 00:03:18,109 most of them in the Netherlands. 88 00:03:18,110 --> 00:03:20,209 But the examples here I have 89 00:03:20,210 --> 00:03:23,239 just made up and 90 00:03:23,240 --> 00:03:24,979 in this financial model, you will see 91 00:03:24,980 --> 00:03:27,199 boxes and every box is a financial 92 00:03:27,200 --> 00:03:29,929 institution. It has a name or a label. 93 00:03:29,930 --> 00:03:31,789 So in this case, it is ABN Amro, one of 94 00:03:31,790 --> 00:03:33,139 the Dutch banks. 95 00:03:33,140 --> 00:03:35,269 And then you can have a couple of 96 00:03:35,270 --> 00:03:36,259 accounts. 97 00:03:36,260 --> 00:03:38,059 You will see there will always be at 98 00:03:38,060 --> 00:03:40,309 least two. Otherwise there is very little 99 00:03:40,310 --> 00:03:41,249 you can do. 100 00:03:41,250 --> 00:03:44,479 An account looks like a T shape 101 00:03:44,480 --> 00:03:46,879 or the right side. You will see one money 102 00:03:46,880 --> 00:03:48,349 is taken out of the account. 103 00:03:48,350 --> 00:03:49,399 We call it a debit. 104 00:03:49,400 --> 00:03:51,499 And on the left side, whenever money 105 00:03:51,500 --> 00:03:52,819 is put into account, we call it to 106 00:03:52,820 --> 00:03:53,839 credit. 107 00:03:53,840 --> 00:03:55,939 So what you see here is a transfer 108 00:03:55,940 --> 00:03:57,709 of 500 euros. 109 00:03:57,710 --> 00:04:00,559 I didn't state that, but let's say euros 110 00:04:00,560 --> 00:04:01,560 from others to Bob. 111 00:04:03,130 --> 00:04:05,189 This is the simple one, and there are a 112 00:04:05,190 --> 00:04:07,289 couple of rules, financial models, and 113 00:04:07,290 --> 00:04:09,839 one of them is when you sum up everything 114 00:04:09,840 --> 00:04:11,279 on the left side and you sum up 115 00:04:11,280 --> 00:04:13,229 everything on the right side within a 116 00:04:13,230 --> 00:04:15,899 single box, it should be equal. 117 00:04:15,900 --> 00:04:18,088 So whenever we take 500 euros 118 00:04:18,089 --> 00:04:20,189 from an account, we have to 119 00:04:20,190 --> 00:04:22,349 put in 500 euros somewhere 120 00:04:22,350 --> 00:04:24,449 else. We cannot invent money in this 121 00:04:24,450 --> 00:04:25,450 way. 122 00:04:29,550 --> 00:04:30,989 Let's make it a little bit more 123 00:04:30,990 --> 00:04:33,119 difficult. We have now two financial 124 00:04:33,120 --> 00:04:35,219 institutions is no longer at ABN 125 00:04:35,220 --> 00:04:37,110 Amro is now moving to Engy 126 00:04:38,190 --> 00:04:41,189 and we still want to transfer 500 euros, 127 00:04:41,190 --> 00:04:43,619 but we cannot move 128 00:04:43,620 --> 00:04:45,839 funds across a box 129 00:04:45,840 --> 00:04:47,069 in the easy way. 130 00:04:47,070 --> 00:04:49,619 So we need to think of a way to do this. 131 00:04:49,620 --> 00:04:51,719 Well, one where you could do this is 132 00:04:51,720 --> 00:04:53,639 introduce a new account in English 133 00:04:53,640 --> 00:04:55,409 system, which is for ABN Amro. 134 00:04:55,410 --> 00:04:57,719 So ABN could hold 135 00:04:57,720 --> 00:04:59,009 funds at AIG. 136 00:05:00,330 --> 00:05:02,459 And then and then when Ali says I want 137 00:05:02,460 --> 00:05:04,619 to send Bob 500 euros, ABN 138 00:05:04,620 --> 00:05:06,539 could pay it out of its engi account to 139 00:05:06,540 --> 00:05:07,540 Bob. 140 00:05:08,950 --> 00:05:11,019 But we need to make something out the top 141 00:05:11,020 --> 00:05:13,569 side to show that would be a flip 142 00:05:13,570 --> 00:05:15,649 account where the money from 143 00:05:15,650 --> 00:05:16,650 others is going to. 144 00:05:18,790 --> 00:05:20,289 This is, by the way, not how it works 145 00:05:20,290 --> 00:05:21,519 exactly with ABN, 146 00:05:22,720 --> 00:05:25,149 but it is to introduce the concept of 147 00:05:25,150 --> 00:05:26,769 these two accounts are now linked 148 00:05:26,770 --> 00:05:29,019 together and they should always mirror 149 00:05:29,020 --> 00:05:30,519 each other. And therefore, we also call 150 00:05:30,520 --> 00:05:32,139 them mirror accounts. 151 00:05:32,140 --> 00:05:34,359 So let's rename it on 152 00:05:34,360 --> 00:05:36,309 the bottom. You see ABN Amro account at 153 00:05:36,310 --> 00:05:38,409 AIG and on the top we see a mirror 154 00:05:38,410 --> 00:05:39,549 account and 155 00:05:40,660 --> 00:05:42,849 different banks write it in different 156 00:05:42,850 --> 00:05:44,919 ways. But one of the notations I've seen 157 00:05:44,920 --> 00:05:46,989 is you just prefix Kamdesh. 158 00:05:46,990 --> 00:05:48,389 So that's what I'm going to do here. 159 00:05:50,020 --> 00:05:52,089 It's important. It's a new rule for 160 00:05:52,090 --> 00:05:54,369 a financial model that accounts 161 00:05:54,370 --> 00:05:55,659 are always mirrored. 162 00:05:55,660 --> 00:05:58,089 If they're not, there is a discrepancy 163 00:05:58,090 --> 00:06:00,849 and there's also sometimes happens in 164 00:06:00,850 --> 00:06:01,989 reality. So 165 00:06:03,160 --> 00:06:04,869 people are going to be involved to fix 166 00:06:04,870 --> 00:06:06,249 the mistakes. 167 00:06:06,250 --> 00:06:08,049 By the way, you're going to do it on a 168 00:06:08,050 --> 00:06:09,039 theoretical level. 169 00:06:09,040 --> 00:06:11,139 Whenever you have some product, 170 00:06:11,140 --> 00:06:12,519 you will have to demonstrate that 171 00:06:12,520 --> 00:06:13,839 everything will work out. 172 00:06:13,840 --> 00:06:15,699 So this rule must be satisfied. 173 00:06:17,350 --> 00:06:19,329 Now, in reality, as I've already said, 174 00:06:19,330 --> 00:06:20,349 this is not how it works. 175 00:06:20,350 --> 00:06:22,449 What ABN and AIG and there's one 176 00:06:22,450 --> 00:06:24,819 interesting reason banks 177 00:06:24,820 --> 00:06:25,899 are risk averse. 178 00:06:25,900 --> 00:06:28,509 So why would ABN put money 179 00:06:28,510 --> 00:06:30,939 in AIG? If AIG goes bankrupt, 180 00:06:30,940 --> 00:06:32,980 ABN will lose money they don't want to. 181 00:06:34,800 --> 00:06:36,869 Still, we want to 182 00:06:36,870 --> 00:06:39,089 do it in this way and we 183 00:06:39,090 --> 00:06:41,549 need to send this 500 euros from Alice 184 00:06:41,550 --> 00:06:42,550 somewhere. 185 00:06:43,740 --> 00:06:46,349 Now, one option you could do is introduce 186 00:06:46,350 --> 00:06:48,659 a bank, the different kind 187 00:06:48,660 --> 00:06:50,789 of bank, one that everybody really 188 00:06:50,790 --> 00:06:52,169 trusts. 189 00:06:52,170 --> 00:06:54,359 And this is like a central bank, for 190 00:06:54,360 --> 00:06:55,360 example. 191 00:06:57,030 --> 00:06:59,309 Now, I'm going to introduce the European 192 00:06:59,310 --> 00:07:01,559 Central Bank target to system here 193 00:07:01,560 --> 00:07:02,779 and target to us. 194 00:07:04,160 --> 00:07:05,819 OK, I'm going to show you a little later. 195 00:07:05,820 --> 00:07:06,809 But it isn't it. 196 00:07:06,810 --> 00:07:07,810 Yes, 197 00:07:09,690 --> 00:07:11,399 you we are moving central bank money. 198 00:07:11,400 --> 00:07:13,709 And as a customer, as 199 00:07:13,710 --> 00:07:16,139 a person or a normal company, 200 00:07:16,140 --> 00:07:18,479 you cannot hold an account at a central 201 00:07:18,480 --> 00:07:20,609 bank. Only financial institutions can 202 00:07:20,610 --> 00:07:21,919 do so. 203 00:07:21,920 --> 00:07:24,029 So here, ABN Amro has an account at 204 00:07:24,030 --> 00:07:26,459 the central bank. IG has one 205 00:07:26,460 --> 00:07:28,559 and now we can make the story work 206 00:07:28,560 --> 00:07:29,560 here. 207 00:07:29,880 --> 00:07:32,159 We debit 500 euros from Aldiss 208 00:07:32,160 --> 00:07:34,949 account. We credit it on the mirror 209 00:07:34,950 --> 00:07:37,649 that ABN has in its book books. 210 00:07:37,650 --> 00:07:39,599 We send a message to the ECB. 211 00:07:39,600 --> 00:07:41,729 We're saying, OK, there is a payment from 212 00:07:41,730 --> 00:07:43,889 others to Bob am 213 00:07:43,890 --> 00:07:46,079 I need to transfer 500 euros from 214 00:07:46,080 --> 00:07:47,159 my account to IG. 215 00:07:47,160 --> 00:07:50,069 So this is what the ECB is going to do. 216 00:07:50,070 --> 00:07:52,589 And then the message is sent to IG. 217 00:07:52,590 --> 00:07:55,229 You have incoming payment, 500 218 00:07:55,230 --> 00:07:57,749 euros have been credited to your account. 219 00:07:57,750 --> 00:07:59,549 Please make sure that Bob will receive 220 00:07:59,550 --> 00:08:00,550 this. 221 00:08:02,880 --> 00:08:04,969 Now, there was green arrows, I 222 00:08:04,970 --> 00:08:06,959 message. So we need some kind of 223 00:08:06,960 --> 00:08:09,029 interbank messaging and 224 00:08:09,030 --> 00:08:11,429 this is where Swift plays a role, 225 00:08:11,430 --> 00:08:13,170 you may have heard Swift in the news. 226 00:08:14,940 --> 00:08:17,249 Swift has been established a long time 227 00:08:17,250 --> 00:08:20,039 ago in the time that we didn't work 228 00:08:20,040 --> 00:08:22,349 the way we work like now, 229 00:08:22,350 --> 00:08:25,079 but for payment, they have two important, 230 00:08:25,080 --> 00:08:27,239 very important, um, 231 00:08:27,240 --> 00:08:28,259 roles. 232 00:08:28,260 --> 00:08:29,579 The first one is they offer a 233 00:08:29,580 --> 00:08:31,679 communication network and 234 00:08:31,680 --> 00:08:33,719 nowadays part of that is going over the 235 00:08:33,720 --> 00:08:34,720 Internet. 236 00:08:35,640 --> 00:08:37,889 But back in the day, this wasn't a case, 237 00:08:37,890 --> 00:08:39,989 of course, and it looks 238 00:08:39,990 --> 00:08:41,729 a bit like this. So everyone wants to 239 00:08:41,730 --> 00:08:43,589 send a message to the ECB. 240 00:08:43,590 --> 00:08:45,629 And first of all, you will need some 241 00:08:45,630 --> 00:08:47,159 address for this. 242 00:08:47,160 --> 00:08:50,399 We have bank identifier codes because, 243 00:08:50,400 --> 00:08:52,499 um, they are eight or 244 00:08:52,500 --> 00:08:54,749 11 digits long 245 00:08:54,750 --> 00:08:56,879 and they have a certain structure. 246 00:08:56,880 --> 00:08:58,679 The first four digits are the bank code. 247 00:08:58,680 --> 00:09:00,839 So in the case of ABN Amro, we 248 00:09:00,840 --> 00:09:03,659 see at the bottom it is ABN Abney. 249 00:09:03,660 --> 00:09:05,459 Then we have two digits for the country 250 00:09:05,460 --> 00:09:07,559 Anel and two digits for location 251 00:09:07,560 --> 00:09:10,019 A2, which is Amsterdam 252 00:09:10,020 --> 00:09:12,269 on the right you see that Aengus also in 253 00:09:12,270 --> 00:09:14,609 Amsterdam on the top you see 254 00:09:14,610 --> 00:09:16,859 the ECB SBF 255 00:09:16,860 --> 00:09:19,379 which is located here in Germany 256 00:09:19,380 --> 00:09:20,789 and first for Frankfurt. 257 00:09:22,470 --> 00:09:24,839 Now ABN Amro sends a message to Swift 258 00:09:24,840 --> 00:09:25,739 Swift Storchak. 259 00:09:25,740 --> 00:09:28,409 A message are forwarded to ECB 260 00:09:28,410 --> 00:09:30,989 and the ECB will acknowledge this. 261 00:09:30,990 --> 00:09:33,089 So despite all that, how 262 00:09:33,090 --> 00:09:34,649 it is on the Internet where we have a 263 00:09:34,650 --> 00:09:36,989 best effort model for messages 264 00:09:36,990 --> 00:09:39,299 here, we actually do acknowledge 265 00:09:39,300 --> 00:09:41,699 everything. And when a message 266 00:09:41,700 --> 00:09:43,979 doesn't arrive, it will retransmit, 267 00:09:43,980 --> 00:09:45,239 et cetera. 268 00:09:45,240 --> 00:09:47,519 Swift will also archive the message. 269 00:09:47,520 --> 00:09:49,049 So whenever in the future there is a 270 00:09:49,050 --> 00:09:51,149 dispute, Swift can say, OK, 271 00:09:51,150 --> 00:09:52,619 here are all the messages that have been 272 00:09:52,620 --> 00:09:54,599 sent. Those times it has been 273 00:09:54,600 --> 00:09:55,769 acknowledged, etc. 274 00:09:55,770 --> 00:09:57,539 so we can reconstruct what has happened 275 00:09:57,540 --> 00:09:59,639 and what would then legally 276 00:09:59,640 --> 00:10:00,719 be the thing that 277 00:10:01,920 --> 00:10:03,390 should be. That should be. 278 00:10:06,370 --> 00:10:08,319 And a second roll of Swift is now we have 279 00:10:08,320 --> 00:10:10,509 this network and we can send messages. 280 00:10:10,510 --> 00:10:12,219 What do those message looks like? 281 00:10:12,220 --> 00:10:14,319 So they create standards, 282 00:10:14,320 --> 00:10:16,749 message definitions, and 283 00:10:16,750 --> 00:10:19,149 nowadays we have two types 284 00:10:19,150 --> 00:10:20,619 commonly used in some places. 285 00:10:20,620 --> 00:10:22,719 M10 ex ante 286 00:10:22,720 --> 00:10:24,729 is the old style, which stands for 287 00:10:24,730 --> 00:10:26,799 Message Stipe's and there are a lot 288 00:10:26,800 --> 00:10:28,989 of them. They all have an identifier of 289 00:10:28,990 --> 00:10:30,699 three digits. 290 00:10:30,700 --> 00:10:32,529 So we have, for example, M2 one of three, 291 00:10:32,530 --> 00:10:34,809 which is a customer payment to a two 292 00:10:34,810 --> 00:10:36,519 is a payment from an institution to 293 00:10:36,520 --> 00:10:38,709 another institution when and not 294 00:10:38,710 --> 00:10:40,719 specifically for a client. 295 00:10:40,720 --> 00:10:43,149 And I intend to inform another 296 00:10:43,150 --> 00:10:45,009 bank that his account has been debited. 297 00:10:47,140 --> 00:10:48,140 There are a lot more. 298 00:10:49,340 --> 00:10:51,589 And then X, 299 00:10:51,590 --> 00:10:53,779 because we are going forward 300 00:10:53,780 --> 00:10:56,659 in time, so we need Actimel, 301 00:10:56,660 --> 00:10:57,660 um, this 302 00:10:58,820 --> 00:11:00,979 is a new standard, 303 00:11:00,980 --> 00:11:03,619 also an ISO standard, actually, 304 00:11:03,620 --> 00:11:05,389 and people who may 305 00:11:07,040 --> 00:11:09,169 communicate with banks may know, 306 00:11:09,170 --> 00:11:11,419 for example, pain one and those 307 00:11:11,420 --> 00:11:13,819 kinds of. But those are also used between 308 00:11:13,820 --> 00:11:14,820 banks. 309 00:11:16,910 --> 00:11:18,949 So let's see some example, maybe one or 310 00:11:18,950 --> 00:11:21,019 three issue credit transfer 311 00:11:21,020 --> 00:11:23,389 for a single a single 312 00:11:23,390 --> 00:11:25,189 credit transfer for customers. 313 00:11:25,190 --> 00:11:27,319 So we're actually clients of banks 314 00:11:27,320 --> 00:11:28,579 are involved. 315 00:11:28,580 --> 00:11:31,099 Here's an example. We have five blocks. 316 00:11:31,100 --> 00:11:32,989 The most interesting block is block four. 317 00:11:32,990 --> 00:11:35,209 It contains all the information and 318 00:11:35,210 --> 00:11:37,549 it is kind of like a tag value 319 00:11:37,550 --> 00:11:38,449 pair. 320 00:11:38,450 --> 00:11:40,519 So, for example, we have detect 321 00:11:40,520 --> 00:11:42,979 a 30 to A and it states 322 00:11:42,980 --> 00:11:45,109 that the first six digits are 323 00:11:45,110 --> 00:11:47,239 to date, June 26 of 324 00:11:47,240 --> 00:11:48,489 May in the year 2000. 325 00:11:48,490 --> 00:11:50,869 We have sent us dollars with the amount 326 00:11:50,870 --> 00:11:52,939 of one thousand one hundred and one 327 00:11:52,940 --> 00:11:53,940 point fifty. 328 00:11:55,280 --> 00:11:56,689 This is the amount that is actually 329 00:11:56,690 --> 00:11:57,859 moving between banks. 330 00:11:59,210 --> 00:12:01,039 Thirty three B is the amount that was 331 00:12:01,040 --> 00:12:03,199 ordered. You see a difference of 332 00:12:03,200 --> 00:12:04,129 20 U.S. dollars. 333 00:12:04,130 --> 00:12:06,049 That's the charge on the bottom. 334 00:12:06,050 --> 00:12:08,299 You see 71 F there 335 00:12:08,300 --> 00:12:09,300 are some charges. 336 00:12:12,340 --> 00:12:14,229 Let's not go to deep into this, but at 337 00:12:14,230 --> 00:12:16,449 this stage, we're sending funds from 338 00:12:16,450 --> 00:12:18,939 here to there and this is all banks 339 00:12:18,940 --> 00:12:21,729 needs to figure this things out. 340 00:12:21,730 --> 00:12:23,599 Then there is block five and it contains 341 00:12:23,600 --> 00:12:24,969 some measures, authentication code. 342 00:12:24,970 --> 00:12:27,489 So it is not easy to change those two 343 00:12:27,490 --> 00:12:30,429 so we can detect transmission errors. 344 00:12:30,430 --> 00:12:32,679 Now, moving to XML, 345 00:12:32,680 --> 00:12:34,779 we need new names, of course, and we need 346 00:12:34,780 --> 00:12:35,780 a smaller font. 347 00:12:38,650 --> 00:12:40,809 But for the rest, this is 348 00:12:40,810 --> 00:12:41,989 an example. 349 00:12:41,990 --> 00:12:44,109 So again, there is an envelope 350 00:12:44,110 --> 00:12:46,149 at the top for those who can read it, 351 00:12:46,150 --> 00:12:47,729 stating this is going from this 352 00:12:47,730 --> 00:12:49,689 institution to this institution. 353 00:12:49,690 --> 00:12:51,669 And there is a content which says there 354 00:12:51,670 --> 00:12:53,889 is one transfer in this XML file and 355 00:12:53,890 --> 00:12:54,890 it has some details. 356 00:12:57,940 --> 00:13:00,009 Um, so this is the example 357 00:13:00,010 --> 00:13:01,349 we were looking at, um. 358 00:13:02,610 --> 00:13:04,199 But there is there is something about 359 00:13:04,200 --> 00:13:06,479 this I told before, 360 00:13:06,480 --> 00:13:08,519 the targeting system is called an 361 00:13:08,520 --> 00:13:10,679 protegees, which stands for real time 362 00:13:10,680 --> 00:13:12,209 gross settlement system. 363 00:13:12,210 --> 00:13:15,209 And here we are transferring like 364 00:13:15,210 --> 00:13:16,619 some people and banks are actually 365 00:13:16,620 --> 00:13:18,299 calling real money. 366 00:13:18,300 --> 00:13:20,069 I don't know what they call the money 367 00:13:20,070 --> 00:13:22,049 that I deposited in my account then, but 368 00:13:23,580 --> 00:13:25,170 this is central bank money. 369 00:13:26,190 --> 00:13:27,190 It beaners. 370 00:13:28,500 --> 00:13:30,749 Um, but 371 00:13:30,750 --> 00:13:32,969 and transaction and target too is quite 372 00:13:32,970 --> 00:13:33,749 expensive. 373 00:13:33,750 --> 00:13:34,750 And 374 00:13:36,180 --> 00:13:38,399 banks normally do transactions 375 00:13:38,400 --> 00:13:40,199 up to hundreds or sometimes thousands 376 00:13:40,200 --> 00:13:41,639 transactions per second. 377 00:13:41,640 --> 00:13:43,469 Dagoberto cannot handle this. 378 00:13:43,470 --> 00:13:45,839 If all of Europe will do, it will 379 00:13:45,840 --> 00:13:46,799 be transmitted this way. 380 00:13:46,800 --> 00:13:48,719 And at the bottom you actually see the 381 00:13:48,720 --> 00:13:50,609 pricing options for type two 382 00:13:50,610 --> 00:13:51,989 transactions. 383 00:13:51,990 --> 00:13:53,729 The cheapest single transaction can be 384 00:13:53,730 --> 00:13:55,619 transported for twelve and a half cents. 385 00:13:55,620 --> 00:13:57,899 And I know for sure that I can send 386 00:13:57,900 --> 00:13:59,999 someone a euro without paying twelve 387 00:14:00,000 --> 00:14:01,439 and a half cents. So there is something 388 00:14:01,440 --> 00:14:03,299 else going on here. 389 00:14:03,300 --> 00:14:05,369 What is actually happening for low 390 00:14:05,370 --> 00:14:07,559 value payments isn't 391 00:14:07,560 --> 00:14:09,899 we are going to net Bachus. 392 00:14:09,900 --> 00:14:12,029 So the example I showed just before, if 393 00:14:12,030 --> 00:14:13,619 a company sends Tamilian to another 394 00:14:13,620 --> 00:14:15,779 company, we call it a high value 395 00:14:15,780 --> 00:14:17,129 payment. We do it in that way. 396 00:14:18,450 --> 00:14:20,129 But I'm not going to show his low value 397 00:14:20,130 --> 00:14:22,919 payments that works like this. 398 00:14:22,920 --> 00:14:25,109 And at the bottom of the four 399 00:14:25,110 --> 00:14:27,569 largest retail banks in the Netherlands, 400 00:14:27,570 --> 00:14:29,849 ABN Amro, Rabobank, Asness Bank and IAG. 401 00:14:29,850 --> 00:14:32,159 And during the day, people 402 00:14:32,160 --> 00:14:33,669 are sending in payment order. 403 00:14:33,670 --> 00:14:35,609 So what an app or whether 404 00:14:36,780 --> 00:14:38,219 through the Internet, you're saying I 405 00:14:38,220 --> 00:14:39,220 want to transfer money. 406 00:14:40,230 --> 00:14:42,029 Now, let's say again, Alissa's at ABN 407 00:14:42,030 --> 00:14:45,209 Amro, ABN sent to a clearinghouse 408 00:14:45,210 --> 00:14:47,729 a message saying, OK, this is 409 00:14:47,730 --> 00:14:49,289 there is a payment. 410 00:14:49,290 --> 00:14:50,909 And one of the clearinghouses we have in 411 00:14:50,910 --> 00:14:53,399 Europe is eBay, step two, another one 412 00:14:53,400 --> 00:14:55,739 mostly in the Netherlands, that sequence. 413 00:14:55,740 --> 00:14:58,109 And they collect all those payments 414 00:14:58,110 --> 00:15:00,689 and they just put them on a heap. 415 00:15:00,690 --> 00:15:02,429 And then periodically 416 00:15:03,600 --> 00:15:05,579 a process starts and this is the 417 00:15:05,580 --> 00:15:06,959 settlement cycle. 418 00:15:06,960 --> 00:15:09,059 So now we have from all banks a 419 00:15:09,060 --> 00:15:11,699 list of payments they want to do. 420 00:15:11,700 --> 00:15:13,409 What we can now do is we cannot add all 421 00:15:13,410 --> 00:15:14,459 together. 422 00:15:14,460 --> 00:15:16,079 So let's say there are a lot of payments 423 00:15:16,080 --> 00:15:18,239 from ABN Amro going to the other banks 424 00:15:18,240 --> 00:15:20,009 and they all sum up to an amount of, say, 425 00:15:20,010 --> 00:15:23,069 800000 euros and incoming 426 00:15:23,070 --> 00:15:25,379 payments for the amount of one million 427 00:15:25,380 --> 00:15:26,549 euros. 428 00:15:26,550 --> 00:15:28,769 Now, the net result is that ABN should 429 00:15:28,770 --> 00:15:31,229 receive two hundred thousand euros. 430 00:15:32,790 --> 00:15:34,859 So there will be one transaction 431 00:15:34,860 --> 00:15:37,499 in Target to just redistributing 432 00:15:37,500 --> 00:15:39,839 things according to all the individual 433 00:15:39,840 --> 00:15:41,699 payments we have seen in this cycle. 434 00:15:42,960 --> 00:15:44,639 So EBA in this case 435 00:15:46,020 --> 00:15:48,359 prepares all this, sends information 436 00:15:48,360 --> 00:15:50,049 back to all the bank saying these are 437 00:15:50,050 --> 00:15:51,869 your incoming payments. 438 00:15:51,870 --> 00:15:53,999 So now I knows Bob is going to be 439 00:15:54,000 --> 00:15:56,249 paid, but IG is not yet going 440 00:15:56,250 --> 00:15:57,750 to pay Bob at this point in time. 441 00:15:58,770 --> 00:16:01,349 EBA sends a message to target to saying 442 00:16:01,350 --> 00:16:03,509 this is how I want to 443 00:16:03,510 --> 00:16:05,789 redistribute the funds and 444 00:16:05,790 --> 00:16:07,439 target to send to all the banks. 445 00:16:07,440 --> 00:16:09,239 Here you have an incoming payment or you 446 00:16:09,240 --> 00:16:10,199 have an outgoing payment. 447 00:16:10,200 --> 00:16:12,419 So there is a credit or a debit on 448 00:16:12,420 --> 00:16:13,849 your account now. 449 00:16:13,850 --> 00:16:16,079 And you see what I 450 00:16:16,080 --> 00:16:17,999 have done, those transactions. 451 00:16:18,000 --> 00:16:19,949 I have those incoming transactions and 452 00:16:19,950 --> 00:16:22,079 this is what happens on target to 453 00:16:22,080 --> 00:16:24,709 it will compute the same sum and see that 454 00:16:24,710 --> 00:16:26,909 the net amount is equal to what happens 455 00:16:26,910 --> 00:16:28,649 at Target, too. And then they say, OK, 456 00:16:28,650 --> 00:16:30,599 I'm now very certain I have received 457 00:16:30,600 --> 00:16:32,309 money, central bank money. 458 00:16:32,310 --> 00:16:33,990 So now I'm going to pay out Bob. 459 00:16:36,400 --> 00:16:38,559 So it looks a bit like this, the slides 460 00:16:38,560 --> 00:16:40,329 are going to be on the west side, by the 461 00:16:40,330 --> 00:16:42,579 way, so if you want to study it more 462 00:16:42,580 --> 00:16:44,409 in depth, then you can take your time. 463 00:16:45,550 --> 00:16:47,619 But there is one more 464 00:16:47,620 --> 00:16:49,329 thing I introduced in here. 465 00:16:49,330 --> 00:16:51,519 And Abian, you see a suspense 466 00:16:51,520 --> 00:16:52,659 account. 467 00:16:52,660 --> 00:16:54,279 Some banks, and I call it the wash 468 00:16:54,280 --> 00:16:56,739 account or control account, 469 00:16:56,740 --> 00:16:58,509 but I like the term suspense. 470 00:16:58,510 --> 00:17:00,609 So banks use different names for 471 00:17:00,610 --> 00:17:02,979 the same thing. Very interesting. 472 00:17:02,980 --> 00:17:05,318 So when Alice sends this payment order 473 00:17:05,319 --> 00:17:08,348 saying I want to those 500 euros to Bob, 474 00:17:08,349 --> 00:17:10,149 the money is taken out of her account. 475 00:17:10,150 --> 00:17:12,098 So it's debited there and we need to put 476 00:17:12,099 --> 00:17:14,259 it somewhere is one of those rules. 477 00:17:14,260 --> 00:17:16,899 So let's put it in the suspense account 478 00:17:16,900 --> 00:17:18,368 at this point in time. 479 00:17:18,369 --> 00:17:20,618 This is no longer a claim on ABN Amro 480 00:17:20,619 --> 00:17:23,019 for this 500 euros, but also 481 00:17:23,020 --> 00:17:24,039 ABN Amro note. 482 00:17:24,040 --> 00:17:26,169 I cannot just use those 500 euros 483 00:17:26,170 --> 00:17:27,639 for anything because it is in the 484 00:17:27,640 --> 00:17:29,589 interest suspense account and it's not in 485 00:17:29,590 --> 00:17:31,170 their own account. 486 00:17:32,680 --> 00:17:35,349 Then when the settlement cycle happened, 487 00:17:35,350 --> 00:17:37,479 Stube money is moved 488 00:17:37,480 --> 00:17:39,609 and it's moved and the ECB target 489 00:17:39,610 --> 00:17:41,859 system and all the banks 490 00:17:41,860 --> 00:17:43,899 and then in their turn will receive 491 00:17:43,900 --> 00:17:45,969 notifications and can perform the final 492 00:17:45,970 --> 00:17:47,709 transfers and they can either go out of a 493 00:17:47,710 --> 00:17:50,080 suspense account or out of the account. 494 00:17:54,810 --> 00:17:57,149 So and I'm already 495 00:17:57,150 --> 00:17:58,649 going to the final part to you, but 496 00:17:58,650 --> 00:18:01,139 there's also a more difficult part, so 497 00:18:01,140 --> 00:18:02,799 it will take a bit of time. 498 00:18:02,800 --> 00:18:04,799 How does thing do things look in an 499 00:18:04,800 --> 00:18:07,349 international cross-currency system? 500 00:18:07,350 --> 00:18:10,049 So let's make it very 501 00:18:10,050 --> 00:18:11,279 interesting. 502 00:18:11,280 --> 00:18:13,559 First of all, the world 503 00:18:13,560 --> 00:18:15,069 is Jewish and there are a lot of banks. 504 00:18:15,070 --> 00:18:17,369 So we need a routing system, a routing 505 00:18:17,370 --> 00:18:18,659 table. 506 00:18:18,660 --> 00:18:20,939 Back in 1987, this wasn't 507 00:18:20,940 --> 00:18:21,940 a routing table. 508 00:18:23,520 --> 00:18:25,649 And every year a new Elmau element that 509 00:18:25,650 --> 00:18:27,719 came out where you can show these are the 510 00:18:27,720 --> 00:18:29,909 banks, this bank has a relationship with 511 00:18:29,910 --> 00:18:30,989 this bank. 512 00:18:30,990 --> 00:18:32,759 The relationships I'm going to show you, 513 00:18:32,760 --> 00:18:34,829 I have just invented them 514 00:18:34,830 --> 00:18:36,959 yesterday. So those are probably not the 515 00:18:36,960 --> 00:18:39,719 ones that are in real life. 516 00:18:39,720 --> 00:18:41,909 But for example, here at Kassabian 517 00:18:41,910 --> 00:18:43,799 as a dollar relationship, the U.S. 518 00:18:43,800 --> 00:18:45,809 dollar relationship with Citibank or with 519 00:18:45,810 --> 00:18:48,179 JP Morgan and this 520 00:18:48,180 --> 00:18:49,799 bank in Brazil has this kind of 521 00:18:49,800 --> 00:18:51,629 relationship with this American bank. 522 00:18:51,630 --> 00:18:53,819 And then the sending bank has 523 00:18:53,820 --> 00:18:54,929 to task. 524 00:18:54,930 --> 00:18:57,299 And at this time it was like flipping 525 00:18:57,300 --> 00:18:59,819 pages, finding around how you could 526 00:18:59,820 --> 00:19:01,889 make sure the funds ends up in 527 00:19:01,890 --> 00:19:04,019 the last in the last bank 528 00:19:05,280 --> 00:19:06,280 beneficiary bank. 529 00:19:07,650 --> 00:19:09,719 So let's let's look at an example here 530 00:19:09,720 --> 00:19:11,699 and what we're going to do. 531 00:19:11,700 --> 00:19:14,279 I've now moved Bob out of Europe, 532 00:19:14,280 --> 00:19:16,259 moved him all the way to Brazil, and he's 533 00:19:16,260 --> 00:19:18,479 now no longer transacting in 534 00:19:18,480 --> 00:19:20,519 euros. But he has an account in Brazilian 535 00:19:20,520 --> 00:19:21,520 real. 536 00:19:22,170 --> 00:19:24,239 And this is still at ABN Amro and has an 537 00:19:24,240 --> 00:19:25,240 account in Euros. 538 00:19:26,370 --> 00:19:29,159 Now, Alice wants to send Bob a payment 539 00:19:29,160 --> 00:19:31,319 for a payment. We need a currency for 540 00:19:31,320 --> 00:19:32,589 this payment. 541 00:19:32,590 --> 00:19:35,130 Um, let's pick up dollars 542 00:19:36,700 --> 00:19:38,459 and we want to send 600 U.S. 543 00:19:38,460 --> 00:19:39,479 dollars. 544 00:19:39,480 --> 00:19:41,849 So the first thing that happens is ABN 545 00:19:41,850 --> 00:19:44,429 Amro has to somehow decide 546 00:19:44,430 --> 00:19:46,649 an amount of euros to take out of 547 00:19:46,650 --> 00:19:47,650 Alice's account. 548 00:19:48,780 --> 00:19:51,399 So we have an exchange rate, an ABN Amro 549 00:19:51,400 --> 00:19:53,909 is going to choose. 550 00:19:53,910 --> 00:19:56,189 Another option could have been ABN Amro 551 00:19:56,190 --> 00:19:57,369 doesn't do U.S. dollar. 552 00:19:57,370 --> 00:19:59,429 So it's first doing a euro payment to a 553 00:19:59,430 --> 00:20:01,709 different bank, maybe a larger 554 00:20:01,710 --> 00:20:03,779 bank who can then 555 00:20:03,780 --> 00:20:05,909 do a foreign exchange. 556 00:20:05,910 --> 00:20:08,189 And then ABN Amro often doesn't even 557 00:20:08,190 --> 00:20:10,619 know how to how much to debit 558 00:20:10,620 --> 00:20:11,939 Alice's account. 559 00:20:11,940 --> 00:20:13,859 So this is a you see here, this is a 560 00:20:13,860 --> 00:20:16,049 complex thing starting to hear, but 561 00:20:16,050 --> 00:20:18,150 let's not dove into that thing. 562 00:20:19,350 --> 00:20:21,449 So 500 euros are taken out of 563 00:20:21,450 --> 00:20:23,519 Alice's account and needs to be credit 564 00:20:23,520 --> 00:20:25,619 to some other account. 565 00:20:25,620 --> 00:20:27,419 Now, what happens in this case is ABN 566 00:20:27,420 --> 00:20:29,489 Amro is going to 567 00:20:29,490 --> 00:20:31,709 actually increase 568 00:20:31,710 --> 00:20:33,419 their position in euros. 569 00:20:33,420 --> 00:20:35,669 So the euros are now going to belong, 570 00:20:35,670 --> 00:20:38,189 are actually owned by ABN Amro 571 00:20:38,190 --> 00:20:40,289 and in return is going to take 572 00:20:40,290 --> 00:20:42,539 out decrees that used 573 00:20:42,540 --> 00:20:43,540 dollar position. 574 00:20:44,730 --> 00:20:47,249 So this is actually selling euros 575 00:20:47,250 --> 00:20:49,349 to ABN Amro to buy back US 576 00:20:49,350 --> 00:20:50,350 dollars. 577 00:20:53,280 --> 00:20:55,439 But those euros and 578 00:20:55,440 --> 00:20:58,079 those dollars need to be somewhere. 579 00:20:58,080 --> 00:21:00,429 So you don't see here where the euros 580 00:21:00,430 --> 00:21:02,549 about probably in the target 581 00:21:02,550 --> 00:21:03,479 two system. 582 00:21:03,480 --> 00:21:04,559 That's a different account. 583 00:21:04,560 --> 00:21:06,359 But we don't even need to touch it 584 00:21:06,360 --> 00:21:07,919 because entirely, too, we don't need to 585 00:21:07,920 --> 00:21:09,029 move euros. 586 00:21:09,030 --> 00:21:11,489 We're selling them to ABN Amro, 587 00:21:11,490 --> 00:21:12,509 but US dollars. 588 00:21:14,720 --> 00:21:17,059 ABN Amro cannot have an account 589 00:21:17,060 --> 00:21:19,009 at the Federal Reserve, the central bank 590 00:21:19,010 --> 00:21:21,289 in the US, because 591 00:21:21,290 --> 00:21:22,729 they don't have a banking license in the 592 00:21:22,730 --> 00:21:24,739 U.S. So they need to start somewhere 593 00:21:24,740 --> 00:21:26,809 else. Well, in this case, they're going 594 00:21:26,810 --> 00:21:29,029 to store it in a commercial bank 595 00:21:29,030 --> 00:21:31,159 in the US, let's say JP 596 00:21:31,160 --> 00:21:33,349 Morgan. As I said, I just invented this 597 00:21:33,350 --> 00:21:34,459 relationship yesterday. 598 00:21:35,570 --> 00:21:37,699 So maybe JP Morgan 599 00:21:37,700 --> 00:21:40,189 has in USD denominated account 600 00:21:40,190 --> 00:21:42,359 in the name of ABN Amro 601 00:21:42,360 --> 00:21:44,509 and we need to move 600 euros 602 00:21:44,510 --> 00:21:45,859 from there to Bangkok. 603 00:21:45,860 --> 00:21:48,139 Safra, which is a Brazilian bank, 604 00:21:48,140 --> 00:21:49,140 yesterday Googled 605 00:21:50,510 --> 00:21:52,639 and then and 606 00:21:52,640 --> 00:21:54,769 we need to make the thing match again. 607 00:21:54,770 --> 00:21:56,329 So we need to mirror it. 608 00:21:56,330 --> 00:21:58,429 And if you do it in that way, it will all 609 00:21:58,430 --> 00:22:00,379 line up pretty easily. 610 00:22:00,380 --> 00:22:01,509 Taking out. 611 00:22:01,510 --> 00:22:03,769 So debiting the position of ABN 612 00:22:03,770 --> 00:22:05,989 Amro in USD, crediting the mirror 613 00:22:05,990 --> 00:22:08,119 account of JP Morgan and the 614 00:22:08,120 --> 00:22:09,919 other side mirror must be flipped. 615 00:22:09,920 --> 00:22:12,199 So ABN Amro is debited. 616 00:22:12,200 --> 00:22:14,359 Banco J. Safra is credited in U.S. 617 00:22:14,360 --> 00:22:15,409 dollars. 618 00:22:15,410 --> 00:22:17,629 Mattituck sent to Brazil 619 00:22:17,630 --> 00:22:20,719 and they are debiting their mirror. 620 00:22:20,720 --> 00:22:22,789 It's a mirror crediting 621 00:22:22,790 --> 00:22:25,339 something in this case there deposition. 622 00:22:25,340 --> 00:22:27,409 So now what's going to happen here 623 00:22:27,410 --> 00:22:29,569 is USD is 624 00:22:29,570 --> 00:22:31,639 sold to Banco J. 625 00:22:31,640 --> 00:22:33,829 Safra and both are 626 00:22:33,830 --> 00:22:35,269 Brazilian Reales. 627 00:22:35,270 --> 00:22:37,459 This happens by Bob, actually, but it's 628 00:22:37,460 --> 00:22:38,930 all hidden in the process. 629 00:22:40,160 --> 00:22:42,109 So two thousand Brazilian reals are 630 00:22:42,110 --> 00:22:43,110 debited from. 631 00:22:45,350 --> 00:22:47,569 The position and the 632 00:22:47,570 --> 00:22:49,999 bureau position and credited to Bob 633 00:22:50,000 --> 00:22:51,559 and Bob has received the funds. 634 00:22:53,480 --> 00:22:54,799 This may seem pretty difficult. 635 00:22:54,800 --> 00:22:56,819 So again, the slides are line if you want 636 00:22:56,820 --> 00:22:58,999 to walk through the process 637 00:22:59,000 --> 00:23:01,489 to to really understand 638 00:23:01,490 --> 00:23:03,259 it. But here are a couple of things that 639 00:23:03,260 --> 00:23:04,879 are interesting here. 640 00:23:04,880 --> 00:23:06,709 Um, and maybe an embryo. 641 00:23:06,710 --> 00:23:08,389 And actually everywhere in Europe, we 642 00:23:08,390 --> 00:23:10,489 have now events and they're all 643 00:23:10,490 --> 00:23:12,559 standardized and automated and there is a 644 00:23:12,560 --> 00:23:14,269 checksum in there. So a lot of mistakes 645 00:23:14,270 --> 00:23:16,669 can be prevented up front in 646 00:23:16,670 --> 00:23:18,799 the US and in Brazil, we have different 647 00:23:18,800 --> 00:23:20,929 systems. So, well, 648 00:23:20,930 --> 00:23:22,429 there is some manual thing in here. 649 00:23:22,430 --> 00:23:24,829 And if the beneficiary account number 650 00:23:24,830 --> 00:23:28,039 is wrong, money may be moved 651 00:23:28,040 --> 00:23:30,319 from JP Morgan, 652 00:23:30,320 --> 00:23:31,549 from ABN to Bank or J. 653 00:23:31,550 --> 00:23:33,199 Safra and message is forwarded. 654 00:23:33,200 --> 00:23:35,329 And in the end they see I 655 00:23:35,330 --> 00:23:36,740 don't know where to put this money. 656 00:23:38,120 --> 00:23:40,399 So a message goes back, which 657 00:23:40,400 --> 00:23:43,489 can be which is also an empty message. 658 00:23:43,490 --> 00:23:44,479 One ninety nine. 659 00:23:44,480 --> 00:23:46,759 If I'm correct in saying, OK, 660 00:23:46,760 --> 00:23:48,589 I don't know what to do with this money, 661 00:23:48,590 --> 00:23:50,629 it goes back to ABN Amro and a manual 662 00:23:50,630 --> 00:23:51,889 processes started. 663 00:23:51,890 --> 00:23:53,629 Manual process takes time and 664 00:23:53,630 --> 00:23:55,879 investigation takes time and it 665 00:23:55,880 --> 00:23:57,829 cost a lot for banks. 666 00:23:57,830 --> 00:23:59,899 So this is actually the reason 667 00:23:59,900 --> 00:24:01,399 or one of the reasons why international 668 00:24:01,400 --> 00:24:02,999 payments are expensive. 669 00:24:03,000 --> 00:24:05,539 A lot of problem errors go on in there. 670 00:24:05,540 --> 00:24:07,219 Those must be corrected. 671 00:24:07,220 --> 00:24:09,679 And a bank can choose to either 672 00:24:09,680 --> 00:24:11,899 charge those customers that 673 00:24:11,900 --> 00:24:14,269 make the mistakes, but not always. 674 00:24:14,270 --> 00:24:15,799 You can really identify them. 675 00:24:15,800 --> 00:24:17,779 So another thing is, well, we know the 676 00:24:17,780 --> 00:24:19,069 amount of mistakes we make. 677 00:24:19,070 --> 00:24:20,359 We have a team. 678 00:24:20,360 --> 00:24:22,099 It cost us this much. 679 00:24:22,100 --> 00:24:23,389 Let's spread it out over all the 680 00:24:23,390 --> 00:24:25,489 Internet, international payments and 681 00:24:25,490 --> 00:24:28,039 just say sending money from 682 00:24:28,040 --> 00:24:30,409 Europe to Brazil is like 15 683 00:24:30,410 --> 00:24:32,479 euros. And then it kind 684 00:24:32,480 --> 00:24:34,159 of works out. 685 00:24:34,160 --> 00:24:35,359 And that's what most banks are then 686 00:24:35,360 --> 00:24:36,360 doing. 687 00:24:36,950 --> 00:24:39,109 And another thing here is 688 00:24:39,110 --> 00:24:41,219 ABN Amro is in the euro 689 00:24:41,220 --> 00:24:43,579 timezone, Europe's time zone. 690 00:24:43,580 --> 00:24:45,679 JP Morgan is in a different time zone 691 00:24:45,680 --> 00:24:47,839 bank, which for sufferers in a different 692 00:24:47,840 --> 00:24:49,879 time zone, more aligned with JP Morgan. 693 00:24:49,880 --> 00:24:52,159 But sometimes it therefore, 694 00:24:52,160 --> 00:24:54,049 when the message is sent to another bank 695 00:24:54,050 --> 00:24:56,119 and their central bank is not open or 696 00:24:56,120 --> 00:24:58,219 they themselves are not open, it just 697 00:24:58,220 --> 00:25:00,289 sits there waiting for the sun going 698 00:25:00,290 --> 00:25:01,290 in their direction. 699 00:25:03,680 --> 00:25:05,359 So this is one of the reasons why it 700 00:25:05,360 --> 00:25:06,469 takes time. 701 00:25:06,470 --> 00:25:08,539 All of the things is, for example, now 702 00:25:08,540 --> 00:25:10,669 there is a US bank in the middle of 703 00:25:10,670 --> 00:25:13,369 a payment from a Europe client 704 00:25:13,370 --> 00:25:15,139 to a Brazilian client. 705 00:25:15,140 --> 00:25:17,419 And the US banks have 706 00:25:17,420 --> 00:25:19,729 very stringent controls 707 00:25:19,730 --> 00:25:21,859 here. They must not be in the path 708 00:25:21,860 --> 00:25:24,079 of any terrorist money, for example. 709 00:25:24,080 --> 00:25:26,929 So JP Morgan may decide for some reason 710 00:25:26,930 --> 00:25:29,449 to delay this this transaction 711 00:25:29,450 --> 00:25:31,849 so they can figure out whether Bob 712 00:25:31,850 --> 00:25:33,949 is actually a 713 00:25:33,950 --> 00:25:34,950 good customer. 714 00:25:37,760 --> 00:25:39,889 So there are a lot of 715 00:25:39,890 --> 00:25:41,779 things that are adding in delays and 716 00:25:41,780 --> 00:25:44,149 costs in the way we do banking 717 00:25:44,150 --> 00:25:45,150 right now. 718 00:25:46,500 --> 00:25:48,639 And this is my most, 719 00:25:48,640 --> 00:25:50,999 uh, uh, 720 00:25:51,000 --> 00:25:53,189 complex example, if you want to see 721 00:25:53,190 --> 00:25:55,499 more complex examples, 722 00:25:55,500 --> 00:25:56,699 just come by after what? 723 00:25:56,700 --> 00:25:58,229 I don't have them here, but maybe we can 724 00:25:58,230 --> 00:25:59,230 send them later on. 725 00:26:00,420 --> 00:26:02,939 Sometimes it's fun to look at them, 726 00:26:02,940 --> 00:26:04,319 but think again. 727 00:26:04,320 --> 00:26:06,509 Banks are risk averse when it goes 728 00:26:06,510 --> 00:26:07,949 to the payment departments. 729 00:26:07,950 --> 00:26:08,950 Thank you very much. 730 00:26:19,970 --> 00:26:21,769 Thank you, Mark. 731 00:26:21,770 --> 00:26:24,259 Thank you for the world without blocking. 732 00:26:24,260 --> 00:26:26,089 I hope we're moving fast. 733 00:26:26,090 --> 00:26:28,639 Are the questions here in this audience? 734 00:26:28,640 --> 00:26:30,259 Yes, here, sir. 735 00:26:30,260 --> 00:26:32,099 You're the first one. 736 00:26:32,100 --> 00:26:33,109 Take your chance. 737 00:26:33,110 --> 00:26:35,509 Thank you for your talk. 738 00:26:35,510 --> 00:26:37,969 My question is, why does ABN Amro 739 00:26:37,970 --> 00:26:38,970 do the. 740 00:26:41,210 --> 00:26:43,279 OK, why does ABN Amro do 741 00:26:43,280 --> 00:26:44,280 this 742 00:26:45,560 --> 00:26:47,659 hook via an American 743 00:26:47,660 --> 00:26:49,759 bank? I think ABN Amro is 744 00:26:49,760 --> 00:26:52,099 not that small of a bank and Brazil 745 00:26:52,100 --> 00:26:53,629 is not that small of a country. 746 00:26:53,630 --> 00:26:56,239 So why does it ABN Amro 747 00:26:56,240 --> 00:26:58,339 does open an account 748 00:26:58,340 --> 00:27:00,349 at a Brazilian commercial bank and do 749 00:27:00,350 --> 00:27:02,629 with them what they do with Morgan, but 750 00:27:02,630 --> 00:27:03,829 avoiding the dollars? 751 00:27:03,830 --> 00:27:04,939 It's a very good question. 752 00:27:04,940 --> 00:27:07,069 And the real answer here is 753 00:27:07,070 --> 00:27:09,049 I invented those relationships. 754 00:27:09,050 --> 00:27:11,329 OK, but to go into a little 755 00:27:11,330 --> 00:27:13,669 bit more subtlety and for 756 00:27:13,670 --> 00:27:15,979 a bank to keep this relationship open, 757 00:27:15,980 --> 00:27:18,349 they it cost them money. 758 00:27:18,350 --> 00:27:20,749 So it depends a lot on how much 759 00:27:20,750 --> 00:27:22,249 transactions they're going to be with 760 00:27:22,250 --> 00:27:24,179 Brazil, for example. 761 00:27:24,180 --> 00:27:26,389 And it costs money for a couple 762 00:27:26,390 --> 00:27:28,459 of reasons. And one of them is, in 763 00:27:28,460 --> 00:27:30,739 fact, they don't like keeping money in 764 00:27:30,740 --> 00:27:32,119 another commercial bank. 765 00:27:32,120 --> 00:27:35,359 So during the year, they do continuous 766 00:27:35,360 --> 00:27:37,759 checks on how is your liquidity position, 767 00:27:37,760 --> 00:27:39,229 how is your solvency position? 768 00:27:39,230 --> 00:27:41,479 And maybe we want to lower the amount 769 00:27:41,480 --> 00:27:43,549 of money we keep in your bank or maybe 770 00:27:43,550 --> 00:27:45,679 we accept a higher amount. 771 00:27:45,680 --> 00:27:47,689 So there's a lot of work going on in 772 00:27:47,690 --> 00:27:48,739 there. 773 00:27:48,740 --> 00:27:50,659 In the past, you saw that there were a 774 00:27:50,660 --> 00:27:52,069 lot more relationships. 775 00:27:52,070 --> 00:27:54,229 And what you see now in banks, especially 776 00:27:54,230 --> 00:27:56,329 since in Europe, we are now 777 00:27:56,330 --> 00:27:57,709 one single region. 778 00:27:57,710 --> 00:28:00,019 You see banks like to decrease the amount 779 00:28:00,020 --> 00:28:02,119 of relationships they have and as a 780 00:28:02,120 --> 00:28:04,309 result, concentrate money in a couple of 781 00:28:04,310 --> 00:28:06,649 large banks. 782 00:28:06,650 --> 00:28:07,650 OK, thank you. 783 00:28:10,160 --> 00:28:12,349 I was wondering if you looked at 784 00:28:12,350 --> 00:28:13,849 how it works, for example, to move other 785 00:28:13,850 --> 00:28:16,339 kinds of assets like stocks, 786 00:28:16,340 --> 00:28:18,409 real estate. Is it a similar process 787 00:28:18,410 --> 00:28:19,909 or is it completely different? 788 00:28:19,910 --> 00:28:21,529 Because that's also a very popular 789 00:28:21,530 --> 00:28:23,159 application of block change. 790 00:28:23,160 --> 00:28:25,219 Yeah, um, the answer 791 00:28:25,220 --> 00:28:26,539 is no, I haven't. 792 00:28:26,540 --> 00:28:28,280 And the reason is 793 00:28:29,780 --> 00:28:31,999 the most things I'm involved with 794 00:28:32,000 --> 00:28:33,919 involved in with banks right now is with 795 00:28:33,920 --> 00:28:35,239 payments. 796 00:28:35,240 --> 00:28:37,429 So for the others, I do know a bit 797 00:28:37,430 --> 00:28:39,289 what is going on, but not in really in 798 00:28:39,290 --> 00:28:40,290 depth. 799 00:28:41,930 --> 00:28:43,879 We have a question there from out of 800 00:28:43,880 --> 00:28:45,979 space, how does this 801 00:28:45,980 --> 00:28:48,589 all work with people or credit cards? 802 00:28:48,590 --> 00:28:51,589 The payments there are usually instant 803 00:28:51,590 --> 00:28:53,359 and it's a very good question. 804 00:28:53,360 --> 00:28:56,239 And actually that payment is not instant. 805 00:28:56,240 --> 00:28:58,279 What is instant is the promise that you 806 00:28:58,280 --> 00:28:59,280 will be paid. 807 00:29:02,610 --> 00:29:03,610 And this. 808 00:29:08,500 --> 00:29:10,869 Now, I have I know one thing, 809 00:29:10,870 --> 00:29:13,089 they call it Cartes, and it's a separate 810 00:29:13,090 --> 00:29:15,279 department and it works completely 811 00:29:15,280 --> 00:29:17,259 different. I have to ask around a bit 812 00:29:17,260 --> 00:29:18,909 what I have understood about credit 813 00:29:18,910 --> 00:29:21,099 cards. And there is 814 00:29:21,100 --> 00:29:23,169 some at some point 815 00:29:23,170 --> 00:29:25,419 in time, there are still obligations. 816 00:29:25,420 --> 00:29:27,609 Um, so 817 00:29:27,610 --> 00:29:29,649 one of the questions I haven't yet an 818 00:29:29,650 --> 00:29:30,609 answer for myself. 819 00:29:30,610 --> 00:29:33,039 For example, if if I have a 820 00:29:33,040 --> 00:29:34,809 credit card at AIG and I want to pay 821 00:29:34,810 --> 00:29:36,939 someone in the US, what happens 822 00:29:36,940 --> 00:29:39,369 when he goes bankrupt before 823 00:29:39,370 --> 00:29:41,499 the money actually goes out? 824 00:29:41,500 --> 00:29:43,299 That's one of the questions I hoped I 825 00:29:43,300 --> 00:29:45,759 could have answered today, but 826 00:29:45,760 --> 00:29:47,109 not yet. Maybe next year. 827 00:29:48,430 --> 00:29:49,519 Okay, I have a question here. 828 00:29:49,520 --> 00:29:51,819 This gentleman white shirt, um, 829 00:29:51,820 --> 00:29:54,039 why don't they just use the central bank? 830 00:29:54,040 --> 00:29:55,479 You know, like, uh, like the European 831 00:29:55,480 --> 00:29:57,219 Central Bank is having a connection with 832 00:29:57,220 --> 00:29:59,379 the American Central Bank, and so they 833 00:29:59,380 --> 00:30:01,239 use those for exchange. 834 00:30:01,240 --> 00:30:02,739 That's also a good question. 835 00:30:02,740 --> 00:30:04,959 And in general, the European 836 00:30:04,960 --> 00:30:07,029 Central Bank has a couple of 837 00:30:07,030 --> 00:30:09,099 roles in society, and one of 838 00:30:09,100 --> 00:30:11,199 them is Target, too, 839 00:30:11,200 --> 00:30:13,539 and another one is having 840 00:30:13,540 --> 00:30:15,129 oversight over the euro area. 841 00:30:15,130 --> 00:30:16,359 But they have nothing to do with U.S. 842 00:30:16,360 --> 00:30:18,159 dollars. And whenever you don't do that, 843 00:30:18,160 --> 00:30:20,679 you're actually importing new risks 844 00:30:20,680 --> 00:30:22,269 that you don't like. 845 00:30:22,270 --> 00:30:24,399 And the central banks, 846 00:30:24,400 --> 00:30:26,829 we want to trust them and 847 00:30:26,830 --> 00:30:28,449 they should therefore be a little 848 00:30:28,450 --> 00:30:30,099 trustworthy, actually, and not do 849 00:30:30,100 --> 00:30:32,839 anything that may be a risk. 850 00:30:32,840 --> 00:30:35,169 Okay, this gentleman here, your bank, 851 00:30:35,170 --> 00:30:37,329 concerning the security with 852 00:30:37,330 --> 00:30:39,759 swift transfers there, it has 853 00:30:39,760 --> 00:30:42,129 have been recently some 854 00:30:42,130 --> 00:30:45,039 some kind of virtual Haith, 855 00:30:45,040 --> 00:30:46,629 for example, I think in Bangladesh a 856 00:30:46,630 --> 00:30:47,889 couple of months ago. 857 00:30:47,890 --> 00:30:50,709 Could you elaborate a bit on how they 858 00:30:50,710 --> 00:30:52,959 how they how it works actually and how 859 00:30:52,960 --> 00:30:54,909 they try to to fix it? 860 00:30:54,910 --> 00:30:57,459 Security only a little bit. 861 00:30:57,460 --> 00:30:58,899 Um, yes. 862 00:30:58,900 --> 00:31:00,649 In the EU saying, you know, he's working 863 00:31:00,650 --> 00:31:02,079 in the financial sector, 864 00:31:03,220 --> 00:31:05,649 but that's also true. 865 00:31:05,650 --> 00:31:07,839 But another thing, a lot of people don't 866 00:31:07,840 --> 00:31:09,129 know everything. 867 00:31:09,130 --> 00:31:10,719 Actually, nobody knows everything in this 868 00:31:10,720 --> 00:31:12,909 sector. So you have to network your way 869 00:31:12,910 --> 00:31:14,169 to the knowledge you want to know. 870 00:31:14,170 --> 00:31:16,059 And if you need a knowledge for your 871 00:31:16,060 --> 00:31:18,009 work, you can you have a reason to do so. 872 00:31:18,010 --> 00:31:20,199 And otherwise you do it in your spare 873 00:31:20,200 --> 00:31:21,189 time or whatever. 874 00:31:21,190 --> 00:31:23,679 Anyway, what happened 875 00:31:23,680 --> 00:31:25,239 with Bangladesh and whatever. 876 00:31:25,240 --> 00:31:27,519 I'm not sure about security 877 00:31:27,520 --> 00:31:29,859 in general, the messages or 878 00:31:29,860 --> 00:31:31,989 some messages I signed and it depends on 879 00:31:31,990 --> 00:31:34,569 the message type and I found 880 00:31:34,570 --> 00:31:36,429 find they have a really interesting 881 00:31:36,430 --> 00:31:38,529 choice. Weissel messages I signed, 882 00:31:38,530 --> 00:31:40,569 I still do not reason, for example, the 883 00:31:40,570 --> 00:31:42,669 empty one of three assigned, which 884 00:31:42,670 --> 00:31:43,960 I believe is a good thing. 885 00:31:45,370 --> 00:31:47,589 But some banks, for example, choose 886 00:31:47,590 --> 00:31:49,749 to only credit to the beneficiary 887 00:31:49,750 --> 00:31:51,279 account when they receive to empty one of 888 00:31:51,280 --> 00:31:53,499 three and empty nine ten, saying 889 00:31:53,500 --> 00:31:55,299 we have received funds in another 890 00:31:55,300 --> 00:31:56,859 commercial bank, for example. 891 00:31:56,860 --> 00:31:59,109 But the nine ten is not signed, so 892 00:31:59,110 --> 00:32:01,149 they wait for two messages, one of them 893 00:32:01,150 --> 00:32:02,919 that can be faked. And I was like, then 894 00:32:02,920 --> 00:32:04,450 why work for wait for this message? 895 00:32:06,310 --> 00:32:07,899 They don't know the answer to people I 896 00:32:07,900 --> 00:32:09,369 could ask. Don't know the answer. 897 00:32:09,370 --> 00:32:10,370 So. 898 00:32:11,880 --> 00:32:14,309 It's amazing to me that the mystical 899 00:32:15,420 --> 00:32:17,579 financial world, they're filled up 900 00:32:17,580 --> 00:32:19,229 with trust. 901 00:32:19,230 --> 00:32:21,809 Yeah, a bit, but yeah. 902 00:32:21,810 --> 00:32:23,189 Yeah, OK. 903 00:32:23,190 --> 00:32:25,389 So I don't know if I trust this guy. 904 00:32:25,390 --> 00:32:26,969 There's a question from outer space 905 00:32:26,970 --> 00:32:28,469 again. I wouldn't, by the way. 906 00:32:28,470 --> 00:32:30,009 No, I know. 907 00:32:30,010 --> 00:32:32,399 Why couldn't the international 908 00:32:32,400 --> 00:32:35,219 money transfer system be better automated 909 00:32:35,220 --> 00:32:37,709 to make the costs 910 00:32:37,710 --> 00:32:38,710 less? 911 00:32:39,600 --> 00:32:42,089 Well, actually, that's one of the reasons 912 00:32:42,090 --> 00:32:44,279 why banks are looking for block change. 913 00:32:44,280 --> 00:32:46,379 They also see this as expensive 914 00:32:46,380 --> 00:32:48,659 and error prone and block 915 00:32:48,660 --> 00:32:50,279 chain is this magical thing, right? 916 00:32:51,750 --> 00:32:54,299 So, yes, they're investigating 917 00:32:54,300 --> 00:32:56,499 and I fully agree. 918 00:32:56,500 --> 00:32:57,969 That's all I can say today. 919 00:32:57,970 --> 00:32:59,739 OK, this gentleman here is arguing since 920 00:32:59,740 --> 00:33:00,740 long time. 921 00:33:01,530 --> 00:33:03,749 So you said for transfer 922 00:33:03,750 --> 00:33:05,729 between two banks in different time 923 00:33:05,730 --> 00:33:07,859 zones, think time because sometimes 924 00:33:07,860 --> 00:33:09,419 waiting for acknowledgment till the sun 925 00:33:09,420 --> 00:33:11,399 come up. Is that why this process is not 926 00:33:11,400 --> 00:33:13,629 automated? So sending messages 927 00:33:13,630 --> 00:33:15,569 back and back and that's it? 928 00:33:15,570 --> 00:33:17,459 Yeah, it actually depends on the banks 929 00:33:17,460 --> 00:33:18,629 that are involved. 930 00:33:18,630 --> 00:33:20,759 So, for 931 00:33:20,760 --> 00:33:23,129 example, AIG wants to be a 24/7 932 00:33:23,130 --> 00:33:25,199 bank, but they depend 933 00:33:25,200 --> 00:33:26,449 on other banks. 934 00:33:26,450 --> 00:33:29,129 So, yeah, 935 00:33:29,130 --> 00:33:31,289 if, for example, there are also banks 936 00:33:31,290 --> 00:33:33,239 that haven't automated the lot. 937 00:33:33,240 --> 00:33:35,549 So if those one of those is in the path, 938 00:33:35,550 --> 00:33:37,659 by definition, it takes time. 939 00:33:37,660 --> 00:33:39,659 But there are also other factors than 940 00:33:39,660 --> 00:33:41,729 only time zone or opening hours 941 00:33:41,730 --> 00:33:42,359 of banks. 942 00:33:42,360 --> 00:33:44,819 But thanks, gentleman 943 00:33:44,820 --> 00:33:46,259 there in the back, please. 944 00:33:46,260 --> 00:33:48,389 And a question about your personal 945 00:33:48,390 --> 00:33:50,669 experience. Why do banks always 946 00:33:50,670 --> 00:33:52,619 say, hey, we want block change when it 947 00:33:52,620 --> 00:33:54,839 seems like they actually only want more 948 00:33:54,840 --> 00:33:56,399 international standardization? 949 00:33:56,400 --> 00:33:58,349 Or do you think they want to separate the 950 00:33:58,350 --> 00:34:00,119 central authorities with some 951 00:34:00,120 --> 00:34:01,739 peer-to-peer technology? 952 00:34:01,740 --> 00:34:03,809 OK, I cannot talk for all banks. 953 00:34:03,810 --> 00:34:05,099 Why do want something? 954 00:34:06,690 --> 00:34:08,249 But what I have seen is they're 955 00:34:08,250 --> 00:34:09,299 interested in the technology. 956 00:34:09,300 --> 00:34:11,189 There is a lot of talk and hype about it 957 00:34:11,190 --> 00:34:13,349 in the media and in conferences 958 00:34:13,350 --> 00:34:15,419 and everywhere. So they're like, OK, 959 00:34:15,420 --> 00:34:17,849 this is something important and 960 00:34:17,850 --> 00:34:20,549 also one which I find very interesting. 961 00:34:20,550 --> 00:34:22,439 A lot of billions of dollars have been 962 00:34:22,440 --> 00:34:24,479 invested in startups, so it must be 963 00:34:24,480 --> 00:34:26,309 important. So let's also invest some 964 00:34:26,310 --> 00:34:28,408 more, follow the 965 00:34:28,409 --> 00:34:29,609 money. What's the message? 966 00:34:29,610 --> 00:34:30,610 Isn't it? 967 00:34:31,170 --> 00:34:34,149 But OK, besides that reasoning 968 00:34:34,150 --> 00:34:36,329 and most banks I'm involved 969 00:34:36,330 --> 00:34:37,988 with actually trying to understand the 970 00:34:37,989 --> 00:34:39,629 technology and a lot of ideas have 971 00:34:39,630 --> 00:34:41,039 already been scraped. 972 00:34:41,040 --> 00:34:42,899 They say, OK, block change is not a fit 973 00:34:42,900 --> 00:34:44,158 in here. 974 00:34:44,159 --> 00:34:46,709 And so they're actually doing 975 00:34:46,710 --> 00:34:48,779 a real job in understanding this 976 00:34:48,780 --> 00:34:49,780 thing. 977 00:34:50,840 --> 00:34:53,238 This you have a question? 978 00:34:53,239 --> 00:34:54,239 Yeah, sure. 979 00:34:55,639 --> 00:34:57,859 How can a bank like 980 00:34:57,860 --> 00:35:00,139 revelant let their customers get 981 00:35:00,140 --> 00:35:02,119 money all over the world in every 982 00:35:02,120 --> 00:35:03,949 currency for free? 983 00:35:03,950 --> 00:35:06,169 I'm sorry. How can it 984 00:35:06,170 --> 00:35:07,849 be that there's a new bank called 985 00:35:07,850 --> 00:35:09,979 Revelant and 986 00:35:09,980 --> 00:35:11,419 you can have a credit card from them? 987 00:35:11,420 --> 00:35:13,399 I have a credit card and I can get money 988 00:35:13,400 --> 00:35:15,199 all over the world in every currency form 989 00:35:15,200 --> 00:35:16,639 for free. 990 00:35:16,640 --> 00:35:18,559 So how is that possible? 991 00:35:18,560 --> 00:35:20,659 Quite probably you get it for free, but 992 00:35:20,660 --> 00:35:22,699 the bank is paying for it or their 993 00:35:22,700 --> 00:35:23,700 investors. 994 00:35:26,390 --> 00:35:28,189 Yeah, that's true. 995 00:35:28,190 --> 00:35:30,399 OK, so for example, I 996 00:35:30,400 --> 00:35:32,509 am in the Netherlands, 997 00:35:32,510 --> 00:35:34,219 you have a payment system called ideal 998 00:35:34,220 --> 00:35:35,929 and you pay for a transaction that's 999 00:35:35,930 --> 00:35:37,669 mostly used for Internet payment. 1000 00:35:37,670 --> 00:35:39,769 But lately banks are 1001 00:35:39,770 --> 00:35:41,389 building apps or functionality. 1002 00:35:41,390 --> 00:35:43,249 So you can send an ideal link to someone 1003 00:35:43,250 --> 00:35:44,929 else as a consumer and they don't charge 1004 00:35:44,930 --> 00:35:46,819 for it. But banks still have to pay the 1005 00:35:46,820 --> 00:35:49,039 other banks and that's 1006 00:35:49,040 --> 00:35:51,079 they're paying for it because they want 1007 00:35:51,080 --> 00:35:53,029 the publicity or they want a certain 1008 00:35:53,030 --> 00:35:55,189 image or whatever else you think 1009 00:35:55,190 --> 00:35:57,199 about. You can get money out of an ATM 1010 00:35:57,200 --> 00:36:00,139 for free. But those very secure devices, 1011 00:36:00,140 --> 00:36:02,239 which has a lot of manpower, men are 1012 00:36:02,240 --> 00:36:03,409 involved. 1013 00:36:03,410 --> 00:36:05,749 They cost money. So you as a customer, 1014 00:36:05,750 --> 00:36:07,759 I just a cost center and not a profit 1015 00:36:07,760 --> 00:36:08,760 center for a bank. 1016 00:36:10,070 --> 00:36:12,499 Most things customers are retail. 1017 00:36:12,500 --> 00:36:14,389 Customers do it. Banks don't make them 1018 00:36:14,390 --> 00:36:15,390 real money 1019 00:36:17,490 --> 00:36:18,109 or profits. 1020 00:36:18,110 --> 00:36:19,110 At least 1021 00:36:20,540 --> 00:36:22,249 banks are a little bit providing 1022 00:36:22,250 --> 00:36:24,379 umbrellas when the sun is shining, 1023 00:36:24,380 --> 00:36:25,429 of course. 1024 00:36:25,430 --> 00:36:28,609 But when the first raindrop falls, 1025 00:36:28,610 --> 00:36:30,829 there goes the umbrella. 1026 00:36:30,830 --> 00:36:33,289 That's my experience pleaser. 1027 00:36:33,290 --> 00:36:35,989 So you say that a lot of costs 1028 00:36:35,990 --> 00:36:38,209 happen when a transaction fails. 1029 00:36:38,210 --> 00:36:40,459 Reitman's is error messages sent back 1030 00:36:40,460 --> 00:36:42,379 and it's manually cleared. 1031 00:36:42,380 --> 00:36:44,749 And I'm wondering, I mean, 1032 00:36:44,750 --> 00:36:46,699 these could be solved with modern 1033 00:36:46,700 --> 00:36:49,009 communication protocols and banks working 1034 00:36:49,010 --> 00:36:51,109 on a system to anticipate the 1035 00:36:51,110 --> 00:36:53,209 result of sending this 1036 00:36:53,210 --> 00:36:55,999 all ends and empty message 1037 00:36:56,000 --> 00:36:58,879 when they know that it will fail. 1038 00:36:58,880 --> 00:37:00,919 Yeah, a little bit, yes. 1039 00:37:00,920 --> 00:37:02,539 But one of the things here is also 1040 00:37:02,540 --> 00:37:04,099 standardization. 1041 00:37:04,100 --> 00:37:06,469 As long as everybody talks in the same 1042 00:37:06,470 --> 00:37:08,569 way, for example, format of 1043 00:37:08,570 --> 00:37:10,789 account numbers and things are easier. 1044 00:37:10,790 --> 00:37:12,319 And that's one of the things that has 1045 00:37:12,320 --> 00:37:14,299 happening, is happening in Europe. 1046 00:37:14,300 --> 00:37:16,519 Standardize everything before SEPA 1047 00:37:16,520 --> 00:37:18,469 and Ibanez, the Netherlands had a 1048 00:37:18,470 --> 00:37:20,029 different system than Belgium and the 1049 00:37:20,030 --> 00:37:22,249 different one than in Luxembourg, and all 1050 00:37:22,250 --> 00:37:23,590 the countries had their own thing. 1051 00:37:24,800 --> 00:37:27,379 So that's actually why 1052 00:37:27,380 --> 00:37:29,329 SEPA is there to standardize what's going 1053 00:37:29,330 --> 00:37:30,529 on in this region. 1054 00:37:30,530 --> 00:37:32,629 Now, one of the parts of supplies, 1055 00:37:32,630 --> 00:37:34,699 for example, in other countries 1056 00:37:34,700 --> 00:37:37,009 are now looking into can we also 1057 00:37:37,010 --> 00:37:39,289 incorporate Iban just to lower 1058 00:37:39,290 --> 00:37:41,389 the amount of errors that we have because 1059 00:37:41,390 --> 00:37:43,609 of this region? 1060 00:37:43,610 --> 00:37:45,019 And of course, there are more reasons, 1061 00:37:45,020 --> 00:37:47,389 but standardization is a very important 1062 00:37:47,390 --> 00:37:47,869 thing. 1063 00:37:47,870 --> 00:37:49,340 Before you can actually automated, 1064 00:37:50,930 --> 00:37:52,879 sir, here at the right side, you have a 1065 00:37:52,880 --> 00:37:54,949 question or you were just waiting for the 1066 00:37:54,950 --> 00:37:57,559 bus, OK, the bank 1067 00:37:57,560 --> 00:37:59,749 and the international 1068 00:37:59,750 --> 00:38:00,319 transfers. 1069 00:38:00,320 --> 00:38:02,869 Is there a protocol, a standardized 1070 00:38:02,870 --> 00:38:04,939 protocol which each bank must 1071 00:38:04,940 --> 00:38:07,969 follow and to develop that and 1072 00:38:07,970 --> 00:38:10,069 can I can I open a bank and say, oh, 1073 00:38:10,070 --> 00:38:12,449 no, I have my own protocol 1074 00:38:12,450 --> 00:38:14,629 and or of China 1075 00:38:14,630 --> 00:38:16,909 maybe says no, we think we 1076 00:38:16,910 --> 00:38:17,689 can do it better. 1077 00:38:17,690 --> 00:38:19,789 And yeah, I would be 1078 00:38:19,790 --> 00:38:21,020 very interesting to try, 1079 00:38:22,550 --> 00:38:24,619 but the standards are 1080 00:38:26,330 --> 00:38:28,349 as long. The most important thing is that 1081 00:38:28,350 --> 00:38:30,409 two banks that have a relationship 1082 00:38:30,410 --> 00:38:32,459 also have a standard. 1083 00:38:32,460 --> 00:38:34,909 Now, one of the most nice 1084 00:38:34,910 --> 00:38:36,709 thing is that you can buy standard 1085 00:38:36,710 --> 00:38:38,779 software for banks if you 1086 00:38:38,780 --> 00:38:39,769 want to start your own bank. 1087 00:38:39,770 --> 00:38:42,049 So some protocols have been implemented 1088 00:38:42,050 --> 00:38:44,209 like the empty defined by 1089 00:38:44,210 --> 00:38:46,459 SWIFT. So that becomes the standard 1090 00:38:46,460 --> 00:38:48,109 in that way. So it's not a standard 1091 00:38:48,110 --> 00:38:50,149 because of law, but it's the standard 1092 00:38:50,150 --> 00:38:52,279 because, well, it 1093 00:38:52,280 --> 00:38:54,199 makes things easier to do things the same 1094 00:38:54,200 --> 00:38:55,189 way. 1095 00:38:55,190 --> 00:38:56,299 You had that experience. 1096 00:38:56,300 --> 00:38:57,650 You told me about 1097 00:38:58,970 --> 00:39:01,399 considering to start a Bitcoin 1098 00:39:01,400 --> 00:39:03,709 bank then, wasn't it? 1099 00:39:03,710 --> 00:39:05,959 So, yes, if you want to talk more 1100 00:39:05,960 --> 00:39:08,959 about this through this after this show, 1101 00:39:08,960 --> 00:39:11,239 we have some other questions. 1102 00:39:11,240 --> 00:39:12,649 I know you've been talking about 1103 00:39:12,650 --> 00:39:13,969 irregularities in this. 1104 00:39:13,970 --> 00:39:15,769 Let's call it money routing system, I 1105 00:39:15,770 --> 00:39:17,629 guess then and you've been saying that 1106 00:39:17,630 --> 00:39:19,729 manual work is being involved in 1107 00:39:19,730 --> 00:39:21,169 resolving these issues. 1108 00:39:21,170 --> 00:39:22,549 Do you know anything about the social 1109 00:39:22,550 --> 00:39:25,219 relationships between bank personnel 1110 00:39:25,220 --> 00:39:27,529 around the globe or how 1111 00:39:27,530 --> 00:39:29,719 are these things being resolved? 1112 00:39:29,720 --> 00:39:31,279 Are there people involved who know each 1113 00:39:31,280 --> 00:39:33,139 other? How do they know each other? 1114 00:39:33,140 --> 00:39:34,879 I actually have no idea. 1115 00:39:34,880 --> 00:39:35,960 I have seen 1116 00:39:37,070 --> 00:39:39,229 an example of a marriage where one 1117 00:39:39,230 --> 00:39:41,509 bank sends to another bank and it doesn't 1118 00:39:41,510 --> 00:39:43,159 say names of of people. 1119 00:39:43,160 --> 00:39:45,619 It's just like regarding 1120 00:39:45,620 --> 00:39:48,319 empty message with this identifier 1121 00:39:48,320 --> 00:39:50,479 if this is going on and. 1122 00:39:50,480 --> 00:39:52,549 So you could automated, you could 1123 00:39:52,550 --> 00:39:54,709 say, but then 1124 00:39:54,710 --> 00:39:57,019 the banks have to trust each other, vice 1125 00:39:57,020 --> 00:39:59,089 versa, above the claims that are 1126 00:39:59,090 --> 00:40:00,559 being made, right? 1127 00:40:00,560 --> 00:40:02,749 Well, maybe, maybe not on this level, 1128 00:40:02,750 --> 00:40:03,709 maybe not on this level. 1129 00:40:03,710 --> 00:40:05,899 But, yes, when there is a relationship, 1130 00:40:05,900 --> 00:40:07,669 you need to trust each other and 1131 00:40:07,670 --> 00:40:09,439 specifically in one direction, because 1132 00:40:09,440 --> 00:40:11,569 one bank has money in the other, 1133 00:40:11,570 --> 00:40:13,069 the other way around to trust could be a 1134 00:40:13,070 --> 00:40:14,690 little less. 1135 00:40:15,770 --> 00:40:17,959 But whenever you're sending 1136 00:40:17,960 --> 00:40:20,449 a message saying this is 1137 00:40:20,450 --> 00:40:22,729 going wrong, that message is 1138 00:40:22,730 --> 00:40:25,009 normally signed and 1139 00:40:25,010 --> 00:40:26,959 then whatever is in the message is 1140 00:40:26,960 --> 00:40:28,219 therefore legally binding. 1141 00:40:29,360 --> 00:40:31,969 There is also, by the way, a non signed 1142 00:40:31,970 --> 00:40:34,069 check message and this is not used 1143 00:40:34,070 --> 00:40:35,359 for this functionality. So whenever 1144 00:40:35,360 --> 00:40:36,679 something goes wrong there, then you 1145 00:40:36,680 --> 00:40:39,499 first have to set up a relationship and 1146 00:40:39,500 --> 00:40:40,939 that's also difficult. So therefore, 1147 00:40:40,940 --> 00:40:42,439 sometimes you see the message flowing 1148 00:40:42,440 --> 00:40:43,909 back to in the same route, but a 1149 00:40:43,910 --> 00:40:44,910 different direction. 1150 00:40:46,740 --> 00:40:48,799 OK, I've personally I have one last 1151 00:40:48,800 --> 00:40:50,219 question for you there. 1152 00:40:50,220 --> 00:40:52,609 Can we can we talk about 1153 00:40:52,610 --> 00:40:54,829 the revolving door principle 1154 00:40:54,830 --> 00:40:57,110 as well in the banking 1155 00:40:58,730 --> 00:41:00,019 bitcoin industry? 1156 00:41:00,020 --> 00:41:01,999 Like, OK, I don't know the level. 1157 00:41:02,000 --> 00:41:03,829 It's like a government in America is 1158 00:41:03,830 --> 00:41:05,899 happening currently, for instance, 1159 00:41:05,900 --> 00:41:07,579 through the revolving door where people 1160 00:41:07,580 --> 00:41:09,889 first start working at financial 1161 00:41:09,890 --> 00:41:12,289 sector and then in in 1162 00:41:12,290 --> 00:41:14,359 the governmental sector, in this case, 1163 00:41:14,360 --> 00:41:16,009 bitcoin and banking. 1164 00:41:16,010 --> 00:41:16,939 It's a good question. 1165 00:41:16,940 --> 00:41:19,309 And I know a lot of people 1166 00:41:19,310 --> 00:41:21,409 who works in banks or worked 1167 00:41:21,410 --> 00:41:23,569 in banks and are getting interested in 1168 00:41:23,570 --> 00:41:24,049 Bitcoin. 1169 00:41:24,050 --> 00:41:25,050 I'd like Jane, 1170 00:41:26,450 --> 00:41:28,489 I know very little amount of people that 1171 00:41:28,490 --> 00:41:30,619 go in the other end and I even don't know 1172 00:41:30,620 --> 00:41:32,869 one who is really doing a revolving door 1173 00:41:32,870 --> 00:41:33,919 kind of action. 1174 00:41:33,920 --> 00:41:36,049 OK, so this is the first one. 1175 00:41:36,050 --> 00:41:38,269 Well, thank you, guys. 1176 00:41:38,270 --> 00:41:39,270 Thank you.