In October of this year the New #Zealand Government’s Ministry of Business, Innovation & Employment (MBIE) released an issues paper outlining the current state of the country’s retail payment systems. The paper is part of a broader conversation about payments, #technology and banking efficiency that many governments are starting toRead More
Bank Innovation
Investors continued to take a much more cautious approach to #fintech investments this year. #Venture capital (VC)-backed #global fintech deal activity fell for the second consecutive quarter, marking its lowest level since Q2’14, according to the Pulse of Fintech, the quarterly report on global fintech VC trends published jointly by KPMG International and CB Insights.
VC-backed fintech in Q3 2016
VC-backed fintech #funding dropped 17% to US$ 2.4B, while deal activity fell 12% to 178 deals in #Q3’16 compared to the previous quarter. Asia was the only continent to see a fintech funding increase on a quarterly basis in Q3’16, while North America and Europe fintech funding declined. All three continents covered in the report saw fintech deal count drop.
Chia Tek Yew
“Asian investors are seeing the potential of fintech amidst global uncertainty in an environment of moderating growth,” said Chia Tek Yew, Head of Financial Services Advisory, KPMG in Singapore. “As businesses continue to embark on the journey of transformation, interest and investment in Asia’s fintech sector will continue to be strong, particularly in areas like payments #technology, insurance technology and regulatory or risk technology.”
Mr Chia added: “Singapore is a leading fintech hub, being one of the first countries in the world to put in place a regulatory fintech sandbox. There are also plans by the authorities to explore ways to attract more VC funds, which bodes well for the overall funding ecosystem.”
Asia quarterly fintech funding tops US: US$ 1.2B across 35 deals in Q3’16. While the number of VC-backed fintech deals dropped to a five-quarter low in Asia, funding increased 50% on a quarter-over-quarter basis to reach US$ 1.2B. Year-to-date results of US$ 4.7B suggest Asia-based fintech investment for 2016 could top last year’s peak investment results of US$ 4.8B. Corporates continue to be highly active in Asia’s fintech investment environment, participating in more than half of all deals to VC-backed fintech startups in Q3’16.
North America sees fintech funding fall below US$ 1B. North America saw both fintech funding and the number of deals fall on a quarter-over-quarter basis, as VC-backed startups raised just US$ 0.9B across 96 deals, a drop of 5% in deals from Q2’16 Funding in Q3’16 to VC-backed fintech companies in North America fell 68% compared to the same quarter last year, which saw US$ 100M+ financings to the likes of Sofi, Avant and Kabbage. #KPMG and the KPMG logo are registered trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity.
Deal Count and Investment by Continent
Europe fintech funding on pace to drop below 2015 levels. Q3’16 saw European fintech deals fall 17% quarter-over-quarter as fintech funding in Europe dropped 43% over the same time period to US$ 233M. Germany outpaced the UK in terms of fintech funding for the second consecutive quarter, with 35% more funding raised by German- based VC-backed fintech companies than those in the UK.
Corporates stay active in fintech. Corporates participated in 30% of global VC-backed fintech deals for the second consecutive quarter in Q3’16, driving a significant amount of fintech deals activity globally. Citigroup, Banco Santander and Goldman Sachs have made over 20+ fintech investments in total over the past five quarters, while a host of insurers have launched corporate venture arms.
Other key highlights from the Pulse of Fintech:
The Pulse of Fintech
Global fintech mega-rounds fell to a new low in Q3’16. Asia saw US$ 50M+ fintech rounds stay level for the fourth straight quarter, while Europe has not registered a single US$ 50M+ round to a VC-backed fintech company so far in 2016.
The median late-stage deal size in fintech globally fell to US$ 23M in Q3’16. This is significantly smaller than the same quarter last year, when median late-stage fintech deal size hit US$ 50.2M globally.
Total year-to-date funding to VC-backed InsurTech companies reached US$ 1.36B at the end of Q3’16. InsurTech-focused VC-backed deal activity topped 20 deals during three of the past five quarters.
Next-gen payments has attracted US$ 1.2B+ in 2016 VC-backed funding (year-to-date). The top 20 deals, including Affirm, Mobikwik and One97, raked in 67% of the total funding to payments technology companies in the first three quarters.
Anand Sanwal
Anand Sanwal, CEO of CB Insights, adds: “While we continue to see significant investment into fintech companies globally, the euphoria for mega-deals that we saw into the latter half of 2015 has waned. Total investments to key areas like marketplace lending and #blockchain technology have both seen #declines heading into the tail-end of 2016.”
The post Global Venture Capital-backed Fintech Funding Declines In Q3’16: KPMG And CB Insights appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
The insurance sector has entered a phase of profound transformation. Numerous #Insurtech startups—around 1,000 according to Venture Scanner map—have popped up to challenge the traditional model by generating more than 16 billion dollars in the last year from insurance companies.
I believe that we will see a completely changed insurance sector in the medium term. But I consider it a joke for an industry conference to show a picture of a newborn and sell it as the last intermediary or the last client to have purchased an insurance policy. I’m convinced that insurance companies will still be relevant in the future, or will become even more relevant than they are now, but these companies will have to be insurtechs, or players who use #technology as the main enablers for reaching their own strategic objectives.
The reach of this #digital transformation goes way beyond the elimination of “the middle man” and interpretations from a distribution point of view. The direct digital channel dominates very few markets and deals only with compulsory insurance. Whereas in the vast majority of markets, a multichannel oriented customer continues—with variations from country to country—to choose at least at some point of the customer journey to interact with an intermediary. The amplitude of the digital transformation happening in the insurance industry is widespread and encompasses all of the phases of the insurance value chain, from underwriting to claims.
Any insurance will be InsurTech
Every insurance sector player—whether it’s a reinsurer, a carrier or an intermediary—ought to pose this question: How should the insurance value chain be reshaped by using the new technologies at hand? There are numerous relevant technologies that come to mind, including: the cloud, the Internet of Things (IoT), big data and advanced analytics, quantum computing, artificial intelligence, autonomous agents, drones, #blockchain, virtual reality, self-driving cars.
In order to take full advantage of these technologies, there has to be a structured approach that begins with identifying use cases that can have an actual contribution to reaching strategic business goals, then takes these use cases and applies them in such a way to maximize the effects inside the insurance value chain of each player. Finally, it should look at the software/hardware selection or the “make vs. buy” choices. The essential idea is that there is no such thing as “one size fits all.” Each player needs to create customized use cases based on their individual strategy and characteristics.
To date there are several types of approaches to mapping insurtech initiatives. I have developed my own classification framework based on six macro areas (Awareness, Choice, Purchase, Usage, IoT and peer-to-peer (P2P)). Insurance IoT, also known as connected insurance, represents one of the most relevant and mature insurtech trends.
Connected Insurance represents a new paradigm for the insurance business, an approach that fits with the mainstream Gen C, where “C” means connectivity. This novel insurance approach is based on the use of sensors that collect and send data related to the status of an insured risk and on data usage along the insurance value chain. During the first edition of the Connected Insurance Observatory since January 2016, participants had the opportunity to learn what the results in the auto sector are and about some of the first uses of this approach in the other business lines.
Connected insurance: the insurance policy for the Gen C
Auto telematics represents the most mature insurtech use case, as it has already passed the test and experimentation phase within the innovation unit. It is currently being used an instrument for daily work within motor insurance business units. In this domain, Italy is an international best practice example: Here you can find at the end of 2015 half of the 10 million connected cars in the world have a telematics insurance policy. According to the SSI’s survey for the Connected Insurance Observatory, more than 70% of Italians show a positive attitude toward motor telematics insurance solutions. According to the Istituto per la Vigilanza sulle Assicurazioni (IVASS), about 26 different insurance companies present in Italy are selling the product, with a 16% penetration rate out of all privately owned insured automobiles in the second quarter of 2016. Based on information presented by the Connected Insurance Observatory — a think-tank I created in partnership with Ania that brings together more than 30 European insurer and re-insurer groups — the Italian market will surpass 6 million telematics policies by the end of the year.
Based on this data, we can identified three main benefits connected insurance provides to the insurance sector:
The insurance companies that are part of the Observatory are adopting this new connected insurance paradigm for other insurance personal lines. The sum of insurance approaches based on IoT represents an extraordinary opportunity for getting the insurance sector to connect with its clients and their risks. The insurers can gradually assume a new and proactive role when dealing with their clients—from liquidation to prevention.
It’s possible to envision an adoption track of this innovation by the other business lines that are very similar to that of auto telematics, which would include:
After having passed through all the previous steps in a period spanning almost 15 years, the Italian auto telematics market is currently entering this growth phase. The telematics experience teaches us three key lessons regarding the insurance sector:
[linkedinbadge URL=”https://www.linkedin.com/in/matteocarbone” connections=”off” mode=”icon” liname=”#Matteo Carbone“] is Principal at Bain & Company
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.”
The post SETL, Deloitte and Metro Bank Put Sterling Onto The Blockchain For Consumer Payments appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
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.”
The post The Next Generation of Financial Cyber-Fraud Prevention is Unveiled appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
The world has seen unprecedented disruption from #technology in many sectors, as major trends such as Cloud Computing, Big Data and Internet of Things converge to what some say is the fourth industrial revolution. Now this trend is reaching #asset management.
Our predictions for asset management in this new world are:
(1) Large mergers in the highly fragmented fund industry driven by a trend to lower fees and therefore a reach for scale.
(2) Smaller industry players who really aim to understand their customers and implement ‘ease of use’ for the clients have the potential to jump ahead in this game.
The Finance sector, in particular the asset management industry, has broadly been slow to adapt this technological change. One reason for this is that the sector is quite conservative but it is also in our view due to financial regulation actually protecting the incumbents.
However, we have seen technology making inroads into asset management. Let us list three examples:
a.) Exchange Traded Funds (or ETFs) would have been not possible without fast computer technology to easily replicate indices of all types.
b.) High Frequency Trading obviously uses improvements in communication speeds thought impossible a decade ago, opening an area for new sources of returns.
c.) The Internet has triggered transparency in the sector, on fees, on performance, on manager changes et al. We are now able to ‘prove’ that stock picking is not adding value.
In our view, the industry is just about to see the full impact of technological change. Despite rising markets over the last couple of years, fees already came under pressure. This likely has been only the early inning as they say in baseball, and we may see even zero fee funds being offered. Commoditized offerings simply cannot be differentiated by definition and the price approaches the cost.
According to Morningstar 70 % of all net flows in equities went into passive products in 2015, hence this trend is affecting the whole industry. Passive funds have typically lower fees than actively managed funds and reached already a 40 % market share in the US fund market for equities.
Where is threat, there is also opportunity for agile players. The industry is mostly still not using the latest technology, has not cut all the processes into modules and automatized them as the manufacturing sector did many, many years ago.
Here, new technologies such as #Blockchain could be helpful. While the concept may be close to its peak in terms of the Gartner hype cycle, we see a lot of areas where the technology can be applied. Isn’t it an anachronism that we can deliver milk in one hour but shares settle three days later?
We do not think so as those companies have other, easier targets first. Finance is highly regulated and complex, and you need domain expertise to be successful. However, the asset management industry could profit from implementing the customer centric obsession tech companies demonstrate. Where is the Amazon type recommendation engine for financial products?
Some think that Uberization stands for the currently large tech companies replacing #banks and asset managers. Yes, firms such as Alibaba have demonstrated their ability to raise $ 100 bn quickly by using their platform. Uber stands though for the ‘gig’ economy, for a highly efficient, mostly outsourced operation that uses the latest technology and increases the efficiency of underutilized assets. Netflix or Apple demonstrated what ease of use means, Tesla shows that your product feels fresher if you car comes with a regular software update. Hence, the Uber Moment of Asset Management will create an avalanche of new, easy to handle tools, and new players who are betting on this technology are likely to gain share.
They did not believe it in the taxi and hotel industry before it was too late. Be warned it may happen also in asset management!
There are many more themes we could address here but leave them for a later blog post (please visit http://www.hcp.ch for future updates). For the readers in Switzerland, please feel free to attend my presentation at the CFA events in Zurich and Geneva this week.
Feedback is welcome!
[linkedinbadge URL=”https://www.linkedin.com/in/bolko-hohaus-5406219″ connections=”off” mode=”icon” liname=”Bolko Hohaus”] is Founder & CEO at HCP Hohaus AdvisoryFounder HCP Hohaus Advisory
HCP Hohaus Advisory is a company based in Switzerland focussing on state of the art, innovative asset management solutions.
We know the next POTUS but we do not necessarily know what his policies will be at a granular level, although we know some of his pronouncements at a high and vague level. I will refrain from passing judgement on some of Trump’s promises, how he managed his campaign, some of his specific messages and the various forces that helped him get elected, such is not my purpose with this post.
We know, for example, that part of Trump&8217;s platform is to create more US based jobs, which he intends to do partly via tax cuts, partly via the renegotiation of trade deals and potentially erecting trade tariffs, partly via smart infrastructure spending and partly via deregulation.
Without going into budgetary and economics details, a combination of tax cuts and increased infrastructure spending sure looks to me like a recipe for larger federal deficits, i.e. more government borrowing and the potential for inflation. Indeed, financial markets expect just that as the yield curve started steepening with long term rates spiking up immediately after the election.
Bank stocks also rose after the election, which is great news for bank investors as well as bankers. I believe this can be explained by two factors: the first being renewed expected inflation which I just explained and the second being potential deregulation. The former seems a foregone conclusion, the latter needs further examination.
Trump is no fan of regulation and has stated it on many occasions. We should expect many federal initiatives to be toned down, de-fanged or outright destroyed, based on how POTUS and Congress will collaborate. Think of the EPA, the Clean Air Act, Obamacare as being in the immediate line of fire. Trump has also indicated he is no fan of financial regulation, although his pronouncements have been less clear, and we have heard pundit chatter focused on repealing Dodd Frank in whole or in part – the Volcker rule comes to mind &8211; or even bringing back Glass Steagall. He also has stated he is no fan of the current Fed Chair. Further, some of Trump&8217;s supporters have also publicly criticized the recent DOL fiduciary rule intended for the asset management industry or their profound dislike for the CFPB. I am sure I am missing other financial regulatory flash points. At the same time, Trump needs to fill many positions for his incoming administration and the rumor mill is already hard at work, with industry insiders and/or lobbyists names being circulated to help with the transition effort or as outright candidates for prominent positions.
I venture that the complex system that is Trump&8217;s vision and gut decisions on the one hand, his transition team on the other hand, and the influences both will be subjected to will flesh out exactly how populist the Trump administration will be or how friendly to the private sector, financial services firms included. Let&8217;s take one example: the CFPB is one of the few entities that has battled #banks&8217; wrongdoings. We also know that banks are still deeply unpopular due to their role in the great recession. Will a Trump administration rein in the CFPB and in so doing risk alienating part of their electoral base which is surely not pro-banks. As far as this example is concerned I sense a tension between Trump and his inner circle and a Republican Congress and Wall Street. In other words, how will “drain the swamp” will be interpreted and applied. The same lens can be applied to all other financial regulations which are deeply unpopular with the Republican establishment but may be interpreted as rightful banker punishment by the electorate.
Be that as it may and given that the Trump administration will be busy with dismantling other regulations and that the DOJ may be focused on other targets than the financial services industry &8211; based on Trump&8217;s goals &8211; it is safe to say that in the most benign case, financial regulation will not increase and enforcement will move into neutral, essentially hitting the pause button, or in the most extreme case, deregulation will be actively sought. In either case, financial institutions will breathe a sigh of relief &8211; small win vs major win &8211; and will enjoy the fruits of renewed inflation expectations. Indeed, the more reliable story here is that of rising interest rates, obviously far out on the yield curve &8211; this has already happened and will continue to happen I believe &8211; and at some point also with short term maturities when the Fed will stop signaling and start raising. Even more so if the Fed Chair is replaced?
Rising interest rates is good for banks bottom lines. A fatter net interest income does wonders to the income statement and return on equity. The important question here is whether renewed profitability will halt further digitization of the industry or further enable it? Will #fintech suffer or go from strength to strength? Will banks, which have resisted change up to only recently, use the excuse of increased profits to stop investing or collaborating in/with startups, stop rolling out ambitious innovation plans and return to a conservative stance? I suspect that in the aggregate the answer may be yes, the more so if return to profitability is swift and material. I also expect leaders to accelerate their plans to reinvent themselves, knowing that secular trends are too important to ignore and that tech giants are the real threat. Thusly a relative retrenching of US fintech related investments may be expected &8211; arguably a continuation from the recent retrenchment &8211; especially in the direct to consumer space. I also expect the third fintech wave to accelerate: deeper digitization via the adoption of enabling technologies sold to incumbents by new b2b startups.
This aggregate vision gives us only partial clarity though. What will be the impact within the fintech sector?
Banks have a natural competitive advantage against alternative lenders or marketplace lenders. In a low interest rate environment this competitive advantage was blunted. In a rising interest rate environment this competitive advantage will be used with ruthless efficiency. Thusly, I expect fintech startups in the lending space to come under pressure &8211; natural outcomes would be further bank collaboration, mergers between alt lenders, acquisitions by incumbents and the inevitable bankruptcies of the weaker platforms. Should regulatory pressure on lending practices abate, this will further strengthen banks. Either way I expect banks to increase their domestic lending activities.
From a capital markets perspective &8211; and to some extent in asset management too &8211; less enforcement actions coupled with potential outright repeal of complex legislation or regulation and the introduction of simpler frameworks will reduce compliance pressure as well as regulatory dislocation. From that perspective some regtech business models may end up having a hard time finding traction. What is clear though is that any regtech solution focused on fighting fraud, illegal activities, tightening AML/KYC and identity verification as well as strengthening security and cybersecurity will remain strong given the broad consensus towards doing more rather than less in that space.
Based on my current understanding, I think the net effect of Trump administration will be neutral for the insurance sector and insurtech &8211; not including health care obviously. I do not have enough data points though so I might be completely off the mark.
We also must deal with the payments sector. Considering an extreme deregulation scenario, might we see further changes targeted at interchange fees, on the credit card side, or more particularly on the debit card side? One cannot discount this entirely &8211; again think of the interaction between a Republican Congress and President Trump. Needless to say that payments solutions that address infrastructure spending, directly or indirectly, will be potential winners. Incumbent cross border solutions that process or finance trade may be hit by a populist Trump bent on renegotiating trade deals and starting a tariffs war &8211; trade finance or supply chain finance platforms come to mind given they cater to onshore/offshore manufacturing/trade value chains.
Switching back to higher level concerns, we should also keep in mind the potential for a global recession. Should the actions and choices of the Trump administration hurt the US economy and via domino effects trigger a deep recession, the financial services industry will be the first to be hurt: weak $ , lower growth, less payments to process, less investments to make, less lending, increased risk. &8220;Mainstream&8221; fintech would definitely suffer if this were to happen. I believe this to be a remote event but one cannot discount it entirely.
Based on the last two points, it is therefore logical to infer that cryptocurrencies, #blockchain solutions and #bitcoin in particular &8211; due to their disintermediated nature &8211; may become even more attractive as alternative modes of payments, stores of value and means to build new exchange rails; whether new policies have a benign negative effect and especially whether we head towards more sever outcomes.
On another note, even though a majority of the tech industry did not support Trump, it is hard to imagine his administration being directly hostile to the #technology sector, fintech included, and in so doing hurt job creation &8211; indirect and unintended consequences of supporting &8220;made in USA&8221; and threatening the intricate global supply chains of most tech companies aside. Yet it is far from clear what Trump&8217;s stance is with regards to Silicon Valley and on advanced technologies such as AI, robotics, blockchain, advanced analytics, IoT. Although these have the potential to augment humans, they also have the potential to eliminate them too. How would self driving cars play to his electoral base and his theme of creating mainstream jobs? What about the knowledge economy, the sharing economy, digital natives, digital workers, p2p networks, AI chatbots that would displace bank tellers. All these themes are imbedded in fintech, from payments to helping with lending, to capital allocation, to new financial services.
The above thoughts are focused on US fintech which is somewhat disconnected on the tech side from Europe or Asia. Domestic US payments is a beast in and of itself for example. European or Asian fintech is linked to US fintech via the $ . Should Trump&8217;s impact be a net negative on the $ and reduce confidence in the US economy, I would expect an acceleration towards decoupling away from the $ for international trade, international settlements, international payments. Alternative solutions such as a new basket of currencies, the rise of one to one currency settlements such as Euro-Yuan or in the more extreme case relying on a #cryptocurrency as proxy for a new standard would de facto re-align global financial exchanges in a drastic new way and global fintech business models accordingly.
In summary I see several potential paths:
1) Extreme populism and no material financial deregulation lead to a global recession: fintech startups and financial services incumbents will suffer; crypto currencies and blockchain will get a major boost.
2) Benign populism and some financial deregulation lead to a slight positives and a middle of the road path: some fintech startup models will suffer and financial services incumbents will be stronger, all else being constant.
3) Watered down populism aligned with major financial deregulation lead to strong growth, at least in the short term: financial services incumbents to be the clear winners along with fintech startups tightly aligned with incumbents&8217; needs.
The fact that we are faced with such a divergent array of paths speaks to the unique and quasi-quantum state of Trump as a politician and businessman, exhibiting potentially pragmatic and radical intents simultaneously. I will even go further and state &8211; Nassim Taleb who I respect immensely already made this point &8211; that Trump was the ultimate antifragile candidate and that he may reveal himself to be the ultimate antifragile President. (Antifragility works up to a point, see path 1 above with clear winners and losers.) As such, thinking about fintech investment/operating strategies also need to be antifragile. I have already re-aligned my investment themes accordingly.
Trump&8217;s administration picks as well as the decisions he will make in the first 100 days in office will enlighten us as to which is the most likely.
My recent experience with #FinTech Startup Revolut has shown me that the #banks can still sleep quietly for a while as Fintech Start-ups will in fact not be in measure to disrupt the industry if #they don’t also change the rules of the game…
What went wrong with Revolut?“Revolut is a Global Money App, cutting your hidden banking fees to zero. It allows you to exchange currencies at perfect interbank rates, send money through social networks and spend with a multi-currency card everywhere MasterCard® is accepted. All this is done at the touch of a button, in a beautiful mobile application. Our goal is to completely remove all hidden banking costs.” Source: https://revolut.com/about
So what went wrong with my Revolut account… I used my multi-currency card abroad to pay for goods in Euro. I received a VAT refund in Euro that was to be re-credited to my Revolut account. But today, when I logged into my account, I noticed that the refund had been re-credited in Sterling, with someone taking a hefty spread in the process…
So in simple words, it did not go as planned, the client promise was broken, and the hidden banking costs were suddenly very visible… I decided to query this with the Revolut customer service…
What clients of FinTech Start-ups want is a completely different approach that puts them at the center. They want services that are not only answering their needs, but that are also:
FinTech Start-ups have understood that, or at least, part of it…
They are leveraging new #technology to outgun the banks that are suffering from their archaic systems. The claim is that FinTech Start-ups armed with integrated systems, new algorithms and access to social networks can now analyse client sentiment real time and can offer the right service at the right time, for the right price.
From Pixabay
Banks on the other hand are struggling to make sense of big data. Because it lives on several databases and systems that are hardly integrated, because they did not think of asking clients the right to use this data twenty years ago when they signed them up, and because of plenty other valid reasons, mining through this data is a difficult, near impossible, task.
Clients are attracted to FinTech Start-ups because of the glitter this new lawyer of technology provides. They see the novelty in the approach and they believe something has changed…
Clients love the new simplicity – no more endless paper form to sign, all is done with a click on a fancy app interface and they even work with pictures of you, your ID card or proof of residence taken through your smartphone!
Clients love the increased speed – they can do it here and there, through the internet and 4G mobile connection, wherever they are, no more need to visit a branch in person.
Clients love the convenience – FinTech Start-ups provide the same services as traditional banks, often even better, and at a fraction of the price they normally pay their bank.
From Pixabay
But underneath, unfortunately, it seems nothing has changed… When the acid test comes, when something goes wrong at a FinTech Start-up… then the same old mechanisms that make you hate your bank re-surface:
Claiming that they did not do anything wrong
“Just to inform you that we don’t have any control over the refunds. Refunds are processed automatically after the merchant’s release.”
Putting the fault on the other party in the chain
“It is not our fault as we are not able to choose the currency for the merchant” or “if you were expecting to receive these refunds in Euros, and apparently you have received in GBP is because the merchant released then in this currency.”
Invoking procedures and rules that prevent them doing it the simple way
“However there is a procedure that needs to be followed. Especially when, as in this case, we didn’t have any control and the way to rectify it, is to raise a chargeback.”
Referring client to another department or to third party as the solution lies outside their competence
“I will forward this to the chargeback team.” or “You can contact the merchant and ask for clarification.”
This behaviour will not help FinTech Start-ups win!
Clients are asking for a great customer experience, they are asking for simplicity, speediness and convenience, even when, or especially when, things break. This is exactly where FinTech Start-ups need to make the difference. Playing it #like the banks will not satisfy clients, it will end up putting FinTech Start-ups and banks in the same basket.
First, the FinTech angle should have kicked in immediately:
From Pixabay
The data analysis should have been instantaneous, with artificial intelligence reading the support chat channel and picking up that I was growing more and more upset by the interaction with the customer service representative. This was visible in the language I was using and the speed at which I was typing (and the accompanying typos).
From Pixabay
Social Media listening should have also indicated real-time that I was starting to tweet about my problem and my frustration at the lack of understanding from the customer service representative, and that I was starting to drag influencers in the discussion.
This would have also been supported by a rapid scan to establish my social media strength (number of followers, Klout score, retweets and likes) and the risk of PR damage that could result.
Finally, the CRM system should have spitted out a customer profile showing that over the past 4 months:
I had increased my volume of transactions significantly (so I was on my way to become a “good” client)
that all transactions I had done were in Euros and that there were no transaction in GBP (so there was possibly something abnormal with those two transactions in GBP)
Then, the Start-up angle should have also played a role:
– The customer service representative should have calculated the costs involved to solve the issue quickly and bring immediate satisfaction to the client:
namely by reversing the two transactions in GBP into EUR, at an exchange rate of 1 GBP for 1.1177 EUR – which was 54.78 GBP x 1.1177 = 61.23 EUR, when I was claiming I should have received 64.50 EUR – that means a cost of 2.92 GBP.
&8211; The customer service representative should have then assessed how much effort any other alternative solution would take:
time spent by customer service staff to escalate the client’s request, plus time spent by the compliance team to raise a chargeback request and deal with the third party to fix the issue and to that, add the potential loss of faith in the product by the client, plus any potential damage to the brand resulting from the negative publicity on the social networks.
&8211; Armed with those two assessments, the customer service representative would then decide quickly which solution would be the most satisfactory for the client and the less expensive for the FinTech Start-up to execute and would have executed it.
So, in other words, the customer service representative should have assessed what was my issue with Revolut (i.e. refund process did not work properly), should have assessed the most practical and easiest way for Revolut to address my need (i.e. fix the refund by compensating the difference) and should have asked me how Revolut could still increase my client satisfaction (i.e. reinforce their client promise and turn me into a champion of their brand to drum up more business).
FinTech Start-ups need to go further than just layering a fancy new technology on one of the oldest jobs in the world if they want to win. They need to adopt a client-centric strategy, putting client satisfaction at the core. Because it is the alliance of technology and client-centric approach that will help them beat the banks.
Client-centric champion Amazon would have paid back the 2.92 GBP in a split-second and would have probably issued a compensation voucher to make up for the bad customer experience. This would have reinforced my trust in their brand and would have led me to sing their praises on the social networks, bringing them additional clients attracted by this positive client experience sharing.
FinTech Start-ups need to do the same, before Amazon starts doing FinTech…
This article first appeared on Lionel Guerraz&8217;s Blog
Featured Image: From Pixabay
The post Why FinTech Startups Will Not Win If They Play Like The Banks appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
An #upcoming #blockchain #hackathon organized by EPAM in collaboration with #Swiss Finance + #Technology Association and Validity Labs is looking for innovative solutions to #disrupt the #insurance #industry.
Image credit: Golden Bitcoins by Julia Tsokur via Shutterstock.com
The EPAM 2016 Blockchain Hackathon, taking place on November 18 and 19, 2016 in Zurich, is seeking dynamic teams to take on the challenges set by the three largest insurance companies in Switzerland, namely SwissLife, Zurich and SwissRe.
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You still can apply for it or join as a visitor, hurry up!
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The teams will be judged by representatives from these three companies on the following criteria: originality and innovation, usefulness and practicality, business potential and commercialization to go to market, design and interface, and technical implementation.
Industry experts will assist the teams during the hackathon to provide insights and answer questions about specific industry characteristics.
Like #banks, insurers have been exploring the merits of blockchain technology to disrupt their industry and streamline payments of premium and claims.
According to a Deloitte paper, blockchain technology could support the significant digital transformation underway in the industry because much of this transformation relies on data.
“Smart contracts powered by a blockchain could provide customers and insurers with the means to manage claims in a transparent, responsive and irrefutable manner,” the report states.
&8220;Contracts and claims could be recorded onto a blockchain and validated by the network, ensuring online valid claims are paid. […] Smart contracts would also enforce the claims – for instance, triggering payments automatically when certain conditions are met (and validated).&8221;
Blockchain technology could allow the industry as a whole to streamline its processing and offer a better user experience for customers. Storing claims and customer information on a blockchain would also cut down fraudulent activity.
Early blockchain developments have tended to focus on optimizing current ways of working within organizations. For instance, London-based #bitcoin startup Everledger uses the blockchain to create a permanent ledger for diamond certification and related transaction history. The ledger lets insurers and potential buyers check the history of any individual stone, helping insurers prevent, detect and counter fraud.
Despite the enormous potential, the biggest challenges to industry-wide implementation are facilitating collaboration between market participants and technology leaders, succeeding in the operational transformation, and shaping a stimulating regulatory environment, according to McKinsey and Company.
EPAM Systems is a leading global product development and platform engineering services company and one of Forbes’ 25 Fastest Growing Public Tech Companies.
Validity Labs, a startup created by several blockchain technology experts in Zurich, aims at bridging the shortage of educated blockchain engineers, entrepreneurs and executives. The company organizes various educational events and workshops in Switzerland.
Swiss FinteCH is an independent association aimed at promoting and supporting Switzerland&8217;s #fintech industry. It connects stakeholders, creates research papers, advocates for solutions and promotes Switzerland as a global fintech hub.
The post Upcoming Swiss Hackathon Seeks To Use Blockchain To Disrupt The Insurance Industry appeared first on Fintech Schweiz Digital Finance News – FintechNewsCH.
#Blockchain & Smart Contracts make sure the same information is shared by different players in real-time and cannot be modified without the consent of all, as simple as that.
When it comes to the Capital Market, most articles on this topic explore how to use this #technology to solve the problem of real-time reconciliations between #banks, counterparts, CSD, CCP…
Imposing a standard in Blockchain & Smart Contracts to the market, obtaining regulators’ blessing and deploying the technology within the ecosystem will take years (anywhere between 5 to 10 years). Remember the Target2-Securities? It started in 2008 and was supposed to be implemented in 2015 in France, Germany, Italy and Spain. 8 years later and still working on it :-).
Aren’t there more pressing problems?
Don’t these problems look familiar to you?
This is how the trading infrastructure in the Capital Market looks (this is not representative of all systems and locations):
So let us take a step back and look at one of the major challenges in the Capital Market:
The idea of having one system that does it all “all singing, all dancing” to reduce the cost of infrastructure is a utopia. And whatever solution we have out there, experience showed that its TCO is prohibitive.
How about shifting the focus of the Blockchain and Smart Contracts technology to solve this particular problem?
Let us call it the Internal Blockchain Technology Solution 😉
Imagine this scenario:
A trade event is to be recorded. In real-time, these departments are made aware of the event: Risk, Collateral, Treasury, Back-Office, Finance, Compliance, Credit, Audit…
If the event creates an issue within any of these departments, then the corresponding department rejects it and the event is cancelled or put on hold in real-time.
Isn’t it what all these expensive, heterogeneous and complex interfaces between the systems of the trading infrastructure are trying to achieve?
Using the Blockchain & Smart Contracts internally has huge benefits for financial institutions:
Vendors in this market need to focus on developing Smart Contracts representing trades and their events and creating a middleware that uses this Blockchain technology to sync different systems.
Combining the above with a Standard Target Operating Model for post-trades and outsourcing to the Cloud (Utility) will allow banks to dramatically reduce their infrastructure cost.
This can be done TODAY. No need to wait 10 years until a standard emerges and regulators give their sign-off.
And I can help!
[linkedinbadge URL=”https://www.linkedin.com/in/gerardrafie” connections=”off” mode=”icon” liname=”Gérard Rafie”] is #FinTech Strategic Consultant – Capital Market & Treasury
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