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March 2018	Citi GPS: Global Perspectives & Solutions

Interview with Ping An: Jonathan Larsen

About Jonathan Larsen

Jonathan Larsen is the Chief Innovation Officer of Ping An Insurance Group. He is also the Chairman and CEO of the Ping An Global Voyager Fund. Previously, he was the Global Head of Retail Banking at Citigroup and also Head of Consumer Banking in Asia. Mr. Larsen has over 30 years of financial industry experience.

Q: Tell us about the Voyager Fund’s first investment: 10X Futures Technology.

10X Future Technologies was set up by Antony Jenkins (ex-Barclays CEO) in 2016. Legacy platforms relying on mainframe systems and many layers of surrounding technology are holding the banking industry back — they are hugely expensive and stifle innovation. Antony and the 10X team have created a new model based on contemporary cloud-based technology and an architecture centered on the customer. Consistent with contemporary SaaS-based models, business users are able to define and create products and processes without relying on technology resources. The platform includes sophisticated, real-time, recursive analytics tools suited to today's digital customer engagement models. Importantly, all data at rest and in transit is encrypted. 10X announced in late 2017 that it had raised nearly £34 million in funding from Ping An Group and Oliver Wyman, amongst others, to support its expansion.

Q: What is the problem with legacy systems?

The cost of creating new products using 10X Technology is a fraction of the cost that banks would pay with their legacy platforms. 10X is offering software to replace the core banking system, the multiple additional product processors operated by many banks, the many customer databases found in most banking architectures as well as middleware platforms, with a single modular but integrated solution. It also replaces the front-end mobile/Internet platforms if need be.

10X is just one example of large scale change likely in legacy platforms at financial institutions.

Q: Does 10X Futures Technologies already have clients?

10X’s first client, Virgin Money, signed a major contract in November 2016 to build the technology backbone for Virgin Money’s new digital bank. This is part of a broader plan to increase Virgin Money’s appeal in the consumer and SME markets through the creation of a data-driven, customer-centric digital offering. The new digital bank will enable Virgin Money to unify its data platforms and offer customers a Universal Account that can be personalized to create a unique proposition tailored to individual needs.

Q: What are some of the other interesting projects you have seen abroad in your travels with the Voyager Fund?

90% of our focus is Global ex-China. We find a lot of innovation in the U.S., Europe and Israel and to a lesser extent in Asia. Silicon Valley/San Francisco, London, Continental Europe (especially Germany) and Israel present a lot of opportunities in the FinTech and digital health segments.

Singapore is still emerging as a FinTech hub, it is going to take time. They now have some 400 FinTech-related companies. That is good, but it will take time to build depth. A lot of Asia cross-border investments today are market access plays rather than core innovation plays.

© 2018 Citigroup

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86	Citi GPS: Global Perspectives & Solutions	March 2018

Given the breadth of Ping An's businesses, we cover a very broad range of business sectors and technologies. So far, we've seen a lot of interesting investment opportunities in the B2B space, more so than the B2C challenger sector. But there are opportunities in both the B2B and B2C segments today.

Q: Most financial institutions are happy being reactive. What drives this mindset

— is it the costs and that the return on investment is not that big or is it the culture?

Contemporary technology offers enormous opportunities to reduce friction, lower the cost of delivery and to improve customer experience. It is remarkable how slow much of the financial industry has been in taking advantage of these opportunities. Legacy gridlock is certainly one reason. Caution engendered by the post global crisis regulatory environment is likely another. While every major institution has some level of "agile" digital development and many are investing, as are we, in new generation financial enterprises, in very few cases has this penetrated to the core of the business. In the short term it would seem that the market often rewards cost optimization and return of capital over innovation and investment in future revenues.

All of this needs to change. The pace of innovation and the collective effect of the FinTech revolution are accelerating. Some institutions take comfort from the rise of B2B service providers, believing that FinTech represents an enabler for traditional players rather than a competitive threat. A different take is that the "B2B" FinTech sector actually represents the virtualization of the infrastructure of the financial industry and represents a massive lowering of entry barriers for new kinds of financial service providers and the embedding of financial services into a wide range of ecosystems not controlled by the financial industry.

I think we will see an increasing divergence between banks and other financial providers who embrace this new world at a fundamental level and those who are content to become commodity providers of regulated services with lower and lower margins and legacy costs. For the latter the future will be grim.

Q: What sets Ping An apart from other financial institutions?

It starts with being a founder-led company — a consistent customer-centered vision, a comfort with fundamental change as a way of doing business, and the embracing of technology as the core of what we do. Ping An has no mainframe computers and no legacy platforms. The firm invests $1 billion a year in R&D including extensive AI capabilities in areas ranging from facial recognition, voice print recognition, and many business-specific applications in insurance, banking, consumer credit, personal wealth management. These factors form a uniquely powerful combination with Ping An's massive scale, with over 150 million financial customers and 430 million digital users across the group.

It is important to create conditions where experimentation can be done on a significant scale. Ping An has a willingness to create new models and is not afraid of change. There are few if any financial institutions in the world capable of repeatedly creating new businesses such as Lufax, Good Doctor or One Connect. Ping An has these and many more at various stages of incubation and development.

Ping An tries to create a constant sense of crisis. Managers are encouraged to constantly re-think how existing activities can be better performed and how technology can be applied to customer problems in new ways.

© 2018 Citigroup