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Ep. 2: Digital Silk Roads

tresataFebruary 22 2021

DESCRIPTION

Abhishek Mehta is the founder & CEO of Tresata & a self-proclaimed history buff. In this episode, Abhishek helps us not only articulate what Digital Silk Roads are, but also highlights why they may represent the largest business opportunity for the financial services industry.

TRANSCRIPT

Abhishek [0:00]
The idea of Digital Silk Roads, is the evolution of that concept – of routes, where you interact across economic, social, cultural, political & religious topics, as well as units. And how that is fundamentally rewritten, in a world where data, digital & technology are the highways that trade commerce & economics will be performed on.

Shreya [0:36]
This is Tresata Talks & I’m your host, Shreya Nandi!

Shreya [0:42]
Our intention is to bring you perspectives – some our own, some from our group of even smarter friends & confidantes – to help inform your opinions on how data, digital & tech will reshape the world we live, breathe & play in.

Shreya [0:58]
Today, we have Abhishek Mehta, the founder & CEO of Tresata. And we’re talking about Digital Silk Roads & why they’re the biggest business opportunity for a host of industries.

Shreya [1:12]
You can find the transcript for this episode on Tresata.com, that’s t-r-e-s-a-t-a-.-c-o-m

Shreya [1:22]
And, let’s keep listening

Shreya [1:27]
Hi Abhi, welcome to Tresata Talks! We have you here today to talk about Digital Silk Roads, a concept that I’ve been hearing a lot in the office recently, the virtual office so to speak. Could you give us a definition of what Digital Silk Roads are?

Abhishek [1:45]
You’re right. I guess even in the virtual office, a lot of you have heard me talk about this, sometimes incessantly. And the reason behind that has been, I have been thinking about the idea of Digital Silk Roads probably my entire two decades of professional experience, but especially in the last five years.

Abhishek [2:09]
And the pandemic & what has happened in the last 12 months has only made it more relevant. Not just to me as an idea, but I think has also made it very relevant to what is happening in the world & what potential it holds towards, in some cases, disrupting, but in most cases innovating around business models. In my opinion, that impacts every single industry that you & I are familiar with. 

Abhishek [2:37]
The idea, when you think of it from that big & open or that big a concept, is actually quite simple. Which is as you shall remember, I’m a history buff & has always been a history buff. Silk roads were & are a network of trade routes. And the silk roads were around the trading of silk from the east to the west. 

Abhishek [3:05]
What is forgotten is not only that they were central to economic revolutions & behaviors around the globe, but they were also central to cultural, political & religious interactions. And the idea of Digital Silk Roads, is the evolution of that concept – of routes, where you interact across economic, social, cultural, political & religious topics, as well as units. 

Abhishek [3:35]
And how that is fundamentally rewritten in a world where data, digital & technology are the highways that trade commerce & economics will be performed on. And that’s Digital Silk Roads.

Shreya [3:54]
That really makes me wonder, because it is such a grand topic, what are the contributing factors that we need to know that lead to the birth of Digital Silk Roads?

Abhishek [4:05]
There are three key factors that need to happen in order for the evolution to be complete. Number one is the contextualization of supply chains. It was a lot easier to do in physical trade routes, but it has become a lot trickier to actually pull off when the same trade interactions & supply chains are mostly digital. That’s number one.

Abhishek [4:31]
Number two is the ability, once you have contextualized the supply chain, to extract intelligence from the financial data that underpins a supply chain. So as you can imagine, whether you are a producer or a consumer, whether you’re a buyer or a supplier, at the end of the day, there is a certain financial transaction that is taking place to connect one side of the transaction to the other.

Abhishek [5:01]
So that is number two, extract intelligence from financial data that is inherent in those supply chains. And number three, is overlay that financial intelligence with the digital, physical & ESG data that adds the dimension, to not just create a holistic perspective on what the digital silk road is doing, is transacting, is moving, is consuming.

Abhishek [5:31]
But also make it holistic, make it sustainable, make it something that can be a virtuous loop towards the future of not just, you know, the producing & the consuming parts of our society, but also the planet that fundamentally drives the silk road. And those three are the most important ingredients in actualization of Digital Silk Roads.

Shreya [6:00]
You’ve touched on different things, financial data, you’ve touched on sustainability, you’ve touched on supply chains. So where do you believe the biggest opportunity lies in here?

Abhishek [6:12]
Some may say that, you know given the fact the word digital seems to be the defining concept of Digital Silk Road, it should be some of the most interesting digital properties & companies in the world. But I don’t think so, Shreya. According to my hypothesis & my research, the industry that has probably the biggest role to play & the most to gain & as a corollary the most to lose, is the financial services industry.

Abhishek [6:49]
And here’s why. The banks today & even historically, the financing of the silk road was where most of the intelligence around the silk road resided. And if you go back to the three ingredients, the ability to extract intelligence from financial data is most readily done by financial institutions: banks, merchant banks, trade finance participants & others.

Abhishek [7:21]
They have almost an incumbency advantage that they can leverage across this particular ecosystem. And the reason why it’s very powerful, or can be very disruptive – it is also referred to as the payment industry, right? So another perspective on financial transactions is that payments need to be made between suppliers & buyers, between producers & consumers.

Abhishek [7:47]
And the payments industry today is a two-trillion-dollar industry. To put that in context or reference, Shreya, the advertising industry where you have seen some of the most interesting companies emerge, that industry is only 500 Billion. So the payments industry is four times the revenue pool of the advertising market that has seen the emergence of some very powerful companies. 

Abhishek [8:12]
You know, everything from Google & Facebook, to some of the smaller upstarts that you’ve seen emerge. So by that very definition & the very ownership model, or you know, consumption model of how trade happens today, the banks have the most to gain & the banks have the most to lose.

Shreya [8:32]
And that helps us understand where the business opportunity lies. So as we think about Digital Silk Roads, why is it important to add context to supply chains?

Abhishek [8:46]
I guess, you know, I’ll call it the worst kept secret or the best kept secret, depending on which side of the industry you’re in. If I believe that the banks have the most to gain from the creation of Digital Silk Roads, they have a current gap in something that they haven’t been able to do, which has been done quite successfully in the advertising profit pool or revenue pool as you were talking about. 

Abhishek [9:12]
Which is the data that is captured & created currently across the payments value chain, broadly defined, is trapped. It is trapped in a variety of organizations & silos & legacy technology. And without that data that trapped data being released, it’s almost like the genie in the lamp. Without the genie in the lamb being released, the opportunity that the banks may have to drive some of this disruption will be lost.

Abhishek [9:45]
A simple supply chain of a smartphone suddenly sounds a lot more complex when you add all of the components: the manufacturers of the components, the suppliers of the components, the raw materials that go into the components, the buyers of the components, the marketing of the actual end product, the movement of the end product in your hands, whether it’s online or offline. All of that is very very complex. 

Abhishek [10:12]
And without the ability to contextualize those complex supply chains, understand the relationships in those supply chains, none of this can be done; which is why I called it almost a foundational asset that is required & is essential for Digital Silk Roads to actualize. 

Shreya [10:33]
Abhi, now that we understand the financial data angle, I want to ask you about ESG, or the Environmental, Social, Corporate Governance angle. Where does ESG come into Digital Silk Roads?

Abhishek [10:47]

At the heart of the argument I’m about to propose is something very simple: economics. ESG is being defined as having potentially a 30 to 40 trillion dollar impact or market, in the world over the next 10 to 15 years. 

Abhishek [11:06]
And the more I read about ESG, Shreya, the more it became clear to me that when you think around the sustainability & the verification & validity of anyone claiming their ESG credentials. The only way to ensure those credentials are true & have been met goes back to the same foundational concept you & I spoke about: contextualizing supply chains. 

Abhishek [11:39]
So I’ll take a simple example: let’s take the economics out of it now, right. So we all agree payments is 2 trillion, the ESG market is 30 to 40 trillion so numbers are massive. But say I come to you right & you are a producer of some really fancy shoes. How can we ensure that when your company comes & says we are a sustainable manufacturer of natural goods & services, in this particular case shoes, how do we know we can completely agree with, or believe your statement? 

Abhishek [12:17]
And in my posit, the only way to ensure that your assertion is true, is looking at your supply chain: both the backwards integration of it & the forwards integration of it, extracting the financial intelligence to make sure we can actually see your network of buyers, suppliers & consumers, applying & overlaying the digital, physical & ESG data I spoke to you about & then letting the supply chain automatically inform who actually has appropriate credentials & is truly neutral to the planet & who is not. 

Abhishek [13:02]
So I believe the Digital Silk Road assumes even greater significance to not just the disruption or the economic disruption around you know the industry that it may impact: financial services, oil & gas, agriculture, et cetera, et cetera. 

Abhishek [13:18]
But it also becomes critical to the cultural & political revolution that is brewing around making all of our industries neutral to Planet Earth, right, the one asset we don’t ascribe enough economic value to because we take it for granted.

Abhishek [13:38]
So that was my hypothesis, that I actually believe that if we actually have to make, if we as society have to ensure that ESG is not just a warranted World Economic Forum idea, but something that is truly imbibed & acted upon & integrated in everything we do, everything we consume, everything we produce without the presence of Digital Silk Roads’ rails.

Abhishek [14:09]
One of the rails being the contextualization of supply chains, the other rail being extraction of intelligence from financial data to add relevance & heft to the supply chain & the third rail being the application of sustainability metrics & statistics to that supply chain, that in my mind completes the actualization of Digital Silk Roads.

Shreya [14:36]
That really painted a really thorough picture of it & it really does give me hope as a ‘Gen-Z’er, who is highly sensitive to the fact that Mother Earth is not playing around anymore. It really sounds like Digital Silk Roads as you said in the beginning, really holds the key to a lot of how we operate in the future. And I know Tresata has a stake in this right now or at least developing it. Are there other disruptors that we should pay attention to when it comes to these Silk Roads?

Abhishek [15:12]
Yes. Of course. You know the world would not be fun & life wouldn’t be, you know, worth living if there weren’t many smart people thinking about the same problems you know.  And I am not the smartest in the world thinking about this, I have to happen to have an informed hypothesis. I think there are a host of incredibly smart minds thinking about their own versions of what I call Digital Silk Roads.

Abhishek [15:44]
The one that no one can at this point disregard or choose to ignore, is of course Amazon. And I have said publicly that if the financial supply chain that exists today & is in the hands of the financial institutions of the world, if the extraction of intelligence from those supply chains isn’t done in a timely fashion, the one player who will run away with it because they’re building virtually a parallel planet of producers, suppliers & consumers, & will do everything from not just the ability to sell goods & services & deliver goods & services but also, you know at some point finance those goods & services is Amazon.

Abhishek [16:32]
They have the marketplace, they have the transportation & logistics that they own, you know, they have I think at this point almost 10 million merchants globally & they

Abhishek [17:04]
I think the second interesting ones are software companies, you know, you correctly state that, you know, we have a leg in the race as well. We have spent a tremendous amount of effort & created a tremendous amount amount of intellectual property, as you know, around contextualizing supply chains & around the extraction of intelligence from financial data & as you know, the newest product that you know we have been working on internally that we call ‘sustAIn’ – the ability to overlay ESG, digital & physical data to the first two assets that we have.

Abhishek [17:40]
So I think software companies like ours will also have a role to play, not individually by ourselves, but by applying some of our intellectual property, our software & our automation & you know the machine learning capabilities we take to market. Applying those to our clients, what we call our partners, but our clients right, as the world calls our clients, in the financial services industry, in the logistics industry, in the transportation industry, in the agriculture industry, in the grocery industry, in the retail industry. 

Abhishek [18:16]
So I think I would say two interesting players right, the online purveyors of goods & services are very interesting like Amazon & then you know, the software players are very very interesting as well.

Shreya [18:28]
This really is the future some might say where we can really use what we have & just you know with technology moving at the pace that it is, this seems to be the natural next step. Let’s see how long it takes to get there. That is all the time we have today Abhi. Thank you so much for providing so much information about Digital Silk Roads, I definitely am enlightened now.

Abhishek [18:55]
Shreya, it was absolutely my pleasure. I am so glad that as you correctly again remind me of my age, but as a ‘Gen-Z’er you know I’m incredibly, incredibly hopeful of the promise that your generation holds in helping us realize some of these things. And thank you for having me. I thoroughly enjoyed it & wish you a lot of luck with Tresata Talks. 

Shreya [19:25]
Did you hear something you like? Or do you agree to disagree? Email us at curious@tresata.com. That’s c-u-r-i-o-u-s-@tresata.com.

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