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Mr. Robot and fintech, season 2 wrapup

It’s difficult to admit, but I was late to the Mr. Robot party. When we published our Mr. Robot and fintech article a few weeks ago, I still hadn’t watched a single episode. Zack Miller kept telling me I would love the show, and we came to an agreement: I’ll start Mr. Robot if he watches The Wire.

Zack finished The Wire in a month and I caught up with Mr. Robot in 2 weeks. I love the show…I’m now talking about it all the time and constantly checking the r/MrRobot subreddit. I even walked two avenues and 10 blocks from my hotel to the NBC store in NYC to buy our office some Mr. Robot gear (they had nothing in the store, only online…appropriate?).

But underneath the writing and camerawork are fintech themes that form the foundation of the characters strategies. From cryptocurrencies to bailouts, the characters utilize finance tools to reach their goals.

Here are our five favorite fintech themes that came up during Season two of Mr. Robot.

(Spoiler Warning)

E-Coin vs. Bitcoin

The show leaves us at the end of Season Two pitting two cryptocurrenceis against each other. E-Corp CEO Phillip Price is trying to get the U.S government to adopt an E-Corp issued cryptocurrency called E-Coin. He argues U.S. officials that it’s better to have a regulated crypotcurrency than the unregulated Bitcoin, which also happens to be controlled by the Chinese.

Dark Army leader Whiterose/Chinese Minister of State Security Zhang is trying to position Bitcoin as the currency of choice, setting up a fight between U.S./E-Corp-controlled E-Coin and Chinese/Dark Army-backed Bitcoin. Most intriguing is the China vs. U.S. battle for global economic supremacy — something we’re all too familiar with in the real world.

Paper backups

I guess paper is important. Some digital banks and online lenders have eliminated paperwork and gone fully digital. But it’s these paper files that E-Corp is using to try to rebuild and recreate the world economy before the 5/9 hack.

The idea that a bank could reconstruct an economy from paper files may be one of the reasons that incumbent banks are hesitant to move fully digital. The files are still not safe from the creativity/insanity of Stage 2, but paper backups are still a financial institution’s security blanket in case the world goes to hell.

Dark Net

Elliot gets into a world of pain when he looks where he’s not supposed to. After fixing the security of Warden Ray Heyworth’s bitcoin wallets, Elliot finds a Dark Net marketplace filled with all sorts of goodies like drugs, guns, and human trafficking.

The unfortunate truth is that cryptocurrencies like Bitcoin are frequently used for illegal activities. Cryptocurrencies are unregulated and are now the currency of choice for many a criminal. In the past five months alone, about $12 million of Bitcoin has been seized from criminal activity.

Reissue debt in cryptocurrency

In the same scene that Price asks the government to support his E-Coin, he asks them to allow E-Corp to reissue existing consumer debt in cryptocurrencies. This isn’t an easy task. Just think about it: every stock purchase, loan, and bank account needs to be converted from dollars into cryptocurrencies. The official named Jack (Lew?) exclaims, “You can’t create a currency, that’s the federal government’s job!”

Jack’s sentiment gives a view on how far things have to go in order for cryptocurrencies to become officially accepted as currency. Something like a 5/9 level hack would have to occur for governments to drop their respective currencies.

China’s Bailout

Price’s negotiation with the Chinese over a $2 trillion bailout is a big part of E-Coin vs. Bitcoin battle. He pitches three U.S financial leaders in Washington about the bailout, aptly named Jack (Lew), Mary (Jo White) and Janet (Yellen). Price hopes to use the $2 trillion against the Chinese by turning E-Coin into the new foundation of the global economy.

This emulates the financial concept that when you loan someone so much money, the borrower is actually in control. The government is forced to allow the bailout because E-Corp is too big to fail, and now Price gets to fight Whiterose/Zhang for control of the world economy.

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High 5! The five fintech stories we’re following this week

5 trends we're tracking in finance

Banks still not replacing core systems in face of falling tech costs

We talk a lot about the newest new thing in financial technology but that’s generally more on the periphery of the tech stack. Core banking systems aren’t being replaced. They’re being patched up. That’s why only 15% of bankers expect to build a new core in the near future. CEOs, when faced with short lifecycles in the C-suite, choose to merely maintain existing systems rather than take the pain (and cost) of building new ones.

That’s how you get 40 year old core IT systems like at ANZ. And it’s also why big banks are even contemplating creating their own digital currency for clearing and settlement.

Many in the industry think that banks are moving more to an ecosystem model, where they focus on core things and leverage tech firms for everything else. So you get fintech startups flocking to a 126 year old Kansas bank. It certainly appears things are headed in that direction, though maybe not in Australia, where banks are refusing to open up their data to third parties.

Looks like technology will be playing more of a role in financial advisory work, too. Whatever happens with the new DoL rule and how it may change Series 7 brokerage work, it will most likely require advisors to invest more in technology. That’s because people who help make financial decisions for clients will have to better track their advice and back it up with analysis.

Banks find it hard to catch a break

It’s not easy to be a big bank these days. You’re damned if you close the branches and damned if you don’t. It’s worse: even when you close the branches, some customers keep coming back looking for them. So, you may be improving your SG&A line, but you could be losing customers to your competitors that remain entrenched in neighborhoods.

In a deep way, banks understand this conundrum and that’s why they’ve been relatively slow to cut physical branches as society catches up with technology trends. So, they look for other structural changes to lower costs and improve service levels. Like AI for helping with compliance, for example.

Mr Robot’s view on the future of money and payments

Our journalists are getting sick of me quoting this series. But I’m hooked. In the USA Networks show’s second season, it takes the financial system seizing up for the migration to cryptocurrency to begin in earnest. What happens when trust in the financial services is completely lost? Mr Robot, at its core, is a story about the end of money.

I’ll tell you what happens (no spoilers). After the financial system is brought to its knees and the majority of consumer debt erased, somewhat ordered chaos ensues. Transactions move to cash, but even fiat money begins to lose its cache. “When you get down to it, paper money is a symbolic construct. With no financial records left, what value does it really have? What value does anything have?” wrote Vulture.

Investing more in the fintech game

There’s a trend with upstart fintech firms, especially ones that face consumers, to brand themselves as a friendly alternative to traditional financial services. LendUp fits that description. The consumer credit firm bills itself as a compassionate lender that helps people build their credit history slowly with tighter credit lines. It just closed on $47 million in a round led by Y Combinator’s investment fund.

Goldman Sachs isn’t too busy building out its online bank, Marcus, to get involved with other fintech deals. The investment bank created a $100 million lending facility for Fundation, an online SMB lender.

Visa goes all in at the Olympics

One credit card company went for gold in Rio. Precious metal, that is. As a sponsor of the 2016 Games, Visa spent an estimated $32 million for 242 national airings of their commercials during the games. The firm also gave tokenized contactless payment rings to Visa-sponsored Olympians.

This prelude of the credit card company’s promotion of its contactless capabilities was followed soon after by a wider rollout of its payment rings.

 

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The future of money, banking, and payments as seen through Mr. Robot

Mr. Robot's view of money

I can’t stop watching Mr. Robot. It’s one of those shows that leaves you feeling palpably worse than you felt before the show started. But I can’t escape the grip of this dark, dystopian story of a bunch of hackers attempting to bring down the fabled E Corp.

Evil Corp, as the show’s protagonist, Elliot, calls it, maintains a banking and consumer credit division, in addition to selling other prosaic things like consumer electronics. The firm controls something like 70% of the global consumer credit industry. That makes it an easy target for fsociety, a confederation of hackers that intends to erase the massive debt burden on this generation of Americans.

The hackers win, at least initially. Evil Corp’s systems are brought to their knees and the financial system seizes up. Without access to money and civil services, everything becomes barterable and entrepreneurial people begin offering services, like burning trash, to fill in the holes.

And that’s the interesting part. The story is ostensibly about the dismantling of one of the largest financial firms in the world, but little direct air time is given to that piece of the story. Instead, viewers only catch quick glimpses of the show’s perspective on money because the plot focuses instead on the psychology of the protagonists. But how the post-modern system is portrayed is interesting because it touches on money, value, and the move towards cryptocurrency.

Here’s what Mr. Robot has to contribute on the future of money.

With credit gone, trust erodes and cash is king

After Elliot, Darlene and team erase Evil Corp’s consumer debt ledgers, the stock market and world financial systems are sent reeling. Rationing becomes the norm as money becomes extremely tight. As the company scrambles to resuscitate its database, consumer spending is restricted to $50 per week. Even Evil Corp’s CEO, Phillip Price is asked to pre-pay for a swanky dinner for four at an empty restaurant.

All forms of money are eminently hackable

In the show, the lowly automated teller machine is mincemeat for the unscrupulous. In fact, as a promotion for Mr Robot’s second season, fans hacked a fake ATM for real money. Just like in real life, even bitcoin is susceptible to fraudsters. Early in Season 2, we meet a badly-bruised computer engineer who used to run a bitcoin service. He’s being pressured by a couple of miscreants, who run an ecommerce site where you can literally buy anything. They want him to restore his service, which he sort of refuses to do because it’s continuously exploited and robbed by hackers. The webmaster’s fate is bleak, as is the view of digital currency’s security in the show.

Money devalued in favor of messaging and optics

For the Mr. Robot hackers, it’s not about the money. In the premier of Season 2, the group appears to be ransoming off Evil Corp’s encrypted files. An executive from the company is told to bring nearly $6 million in cash to a park in front of One World Trade Center. Tension builds as he awaits further instructions. They finally come as the executive is told to remove the cash from duffel bags and set it on fire.

“The scene drives home an alarming idea: When you get down to it, paper money is a symbolic construct. With no financial records left, what value does it really have? What value does anything have?” wrote Vulture.

In the battle of digital currency, bitcoin loses

Trapped in an aimless search for meaning. The human condition is a tragedy. #MrRobot. TOMORROW. 10/9c. USA Network.

A photo posted by Mr. Robot (@whoismrrobot) on

In addition to mentions of bitcoin wallets being ransacked by loosely-confederated hackers, Mr. Robot introduces its own twist on digital currency. It appears Evil Corp, which had its traditional lending business hacked, also has its own form of digital currency, called E Coin. Episode 7 of the second season makes reference to this currency, though we’ve seen allusions to it already in in-store signage. An announcement comes down from on high that taxis will no longer be taking cash and people are encouraged to use E Coin. In a world that just suffered a massive hack that disabled the financial system, digital currencies appear more stable that traditional cash.

“But hey, what if the dollar was no longer a stable enough currency to trade in, thanks to, say, a massive hacking attack? Would that not make E Coins a very attractive alternative currency, one that was both stable and already being used by most households?” wrote the Guardian.