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BruceCahan CompassionateMoneyBriefing 4/6/17
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Compassionate Money:Credit unions as member parachutesBruce Cahan, Adjunct Professor Stanford University School of EngineeringThought Leadership for Finance Innovators Filene Research Institute at Stanford Program
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© 2012-7 Bruce B. Cahan & Urban Logic, Inc.. All rights reserved.
Presentation not to be copied, posted online or otherwise used without written permission. Image sources available on request, and used under “fair use” exception for academic purposes.
Use of images or logos from Stanford University or other third parties does not imply their endorsement of the projects proposed herein.
April 6, 2017
Bruce Cahan
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Stanford University Adjunct Professor, School of EngineeringCo-founder, Stanford Science-Based Banking Initiative
Banking and Finance InnovatorAs an Adjunct Professor in the School of Engineering and as an active participant in Stanford’s Computer Science and Law Schools’ Center for Legal Informatics (CodeX), Bruce is reimagining banking and finance. Bruce curated TEDxNewWallStreet and is creating GoodBank™(IO) as a teaching hospital bank to grow a new banker culture. Bruce’s reports for the UK’s Technology Strategy Board (KTN-FS) and other government and industry groups, and his input into bank regulatory policy and practice are sought after insights.
BioRecovering Wall Street lawyer, Hong Kong merchant banker, advised US, NY State & other governments on finance and geospatial innovations, 9/11 emergency responder, Ashoka social entrepreneur & father of 22 year old twin boys…
JD Temple University School of Law Bar Admissions CA, NY & PABS Economics & International Business Wharton School University of Pennsylvania
Google Profile http://www.google.com/profiles/brucebcahan
April 6, 2017
My range is passionately wide§ Teaching to attract a new cohort of Sustainable Bankers and Investment Professionals
§ Sustainable Banking (CEE 244A 2012 – 2017)§ Ethics of Finance & Financial Engineering (MS&E 148 2017)§ Investing on the Buy Side of Wall Street (MS&E 449 2016 & 2017)§ Hacking for Urban Resiliency (MS&E & CEE proposed)§ Let’s Build a Better Bank and Better Banking (GSB proposed)
§ GoodBank™(io) as an independent teaching hospital lab for sustainable bankers (Urban Logic)§ Research to reward Sustainable Finance customers’ impacts
§ Valuing what matters: Periodic Table of Quality of Life§ Real Estate design, construction, use, insurance and financing decisions on the blockchain (RE-OS)§ Banking in Space & computational/smart contracts of insurance to respond to disasters & humanitarian crises§ Parametric Flood and Natural Disaster Insurance§ Repurposing Gift Card Breakage for Good (P125)§ Migration Storytelling Project to go back 5,000 years and see common journeys§ Faith-based traditions of sustainable finance, and how to implement them today§ Three-Layered Map of the World so indigenous peoples use money to match others’ capacities to their
needs§ Cannabis Banking as a legal activity for banks and credit unions
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©2017 BRUCE CAHAN, URBAN LOGIC & STANFORD UNIVERSITY
April 6, 2017
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Let’s not throw away our shotI’m not going to throw away my shot
April 6, 2017CONFIDENTIAL MATERIALS
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2016 Presidential Vote by Income
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Income: $250,000+
Income: $200 - 250,000
Income: $100 - 200,000
Income: $50 - 100,000
Income: $30 - 50,000
Income: Under $30,000
Hillary Clinton Donald Trump Other
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Source: NY Times 11/8/16
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2016 Presidential Vote by residence, political & religious beliefs
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Residence: City
Residence: Suburbs
Residence: Small city of rural
Politics: Liberal
Politics: Moderate
Politics: Conservative
Religion: Protestant or Christian
Religion: Catholic
Religion: Jewish
Religion: Other
Religion: None
Hillary Clinton Donald Trump Other
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Source: NY Times 11/8/16
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BruceCahan CompassionateMoneyBriefing 4/6/17
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2016 Presidential Voteby gender, race, age & education
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Gender: MaleGender: Female
Married: YesMarried: NoRace: WhiteRace: Black
Race: Hispanic/LatinoRace: AsianRace: Other
Age 18-29Age 30-44
Age 45 - 64Age 65+
Education: White College GraduateEducation: White without College
Education: Person of Color College GraduateEducation: Person of Color without College
Hillary Clinton Donald Trump Other
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Source: NY Times 11/8/16
Who will be vulnerable now?
Compassionate money matters more than ever…
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Trump Budget Request March 2017April 6, 2017CONFIDENTIAL MATERIALS
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-31%
-29%
-21%
-21%
-18%
-16%
-14%
-13%
-13%
-12%
-6%
-5%
-4%
-4%
-1%
6%
7%
9%
-35% -30% -25% -20% -15% -10% -5% 0% 5% 10%
EPAState
AgricultureLabor
HHSCommerce
EducationHUD
TransportationInteriorEnergy
SBATreasury
JusticeNASA
VADHS
Defense
Trump Budget Request March 2017April 6, 2017CONFIDENTIAL MATERIALS
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Agencies/Departments to be eliminated (zero budget):
• African Development Foundation• Appalachian Regional Commission• Chemical Safety Board• Corporation for National and
Community Service• Corporation for Public Broadcasting• Delta Regional Authority• Denali Commission• Institute of Museum and Library
Services• Inter-American Foundation• U.S. Trade and Development Agency
• Legal Services Corporation• National Endowment for the Arts• National Endowment for the
Humanities• Neighborhood Reinvestment
Corporation• Northern Border Regional Commission• Overseas Private Investment
Corporation• U.S. Institute of Peace• U.S. Interagency Council on
Homelessness• Woodrow Wilson International Center
for Scholars
Laws Passed & Signed so far§ Increases in Personal Accountability
§ GAO Access & Oversight (P.L. 115-3) audits National Directory of New Hires to ensure means-testing for unemployment insurance, food stamps (SNAP), earned income tax credit and welfare (TANF)
§ Decreases in Corporate Accountability§ Repeal of the Disclosure of Payments by Resource Extraction Issuers SEC Rule (P.L. 115-4)
that limited bribery by U.S. corporations abroad§ Repeal of the Stream Protection Rule (P.L. 115-5) to limit waste dumped by coal mining into
local drinking water supplies§ Repeal of the Implementation of the National Instant Criminal Background Check System
(NICS) Improvement Amendments Act of 2007 (P.L. 115–8) allowing gun sales to people with mental illness
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Trump Executive Orders Timeline§ 1/20/17: EO 13765 Suspended implementation of Obamacare pending
its repeal
§ 1/20/17: HUD Letter 2017-07 Suspended reduction in FHA’s mortgage insurance premiums
§ 1/27/17 EO 13769 put into effect new immigration screening procedures, authorizing deportations and employer fines – restraining order issued by federal courts
§ 2/3/17 Ordered Secretary of Treasury to develop new core principles for US Financial System regulations (repealing Dodd Frank)
§ Threatens to Withdraw from the Paris Accords on Climate Change that limited national and corporate pollution
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Trump Budget & Tax Reform Debates Could Question/Limit/Unwind Credit Unions’ Tax Exemption § 1934 Federal Credit Union Act created the tax exemption§ 1998 Credit Union Membership Access Act (P.L. 105-219)
reaffirmed tax exemption§ January 24, 2017 - NAFCU sent Congress an independent
study showing the positive impact of credit union tax exemption
§ March 16, 2017 Trump Budget proposes to eliminate CDFI Program
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Inequality in U.S. is unsustainable
Q: Could bank data analytics + Impacts + FinTech reduce inequality?
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BruceCahan CompassionateMoneyBriefing 4/6/17
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
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1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Inequality: 5 Tiers of Household Income 1947 – 2013Source: US Census Table F2
Bottom 20% Second 20% Middle 20% Next 20% Top 20%
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$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
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1987
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1997
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2000
2001
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2010
2011
2012
2013
Inequality: Tiers of Household Income 1967 – 2013Source: US Census Table H1
Bottom 20% Second 20% Middle 20% Next 20% Top 5%
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0%
5%
10%
15%
20%
25%
30%
1917
1919
1921
1923
1925
1927
1929
1931
1933
1935
1937
1939
1941
1943
1945
1947
1949
1951
1953
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1961
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1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Inequality: Share of Income earned by Top 1%Source: Economic Policy Institute The Increasingly Unequal States of America
Income Inequality by State 1917 to 2011
United States (by Piketty and Saez) Northeast Midwest South West Poly. (United States (by Piketty and Saez))
Early 1900s Early 2000s
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US is the land of immigrantsHow are banks meeting or abusing immigrants’ global financial needs?
22
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
1820s1830s1840s1850s1860s1870s1880s1890s1900s1910s1920s1930s1940s1950s1960s1970s1980s1990s2000s 2010 2011 2012 2013
Immigration to US by Continent/Country 1820 - 2013(Source: DHS Yearbook of Immigration Statistics 2013)
Europe Mexico Caribean Canada / Newfoundland South America Central America Asia Africa Oceania
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US is the land of immigrantsHow are banks meeting or abusing immigrants’ global financial needs?
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0%10%20%30%40%50%60%70%80%90%
100%
1820 to
1829
1830 to
1839
1840 to
1849
1850 to
1859
1860 to
1869
1870 to
1879
1880 to
1889
1890 to
1899
1900 to
1909
1910 to
1919
1920 to
1929
1930 to
1939
1940 to
1949
1950 to
1959
1960 to
1969
1970 to
1979
1980 to
1989
1990 to
1999
2000 to
2009
2010 2011 2012 2013
Immigration to US by Continent/Country 1820 - 2013(Source: DHS Yearbook of Immigration Statistics 2013)
Europe Mexico Caribean Canada / Newfoundland South America Central America Asia Africa Oceania
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-100,000 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000
Bottom 20%
Second 20%
Middle 20%
Next 20%
Top 20%
Inequality: Tiers of Household Wealth & Debt (2011)Source: US Census Tables 1 and 2
Debt (Mean) Net Wealth (Mean)
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Is your credit union’s portfolio affected by members’ losing social safety nets, switching jobs, managing change alone?
0% 10% 20% 30% 40% 50% 60% 70%
Credit cards/total loansOther unsecured loans/total loans
New automobile/total loansUsed automobile/total loans
First mortgage/total loansHEL & 2nd Mtg/total loans
Member business loans/total loansShare drafts/total savingsCertificates/total savings
IRAs/total savingsMoney market shares/total savings
Regular shares/total savings
2016 Credit Union Portfolios
All CUS <$20M $20-50M $50-100M $100-250M $250-500M $500M-$1B >$1B
April 6, 2017CONFIDENTIAL MATERIALS
25Source: CUNA 2016 U.S. Credit Union Statistical Profile
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Members are asking: “Where’s my parachute?”
Joseph Heller, Catch-22 (1970)
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BruceCahan CompassionateMoneyBriefing 4/6/17
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“What is sanity today?”Joseph Heller, Catch-22 (1970)
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Bankers are not normal personalitiesCONFIDENTIAL MATERIALS
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Counselor INFJField Marshall ENTJ
Mastermind INTJTeacher ENFJInventor ENTPArchitect INTPPromoter ESTP
Healer INFPOperator ISTP
Champion ENFPPerformer ESFPSupervisor ESTJComposer ISFP
Inspector ISTJProvider ESFJProtector ISFJ
0% 5% 10% 15% 20% 25% 30%
Myers-Briggs Personality Types(% in normal & banker populations)
Normal Population Bankers/Financial Services
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Bankers stay far away from ImpactsCONFIDENTIAL MATERIALS
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Impacts(Creating True Value)
Real Assets(Loan Collateral)
Investments(Claims on Real Assets)
Depositors(Cash Sources)
Bank Owes Safety
FixedBonds, CDs,
Leases
People Business
VariableARMs, Credit Cards
City
InterbankCDs, Hedges,
Options, Swaps
Un-invested Reserves
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FinTech is changing “banking”
FinTech is way beyond Disrupting Banking
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Equity Financing
Consumer Banking
Financial Research
Lending Personal Finance
Remittances BankingInfrastructure
Institutional Investments
Payments
BusinessTools
Crowd-funding
Retail Investments FinTech1,071 Companies
Contact [email protected]
to see all companies
1,092 Companies$17.1B Funding
April 2015
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April 2014October 2014November 2014
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BruceCahan CompassionateMoneyBriefing 4/6/17
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April 6, 2017 CONFIDENTIAL MATERIALS
587 Companies
November 2014
658 Companies$835M in funding
June 2015
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Banking and finance: Yet to be simpler, cheaper, safer, fairer, impactful
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Is FinTech more Am. Madness?
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April 6, 2017
20-Year Returns Disappoint Average Investors
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0%
2%
4%
6%
8%
10%
12%
REIT
s
S&P
500
Bond
s
Gol
d
EAFE
Hom
es Oil
Ave
rage
Inve
stor
Infla
tion
Ann
ualiz
ed R
etur
n
1992 - 2011 1994 - 2013 1996 - 2015
Sources: Multiple
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Fintech is offering
borderless services
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Simplify my financial life. Heal the mistakes of my learned taboos. Crowd-source breaking us free of debt.
BruceCahan CompassionateMoneyBriefing 4/6/17
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If GoPro can unleash the hero in our story, can Stanford work with credit unions to share the heroism of navigating our financial lives?
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If Google can invent a self-driving car, can Stanford work with credit unions to invent navigating the landscapes of our financial lives?
April 6, 2017
Use “Big Data” to solve shared needs of lenders & borrowersGo beyond “Big Data” for loan approval and marketing
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LifecycleChallengesas“BigData”
Bankswatchusnavigate,alonewithdifferentadvantages/disadvantages…IQ/socialtools,biases,instincts,wealth
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FearisfakecollateralBanksthattrafficinfear,break
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Maximizefeardigital, mobile versions of Banking 1.0 cannot help you here
College savings for the kids?
Find a new Job yet?
Having twins?
Health issue#1?
Health issue#2+?
Need new car
already?
Really, a Divorce so
soon?
New tax rules?
StartupBusiness a
failure?
Your fear is unique
Bank
asK
nowledgeBlockageLayers
Penalizefate&illiteracyinhum
anlifecycle
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LifethrowsusRubik’sCubes
Twistingusto/fromwhoweare/wanttobe
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BanksprofitbychangingthegamePreyonseparatingusas“ruggedindividualistproblemsolvers”
Images:CubeTwister
2- LayersofLegalese
3 - LayersofManagerApproval
4- LayersofMergers&newIT
5 - LayersofInterestRates&Fees
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ThemediacelebrateourruggedindividualismMeanwhilethemiddleclassdeclines,lackingsupports
6/26/15
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BruceCahan CompassionateMoneyBriefing 4/6/17
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We’renotallruggedindividualistsNoneofustameallfrontiersalone,andnewfrontiersarecomingParanoia,politics,guns,lawyersandlobbyistsdon’tmakeussafer
6/26/15
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Wedon’thavetobeislands,aloneinfear,lostWecouldbesafeasanetworkofhumanandonlineresources
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AdjacenciesWeareinsocietyasdiversebeingswithsurvivaltalesIt’sourgifttoteachandrescueeachother
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BanksasKnowledgeTransferHubs(KTH’s)seekingandofferingourtalentsspeedsmanaginglifecycles,andmakesthebankstronger
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KTHBankslink&rewardcustomerswhoseek&sharehelpAdjacencies=skills,resources&insightstotriumphlifecycleevents
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Banking3.0:AltruismthruKTHhubsforlifecyclesrichlyshared
We funded College
We found a new Job
We had twins & survived
We’re Healthy now
We shifted our Industry
We got a fleet price
for our new cars
We mediated our
Divorce
We used the new tax
rules
We’re on our third
VC StartupWe see your
fears everydayKnow
ledgeTran
sferHub
app&re
wardsth
ehu
manto
uch
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KnowledgeisrealcollateralSolvinglifecycleshealsustofeelgoodagain
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andthedataaboutothers’survivinglifechallengesmightcomeinhandyonedaywhenCUmembersfindthemselveswithoutaparachute
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Redesigning banking asstorytelling money®
An example of what science-based banking can do…
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April 6, 2017
BruceCahan CompassionateMoneyBriefing 4/6/17
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FICO ignores human storiesCash flows reveal impacts, beyond historical credit use & repayments
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April 6, 2017
Environmental
SocialSafetyEconomic
Operating system redesign for Sustainable Banking
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Small businesses are impact storiesChina Fintech could augment credit scores by transmitting SME stories
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Fair Isaac (FICO) ignores SME storiesCash flows reveal impacts, beyond historical credit use & repayments
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April 6, 2017
Cash flows reveal impacts, beyond historical credit use & repayments
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The “Sandbox” is full of SME stories
April 6, 2017
Creating storytelling money®
A process of daily information flows
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•Trust goals:•Bank is safe•Funds safe at bank•Bank is fair
•Story to be told:•Belong to groups with
similar values•Culturally identify
•Trust goals same as depositor’s
•Story to be told:•Wants to show impacts to
gain customer loyalty•Already has ISO or other
certified process, a CSR, GIIN or other program validating impacts
•Mission to improve Quality of Life (QoL)
•Trust goals same as depositors•Trust/safety/risk management/pricing
•Due diligence validates borrower story as QoL factors
•Uses depositor’s values to rank QoL impacts achieved by borrower
•Tag money with QoL impacts
•Safety – show how Quality of Life (QoL) underwriting improves bank safety
•Fairness – show how QoL focus causes borrowers to handle money more wisely
•Impacts – Use bank as social media tool for businesses and depositor/customers to connect on shared values
Stories worth telling Stories tagged to be heard
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April 6, 2017
Means Meter® Mobile ScreensMeans Meter summary bar above recent spending activity gives a high level overview of congruency..
The Means Meter threads throughout the experience, including line items in the transaction activity.
Beyond the summary bar, the Means Metercan convey trending categories which are reflected in the customers financial activity.
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Storytelling money® tagged toPeriodic Table of ImpactsImpacts we measure, plus space for impacts we’ve yet to measure
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April 6, 2017
Impact metrics are evolvingSemantically name, translate and combine impact measures
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April 6, 2017
BruceCahan CompassionateMoneyBriefing 4/6/17
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Periodic Table of Quality of Life (QoL)Every Loan + Customer + Bank produces functional Values at Risk (f-VaRs)
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Adjacencies
f-VaRsSustainable Resiliency®
(Regional Score)
April 6, 2017
Leverage the power of adjacency to visualize proportional impact.The Periodic Table, as a metaphor, is a powerful one in this context as it conveys the building blocks of my values as indicated through my financial activity. Yet, it takes the metaphor to a different level by infusing proportion and proximity as extra layers of analysis.
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Users can adjust their view of the Periodic Table from a birds eye to a category.The birds eye view lets me see everything but the category view restricts the lens to show me what is around me from this new vantage point, being on the ground as opposed to high in the air.
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Quality of Life Elements as Data Analyticsimprove Asset Value OS, Bank OS Safety
§ Leverage Quality of Life intersections: § Health and Water Quality§ Poverty and Education
§ Leverage intersections to reduce Financial risks:§ Knowledge about the dignity of seeking solutions§ Commercial Real Estate adaptable to Climate Change§ Healthier Workers earn more, improving Consumer Credit Scores§ Poverty interventions reduce Consumer Loan Default Contagion
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April 6, 2017
Safety + Transparency + ImpactsWhy Banks don’t show they are different
Banks are not showing their relevance to customers’ lives
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April 6, 2017
Trust - Banks need to earn back public trustImpacts can be transparent, building public trust
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0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Overall trust in U.S. banks
Banks and financial services are least trusted industries
Culture of greed and self-dealing created bank scandals
Distrust business if corrupt, wrong incentives drive decisions, perform poorly
Academic and professional experts are most trusted spokespeople for brand
Technology is most trusted industry
Overall trust in Chinese banks
Edelman Global Trust Barometer 2013
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REPORT
Choosing Relevance: How Credit Unions Can Harness Transparency and Show ImpactBruce B. Cahan, Founder/CEO, Urban Logic, Inc., and Visiting Scholar, Stanford University
Banks and financial services are navigating a transformative era.
Customers’ needs are evolving and disruptive technologies are influencing service delivery.
The time is now to refocus so that your bank is positioned to deliver measurable impact in the digital age.
April 6, 2017
New Math of Millennials & BoomersBanks’ NPS ≠ Future Relevancy
A new generation of potential bank customers want more
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Millennials distrust banksCONFIDENTIAL MATERIALS
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Source: Millennial Disruption Study
Of top 10 least favorite brands among U.S. Millennials, four are banks:
§ Bank of America Corp.
§ J.P. Morgan Chase & Co.
§ Citibank
§ Wells Fargo & Co.
April 6, 2017
BruceCahan CompassionateMoneyBriefing 4/6/17
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Millennials in US distrust banksCONFIDENTIAL MATERIALS
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33%
70%
73%
73%
88%
Think we won't need banks in the future
Banking will be totally different 5 years …
Amazon, Apple, Google, Paypal or Square …
Would rather go to the dentist than their bank
Do banking online
0% 20% 40% 60% 80% 100%
10,000 US Millennials
Source: Millennial Disruption Study
April 6, 2017
Ripe areas for Relevance
Fintech could be proactive engine for improving customer lives
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WW I & II Veterans 1922 - 1945
Baby Boomers 1946 - 1964
Generation X 1965 - 1980
Generation Y 1981 - 2000
April 6, 2017
Add Financial LiteracyCONFIDENTIAL MATERIALS
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20% 40% 60% 80%
Have no monthly budget to track spending
Spending more monthly than last year
Don't pay monthly bills on time
Carry credit card debt from month to month
Worry have no rainy day savings for emergencies
Have not reviewed their credit score in last year
Learn about personal finance from parents or home
Know would benefit from more financial coaching & literacy
Receives wages from employer by direct deposit/EFT
Pays bills online
Failing Financial Literacy or Resiliency in the U.S.(Harris Consumer Financial Literacy Survey 2013)
April 6, 2017
Add Financial Literacy at HomeCONFIDENTIAL MATERIALS
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20% 30% 40% 50% 60% 70% 80%
Fear not having enough money to live comfortably in retirement
Feel confident in their financial future
Have a financial plan
Failing Financial Literacy Starts Early in the U.S.(Genworth Survey of Financial Planning 2013)
Didn’t have parents that set good financial examples Had parents that set good financial examples
April 6, 2017
Add Financial Literacy at SchoolCONFIDENTIAL MATERIALS
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0% 10% 20% 30% 40% 50% 60% 70%
I plan to start my own business
I will invent something to change the world
My school teaches me about money & banking
My school teaches how to start & run a business
I have a bank or CU account
Financial Literacy & Aspirations of U.S. Youth (Gallup HOPE Index of 2012)
Agree Disagree
April 6, 2017
Reduce Financial Stress at workCONFIDENTIAL MATERIALS
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0% 20% 40% 60% 80% 100%
Fear will lose home in foreclosureFear won't be able to pay for college
Can't keep up with debtsFear being laid off work
Consistently use credit cards to pay for necessitiesHomeowners whose mortgage balance exceeds …
% of "under-water" homeowners receiving foreclosure …Have investigated costs of college/education
Health Insurance requires high or mid-deductibleSaving to pay education expenses
Spending less than a year ago to save moreHaven't reviewed Life Insurance needs in last year
Have adopted a debt reduction plan/budget% with a debt reduction plan sticking to it consistently
Financial Stress Shows up at Work(PwC Employee Financial Wellness Survey 2013)
All Employees
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0% 20% 40% 60% 80%
Can't meet monthly expenses
Have had to draw down retirement savings to pay …
Financial stress is a distraction at work & reduces …
Can't retire when I want to
Aren't covered by Disability Insurance
Won't have enough saved for emergencies
Feel uncomfortable making financial investments
Find it difficult to meet monthly expenses
Consistently carry credit card balances month-to-month
Feel stress in dealing with finances
Financial Stress Shows up at Work(PwC Employee Financial Wellness Survey 2013)
Gen Y Gen X All Employees
April 6, 2017
Collaborative Opportunity:Pool Discounts on Consumer Spending
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0% 5% 10% 15% 20% 25% 30% 35% 40%
ReadingAlcoholic beverages
Tobacco products and smoking suppliesPersonal care products and services
EducationMiscellaneous
Cash contributionsApparel and services
EntertainmentPersonal insurance and pensions
Health careFood
TransportationHousing
U.S. Consumer Spending 2012
$150,000 & above $100-$149,999 $70 - $99,999 $70,000 & less
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Reduce Unbanked/UnderbankedCONFIDENTIAL MATERIALS
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0% 5% 10% 15% 20% 25% 30% 35% 40%
Underbanked Hispanic
Underbanked Black
Underbanked
Unbanked Hispanic
Unbanked Black
Unbanked
CA West All US Source: FDIC, 2012 National Survey of Unbanked and Underbanked Households
April 6, 2017
BruceCahan CompassionateMoneyBriefing 4/6/17
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Displace Alternative FinanceCONFIDENTIAL MATERIALS
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0% 10% 20% 30% 40% 50% 60% 70% 80%
Underbanked used Payday in last year
Unbanked used Payday in last year
Unbanked ever used AFS
Underbanked used AFS in last 30 days
Unbanked used AFS in last 30 days
Have used AFS - Black
Have used AFS - Hispanic
Have ever used AFS
CA West All US Source: FDIC, 2012 National Survey of Unbanked and Underbanked Households
AFS Alternative Financial Services are non-bank check cashing, non-bank money orders and non-bank remittances. AFS credit products are payday loans, pawn shop loans, rent-to-own agreements and refund anticipation loans.
April 6, 2017
Sustainable banking
Simplify three strands: safety, fairness, impacts
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Show Impacts People Care AboutCONFIDENTIAL MATERIALS
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Protestant (Evangelical)
26.2%
Catholic23.8%
Protestant (Mainline)
18.0%
Unaffiliated/Nothing in Particular12.1%
Historically Black Churches
6.9%Agnostic
2.4%Jewish1.7%Mormon
1.7%Atheist
1.6%Other Faiths1.2%
Don't know0.8%
Jehovah's Witness0.7%
Buddhist0.7%
Orthodox Church0.6%
Muslim0.6%
Hindu0.4%
Other Christian0.3%
Other World Religions0.3%
U.S. Population Religion Survey 2007(Pew Foundation)
April 6, 2017
Sustainable Banking attracts unlikely allies, a movement taking hold
A Jewish boy from Philadelphia meets someone special
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A wonderful synergyWhat if you had 45 seconds with Pope Francis?
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April 6, 2017
What if you had 45 seconds with Pope Francis?
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“We need a banking and financial system that helps us make decisions that last as long and stand as tall [for 1,000 years] as this little tree…”
Benchmarks for faith-congruencyStorytelling money® aware of ancient wisdom captured as religion
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Compliance≥ 99%
Prudence≥ 51%
Congruency≥ 25%
Catholic Funds Benchmark Performance Targets by 2020?• Compliance ≥ 99% legally compliant
• Prudence – ROI ≥ 51% of comparable investment funds – keep pace with market
• Congruency – ≥ 25% of managed investments or business operations report their environmental & social impacts
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A clear message of Bankers, Impact Investors and others at the Vatican
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Data speak for the poor, the planet Trust - Banks’ social behaviors are keyImpacts could be a brand differentiator for FIntech
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0% 10% 20% 30% 40% 50% 60% 70% 80%
Would pay a premium if brand supports good causes
People like me can fix societal issues
Social purpose is most important in choosing between brands offering same quality and price
Trust in brand because it is ethically and socially responsible
Recommend, promote or switch to brands that support a social purpose
Want brands that do good while making money
Edelman Good Purpose Consumer Survey 2012
99
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Show you help people
Relevance Takeaway: Help people needing financial help
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Mapping our focus
Banking as a prelude to science-based finance
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Getting our bearingsGlobal Market Sizing (USD$ Trillions)
§ $87TN Gross Domestic Product (2013) 62% consumed by households & 18% by governments
§ Global Population 7.1BN (July 2014) - 3.3BN in workforce§ Urbanization is a major factor in climate change and poverty, 52% of
humanity lives in cities, producing 75% of energy related CO2 emissions§ Unemployment& Underemployment up to 30% in development countries, with
increasing inequality (38+ GINI)§ Global climate change§ $3TN Global Government Shortfall (Revenues – Expenses) resulting in growing
public debt (63.3% GDP in 2013)§ $10.6 BN Impact Investing (2013) committed, $12.7BN for 2014§ $156TN Global Financial Assets excluding securitized products§ Banks finance 88% of Global GDP
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Why focus on BankingGlobal Market Sizing
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$77, 88%
$10, 12%Global GDP (Trillions, %)
BanksImpact InvestingOther
$10.6BN = 0.012%
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April 6, 2017
“Sustainable Banking” defined
A Sustainable Bank is
§ Safe – in good & bad economies
§ Fair/Trustworthy – customer as family
§ Impactful – grow regional quality of life
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Fair Safe Impactful
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Science-based banking
Using science to build trust, safety, profits
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Science-based banking What it is, how it’s different, what it lets us see and do better
Science-based banking…Makes lending and investment decisions based on:§ Fundamental models of the real world, as validated by
§ Physical sciences (chemistry, physics, engineering)§ Natural sciences (biology, ecology, medicine)§ Social sciences (anthropology, economics, psychology)
§ To determine bank assets’ and revenues’§ Intrinsic value to the real economy§ Susceptibility to change§ Underlying reasons for such values to change
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BruceCahan CompassionateMoneyBriefing 4/6/17
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Internet of Things data not yet in bankingHuge resource for managing banks’ safety, profit, trust, impact challenges
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April 6, 2017
Use your bank as a platform for university research & new designsRelevance Takeaway: Strategically partner with university talent
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April 6, 2017
Safe fintech innovation spaceat StanfordPlans for Stanford Science-Based Banking Initiative + GoodBank™(IO)
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April 6, 2017
Three steps for reinventing banking
Science-Based banking affiliatesStep 1
Science-Based banking initiativeStep 2
GoodBank™(IO)
Step 3
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Prove new bank designs work
Stanford University
April 6, 2017
Stanford Sustainable Banking Seminar CEE 244A Spring 2013 speakers and participants
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Head of Global Citizenship
Head of Renewables Finance
Head of Global Regulatory Affairs*
Enforcement balanced byInnovation (Project Catalyst)
Banking Commissioners,Current and Former
VC Fund, Founder
Solar Crowdfunding, Founder
Small Business Lending, Founder
Business Finance Writer
Managing Director
Head of Western Region
Major Banks Bank Regulators Banking and Finance Innovators, Journalists & Advisors
* Visited upon hearing of CEE 244A
April 6, 2017
Stanford Sustainable Banking Seminar CEE 244A Spring 2014 speakers and participants
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Major & Special Banks Bank Regulators Sustainability, NGO & Human Design Factors
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Stanford Sustainable Banking Seminar CEE 244A Spring 2015 speakers and participants
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Innovators in Fintech Bank Regulators Equality, Sustainability, Resiliency & Human Design Factors
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Africa’s largest bank
April 6, 2017
Stanford Sustainable Banking Seminar CEE 244A Spring 2016 speakers and participants
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Innovators in Fintech Banks & Regulators Equality, Sustainability, Resiliency & Human Design Factors
CONFIDENTIAL MATERIALS February 17, 2017
Buy Side Course Speakers (MS&E 449 2016)Date Speaker Organization Buy Side Specialty
January 4 Bruce Cahan Stanford Engineering Wall Street lawyer, HK merchant banker & public financeJanuary 11 Brent Whisenant Medley Partners Private Equity 1, fmr Family OfficeJanuary 22 Katie Hall Hall Capital Partners Hedge Fund 1, fmr Endowment FundJanuary 25 Pooja Malik Nipun Capial Hedge Fund 2, fmr BlackrockFebruary 1 Ben Bisconti Accel-KKR Private Equity 2, fmr CS First BostonFebruary 5 Bill Gurley Benchmark Capital Venture Capital 1February 8 Mike Calbert Kolberg Kravis Roberts (fmr) Private Equity 3February 19 Hayley Boesky Bank of America Capital Markets 1, fmr Federal Reserve
February 19 B. Scott Minerd Guggenheim Partners Global Investment Advisory 1, mbr FRB-NY’s Advisors
February 19 David Demers Summer Road Family Office 1, original quantFebruary 22 Gene Frantz Google Capital Venture Capital 2February 29 Alan Boyce Materra Hedge Fund 3, fmr. Bankers TrustMarch 4 Ben Narasin Canvas.vc Venture Capital 3March 7 Rob Wallace Stanford Management Endowment Fund 2, fmr. Yale Endowment
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0% 10% 20% 30% 40% 50% 60% 70% 80%
No Answer
Other:
Greed - show me the money
Congruency - moving money to meet the real economy's needs
Competition - beating peers' returns and risk performance
Analytics - earning returns that beat the market indexes
What interested Stanford MS&E 449 Students about the Buy Side? (Winter 2016 Quarter - n=22)
February 17, 2017CONFIDENTIAL MATERIALS
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0 2 4 6 8 10 12
Aeronautics & Astro (MS)Civil & Envir Engr (MS)
Comput & Math Engr (MS)Computer Science (BS)
Economics (BA)Economics (BA)/French (Min)/Political Science (Min)
Materials Science & Engr (PhD)Mechanical Engineer (PhD)
Mgmt Sci & Engineering (BS)Mgmt Sci & Engineering (MS)
Political Science (BA)/History (Min)Symbolic Systems (BS)
Undeclared (B)Science, Tech, & Soc (BS)Science, Tech, & Soc (BA)
Public Policy (MA)
# Students
Buy Side Investing Student Mix (MS&E 449 – Winter 2017)
Freshman Sophomore Junior Senior GradYear1 GradYear2 GradYear3 GradYear4+
Buy Side Course Speakers (MS&E 449 2017)Date Speaker Organization Buy Side Specialty
January 9 Bruce Cahan Stanford Engineering Weil Gotshal & Manges, HK Merchant Bank
Toby Espinosa Stanford Engineering MS&E Family Offices, Alternative Investing Landscape
January 18 Keith Rabois Khosla Ventures Seed & Venture Capital
January 23 Brent Whisenant Medley Partners Family Office & Real Estate
January 30 Mark Stevens Sequoia Capital Venture Capital
February 6 Gene Frantz Google Capital Growth Equity
February 13 Jonathan Coslet TPG Private Equity
February 27 Meridee Moore Watershed Management Hedge Funds
March 3 Ben Bisconti Accel-KKR Value Investing
March 6 Rob Wallace Stanford Management Company Endowment Fund
March 13 Gabe Santos Homestead Capital Agriculture
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February 17, 2017February 17, 2017
Stanford Centers of Expertise for Science-Based Banking§ Engineering§ Business§ Computer Science§ Law§ Startup Culture Hubs§ Sociology§ Medicine & Wellness
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Engineering: § Stanford Engineering
School and its Departments of Civil and Environmental Engineering (CEE) and Management Science and Engineering (MS&E)
§ Center for Financial and Risk Analytics & Institute for Computational Math
§ Center for Sustainable Development and Global Competition
§ Design School (d.school) & Center for Design Research
§ Global Projects Center§ Woods Institute for the
Environment§ Precourt Institute for
Energy
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Computer Science & Law: Stanford’s Computer Science Department (CS) and the Law School (Law)§ CodeX Center for Legal
Informatics§ Law School’s Steyer-
Taylor Center for Energy Policy & Finance
Startup Culture Hubs: Stanford startup entrepreneurship incubators, such as MS&E’s Stanford Technology Ventures Program§ StartX§ BASES: Business
Association of Stanford Entrepreneurial Students
April 6, 2017
Sociology: Stanford’s Sociology Department§ Center for Poverty and
Inequality (one of three national poverty centers)
§ Stanford’s Persuasive Technology Lab
Medicine & Wellness: Stanford Medical School (Med)§ Center for Compassion
and Altruism Research
International Studies Freeman Spogli Institute§ Center for International
Security and Cooperation
§ Stanford Cyber Initiative
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Business: Stanford’s Graduate School of Business (GSB) § Public Management
Program § Center for Social
Innovation§ Stanford Institute for
Innovation in Developing Economies (SEED)
Economics§ Institute for Economic
Policy Research (SIEPR)§ Center on Longevity
(jointly with Med School)
April 6, 2017 April 6, 2017
Q: How would you partner with Stanford or other universities – data analytics, AI, IoT, connected cars?
Focus: Making Credit Union Fintech’s Future smarter and impactful
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BruceCahan CompassionateMoneyBriefing 4/6/17
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Science of Re-engineering Banking
§ Bank Safety OS – Built a CAMELS Ratings Model from Federal Call Report Data (FFIEC)
§ Asset Values OS – Building a Periodic Table of Quality of Life Elements, and calculating their functional Values at Risk (f-VaR ), from Standard Municipal Budget Data (CAFR)
§ User Experience (UX) Designs – Designed Semantic Money®
/ Storytelling Money® used in a Means Meter™ app** Trademarks of Urban Logic, Inc.
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April 6, 2017
We begin a new journeyAsking “What should banks and financial services be?”
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Simplify my financial life. Heal the mistakes of my learned taboos. Crowd-source breaking us free of debt.
Contact informationBruce Cahan, Stanford Engineering Adjunct [email protected] / [email protected] / (212) 399-9700
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Intellectual Property RightsThis material is copyright 2002 – 2015 by its respective owners. All rights reserved.
Bruce Cahan and his nonprofit Urban Logic, Inc. conceived, designed and described GoodBank™(IO) and its constituent technology, user experience design, underwriting and other elements prior to, and through research and funding separate from, his affiliations and appointments at Stanford University. Such copyrighted and patentable intellectual property are and remain solely that of Mr. Cahan and Urban Logic.
Mr. Cahan conceived of establishing a Sustainable Banking Institute at Stanford University during the course of discussions with Stanford Professor Michael Lepech at Stanford. Such copyrighted and patentable intellectual property was created by Mr. Cahan and Dr. Lepech and is governed by the Stanford University Research Policy Handbook.
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Confidential Materials
© 2012-4 Bruce B. Cahan & Urban Logic, Inc. All rights reserved. Presentation not to be copied, posted online or otherwise used without written permission.Image sources available on request, and used under “fair use” exception for academic purposes
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