Digitization in the brokerage business is shrewd – Motif investing is closing

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.

MOTIF Investing, one of the earliest innovators in the digital investing space in the US, is shutting down. Apparently, the communication hasn’t been that great, as some advisors found out from a tweet. Motif portfolios will be moved over to Folio Investing that has been competing with Motif.

At Daily Fintech we started covering Motif as early as 2014. The company is 10yrs old and its retail arm `Motif Investing` allowed DIY investors to invest in customized thematic portfolios for $9.95. It was not a social trading platform. It was a regulated broker-dealer in the US whose product offering was low cost but active, as individuals could change weights in each Motif.

In mid 2017, I had picked and covered the `Digital Dollars` Motif that had a 30% one year performance. It was an example of a thematic, fully transparent and customizable motif, with a fintech focus. In that post I was comparing alternative structured product offering exposure to the same thematic.

`What is more important is that Motif offers an optimization algo that allows users to take stocks that can be considered players in the mobile payments space (which are 26 US listed stocks) and optimize (holdings and weights). This is a great tool for DIY thematic investing.` excerpt from my 2017 post

 Motif Capital was the other part of the Motif business launched in 2016 as an investment advisor of all institutional dealings. Through that business, Goldman Sachs had a partnership with Motif, which created in 2019 thematic indices and ETFs, the Goldman Sachs Motif Next Wave of Innovation ETFs.

Screen Shot 2020-04-20 at 09.58.20 

In 2015, Motif had also struck a unique deal with JP Morgan, through which it would offer Pre-IPO access to retail. A strategic investment happened but unfortunately, the market never saw anything actually happen.

Motif was clearly a fascinating early innovator. They even added direct indexing, fractional investing capabilities, and a growing offering with ESG thematics. Seems like they were doing everything right.

They were backed by Goldman Sachs, JP Morgan, the UK based VC is Balderton Capital and the Chinese social network company Renren Inc.

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Source: Crunchbase

Motif had raised $126million over the past 10yrs. When I spoke to them in 2016, they were already concerned about a Chinese copycat site MotifInvesting.net that had launched with the same even dashboard. And of course, about being leapfrogged by incumbents.

Fast forward to today, and the Robinhood effect killed them.

Folio Investing (a 20yr player) had already `copied` Motif Investing with their Ready-to-Go-Folios and a much cheaper price. Motif had to fold its business and investors using the unlimited plan will be getting a very similar offering with a 30% lower subscription.

`Investors will be transferred to a Folio Investing Unlimited plan by May 20 and charged $19.95 per month, a discounted fee from the usual $29 negotiated by Motif. ` Source

The sentiment in most online media is one of sadness, as an innovator is killed or stopped because of the price wars. WealthManagement reported that As of late March, Motif Investing’s wholly-owned subsidiary, Motif Capital Management, had $868 million in assets under management, according to regulatory filings.

Motif`s data-driven business that was behind the customized indices and the white papers around investment themes, will also suffer from this sad event.

The vision that Motif had to expand to China, the birthplace of Techfin, will not become reality.

The brokerage business is in danger to stop innovating, simply because commissions have gone to zero and the Schwab`s of the world have caught up with fractional ownership offerings, direct indexing, low cost financial advice and more.

Some say that Motif never found a product market fit. I say, that Motif was in the low-cost active space during a time that low cost passive outperformed. And it was not bought out 3-4 yrs ago from a large broker, like Interactive Brokers bought Covestor in 2015.

Notes: InvestorJunkie review of the Folio investing product and pricing

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Rise and rise again, until Libras become Lions

LYNXNPEG3F1HW_L.jpgAfter months of criticism, the Libra cryptocurrency project is pivoting. To appease skeptical regulators, Libra is shifting gears from a new global financial system to a more traditional payment network, with digital coins backed by individual fiat currencies, very similar to PayPal. When the Libra Association announced the cryptocurrency last June, it intended to create a single global digital currency that would be pegged by a basket of fiat currencies from different countries. Politicians, regulators and central bankers everywhere were rattled and feared that Libra could undermine their power, control and threaten monetary sovereignty.

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

Facebook shook the world last year when it announced Libra. The idea was simple, to let billions of people send and receive money, using a single global digital currency, on their mobile phones with Facebook.

Around the globe, regulators raised red flags, with severe consequences on the original membership of the Libra Association. From the cryptocurrency’s announcement until January this year, almost 40% of the original members dropped out, including Visa, Mastercard, Stripe, PayPal, Mercado Pago, Ebay, Booking Holdings and Vodafone.

After the G7 nations and the US Congress agreed to block the launch of the Libra and the US Senate hearings in October, Mark Zuckerberg said that he would not go forward with Libra, without regulatory approval.

Seven days ago, the G20’s Financial Stability Board (FSB) released ten recommendations on how to approach stablecoins, and few days after the G20 recommendations, Libra updated its white paper to make it more “regulatory-friendly”.

The new version attempts to address past problems, taking into account the regulatory challenges: single-currency stablecoins, regulated nodes (VASPS), forgoing the future transition to a permissionless system and improving Libra Reserve

Offering single-currency stablecoins, in addition to the multi-currency coin
Instead of a single cryptocurrency Libra will release several stablecoins, backed by fiat currencies, USD, Euro, GBP and SGD. Each single-currency stablecoin will be fully backed by the Libra Reserve.

Enhancing the safety with a robust compliance framework
While “unhosted wallets” can contribute to financial inclusion, they also bring greater risks. To address concerns, only financial institutions that follow guidelines will initially be able to deal in Libra coins. Libra will set some restrictions on balances and transaction limits and will also create an “FIU-function: Financial Intelligence Function”, to monitoring activities on the network.

Forgoing the future transition to a permissionless system
Regulators raised several questions about the potential risk of preventing unknown participants from controlling the Libra system and removing key compliance regulations.  The network will limit access to its blockchain to authorized participants. In an effort to keep the network open and decentralized, the Libra Association will expand the number of memberships.

Building strong protections into the design of the Libra Reserve
To better protect token holders, the Libra Reserve will be a 1:1 reserve, with 80 percent in short-term, low credit risk and high liquidity securities and the remaining 20 percent in cash and CBDCs. The Reserve will mint and burn each stablecoin for market demand and the mechanism will be ruled by a group of regulators and central banks.

These changes could help Libra with regulation. They could also clear the way for more companies to join the association, by lowering the risk of backlash from regulators.

Winston Churchill said: “To improve, is to change; to perfect, is to change often”. In the lifetime of successful projects and startups, you’ll see one or two pivots. A change in course of direction, that results in a material change in the product-market strategy. This may sound like a Hail Mary, but the most critical decision for any project, is to know when to stay the course and when to turn.

While these developments mark a victory for regulators, they also raise questions about government roadblocks other potential and “less privileged” innovators could face. Time and time again, regulators in the US, Europe, China and elsewhere, have demonstrated that they will go to great lengths to halt initiatives they consider as threats, to their power and control.

The coronavirus lockdowns are making us rethink everything. They have highlighted the need for digital payment systems, that let people pay for things even when they were stuck at home.

Unfortunately, the changes to Libra make it less open and less decentralized. While they might not be the best way to move forward, if you’re Facebook and you want to grow, it’s better be in the game, instead of being sidelined. By taking this approach, Facebook can finally take the first step and get the approval to launch the project, even if it’s watered down.

For those that are disappointed, let me remind you we already have a superior decentralized digital currency, that lets anyone, anywhere send and receive money… Bitcoin!

Image Source

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This Week in Fintech ending 17 April 2020

this week in Fintech V2.001

This weekly summary from our 7 experts, brings you insights based on their experience as investors, entrepreneurs & executives.

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

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

Monday Ilias Hatzis our Greece-based crypto entrepreneur (Founder & CEO at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech) @iliashatzis wrote Time to buy more Bitcoin and time to HODL

No one has a crystal ball to predict the future. With less than a month away from Bitcoin’s halving, will this event boost its price? How does this play out, with the coronavirus pandemic? As economists are forecasting a global recession, many believe that we are preparing for a financial reset. Deutsche Bank sees a digital payment transformation post-coronavirus. The majority in the crypto community believes that Bitcoin could survive a global financial crisis and thrive.

Editor note: Personally I also think it is time to Buy & HODL Bitcoin although I have no clue what the short term price action will be and obviously I Am Not A Financial Advisor.

Monday Bernard Lunn,  CEO of Daily Fintech and author of The Blockchain Economy @LunnBernard wrote How the humble QR Code could foil an authoritarian power grab using the fear pandemic from coronavirus.

Editor note: Part 4 of a series about how the pandemic is changing our world.

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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 Lockdown & market uncertainty lead to a surge in B2B robo-advisors

Digital investing, advice and portfolio management is on the rise. A surge in account openings across the board, is now well documented. The first quarter of 2020 has seen a sizable increase in activity compared to 2019.  TD Ameritrade’s automated investment offering reports an increase of 150%. Betterment has publicized account opening increases of 25%. Wealthfront reports a 68% rise since the market downturn.

Editor note: To buy the dip in a diversified way use a Robo Adviser. This is now a mature space with a few behemoths dominating the market and many  ventures pivoting to a B2B model. 

Alan Scott Managing Director EMEA at 24 Exchange @Alan_SmartMoney wrote Stablecoin News for week ending Tuesday 14 April 2020

This weekly snapshot is the news that matters in the Stablecoin market.

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 Fintech Lenders Moula & Prospa Winners In Government Loan Scheme

SME fintech lenders Moula and Prospa have been bought into a landmark government guarantee scheme – the Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme – that will see up to $40 billion in lending make its way to Australia’s hard-hit SME sector in the coming months.

The announcement has the potential to transform the two lenders into ‘household names’ in the SME finance space, marking a significant new turning point for both fintechs.

Editor note: Transparency in how government money that is meant to support the SME sector through the Coronavirus crisis is critical to building trust. The  Fintech channel is potentially more transparent than the Bank channel.

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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 Carriers can be wrong in being right. Governments too. Time to get benefits to SMEs.

Fiduciary duty or duty of care?  What a quandary for insurers this business interruption insurance situation continues to be.  Easily a trillions of dollars concern in western economies alone, more each day as the mandated shutdowns continue.  The author has previously noted the tension between repudiation/denial of BI claims and the drumbeat of public and government pressure to afford cover; is there also a public duty of care insurers hold to ensure there’s an SME business community to insure once the permission is given to restart the economy?

Editor note: News headlines describe Govt payments to SME ,which can be called bailout, being delayed. Pat’s post digs into to delays in payments from Insurance, which CANNOT be called bailout.

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Friday  Sheldon Freedman, Fintech lawyer at Hassans International Law Firm

wrote: Security Token news for Week ending 17 April 2020

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

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Security Token news for Week Ending Friday 17 April 2020

Security Token news for Week Ending Friday 10 April 2020Security Token news for Week Ending Friday 10 April 2020Security Token news for Week Ending Friday 10 April 2020

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

ZenSports Issues Security Token Dividends 

This week, the blockchain-based mobile betting app, ZenSports announced the issuance of quarterly dividend payments to SPORT security token holders in the coming days. Notably, ZenSports was one of the first betting platforms to embrace security tokens.

Why it matters: This is a big step forward for a sports token to pay dividend. The paying of a quarterly dividend is a big confidence-booster for San Francisco-based ZenSports. The SPORT security token was sold to accredited investors through a Regulation D/Regulation S offering in 2018, with ZenSports entering the market as one of the first decentralized peer-to-peer sports betting mobile apps. The Company’s direct betting system obviates the need for bookmakers. ZenSports has ambitious plans for more crypto integration, with the planned issuance of a utility token this year.

Black Manta Capital Introduces $12 Million Real Estate Security Token Offering

Germany-based Black Manta Capital Partners has introduced a $12 million security token offering (STO) for the Berlin real estate market.  The initiative is reportedly a collaboration with Tigris Immobilien, a German real estate company. Approximately 2000 sq meters of real estate property, which mainly consists of individual small apartments units (40 to 60 sq meters each) are being offered by the project. Construction is scheduled to be completed within the next two years. The units may be sold to owner-occupiers and qualified investors.

 

Why it matters:  This is another step toward real estate tokenization in Germany.  This offering will allow ordinary investors to participate in the type of deal usually restricted to institutional or accredited investors. Minimum investment is €500. The STO is regulated by Germany’s financial regulator, BaFin.

 

Algorand has launched a multi-million dollar program to foster its blockchain ecosystem

The Algorand Foundation has launched a new grants program worth $50 million in ALGO tokens to build out its borderless economy.  To spur ecosystem growth, the foundation announced the launch of a 250-Million Algo Tokens (ALGO) Grants Program this week. The program has a long term, global focus and will provide funding to projects building apps that support infrastructure, end-user applications, and research innovation on the Algorand blockchain.  The potential use cases include DeFi, payments, asset exchanges, social media integrations, supply chain initiatives, copyright authentication, and asset tokenization. Algorand intends to enable an active blockchain community via a public, permissionless, pure proof of stake blockchain with an open-source approach.

Why it matters: This may be a shot in the arm for global blockchain infrastructure.  Algorand, Inc. is a technology company founded by MIT professor and cyptography pioneer, Silvio Micali. The Algorand platform is designed to deliver true decentralization, scale and security.  In June of 2019, Algorand raised $60 million in four hours by auction of Algo coins via Coinbase out of Singapore. The previous year it scored $66 million in a conventional capital raise from American East Coast VC firms.

The Algorand Foundation helped make the World Chess hybrid IPO possible,  a hybrid IPO that included a security token offering and a London Stock Exchange listing.  Conducted via digital securities platform, Securitize, on the Algorand blockchain, the Hybrid IPO utilized a new Algorand feature making it possible to tokenize and issue any type of asset, in this case, stock.  Securitize has a partnership with Algorand to support its DS Protocol, which will allow issuers the ability to issue Securitize powered digital securities on the Algorand Blockchain.

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.

New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just US$143 a year (= $0.39 per day or $2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

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Carriers can be wrong in being right. Governments too. Time to get benefits to SMEs.

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Fiduciary duty or duty of care?  What a quandary for insurers this business interruption insurance situation continues to be.  Easily a trillions of dollars concern in western economies alone, more each day as the mandated shutdowns continue.  The author has previously noted the tension between repudiation/denial of BI claims and the drumbeat of public and government pressure to afford cover; is there also a public duty of care insurers hold to ensure there’s an SME business community to insure once the permission is given to restart the economy?

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’.

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  • No one anticipated COVID-19 in the manner in which it came.
  • Few SMEs had excess cash set aside for this dark of a day or bad business weather.
  • Few insurance policies were sold that covered BI losses that were not precipitated by direct physical damage.
  • Even fewer insurance policies afforded BI cover that was prompted by government or other indirect reactions to a pandemic.
  • Very few insurance proceeds have reached the street.

All the efforts have been focused on defensive postures by carriers, concerned outreach by SMEs to government, plaintiffs’ bar attorneys aggregating clients who have suffered economic losses due to shutdowns and loss of clientele from social distancing, and constitutional challenges proposed by US elected representatives.  Oh, and for U.S. SMEs, plenty of effort collecting business records for applications for stimulus loans.  Lots of actions, few results.

 

At this time there must be a recognition that posturing does not resolve anything, nor does it get recovery funds to the street.  Government and litigation trying to force insurance companies to foot a trillion dollar plus bill for BI losses is truly a fools’ game.  The full capitalization/available cash from insurers would be insufficient to resolve BI claims, if the claims could be accurately calculated, and if the claim period was known (which at this time it is not.)  What would be accomplished is the functional failure of the risk financing industry as it’s known.

That being said, can the insurance industry simply build a defensive wall of policy terms and deny claims and any duty to mitigate the costs of risk for the SMEs?

Sure they could, and a large portion of the Before COVID (BC) cohort will fail, and the existence of a significant driver of business would sunset, along with the need for those firms’ insurance policies.

 

One wonders if SMEs can wait for government sponsored programs to get up to speed, or if sufficient funding will be available to address the needs of even a portion of the many millions of businesses in need.  In what way can insurance companies step in- without compromising uniform application of policy terms- and shine a little light on these dark days?

There are many P& C carriers providing givebacks, rebates, credits, and other premium forbearance (see the curated list by Nigel Walsh here), the vast majority being personal motor/auto benefits.  By the author’s calculation of available and applicable US auto premiums the $8-10 billion total being rebated or credited to individual insureds falls about $6 billion short per month of what excess premiums calculate to.  It’s a start, for sure, but a closer look is needed.

 

In contrast, what is in the press are reports of not only denials of business insurance policies’ coverage for business interruption, but uncertain positions carriers may be taking in supporting those denials- see mention of one carrier in this Business Insurance article, “Most small UK businesses not insured for pandemic: Watchdog”, and the FCAs position that carriers will need to be self-regulating for confirmation of pandemic policy cover.

Having ten US states to date with legislative proposals to change insurance contracts ex post facto to include BI cover for pandemics is an expression of frustration of the part of those states in there not being a better resolution for the economic shortfall.  Passage of any of the bills will prompt litigation focused on Article 1, Sections Nine and Ten, of the U.S. Constitution that expressly forbids alteration of contracts after the fact.  Other countries have different treatments and brief research for this article finds the UK Parliament might have the right to pass such a law stipulating insurance companies being responsible ex post facto existing insurance contracts, due to the doctrine of parliamentary supremacy allowing Parliament to pass any law it wishes (https://en.wikipedia.org/wiki/Ex_post_facto_law ).  No matter the legal handling the outcome of any actions would potentially take years (months at minimum) for benefits to flow to insureds.

Slow admin of government programs, little or no coverage for SMEs within insurance policies.  SMEs shuttered, tens of millions unemployed.  Who will provide confidence that SMEs’ rents can be paid, benefits can be maintained, TAXES PAID, and confidence that the end of the shutdowns is not ad sundown for SMEs?

Carriers can take action without compromising any legal positions re: insurance contracts.  Governments can take actions.

Consider possibilities:

  • Reduce policy premiums to a minimum– $10, or 10 euro. Get regulators on board.  No need to change policy terms, risks are lower since businesses are shuttered.  Backload renewal premiums into 2021.
  • Rebate some premiums for April– same support as above.
  • Governments- provide some tax credits to the carriers for the premium forgiveness.
  • Carriers, brokers, agents– make a specific and comprehensive effort to review the provisions and endorsements of every policy to confirm there absolutely is no room for BI cover. Policies are worded differently- direct physical loss, direct physical damage, direct property damage, damage due to a covered risk, etc.  Spend time on finding cover in concert with efforts spent denying/defending against cover.
  • Collaborate with peer companies in establishing recovery funds that are dedicated to SME benefits. Not policy benefits, but support benefits.
  • Reach out to every customer to suggest recovery resources that may be of benefit to them. Actually know what those resources are.
  • Suspend payment of firms’ sales tax and withholding taxes until the shutdown ends and cash flow begins.
  • Find clever ways to accelerate acceptance, review, and funding of loans. Want to pass meaningful law changes?  Look at the CFR that stipulates SOP for the SBA (how about those acronyms?)  The persons who can make this happen know what the acronyms mean.

Every effort is needed to cut the Gordian knot of admin barriers that delay getting benefits to the SMEs.

There will be a lot of financial resources spent developing and defending positions in court; why not calculate the cost of helping vs the cost of defending?

The insurance industry, regulators, governments, insureds, capital markets and banks have a vested interest in continuity of SMEs’ viability, finding practical solutions for the current crisis, and planning for the next pandemic or economic outcome of systemic risk effects.  Planning must begin now, and efforts are underway, e.g., the Ten C’s Project.  Government programs initiated on an adhoc basis are not adequate response vehicles, and laying the burden upon the shoulders of insurance is not a prudent path to follow.  We need to collectively mitigate the current effects and collectively solve how future economic occurrences will not be like what COVID-19 has wrought.

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Fintech Lenders Moula & Prospa Winners In Government Loan Scheme

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

SME fintech lenders Moula and Prospa have been bought into a landmark government guarantee scheme – the Coronavirus Small and Medium Enterprises (SME) Guarantee Scheme – that will see up to $40 billion in lending make its way to Australia’s hard-hit SME sector in the coming months.

The announcement has the potential to transform the two lenders into ‘household names’ in the SME finance space, marking a significant new turning point for both fintechs.

As part of the history-making COVID-19 stimulus measures in Australia, the government will look to guarantee 50% of new loans issued by participating lenders to SMEs.

Loans will be unsecured, and come with a 6-month repayment holiday. The borrowing limit under the scheme will be capped at $250,000, and all lenders will use their usual discretion in setting lending limits.

The push to keep SMEs afloat is being complemented with the government’s JobKeeper program. Eligible SMEs – namely those that can demonstrate a turnover reduction of 30% or more – will be entitled to access a fortnightly subsidy of $1500 per eligible employee, to keep paying their employees. The program runs until September of this year.

Another large Australian neobank, Judo Bank, has also been added to the list of approved lenders.

Many fintech lenders are significantly more expensive than traditional banks, however there is potential now for non-bank lenders to revaluate their risk/reward matrix, and strongly compete. There is no doubt speed of financing is key in the current environment, and it is arguable fintechs already have a leg-up in this regard.

However the competition – traditional banks – aren’t going to waste a good crisis either. NAB’s COVID-19 business loan is priced at the very attractive 4.5% p.a. As a bank emerging out of a series of high profile, brand damaging moments over the past two years, due to the Royal Commission, being able to execute over the next 12 months will be key to winning back market share and trust for the blue chip.

This competition is definitely going to get interesting, and SMEs will be the winner.

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Stablecoin News for week ending Tuesday 14 April 2020

Stablecoins.001

Does the concept of Stablecoins advance or hinder Crypto Adoption?

Here is our pick of the 3 most important Domain news stories during the Period:

Welcome to my first review of the weekly news on Stablecoins.  I chose to focus on this subject because I firmly believe they will be the gateway drug to Crypto.  I love Crypto, the Tech, the distributed nature, the possibilities but unfortunately the mainstream is not really that into it. 

Now, like a scorned Romeo we can all postulate as to why, the Tech is not mature, the use cases not properly explored or people just don’t get it, yet.  But, to me the gap between our current “real” world and the “virtual” Crypto is too large for the mainstream and they will need a bridge and a nudge before they will put down whatever they are doing for just a second and join us, the early adopters.

So Stable coins can be that bridge, enabling us at our own pace to stroll from our local Fiat currency into a new world and then back again as and when it suits us.  Suddenly, Crypto is not such a binary leap for the brave and adventurous at heart, but soon will also be a safe play for those of a gentler nature.  

First, let’s briefly explore the topic of Central Bank Digital Currencies (CBDC’s).   Besides the Fed (the big Daddy of Central Banks) there is a lot going on here. The ECB, Bank of England (BoE) and of course the Peoples Bank of China (PBoC) all have active projects that will deliver some sort of MVP by the end of the year.  However, maybe the most interesting is the BIS (sometimes referred to as the Central Bank for Central Banks). For those of you who want to understand more about the topic of CDBC’s, I suggest this link to a recent BIS paper as a good starting point. Impending arrival – a sequel to the survey on central bank digital currency

Three articles that caught our eye.

  1. This week Banque De France (French Central Bank) produced an Request For Proposal (RFP) for their project, check it out at this Finextra article which also includes a link to the actual RFP. Banque de France plans CBDC experiments
  2. BoE held a webinar on the current state of their thinking and asked for feedback, you can catch up with a recording of the webinar and other related documents here Central Bank Digital Currency: opportunities, challenges and design
  3. And finally, even in these bleak times according to this Reuters report from Deutsche Bank Analyst Mike Dolan the pandemic may actually hasten adoption of CDBC’s RPT-COLUMN-Pandemic shock may hasten central bank digital cash: Mike Dolan

Hopefully, you have found something interesting, new and of value in this weekly summary.  In the meantime, stay safe and sane!  

New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just US$143 a year (= $0.39 per day or $2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

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Lockdown & market uncertainty lead to a surge in B2B robo-advisors

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.

Digital investing, advice and portfolio management is on the rise. A surge in account openings across the board, is now well documented. The first quarter of 2020 has seen a sizable increase in activity compared to 2019.  TD Ameritrade’s automated investment offering reports an increase of 150%. Betterment has publicized account opening increases of 25%. Wealthfront reports a 68% rise since the market downturn.

Vanguard`s all-digital offering launched in late March, so figures are not available. Schwab has also confirmed the overall trend of an uptick in account opening, but no one has reported AUM figures yet.

The Robinhood debacle surely shifted several accounts to other digital platforms but it also revealed that a large portion of Robinhood`s clients were consumers that have very small amounts to trade (interest in fractional shares) and also use their margin allowance to leverage their plays.

The US market is witnessing an increase in consumer interest to start investing during this downturn. I believe that we will maintain increased levels of users on digital platforms.

Go Digital or Die is not debatable anymore in wealth management. There will be variations of Digital but no more only physical.

Last week, I had the pleasure of attending a webinar hosted by Bambu, the B2B robo-advisor out of Singapore. Bambu has grown since 2016 globally with offices n Kuala Lumpur, Hong Kong, London, San Francisco, and Dubai. They offer all the picks and shovels needed to launch any variation of a Digital investing offering. Their narrative is about creating 21st century investors. They have the backing of Franklin Templeton and have partnered with Refinitiv and Apex.

Since Bambu is not a B2C provider, they embarked on a consumer sentiment analysis by using advanced Google search analytics. Some of their findings show consumer changes and preferences. Naturally, their results have a US bias as it is the largest market in digital advice and investing. During this crisis, there has been an upsurge in searching for Financial advisors.

Consumers are increasingly interested in Long term digital advice.  

Retirement advice, tax optimization and harvesting, are highly sought.

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`Retirement planning` has been strongly trending which is unexpected. People close to retirement prefer traditional channels of advice typically. This trend shows us that there is a reversal and a huge opportunity. It can also mean that consumers realize that there is value in paying an advisor to plan for retirement from early on.

The value of retirement Advice is on the rise.

Bambu`s analysis confirmed (what I knew from fund flows reported by several data providers globally) that there was a huge shift from Fixed income to Equity ETFs. This has resulted in an unexpected inflow into Equity ETFs despite the market downturn.

Eric Balchunas, senior Bloomberg ETF analyst, reported that Vanguard Q1 ETF inflows were at a record $47 billion and this was ALL Equity ETFs, as fixed income ETFs were net $0.

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QQQ the Invesco ETF tracking Nasdaq, also saw peak inflows (via Bambu)

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What Bambu added to the picture, that the hugely positive Equity ETF inflows came also from a consumer shift from investing in individual stocks to investing in ETFs.

Consumers are de-risking (diversifying) from individual stocks into ETFs.   

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Consumers are inquiring about Rebalancing. Digital advice on managing portfolios is on the rise which is a shift from stock picking.

None of the US Robo advisors have announced any firings and some are even hiring analysts, developers, and managers.

Bambu reports a very busy month, which shows that Digital in wealth is not going away and variations will be the norm depending on the geographic region and the area of focus.

Uncertainty and the lockdown has strengthened the B2B robo advisor segment.

Go Digital for Financial advice, rebalancing, tax harvesting.

Recording of the Bambu webinar with lots of graphs and details.

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How the humble QR Code could foil an authoritarian power grab using the fear pandemic from coronavirus.

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This is the fourth in our series on how Coronavirus is changing our world. The first looked at how this is crashing legacy financial markets. This was the destructive part of creative destruction. The second in the series was a hopium dream of a positive post Coronavirus future in general terms – not business as usual but better. The third outlined 6 technology silver linings in the dark Coronavirus cloud. In this post we stray into geo politics to answer the question “what if authoritarians use the fear pandemic from coronavirus and technology from social media to AI to payments and 5G to grab more power?”

Technology is neutral; it can be used by authoritarians or by the people. The future can be dark or light depending on what we do. Those who want a light future may want to reach for help from a very boring technology called the QR code.

The fear derived from 911 was mostly spectator fear. Unless you lived in downtown NYC, you watched events on the media. The fear pandemic from coronavirus is more real and personal for almost everyone on the planet. We all face restrictions and threats to our health and the health of our loved ones.

Nearly 20 years after 911, count the cost in lives and money lost from endless wars and from our loss of personal freedoms. Imagine what authoritarian power grabbers around the world will do with the fear pandemic from coronavirus. 21st century authoritarians also have access to technology from social media to AI to payments and 5G that would have been the dream of 20th  century authoritarians.

China is embarking on a PR charm offensive, featuring their response to the coronavirus pandemic. Many are cynical about this and do not believe the data coming out of China. Sadly the politicized response from America is equally distrusted by many people. 

Authoritarians everywhere are figuring out how to use the fear pandemic from coronavirus and technology from social media to AI to payments and 5G to grab more power.

So should we all just give up and resign ourselves to a bleak future that  is mashup of 1984 and Brave New World?

Fortunately freedom loving people could get help from some humble technology called the QR Code.

We have featured QR code technology many times on Daily Fintech (see here for search on our archives). This post is a good intro.

This is how this relates to the fear pandemic from coronavirus. It now looks likely that some form of antibody testing is viable. This has three big benefits. Those who have been tested as having immunity can:

  • go to work, restarting the economy and putting food on the table
  • work or volunteer in hospitals
  • donate blood to help cure people who are already sick.

The less obvious benefit is reducing fear. Imagine seeing somebody show you their immunity card. You are not afraid to be around them. You can shake their hand, high five them, hug them all quite safely. Of course you have to trust that immunity card and it has to be visible, which is where the QR Code comes in. Let’s say your QR Code enables a QR Code scanner to see exactly what test they had and when and who administered the test;  full transparency generates trust.  The QR code showing your immunity is a kind of passport. QR Code scanners are cheap. Any shop/cafe/restaurant owner for example can have one. The QR code can also be embedded into paper and plastic cards issued by governments.

The key to this kind of people-powered technology is:

  • Consumers consciously decide if they want to wear the passport.
  • Anybody with a QR Code scanner can read your passport.

Now contrast that with fear-powered technology that authoritarians love:

  • Consumers legally sign up, but are not really conscious of the tradeoffs
  • The data is controlled by a few centralised institutions 

It is your technology and your choice.

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Introducing Alan Scott as the Daily Fintech Stablecoin News Curator

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During January we started a new format to curate the most important news in big waves of change in Fintech. The logic was explained in this announcement.

We started this new format in Security Tokens, because we believe that this is a big wave of change. So we worked hard to find an expert to guide us on what is happening in Security Tokens and we found that expert in Sheldon Freedman.

Another big wave of change iin Fintech is Stablecoins. So I am delighted to announce that, starting tomorrow,  Alan Scott will be your Stablecoin News Curator

We believe in constraints because sipping from a firehose is a time suck for the busy senior leaders who rely on Daily Fintech to deliver just enough information to get on with their job.  So once a week your News Curator will choose the 3 most important Stablecoin news stories. This requires judgement and that only comes with deep experience in the market, which is why we are so happy to announce that  Alan Scott will be your the Daily Fintech Stablecoin News Curator

We chose news about Stablecoin because we believe that this is a tsunami sized wave of change where there is a big demand for quality information. It is also a complex subject and so we worked hard to find the best expert, wherever they are in the world (location is never an obstacle for us,  because we have been running a decentralized remote working operation since we started in 2014) and we found that expert in Alan Scott. Alan and I first started working together over 12 years ago and I have enjoyed talking to him about all subjects related to cryptocurrency and FX, particularly Stablecoins. Alan is that rare combination, both deeply knowledgeable and an outside the box thinker. He is a serial entrepreneur and senior executive who has “walked a mile in your shoes”.

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

Last week I interviewed Alan to get his views about Stablecoin. So I was delighted when Alan agreed to be our Stablecoin News Curator.

Please welcome Alan Scott. He will be your guide to the Stablecoin tsunami of change. Please tune in each Tuesday to learn what matters in the Stablecoin market. For more about Alan from his LinkedIn profile:

“Technology builder and seller with senior leadership roles developing electronic FX (eFX) systems since 2003. Involved in all areas from Leadership, Sales, Systems Design, Development and Implementation of leading systems at my own company called Velsys (33% Deutsche Bank owned), and then latterly at 360T and Integral.

Currently MD EMEA at 24 Exchange. 24 Exchange 24 Exchange is an electronic communication network (ECN) for over-the-counter (OTC) products. The unique model created by 24 Exchange where Standard Chartered Bank operates as a central dealer addresses major challenges in the NDF markets. These include fragmented liquidity due to jurisdiction, high transaction cost, information segregation and inefficient collateral management.

Standard Chartered Bank acts as a liquidity provider, liquidity taker, prime broker as well as Central Dealer. Standard Chartered Bank is a strategic investor in 24Exchange.

Prior was CEO/Founder SmartMoney. SmartMoney was a start-up focused on bridging the divide between Crypto and FX. Its mission is to build a unified system that is truly fair to both counterparties in a trade and not biased to one side or the other.

Member of the ACI Committee For Professional Conduct (CFP), responsible for the model code and adherence to the Global Code amongst other things and the FX Committee since 2014, in addition, Chair of the Crypto Working Group subcommittee under the CFP.

As the CEO of Velsys, led the development of a new cloud or SaaS based eFX solution called V-FX. Velsys developed from an Australian based company to a global technology specialist with employees in Singapore, London and New York.

At 360T a leadership role providing technical and business analysis input in to the on-going design and development of Product, System and Liquidity Management.

In summary;

Product roadmap and Architecture for complete front to back FX eCommerce system, covering key business functionality such as:

o Risk and Position Management with Auto Hedging,

o Internalisation and Aggregation,

o Integration with Credit and Back Office systems including Post Trade, STP,

o Pricing including skewing and spreading,

o Web GUI design, look and feel,

o FIX and proprietary connectivity.

Connectivity and integration experience with all of the major FX platforms (360T, FXall, Bloomberg, Reuters, Currenex, Integral).

Liquidity Management and knowledge of the systems used by the major market makers or Liquidity Provision banks (Deutsche, RBS, UBS, Citi, JPM, Morgan Stanley, Standard Chartered and HSBC).”

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