It seems as though #fintech-ers are more interested in chatbots than #blockchain these days, but that doesn’t mean distributed ledger #technology has slid out of the spotlight. Blockchain startup #Chain made waves at the recent Money20/20 event when it announced what it’s calling the Chain Core Developer Edition: basically theRead More
Bank Innovation
In the startup world, #insurtech is currently one of the most dynamic and exciting sectors: more than $2,6bn were invested in the industry last year, three times the amount invested the year prior. Corporate insurers such as Axa, Allianz, AIG or Aviva are creating in-house funds to identify the most promising innovation in the field. The landscape is fast evolving, with the shared economy practices turning the industry upside down: thus, unicorns like Blablacar or Airbnb push traditional actors to develop new insurance models that go beyond transportation and housing, and draw from IoT, big data, or gamification to transform the insurance industry overall.
An entire book would not be enough to capture all insurtech innovations, so let’s focus on three transforming trends in the industry and their impact on traditional insurers.
Don’t speak about insurtech, speak about insurtechS!
Traditional insurance used to be applied to a few sectors, with a few bundle products, but times have changed! The industry is now facing several levels of segmentations:
These segmentations mean traditional insurance actors are faced with new challenges to respond to new consumptions habits, as well as new business opportunities, for instance responding to specific needs.
Mastering personalised insurance
Not only have consumers changed their habits, but they are also increasingly asking for personalized services: less and less people are willing to pay bundles, and would rather get personalized coverage. Whilst before, insurers relied on market trends to develop new insurance products, they now need to be more lean and creative in their packages.
Failure to satisfy increasingly demanding and selective consumers would result in losing clients, but traditional actors have in fact been very good at embracing insurance curation: they are making the most of new health tracking devices to provide premiums to fit customers, or offering discounted auto insurance for customers using telematics devices to track safe driving. All-in-one policies are also starting to emerge, thanks to highly personalised digital risk assessment.
For corporate insurers, insurtech is a way to climb the food chain
The emphasis put by traditional insurers on insurtech is easily justified: from data analytics and lifestyle apps allowing client service personalisation, to hardware supporting preventive action rather than corrective ones (to detect fire for instance), the added-value of insurtech is immense. Information security systems or digital processing are further revolutionizing customer service, making insurance/client relations more seamless.
Insurtech ultimately gives incumbents the opportunity to get directly exposed to the client rather than go through intermediary brokers, making coverage more affordable for consumers and more profitable for the providers. As such, corporate actors and insurtech startups should not see each other as competitors, but rather as complementary actors. In fact, no insurtech today is directly challenging an insurance company like Monzo or Starling Bank do with traditional #banks, and for insurtech, the path to customer acquisition is more so than not likely to go past corporate insurers.
Increased synergies between insurtech and corporate insurers are likely to be beneficial to both parties. Other than the traditional challenges related to regulation and barrier to entry, the main test for insurtech and insurance companies will come from the consumers’ reaction: if the personalisation of services can be beneficial operationally, it also comes at high cost, that of privacy. Traditional insurers and insurtech companies will therefore have to work together to guarantee that their customers’ data is collected and managed in a secure and safe way. And for that cybersecurity startups may have some answers.
[linkedinbadge URL=”https://www.linkedin.com/in/antoine-baschiera-85aa033a” connections=”off” mode=”icon” liname=”Antoine Baschiera”] is CEO at Early Metrics
The #banking industry for a long long time enjoyed strong barriers to entry. It was difficult for new #banks to start – licensing and regulation kept new entrants away. As a result banks enjoyed low customer switching, which in turn, allowed it to earn high returns on capital over extended periods. Banks could easily get 16-18% returns.
#Fintech is now changing this industry. New Fintech startups are launching discrete banking products that disrupt that particular segment of banking services. For example, Digital Wallets is disrupting credit/debit cards.
Lets take a look at how Digital wallet is disrupting credit cards. In India, Digital wallets such as PayTM, Mobiwiki & others are at a stage where number of transactions over digital wallet will exceed the number of payments done on credit & debit cards.
The rise of digital wallets is changing the industry’s dynamics. By 2017, more number of transactions will be done over digital wallets than with the older credit or debit cards.
Source: scroll.in
As digital wallets gain preeminence, digital wallets can morph into credit cards, and offer credit to customers and even merchants who accept digital wallet payments.
Today most consumers who use digital wallets such as PayTM also use credit/debit cards to transfer money from their credit/debit cards to their wallets & having a credit card like facility available on their digital wallet will make them stop using credit/debit cards.
Digital wallets uses cloud computing and captures all the transaction data to analyze customer or merchant usages. Based on this transactional information, a credit score can be developed and against which loans or business lines of credit can be issued.
In short, digital wallets will completely disrupt and swallow debit & credit card business of the banks.
[linkedinbadge URL=”https://www.linkedin.com/in/arun-kottolli-24ba881″ connections=”off” mode=”icon” liname=”Arun Kottolli”] is Product Portfolio Strategy at Hewlett Packard Enterprise
Claudio Schneider (43) stösst per 1. November 2016 als #Partner zum Team der Kreditver- mittlungsplattform #LEND. Schneider bringt über 17 Jahre Erfahrung im Investment Banking mit. #Für die Barclays Capital leitete er das institutionelle Fixed Income Credit Geschäft in der Schweiz.
Davor arbeitete er als Senior Credit Trader und Risikomanager für die UBS Investment Bank in London. Neben Unternehmensanleihen und -krediten umfasst seine Expertise Kreditderivate sowie die Verbriefung von Kreditforderungen. Er ist mit den Be- dürfnissen institutioneller Investoren somit bestens vertraut.
Claudio Schneider, Partner von LEND
Schneider wird bei LEND sowohl auf operativer als auch strategischer Ebene involviert sein. Er wird sich schwerpunktmässig mit der Akquise von institutionellen Investoren be- fassen. Diesen Bereich will LEND weiter auf- und ausbauen: Das #Fintech-Start-up sieht re- ges Interesse von institutioneller Seite am Peer-to-Peer-Lending. Auch Pensionskassen und Versicherungen wollen von der neuen Möglichkeit Gebrauch machen, direkt in Kreditpro- jekte investieren zu können, zumal die Kosten der Direktanlage viel tiefer sind und die Returns dementsprechend attraktiver.
Schneider reiht sich bei LEND in ein Expertenteam mit fundierten Kenntnissen in der klas- sischen und der digitalen Finanzbranche ein. LEND bringt auf seiner Kreditvermittlungs- plattform Kreditnehmer und Geldgeber direkt zusammen und macht die Bank als Vermitt- lerin überflüssig.
Featured Image: LEND.ch
The post LEND wächst – ein neuer Partner für das Zürcher Crowdlending-Start-up appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
This week saw the release of The #Fintech 100, a collaborative report put together by H2 Ventures and KPMG. The report takes a global look at the 50 established fintech businesses and 50 emerging stars and is a must read for anyone wanting to understand the industry landscape. Behind lendingRead More
Bank Innovation
The Swiss are world leaders in many things: watches, chocolate, Swiss Army knives and wealth management. Although the world of Swiss private banking has had more downs than up lately, wealth management is in the national DNA. There is good reason to see the Swiss coming out on top as private banking reinvents itself as a more digital product. Amongst the Swiss #banks, UBS is well set up to lead the pack; its recent announcement of its intentions in the UK: “UBS to launch digital wealth management platform in Britain” offers much promise, as does history, or rather deja vue.
In the #FinTech world, several different terms are used to describe expected changes or influences on the same thing: Digital Wealth Management. #Robo-Advisors. Machine Learning are all being applied in relation to what commentators see will be the future in the world of asset or wealth management.
In essence, this is about applying more advanced processes to the matter of looking after people’s money; making the interaction between bank and clients function faster, better and cheaper via mobile and internet channels, using rules to drive investment decisions and using AI, artificial intelligence, or Machine Learning to learn lessons and fine tune those decisions. For all the new terms and new #technology, the underlying core banking discipline is not changing;
Swiss banks have been managing money on this basis for a very long time. There is an ingrained culture of formally setting investment strategies based on investing goals; growth, balanced, capital preservation and of dealing with the multi-currency needs of an international clientele.
The theory is underpinned by solid back-office processes, for example in investment controlling, making sure that the investment guidelines are followed. Having been the product manager for a Shariah complaint cash management fund, I have seen this working first hand at Credit Suisse. Asset servicing is another discipline where the Swiss excel; the international client base means the banks have a very diverse set of asset information and detail to keep on top of. Prices, corporate actions and dividend information are all effectively gathered and processed.
Historically, the Swiss have not been that efficient; fat, super-normal, profits bloated by lots of offshore, black money have masked high costs and poor processes. The game plan worked as long as the vast majority of those assets were processed on the big, old-iron, mainframes in Switzerland. Neither UBS nor Credit Suisse managed too build really great platforms for offshore processing that would replicate the efficiency of the HQ machinery. In the US, firms such as Vanguard have led the way in offering low cost investment vehicles.
So, the core already exists as the industry transitions to another generation, both of clients, technical capabilities and regulatory requirements. The challenge is to adapt. According to head of digital at one of the major banks, the key challenges are:
In thinking about where the industry is headed, I had a sense of deja vue. In the early nineties, securities lending, or Stock Borrow & Loan as our American cousins like to call it, became possible in Switzerland. The challenge was to to open up all the “internal drawers” where the security positions were filed away and channel the aggregated holdings to the market. The assets were there, they just needed to be connected up and channeled to the borrowers. UBS, or rather the then SBG, led they way. Led by the charismatic Felix Oegerli, a very capable team added a great deal to the industry. Credit Suisse had the same starting position, but could not get out of the starting blocks. From days at Goldman Sachs, where we were active borrowers, I recall a time lag of about two years between the first deals with the leaders at UBS and the laggards at Credit Suisse.
Another recent announcement UBS’s private banking arm suggests the bank is taking the steps to simplify their infrastructure: “UBS’ European Bank Finds a Home”
Lessons Learned: Digital private banking is really the world of what the academics call the “adjacent possibles“. What is close to what we are already doing?
Apple did not invent MP3 music storage, they innovated around it, creating the iPod and the iTunes music store. Apple was not a start up when it made that move. In the mid aughties, Credit Suisse, then under the leadership of the ex McKinsey duo of Lukas Muehlemann and Thomas Wellauer pursued a “mass affluent” strategy. This was based on “bricks” rather than “clicks”. That was an idea ahead of its time. The “mass affluent” will not pay 100 basis points or more for advice. What they will pay will support a “clicks” based approach, but not a “bricks”based one.
There is wonderful advert for Ricola, a Swiss company which makes lozenges. The main character pops up to challenge others around the world making claims to have invented the sweet, challenging them: “Who invented it? The Swiss!”
My money, well at least the deeply out of the money options my wife has as a UBS employee, is on the Swiss mastering this evolution and UBS leading the pack.
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[linkedinbadge URL=”https://www.linkedin.com/in/bankersplumber” connections=”off” mode=”icon” liname=”Olaf Ransome”] is Bankers`Plumber | Intraday Liquidity | Cash Management | BCBS 248 | CLS Programme Manager
Americans are quite happy to look at #nonbank #lenders for #their borrowing needs, but that doesn’t necessarily mean they distrust #banks. A recent J.D. Power survey of small business owners released some startling figures — startling to banks, that is. Most #borrowers, specifically small-business borrowers, consider nonbank lending options for their financingRead More
Bank Innovation
In-house counsel are going to be hearing a lot about smart contracts. They need to prepare themselves for the discussions that their business and commercial leads are going to want to have with them. That means quickly coming to grips with the key commercial, legal and regulatory issues that #smart contracts can give rise to.
Smart contracts exist as code within blocks in a #blockchain. They have the potential to automate performance of a transaction and are typically described as “self-executing” for this reason.
In identifying the issues a business may face in a smart contract deployment, it is important to take on board that there is a spectrum of possibilities as to what a smart contract actually is. At one end of the spectrum, there is the “code is contract” model (which aspires to fully encode complex commercial contracts). At the other end of the spectrum, there is the automation of business logic and/or the automation of the performance of aspects of a conventional contract.
The “code is contract” model is very challenging from a legal perspective. It puts into question an issue potentially relevant for all smart contracts: has a legally binding contract formed? The answer to that question may vary according to the applicable law determining the issue.
In between the two extremes on the smart contract spectrum, it is likely that more modest but achievable use cases will emerge. A good example is the smart contract model developed by Barclays and R3, under which contracting terms (in the form of an ISDA master agreement in natural language) are connected to computer code via parameters (a smart contract template). These parameters feed into computer systems for execution.
This is in effect a split (or so-called “Ricardian”) contractual model, which avoids some of the pitfalls currently associated with the “code is contract” model (for example, how do you encode concepts that involve judgement or degree, such as “reasonable endeavours” or “as soon as practicable”?)
Any proposed smart contract deployment would need to consider regulation. However, to date, the responses of regulators globally to blockchain #technology have been fragmented, and are (generally speaking) at quite an early stage.
There is likely to be a lack of certainty and consistency in terms of the regulatory treatment of smart contracts and other applications of blockchain technologies for some time. In developing their regulatory responses, policy-makers will need to consider a number of key questions, such as: what should be regulated; which activities should be regulated; who should be subject to and responsible for compliance with the relevant obligations; and how should regulatory responses be pitched so as to avoid stifling innovation? In addition, policy-makers are likely to focus on how AML and KYC regulatory obligations can be credibly performed. Regulators will also be interested in how the use of blockchain and smart contracts affects firms’ risk profiles.
As a matter of risk analysis, in-house counsel will need to consider the legal and operational consequences of transacting in an electronic context. Apart from the fundamental question about whether a legally binding contract is formed, it is important to bear in mind that smart contracts sit within blockchains operating over the World Wide Web. They are code. Code can contain bugs. Code may not always perform as the parties had intended. Messages transmitted over the Internet can be delayed or interrupted, and data can be corrupted in transmission. Private encryption keys can be obtained by hacking. The liability implications of these kinds of events need to carefully considered.
It is likely that, once a model is demonstrated to work in a live environment, not only will it be adopted elsewhere, but smart contracts will, with developments in the underlying technology, incrementally become more sophisticated over time. It is quite possible that, in five years or ten years’ time, smart contracts will be doing significantly more than just automating aspects of the performance of contracts.
However, some observers put the time horizon for a large-scale implementation of smart contracts within, say, the financial services sector at just 18 months. My own view is that it will probably take longer. Having said that, there is a great deal of technology and entrepreneurial “digital fuel” being thrown at this area at the moment, so in-house counsel would be wise to track developments and to ask to be involved in the consideration of a business’s use cases and proof-of-concept deployments for smart contracts at an early stage .
Norton Rose Fulbright has a dedicated global team focused on blockchains, distributed ledgers and smart contracts. Follow the latest developments here.
Sean Murphy is a Norton Rose Fulbright Partner in London. He co-chairs the firm’s global blockchain and distributed ledger practice group.
#Peer-to-Peer Lending is emerging in #India and will be successful if the Credit quality on these platforms have a reasonable default rate and provide good returns to the lenders.
Peer-to-Peer Lending is a new asset class and it is important to create Awareness, Education and Understanding for lenders on how to proceed further to add #P2P lending in your investment portfolio.
At Citibank Consumer Bank, where I worked for close to 20 years, I learnt a concept of “Negative Self Select”.
In simple terms “Negative Self Select” means customers who choose your product and brand have poor credit track record. If most of the poor credit profile are choosing your product or brand your portfolio quality is bound to perform poorly over time compared to the industry peers.
Then the question arises, What leads to “Negative Self Select” ?
As a Bank, we used to have 3 key criteria to understand if we were a potential target of “Negative self select”.
They were:
These 3 criteria could work in combination or stand alone. It is quite logical that the best customer would not want to be inconvenienced by Heavy documentation, wait for long or pay higher cost for borrowing until and unless s/he does NOT have a choice.
Only, poor credit quality customers would go through these inconvenience as they do NOT have a choice.
However, for Peer-to-Peer Lending platform there are 2 more challenges:
At Monexo (http://www.monexo.co/in), we have solved for all of them before we launched our platform, namely:
We are building a new paradigm for borrowers and lenders with our 3D’s – Digitial, Data Science and Democratisation of Finance at Monexo (http://www.monexo.co/in). Visit us, talk to us and engage with us in our vision of “making borrowing more affordable and investing more rewarding.”
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