Free stock-#trading app #Robinhood is exploring virtual currency trading on its platform, according to co-founder Vlad Tenev. “We are looking at it, a lot of customers have been interested and are requesting the feature [like this reedit user], so it’s definitely something we are taking a look at,” he said today during the Future of […]
Bank Innovation
INV #Fintech, this site’s sister accelerator, announced a partnership today with Shanghai-based #JadeValue, an incubator and investment #fund, to enhance financial #technology startups in both the United States and China. INV startups will be introduced to JadeValue for investment and introduction to the Chinese market through JadeValue or its parent company, CashBUS, a Shanghai-based personal lender. INV, […]
Bank Innovation
“It’s time to break the silence and reveal what is real and what isn’t behind the #Blockchain mirror” – Jiri Kram
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DISCLOSURE: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. Views shared here are my own and cannot under any circumstances be interpreted as an official account of any company I am associated with current or in past.
Let me tell you a story of my first encounter with Blockchain in 2014. I was in a pub in London with a couple of people. One of them was a Man with a #Bitcoin Wallet. I had no idea what Bitcoin is and why that cocky individual was cockier than usual that day. When I heard him claim that #banks will be rendered irrelevant by Bitcoin, I didn’t just focus on the message but on the character of the man delivering it. I considered joining his secret society but when I saw the same discussion going on in the channel – where many cocky developers with egos the size of a herd of elephants preached a new revolution called Bitcoin – I realised that this “revolution” is similar to many previous ones: tulips, south sea, dot.com or subprime mortgage. It is driven by two things: greed, and the naive belief that this time, is no different.
When I saw this cocky developer claim the next day on his LinkedIn page “Hey Goldman Sachs we don’t need you anymore! You are done!”…
I realised we are in a bubble.
When you are speaking with someone in the Bitcoin community, there is only one thing mentioned, as was during the dot.com era, in every conversation. Bitcoin is here forever and will change everything. What all those crypto-pundits and bitcoin millionaires fail to remember or read about is that at the beginning of the dot.com boom there were also many that thought they would last forever. Let me remind you: Netscape, Yahoo, AOL, Lycos, Excite, AltaVista… etc. I can make a much longer list. The outcome yielded different winners: Amazon, Google, Salesforce… etc. What makes you certain that Bitcoin will be a Google, not an AltaVista?
Dot.com
Bitcoin
Once again, as with dot.com, there is something hidden from the public. While the media mulls over Bitcoin and gives credence to a slew of people proclaiming a “decentralised network that no one will own” to a naive public, convincing them to dump zillions into “ICOs” (which are as safe “as houses, same as subprime mortgages were back in 2007), there is something else happening. Let’s consider FAAMG (Facebook, Apple, Amazon, Microsoft, Google). These five companies control cash reserves greater than the GDP of many medium sized countries. They have the ability to quickly control an industry should they choose to. Do you really think it’s a coincidence that Amazon, Microsoft, and Google clouds are also major deployments for many Blockchain networks?
It’s a charming idea to think that you can build a “Goldman Sachs independent” financial system and have Goldman Sachs and others just “watch” while a group of very smart developers (since bitcoin developers are the smartest people in the room) replace the world’s financial system. Of course, Goldman will just sit and watch their Bloomberg screens, unable to figure out how this “mysterious out of reach asset” moves. Do you really think that the largest banks in the world that control the flow of trillion dollars will sit idle? Can’t they read open source on GitHub? Really? I think you will be very surprised, soon.
In 2014 the victims expected to suffer the most from Bitcoin were traditional IT vendors like Intel, IBM, Oracle and SAP. As with the case of large banks, developers expected IT vendors that control multibillion dollar markets to simply sit and watch in a panic – totally unable to figure out what is in the magic open source. Bitcoin pundits forgot that if something is open source, it’s available and readable. So it’s not too difficult to reengineer the code to see how it works. Then toss a few billions into R&D and “partner” or “acquire” a couple of smaller companies and there you go – Bitcoin converged into Blockchain. Blockchain is not dependent on Bitcoin, like TCP/IP wasn’t dependant on AOL. If you think it is a coincidence that no big IT corporation supports Bitcoin, think again. Bitcoin is a first generation #technology. It will be replaced, like Altavista was replaced by Google.
ICO (Initial Coin Offering) is the phenomena of the day. Reading descriptions on a list of ICOs is like travelling back in time. The majority of ICOs simply anticipate, as did their dot.com predecessors in the 90’s, that when developers build something customers will magically flock to it and they will become the new Google. Is it really that simple? Another great example observed with delight from large IT corporations is how ICOs and frantic attempts to create the new “magic coin” always jam the #Ethereum network – the “world’s computer.” It seems that a new magic network realized the technical reality that behind every bitcoin or ether is a computer. Every computer in the world works with only two principles: 0 and 1. The only thing that matters is how fast and correctly a network can deliver zero and one instructions to hardware. There is no magic wand for ICO, there is just a bubble and many people will lose money because they have no idea what they are investing in technically, let alone commercially.
As with previous games the winners are already taking in massive rewards because they are already hooked into an existing IT and banking infrastructure. When you remove your Bitcoin rose coloured glasses you learn what is really happening – there is no one building a Bitcoin network. The only place where investments flow into is Blockchain infrastructure that must be enterprise grade. That’s why there are three major consortia in the Blockchain world: Hyperledger – which runs under a Linux foundation and includes members like IBM and Intel (already pronounced dead by Bitcoin pundits). Next there is Ethereum, which is after Bitcoin the most known currency and also sparked a mania of ICOs. However, Ethereum doesn’t only have a public layer running on millions of anonymous computers. Vitalik Buterin and his team quickly realised that to get into enterprises they need something more. So a new Ethereum alliance was created that attracted the likes of JP Morgan, Santander… and many others that were supposed to be killed by Bitcoin. The last one is the most mysterious of all – R3. This is the largest consortium of banks. They are focused on DLT (Distributed Ledger Technology) and as with the previous two, do not include Bitcoin. Simply because Bitcoin as a technology is irrelevant.
Another dinosaur that should be eliminated by Bitcoin, as I was told many times, are large accounting and audit firms. The reason I was confidently given is that Bitcoin is “self-controlling” so there is no reason to audit or control anything. Also that on Bitcoin “everyone has all history of transactions from the beginning of time.” What no one expected was, what a surprise, that if you want to replicate the history of all transactions all the time to every participant, it is required that: 1) data needs to be constantly updated, which means massive traffic and costs, 2) data must be physically stored somewhere on your computer, 3) to access the bitcoin network you will need somewhere to save the keys and this resource will be accessible only as long as this place exists e.g. MtGox. Meanwhile the Big 4 accounting/audit firms (Deloitte, EY, KPMG, PwC) looked into the nature of bitcoin, extracted Blockchain technology, and with the help of major IT companies like Microsoft and IBM are silently building a safer Blockchain platform that, unlike the anarchy driven Bitcoin, is fully auditable.
Same as the Internet didn’t make IT departments irrelevant, Blockchain will not replace IT departments. What will change is the speed of business and the types of skillsets needed in an IT department. There will also be no immediate shift of everything to Blockchain. There will be a long period where Blockchain systems co-exist and integrate with existing IT systems. Blockchain will also lead to a strong surge in cloud adoption because it is much cheaper to store Blockchain data in the cloud than on physical computers. Considering that a Bitcoin transaction costs 4 dollars – it would mean economical suicide for any company that would adopt it. An issue also not frequently talked about is speed. Bitcoin transactions take 10 minutes to validate. Why? Because Bitcoin is a technically flawed architecture. It expects each node (each computer) in the network to have the same replica of data as other computers, which causes a massive technical problem in terms of network synchronisation due to an architecture that requires the Blockchain network to permanently store all data from the beginning of time. This architecture is doomed to collapse, simply because Bitcoin and Ethereum are now invaded by many HFT (High Frequency Trading) machines that react in microseconds compared to the network’s minutes.
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DISCLOSURE: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. Views shared here are my own and cannot under any circumstances be interpreted as an official account of any company I am associated with current or in past.
[linkedinbadge URL=”https://www.linkedin.com/in/jirikram” connections=”off” mode=”icon” liname=”Jiri Kram”] Jiri Kram is Cloud Architect & #Fintech CTO educated and certified by MIT and this article was originally published here.
The opportunity ship has sailed for personal finance management, lending, or #robo advisory sectors of #fintech, according to Rebecca Lynn, co-founder of venture capital firm Canvas. So where are investors looking for new opportunities? “Startups that are addressing the #infrastructure issues of banking, whether it’s #blockchain, or fraud prevention, or compliance,” she said during the Future […]
Bank Innovation
For the third consecutive year, Bank Innovation has teamed up with Open Bank Project and (this year) the University of Warwick, to conduct a research survey on how financial institutions worldwide are prioritizing API initiatives in 2017. The report, which surveyed more than 200 high-ranking executives from financial services and banking industry, indicated a growing […]
Bank Innovation
Steve Jobs once said, “Your #customers dream of a happier and better life. Don’t move products. Instead, enrich lives.” Considering the degree to which Apple’s products are ingrained in people’s day-to-day lives, they’ve stuck well to Jobs’ guidance.
One of the areas of retail banking where it should be easiest to sell dreams, not products, is the mortgage business. People want to buy a house and build a future; they don’t want to buy a mortgage. Long before lifestyle reality shows conditioned us to always be thinking about remodelling, I remember walking the empty rooms of my first home in Scotland dreaming about the home it could become. Unless you’re a commercial developer, a mortgage is just a means to an end, but it’s still one of the most meaningful and intimate transactions that #banks can have with their customers. However, the entanglement of #mortgages with dreams and aspirations also makes it a very vulnerable product category. Customers’ dreams of a new home now tend to manifest themselves via a #digital footprint that ranges from simple real estate searches, to baby announcements, and relocation research. For lenders with the right analytical #tools, these digital footprints create an ideal opportunity to intersect customers before they ever think about contacting their bank. In the US, the result is that banks are now beginning to fade from the mortgage landscape, with non-banks occupying six out of the top 10 origination spots in 2016, up from just two in 2011¹.
Read the report
For banks to remain relevant in the mortgage category, they need to get into the dream-fulfilment business. That means going beyond the traditional bank credit offering to facilitate a compelling end-to-end home-buying journey. The goal must be to meet customers’ digitally groomed expectation that banks know them enough to anticipate their mortgage needs and delight them with relevant, hyper-personalized offers and service. To stay relevant, banks need to get out of their traditional reactive stance and develop a #predictive mortgage acquisition strategy.
Effective predictive mortgage origination draws on #three core digital tools that enable lenders to connect with borrowers and enhance their experience earlier in their journey to homeownership: programmatic marketing platforms, advanced analytics and artificial intelligence (AI). Together, these capabilities create predictive lenders who can put the customer at the center of their marketing efforts and act on moments of influence throughout the customer journey from dream to move-in date and beyond.
For example, good predictive lenders build data management platforms that store and cull rich customer attribute data to inform personalized, contextualized and precise offers. By analysing the data at a granular level, lenders learn more about customers’ device-usage patterns, behavioural trends, social media profiles, purchase history and search priorities, allowing them to respond to specific contextual cues instead of simply targeting segments. With AI, predictive lenders can automate personalized marketing to #acquire customers at scale, speed processes, limit manual intervention and cut costs. #This isn’t just about keyword search response where any customer behaviour vaguely related to a new home search results in them being bombarded with generic mortgage offers. That is the digital equivalent of dumb direct mail, and not surprisingly the hit rates are low and getting lower for that type of blunt-instrument marketing. Instead, sophisticated machine learning can glean real insights from patterns in customers’ behaviour and data relationships to refine and predict next-best actions to a level where bank interventions are seen as truly helpful and not annoying. The difference between the best and the rest is becoming dramatic. Those who can identify and interpret the right precursor home-buying signals from their customers have seen click-through rates improve to six times industry benchmarks.
Smart banks will help customers realize their dreams of a happier and better life in a new home by enriching the mortgage experience with greater predictability. To learn more about how, I invite you to explore our report: The power of prediction in digital mortgages
¹Wall Street Journal, November 2, 2016
The post This way to predictive mortgages: Three digital tools banks can use in the battle to acquire customers appeared first on Accenture Banking Blog.
How do you serve the investor that’s never invested before? #Fiserv and #GoldBean have a solution. #Financial solutions provider Fiserv has partnered with digital investing startup GoldBean in order to bring #personalized, digital financial #advice to Fiserv customers, the companies announced today. “For the vast majority of people who have a wealth manager or an […]
Bank Innovation
Mobile wallets may not be replacing #cash as yet, but that doesn’t mean cash is still the consumer go-to. About 20% of #consumers (or 1 out of 5) are not presently carrying physical cash in their physical wallets, according to the American Express Digital Payments Survey released this week. Additionally, nearly half of consumers (46%, […]
Bank Innovation
Now that the industry is (mostly) clear on the #fintech “friend or foe” issue, startups are busy pitching their products to the eager incumbents and their #innovation teams. However, a new creature has emerged in this process, which can potentially place more roadblocks on a startup’s development journey. Startups, #beware of “innovation tourists.” “One of […]
Bank Innovation
#Fintech. The cloud. #Digital #wallets. #Blockchain. These are all buzzwords typical to the banking and payments space, but within the mobility landscape, they are only starting to gain traction. But that does not mean these terms are insignificant or that they aren’t actively playing a role in the transformation of mobility consumption or auto finance. With […]
Bank Innovation
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