The next generation of re-bundling with embedded finance is on its way

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Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019. 

The rebundling of scattered digital financial services is underway at different stages in the various subsectors. Rob advisors adding consumer banking services, digital lending platforms adding investment offerings, mobile-only banks adding insurance and investment services, and on and on. Embedded finance (sorry Ron Shevlin for using this buzz word), platformification of banking, or creating an Asian Internet of Finance Western edition; in one form or another these trends are unstoppable. By now, they are the normal.

So what does the next generation of re-bundling look like and has it started already?

Last January, I wrote a post that seemed very much out there (and to some maybe it still sounds awkward) that looked at the existing silo between Food and Finance.

Food and Finance blurring through technology

With the COVID-19 lockdowns still fresh in our minds, managing uncertainty, enhancing our immune system, and the connection between our finances and our health (physical and mental) are very clear.

The current setting makes it very easy to understand Paolo Sironi`s dense FMT theory. Just focus on the main underpinning of FMT: Finance is about managing uncertainty. Of course, this is not reversable. Meaning managing uncertainty is not only about finances. Our physical and mental health are a big part of dealing with uncertainty. In my earlier piece I took the scientific views of biomedical gerontologists and of philosophers who foresee `the last days of death` and linked them to what Hippocrates and the Chinese have been preaching for centuries:

Food could become our best medicine

The research and innovation on this front, is already underway. At the upcoming Decoding the nature of future conference in Paris (Fall 2020), several important topics will be discussed. I zoom into the big topic of linking Food with Health and the trends around customized products for the future. AlimAvenir, a French specialist in the food innovation, has published a study addressing four main big topics

  1. Feeding 9.8 billion people in 2050: alternative proteins?
  2. The kitchen of the future: digitally assisted home cooking or robots?
  3. Food and health: are customized products the future?
  4. Transparency, traceability and future imperatives

Under the 3rd topic, of my interest, they look at customized food, the role of microbiota in certain pathologies that are big issues (like obesity, diabetes, gastro diseases etc). They conclude that smart IOT devices will allow advancements in this direction. They see growth in preventative medicine.

They also see reducing uncertainty, repricing financial contracts based on genetic data. They suggest that this decade will also force us to decide on how genetic data is shared. Technology aims to improve our genetic data (in this framework through customized food) so that a mortgage provider (be it a bank, or a non-bank) can customize the tenor of the mortgage accordingly. With better or improving genetic data, the tenor of the mortgage can lengthen.

Customized food can improve genetic data which in turn can improve conditions in financial contracts.  

I am starting to see a world of programmable financial contracts whose clauses are cryptographically linked to our genetic data.

In turn this data is dynamic with customized food being one of the ways we can improve it. Rejuv the spinoff from SingularityNet is one example of this kind of innovation. It is built on the Singularity Net protocol which is a decentralized protocol for benevolent AI agents (see previous post here). Rejuv connects individual health data securely, with researchers, clinics and the AI agents, to improve health via lifestyle adjustments. Tokens are used to reward members.

The silos between customized food and finance, are starting to blur in these new ways. The triangular connection I see, is now the broader Longevity sector to finance. In addition to customized food as medicine to improve genetic data, we can foresee precision, preventative, personalizes, and participatory medicine – the so called P4 – linking to finance.

Managing uncertainty in life is first about improving our physical and mental health. So starting with that as the core offering and creating a marketplace with analytics and services that improve diagnosis, prognosis, and suggest customized `journeys` (treatments), looks like the way a 2030 financial platform-ecosystem should look like.

Managing health uncertainty, advising and optimizing that aspect of our life bundled with debit, credit, insurance, and investments, is the way to go.

Customized health and wellness journeys improve our longevity (length and quality of life) which leads to a more pressing need to manage jointly our finances.

 One example of innovation in this direction is the Longevity Bank, soon to be launched, by longevity scientist experts. I met Dmitry Kaminsky, cofounder of Longevity Bank, in Davos and included the initiative (No. 33) in `Celebrating the WEF 50th anniversary with 50 bytes from Davos 2020`. Their motto is Health is the New Wealth.

The challenging link between genetic data, health data, financial data and corresponding analytics on each of these areas, is the next re-bundling wave. The opportunity is big and the complexity is breathtaking.

Margaretta Colangelo and Dmitry Kaminsky, the authors of the Longevity Industry book, call the Longevity industry, the Biggest and Most complex industry in human history. I think this statement will have no challengers. Yet we are marching towards a rebundling with finance.

Stay tuned.

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How innovative can Goldman Sachs be with its planned robo-advisor?

Maybe Goldman Sachs leads the way so that Digital Advice reaches the $1.26 trillion projected by 2023.

The large players are moving down-market, slowly and steadily. Goldman Sachs moved Marcus into their asset management division last year and has just announced that they will launch a robo-advisor with a $5k minimum next year. They acquired early on, Honest Dollar for digital retirement savings and Clarity Money, a PFM app. Both are mobile offerings.

Goldman at a high-level glance

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Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

The details of their planned robo-offering are not known yet and Goldman`s offering with the masses is a work in progress.

 Will Goldman develop a first-class Mobile digital advice app?

 Now that would be a great First in the US market. My intuition tells me that Goldman Sachs will integrate its existing partnerships, like the one with Motif, into this offering and use its existing brand name to build a pipeline of new customers. The partnership with Motif (established earlier this year) aims to launch innovative ETF products and indices based on machine learning and artificial intelligence.

  • Goldman Sachs Motif Data Driven World ETF (GDAT)
  • Goldman Sachs Motif Finance Reimagined ETF (GFIN)
  • Goldman Sachs Motif Human Evolution ETF (GDNA)
  • Goldman Sachs Motif Manufacturing Revolution ETF (GMAN)
  • Goldman Sachs Motif New Age Consumer ETF (GBUY)

Goldman and the newly acquired network of United Capital, are a great launchpad for the upcoming GS down market offering. Imagine it is Christmas next year and your mass affluent dad, aunt, or older friend already banking with GS and or UC, offer you a new investment account at GS which you can be fund with only $5k. Goldman remains a very sticky brand name that is envied by many in the market, and it will become accessible to the masses. The second trick up GS`s sleeve is that their product offering is not only the basic, mass-produced ETFs only but the innovative, in-house branded forward-looking ETFs too.

Smart products via a low-cost offering, by a top brand name provider. And if GS`s offering is mobile-first, then it has a great chance to leapfrog the existing pack.

Resources

https://www.etfstream.com/news/5822_goldman-sachs-and-motif-partner-for-the-next-wave-of-innovation/

 

The post How innovative can Goldman Sachs be with its planned robo-advisor? appeared first on Daily Fintech.

Zooming out on Capital Markets and Wealth management

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A New Year doesn’t always necessarily mean a new mindset but it does allow us to reflect and zoom out.

Capital markets and wealth management, are being disrupted but we are still early in the journey.

In financial products, Price wars continue and zero-fee products keep growing.

In business models, ‘Go Big’ through volume and marketplace offerings continues to dominate; but beware.

The dream of decentralized Community building through blockchain Tech, has failed miserably for now.

The dream of unlocking value through accounting on DLT and automating liquidity through P2P networks, is gaining traction at the country level too.

Robo-advisors and neobanks, have been pushing prices down. Whether it is ETFs themselves, single stock trading, constructing or rebalancing portfolios, buying insurance, Currency exchange, remittances. Customer is king not only getting better UX but also pushing the Fidelities and the Blackrocks of the world to increase their zero-fee offerings. From zero-fee index funds, to zero-fee trading of single stocks. Robinhood and Vanguard have a huge effect on keeping the pricing war very much alive.

The oxymoron is that the dominant business model remains platforms and marketplaces that cross-sell and aim to keep the customer hoping to sell more and more. But as long as the focus is on the product, as the margins will keep diminishing, it will be a Catch22 game. Margins are not uniform but the tech-enabled price war will eventually squeeze them all down to zero.

Think of Robinhood who started off from freemium stock trading. Their growth has been hugely ‘subsidised’ by VCs – $539million over 5yrs – and now they went out offering checking and savings accounts (albeit screwing up on the pricing)[1].  Sofi who started in student loan refinancing, and went into mortgages, thereafter moved into wealth Management. Goldman Sachs, an incumbent investment bank, who went in and out of banking, then targeted retail customers through Marcus, a consumer loan fixed fee service; and is now moving Marcus to their investment unit.

Will a new business model emerge in 2019 that circumvents this investable Catch22 of going after ‘Growth’ only to sell financial products whose margins are going to zero, one after another? This is what will be on my radar screen for this year.

The other oxymoron that is evident both from 2017 and 2018, is that the current designs and implementations of blockchain technology (predominantly, cryptocurrencies) have failed in building communities natively. During the bull phase, this was masked as “the crypto community” had a growing number of cross-over[2] members. But the common thread was only FOMO and herding. During the bear phase, the “carrots” put out to design communities were IMHO “a disgrace”. Incentives like retail bounties, airdrops of all sorts, are no innovation. Using Telegram and 24/7 digital community managers, has been ineffective in building trust with the potential retail investors and being transparent post ICO with governance and financial reporting.

The good news is that DLT experimentation grew substantially during the crypto winter and even countries are stepping in. The motives are either to boost the local economy by creating a tech ecosystem – in a decentralized design there can be several players included instead of “a winner takes all” operation – or to transform the government in several areas like land registries, self-sovereign IDs, voting, health, education, capital markets ect.

Happy New Year for those that were still on vacation last week. Lots of exciting insights to share this year too.

[1] I’ll ignore their failure in executing. What fintech can learn from Robinhood’s ‘epic fail’ of launching checking accounts

[2] Cross-Over Buyers is a Wall Street term that refers to investors that buy into an asset class only to capture high returns in the short term; whereas typically they invest in another asset class in the long term.

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.

SEC – Philippine Securities and Exchange Commission

PAA Capital Group Asia  is proud to announce its establishment in the Philippines.

SEC Certificate of Registration of Pacific Asian Atlantic Capital, Inc. granted. Below are the details provided by the Unified Registration Record (URR) for easier reference:

 

SEC Registration No.: CS201615085

Tax Identification No.: 009-346-740

HDMF No.: 206410700004

PHIC No.: 001000048850

SSS No.: 0395363054

True or False? — It Takes Money to Make Money

The short answer is YES; of course it takes money to make money. To make money in the stock market, you must have money to make the initial stock purchases. Starting a business requires money to buy inventory, marketing materials, office space and equipment. Even lottery winners had to have the seed money required to buy the ticket. The only exceptions that come to mind are inheriting, stealing or finding money.

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