#Capital One will be the fifth bank to go live with #realtime peer-to-peer payments on the clearXchange #network, it was announced this morning. Capital One 360 customers can currently receive realtime payments from other #banks in the network, which now includes Bank of America, JPMorgan Chase, U.S. Bank, and, most recently,Read More
Bank Innovation
Scandals aside, #Lending #Club has been doing well in the area that mattered — borrowers were paying back their loans. But a new report from the Wall Street Journal indicates that chargeoff rates at Lending Club are up 38% since 2013. This is troubling because credit card default rates decreased over theRead More
Bank Innovation
A question that #security providers are prodded to answer is how to safeguard identity while not burdening the end user too heavily with new tasks when they access their accounts online, whether on desktop and mobile. This question, however, is a flawed one since within our reach is a solution that markedly enhances user experience (UX) while providing the best security available.
The marriage of biometrics and cryptography along with advances in mobile #technology has made biometrics a viable, immediately-deployable, and scalable replacement for yesterday’s flawed username and password authentication scheme. The solution is called #biometric tokenization, and our partners are already implementing it to eliminate passwords, lower enterprise risk, introduce IT efficiencies, and preserve user privacy.
What remains when passwords are left behind is a new UX where the user registers his or her biometric signature on-device, and when their banking app prompts them to log in, transact, or otherwise assert their identity he or she simply authenticates using the device’s embedded fingerprint sensors, camera, microphone, or combination thereof. When accessed, a cryptographic challenge-response validates the identity, login, transaction, or communication in under a second.
The biometric data is decentralized across millions of user devices, meaning the financial services institution no longer holds customer data as it currently does with passwords and PIN codes. It also means that the user is in possession of his or her biometrics, and that these encrypted templates are stored offline in trusted zones found on the devices.
Biometric tokenization such as the FIDO UAF standard HYPR supports is integrable with existing security architectures, requiring no overhaul, and HYPR is interoperable with the diverse biometric sensing modalities, biometric sensing vendors, operating systems, devices, and enterprise applications in use and in place. Bank employees using internal applications on desktop are treated to the same UX that their customers using a consumer-facing mobile app are, and a user’s mobile device can communicate over Bluetooth low-energy (BLE) to navigate desktop applications.
The underlying security that decentralizes and encrypts biometrics also delivers the best UX Internet users have ever known. Biometric tokenization eliminates passwords—it doesn’t corral passwords into a single sign-on, and it doesn’t cause the actioning of an on-device biometric to unlock the phone or paste in passwords. This is true password elimination for the best UX plus top security—no workarounds or corner-cutting.
Enterprises like #banks and their customers can finally “forget about forgetting” when it comes to the credentials they once used to access accounts, and when a device is lost the biometric template, lacking its owner, is rendered useless. Public keys on the enterprise side are also revocable, adding another layer of confidence to the enterprise and user.
Biometrics has brought us such a long way in security innovation because of the security in its own right. What’s not widely known is that there is a usability revolution in the making as a byproduct of the hard work companies like HYPR are doing to finally make online banking safe.
[linkedinbadge URL=”https://www.linkedin.com/in/george-avetisov-b555a6a6″ connections=”off” mode=”icon” liname=”George Avetisov”] is CEO is Co-Founder & CEO at HYPR
[linkedinbadge URL=”https://www.linkedin.com/in/per-lind-5b894″ connections=”off” mode=”icon” liname=”Per Lind”] is Partner at HYPR Asia Pacific.
Introduction
With all the media attention on “brexit” there is a renewed interest by #FinTech companies who want to take full advantage of the European Financial Services market in examining locations outside of the UK. Once again cities in Europe are positioning themselves as the next hub. Paris, Frankfurt, Dublin and more certainly all have their advantages. We have seen the German FDP taking the initiative driving around the City of London advising start-ups to “keep calm and move to Berlin”. In choosing a location for FinTech business, entrepreneurs need to consider key aspects: the business environment, market access, regulatory and government support. We believe #Luxembourg is well positioned with respect to these aspects coupled with a unique set of advantages.
Environment
Luxembourg has a track record in evolving the economic environment to suit the needs of the time. Over the last 50 years Luxembourg has transformed itself from an iron and steel centre to a global financial centre and media hub, with two home-grown European giants in the field, RTL Group in media and SES (Société Européenne des Satellites) in satellite transmission.
Developing a strong FinTech industry has naturally become a key focus as Luxembourg hopes to capitalize on its international character and openness to innovation. Finance represents 36% of GDP, the creation of a vibrant FinTech hub is high on the political agenda. Luxembourg’s small size and agile government machinery provides a unique environment for FinTech including:
Market access
As a ‘gateway to Europe’ Luxembourg is at the heart of European decision making and is quick and efficient at transforming EU directives into practical applications which have been influential in attracting many key players to setup their operations in Luxembourg including PayPal, Amazon Payments, Rakuten, and Yapital. EU “passporting” regulations allow companies based in EU member states to operate throughout the European Union.
Ecosystem
Luxembourg has created an active and vibrant ecosystem including incubators and accelerators, law firms, service companies, IT hosting companies, university with its research centre, data centres, and financial expertise.
This ecosystem, stimulated by innovation funding and supported by pro-active and pragmatic approach to regulation, has enabled an industry hub of over 150 FinTech companies. Many are small start ups such as Digicash in mobile payments, Mangopay, a crowd funding platform or #BlockChain, part of the crypto-currency value chain.
The reason they give for coming to Luxembourg is access to Talented ‘International’ People (Luxembourg has the highest number of developers in the world per capita) and an active tight knit ecosystem, with a ‘can do’ attitude that incorporates private business, public research organisations and government bodies such as regulators and innovation agencies. For the period 2016-2020, Luxembourg will spend 200M€ promoting research, development and innovation.
In February, Minister of Finance, H.E. Pierre Gramegna, announced a project to create the LHoFT, the Luxembourg House of Financial #Technology which will provide a place for companies from Finance, Technology and FinTech to interact amongst themselves and with research and government actors to develop ground-breaking concepts.
Regulation
As a founding member of the EU, Luxembourg has a real influence on its strategic direction, particularly in the area of the regulation of new financial products. Currently it is moving faster than UK and Germany on crypto-currency regulation, Luxembourg recently made history by becoming the first member state to issue a license to crypto-currency exchange Bitstamp.
The Luxembourg regulator CSSF (Commission de Surveillance du Secteur Financier) has created an Innovation, Payments, Markets Infrastructure and Governance department responsible for financial innovation, payment services, markets infrastructures and general and transversal aspects relating to governance and remuneration in the financial sector.
“Luxembourg’s regulatory approach has contributed to the development of an important payment services industry which generates nowadays an ecosystem of highly innovative products”, says Nadia Manzari, Head of Innovation, Payments, Markets Infrastructure and Governance, at the CSSF.
Research
As a global leader in specific financial niches and with renowned experts populating the research institutes, Luxembourg has fast access to financial and technology talent to deliver game changing ideas.
The University of Luxembourg, one of the youngest universities in Europe, announced in January the establishment of a FinTech lab as a part of its interdisciplinary centre for Security, Reliability and Trust (SnT). Professor Björn Ottersten (Director of SnT) explains, “the coming years will see a transformation driven by technological advances and Luxembourg must be at the forefront if it wishes to maintain its current position. SnT can play an instrumental role as an R&D partner positioning corporate partners and increasing their competitiveness.”
The Luxembourg Institute for Science and Technology (LIST) is another important piece of the puzzle with a strong focus on FinTech research.
Infrastructure
As home to major payment systems in Europe, mission critical infrastructure is a must have. Luxembourg has invested heavily in internet infrastructure and is home to 40 percent of Europe’s tier IV data centres — the most robust and secure favoured by financial companies.
Funding Opportunities
For start-ups, Luxembourg’s “Fit for Start” scheme offers early-stage funding and coaching to ICT start-ups in Luxembourg. The programme is intended to help fund the development of a prototype and to provide start-ups with support in their early phase.
The Luxembourg Government announced the launch of a seed fund, created jointly with a group of private investors, to support the financing and development of start-ups operating in the field of ICT. Named the ‘Digital Tech Fund’, the fund was set-up on the initiative of the Ministry of the Economy as part of the national “Digital Lëtzebuerg” initiative.
For more established companies, the national level “Law of 5 June 2009 relating to the Promotion of Research, Development and Innovation” provides for financial support to companies who launch innovation activities in Luxembourg. The support is particularly adapted to the needs of Small and Medium-Sized Enterprises and allows granting specific support to R&D&I Projects or Programmes, Process and Organisational Innovation in services and “De minimis” measures (discretionary, capped aid measures, to enable enterprises and private research organisations to benefit from public funding if these entities are not eligible for a specific aid schemes).
As a base in the European Union, Luxembourg can provide a means to benefit from European Union-wide schemes including access to the EU’s €74bn Horizon 2020 fund, aimed at driving innovation within the EU. Together with the Juncker plan, this represents significant funding opportunities for companies located within the EU market.
In addition there is an abundance of private funding opportunities including the Luxembourg Business Angels Network (LBAN) – a strong and active community of business angels and seed capital investors in Luxembourg.
Want to find out more?
As an independent member of the FinTech innovation ecosystem in Luxembourg, FinnoLux have developed a number of services to help growth-mode FinTech companies to establish themselves in Luxembourg. We are able to help you by:
We have put together a unique package of services which bring together all required pieces to setup and (re)locate your FinTech business in Luxembourg. Our partners include:
Luxembourg Key Facts
If you would like to know more about bringing your business to Luxembourg, please see our website at http://www.finnolux.com and feel free to get in touch.
[linkedinbadge URL=”https://www.linkedin.com/pulse/why-bring-your-fintech-business-luxembourg-matt-elton” connections=”off” mode=”icon” liname=”Matt Elton“] is Cofounder at Finnolux and this post was originally published on linkedin.
The latest to trend on iTunes and Google Store: #Pokemon GO. Pokemon GO, released last week, reportedly has more than 5 million users across the three countries, U.S., New Zealand, and Australia. Pokemon has been around for decades (that’s probably why it’s so popular among adults, too), and the gameRead More
Bank Innovation
It’s become common for bankers to say, “Our bank is a #technology company.” But technology #companies &8220;move fast and break things,&8221; and that doesn&8217;t square well with providing customers reliable access to their money. Case in point: MyKai, the remarkably clever chatbot from #Kasisto, suffered an #outage yesterday on oneRead More
Bank Innovation
Constantly reinventing the wheel is a barrier to innovation
We’ve added “aas” to so many functions and products, from Software to Platforms to Backend (there’s some joke to be made here, but I’ll refrain…). If you started building products or services in the last few years (like me), you might take for granted that you don’t have to reinvent the wheel every time you want to access basic infrastructure and functionality; you probably rely on AWS for hosting, and use a CRM in the cloud to keep track of your customers.
But when it comes to #financial services, building products & services is still largely on-premise, and most product managers and developers are reinventing the wheel.
Development and product teams can focus on what they’re good at
Let’s say you have a great idea for a new savings app based on behavioral economics. To build an MVP and get your first 100 users on it, you’ll have to have a mechanism to move money and you’ll have to be compliant with KYC and AML regulations. Neither are easy tasks, and neither one is core to your product or competitive advantage. They’re simply table stakes for getting off the ground.
APIs are the way to make viable financial ecosystems and the key to making Financial-Services-as-a-Service possible. A variety of well-designed, easy-to-integrate APIs will let you launch faster while staying focused on your product and customers. You may integrate Plaid, Dwolla, Twilio, or some combination of the three. Think of the developer hours you’re saving by not building those functions yourself.
Big financial institutions can become platforms (the American dream!)
On the other side, big financial services companies are also getting into APIs, and for good reason. They don’t just want to use the services, they want to be the platforms upon which those services are built and distributed. They want to be ecosystems. Be Apple, not Tidal.
Without APIs, #banks, and financial institutions are siloed. Few users want to process a payment through their bank or make a trade through an archaic brokerage online when they can use Venmo or Robinhood. But banks have trouble building this themselves — for one thing, as one of my favorite #fintech VCs put it recently, “banks think they’ve hired developers, when in fact, they’ve just built IT departments”. By embracing APIs, they can take advantage of innovation without doing it all themselves, by opening themselves up.
Open #API platforms and initiatives are allowing bigger financial services institutions (e.g. BBVA, Capital One, Barclays) to have innovative products and services built off of their platforms, bring exciting experiences to customers, and get talented developers connected to their banks without completely renovating their core banking systems.
[linkedinbadge URL=”https://www.linkedin.com/in/laura-spiekerman-7306065″ connections=”off” mode=”icon” liname=”Laura Spiekerman“] is the cofounder and CRO at Alloy, which offers an identity and onboarding API for financial services companies. To send feedback, questions, or simply connect with Laura: Twitter, LinkedIn, or email [email protected].
#Wealth #management has historically been a good source of revenue for #banks, but it carried a significant cost, too. #Smaller banks, with fewer resources, often cannot afford the employees that deliver the revenue. A new #deal announced this week between wealth management firm #Personal Capital and BancAlliance, a network of 200Read More
Bank Innovation
#Wealth #management has historically been a good source of revenue for #banks, but it carried a significant cost, too. #Smaller banks, with fewer resources, often cannot afford the employees that deliver the revenue. A new #deal announced this week between wealth management firm #Personal Capital and BancAlliance, a network of 200Read More
Bank Innovation
Big bank comeback in mobile payments: Payment processing companies such as PayPal have long offered a nimbler and faster payment option to consumers. The downside has been cost as merchants typically pay a fee for using the service which is often passed on to consumers. US bank J.P. Morgan Chase seems willing to challenge nascent players head on with a payment solution of its own. The big bank maintains the upper hand in the battle as it can offer its services at a significantly discounted rate. The winner will be merchants, which have long complained of exorbitant transaction fees.
AmEx ventures into on-line loans: In more news of incumbents challenging new market players, AmEx has announced an on-line lending platform for small-business clients. Popularized by the likes of #fintech companies such as Lending Club, Square Inc. and On Deck Capital, on-line lending offers loans at significantly reduced turnaround times but at rates sometimes greater than those offered by financial institutions. AmEx is seeking to bridge that divide through quick funding and competitive rates.
Russian blockchain consortium sees daylight: Novel technologies face an uphill adoption challenge, comprehension of the concept being a major roadblock. Industry consortiums alleviate these concerns and promote further cooperation among members to accelerate adoption. With this in mind, a group of Russian #banks have announced their intention to form a consortium to explore #blockchain. Among the potential applications the consortium will investigate include KYC procedures as well as joint settlements. The news comes on the heels of a similar Chinese project recently announced and led by 31 financial and #technology firms.
Blockchain based FX clearing: Clearing trades is expensive and timely with the typical settlement time hovering around three days. Blockchain promises to cut that delay to mere minutes, if not instantaneously. As such, the application of distributed ledgers in clearing and settlements has garnered much attention in the past year. Enter FXCH, a startup Irish clearing house. It successfully cleared an fx-spot transaction using blockchain. Said Franck Mikulecz, founder of FXCH: “Streamlining steps to settle FX trades at a fraction of the current costs is brilliantly disruptive.” The successful transaction will surely give credence to the potential of blockchain in clearing and settling trades.
The Instagram bank branch: In an unconventional branding and marketing exercise, the Singaporean subsidiary of Malaysian bank CIMB has launched a new social media campaign to promote its offerings. Dubbed The Small Bank Theory, the bank has created an “Instagram branch” in the hopes of familiarizing potential clients with its products and services and to replicate, to the extent possible, the actual experience of visiting a physical branch.
Please contact me to discuss these and any other related topics.
Abraham A. Tachjian
[linkedinbadge URL=”https://www.linkedin.com/in/abrahamtachjian” connections=”off” mode=”icon” liname=”Abraham A. Tachjian”] is Legal Counsel at Standard Chartered Bank – FinTech/Blockchain Adviser and Speaker
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