World’s first Central Bank Digital Currency payment successful- MAS lead the way

The Monetary Authority of Singapore (MAS) have been piloting several Blockchain use cases over the past few years. Central Bank Digital Currency (CBDC) was one of the key focus areas of Project Ubin – MAS’ Blockchain initiative. In September 2018, I had published my post on Singapore and their efforts around Blockchain.

With the five phased approach to Project Ubin, we may soon see a state issued digital currency. That would not only put Singapore ahead of its Asian peers, it may be a Global first.

We now have a global first. Just over a week ago, MAS and the Central Bank of Canada made an announcement that a transaction between digital currencies of the two central banks was executed successfully. The trial was performed with the help of Accenture and J.P.Morgan.

As the Blockchain narrative developed over the years, one of the key buzzword was decentralisation and disintermediation. However, in the last two years, we have seen permissioned Blockchains gain popularity.

The three dimensions of the Blockchain Trilemma proposed by Vitalik Buterin were, Scalability, Security and Decentralisation. Designers of Blockchain systems have to choose between these three dimensions. The rise of permissioned Blockchain indicates that Decentralisation would be the first to be compromised amongst the three dimensions.

There are several reasons why a central bank would launch a digital currency. In the case of the Petro, the rationale was largely to stay clear of sanctions and raise capital to pay back some of their debt.

Reserve Bank of India on the other hand is exploring CBDC as it would be a low hanging fruit after the mass (forced) adoption of the nation’s identity system – Aadhaar. A good model would be to link a CBDC to Aadhaar verified wallets to create accountability and traceability of cash in the economy.

RBI was also spending 7 Billion Rupees ($100 Million) per year in just creating and managing the Rupee. There would be huge savings if they launched a CBDC.

Getting back to the SGP digital currency. Some key points to note are the following,

  • The exchange transaction happened between SGD and CAD.
  • The MAS network was built on the Quorum Blockchain and the Canadian network was on Corda.
  • The principle of Hash Time Locked Contracts (HTLC) was used to ensure an all-or-nothing guarantee. If one leg of the transaction fails to complete, the entire transaction is rolled back.
  • Interledger protocols can be used if parties were on different Blockchain networks.
  • Off-Chain transfer of hash were performed to initiate and complete the transactions.
  • The asset swap was performed using an intermediary, and a multi-currency support option was modelled in using this infrastructure.
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The picture above explains the HTLC framework used by this model. A report was published at the back of this initiative, describing several models that cross border settling systems could use.

The next wave of central bank blockchain projects can make further progress by bringing technology exploration together with policy questions about the future of cross-border payments

Sopnendu Mohanty, Chief Fintech Officer, MAS

The report also goes into the depths of the challenges in using HTLC and the potential alternatives being worked on by the Blockchain community. Like in most other Financial Services use cases of Blockchain, this transaction was also executed in a controlled environment.

CBDC are still in their infancy. This pilot could be followed up by collaboration across several central banks at the policy, governance, process and infrastructure levels. This would benefit the global economy at a scale never seen before. Let’s take stocks in a year. Watch this space.

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on “Sustainable Deeptech Investments” and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

Ready for a dynamic, digital, and unstable world, like in nature?

Last week Christine Lagarde moderated a panel with two Central bankers (European Central Bank and CB of Kenya), an incumbent (JPMorgan) and a disruptor (crypto fintech company Circle). The topic was “Money and Payments in the Digital Age.”

CCN covered the panel discussion with a narrative of `In crypto we trust`. Coindesk covered it with a rhetorical question narrative of `In Math we Trust?`.

It is already six months since I covered Blockchain from a policy angle in `In the EU Blockchain Resolution we Trust`. Building Trust through disintermediation is the line of thinking behind the Blockchain Resolution which is still a work in progress. Europe continues to be the thought leader at the policy level with this initiative which has immense potential. During the same period, I had the privilege of attending the talk of Dr. Zhang on the topic “In Math we Trust” and moderating a session with him at the LCX Blockchain Series, in Vaduz, Liechtenstein. Dr. Zhang, was a renowned Chinese American scientist, a physics professor at Stanford and I remain inspired by his narrative.[1]

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The powerful origin of the narrative `In Math we could Trust`

Let’s go back to the Greeks where thought leadership of all theoretical and foundational concepts started. Dr. Zhang spoke about Archimedes, his Eureka moment which permitted gold to become a medium of exchange. He spoke about the 2nd law of thermodynamics which states that the natural world is mostly in disorder and rarely in order (consensus state). In nature, order and consensus can only exist in subsystems. And when this happens it happens at a cost. In physics parlance, in order to reach order and consensus in nature, there needs to be some entropy (disorder) produced and dumped outside the subsystem for it to reach consensus.

Let’s tie this to the computing world. In distributed computing, the Fischer-Lynch-Patterson theorem is the analog of the 2nd law of thermodynamics and proves that there is No deterministic algorithm that can be a master algorithm for the system to reach consensus. So, once again science like in nature, proves that to reach consensus we need to pay a cost. This is where the Proof of Work, an old cryptographic concept, comes into play.

One way we can reach consensus regarding transactions is by using Proof of work. This is a way, to reach consensus on the Temporal Order of transactional data. The cost we pay is the amount of electricity we burn to solve the puzzle (which is on the other hand easily verifiable). Consensus on time-stamped verification of transactional data, can be reached through this process that dumps entropy (electricity in the case Bitcoin Blockchain) outside the system.

Our world historically has been oscillating between centralization and decentralization.

big bangLooking back in history for more evidence: The circuit switch technology created the then seemingly indestructible monopoly of ATT. This monopoly was only destroyed form the decentralized TCP/IP protocol that gave birth to the internet and to the gradual adoption of VOIP. As the internet became the dominant technology, several other monopolies grew out of the content generated on it; e.g. Google and Facebook. And now, we are in the beginnings of what Paul Nunes coins as the next Big Bang disruptionBlockchain is threatening the powerful giants built on the first open source protocol, the internet, with a wave of data decentralization.

The internet has evidently increased connectedness. However, its design is not a collaborative one. The world that is built on top of this open protocol, the internet, is not a world that is more fair and that builds trust. The “trading” or any exchange of information on the web, is not collaborative. The central entities, the Googles and Facebooks, are the ones that are organizing the information and the data on the web. The first, step in the process of decentralizing the web, is to break these data monopolies.

Blockchain is a decentralized mechanism in which trust is built-in with mathematical formulas. As Plato preached, mathematics is the ONLY internally consistent language. As Nick Szabo preached, in his God protocols, mathematics is the language of God. God in this context is the entity that acts in the interest of everybody.

Blockchain protocols are presenting us with an opportunity to build on protocols with built-in consensus mechanism governed by math. Mathematics governance guarantees fairness and trust.

Dr. Zhang argued in this speech that we humans have developed languages and law in our attempts to organize and collaborate in societies and reach consensus on various issues. He now believes that we are stepping into the most advanced era in which Mathematics will be trusted in order to reach consensus. Admittedly from all the sciences (social, political, physics etc.) mathematics is the branch of knowledge with the highest level of consensus and in which we trust.

Dr. Zhang emphasized that we live in a world that is based on theoretical mathematics that were developed with no real-world application in mind and are now being used in all sorts of experimentations as we are in the early stages of the blockchain development. From hash functions to more such `abstract first` math concepts.

  • Public/private key based on elliptic curve
  • Cryptographic hash function
  • Zero-knowledge proof. Zk-snark and Zk-stark
  • Secure multi-party computation, differential privacy
  • Formal verification
  • Homomorphic encryption
  • Dag, directed acyclic graph: money grows on trees!

Source: from Dr. Zhang`s talk; see full video here.

The choice we have is to `Trust in Math`

 Look at the 2nd law of thermodynamics, nature, and the lessons from the earlier tech disruption waves. Once we embrace the dynamic, digital, and unstable world we live in; we will realize that we have a great opportunity to embrace theoretical mathematics in designing governance and the Internet of value.

It will be a trustworthy design with inherent instabilities as in nature and as outlined in the 2nd law of thermodynamics. We have to move away from the belief that forced consensus mechanisms like regulations can provide stability.

[1] I delayed this post because of the unfortunate and sudden passing away of Dr. Zhang late last year.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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IBM World wire – the inevitable rise of Centralized Blockchains

72 countries, 47 currencies, 44 banking endpoints and more than 1081 unique currency trading pairs. IBM Blockchain World Wire is here.

IBM Press release on World Wire

In the last four weeks, we have had JPM Coin announcement by JP Morgan, followed by Facebook’s ambitions to plug crypto payments into Whatsapp, and now IBM have announced the launch of World wire – a cross border payments platform on Stellar protocol. I tried to call them permissioned Blockchain, but couldn’t resist calling them “Centralized”.

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When I blogged about JPM Coin a few weeks ago, and how it could affect both Ripple and SWIFT, one unanimous comment I received was that JPM Coin couldn’t be considered a cryptocurrency. I have had several philosophical arguments over the years on why a permissioned Blockchain, preferred by enterprises, do not/do qualify as Blockchain as they are centralized.

For all practical reasons, we have seen the rise and fall of decentralized Blockchain. Most of us would like a utopian decentralized world without these too-big-to-fail firms throwing their weight around, or central regulators calling the shots, or tech giants monopolizing industries with their data might. However, it is hard to make the leap from a highly centralised system (we have today) to a new decentralised way – not just philosophically, but also pracically.

The focus has shifted from ICOs to the more conservative STOs, with stable coins showing up in most use cases. Several startups I have met in the last few months have even stopped using the term ‘ICO’. The resurgence of Blockchain is now being led by big firms like IBM, Facebook and JP Morgan. I wouldn’t be surprised if this becomes the norm in 2019, where we see more Blockchain based production use cases from enterprises.

IBM have been working in partnership with the Stellar Foundation for quite sometime now. When I spoke to Lisa Nestor, the Director of partnerships at Stellar in Q4 2018, she mentioned that they had a strategic partnership with IBM. She stressed the importance of working closely with incumbent organisations across industries to make Blockchain usage mainstream.

We’ve created a new type of payment network designed to accelerate remittances and transform cross-border payments to facilitate the movement of money in countries that need it most

Marie Wieck, General Manager, IBM Blockchain

As a result the IBM World wire, focused on the cross-border payments market has already enabled payment locations in 72 countries, with 48 currencies and 44 banking endpoints. It supports Stellar Lumens and a USD based stablecoin – thanks to their work with Stronghold. The network will also support stablecoins issued by several of its consortium banks. The list includes stablecoins based on Euro, Indonesian Rupiah, Philippine Peso, Korean Won and Brazilian Real. How will this affect Ripple?

Credit Ripple for the vision of using a digital asset in order to enact immediate settlement with finality. I think their implementation followed one path. Our implementation is a little bit different. We are not the issuer of an asset. In fact, what we believe is that there should be an ecosystem of a variety of digital assets that provide the settlement instruments that enable these cross-border payments.

Jesse Lund, IBM’s VP of Blockchain and Digital currencies

IBM’s strategy of keeping the platform agnostic to any kind of digital asset is a master stroke. The platform will work through the following steps,

  • Institution A chooses USD to execute a transaction with to Institution B in Euros
  • Institution A converts USD to XLM (or any other digital currency of their choice)
  • IBM Worldwire converts XLM to Euros and records the transaction on the Blockchain
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The new world of international payments look pretty disintermediated, near real time and efficient. Bringing on-board new markets is cheaper; micro payments support and end to end transparency are all benefits too. Are we still going to be hung up on “It is not really decentralized”? Do we care?


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).


FB doing a Tencent – Cryptos mainstream adoption in sight?

We have had a record breaking February in the UK weather-wise. One of the days in Feb saw temperatures go up to 21 degrees Celsius. While the cold has returned a little bit, it seems winter is largely done. I get that sense with cryptos, as large institutions one after another are announcing projects, and it only takes one of them to take off for cryptos to go mainstream.

Messaging applications thinking of launching their own cryptos is nothing new. Telegram and Signal have been at it for sometime. However, it is a bigger deal when Facebook looks at introducing cryptocurrency based payments on Whatsapp. The size of the opportunity for Facebook and their partners when the platform is Finteched will undoubtedly get them out of their issues they have faced over the past 24 months.

The Facebook Opportunity

Facebook has two problems to solve, and both potentially powered by Blockchain.
Facebook’s Blockchain team has been spearheaded by former PayPal president David Marcus since last May. In order to replicate Tencent’s successes, they need to leverage the user base of their apps (FB, Whatsapp, Instagram). Bringing payments to Whatsapp would have have been a good starting point, however Facebook’s attempt at doing that in India (the largest Whatsapp) hasn’t gone too well.

About 1 Billion people in India have a mobile, and about 300 Million of them use Whatsapp. Last year, Whatsapp pay launched in a controlled fashion to 1 Million users in India. They used the government backed UPI (Unified Payments Interface), and during the pilot, they achieved about a Million transactions per month. However, the regulators weren’t happy that the payments engine was on Facebook servers. They wanted the servers to be in India, and despite several conversations there is no solution.

The payments market in India is a $1 Trillion market by 2023, and it would be a shame if they missed the bus.

Facebook is looking to create a stablecoin attached to a basket of currencies. There is a team of about 50 people working on this project. If FB planned to use the Indian market as a testing ground for the crypto-powered Whatsapp pay, they may now have to deal with the crypto currency regulatory ban too. However, if they managed to clear the regulatory hurdle, their growth could dwarf the likes of PayTM, and that would just be the start. On top of it, Indian remittance market boomed to $80 Billion last year. If I could use whatsapp to send money to my mom, that would be awesome!!

The other issue that FB has had is around data privacy. With identity management being one of the key concerns, FB saw record number of millennials leave their platform last year. However, with a Blockchain powered Self Sovereign Identity engine, Facebook connect could redefine it’s position with data privacy as a distributed identity management platform.

How decentralised it (the identity engine) will stay if launched is another challenge. Most federated and decentralised identity management engines have ended up creating a centralised monopoly in the past. With Blockchain behind the scenes, one would expect that to be different.

Will Facebook replicate Tencent inspired successes through Whatsapp? Will FB change perceptions through a genuinely decentralised identity engine? Would 2019 be the year of mainstream adoption of cryptos? Watch this space.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email


The Return of Crypto DeQuorum – JPMCoin the XRP Killer

After a busy day, I sat down to have a late lunch at 3 PM on Thursday, and I saw a Whatsapp message pop up – and I stood up from my chair saying “Ohhh Ehhmmm Geee”. That was my reaction when I heard about the news of the JPM Coin. Of all the banks, JP Morgan led by Jamie Dimon had to be the first mover to launch their asset backed crypto. It is less than 2 years since Jamie Dimon called Bitcoin a big fraud.

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Will this bring back some decorum into the crypto world? Will this kill Ripple’s XRP? My head is abuzz with all these questions, so bear with me as I manage/struggle to lay them out.

The crypto world can do with some positive news and sanity as there is a sense of the crypto winter coming to an end. As much as I loved to hear the news, and was glad for the crypto industry as a whole, I felt for some of the early adopters of the technology. There is a good chance that we will see a BarcCoin, CitiCoin, GSCoin, and so on, with similar working models. There is more than a chance that we will see some existing players disappear. Let us quickly visit the salient features of the JPM Coin model.

  • It will use the Quorum Blockchain developed by JPM. It provides for
    high speed and high throughput processing of private transactions within a permissioned group of known participants
  • It will be a stable coin, whose value will be always $1 USD – so market volatility linked with Cryptos is mitigated.
  • It will be used for wholesale payments that JP Morgan processes, estimated at ~$6 Trillion per day.
  • The network can be a private or even a centralised network permissioned by JPM.

With real time cross border B2B payments as the core use case, JPM Coin may create some challenges for Swift. Last year, Swift announced that its GPI technology that has had good feedback from its banking customers.
GPI technology that let banks see where their payments were at all times, and that came with rules around response and confirmation times.

However, the challenge for the newcomers (then) that kept Swift going was the mutual KYC requirement from the regulators, which was harder using a DLT payment mode. And GPI let banks see where their money was at all times. Assume a London based bank is sending money to a bank in Mumbai, there may be a couple of correspondent banks in between. The London bank can see where the money is, and stay on top of any delays, issues etc., They can also stay on top of the Service Level Agreements (SLAs) that the intermediaries offer.

With a crypto based approach, the transfer will be instantaneous without any need for correspondent banks as long as regulatory and relationship hurdles are overcome.

Ripple and XRP have had their challenges in gaining adoption from key banking players. One of the key reasons why cryptocurrencies couldn’t be used for cross border B2B payments is because of the market volatility of the cryptos. With a stablecoin like JPM Coin, that fundamental issue has been addressed.

Also, with the banking and corporate relationships that JPM commands, most of their counterparties would be better off being part of the network. The JPM’s interbank network has about 157 global banks, and adoption should be pretty quick once the piloting is successful. Although the underlying Quorum blockchain is based on Ethereum, it offers both private and public transactions capabilities. So banks and corporates on the network will have privacy if they choose/need it.

However, the real pain hits them (corporates) when a bunch of tier 1 banks launch their own stable coins. This space has just started to get interesting, and we should see an avalanche of similar offerings from global banks.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email


US Health Care: The $2.8 trillion opportunity

US health

 

Reposted from April 2018, as it is Chinese New Year for Zarc Gin, our regular Insurtech Expert based in China.

A couple of weeks ago, there were rumors of Walmart purchasing U.S. Health Insurer Humana.

I’ve written about the U.S. healthcare market a few times and thought this news was rather interesting.

As I started researching this topic,  I decided to take a look at the U.S. healthcare market a bit more broadly.  

During my research on Walmart and Humana, I uncovered some interesting facts and figures which help to further shape my opinion on the opportunities I see in the future of the U.S. healthcare industry.  

While the initial sections are numbers focused (be prepared for a lot of numerical data!), I do touch on technology as well later on.  

As such, I have structured this week as follows:

  • Getting a bigger slice of the $3,300,000,000,000 pie
  • What do all these (potential) mergers mean?
  • How Technology can help
  • Amazon vs. Walmart – which ‘category killer’ will it be?

Getting a bigger slice of the $3,300,000,000,000 pie

There have been a number of large potential mergers in the U.S. Health Insurance & healthcare space, including:

Albertsons and Rite Aid also happened this year which, according to this article, included 2,569 pharmacies (the other 1,932 of which were transferred to Walgreens as part of another deal.)

As I read more and more about these various deals, both qualitatively and quantitatively, it became more clear what was going on.  

And then, I read in this article, the following quote from Walgreens Chief Medical Officer Dr. Patrick Carroll:

Why not use those locations as a strategy for healthcare?

Then it all made sense.  Allow me to share.

According to the Center for Medicare and Medicaid Services (CMS) National Health Expenditure Data (NHE), NHE grew 4.3% to $3.3 trillion in 2016, or $10,348 per person, and accounted for 17.9% of Gross Domestic Product (GDP).

Healthcare expenses are $3.3 trillion in the U.S. alone.  That’s $3,300,000,000,000, folks.

I was curious as to what that $3.3 trillion broke down into, so I started digging deeper.  

Included in the CMS link above are tables that have a number of ways to analyze this expenditure data (24 different ways to be exact).  

If you are interested, please look for this link on the page:

Screen Shot 2018-04-16 at 4.17.39 PM

Table 4 in the Zip file had some really interesting data:

2016 NHE

Zooming in on that data, I found some even more interesting numbers:

Screen Shot 2018-04-16 at 4.55.00 PM

Of the $3.3 trillion being spent on Health related expenses, $2.8 trillion was being spent on Personal Health Care ($2,800,000,000,000).

That’s a lot of money.  

And of that $2.8 trillion, $2.2 trillion is being funded through Health Insurance.  

That doesn’t tell the whole picture though.

What do all these (potential) mergers mean?

In addition to the research I found above, I found some more stats which painted a much broader idea about the conclusions that I was beginning to draw.

US Health Insurer market share

According to Health Payer Intelligence, in 2016, the top 5 health insurers payers in the U.S. are:

  1. United Health Group – with $184.8bn in revenue and 70 million subscribers
  2. Anthem – $89.1bn in revenue and 39.9 million subscribers
  3. Aetna – $63.1bn in revenue and 23.1 million subscribers
  4. Humana – $54.3bn in revenue and 14.3 million subscribers
  5. Cigna – $39.7 bn in revenue and 15 million subscribers

With a population of 326m people in the US, these 5 companies have coverage for 162 million people (or 49.7% of the population).

Pharmacy market share

In terms of prescription revenues, the pharmacies in the US are split as follows:

Largest_US_Pharmacies_by_Total_Prescription_Revenues-2017

And in terms of number of pharmacies, the top 10 can be found here (according to SK&A Pharmacy Data):

Screen Shot 2018-04-16 at 6.50.01 PM

Pharmacy Benefit Manager market share

Pharmacy Benefit Managers (PBMs), according to Wikipedia, are third party administrators that ‘are primarily responsible for developing and maintaining the formulary, contracting with pharmacies, negotiating discounts and rebates with drug manufacturers, and processing and paying prescription drug claims’ and ‘As of 2016, PBMs manage pharmacy benefits for 266 million Americans.’ (that’s managing the prescriptions for 81% of the population…)

According to Statista, in 2016, the market share is as follows:

Screen Shot 2018-04-16 at 6.57.03 PM

Pulling it all together

Looking back at the potential mergers mentioned in the first section, we have a high possibility of:

  • Walmart (#4 in terms of number of pharmacy locations and #5 in terms of total prescription revenue), partnering with Humana (#4 Health Insurer in terms of revenue and # of subscribers, and which also happens to be the 4th largest PBM).  
  • Aetna (#3 Health Insurer in terms of revenue and # of subscribers) partnering with CVS (#1 in terms of number of pharmacy locations, prescription revenue and the largest PBM)
  • Cigna (#5 Health Insurer in terms of revenue and # of subscribers) partnering with Express Scripts (#3 in terms of prescription revenue and the largest PBM, tied with CVS).

Not to mention the fact that United Health Group (#1 Health Insurer in terms of revenue and subscribers) owns Optum Rx (third largest PBM).  They have upped their health care presence in the past few years by buying MedExpress Urgent Care, which has 203 locations.

One may think that Anthem (#2 Health Insurer in terms of revenue and # of subscribers) is missing out, but maybe they have some benefits to sitting on the sidelines and it’s no wonder there is some chatter relating to potential antitrust violations within these deals.

If I look at all of these facts and figures, it looks like these companies are aiming to build mini ecosystems for their customers, in an effort to start getting a bigger piece of the $3.3 trillion mentioned before…most specifically, the $2.8 trillion being spent on personal health care.

After all, if these companies can offer it all ‘in-house’; meaning prescriptions, simple doctor visits through their in-store clinics and a mechanism to have it paid for through Insurance benefits, then consumers may only need to go to hospitals for specialist visits and more serious ailments.  This should ultimately lower the cost of health care, while also shifting some of that $2.8 trillion to some different hands.

How Technology can help

Technology will play a key role in enabling this to happen.

Ecosystems

In an article a few months ago, I wrote about what I thought CVS and Aetna could learn from Ping An, which I consider to be offering the ‘gold standard’ in terms of healthcare Ecosystems.

From that article, I analyzed the Online to Offline (O2O) capabilities within their Ecosystem:

Online through use of the Good Doctor app, a policyholder can:

  • Search for, and book doctors.  This can be either online consultations or in-person (i.e. offline)
  • Have an online consultation with a doctor
  • Purchase medicine
  • Get access to information about various health topics – either general or specific to me
  • Monitor their own health plan

Offline, Ping An has developed a network of hospitals, physicians, pharmacies and more, which will allow the policyholder access to services they can’t get through the online platform

All of these players are aligning the essential businesses in order to build these ecosystems. The Insurers already have relationships with the hospitals as well, which should help in bringing it all together.

IoT

Florian Graillot, Insurtech influencer and partner at astorya.vc recently wrote a great article in Coverager on Digital Health.  A few points he mentions:

  • Wearables – ‘Technology started to enter in our lives with several players developing wearables focused on fitness, sport and wellbeing.’
  • Data – ‘By trying to collect more customers’ data, they (insurers) hope to better understand their needs and increase the level of engagement they have with them by adding numerous touch points.’
  • Teleconsultation – ‘To increase number of touchpoints and offer additional services, teleconsultation is now a must-have for most of insurers and mutuals’
  • Data Privacy and sharing – ‘To better predict and prevent diseases, technology requires a huge amount of data to be relevant, and we see many startups monitoring behaviors on a real-time basis. This raises the first challenge for both insurers and startups: make people agree to share their personal data.’

Having more information on customers and being able to ‘track’ their health, will help to fuel the ecosystem.  This will enable all the participants in the value chain (doctors, pharmacies and Insurers) to know more about their customers on a real time basis, hopefully helping with more preventative measures and ultimately bring costs down.  As Florian states, ‘Insurers need to develop an ecosystem of technologies and startups around them to address their current challenges: increase number of touchpoints with customers ; understand behaviors to better prevent risks ; and reduce costs of healthcare.

I highly suggest reading the full article.  

Blockchain

Health Insurance probably has the most amount of data being transferred than other lines.  This is due to the numerous amounts of players involved in the process as well as the amount of information on a customer that can be available.

Further, Health Insurance data is the most personal of personal data.  

As such, something like blockchain, to help with the transfer and security of data seems like a solution that can help.

A Blockchain Health Alliance including Humana, Quest Diagnostics, Multiplan, and UnitedHealth Group’s Optum and UnitedHeathcare units has formed recently in an effort to ‘improve data quality and reduce administrative costs associated with changes to health care provider demographic data’.

Further, CB Insights has done a study on ‘5 Blockchain Startups Working To Transform Healthcare’.

Which ‘category killer’ will reign supreme (if at all)?

When it comes to ‘category killers’, two of the biggest and most famous are Walmart and Amazon.

We have been focused on Amazon coming into Insurance so much.  I wrote about this earlier this year, when Amazon, JP Morgan & Chase and Berkshire Hathaway teamed up to announce that they would be partnering on ways to address healthcare for their U.S. employees, with the aim of improving employee satisfaction and reducing costs.

I am still bullish on the prospects of this venture and I know Amazon knows a thing or two about building an ecosystem and how to use data.  However, the potential of Walmart buying Humana does have me very intrigued.

They have a massive head start to Amazon in terms of building their healthcare ecosystem.  After all, it was only 3.5 years ago that they announced the goal ‘To Be The Number One Healthcare Provider In The Industry’.  This includes:

Further, earlier this week, Walmart announced a redesign of its website and Amazon ‘put a pause on its plan to sell prescription drugs to hospitals’.

Summary

OK, are you still with me?  I know this has been a long article.

This topic interests me because it has been the single most mind-boggling item for me to deal with since moving back to the U.S.  I can’t believe how complex the system is here as well as how expensive it is.

It is really an area that needs a lot of help.

I know some of these mergers as well as Amazon’s foray into the larger picture of U.S. Health Insurance are still hypothetical.  However, they are important to monitor for the future of healthcare for people living in the U.S.

In addition to these events from the large Health Insurance incumbents and tech players, I also wouldn’t discount some of the work that Oscar are doing, as well as AXA, which has recently entered an agreement with Oscar and also acquired Maestro Health.

Now that I have looked at the breakdown of spending a bit more, I do believe the companies spearheading these large mergers are aiming to provide their customers with preventative measures, ‘offline’ one-stop shops (clinic plus pharmacies) and online facilities (teleconsulting and pharmacy refill/delivery).  

This will ultimately help them with getting a bigger piece of the $2.8 trillion.

Let’s hope all these efforts also help to reduce that actual dollar amount from a consumer spend perspective.

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Stephen Goldstein is an experienced Insurance executive and Insurtech dealmaker with a core focus on growing revenue, launching go to market initiatives and advising industry leaders.

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Fintech India boosted as Blockchain Consortium for SME lending kicks off

Fintech India saw a boost in 2018 with over 132 investments in startups, with a large proportion of them going into Lending and Insurance. The total investment was about $2 Billion as of Nov 2018. Sequioa, Omidyar, and Kalahari capital were the top investors in the sector.

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The New Year opened with a bang as 11 Indian banks have now come together to form a Blockchain consortium to address the under served SME lending market.

The rise of India Fintech in comparison with the likes of China, is still dwarfed. However, the policy makers have provided ample support to the innovation ecosystem to thrive. Initiatives such as NPCI (National Payments Council of India), Digital India Programme have helped.

The Reserve Bank of India (RBI) has approved 11 fintech firms
who could now be payment banks that offer deposit, savings, and remittance services. Unified Payments Interface (UPI) has been the bedrock of the digital payments boom in the country.

You are probably thinking – too many TLAs (Three Letter Acronyms), but the impact of all these measures on digital payments and lending in the country has been significant.

Inspite of all this, the SME lending market in India has been particularly challenging. SMEs in the country relied on a complicated supply chain that was broken and lacked transparency. A Blockchain network would provide lenders with public credit data, that they could use for their underwriting decisions.

The Micro SME lending market is about 17.3% of the overall corporate lending market in India. And after the recent IL FS scam, the corporate lending market needed a boost to tap into the under served SME sector. The 11 banks involved in the Blockchain consortium would first reach out to supply chain vendors and get their records digitsed.

The consortium includes names like ICICI, AXIS and State Bank of India, who together make up a big proportion of the lending market. Getting them all on a single network along with digitised supply chain information, should allow them to make near real time lending decisions to Micro SMEs.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

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The Self-fulfilling Prophecy; reporting from the WEF in Davos2019

It makes sense to gather high up in the Alps, above the clouds where the sun shines on anyone strolling around while temperatures are -10C or more, to discuss about `Globalization 4.0 `. For those who disagree, just think of it as a tradition.

This year there was no Eureka moment (except if I missed it) but there was a loud and clear support for the Gorilla in the room narrative

A self-fluffing prophecy:

Transhumanism – technology solves our large scale problems!

 So let’s all get to work on experimenting, applying, pivoting technologies, to make the dream come true. It was clear from the themes of talks and panels that we are already spending time and resources on discussing how `Tech` will become reality and what will be the consequences and side effects. Artificial intelligence, Internet of Things, Robots, the future of Work, Blockchain, are the trending tags.

Zoom-in

Given my physical limitations, I attended some events from which I am sharing `color` as we used to say on the trading floor (that is any information that paints a picture of over the counter OTC markets).

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The Global Business Blockchain Council – GBBC, led by Sandro Ro who was appointed in March 2018 covered diverse topics. I arrived to go directly to the Procivis[1], Vetri[2] event because the issue of self-sovereign identity is a building block towards a more decentralized globalization 4.0. The support from the regulator of the canton of Zurich and the presence of the prime minister of Bermuda were one of the highlights.

Watch this space. Later during the week, Joseph Lubin and Tom Lyons had a fireside chat at the infamous piano bar of Hotel Europe, organized by CryptomountainRocks special event during the WEF, and J. Lubin spoke extensively about uport.

Self-Sovereign Identity is the concept that people, businesses, and entities, can store their own identity data on their own devices, and provide it efficiently to those who need to validate it, without relying on a central repository of identity data and without leaving hackable copies all over the web.

This is really the core of the next generation Web. In a nutshell, it means that Blockchain IDs are the way for individuals and any legal entity. These are universally discoverable through zero-trust datastores.

Self-sovereign identity is the chip for Democracy and Web 4.0

 Having said this, I must point out that the anti-blockchain tribe (N. Roubini and more) continue to highlight that we have actually not seen any real use case of the hundreds of Dapps being developed. I also heard that in the crowd that attentively gathered to hear J. Lubin speak. Consensys has not managed yet to make one of its Dapps a solid business case. The Ethereum protocol on the other hand, in an exemplary decentralized fashion, got used for the next generation of crowdfunding. From a 35,000 feet point of view, this does qualify for the next iteration of a decentralized autonomous initiative, launching a business process that created value but also `polluted` capital markets. I can imagine, reviewing this decentralized autonomous collaboration, to see what worked and what didn’t.

I also attended the Women in Blockchain Switzerland panel, which won my heart as the most diverse panel. I walked away hugely inspired by Viola Llewellyn, the African co-Founder & President of the smallbiz Fintech Ovamba and Diana Grigoras. I am only highlighting these two amazing women, only because I know closely the work that Monique Morrow[3] is involved in, Bill Tai (VC, athlete, educator), and Robin Errico Chief Risk Officer and Diversity & Inclusion Leader at Ernst & Young Ltd, Switzerland (EY), who also participated in the panel.

Viola is another woman that is successfully making an impact in the lives of the small businesses in Africa that don’t have a credit history and won’t be served by banks. She has combined Fintech with her local cultural knowledge to offer short-term capital to micro, small and medium-sized businesses. The capital is provided by international investors from the US, U.K. and Japan. Ovamba covers Africa, emerging markets and the Middle east for trade, inventory purchases and growth. Already a 5yrs old Fintech, mobile only and first launched in Cameroon, it now links capital from overseas to businesses in the aforementioned markets. GLI Finance, the UK based alternative lending provider, and Crowdcredit, a Japanese cross border marketplace lending platform are amongst the international partners.

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Communities are still being built with the vision and persistence of a strong leader.

Women excel in building communities, which is excatly what we need for Globalization 4.0.

I visited the Ethereal Lounge and bumped into Don Tapscott who was excited to share more details about the large scale upcoming event in Toronto, Blockchain Revolution Global. A collaboration of the Blockchain Research Institute (BRI) and the MCI world; with a focus on enterprise level applications with a cross-industry selection. I also met for the first time Joe Lubin and chatted about a dear topic to me `liquidity` for digital assets (so many still confuse digitization with liquidity). He mentioned coven.vc, a new Consensys baby, in beta mode which the next generation for designing an open platform for vc investing.

Consensys did layoff people but the venture production continues. Kaleido, a ConsenSys business was launched in collaboration with Amazon Web Services (AWS) this past summer. I heard about it from J. Lubin. It is a marketplace for enterprises to plug-and-play.

Blockchain powered IT services are being built at an accelerated speed. I can’t keep up with innovations.

I spoke at Cryptomountain Rocks, after Daniel Diemers and Barbara Lang, on `A Wall Street take on Crypto`. I shared my strong point of view on how Wall Street will take advantage of the change in the narrative in the blockchain space from a pure `Disruption` rock band style to a `Co-creating sustainable innovation` one.

What parts of the pie from the new digital assets, will Wall Street aim at and what will be left untouched for the cyberpunks[4].

Exclusion is where value is hidden and can be unlocked

 CryptomountainsRock Battles

One of the most effective ways to open up the conversation on topics like decentralization, transparency, rethinking money, unlocking value, digitization of assets and processes, etc, (beyond writing our insights tirelessly here at Daily Finte ch along with others sharing knowledge and expertise on other platforms – text or audio) is the live Cryptomountains Talk Battles that Reto Gradient has designed and is the trademark of the unconference every Spring in Davos. This year was the inaugural event during the WEF of Cryptomountains with lots of talks and panels.

Talk Battle topics during the WEF

  • Forget about Bitcoins
  • Decentralization is an Illusion

The two participants, have 3min each to share their arguments. One has to be pro and the other against. After this the audience votes which speaker needs more support (i.e. arguments are relatively weak). Then, people from the audience line up to support their choice of weakness and have 1min to `help` on stage with their argument. The battles end by….

If you want to participate on stage or from the audience in this kind of battle, come this March to the original annual event in Davos – the unconference with skiing in the morning and talks +.

[1] Procivis and Valid, the early pioneers in Self-Sovereign Digital ID for governments, by Efi Pylarinou

[2] Monique Morrow has been recently appointed President of Vetri. She is the founder of the Humanized Internet and a unique personality that guarantes execution in full alignment with the mission.

[3] Listen to the podcast with Monique Morrow, co hosted with Arun Krishnakumar, on Humanized tech with built-in values.

[4] To book me for a talk – conference event, private event, conference – on this topic or more, click here.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

DX Exchange Security token model could democratise Wall street

2019 is the year of the Security tokens. We have had several ebbs and flows in the Blockchain industry over the last few years. Events of the past 18 months especially have shaken the industry into some serious introspection.

Revelations around the lack of controls and regulations around capital raising models have brought the industry into serious disrepute – in such a fashion that the merits of the Blockchain framework have been challenged. Being a passionate student and a commentator of the industry, I still believe, the model is intact, its the controls around it that have failed to stop human greed from causing havoc.

On the brighter side though, security tokens were seen as the bail out for the industry in many ways. Towards the end of 2018, there were a lot of talks that the model has merits, and as soon as the year opened, we have had the news of DX Exchange platform launch.

The DX Exchange platform allows bluechip stocks traded in NASDAQ on Blockchain using security tokens – this would cut out the middlemen, and when rolled out across markets, would save Billions. The disintermediation that the model brings to the table, will also put several business models dependent on Wall street at risk.

Why is this a better model than an ICO? Is this just another hype? Is this a perfect model that will create the new inclusive Capital markets?

I believe, ICO was the wrong start to the right journey. Being an early stage Venture Capital investor, I understand that valuing a startup is more of an art than science. There are very few data points. So when a business that has no way to value itself goes on Blockchain, the intrinsic value behind the tokens will be challenged by the traditional financial services industry.

Blockchain purists will argue that the new capital markets driven by Blockchain wouldn’t need traditional financial services principles AS-IS. However, what we are trying to do with Blockchain is a massive change in the way we exchange value, and that can only happen by collaborating with the incumbents.

If value has to move from traditional markets to the Neo Market, it can’t happen without key stakeholders in the traditional markets understanding the value of the Neo Market and embracing it. Security tokens can make that happen.

DX stressed that its digital stocks are classed as derivatives — with the underlying asset being equity of 10 Nasdaq-listed firms — and that its platform is regulated under the European Union’s Mifid II directive

CNBC News

With Security tokens, the problem of intrinsic value is resolved. When you have a token that’s valued based on an underlying stock – most people who understand derivatives will get it. Of course, the tokenisation process, the exchange, its participants, operational details of managing transactions will have to be regulated and audited regularly to ensure that the security token industry gains credibility.

In doing so, we would have created a disintermediated Neo market on the Blockchain, but still largely within a traditional financial ecosystem. That is the first step, and I believe the right step for Blockchain in Finance.

Will there be scams? There will be – for sure. But I believe the worst of these scams are behind us, and with controlled progress, the Blockchain industry should see the adoption that it was meant to.

I am really hopeful that there will be a day when Mangoes from my farm in India and Buckingham palace will both go on Blockchain, and I will be able to trade some equity in the palace with Mangoes.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

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BBVA and Porsche – Is DIY Corporate lending on Blockchain the future?

Earlier this month, BBVA announced an acquisition term loan offering on Blockchain, where they lent $170 Million to Porsche.

An acquisition loan is a loan given to a company to purchase a specific asset or to be used for purposes that are laid out before the loan is granted.

– Investopedia

The credit line will allow Porsche to expand their retail distribution channels in Europe and Asia. This is yet another feather in the cap for the BBVA, as they set to establish themselves as a front runner in providing innovative financial services.

In executing this credit line facility, BBVA have managed two firsts – first acquisition term loan ever arranged through blockchain technology, and Porsche Holding is also the first non-Spanish borrower using this technology for the negotiation and closing of a corporate loan

For the BBVA, this is by no means their first stab at something adventurous with Blockchain. Earlier to this, they have offered a syndicate loan on Blockchain for $170 Million to Red Electrica. They also offered a line of credit with Repsol for $367 Million. But this is the first time they have extended it to a non-Spanish borrower.

The press release from the BBVA discusses the benefits of using Blockchain in their Corporate lending process. From automating negotiations and minimizing operational risks, to bringing transparency and immutability to the documentation, the technology adds efficiency to the lending process.

“Our aim is to improve clients’ experience by simplifying processes and enhancing the speed of execution”


Frank Hoefnagels, Head of BBVA CIB in Germany

But BBVA have high ambitions and believe that the technology can help convert corporate lending into a “Do it Yourself” process for their corporate and business clients.

This might yet be another PR stunt, however, if they manage to achieve it, the benefits that framework would add is immense. That can be a blueprint for banks and alternative finance firms to use as a lending operating model for SMEs.

There are firms who have managed to gather a lot of intelligence around lending to SMEs. One of my portfolio firms Funding Xchange is a champion at that. That intelligence acheived through facilitating business loans over the years combined with the process efficiencies and seamlessness that Blockchain could potentially offer would create impact at scale.

It is a year when many crypto dreams have crumbled. But dream we shall, for its the season of hope. And as the New Year dawns, there can be only one way forward – Onwards and Upwards. Happy New Year folks!!


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email