The law of the fintech jungle is changing

Today when I went out to buy my lunch, nursing a crushing migraine I accidentally pulled out my company debit card to pay for the transaction. Luckily, in my glucose deprived eleventh hour, I realised the grey card was not the orange card, and yelled out to the operator to stop the transaction. Not a great look during the Sydney lunch rush hour, with hungry city workers milling around, eager for me to just get on with buying my lunch so they could.

Of course, if I had of had a Curve card on me today, it wouldn’t have mattered if I’d paid with the incorrect card. The card aggregator startup, who celebrated the first anniversary of their launch across 27 European countries today (must have been a slow fintech news day), would have allowed me to jump into their app right after and take advantage of their Go Back In Time feature. Assuming I’d caught my payments slip-up within 14 days, I could have moved it from one card to another. Bingo.

That’s not the only awesome thing about Curve. Like I link my Amex to my PayPal account to take advantage of collecting Amex points at places PayPal is accepted but not Amex, so to could I have once linked my Amex card to my master Curve card.

I use the past tense, because all of that was possible, until Amex pulled the plug on Curve back in late January.

Curve is understandably upset – you can read the founders impassioned blog here – but it does signal and interesting shift in the innovation/incumbent sands. The point at which banks and payment services become relegated to ‘dumb pipes’ is possibly closer than we think. In the Curve and Amex example, it’s already here.

Curve and Amex aside, the emergence of the money ‘experience’ gives me zero doubt that this will be death by 1000 cuts for incumbents, who despite many murmurings haven’t nailed this one, yet. If you can’t deliver the new contextually relevant, digitally immersive experience, then you don’t understand the new laws of the jungle in finance. This rings true for transactional banking and wealth, just as much as it does for payments.

If you are not experience led, and the only way you can retain your position is by killing off those who are, then you’re playing a very dangerous game that doesn’t end well. Curve may or may not win this battle, but it’s arguable we now have a fairly good insight into how Amex is approaching the war.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.

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


What is the problem with Money being a claim on an Institution? Reflections from the AxessThinkTank event

axessThe first full day event focused on what is now `Alternative finance` was of high quality and non-tribal. Organized by the Geneva based, Axess Think Tank, with four themes

  • The future of money
  • The Regulatory landscape
  • ICO-STO and Capital markets
  • Blockchain and the Token economy

I had the great pleasure of moderating the last two topics.

Watch Alpha Point the US based leader in digital Exchange software white label solutions and DLT software. Both team members were extremely upbeat about the growth prospects of their market sector. The CME group and the Royal Mint of England are already their customers and Novogratz invested in them last summer.  I felt that they are out there for a mass distribution of Crypto Exchanges that will allow for the tokenization of all kind of illiquid Assets. While selling exchange software, they are disintermediating the oligopolistic conventional exchange software business.

Cryptofinance is a Swiss quality business that offers asset management services, brokerage and custody. Lewin Boehnke CTO of Crypto Storage AG and head of research and shared insights from their journey, seemed to have a card up his sleeve when he repeatedly stated that

`there are a few major players that will join the digital asset class soon`[1].  Stay tuned on their news.

SCX is the new fully regulated Swiss Crypto exchange live since last summer. The Chairman of the board Christian Katz joined our panel. He is the former head of the SIX exchange and is now devoted to building an institutional grade business. A secure and transparent crypto exchange is undoubtedly needed and C. Katz knows the inside outs of the exchange business.

Taurus is a new Swiss player offering brokerage and trading services. Recently also added storage solutions.

LakeDiamond & Monart, were the two specific tokenization use cases that participated. One in tokenizing the industrial production of diamonds and the other in the contemporary art space.

Capco shared lots of insights from their clients and the projects that they have working on.Romal Almazo, Capco’s UK DLT & Crypto Lead continuously emphasized that we need to go back to the core issue

`What is the problem we are trying to solve?`. Five words please. Then we see whether blockchain can do the magic and solve it.

He was also assertive, in his belief that only what is FCA approved will be the dominant tech that will scale. He announced a CAPCO pilot project that is by invitation only, in which CAPCO will use its global network of SMEs to participate in a solution around digital assets that will be led by CAPCO. The aim is to develop a blueprint in solving market problems via digital assets.

CVVC and Amazix, participated in the panels, sharing their experiences from the growth and pivoting of the startup ecosystem.

e-Money, CBDC, and BTC

When you have a board member of the SNB Andrea Maechler, a senior research advisor to the BOE Michael Kumhof, a research fellow of the Fed St. Louis & Professor at univ. of Basel Aleksander Berentsen, a research fellow of the UCL Center for Blockchain Technology Daniel Heller; there is a lot to absorb from their talks and panel discussions. Add to that the moderator Michel Girardin, from the Univ of Geneva and Jean-Pierre Roth, the ex Governor of SNB, in the audience.

They agreed that payments are the very heart of any economy and that we live in a world that customers expect payments to be like WhatsApp messages.

The SNB is actually following the innovations around payments, whether Fintech or Bitcoin originated. Andrea Maechler, emphasized that the SNB`s mandate is to support and promote cashless payments and this done through SIX. Fintechs that hold a FINMA payment license will be granted access to the SIX system.

Regarding CBDC[2]`s they have concluded that it is not a tech issue but rather a policy issue. The SNB believes that while there are advantages, the main disadvantages, make CBDCs a no-no fort he SNB. They see that a CBDC would increase the risk of a bank run and would make monetary policy ineffective when it is actually mostly needed.

This is where Aleksander Bernesten actually stepped up and provoked the thinking. He firmly believes that Central Bank electronic money would increase financial stability.

Give access directly to the CB to all.

His motto is that

the Censorship resistant attribute of Bitcoin, is priceless!

He makes things simple by focusing on this attribute. Since there is no free lunch, we have to choose between

A Censorship resistant database which is inefficient and slow

Or

An efficient and fast centralized database which is not censorship resistant

 

He thinks that a central bank decentralized currency has no meaning at all. Forget about a Fedcoin type of idea. However, he proposes that Central banks issue electronic money for all! So instead of having the authorized commercial banks exclusively access directly the CB, we should all have direct access to the CB. Forget about the RTGS system.

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For those that want to understand more details read The Case for Central Bank Electronic Money and the Non-case for Central Bank Cryptocurrencies

Note: This post is not comprehensive coverage of the event. By joining the Axess think tank you can access the video recordings and more. Check it out here.

Don’t forget that currently

MONEY is a claim on the Central Bank or a commercial bank!

Will this change? How and when? The Why has been answered: For a Censorship resistance monetary system.

[1] Check https://www.linkedin.com/feed/update/urn:li:activity:6497140631427694592

[2] Central Bank Digital Currency

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.

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.

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


One97 – From selling Astrology services over the phone to a Global Fintech Unicorn

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A glance at the infographic with the top global Fintech unicorns[1] (as of Q3), fired several thoughts. Gold and bronze position to Chinese born giants, Ant Financial and Lu. The top seven Fintech unicorns that could fit their balloons which reflect their relative size in USD, included no European born companies. The US gave birth to four out of the seven Fintechs, which still operate mostly locally – Stripe, Coinbase, Robinhood, and Sofi.

One97 with a $10bil valuation, sitting right in the middle, was the only one that I honestly didn’t recognize with a blink. Once I started looking into the entity, I realized that a visit to New Delhi is long due. India is where One97 Communications operates. It is the leading mobile internet company offering mobile content and commerce services to millions of mobile consumers. Vijay Shekhar Sharma is the founder of this Unicorn which was launched in 2000!

One97 is endorsed by international big brand name investors:

  • Alibaba Group and Ant Financial (AliPay), own 40% of One97 shares.
  • Japan’s SoftBank became a shareholder in May 2017, injecting $1.4 billion in One97 for a 14.2% stake.
  • Berkshire Hathaway invested $356 mln in One97 (3%-4%) on the 28th October 2018, which brought the valuation up to $10bln[2].

One97 Communications is the mama of the flagship Paytm, born in 2010. This is the brand name that we all recognize.

PAYTM, at a glance

Paytm is a leading payment solutions provider to e-commerce merchants using a semi-closed wallet, approved from the Reserve bank of India.

Paytm started off in 2010 as a prepaid mobile and recharge platform and added a data card, postpaid mobile and landline bill payments.

In 2014, it launched the Paytm Wallet, and the Indian Railways and Uber added it as a payment option. It continued into E-commerce with online deals and bus ticketing.

In 2015, Paytm broadened its services with use-cases like education fees, metro recharges, electricity, gas, and water bill payments. It also started powering the payment gateway for Indian Railways.

In 2016, Paytm launched movies, events and amusement parks ticketing as well as flight ticket bookings and Paytm QR. It later launched rail bookings and gift cards. Paytm in India is considered the pioneer of QR based mobile payments.

In 2017, Paytm became India’s first payment app to cross over 100 million app downloads. It launched Paytm Gold, a product that allowed users to buy as little as ₹1 of pure gold online (₹ the new Rupee sign as of 2010).

It also launched the Paytm Payments Bank and ‘Inbox’, a messaging platform with in-chat payments among other products.

In 2018, it started allowing merchants to accept Paytm, UPI and Card payments directly into their bank accounts at 0% charge.

It also launched the ‘Paytm for Business’ app, allowing merchants to track their payments and day-to-day settlements instantly.

The company also launched two new wealth management products – Paytm Gold Savings Plan and Gold Gifting to simplify long-term savings. And an Indian robo-advisor. Paytm Money with various mutual fund products.

It also stepped into gaming with a mobile games platform Gamepind.

Just a glance at the Economic Times under One97, is sufficient to realize how it continues to make the headlines:

Paytm registers 600% growth in UPI transactions in 6 months

Now, you can pay LIC premium through Paytm

One97 Mobility Fund, the ecosystem play

While One97 Communications is the proud mama of Paytm, they have launched a $100M fund that invests in early stage mobile companies  – the One97 Mobility Fund (OMF). Their portfolio currently includes:

  • Paytm
  • TheMobileGamerPublisher of mobile social games for South East Asia reaching out to over 500M mobile users.
  • Ciqual: enables Mobile Operators to improve their data services through customer insights.
  • RainingCloud Technologies: develops AppSurfer (previously known as DroidCloud), a platform enabling Android access across multiple devices like non-android phones and PCs.
  • Dexetra: focuses on Artificial Intelligence around personalized Search and Mobility.
  • Plivo: a cloud telephony solution which helps enterprises and service providers setup, manage and run their own private or public telephony clouds.
  • IImjobs: A job portal run focused on mid-to-senior level placements.
  • CRAFTBY PRODUCTS: Engrave is an India-based design collective engaged in the pursuit of creating lifestyle products with fine craftsmanship.
  • Santa Claus Couriers: is an Indian eCommerce platform
  • MobiSwipe Technologies: allows merchants to use Android mobile phones or tablets as Point of Sale.
  • Zepo Technologies: helps small business owners to setup their online shop.

Why One97?

197 was the telephone directory number in New Delhi. Vijay Shekhar Sharma launched a call center selling Astrology services over the phone, which he named as One97. Eighteen years later, One97 Communications is the 4th Fintech unicorn on the global marketplace. An Indian mobile internet company which has earned the liking of international large investors and which acts like an ecosystem.

[1] Included in the Redefining Financial Services newsletter

[2] Source: https://www.cnbc.com/2018/08/28/reuters-america-update-3-berkshire-hathaway-takes-stake-in-indias-paytm.html

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.

Amazon vs Alibaba – the clash of the mighty techfins in numbers

We may have to soon rename ourselves as Daily Techfin. We have been focusing on the breaking of banks and their resistance to the Fintech avalanche, while Techfins have been slowly but surely capturing the FS world. Lots of numbers coming your way – so be warned.

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Money 2020 opened up in China, Hangzhou – the home of Ant Financial – for the first time this year. China is really were Fintech is happening at scale, and just by sheer numbers, the West look dwarfed. This is largely driven by the growth of Alibaba and Tencent.

Alibaba did $31 Billion in sales on Single’s day, and Amazon had its best sales in history through the 2018 thanksgiving period with 180 Million transactions.

Amazon haven’t announced exact sales revenues, but using Statista’s average online transaction size in 2017 of $81, their total sales could have been $15 Billion.

That just shows the scale of China vs rest of the world. Also, the total ecommerce sales number on Cyber Monday in the US was $7.9 Billion, that is just about 25% of what Alibaba achieved.

While the US Ecommerce market is set to reach $630 Billion by 2020, China’s is projected to be around $1.7 Trillion. Its fascinating to see how these two giants compare against each other in the ecommerce space. But, by Alibaba (Ant’s) own admission ecommerce and payments are just a foot in the door.

Some of the metrics discussed at Money2020 in China this year for different financial services that Ant offered were the following:

“1+N” – Onboard the customer with 1 QR-code – as payment technology. Cross sell marketing, training, cash management, loans, insurance etc.

“310” –  These are their KPIs for SME loans: 3 minutes for processing application, 1 second for monies in the bank, 0 manual work.

“212” –  Their KPIs for Insurance claims – 2 minutes for processing application, 1 second for review, 2 hours for insurance settlement to the account.

Stats Source here

This is only managed by cutting edge technology used with alternate data on consumers, to model their behaviour and assess risks in real time. I had already written about how Amazon helped an SME I knew, with a loan decision on the same day. Ant are just doing it better.

Now who is winning the battle? Amazon definitely have the global advantage. As of 2017 they had 2 Billion visitors per month, whereas Alibaba was at about 900 Million visitors per month. But that doesn’t necessarily translate into Financial Services that are provided by these firms.

In 2017 the number of Alipay users were 400 Million compared to Amazons 33 Million users, and as of September 2018, there were 520 Million Alipay users. Comparing transaction sizes is almost meaningless, as Alipay is light years ahead.

And all this with just 55% internet penetration in China (vs 78% in the US), with Alipay conquering 54% of China’s mobile payments. If payment services that the largest Techfin in the West does, is about 10% of that of the largest Techfin (of the East), it should give a perspective of what it means to other ancillary Financial Services such as lending, insurance etc., And if that is the comparison between the US and China, UK and European Fintechs perhaps won’t even come close.

I must confess that, I started this article wanting to just talk about Alibaba, China and Money2020. But when I started to look at the startling number differences between Amazon and Alibaba, I had to make it more of a comparison (although there is not much of a comparison).

An American friend of mine who recently visited China, mentioned that going to China felt like visiting the future. With the numbers that I have managed to dig out, China does feel like Wonderland when it comes to Fintech, thanks to its TechFins.


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


 

Capital One Keen on Coupons – acquires Wikibuy

Outside of airports, reward schemes and shopping discounts with credit card schemes are notoriously bad and difficult to use. Right now I could not tell you a single discount my Amex entitles me too – maybe Hertz or some obscure wine delivery company? Zero idea. But do I love a discount – heck yes!

As you probably know with online shopping, there is always that trade off when it comes to discounts – the effort you have to put in to finding those coupons online. On a day to day basis, I hardly bother, but as I’m travelling right now, and metaphorically bleeding Euros, my care factor is on the increase. So every time I book something I’m up for investing 10 – 20 minutes on the coupon code hunt. You do get lucky – I landed a 25% discount on a food tour in Rome just the other day, completely by chance – finding an active code on a food bloggers website. But friends – this is ‘needle in the proverbial online haystack’ stuff, and not exactly my idea of how to spend a night in Rome.

Why compromise your dinner plans or leave these things to chance when they could be completely systematised and algorithm-itised? Many people don’t, enlisting the help of companies like Honey. The very clever browser extension automatically finds and applies coupon codes at the checkout with a single click. It has over 10 million users. It’s also becoming a serious contender in the loyalty space, having launched a cashback program Honey Gold. Who knows what it could do next.

So it should be of interest to those in the payments/loyalty space to hear that this week Wikibuy, a 4 year old coupon code start up similar to Honey was acquired by American bank Capital One. According to Tech Startups the product will remain separate to begin with, before ‘potentially integrating with its digital offerings.’

Why would a bank do an acquisition like this? Well, if you’re a loved discount program with a cashback rewards scheme, but you’re still putting payments through someone else’s network, if you were Honey, why wouldn’t you get into issuing and earn more margin and save customers more money? Which means if that strategy plays out, and you were Capital One, automated coupon discounts is a game you can’t afford not to be in any longer.

The future is coming fast. And if it makes my next trip to Europe cheaper – I’m in.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.

Africa’s M-Pesa’s landmark deal with Western Union and their global ambitions

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Africa’s poster child for financial inclusion, Safaricom’s M-Pesa, signed a landmark deal with Western Union earlier this week. The deal would give M-Pesa access to Western Union’s mighty distribution network and banks across 200 countries.

M-Pesa’s journey started in 2007 when Safaricom launched the product for its customers in Kenya. It has seen tremendous growth in some African countries, and not-so-impressive uptake from other parts of the continent. The customer base in Kenya alone is about 17 Million, and Tanzania and South Africa are markets where they have their foot print.

M-Pesa’s expansion beyond Kenya and Tanzania have not been without challenges. Their slow growth in South Africa especially was a disappointment, primarily because of the regulatory landscape, payment infrastructure inter-operability issues and customer awareness were seen as key issues.

That didn’t stop M-Pesa from going Global though. They have a presence in India, through a partnership deal with ICICI bank and also in some parts of Europe. However, they haven’t been able to replicate their African story elsewhere.

mpesa-around-the-world

Since the beginning of this year, M-Pesa seem to have revisited their strategy in going global. They have focused on making the most of their existing account holders in Kenya and Tanzania, and providing them financial services that go beyond borders.

“Essentially, how we will do it is look at mapping of customers we have today where we see customers transacting or making calls,”

– Paul Kavavu, Head of M-Pesa New Business Ventures

In order to do that, M-Pesa had to meet global regulatory standards around Anti-Money Laundering and Terrorism Financing. They seem to have done that well now, and are on a roll in signing partnerships with several global financial services organisations.

They had signed up partnerships with Moneygram and WorldRemit four years ago, but that deal largely focused on inward transactions to Africa. The recent deal with Western Union allows Kenyans to send money abroad from their mobile phone.

That opens up major opportunities for M-Pesa to expand globally through its partner channels. Safaricom charge a commission of Sh100 for remitting up to Sh5,000 to a Western Union agent and Sh500 for more than Sh35,000. While this is on the lower end of the pricing spectrum, it should give them the opportunity to grow.

M-Pesa signed a deal with Paypal earlier this year to exploit the market in India, where they also had tie ups with Vodafone. With global players looking at the Africa opportunity, M-Pesa should be able to script their growth story beyond African shores. In the last 6 months, M-Pesa revenues jumped 18.2% to Sh35.52 billion from Sh26.20 billion a year earlier.

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Its good to see African super stars going global, and their success beyond borders will be a case study in itself. However, I believe, the rest of Africa is more of an opportunity for M-Pesa. Their understanding of the continent, clubbed with recent improvements against regulatory standards, should give them a good chance to look at rest of Africa. There are many leap frog moments to be had in Africa, and M-Pesa is perhaps best positioned to make them happen.

 

Arunkumar Krishnakumar is a VC investor focusing on Inclusion, a writer 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


 

Finastra’s Open Banking Readiness Index – DBS takes Asia top spot

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Finastra recently released their open banking readiness index along with a report  on how banks in Asia have performed against certain criteria. Its not surprising that of the five dimensions that Finastra has set for open banking readiness assessement, DBS bank have topped two. DBS, in my view, have been one of the more innovative banks.

The assessment was done across Banks that together constituted 60% of assets in Asia, so its a fairly good indicator of where banks are.

Now a deeper dive into the index and the criteria:

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APIs are the future, and we have heard that time and time again. The key pillars of the frame work are focused around how banks have prepared to

  • Adopt APIs
  • Integrate with Fintechs and other third parties
  • Manage and mine data internally
  • Monetise data
  • Be innovative

These are fairly broad criteria to assess the readiness across various aspects of producing, managing and sharing data around the value chain. The coverage, in my view, is comprehensive. And purely based on the framework used, it can clearly be replicated across Europe and other parts of the world, to see who the global leaders in open banking are.

On the breadth of coverage, I would have liked better insights on standardisation across APIs. Open banking is great, but when there are some standards that banks can agree on amongst themselves, and conform to them, that would help downstream firms and systems consuming their data.

However, the depth of the assessment is really what could be invaluable. Each of these pillars have left some points unanswered. Let me go through some points I would have liked to have better clarity on.

While adoption of APIs internally and externally is a key metric, I believe awareness around open banking is pretty low amongst the consumers. Shouldn’t readiness factor-in the efforts that banks have put in to raise awareness amongst consumers?

The following are the points that API adoption assessment covers. While this report is all about the readiness of banks for open banking, adoption should lead to something meaningful. And that would be customer uptake.

OpenBanking2

Also, establishing partnerships with Fintechs and integrating are broadly covered. But what we define by partnerships need to be clarified.

Many startups that are approved for open banking have access to Banks’ APIs. But are still miles away from doing anything meaningful with it. Again, the end customer is forgotten here.

Banks have more to do than follow up with these downstream businesses and ensure end customers are benefited. But regulatory framework that approved these Fintechs to use Banks APIs, should have taken some kind of customer metric as a criteria- to me that is readiness where the entire value chain is considered.

One argument is that, it is a pure bank readiness report, and has nothing to do with customers. But there are times where the report talks about integration with the developer community, apps builders, and also with third party service providers, so why not customer uptake too?

For example, the number of live third party applications that actively use a bank’s APIs could have been a good metric.

Another point on the data readiness of banks, where data security and governance are key criteria. In all my years of experience with systems in banks, I know the quality of data is generally very poor. I have worked in environments where a highly critical report has 150,000 manual adjustments in its underlying data. And this is so common place – at least used to be, not long ago.

If banks automate data of poor quality using APIs, and claim readiness over data security and API infrastructure, that would be like lipstick on a pig.

There is no point in securing, sharing or making business decisions on low quality data. This problem is generally amplified in parts of a bank where there are lingering legacy systems. While accuracy of data is taken into consideration, when banks are tested for data readiness, data quality will need to be the number 1 criteria.

It almost feels like the framework has allowed the most topical data problem (information security) as the number one criteria – to me, it is not.

Data monetization models are well thought through. However, how some of those models would help create better (cheaper) products for the end consumer is something banks should start thinking about. And more importantly, how those monetization models will be communicated to the customers in a transparent fashion, is pretty critical in a #facebookIsDead era.

In summary, the report does a great job of providing a view of how open banking can drive innovation within banks. While I have pointed out some minor areas across the framework used, my biggest criticism is that, the customer seems to have been forgotten even in this report – yet again.

Readiness can be about infrastructure readiness, process readiness, or business model readiness. But the so-what needs to be the final readiness score – it has to be about how soon it will benefit customers.


Arunkumar Krishnakumar is a VC investor focusing on Inclusion, a writer and a podcast host.

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