If a market is truly frictionless, where does the value lie?


EY Global

Multidisciplinary professional services organization

4 minute read 4 Jul 2018

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Michael Spiteri, Chief Digital Officer, Santander, explores superfluid markets and their potential in the banking industry.

In physics, certain fluids have the unique property of zero viscosity. In other words, they flow without friction. These liquids are called superfluids. Similarly, a new generation of technologies and innovators is bringing us closer to a state of superfluid markets, where traditional market frictions are reduced or even eliminated.

Q: We talk a lot about the opportunities superfluid markets will offer companies. But are there also any challenges they could present?

Superfluidity is a great idea and frictionless markets are, too. But as an engineer by trade I’m very aware that friction is both a friend and a foe, so it’s a complex idea. If something is truly frictionless, where does the value lie? That is not yet clear to me, but I love the idea. As an industry we’ll certainly be exploring it. How do we remove points of friction from the customer journey? That idea has real value in it.

We talk about looking for the coincidence of friction and value, and where they occur together, there is the opportunity to disrupt. That is what a lot of the work around Silicon Valley has been about. An idea that has been going round my head here at Innovation Realized is what would happen if you took all friction away and it was super easy to do everything: where would the value lie? Where does it go? Does it disappear?

Q: What impact will superfluid markets and other new technologies have on not just customers but also society as a whole?

Exciting ideas like superfluidity will morph and become shaped, not just by our ability to execute them, but by their impact on society. When we talk about artificial intelligence (AI), virtual reality (VR) and the Internet of Things (IoT), most of the conversations I’m involved in tend to veer very quickly away from the technology and onto their social implications. When we use language like bots and robots it can confuse people, and worry them, but really they are just solving equations and problems to find solutions to things that we ourselves are not very good at doing.

We have to be careful about the language we’re using and very clear about how we describe what we’re doing in social terms.
Michael Spiteri,
Chief Digital Officer, Santander

The idea that technology will take over the world and take away people’s jobs is not clear yet. I used to describe myself as a technological utopian. Now I think I’m slightly dystopian. I’m careful about how technology is applied because it has an impact on our society. We have to be careful about the language we’re using and very clear about how we describe what we’re doing in social terms — why it’s good for customers or why it’s good for society. Or being open and honest about not yet knowing whether it will have a positive impact.

Q: How will your particular industry (banking) be able to utilize superfluid markets?

We focused on four ideas at Innovation Realized that will allow superfluid markets to evolve:

  • 3-D printing
  • AI
  • Blockchain technology
  • The IoT

I work for a corporate bank, so 3-D printing has less relevance for us. The other three are very real and very present. At Santander, we’re experimenting with AI to make better decisions to improve customer experience and outcomes.

We’re also using blockchain to make it easier for our corporate customers to create a digital identity and authentication that’s secure and can be shared across a banking value chain. When we can embed sensor technology in small devices at low-cost, we can manage risk better and see where things are on the planet. That has a positive impact both financially and from a risk perspective.

Q: What impact will government regulation have on superfluid markets?

There will certainly be an impact because of things like the Second Payment Services Directive (PSD2). You can choose to stick your head in the sand and hope it passes, or you can choose to embrace it and be part of setting the agenda, that changes how we allow customers to move products and services around the banking industry.

So yes, I see threat from PSD2, but I also see opportunity. Many analysts will see it as a potential disintermediation of the banks themselves, but from a customer perspective it makes you think where your value is and what value you deliver to the customer. I welcome this opportunity.

Generated by EYQ, an EY think tank that explores leading and emerging trends, focusing on “what’s after what’s next?”.


Superfluid markets will morph and become shaped not only by our increased ability to execute them, but by their impact on society.

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EY Global

Multidisciplinary professional services organization