Gamification via a Fintech ecosystem wins a UN Global Climate Action Award

A 3yr old Corporate Social Responsibility – CSR – initiative that took a life of its own, has resulted in a 2019 UN Global Climate Action Award for Alipay AntForest App. A great example of gamification and network effects on an ecosystem like Alibaba. At launch, it was one of the many charity projects that […]

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Six diverse picks of Fintech shovels & Fintech stacks

The transformation of Financial services continues and re-bundling is one of the trends that is at work. Fintechs are collaborating and creating fuller stacks by bundling several services and growing their businesses. Six picks give you a picture of the diversity of this trend. Mambu is a leader in the Saas core banking sector. It […]

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Fintech has not created a level-playing field for small to mid-size banks

Temenos released in April its annual report[1] on the State of digital sales in banking. As I was reading some of the key findings reported by Jim Marous[2], I was struck by these observations:

More concerning is the reality that most of the high marks for digital sales continue to be garnered by only the largest organizations.

 Larger banks ($150B – $2,500B) not only have a financial and technological advantage, they benefit from a head start in the deployment of all digital account opening capabilities, allowing them to gain a share of mind advantage through media and word of mouth. 

 #AndTheIronyIs that technology was supposed to democratize banking not only for the end-customer but also for the smaller, less national, less international financial services provider. After all, fintech is by now overweight B2B providers. Remember it all started as a disruption, replacement to banking. Then it shifted to collaboration and partnerships with incumbents and as Jessica pointed out ‘Something’-as-a-service, the new fintech paradigm.

#AndTheIronyIs that despite the plethora of B2B unbundled fintech services out there, anything you can imagine as a service; the mid and smaller size banks remain overall behind. Of course, there is a variety of metrics and KPIs that one can use to measure their digital readiness. From mobile account opening, save and resume functionality, small business account opening, etc.

Digital transformation these days requires internal cultural and technological changes whose impact will be seen 3yrs down the road. That means that mid to small size incumbents remain at a disadvantage.

level playing field

When I look at 11Pulse, the digital benchmarking offering of 11FS that allows clients to benchmark themselves against peers on onboarding, security, PFM, …; I wonder whether mid to small size banks are flocking to take advantage of this service and to find ways to catch up.

I guess the simplistic answer is that small to mid-size banks don’t have the guts and the budget to stick to such a 3yr plan.

For sure they don’t have any internal strategic funding mechanisms like Goldman Sachs has. Goldman’s Principal Strategic Investments group has made key investments in Kensho and Tradeweb and helped create Wall Street chat platform Symphony, and much more.

Neither do VCs fund the transformation of existing banks because they are only interested in high growth stories, which means investing in those that are building the picks and shovels.

The only such example I have found is Cross River Bank that Battery Ventures, Andreessen Horowitz and Ribbit Capital invested $28million in 3yrs ago[3] and recently another $100mil was announced by KKR. Cross River bank started by supporting fintech startups with loans – $2.4 billion in loans for companies like Affirm and Upstart in 2015 alone. Today it is more than a leading marketplace lender for fintech. It is one of the top go-to bank-fintech cooperation providers. Its customers include Circle, Best Egg, Coinbase, Rocket Loans, Stripe, Upstart, Affirm, and Transferwise. Just 2 weeks ago it Cross River bank acquired Seed, a small business banking company.  Seed is a 5yr old online banking company for small business  owners and freelancers.

`If a payments company wants to become a lender or a lending company wants to do payments, then they have the ability to do that on our rails,` says founder Gilles Gade to Techcrunch.

The question to VCs, CrossRiver bank, 11Pulse, and other remains:

It is either the large incumbents (my Sharks) or the aggressively VC funded Fintechs (my piranhas) that are benefiting from the variety of  `anything Fintech as a service`. What about the bulk in between?

 

[1] The report includes the Temenos proprietary ‘Digital Sales Readiness Matrix’.

[2] Banks Not Meeting Digital Sales Expectations

[3] Who`s building the Banking Smart pipes

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.

 Subscribe by email to join 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).

Digital transformation for insurance or simply competitive advantage?

Just when I thought the Elephant that is insurance was fully accepted as an aggregation of many participants’ perspectives, along comes Digital Innovation, Digitization, and Data Culture discussions as another example of many parts making the whole.  What makes effective digital innovation/integration for an industry or firm, is digitization the root of InsurTech, who in the firm should be taking the lead on evolving the firm into a digital world, all questions that crossed my media feed this week.  On one day!  And a big question- does digital transformation stand on its own as a business initiative, or is it simply one other activity that comprises a firm’s efforts to maintain or grow competitive advantage?

As for the academic approach to digital transformation, I’ll consider two authors of articles that make good points and have solid basis from which to speak. I contend that in some ways the authors are also subject to the potential narrow path of each of the vision-challenged men in the fable- a conceptual grasp primarily of what is immediate and not in consideration of whole issue.  Through whose eyes are the issues being considered?  Customers’? Staff? Leadership? The public?

While there as many definitions of digital transformation as there are discussions about it, this example is a pretty solid one:

“we define digital transformation as the integration of digital technology into all areas of a business resulting in fundamental changes to how businesses operate and how they deliver value to customers. Beyond that, it’s a cultural change that requires organizations to continually challenge the status quo, experiment often, and get comfortable with failure.”  The Enterprisers Project 

(Consider though, that even this description does not embrace transformation from the customer-backwards perspective.)

Two authors who have a good grasp on digital transformation and its effects/integration on/in business provide us some bullet points:  Jim Marous, global authority on marketing and strategy for retail banks and credit unions in his article, “Becoming a ‘Digital Bank’ Requires More Than Technology”, and Claudio Fuentes, Product Manager at Pypestream, as noted in “5 requirements for building a strong data culture”

Areas or components that the authors suggest are needed or are present for effective digital transformation within an organization:

Digital Transformation Pathways

Good summaries, good advice, but are the bullet points actionable across the entire spectrum of insurance or banking businesses?  What if the subject firm is brand new, tech-based, with no analog process ‘baggage’ to wrestle?  The reality of digital transformation is that businesses need to consider the principle as part of being competitive within their respective industries, and in being responsive to what their customers need or expect.  Transformation for the sake of being fashionable might be considered a fool’s chase.

Consider the challenges for the Nigerian insurance industry- very low insurance product penetration, and lower than average acceptance among the population regarding the need/purpose of insurance products.  One hundred million potential insurance consumers, urban and extremely rural.  Does digital transformation make as much sense for that insurance market, when the delivery to existing customers is meeting their needs, and expanding penetration to the balance of the population can be effected through smart devices (much higher penetration of smart devices than insurance) and InsurTech players?  Are digital efforts potentially transformative to existing processes if the customers have no expectations of improvement?  Would it be focus and funds not well spent?  And if an industry is being built from ground up, there is little transformation to be had as any efforts are greenfield.  The point- it’s competitive advantage and customer responsiveness that should drive transformation or not.

(if you want to read a good summary of Nigeria’s FinTech/InsurTech activity and challenges, see Segun Adeyemi,  Where are the Digital Insurance Platforms in Nigeria? )

 A recent article by Richard Sachar, titled Who is Responsible for Leading Digital Transformation Within Insurance Companies  prompted a discussion with one of my favorite InsurTech connections, Thomas Verduzco-Weisel, wherein I opined:

“Better question, one might say- who is responsible for maintaining (or gaining) competitive advantage for a respective insurance organization? Digital transformation has been continuous since the advent of electronic data processing; it simply has a rallying cry now called ‘InsurTech’.   Customers may not know how (what methods) they want their insurance products delivered, but they do know what is important to them.  Keeping that pulse drives how the firm needs to maintain its edge, and then applying process, admin, or tech innovation to keep that edge will direct the firm in who/how/when/and with whom any transformation is needed. What if a firm’s culture, processes, staff, and delivery are driving growth and profitability now, should there be a transformation just to be fashionable?  Good business practices should drive any change, and by extension strategy at the senior level, tactics at operational levels, and all levels keeping track of how customers and staff are maintaining comfort with operations. “

(However, if there’s an urge to be fashionable, innovate/transform from the customer backwards.)

Digital transformation is as fashionable a concept as is InsurTech, and needs to be approached within business context.  There is no question that if transformation is undertaken prudent businesses should follow a framework as suggested by Messrs. Marous and Fuentes.  But before jumping into the fashionable approach, is any transformation being undertaken as a standalone concept, or as part of a firm’s competitive or growth strategy? Have to consider the entire beast, not just one facet or part. And as my fine colleague who knows of such things, Karl Heinz Passler,  states, Stop Confusing InsurTech With Digitalisation.

Digital transformation makes sense where it makes sense, and when undertaken, it makes sense to consider what all the organization’s stakeholders need.

image source

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

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).

Podcast with Urs Bolt after Davos, WEF2019

Urs Bolt comes also from the `O​ld Guard` of the finance world and joined the independent fintech movement in late 2017. He has already become a Fintech influencer and builds bridges between Switzerland and China, with his own unique skill set.

We spent three days together in Davos during the WEF and in this podcast, he shares some of his takeaways from the different events he participated in and of course, his insights on the ongoing Techfin transformation in China.

He speaks about Ant Financial, financial education in China, the financial surveillance challenge and much more. Enjoy.

We closed our discussion with a highlight of an upcoming unconference in Davos that is an annual tradition for both myself and Urs. Last year, I did a one hour talk (mostly standup comedy, see here) and Urs participated in the Talk battles.

Check out and join us this year at CryptomountainRocks10 – 12 March 2019. in Davos

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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.

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.

Viola.png

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.

Wealth & Brokerage Fintechs stars from the Fintech100 report

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KPMG by now has a classic Fintech ranking publication – The Fintech100 Report which is in its 5th year. This year it is in collaboration with H2 Ventures Australia’s early stage VC (full report here). The reason I looked closer into their Wealth & Brokerage section (14 companies) is not because I agree with their ranking criteria or their categorization criteria. I am more interested with those in the emerging categories and those that have managed to be included for the second at least time. I am interested in outliers and underdogs.

 

Robinhood has made it in the Ten top list along with several giants in the “Multi” category like Ant Financial, JDcom, Du Xiaoman Financial, and Sofi (categorized in “Lending” which IHMO should have been “multi”).

Half of the wealth & brokerage FinTechs are in the Top 50 and the rest are in the Emerging 50. Asia (China/Japan/Korea) have 5 out of the 14 and Europe 4 out of the 14. The UK has given birth to 3 out of these 4 Fintechs. Only Robinhood is from the US and Wealthsimple in Canada.

From the 14 companies categorized as “Wealth” only two had made the KPMG 100Fintech report last year: Robinhood and OurCrowd from Isreal. Only one company amongst these is blockchain powered, Quoine from Japan, 29th in the list.

Noteworthy facts about the 14 Wealth Fintechs

  • In May, Robinhood (ranked 8th) surpassed its rival E-Trade with 5 million brokerage accounts and $150 billion in transaction volume.
  • 51 Credit Card (ranked 12th) from China as of the end of 2017, had 81 million users across all apps and managed approximately 106.3 million credit cards, helping users complete a total of $15.6 billion in repayment transactions.
  • Wealthsimple (ranked 25th in 2018 and 29th in 2017) out of Canada has over $1Billion In AUM and has recently expanded in the US and the UK.
  • QUOINE (ranked 29th) out of Japan is the first global cryptocurrency exchange to be officially licensed by the Japan Financial Service Authority. It currently processes annual transactions worth over $50 billion. Qryptos and Quoinex, are among the most advanced in the world.
  • OurCrowd (ranked 32nd in 2018 and 25th in 2017) out of Israel is currently backing 150 startups across the globe and have helped 20 startups successfully exit. The company now has offices in 7 countries and earlier this year hit a major milestone surpassing US$1 billion in AUM and an accredited pool of 10,000 investors.
  • Neyber (ranked 35th) from the UK has provided over US$90 million salary-deducted loans in partnership with employers since 2015. Last month Neyber partnered with robo-advisor Smarterly to launch investment portal SmarterCare for business loans which will offer an investment ISA to employees allowing them to invest directly from their salary at no cost to their employer.
  • Folio (ranked 44th) out of Japan – not to be confused with FolioInstituional, the Fintech for advisors from the US – is an online security brokerage service in Japan, specializing in thematic investing. The platform is a DIY for managing assets through a robo-advisor, but also for designing thematic portfolios (70 themes currently.

Emerging Wealth Fintechs

  • Meet Cleo out of the UK, the AI assistant for financial management targeting millennials, with over 600,000 active users across the UK, US & Canada.
  • DAYLI Financial Group is a B2B Korean Fintech that has become a Fintech venture studio involved also in blockchain. DAYLI owns, CoinOne a large Korean crypto exchange, launched the ICON ecosystem out of Zug. They also design proprietary technologic with AI capabilities for financial management.
  • Dreams is a Swedish neo-bank with $100mil AUM that uses behavioral science for their saving, spending and lending services, in addition to their community management UX.
  • Liwwa is out of Jordan and focused on a niche P2P lending sector serving the MENA region. It is a marketplace for fixed-income investors and SMEs. The company uses a lease-to-own model and offers a Sharia-compliant investment opportunity.
  • Tide is a UK mobile first bank for SMEs only. Not sure why it is not in the neobank category. Since launching in 2017, Tide has acquired nearly 40,000 small business customers and surpassed 1B pounds of transactions in March of this year.
  • Tiger Brokers is a Chinese online brokerage that allows Chinese investors at home and abroad, to trade stocks in the U.S, Hong Kong and mainland China market via the stock connect scheme between Hong Kong and mainland stock exchanges. After 3yrs it’s mobile app accumulated trading volume reached $150 billion. Earlier this year the company became an official strategic partner of NASDAQ data to distribute its US stock market data to the Chinese online world.
  • Wallet.ng is a Nigerian Fintech with over 5,000 users. Their mobile app allows users to make payments, transfer funds, pay bills and withdraw from ATMs – all using their phone number. Last month alone they processed N234 million across just 17,000 transactions and have seen an average of 78% month-on-month growth in transaction volume and value since January 2018.

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.

AI algorithms – takeaways from Fintech+

The Fintech+ conference with its AI thread was unique. The morning sessions included presentations from Nvidia and Google, and use cases and learnings from Zurich Insurance. Leading into the sustainability & Fintech panel that I moderated just before lunch.

Marc Stampfli, Swiss country manager at Nvidia took us on a journey of AI Fall, Winter and into Spring. He explained neural network concepts borrowed from biology and the initial difficulties of neural network computations outperforming statistical approaches. The 1st tipping point came with increased data availability through the internet, and only then we had evidence that neural networks could outperform statistical models.

After that point, we ran into the next problem which was the lack of computing power to process all this data and multi-layer neural networks. And this is where GPU – a kind of parallel computer –  was created and first used in vector mathematics. This is the technology of Nvidia’s processor.

For me, this historical thread is another example of a solution designed for theoretical mathematics that finds a real-world application that takes us to the next level of the 4th industrial revolution. I associate it to the zero-knowledge proof in cryptography, now used in some blockchain protocols, that allows to verify & validate data without having to trade-off privacy[1].

We are living in a world in which, more or less unconsciously, we increasingly “Trust in Math”. After the GPU adoption in business, we moved to new hardware that is not only faster but also smaller in size. We basically reinventing how data rooms looked.  And this the world from Nvidia’s angle. They have facilitated the growth and new value creation, all powered by #AI tools.  The use cases in Finance are immense. Fintech solutions for:

  • Operations: automating claims processing and underwriting in insurance
  • Customer service & engagement: alerting customer for fraud, chatbots, recommendations
  • Investing/Trading: automating research, trading signals, trading recommendations
  • Risk & Security: fraud detection, credit scoring, authentication, surveillance
  • Regulatory & Compliance: AML, KYC, automating compliance monitoring and auditing.

Evidently, the biggest but fundamental problem that incumbents face in adopting any of these potential use cases, is that they first need to find ways to integrate their data and then to upgrade their data rooms to be able to handle the required computing power.

Having said that, Zurich insurance, one of the large Swiss insurers, shared with us their AI projects and research which started as early as 2015. Gero Gunkel spoke about their very successful AI applications in automating the review of medical records with the aim to arrive at a valuation. A process that entails reviewing reports ranging from 10-40 pages and that may take on average 1hour. They used AI algorithms that reduced this to 5 seconds! That is nearly real time for a business process that is Not low hanging fruit.

Zurich Insurance has also been using AI to automate the time-consuming process of collecting publicly available information towards opening accounts for large corporates. This automated web search can not only offer efficiencies but also become a new service provided to the underwriters of these types of insurances.

“Don’t look for the Swiss army knife”, said Gero Gunkel as AI may seem so promising that one can think it can take care of everything.

Dr. Christian Spindler,  IoT Lead and Data Scientist at PwC Digital Services, raised the important question on how to develop Trust in AI. This is a tricky topic as it beckons for answers around the limits of technology. For now, it is recommended to develop AI algorithms that can also provide explanations for their “Answers”.

I would say that “In Math we Trust” to develop algorithms that Answer “What & Why”.

“Improving lives through AI” is Nvidia’s motto for their Corporate Social Responsibility. See their initiatives here.

[1] Zero-knowledge proof allows a someone to re-assure a validator that they have knowledge of a certain “secret” (data) without having to reveal the secret itself. Zcash is an example of such a blockchain protocol.

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

 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.

A Thinktank Fintech initiative out of Greece

“Necessity is the mother of invention” is an English proverb that is not at all outdated. Small countries are developing regulatory frameworks to embrace and take advantage of the so-called “future technologies” because it will enable them to play vital roles in the 4th and 5th industrial revolution. As tech accelerates, it is expected that one generation may actually live through two major revolutions.

Smaller countries, policy-making organizations and think tanks are actively building the next layer to welcome the socio-economic changes that are inevitable.

A Greek think tank, To Diktio, was founded in 2013 with a European focus. To Diktio (the network in the Greek) is a member of the Foundation of Progressive Studies based in Brussels and focused on proposing reforms in Greece and Europe. I would like to thank the President of To Diktio, Anna Diamantopoulou[1] for reaching out to me. We can only grow through collaboration – see partnerships of ToDiktio, here.

To Diktio hosted yesterday a Fintech focused event for its members during which a very thorough Fintech report was presented by Dr. Kourouthanassis, of the Ionian University and Dr. Doukidis, of the University of Athens; and several policy reforms were suggested. I had the honor and pleasure to review the report (in Greek) and also participate virtually in the event to share some of my insights on Fintech global trends and the first necessary steps for Greece to dive into the Fintech opportunity which is much broader than simply reforming banking services (see video here – in Greek only).

The 40-page report offered a thorough overview of Fintech subsectors and also of the policies that have enabled countries to become Fintech hubs.

Naturally, mentioning first the FCA as an early pioneer in the Fintech. Highlighting that the first European Union country that developed a regulatory framework for “specialized banks”, was Lithuania.

The UK and Japan, are the leaders in establishing frameworks to facilitate the Open Banking movement.

Regulatory sandboxes exist in the UK since 2016 and only this summer the Central Bank of Spain announced a Fintech sandbox to be launched.

In Europe, only the UK launched Project Innovate last year to facilitate the dialog between Fintechs and regulators to innovate in the interest of consumers. Only in Australia, there is a comparable setup of the Capital markets authorities who setup as early as 2015, an Innovation Hub program to encourage the cooperation of regulators and innovators.

Fintech pulse

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Based on the Greek Fintech report, already in 2018, the median size of M&A fintech deals in Europe has nearly tripled from last year.

 

 

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Challenger banks, a European specialty, are the ones that have absorbed large Fintech investments; Revolut, Atom Bank, and N26.

 

 

Revolut has already opened offices in Greece, this past Spring. The penetration in the Greek market is remarkable. By the end of 2017, Revolut had acquired 55,000 customers in Greece, making Greece the 4th largest country/client for Revolut after the UK, France, and Lithuania. Revolut is planning to triple the customer base in Greece.

The first homegrown Greek challenger bank is PraxiaBank. The two also homegrown e-money companies are Viva Wallet and Tora Wallet. Viva is already well established with 60k retails clients and 280k business clients and 30mil euros of transactions only for 2018.

As expected several payment Fintechs have presence and business in Greece. Payments are the most mature but thin margin Fintech subsector. From the 375+ payment businesses with EU passporting, ten have reps in Greece and 9 have licenses to operate in Greece. From the 170+ e-payment Fintechs with EU passporting, 3 have a presence in Greece.

The largest Greek telco, OTE, has a new subsidiary Cosmote payments with a plain vanilla topup card. But what is more interesting is to watch what OTE does with their dormant insurance license and their newly acquired full banking license.

Opportunity via Fintech

The low hanging Fintech opportunity in Greece lies in alternative funding for SMEs. Greece is one of the few EU countries that lacks a crowdfunding and P2P lending framework.

The Greek government needs to launch a Digital ID platform borrowing design elements and tech from Estonia and India. Combining this with a basic regulatory reform for alternative lending, would be a short and long-term strategic move. In a traumatized economy that is recovering from foreign investments in real estate, Digital identities and access to alternative funding would make magic.

[1] Anna Diamantopoulou, has served in the Greek parliament for 11yrs and as European Commissioner for Employment, Social Affairs and Equal Opportunities (1999-2004). She has served as Minister of Education, Lifelong Learning and Religious Affairs and as the Minister of Development, Competitiveness and Shipping. She active in several European think tanks.

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

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