#Challenger #banks start #from a pretty grim position – most of them don’t have any customers. So how are they #scaling? Well, whatever they do, it’s important they consider the word scale from both a backend operational perspective and a frontend on-boarding perspective. My view is the most brilliant challengerRead More
Bank Innovation
#BlockShow #Europe #2017 will take place in Alte Kongresshalle, Munich. The #conference is going to become the #major international event for showcasing established #Blockchain solutions.
Blockchain is hailed as one of the most revolutionary technologies of the past few decades. In this year, the industry has experienced an intense influx of investment – the volume of funds invested in Blockchain startups has exceeded $ 1B, and two largest VC deals of this year were also Blockchain-related.
In addition to that, the #technology has managed to receive public recognition from such global giants as Visa, PayPal and Mastercard. This state of affairs has formed a favorable environment for startups, and a real boom followed as a result: the number of young Blockchain companies has grown fourfold over the past year.
30% Discount for Fintechnews reader with Code FNSMUNICH
Becoming more and more accepted worldwide, “the biggest innovation after the Internet itself” is receiving a growing number of various practical implementations and taking over the markets &8211; both within and outside the financial sector. That is why the main goal of BlockShow Europe 2017 is to become the major international platform for showcasing the most disruptive Blockchain use cases in all their multiplicity.
However, none of the Blockchain projects exists in a vacuum &8211; there is a wide range of various external factors considerably influencing the whole industry, and this cannot be ignored. That is why BlockShow Europe 2017 will be opened by a talk about the current state of Blockchain, and the further conference programme will include talks and panel discussions on such topics as “Overcoming the challenges of Blockchain implementation”, “Blockchain Ecosystem from #Banks & Enterprises perspective”, “Security on Blockchain” and other. As for the direct objective of BlockShow Europe 2017, a large-scale comprehensive presentation of the existing revolutionary Blockchain projects will be set out in two parts.
In addition, the conference will provide startups with opportunity to compete with each other for the title of The Best Blockchain Startup 2017 in a competition which will be hosted by Blockchain Angels.
Among the conference speakers will be prominent experts and practitioners of the global Blockchain industry, such as Ned Scott (CEO & Co-founder at Steemit), Adam Stradling (#Bitcoin & Blockchain pioneer, co-founder of Bitcoin.com), Ismail Malik (CEO Blockchain Lab, founder of SmartLedger), Bernd Lapp (Advisor at Ethereum Foundation), Jamie Burke (Founder of Blockchain Angels), Matej Michalko (Founder & CEO at DECENT), and Bruce Pon (CEO & Co-Founder at BigchainDB). This non-exhaustive list is about to expand &8211; so watch for updates!
BlockShow Europe 2017 is organized by the popular Bitcoin & Blockchain media outlet CoinTelegraph in partnership with Zurich-based Blockchain platform Nexussquared and Blockchain payment processor BlockPay. The upcoming event won’t be the first one for CoinTelegraph &8211; in August this year, the company has already held Helsinki Blockchain Conference 2016, the first high-profile Blockchain-dedicated event in Nordic, which attracted massive attention from the regional Blockchain community.
Starting this week, the registration for BlockShow Europe 2017 is officially #open. Get to know more at the official BlockShow Europe website! Please note that there is a unique offer available exclusively for #Fintech News Switzerland community &8211; use a discount code FNSMUNICH to get 30% off all tickets when registering on the BlockShow Europe Eventbrite page.
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This past quarter saw the lowest number of #enforcement #actions #against financial institutions since 2013 (though there were some prominent cases in the media spotlight that may have led observers to think otherwise.) New Haven, Conn.-based compliance management company Continuity noted that despite the decrease in enforcement actions — 99 vs. 150 inRead More
Bank Innovation
#Switzerland has all the ingredients to shape the future of #FinTech. At the same time, regulatory overhang and the powerful traditional financial sector might slow down innovation.
In “FinTech #Made in Switzerland”, Manuel Stagars documents the FinTech ecosystem in Switzerland in conversations with startup founders, innovators in the financial sector, #banks, regulators, politicians, financial experts, and opinion leaders. The #film is a portrait of this emerging sector, its protagonists and their motivations to participate in the evolution of finance.
At the same time, it shall create a dialogue between the different actors in the financial sector in Switzerland around the topic of innovation in banking and the future of Switzerland as a financial center. The project is a collaboration between the filmmaker and the interviewees, where all can voice their opinions truthfully and objectively on a single platform.
FinTech Made in Switzerland is now #available in #English. Watch the video below!
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Debt happens, guys–that’s the message from #Goldman #Sachs&8217;s new #consumer advertisement for its much-talked about new consumer lending arm, #Marcus. It&8217;s also Goldman&8217;s #first advertising campaign… ever. Marcus&8217;s goal, like all consumer lending arms, is to provide consumer loans. However, most consumer lending arms are not backed by #banks thatRead More
Bank Innovation
Debt happens, guys–that’s the message from #Goldman #Sachs&8217;s new #consumer advertisement for its much-talked about new consumer lending arm, #Marcus. It&8217;s also Goldman&8217;s #first advertising campaign… ever. Marcus&8217;s goal, like all consumer lending arms, is to provide consumer loans. However, most consumer lending arms are not backed by #banks thatRead More
Bank Innovation
Even though the #digital age finds its root in the 1950s with the rise of computers, we had to wait until the mid 1990s and the rise of the internet to witness a first wave of tectonic shifts and the creation of what many defined as the New Economy. Innovation, characterized by the application of #technology to productive means and resulting in driving down costs relentlessly over time, was hard at work. This first wave did not escape the rule and we saw the cost of “discovery” plummeting. By discovery I mean the ability to find any type of data. Google benefitted from this trend and built an empire based on hyper efficient search. We also benefitted from another wave that saw the cost of &8220;communication&8221; dropping and the rise of various forms of connecting between humans. Facebook can be viewed at the intersection of discovery and human connections. Apple benefited from the connection/communication wave. Finally, Amazon mined the decreasing cost of discovery in the e-commerce field.
More recently, we have benefitted from the wave of &8220;personalization&8221; where a myriad of applications have unbundled past needs, uncovered needs we did not know we had, or disintermediated needs that were poorly serviced. Again, this wave resulted in the cost of personalization plummeting.
Crucially whenever costs plummet, demand grows in both expected and unexpected ways. The New Economy and our demand have certainly exploded.
It is interesting to observe that the #financial #services industry did not immediately espouse these #waves, nor did it find itself materially impacted by them, or at least it appears so to the naked eye. For example, #banks were not particularly diligent in their internet banking efforts at that time. Even though new technology companies won the early stages of the New Economy and even though the financial services industry did not register any &8220;win&8221;, we also can categorically state that banks or insurance companies did not lose. They still command, to this date, market share and dominance in all five sectors – lending, capital markets, insurance, asset management, payments &8211; in every geography.
The #fintech movement, in its first two phases, the &8220;direct to consumer&8221; phase and, once that first phase failed, the &8220;partnership pivot&8221; phase were essentially driven by the necessity to play catch and for the financial services industry to capture the lower costs of &8220;discovery&8221; and of &8220;connecting&8221; with users. Much needs to be done as most participants have not completed their digital journey. Even though startups and incumbents alike are still mostly focused on digitizing front end processes &8211; on-boarding, distribution, sales, underwriting amongst others &8211; we have now seen a broadening of the digitization movement towards middle and back office processes.
Still this has not resulted yet in a dramatic lowering of costs in financial services and an increase in demand. To be clear, the cost of lending will never &8220;decrease&8221; below an incompressible cost of capital. The cost of delivering a loan should decrease, and in other sectors, the cost of of a payment (be it domestic, p2p, mobile, cross border, b2b) has yet to decrease across the board.
Meanwhile, the technology world is busy reinventing itself and as the waves of discovery, communication, connection and personalization are flattening, new waves are engulfing us. I will focus on two technologies which I believe are the leading candidates to usher the next wave &8211; again characterized by reduced costs and demand explosion: Artificial Intelligence and AR/VR
Artificial Intelligence holds the promise of bringing our decision making to the next level. Any of the AI vectors &8211; machine learning, deep learning, nlp/nlg/nlu to name a few &8211; will drive down the cost of &8220;decisioning&8221;. By decisioning I mean the ability to arrive at optimal decisions via superior analysis of mountains of disparate data and in the absence of clarity. Most technology companies are locked in an epic arms race hiring the right talent, developing their own AI tech stacks and applying their technology breakthroughs to their fast evolving business models. The next wave may indeed see the rise of cognitive enterprises and cognitively enhanced individuals.
AR/VR holds the promise bringing our interaction with the world to the next level. I understand there are differences between AR and VR and for the purpose of this post will assume them away. AR/VR will drive down the cost of &8220;immersive discovery&8221;. By immersive discovery I mean discovery in action, using the full capabilities of our bodies in movement, in our three dimensional world; as opposed to the discovery we have done to date from behind a laptop or a smartphone. Given the explosion of supply and demand ushered by the plummeting cost of &8220;discovery&8221;, I leave you to imagine what this wave may be able to bring about.
Although it seems AI holds a slight edge over AR/VR currently based on maturity and traction, I do not definitively know which wave will be dominant first at scale, either in the enterprise or retail world. Suffice it to say that either wave will pose unique challenges to the financial services industry. Challenges inherent to customizing, designing, implementing and integrating each new technology paradigm. Challenges inherent in making use of and making sense of these new technologies with the right human skills. Finally, competitive challenges in the face of what we can only assume will be renewed pressure from non financial services enterprises ever more willing to capture poorly defended margins in lending or payments.
Although threats from fintech startups or tech companies have not been successful in eroding meaningful market share yet, many industry analysts believe that up to half and sometimes more of incumbents’ revenues are under threat. I believe this analysis does not fully include the implications of the lower cost of &8220;decisioning&8221; or &8220;immersive discovery&8221;. As such financial institutions may be under even more threat than we realize.
Be that as it may, a reasonable and well educated practitioner will healthily push back and raise two objections to the demise of financial institutions at the hand of the potential dislocating effects of the above digital waves. One is articulated around regulation, the other around core systems.
Regulation is tedious, complicated and costly and serves as a defensive moat. In some instances it can be a drag as financial incumbents cannot act as flexibly or nimbly as non-regulated entities. Still, regulation acts as an effective digital fire retardant. Regtech not only holds the promise of lowering the cost of compliance, it also holds the promise of lowering the cost of developing and disseminating regulation to the market. Should regtech lower the cost of compliance to such an extent that fintech startups become more competitive or non-regulated tech companies become less averse to regulation, then regulated financial institutions will come out weakened, all else being constant. I am not predicting this will happen, yet the likelihood should not be discounted altogether
Core systems in the market today are cumbersome, expensive to build, expensive to maintain. Even though financial institutions &8211; banks or insurers alike &8211; dislike their vendors with the intensity of a thousand suns due to the woeful inability current core systems exhibit operating in a digital world, the fact is not everyone can afford core systems. Imagine a world where the cost of building, provisioning or deploying a core system would plummet and you are one step closer to another incumbent competitive advantage vanishing.
Although the future of regtech and core systems is more difficult to predict than a presidential election, the trends clearly point towards cost and complexity reduction and even though the full effects of either the lower cost of &8220;immersed discovery&8221; or &8220;decisioning&8221; are still be be felt, they cannot be avoided. These new digital waves hold the potential to drastically lower the cost and complexity of &8220;building a bank&8221; or &8220;building an insurance company&8221;. Obviously, regulatory capital, liquidity and solvency issues will still hold, but picture a world where building a core stack will be as easy as building a web site and where the cost will be a fraction of what it is now &8211; to the dismay of the entire value chain of third parties currently feasting on any implementation, from consultants to systems integrators &8211; and you can start grasp the monumental changes afoot. Digital waves keep coming and most financial institutions are still standing. How will they respond to the coming waves is an important question to ask. How will incumbent service providers cope is equally intriguing. How fintech startups exploit gaps will be fascinating to witness.
ps: no #blockchain was harmed while writing this post.
#Robo-advisors are causing an uproar and the #wealth management industry needs to #adapt to this new #environment, says Morgan Stanley, one of the largest wealth #managers on Wall Street.
According to Michael Cyprys, an equity analyst at the firm: “The rising threat from robo-advice leads financial advisor’s role to evolve: greater focus on financial planning, embracing digital tools such as robos as a means to become more efficient; pairing human and machine.”
&8220;Digital capabilities become increasingly more important as Millennials are more digital savvy than previous generations which is transforming the investment and wealth management landscape; innovative new entrants such as Robos could take share,&8221; Cyprys wrote in a note earlier this year.
A survey conducted by Morgan Stanley found that 58% of Millennials and 50% of Generation X are interested in using robo-advisors.
Robo-advisors, or automated digital wealth management solutions, have attracted about US$ 50 billion in assets, according to Aite Group LLC. These solutions charge fewer fees, are more open to smaller investors, and are more convenient, offering mobile access and sleek, easy to use apps and websites.
Although the figure remains relatively small compared to the US$ 130 trillion in assets currently under management globally, robo-advisors &8220;have a long runway for growth,&8221; Cyprys said.
Addressing the emerging trend, many firms and #banks have created hybrid models such as Charles Schwab and Vanguard, both of which have developed services that allow their advisors to make significant use of algorithms and robo-advisors.
RBC has teamed up with BlackRock&8217;s FutureAdvisor, Wells Fargo is planning to launch its own robo-advisor in 2017, and UBS&8217;s American wealth management division has invested in robo-advisor SigFig earlier this year.
Going further, Royal Bank of Scotland announced in March that it would replace 220 investment staff with robo-advisors. The bank said that in the future, only clients with £250,000 or more to invest will get face-to-face advice.
Despite the growing appetence for robo-advisors, industry observers and experts believe that these solutions will not necessarily displace traditional wealth managers.
&8220;This is not a human vs. robot competition where one will win,&8221; Jon Stein, CEO of Betterment, an American automated investing service, told Bloomberg.
&8220;There will be customers who want an online driven solution and there will be customers who want the in person relationship, but even those people will expect better #technology as part of the relationship.&8221;
Echoing Stein&8217;s statements, Citi analysts wrote in a report released earlier this year:
&8220;We see the advent of robo-advice as an example of automation improving the productivity of traditional investment advisers, and not a situation where there is significant risk of job substitution. Higher net worth or more sophisticated investors will, in our view, always demand face-to-face advice.&8221;
Holger Spielberg, head of digital innovation at Credit Suisse, shares this sentiment. In an interview earlier this year, Spielberg argued that automated investment services bring many benefits and opportunities to both customers and the banking sector.
&8220;At the end of the day, we #need to look not at what it means for banking, but for the user – the recipient of financial services,&8221; he said. &8220;We need to put them at the forefront.&8221;
Technological disruption is inevitable, Spielberg said. However, he also believes that some aspects of the traditional wealth management services will remain relevant, notably human engagement.
&8220;The human element is a crucial aspect of our strategy,&8221; he said. &8220;What isn&8217;t changing, even with all the changes, is the intent in receiving value.&8221;
Rather than creating a faceless and unresponsive automation, robo-advisors may very well add value and efficiency to private wealth management.
In July, former Credit Suisse bankers Bastian Lossen, Giles Keating and Felix Roescheisen announced plans to launch a new robo-advisor service called Werthstein, according to Finews.
Werthstein has created a new approach in digital wealth management. The solution combines a multimedia platform with portfolio management. The platform will provide wealth management services for free. Customers will only pay a subscription fee for video and multimedia content provided through the platform. These will mainly consist of video clips of bankers and experts sharing investment ideas.
Other robo-advisor services in Switzerland include True Wealth, Glarner KB, Swissquote, and InvestGlass.
Featured image: Robot hand by Ociacia via Shutterstock.com.
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SETL, Deloitte and Metro Bank completed a series of firsts this week in London. SETL provided a contactless smartcard enabled #blockchain allowing digitised #payments, Deloitte exercised its blockchain ID system known as Smart Identity and Metro Bank hosted a connected client account. In an initial test, over 100 users were issued with contactless smartcards and used them to make purchases from merchants equipped with contactless terminals. Consumers and merchant balances were updated live-time with all balances held at Metro Bank.
The successful implementation of a blockchain smartcard retail payment system offers the possibility of significantly reducing current high costs for processing retail transactions. In addition it opens the door to competition in merchant servicing to challenger #banks, which are all but excluded from this activity by the incumbent clearing banks. The service which is provided by SETL Payments Ltd, subject to appropriate regulatory approval, could launch as early as 2017.
Smart Identity blockchain
In on-boarding participants, Deloitte demonstrated its Smart Identity blockchain solution communicating with SETL’s payment blockchain. Customers taking part created their identity records on the Deloitte blockchain and had their key details certified by Deloitte. These certified details were then asserted to the SETL Blockchain to set up user credentials. This is believed to be the first commercial inter-blockchain application demonstrating how portable, cryptographically secured identity might be applied in a real-world #consumer environment.
From Pixabay
SETL’s capacity to process billions of transactions a day with burst speeds in the tens of thousands per second means that it could easily keep up with the volumes processed by the large card networks who process around 2000 to 3000 transactions per second on average with burst rates of around 14,000 transactions per second. Instant settlement for the retailer and the possibility of charges being only a fraction of the credit and debit card schemes could prove to be powerful incentives for its adoption.
Furthermore, the use of point to point encryption significantly reduces the possibility of kind of wholesale data leakage that has impacted the legacy consumer payment infrastructure over the last decades.
David Myers, Partner at Deloitte added: “To use the Deloitte Identity solution in this way is particularly relevant as it underlines the importance, in the new distributed ledger world of identity management. We are pleased that SETL together with Metro Bank have been able to demonstrate both speed, capacity and identity in the challenging retail payments arena.”
Craig Donaldson
Craig Donaldson, CEO at Metro Bank commented: “We’re always looking for new ways to improve our customers’ banking experience, and payments is an often overlooked but critical part of a customer’s journey. Retail payments have for too long been dominated by a few players to the detriment of customers. Given all the potential that blockchain has to offer, we hope that the success of today’s test will play a key role in moving us a step closer to providing a more efficient and flexible service for customers.”
Peter Randall
Peter Randall, CEO of SETL noted: “We are extremely pleased to be working with Deloitte and Metro Bank on this ground-breaking project. The team are leaders in the field of transaction implementation and retail banking service and our common focus on high speed, capacity and resiliency makes us natural partners. This is not a proof-of-concept or a prototype; it will be a revenue generating implementation of distributed ledger #technology.”
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CyberRein, a cyber-security company has announced the launch of Assayer, a #next #generation cyber-fraud software. Targeted at #banks, Assayer uniquely stops criminals deceiving a bank’s existing defences.
Assayer is set to transform cyber-fraud #prevention. Banks existing defences prevent impersonation allowing criminals time to learn how to deceive and plan an attack. Assayer takes away this time, meaning criminals no-longer have months, but milliseconds to plan their attacks. This is ground-breaking and is due to Assayer’s multi-patented Transaction Cloaking #technology that constantly mutates and creates impossible puzzles that criminals must solve to be able to deceive defences.
Assayer’s mutating deception shields are a step-change for banks because they never protect transactions the same way twice. Therefore, anything criminals do learn instantly becomes useless a split-second later, including how to successfully use stolen credentials and biometrics – or even how to deceive Assayer itself.
Sat Birdi
“Banks aren’t losing the cyber-fraud battle because their defences are weak, but because criminals have too long to learn how to defeat them, which is why banking has a $ 100B cyber-fraud problem each year, despite using best-in-class defences. Assayer’s mutating defences eliminate this fundamental vulnerability of time, so criminals can’t learn how to deceive a bank’s defences in the first place,” said Sat Birdi, CEO of CyberRein.
“Assayer allows any bank to finally stop cyber-fraud, not because it prevents it through detection, but because its mutating deception shields never protect transactions the same way twice and cloak a bank and its customers in a way that criminals can’t solve. Assayer’s defence technology is very powerful, because it now allows banks to finally prevent the root cause of all cyber-fraud, the knowledge required to succeed &8211; and the implications are profound and far-reaching”.
As well as cloaking the transactions, Assayer does not affect the bank’s current defences and encompasses them into its deception shields, securing all channels and touchpoints against impersonation, the pre-cursor to all successful cyber-fraud. Assayer will protect anything that is placed within its deception shield and instantly means that a bank’s existing cyber-security investments are future-proofed. The bank’s current defences and customers are not aware that they are being protected – there is no interference, downloads and ultimately no successful cyber-fraud.
ASSAYER
Sat continued, “We live in a truly compromised world where criminals are always waiting for the next opportunity to defraud banks and their customers. At CyberRein, we can eliminate that threat and headache for eBanking executives, and make banking online safer for everyone. Consumers are increasingly asking their banks to do more to protect them, and through Assayer, we are giving the #financial community the chance to do exactly that.
The CyberRein team has over 30 years of expertise in cyber-security and enterprise business solutions delivery, making us a very knowledgeable partner to work with. Our research and technology has taken over four years to complete, because we realised that the problem of cyber-fraud prevention needed a whole new approach to bolster banking’s existing defences, and we’re very excited to be leading the way with the development of this new technology.”
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