Introducing Sheldon Freedman as our Security Token News Curator


A few weeks ago we started a new format. The logic was explained in this announcement.

We believe in constraints because sipping from a firehose is a time suck for the busy senior leaders who rely on DailyFintech to deliver just enough information to get on with their job. 

So once a week we choose the 3 most important Security Token news stories. This requires judgement and that only comes with deep experience in the market. So we were delighted when Sheldon Freedman, one of the leading experts on the Security Token market, agreed to be our regular weekly news curator on the Security Token market. 

We chose Security Token news because we believe that this is a tsunami sized wave of change. After some false starts in 2018 and 2019, we believe that real change is happening in 2020.

“Hofstadter’s Law: It always takes longer than you expect, even when you take into account Hofstadter’s Law.” The flip side of this is that disruptive change is also bigger than expected when it does arrive – think of the Internet. 

Seeing the news that matters each week will help busy senior leaders to position well for this tsunami of change. 

Sheldon Freedman a Fintech lawyer at Hassans international law firm, is one of the leading experts on the Security Token market. Security Tokens is a big, complex subject that requires legal, technical and commercial knowledge and we found that rare combination in Sheldon Freedman.

For the last two weeks I interviewed Sheldon and he picked our 3 Security Token news stories. So I was delighted when Sheldon agreed to be our Security Token News Curator

Please welcome Sheldon Freedman. He will be your guide to the Security Token tsunami of change. Please tune in each Friday to learn what matters in the Security Token market.

You get 3 free articles on Daily Fintech. After that you will need to become a member for just US$143 a year (= $0.39 per day) and get all our fresh content and our archives and participate in our forum.

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Flood insurance- where the rising tide has NOT raised all ships


The problem is known, the data lakes related to the problem are deep, there are huge costs associated with it and plenty of human suffering.   Whole sectors of predictive data businesses have grown to better understand what is behind it, options abound in an attempt to mitigate its effects.  Governments around the globe spend billions in preparation for and response to the events.

So why isn’t flooding, flood damage mitigation, flood damage repair costs/financing, and flood insurance availability less of a global problem?

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


The breadth of the problem

Aon indicates global economic losses due to flooding between 2011-19 exceeded $600 billion US, with only $111 billion insured, an amount that surely does not include all infrastructure and productivity losses, or loss of life.  A $500 billion cumulative coverage gap; surely things have improved during the nine-year period, yes?  No.  The latest three-year period indicates a coverage gap of 84% of flood losses, worse than the cumulative 81% during the decade.

Innovation’s Data Analysis Effects

Much has changed in flood risk prediction since the early 1970’s when public flood programs were introduced (e.g., National Flood Insurance Program in the US).  At that time and until recently efforts expended in determining flood risk for a subject area were through elevation mapping devised from physical surveys of respective areas.  These elevation determinations in conjunction with hydrologic data were the default tool.  Problem was that there were few if any insurance carriers that would write flood cover without subsidy from an area’s federal government. In fact, in some jurisdictions (like the US) flood cover could only be written within a government program.  Too much risk of a regional Probable Maximum Loss event, actuarial premiums would have been prohibitive, adverse selection would be the driver of the coverage chase, etc.  As such government programs were the default option, and even at that participation was low.  In the US an overall participation rate in flood insurance even as late as 2017 was less than 15% of properties.

There have been remarkable advances in mining and analyzing data to identify a property’s relative flood risk, and the probability of a significant flood event, some examples being:

  •, a product of tech innovator First Street Foundation allows the user to input an address within the US and obtain an idea of rising water’s effects
  • Previsico , not only has developed tech do assess probability of flooding in the UK, but includes live modeling during flood events and includes warning capabilities
  • FloodMapp , before, during, and after services- modeling, dynamic prediction and flood damage quantification for claims
  • Hazard Hub , has risk modeling data that in addition to NFIP flood maps model surge and even tsunami risk by property address
  • – provider of property specific flood risk info (thanks Sam Green)
  • included this resource due to the firm’s unique approach to mastering flood tech methodology and applying that knowledge to risk assessment through flood maps.
  • Leveraging social media for warnings- Sri Lanka has had success notifying more remote villages of impending storms/flood potential. Penetration of smart devices provides a warning platform.  Other chronic flood regions like Bangladesh are beginning to see the need of tech warnings due to recent flood events.

Funding risk management

The extensive flood protection gap suggests that private funding of flood risk has been just a small part of overall flood insurance.  The US market has primarily had NFIP response (or ex post government/emergency funds to account for the coverage gap)- a US government flood insurance market that has continuously functioned as a deficit program due to subsidized rates, significant adverse selection/moral hazard issues, being seen more as a constituent response vehicle than an insurance scheme by congress, being administratively under-funded, and not being a mandatory participation plan so the volume of participants is too low to be self-sustaining.

Properties in flood-prone areas within the UK market of late have benefited from the Flood Re program where UK insurance carriers contribute to the flood insurance plan (as do property owners).  Without belaboring the functioning of the plan (take a look at the website) one can say it’s as much an effective hybrid industry/government/property owner plan as found anywhere.  Its plan is to function as is for a few decades then convert to a fully private plan.

In most countries the largest volume of response is in the form of government emergency finds, particularly for cleanup, infrastructure repairs, and immediate populace support.  While significant, these government responses are inefficient at best and typically delayed by legislative inaction. 

Where there is much optimism for funding is in the capital markets- catastrophe bonds and insurance linked securities (ILS).  Per the data found at, ILS and funds held for flood risk are a small portion of the more than $40 billion US held in the reinsurance/ILS market.  There is plenty of capital in the market, however, and the appetite for returns over those of typical financial market vehicles is building interest in ILS.  The complexity of reinsurance/ILS deals is increasing, as is the level of apportioning tranches of risk across hedging deals.  The key is that as private flood insurance becomes more available the need and interest in alternate risk financing will grow.  An 80+% coverage gap for a peril that is becoming increasingly more frequent, in combination with the trillions of dollars of property at flood risk will find ways to attract capital markets’ involvement, and as data availability and granularity increases the pricing of the vehicles will become even more sophisticated. 

Flood insurance going forward

A problem not considered often in the flood peril aftermath is that flooding affects not only individual property owners, but everyone within a flooded region.  Even the elevated property that is not flooded is affected; its residents are prevented from venturing out, cannot not shop at a flooded store, are unable to get municipal services due to closures, etc. And- the cost of government responses in the absence of insurance are borne by all within a community.  The other factor that is often overlooked?  Insurance proceeds ‘jump start’ recoveries with funds for local businesses; lack of widespread flood insurance cover leads to much less money on the street after an event.

Consider flood insurance penetration within the US- less than 15% of all property owners hold flood cover, and most who do keep it due to mortgagee requirements.  A recent article shared by RJ Lehman of the R Street Institute about the Mississippi flooding occurring as this article is written reinforces that most property owners will be left without a financial backstop for flood recovery (by the way- in the US an article like that is written after every flood or hurricane, the only copy that seems to change is the name of the city/town and the number of policies in force.)  The recovery will come without insurance- slowly, funded piecemeal until finally government funding will be made available.

Is it time for regional parametric programs funded by taxes and made available immediately after a trigger event?  Seems a really good idea since no matter what in the flood peril world the government is the funder of last resort, why not make it the quick response at no more cost than we are used to source? FloodFlash has proven event-based parametric flood cover to be effective option for property owners in the UK, and per Artemis’ reporting SJNK (Japan) is rolling out similar cover for property owners there.

Is it time to make flood insurance a requirement of all homeowners insurance holders?  Flood Re seems a reasonable model to follow, and even with disparate regulatory bodies action can be taken to have an entire region/state/country participating.  Flood perils are growing, so are costs, so is the exposure to critical economic areas.  Smarter approaches to private flood insurance that is based on knowledge of not only insurance but on the factors behind flooding and risk as is used by Chris Greene at FloodInsuranceGuru are needed.  Partnerships such as experienced with Previsico and Loughborough University need to be supported.  Subsidized premiums are OK, but much greater breadth of participation is required to make programs even remotely viable.  The underwriting, mapping, and response tech is there, the political and economic will must be also.


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Small Business Fintech is levelling the playing field with big business over cost of capital


Today, Jessica is taking a break. This post is by Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy

We saw the potential in the Small Business Fintech megatrend, which we described as “big enough to drive a truck through” back in 2015 and Jessica Ellerm started our regular weekly column 4 years ago in February 2016 (when it was seen as a niche within a niche).

By 2020, Small Business Fintech has become mainstream and is scaling fast. Today we reflect on the growth of this market. 

Now that Small Business Fintech has attained mainstream status (as seen by all the financings, partnerships, exits and market traction that we report on regularly) it is time to look at 6 niche markets within Small Business Fintech.

  • Credit Scoring. Efficient loan processing through analytics, AI etc is key to Small Business Fintech.  It is easy to lend quickly, but much harder to lend quickly AND profitably.
  • Digital trade finance. This has lots of ventures some them quite mature, but is not as high profile as the first segment. These go via various names such as Supply Chain Finance, Payables Finance, Receivables Finance. These offer lower APR for companies that have invoices from customers who pay reliably (or have a good credit rating).
  • Asset based lending. This is not as mature and still ripe for innovation. It is complex because you also have to fix the currently messy business of asset recovery post default.
  • Innovation Capital for millions of entrepreneurs. The market tends to equate Innovation Capital with equity for Baby Unicorns aka Venture Capital. The much bigger and currently overlooked market is patient capital for Butchers, Bakers & Candlestick Makers ie for main street businesses.
  • Smart contract tokenised payment processing. Our thesis is that the stranglehold of the Credit Card networks will first be broken in Small Business and replaced by some form of innovation that uses smart contract tokenised payment processing using stablecoins. This is still very early stage. 

All these changes are levelling the playing field with big business corporates over the cost of capital. For years, big business corporates got capital very cheaply and quickly while  small business struggled with clunky processes, high rates and lots of personal risk. The second order implications of this levelling of the playing field are profound.

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`NonTransparent ETFs` one step forward and two steps backward

pros cons

The `NonTransparent ETF` wrapper caught my attention recently, while reviewing WealthManagement news and trends. What kind of innovative investment vehicle would choose in our times, this kind of name?

In late January this year, the SEC approved a new ETF wrapper and several companies will be able to launch active ETFs or license the wrapper to asset managers. T. Rowe had first applied for SEC approval to launch actively managed ETFs (what is now called `NonTransparent ETFs`) as early as 2013.

Undoubtedly, the growth of low cost, indexing, passive ETFs has been supported by digital innovations in wealth management. However, it is the incumbents that own the lion`s share of the low cost, passive ETF market. Similarly, it is predominantly incumbents that will be launching NonTransparent ETFs.

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. 

You get 3 free articles on Daily Fintech. Get all our fresh content and our archives and participate in our forum, by becoming a member for just US$143 a year.

NonTransparent ETFs are actively managed ETFs that offer all the advantages of the ETF wrapper – digital access, intraday liquidity, tax efficiencies, ect – for actively managed portfolios. The reason that they have been called `NonTransparent ETF` is that the managers are not disclosing their holdings on a daily basis but on a quarterly basis. The ETF manager will only disclose real-time his-her positions to the Authorised Participant that is the entity who provides the in-kind redemption process.

Eaton Vance has been the only company that already has an approved wrapper, the NextShares, which is an actively managed open-end fund trading on exchanges without regularly disclosing its holdings. ETMFs were launched in 2016 but the growth has been negligible.

Eaton Vance Stock NextShares (EVSTC) – $6mill AUM

Eaton Vance TABS 5-to-15 Year Laddered Municipal Bond NextShares (EVLMC) – $7mil AUM

Precidian received approval in Spring 2019, for their own proprietary NonTransparent ETF structure, the `ActiveShares` which can also be licensed.

In this recent approval, Blue Tractor a 5 year old company also received approval to license its proprietary model, Shielded Alpha, to asset managers who are interested to launch NonTransparent ETFs.

Actively managed ETFs

Actively managed ETFs already exist but they are no more than 2% of the entire ETF sector. They have predominantly been focused on fixed income which is an asset class that the portfolio holdings are not easily replicable. Most asset managers have had difficulties beating their benchmarks and at the same time offering low cost investment vehicles (even in funds) which has resulted in very low interest in equity actively managed ETFs.

As most opportunities in equities have been in smaller caps rather than larger caps and in international markets rather than US domestic markets, actively managed ETFs in larger-cap domestic caps seem challenging.

The NonTransparent ETFs that have been approved maybe (just maybe) will establish themselves especially as investment ingredients that financial advisors embrace. The question is whether financial advisors will stomach the opaqueness of these ETFs. I guess they would if the alpha produced is sufficient but that of course, is a chicken and egg problem.

The only example of fully Transparent Actively managed equity ETFs is the family of ETFs launched by ARKInvest, which I have covered from their early days.

The investment thesis of ARKInvest is Innovation. It offers five actively managed thematic ETFs whose holdings are fully transparent (with a small intraday reporting delay). ARKK is the largest ETF with $1.86billion AUM (Total assets under management for all five ETFs are just over $3billion)

Screen Shot 2020-02-17 at 10.51.14

ARK was awarded by Fund Intelligence in 2019, the ETF Suite of the Year. Cathy Wood, the CEO, has also been disruptive in the way research is conducted at ARKInvest. They have developed an Open Research process that allows them to go beyond the traditional financial analysis by including Theme Developers and experts and holding open debates around their investment themes. More here.

Two picks of noteworthy innovations of ARKInvest ETFs.

  • In the Fall of 2015 ARKW ETF, was the first ETF that invested in Bitcoin through Grayscale’s Bitcoin Investment Trust. I personally remember reading Chris Burniske`s (research lead at the time at ARKInvest) ARKInvest research at the time which was shared openly and led to their investment decision. The ARK Web x.0 ETF (ARKW) listed on NYSE Arca invests in  innovative internet technologies including cloud computing, big data, digital media, e-commerce, bitcoin and blockchain technologies, and IoT.


  • Currenrly, ARKInvest shares openly on their website and on the Github their valuation model of Tesla which is a core holding in three of their five ETFs. Tesla’s Potential Trajectory During the Next Five Years is their latest thinking around Tesla`s potential and the actual model with its inputs is on the github here.


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Bitcoin price surges. Is Coronavirus behind it?


The Coronavirus is negatively already affecting several global industries and should the disruption continue, we could see the impact reach all the way to the end of 2020. One of them, electronics and tech are already feeling the impact of the coronavirus. With Bitcoin’s scheduled halving in May, Chinese miner manufacturers have seen a rise in demand for new equipment. The world’s largest manufacturers of mining equipment are based in China (Bitmain, Canaan, MicroBT, and InnoSilicon) and all of them face delays in production and delivery. The price of Bitcoin and cryptocurrencies have increased whenever investors start to panic. Should we consider the coronavirus outbreak a good thing for the cryptocurrency market?

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and a weekly columnist at

In a tweet on Valentine’s Day, Balaji Srinivasan, the ex-Coinbase CTO, compared bitcoin’s price to the growth of coronavirus. Srinivasan thinks that bitcoin will reach $100,000 following in the footsteps of coronavirus:

The comparison might look far-fetched, but in followup tweet Srinivasan provides more information to defend his position, including links to Wikipedia pages of Excursion probabilities and Geometric Brownian Motions. The comparison probably doesn’t make a lot sense to those unfamiliar with the stochastic process, but Srinivasan tries to enlighten us about the similarities between the latest Bitcoin price surge and coronavirus outbreak.

China has the status as a crypto investment hub. China is one of the most important markets for the crypto industry, not only in terms of sales and adoption, but also in terms of the number of startups. The country is the birth-place of major crypto companies including Binance, TRON, Huobi and others.

Even though the Chinese government has banned the trading of cryptocurrencies, the country still leads Bitcoin mining, with an estimated 65 percent of the total hash rate. China also houses the most crypto exchanges in the Asia-Pacific region, which has 40 percent of the world’s top 50 exchanges.

As we approach the upcoming halving, crypto funds and exchanges have been on an arms race, ordering new and more powerful models as they expect the halving will increase the price of bitcoin.

While manufacturing delays in mining equipment has been good news for existing miners, some mining operations have been interrupted. At a mining farm located in a remote part of China, had to stop operations. Even if some Chinese crypto mining facilities are shut down by authorities, it looks like is has little to no impact on the network’s hash rate. The network appears to be performing stronger than ever with hash rates continuing to rise.

Screen Shot 2020-02-16 at 23.42.26.pngChinese crypto investors are a considerable market force. Since the US-China trade war started in 2019 and now with the coronavirus outbreak and stock markets failing, bitcoin has seen massive investments, by nervous investors.

Usually when stocks go down, cryptocurrency prices go up. Bitcoin has risen 48% since the start of 2020, outperforming gold. This may be due in part to the coronavirus. The market cap for the entire crypto sector has gone from $190 billion to the $290 billion.

Screen Shot 2020-02-16 at 23.48.53.png

With 69,191 people infected with the coronavirus and 1,668 fatalities in China, many basic medical supplies are scarce. The crypto industry was among the first to support the fight against the epidemic. Hyperchain launched Shanzong, a blockchain-based donation tracking application. The platform tracks donations, from money, masks and other medical materials given, the matching to areas of need and delivery. It was launched last Monday and has already recorded 500 donations. Binance Charity helped Chinese Corps to distribute over 70,000 masks in the infected areas.

Also, as the world is trying to tackle the spread and treatment of the coronavirus, blockchain is being used for insurance claims.  In an article by the South China Morning Post, Xiang Hu Bao, a Chinese online mutual aid platform, added the coronavirus to the illnesses that are eligible for a one-time payout of 100,000 yuan ($14,300).

The cryptocurrency space saw the birth of CoronaCoin (NCOV), published in a Reddit post. Now you can bet on the coronavirus pandemic, The more the virus spreads the more valuable the token becomes. According to the website, the total supply is based on the world’s population and the token will be burnt once every 48 hours, depending on the number of infected people and fatalities.  What a way to incentivize people… let’s spread the disease to gain. It should do the exact opposite and gain value as the disease stops spreading. All the money, not just a portion, should be donated for a vaccine and to buy masks and other medical supplies.

The Chinese doctor that alerted the world about the coronavirus, who died last week, has now been memorialized on the Ethereum blockchain. A smart contract on Ethereum with code formatted in the shape of a monument to Dr. Li Wenliang, was created last Friday.

Just like other global epidemics, coronavirus already has a serious impact on the global economy, especially because it’s happening in China, that second strongest economy in the world. In the past Chinese investors have relied on Bitcoin to hedge against the yuan’s devaluation. While that might be one big factor behind the positive trend on the bitcoin’s price, if the coronavirus continues to spread in China and other places, it will hurt the global economy, including bitcoin.

Something bad can never be good in the long run.

Balaji Srinivasan may be right when it comes to the math about bitcoin and it will reach $100,000, but as far as the coronavirus goes, let’s hope its trajectory is already peaking.

Glasgow Economic Forum (GEF) is taking place in the first week of March (7-8 March, 2020). It’s an annual conference organized entirely by students of the University of Glasgow. The event is packed with ideas, discussions and fascinating insights by world-renowned speakers. Support the students and their efforts. If you’re a company, make a donation or buy tickets. Find out how you can help them!

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This Week in Fintech ending 14 February 2020

week with pics BL.001

This weekly summary from our 5 experts, brings you insights based on their experience as investors, entrepreneurs & executives.

Ilias Hatzis started his first company, an internet search engine, during the dot-com era & now focusses on crypto.

Efi Pylarinou worked for top tier Wall Street firms and is now a top global Fintech influencer.

Jessica Ellerm is CEO of Zuper Superannuation & previously worked for a top Fintech startup, Tyro.

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners.

Bernard Lunn is CEO of Daily Fintech and author of The Blockchain Economy.

If you want to continue receiving This Week in Fintech, you can either become a paying Member for $143 per year (and receive all our content in addition to this weekly summary) by clicking here.  If you just want to receive This Week in Fintech for free, you will need to fill in this form. Or fill in the same sign up form at the bottom of this post.

Your Editor is Bernard Lunn. He is also the CEO of Daily Fintech and author of The Blockchain Economy.

Monday Ilias Hatzis @iliashatzis our Greece-based crypto entrepreneur (Founder & CEO at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech) wrote The Digital Wallets of the Future: Money and Identity

Cryptocurrency wallets have been closely linked to other transactional services. A digital wallet refers to an electronic device or online service that allows someone to make electronic transactions. Usually they are bundled with other services, like exchanges (Coinbase, Binance), physical devices (Trezor, Ledger), or other services (Casa). What if cryptocurrency wallets weren’t just about storing digital assets, but were about identity, serving as a single passport to both the physical and digital world?

Editor note:The word wallet is confusing in a Cryptocurrency sense. The analogy to a physical wallet is confusing. That is a custodial wallet aka a bank. In a decentralized world a wallet is a gateway – very powerful but very different.  


Tuesday Efi Pylarinou @efipm our Swiss-based Fintech Adviser,  founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019 wrote Facts & Figures of Amazon lending and the Goldman Sachs X-factor

One can`t be a banking analyst or an automobile industry analyst anymore, with the same silo-ed focus required over the past decades. Industry-specific analysts bring a lot of experience from their respective sectors but lack the insights of innovative business models enabled by the `future technologies` (that are already here by the way).

Editor note: This is an interesting take on how two behemoths – one Tech and one Fin – are converging on the same space and may compete or collaborate. 


Wednesday Jessica Ellerm @jessicaellerm, our Australia-based Fintech entrepreneur and thought leader specializing in Small Business and the Gig Economy & CEO/Co-Founder of Zuper, a new superannuation startup in Australia wrote Australian Fintech Assembly Payments Lands JV with Standard Chartered Bank

Australian fintech Assembly Payments has announced it has entered into a 50/50 JV with multinational bank Standard Chartered, to create a new global ecommerce company that will be underpinned by Assembly’s technology. The move isn’t the first offshore foray for the Australian based fintech, who has a number of international clients on its register, along with home-grown ecommerce talent. 

Editor note: Full stack Fintech that serve consumers & businesses need to be regulated one jurisdiction at a time. Tech ventures that offer a platform to such regulated entities can globalize a lot faster. 


Thursday Patrick Kelahan @insuranceeleph1, our US based Insurtech expert (a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners who also serves the insurance and Fintech world as the ‘Insurance Elephant’) wrote Pulling back the curtain to shine light on ‘scary’ insurance phrases

Reinsurance/ILS, Blockchain, and insurance financials.  Not quite lions, tigers, and bears, but for many who follow insurance the three concepts are as daunting and pose discomfort in understanding. Why then the mention?  Because in an earlier social media post I noted that the three words do not generate a lot of media content traffic, and if there is a related posting, not much response.  A wise connection dropped the key hint to that puzzle- the words need to be discussed in context that makes sense to the reader.  A cool idea, Modern Accelerator.

Editor note: The hard responsibilities and complexities of reinsurance makes the simplistic idea of new full stack regulated Insurtech ventures problematic. Yet customers want and expect innovation. This post is great for somebody who really wants to understand Insurance.


Friday  Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy, wrote: Security Token News for week ending 14 February 2020.

Editor note: This weekly snapshot is the news that matters for busy senior people in the Security Token market.


To continue receiving ‘This Week in Fintech’, the weekly recap of our articles, you will need to fill this form to give us consent to send this to you. Please note that Daily Fintech requires your organizational email address (e.g. corporate, educational or government) and your LinkedIn URL. This information is required for subscribers who want ‘This Week in Fintech’ for free. If you prefer to not provide this information, you can still receive all our content by becoming a paying member.

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Security Token news for Week ending 14 February 2020

Security Token news for Week ending 7 February 2020

Here is our pick of the 3 most important Security Tokens news stories during the week:

One. Ethereum-based FLYT is First Property-backed Security Token in Africa

On February 8th, 2020, Flyt Property Investment announced the launch of Africa’s first-ever security token backed by property. The firm partnered with technology provider Bakari to create FLYT security tokens which are equivalent to one share in the Flyt Hospitality Fund.

Curator’s Note: We take the security of property for granted in the West, but property title is a problem for billions in the Rest of the World. So the fact that this Security Token is from Africa is significant. 

Two. Small German Bank to Offer Tokenized Securities

Munich-based Bankhaus von der Heydt has partnered with blockchain financial services provider Bitbond to help integrate tokenization into its securitization platform.  The partnership will allow the bank to tokenize digital securities onto the Stellar blockchain, which it can offer to institutional clients via private placements.

Curator’s Note: Deployment is expected in April. The Bank plans to offer customers a custody solution for tokenized equity developed by Bitbond and the Bank in 2019. The solution received approval from the German financial regulator.  Bitbond received German regulatory approval for its tokenized bond in January 2019, launching Germany’s first regulated security token offering later that year.

Three. Swiss Company OverFuture Gets Green Light for a Blockchain IPO

In what’s being called a first for Switzerland, OverFuture has been allowed to incorporate for an initial public offering (IPO) of tokenized shares on the blockchain.

Curator’s Note: The firm’s IPO prospectus indicates an offering of 8,399,000 “common equity share security tokens on the Ethereum blockchain, with smart contracts provided by EURO DAXX, a digital assets exchange based in the country’s “Crypto Valley” city of Zug.

We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

For context on Security Tokens please read the chapter on Security Tokens in our Blockchain Economy book and read articles tagged Security Tokens in our archives. 

You get 3 free articles on Daily Fintech. After that you will need to become a member for just US$143 a year (= $0.39 per day) and get all our fresh content and our archives and participate in our forum.

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Pulling back the curtain to shine light on ‘scary’ insurance phrases


Reinsurance/ILS, Blockchain, and insurance financials.  Not quite lions, tigers, and bears, but for many who follow insurance the three concepts are as daunting and pose discomfort in understanding. Why then the mention?  Because in an earlier social media post I noted that the three words do not generate a lot of media content traffic, and if there is a related posting, not much response.  A wise connection dropped the key hint to that puzzle- the words need to be discussed in context that makes sense to the reader.  A cool idea, Modern Accelerator .

Patrick Kelahan is a CX, engineering & insurance consultant, working with Insurers, Attorneys & Owners in his day job. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.  Image

Let’s dive into the three concepts with a full recognition that this blog will serve merely as an overview and whetter of appetites causing the readers to want to consume more. Fair warning- even keeping the topics brief- TL:DR may apply.  That’s OK.

Insurance Financials

There is plenty of government oversight for accounting that dovetails with plenty of regulation, we can’t touch on all the respective countries’ agencies and regulators but in essence they all serve the key roles of making uniform 1) how insurers account financially for their business, and 2) how insurers account for how solid they are in being able to serve their policyholders relative to the agreed scope and cost of risk.

It’s an alphabet soup of government orgs or standards: GAAP, FASB, SAP, IRDAI, NYDFS, SEC, IFRS, FCA, FSDC, SUSEP, NAICOM, ICLG, ASIC, APRA, etc. (almost) ad infinitum.

Fundamentally there are three accounting principles (of the many) with which insurers must comply, just in a slightly different manner from most business organizations :

  • Revenue Recognition Principle
  • Matching Principle
  • Historical Cost Principle

Without complicating things too much, insurance companies have financial stability burden to prove continuously- a carrier’s ability to fund the risk costs that it has agreed to.  All those policyholders have an expectation of indemnity or payment if a loss or occurrence to which their policy agrees to cover /pay comes to fruition.

The three principles noted above are part of the key differences between insurance companies and others, primarily because what insureds receive for premiums is a risk agreement that elapses over time.  Receive $1000 for an insurance contract today for twelve months’ cover.  Money in the bank for a promise over time.  So in respect to compliance with the Matching Principle, premiums are deemed  ‘written’ only until an increment of the policy’s time is expired, wherein the portion of the premium that matches the period is booked as ‘earned’.  One month’s policy duration allows 8 ½% of the written premium to become earned, six months’ earns 50%, and so on.

So you can see how a carrier with a ton of cash on hand might not be as liquid as one thinks if there are an according ton of policies on the books whose expiration extends over twelve months or more.  Written and earned- key concepts.

Here’s an example of a P&L statement showing the written and earned premiums, from German insurer, DFV_AG or Deutsche Familienversichurung:


The sharp eye will note in addition to written and earned premiums there are lines showing the ‘Share of reinsurers’; that will be touched on in the Reinsurance portion of our discussion.

Traditionally the written and earned difference followed a solid calendar pattern due to typical annual expiration of polices.  But what of on demand or ‘gig’ policies?  The covered period may be a few hours or days, so there is little lag between written and earned status.  Knowing a carrier’s business model has become more important than ever since a heavily funded entrant’s cash may be more restricted if it’s a traditional style insurer in comparison with an on-demand player.

Carrying the discussion to the Matching Principle (matching costs to the period in which the costs were incurred) suggests a few important financial factors:

  • Costs of policy acquisition is matched to immediate written policy premiums, e.g., agency/brokerage commissions, marketing, admin office costs, digital format costs, etc., but
  • Costs of policy administration, e.g., adjusting expense, loss costs paid, etc., may be charged to earned premiums in a different incurred cost period.

As for the Historical Cost Principle, regulators want to know concretely what amount a carrier assigns to portfolio assets.  Insurers need to be liquid in their asset portfolio so assets can easily be converted to cash if loss payment volume so demands.  For example, bonds might fluctuate in value over time due to variances in interest rates, but carriers need to maintain a historic cost to keep regulators content for solvency calculations.

Quite a rabbit hole are financials, so the conversation will conclude with THE common comparative measures for P&C carriers-  loss ratio, expense ratio, and combined ratio.  These measures will give the reader a clear idea if earned premiums (revenue) exceed or are exceeded by expenses and loss cost.


loss ratio = claim payments + adjustment expense/earned premiums, expressed as a %

expense ratio = expenses other than adjustment expenses/earned premium. Expressed as a %

combined ratio is a sum of the LR and CR.

Ideally CR is < 100%, meaning earned premiums exceed costs and underwriting activity is profitable.

What must be remembered as carriers are compared- the maturity of a carrier in terms of time in business, how aggressive is growth relative to existing book, the nature of the carrier’s business and how that affects reserves (immediate draw on profits.)  Entrants may have LR that are in the hundreds of %; consider trends or peer comparisons before your lose your mind.


Reinsurance is insurance for insurance companies.  There, that was easy.

Rei was once an easier financial concept to grab- carriers would sign treaties with reinsurance companies to help protect the primary insurer from loss outcomes that exceeded typical loss expectations.  Primary carriers do not plan (or price) for an entire region to be affected at the same time, but sometimes things happen that require excess over planned loss payments, e.g., wind storms, wildfires, tornadoes, earthquakes, etc.  Primary carriers will purchase reinsurance that for a specific period, and in an amount that is triggered once a carrier’s loss payments for the treaty peril or perils is incurred.  Pretty direct and expected by regulators, and part of claim solvency calculations.

What has occurred over years is that reinsurers have evolved into other types of excess risk partners, covering more than just catastrophe losses, and becoming excess risk options.  If you again review DFV_AG’s income statement and consider the premium and loss cost portion of the carrier’s P&L shared with reinsurers, you’ll understand the firm has ceded premium and costs to backers to help smooth growth and provide backstop to the firm’s ability to pay claims and serve its customers.  This has become a common methodology for startups and existing carriers, allows more product variety for reinsurers and spread of risk.

Another evolution over the past years beyond reinsurance is the advent of Insurance Linked Securities (ILS), capital vehicles that are designed solely as alternative risk financing.  Insurance-linked securities (ILS) are derivative or securities instruments linked to insurance risks; ILS value is influenced by an insured loss event underlying the security.  What’s that?  ILS are capital vehicles that simply are designed to pay on an outcome of a risk, e.g., hurricane, earthquake, etc., sold to investors looking for diversified returns in the capital markets.  A hedge against a risk for insurers, an option for better than normal market returns for the holders.  Often referred to as Cat bonds, these bonds serve an important role in the risk markets, and are an opportunity for holders for income.  Often ILS are sliced and diced into tranches of varying risk bonds to smooth the outcome of a linked event.  Don’t be surprised if ILS become a more accepted means of financing more common, less severity risk within the industry, or in use in unique new risk applications, an example being pursued by Rahul Mathur and colleagues.


So much promise, so much confusion, overreach and failure to launch.  Or maybe Blockchain’s connection with the perceived wild west of value transfer, crypto currency, has colored the insurance world’s relative arm’s length view of the concept.

A quick search of definitions produces many references to bitcoin and other crypto currency (I’ll leave those to my knowledgeable Daily Fintech colleagues), but we simply want a definition that maybe doesn’t sound simple (Wikipedia):

“By design, a blockchain is resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”. For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without alteration of all subsequent blocks, which requires consensus of the network majority. Although blockchain records are not unalterable, blockchains may be considered secure by design and exemplify a distributed computing system with high Byzantine fault tolerance. “

Open. Distributed. Peer-to-peer. Decentralized. Immutable. Cool for generating crypto, but not so much for the wild data sharing needs of insurance.

So why is Blockchain not taking hold for insurance?  The use case is tough for carriers- unstructured data (of which carriers have a ton) do not play well in a Blockchain (Blkcn) environment, many changing players in an insurance claim, and so on.  Blkcn holds data securely, but doesn’t guarantee cyber security outside the ledger. Blkcn can be more cumbersome for data retrieval across consortia-based ledgers.  Multiple writers to the ledger, multiple efficiency issues to overcome.

But what of uses for reading data once placed in the ledger? Can be very cool. Anthem is a US health insurance provider serving millions of subscribers nationally, the company recently initiated a Blkcn pilot wherein the company is making ledger access an option for the test participants, with patient records stored in the ledger, and individual subscribers given the option to give providers access to health records via use of a QR code that has an expiration date.  Subscribers have the power over their records and access is given for read only permission.  There are many potential benefits to health insurance Blkcn but the options must dovetail with data security.

Another positive scenario for Blkcn application- crop insurance in previously under-served markets.  OKO Insurance provides micro crop insurance policies in Africa, backing by reinsurance but administered in part by distributed ledger, each farmer’s information residing in the ledger, and access provided to underwriting and reinsurance.  And- if payment is made a partnership with digital payment systems to facilitate settlement.  An active Blockchain as a service company, BanQu, is expert at facilitating these frameworks and has a portfolio of projects around the globe where ‘first mile’ and ‘last mile’ data are administered within a ledger for the respective customer and its affiliates/suppliers.  Permissioned but not written by multiple players, QR codes to allow involved sources access to a supply chain.  And the sponsor of the ledger has a clear data record of each step in a supply or value chain.  Speaking with the firm’s business development executive, Brady Bizal, we discussed how a Blkcn ledger such as BanQu provides could serve as an ecosystem initiative for regions, including the details of insurance for a farmer, payment records, link to in country digital payment systems, risk mitigation firms, and as warranted, the transaction/finance data can be accessed by permissioned bankers at the customer’s choice- the magic of QR codes.  It’s an entrée to a trust system that may otherwise not exist.  Opportunity.  Maybe not the original thinking for Blkcn and insurance, but sit for a few minutes and you will think of many similar possibilities for blockchain use in health insurance alone.

Sorry, there is so much that could be written about the three concepts and I’m hopeful the article answered some questions about finances, blockchain and reinsurance/ILS.  It’s certain readers and experts will advise me of missing sections, and that will be the foundation for a next article on the subjects.

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Australian Fintech Assembly Payments Lands JV with Standard Chartered Bank


Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia

Australian fintech Assembly Payments has announced it has entered into a 50/50 JV with multinational bank Standard Chartered, to create a new global ecommerce company that will be underpinned by Assembly’s technology. The move isn’t the first offshore foray for the Australian based fintech, who has a number of international clients on its register, along with home-grown ecommerce talent. It also isn’t the first time the platform has teamed up with a large bank, having cut its teeth with Australian bank Westpac, who took an equity stake in the company back in 2018.

While Standard Chartered has its eyes on the ecommerce prize with this JV, the Westpac deal instead sought to use Assembly’s technology to enable it to rollout an integrated payment offering for its bricks and mortar retail customers.

Under the new venture, the two businesses will run hard after the USD $29 trillion global ecommerce industry, a large prize that many other businesses, like Adyen, PayPal, Square and Stripe have already made solid inroads into. Given the JV’s Singaporean headquarters, a focus on the booming Asia region may be on the cards.

Standard Chartered is clearly bullish about innovation in the Asia region, securing a virtual bank licence in Hong Kong in 2019, in partnership with several other financial institutions. It has also established a presence in India, launching a B2B commerce platform, Solv.

Growth can only come from looking global for many Australian fintechs, especially those in the payments game, where access to volume is everything. In a tightly held local market, exporting great tech overseas soon becomes a necessity. While this may or may not be the case for Assembly Payments, there is no question that Standard Chartered has just put a huge tick next to their technology, which will no doubt further the core businesses expansion back home.

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Facts & Figures of Amazon lending and the Goldman Sachs X-factor


As I was listening to Cathy Wood`s interview, CEO of ArkInvest, from the Exponential Africa Show; she triggered an insight around investing and disruptive innovation.

One can`t be a banking analyst or an automobile industry analyst anymore, with the same silo-ed focus required over the past decades. Industry-specific analysts bring a lot of experience from their respective sectors but lack the insights of innovative business models enabled by the `future technologies` (that are already here by the way).

I will elaborate on this topic over the next couple of weeks with several examples and insights on where I see the market heading to.

This week I will look at Amazon`s SME lending business facts and figures, as there have been several articles following the announcement of a lending partnership with Goldman Sachs.

Are Banking analysts and Tech analysts collaborating to analyze such partnerships and develop attribution models for the value co-created?

Goldman and Amazon’s lending partnership presents a huge threat to fintechs  Business Insider

Amazon and Goldman Sachs Wade Deeper Into Financial Services Motley Fool

Goldman Has Some Boring Plans Matt Levine Bloomberg

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.

You get 3 free articles on Daily Fintech. Get all our fresh content and our archives and participate in our forum, by becoming a member for just US$143 a year.

Amazon has been offering loans to its marketplace sellers since 2011.

These loans have been by invitation-only. So, on Amazon lending there is no application or evaluation process. It is kind of a reverse process compared to seeking a loan on Kabbage or Square, or Paypal (alternatives for SME borrowing in the US).

On top of this, the Amazon loans come with more restrictions. The loans can only be used to get more inventory and do more business on the Amazon marketplace, NOT on any other distribution channel. Merchants of course, can spend their borrowed funds to `invest` in upping up their game to competing with the Amazon advertising algorithm. Which points to the growth of Amazon`s advertising revenues (read more here Advertising is the new high-priced tobacco and vendors are addicted to it).

Amazon has close to 6 million sellers on its marketplace, however, only 2.5 million are active sellers and furthermore, only 24,000 generate sales over $1million (as of 2018).

That explains why the Amazon lending business has only serviced around 20,000 enterprises since its launch. Tearsheet reports a total of $5billion of loans issued since 2011.

Amazon continued to use the same cautious approach to lending – by invitation only and with restrictions – even after establishing a partnership with Bank of America in 2016. Larger sellers report that they can get much better rates from other lenders (Paypal, Square, Kabbage).

Amazon lending data over the past four years shows that it has not been a business that Amazon sees as strategic.

$661 million loans in 2016

$692 million loans in 2017

$710 million loans in 2018

$863 million loans in 2019

What will change with the Goldman Sachs lending partnership? It can`t simply be the access to a bank`s balance sheet because Bank of America had that capacity too. Last year also, Payoneer, the global payment platform, partnered with Amazon offering working capital for merchants selling on Amazon (figures not yet available).

Will Goldman Sachs enable Amazon to offer competitive real-time loans to all Amazon merchants?

Amazon lending serves only 1% of its active merchants.

What multiple can the Goldman Sachs partnership attain, while still keeping a high percentage of the borrowed funds spent within the Amazon ecosystem?

As Matt Levine says, there could be another scenario which is more in the spirit of Goldman`s interestingness. A Goldman Sachs lending offering for the AWS ecosystem.

The New Breed Of Lender That’s Making Loans To Amazon Sellers Based On Their Sales Data

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