FB doing a Tencent – Cryptos mainstream adoption in sight?

We have had a record breaking February in the UK weather-wise. One of the days in Feb saw temperatures go up to 21 degrees Celsius. While the cold has returned a little bit, it seems winter is largely done. I get that sense with cryptos, as large institutions one after another are announcing projects, and it only takes one of them to take off for cryptos to go mainstream.

Messaging applications thinking of launching their own cryptos is nothing new. Telegram and Signal have been at it for sometime. However, it is a bigger deal when Facebook looks at introducing cryptocurrency based payments on Whatsapp. The size of the opportunity for Facebook and their partners when the platform is Finteched will undoubtedly get them out of their issues they have faced over the past 24 months.

The Facebook Opportunity

Facebook has two problems to solve, and both potentially powered by Blockchain.
Facebook’s Blockchain team has been spearheaded by former PayPal president David Marcus since last May. In order to replicate Tencent’s successes, they need to leverage the user base of their apps (FB, Whatsapp, Instagram). Bringing payments to Whatsapp would have have been a good starting point, however Facebook’s attempt at doing that in India (the largest Whatsapp) hasn’t gone too well.

About 1 Billion people in India have a mobile, and about 300 Million of them use Whatsapp. Last year, Whatsapp pay launched in a controlled fashion to 1 Million users in India. They used the government backed UPI (Unified Payments Interface), and during the pilot, they achieved about a Million transactions per month. However, the regulators weren’t happy that the payments engine was on Facebook servers. They wanted the servers to be in India, and despite several conversations there is no solution.

The payments market in India is a $1 Trillion market by 2023, and it would be a shame if they missed the bus.

Facebook is looking to create a stablecoin attached to a basket of currencies. There is a team of about 50 people working on this project. If FB planned to use the Indian market as a testing ground for the crypto-powered Whatsapp pay, they may now have to deal with the crypto currency regulatory ban too. However, if they managed to clear the regulatory hurdle, their growth could dwarf the likes of PayTM, and that would just be the start. On top of it, Indian remittance market boomed to $80 Billion last year. If I could use whatsapp to send money to my mom, that would be awesome!!

The other issue that FB has had is around data privacy. With identity management being one of the key concerns, FB saw record number of millennials leave their platform last year. However, with a Blockchain powered Self Sovereign Identity engine, Facebook connect could redefine it’s position with data privacy as a distributed identity management platform.

How decentralised it (the identity engine) will stay if launched is another challenge. Most federated and decentralised identity management engines have ended up creating a centralised monopoly in the past. With Blockchain behind the scenes, one would expect that to be different.

Will Facebook replicate Tencent inspired successes through Whatsapp? Will FB change perceptions through a genuinely decentralised identity engine? Would 2019 be the year of mainstream adoption of cryptos? Watch this space.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

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Welcome Pat Kelahan to Daily Fintech

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I am delighted to announce that Pat Kelahan will be writing the Thursday Insurtech column from now on. We interviewed Pat a week ago and then asked him to write the regular column each Thursday. You can see the first post from earlier today. Pat joins the other 4 Authors, one for each day of the week covering a different domain within Fintech from different parts of the world:

– Monday = Blockchain, Bitcoin & Crypto = Ilias Louis Hatzis from Greece

– Tuesday = Wealth Management & Capital Markets = Efi Pylarinou from Switzerland

– Wednesday = Small Business Finance = Jessica Ellerm from Australia

– Thursday = Insurance = Pat Kelahan from USA

– Friday = Consumer Banking & Impact Investing = Arun Krishnakumar from UK.

One reason why senior people give us their attention is that we connect the dots between Fin and Tech. We translate Fin to Tech and Tech to Fin. To do that in Insurtech means combining a) a deep understanding of how Insurance really works b) a customer-centric mindset c) an ability to explain complex subjects in engaging ways. Pat combines all three. You can read more about Pat from his interview last week and on his LinkedIn profile and follow Pat on Twitter. Here is an extract from last week’s interview for Pat to tell us about himself in his own words:

I am a father of seven, husband, multi-tasker and someone who strives to see and communicate the need to keep customer service as the focus of business, including insurance. Having been involved in insurance claims assessment and management for almost twenty years, retail and business ownership for another decade and one half, and construction/disaster work, my customer-focus has seen many iterations. In addition to the direct work of insurance I have remained a student of the industry, gaining understanding of how the ‘pieces’ fit together, and how effects on one facet affects the others. My current role is as Building Consultant/Forensic Market Strategist for H2M architects + engineers, a large engineering firm located in Melville, NY. How does that keep me in the insurance world? Well, the firm has an active division that assists property insurance carriers with forensic cause and origin work, including assessing mold, asbestos, and environmental damage claims, and consulting with adjusters for understanding of what causes claims. In addition, I am charged with helping the firm anticipate changes in property insurance and what comes next. Toward that end I network extensively with insurance stakeholders across the globe, and have introduced the insurance persona, ‘The Insurance Elephant’, to better focus the industry’s need to keep customer service in all it does, particularly as InsurTech efforts evolve. My duties also include presenting at industry conferences, conducting industry training, and consulting on building damage with insurance adjusters and others within the industry. I have a graduate degree in business from a top 50 university, have served as mayor of a village in upstate, NY, and been seated as a member of boards for not-for-profit organizations.

 

Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

Check out our advisory services (how we pay for this free original research).

To schedule an hour of Bernard’s time for CHF380 please click here to send an email.

InsurTech – Putting on its Grown-Up Pants

'Now what?'

Editor’s Note. This is a guest post by Patrick Kelahan who we first introduced to the Daily Fintech community via this interview.

Like the idealistic university student who has matriculated and is now out to conquer the world, InsurTech is realizing that at some point talk is cheap, and the rent has come due.  In its (length depending on whom you ask) three to four to five to nine year tenure, the innovation impetus within the insurance world AKA InsurTech has evolved from an oddity of peer to peer cover, to strident disruptive movement, to the focus of endless conferences, to catching venture capitalists’ attention, to innovation incubators, to – well through the path of evolution of most start-up business models.  That is, except for a few steps: the general acceptance by the industry’s customers, and in proving an independent, sustainable profit from innovative operations.

As such the movement has in many respects run out of idealism and its allowance, and is looking to engage those who have been reminding the ‘students’ all along that disruption for disruption’s sake is misspent effort, that there are rules that must be followed, that some ideas are clever but impractical, and that if they would like, there is an established insurance industry that is ready to embrace the prodigals.

Of course, partnering with incumbent, or legacy, insurance stakeholders (can’t say just carriers, as agents, brokers, MGAs, TPAs, vendors, consultants, etc. are apt partners as well) has its challenges of perspective as well.  In many respects innovation efforts to date have focused on the expense portion of the business, have not made significant inroads into improving claim service (as seen by the customers), have spoken of prevention (IoT, etc.), but have not made anything close to seismic changes on claim severity or service. 

Customers still have little concept of what comes next when a claim service is needed, process redesigns are made but become mired in the morass of organizational culture, and intellectual capital continues to bleed from claim staff ranks. 

There are many success stories to be considered in all insurance covers, but considering the industry is a US $5 trillion annual business and InsurTech efforts can be measured only in tens of billions of dollars, the effect is not yet significant.

And importantly- while InsurTech is the discussion du jour among the industry, that discussion has yet to really address the risk management needs of the 3.5 billion persons in markets who are not served or are underserved in terms of insurance products.

Current InsurTech focus does remind one of the Elephant and the Six Blind men- many innovators ‘seeing’ the industry from the perspective of what each participant respectively touches, and each in great part not seeing the beast for what it is- a complex combination of all its parts, and a complex interplay of the industry’s customers.

There is much to discuss and highlight regarding InsurTech, insurance, and customer service, not only on a niche basis (of which there are many), but on a global basis (literal and figurative).  I look forward to investigating and discussing the many unique areas of insurance while keeping a big picture perspective.  The elephant must be seen, but it’s OK to focus on its parts- and going forward this will include but not be limited to discussion of:

  • Customer understanding and acceptance of industry change
  • Claim processing- where method must resist madness
  • Digital methods’ effect on innovation, service, and development of new products
  • Effects of climate change on catastrophe insurance products
  • Regulation
  • Market growth where legacy barriers were not present- can that be mimicked in mature markets?
  • Comparisons and contrasts on how insurance is perceived globally

And in turn, it will be interesting to observe how InsurTech ‘graduates’ are working to pull on their adult trousers.

Image Source.

Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

Check out our advisory services (how we pay for this free original research).

To schedule an hour of Bernard’s time for CHF380 please click here to send an email.

Your workplace is now a bank branch, but it comes with ‘bleisure’

The workplace is the new bank branch, and a few fintech startups are starting to realise the power of this distribution channel.

Like retail is a digital-yet-physical omnichannel play, so too is the distribution of financial products through the workplace. To get to the end customer you have to be digitally savvy and relevant, but you also have to navigate multiple obstacles before you hit pay-dirt, namely HR managers, CFOs, MDs, Team Leaders, Payroll…not to mention the receptionist, the arch enemy of every sales person. It’s not for the faint hearted, selling into SME land. Ninja skills are a must.

UK based Upgrade Pack is one of those fintech’s having a crack, and recently launched a crowdfunding campaign via Seedrs. At the time or writing, 56% of the round had been filled.

The company’s closed marketplace allows businesses to offer customers and employees access to discounted flights and hotel upgrades across the world. It’s a clever way of tapping into the growing ‘bleisure’ market’, the concept of combining business activity with leisure time – like a weekend in Paris tacked onto a busy week of meetings, confused train journeys and croissants.

Unsurprisingly, bleisure is popular among millennials. A Hilton Hotels & Resorts survey of business professionals found that nearly 70 percent of respondents aged 25 – 35 wanted to tack on leisure time on top of their work trips. The digital nomad, made famous by slashies (Bali based yoga trainer by day, worker by whenever) must represent the pinnacle of millennials bleisure aspirations. I’m not going to lie, as a millennial myself, a bleisure flow state sounds pretty good to me.

Benefits like travel and hotel discounts and points used to be the domain of credit card companies. But now companies like Upgrade, Zenefits and many more are getting in on the game, bringing financial products with them. With millennials and younger generations eschewing credit for buy now pay later programs, or other forms of payment, benefits need a new home. Employers, ever eager to pacify their millennial workforce and ‘retain talent’ are somewhat easy targets for these sorts of programs. They do solve a problem – until of course everyone has them.

At the end of the day, there isn’t much of a substitute for a great work culture, benefit program or no benefit program. But we’ve all slogged it out in jobs that didn’t exactly measure up on that front, so if something can ease the pain of dealing with Mike in payroll, many corporate soldiers will take it.

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

ReitBZ leads the way to Wall Street`s new tokenization business

 

Davos

The big pot is in securitizing illiquid conventional assets using blockchain technology.

First area of growth (where the Sharks have smelt blood) is Securitization of real estate.

 

 

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Wall Street will focus on Extracting Value from designing compliant structured products. Asset-backed digital assets will be the first big Shark attack, Real Estate specifically will have a desk on the WS trading floors much like mortgages and mortgaged-backed securities did.

Mark my words from my January talk at CryptomountainRocks Davos during WEF

 

ReitBZ

Reitbz is the first security token (STO) backed by a traditional investment bank.

$10 for one ReitBz token. No US or Brazilian citizens.  You can pay with Eth or USD pegged coined Gemini Dollar.

Banco Pactual (BTG) from Brazil is the first `Shark` that makes my Davos prediction true.  The next generation of structured products, asset-backed by illiquid real estate, is being designed as we speak in the labs of incumbent banks.

I am very excited because this comes from Brazil and not Manhattan or Canary Wharf real estate. Second, because ReitBZ is backed by distressed real estate that BTG Pactual has access to, as they have been a leading investor in Latam real estate for many years. They manage over $2billion and earned the Euromoney award for Best Real Estate investors in 2017 and 2018.

An Emerging Markets leader in real estate investing, issues,backs and manages the STO.

There is a niche focus on three categories:

  • Real estate foreclosures by developers who were denied financing post-construction.
  • Real estate returned by buyers that couldn’t afford a bank loan after construction.
  • Real estate owned by companies that filed for bankruptcy or judicial recovery

ReitBZ is a transparent structure to invest in deal flow that is not accessible easily.

The funds raised will not be held by the BTG but by a smart contract on the Ethereum protocol[1]. The management of the investment process (purchase, management of the assets, sale) will be done through Enforce, and entity that is 10yrs old. Blockchain technology reduces the costs of a traditional real estate investment fund substantially (custody, bookkeeping, fund admin, structuring etc). The exact savings, I guess will be reported once the structure is live. What is unclear to me, is whether these savings are higher than the tax benefits that investors enjoy through traditional REIT structures (which undoubtedly have much higher costs in structuring).

As the devil is always in the details, keep in mind that on the one hand the funds are kept in the smart contract but on the other hand all decisions are made by BTG/Enforce. They are looking to buy assets at a 30% to 40% discount and over an 18month period, they aim to restructure them and sell them. They estimate that the restructuring process involves 10% to 20% costs. Once the property is sold at a profit, the managers will decide to distribute on a prorated basis the profits via dividends, which will take the form of Airdrops.

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You can read the white paper and the one pager on their site ReitBZ.io.

The fee structure for Enforce is in the White paper (p.18)

  • 1% on the funds allocated to buy a given Target Asset
  • 10% on the net collection arising from the sale of Target Assets (i.e. sale value, reduced by all costs related to the real estate, fees and taxes)
  • 30% performance fee on the amount exceeding a 15%/year post-tax hurdle rate of the Target Assets portfolio

An oscillation between centralization and decentralization is normal. Market forces will determine the sweet spot.

Look at the ReitBZ to realize the structure`s positioning. As in the conventional world, you should always read the covenants. I take this opportunity to highlight the Petro structure which is collateralized by Venezuelan oil resources. The question arises as to how the structure protects the investor to actually be able to access the collateral. Same questions arise for the ReitBZ structure. Real Estate in Brazil, of course, valued and traded in Brazilian Real,….

Cost savings for the investor in complex structures that pool illiquid assets are not that obvious. Again this is from experience from the financial engineering conventional world. All the setup costs may be lower for digital assets, but what about the fees of BTG/Pactual (seems to me borrowed from the old world much like the crypto hedge funds have done) and what about building in tax efficiencies? The truth is that we will need a few iterations of STO asset-backed structures to figure out how to optimize them.

Book one hour with Efi – Efi@dailyfintech.com – Ask me anything (AMA) for 0.10BTC

[1] The legal structure is in the Cayman Islands.

Sources: LATIN AMERICA’S BIGGEST INVESTMENT BANK LAUNCHES SECURITY TOKEN, Bicoinst

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Blockchain Front Page: Are Apple, Amazon, Google and Facebook the future of banking

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Last week our theme was “Is this end of Bear market or Bull trap?

Our theme for this week is “Are Apple, Amazon, Google and Facebook the future of banking?

Banks started around 2000 BC in Assyria and Sumeria, were merchants, made grain loans to farmers and traders who carried goods between cities. Over time, banking evolved to the highly organized system we currently know. While, everyone thought that the banks of the financial crisis in 2008 were too big to fail, we still had a full-blown worldwide banking crisis, with repercussions still felt today.

Ten years later, everyone is talking about how finance and payments could be disrupted by blockchain and cryptocurrencies. Banks around the world have spent the past few years preparing for competition from small, nimble technology startups. Yet, the big four, Amazon, Google, Facebook and Apple have been working diligently and expanding into payments and other financial services to disrupt one of the last frontiers.

On Feb 28, the New York Times reported that Facebook is ready to launch its own cryptocurrency and is speaking with exchanges about listing the coin. Facebook will be launching a stable coin for WhatsApp. Its expected that the stable coin will become available to Facebook and Instagram users, in the future. Facebook’s stable coin will be pegged to the US dollar and will allow users to send money to other users anywhere, instantly. Between WhatsApp, Messenger and Instagram, Facebook has a combined user based of around 2.8 billion people.

With the new stable coin, Facebook will be going after a multi billion remittance market. Facebook’s move is clearly to counter the threat from rivals, Telegram and Signal. Facebook started its efforts in crypto last year, after Telegram raised with its ICO a record $1.7 billion. Eventually we may see Facebook try to take its coin mainstream, allowing users to spend the cryptocurrency with online stores or on FB pages, without the need to  type in credit card or PayPal account details.

Facebook, Google, Amazon and Apple have long tried to break into financial services, with products such as Pay by Messenger and Google Wallet. Amazon has already pushed into loans to small businesses operating on its Marketplace platform, announcing in June 2017 that it had originated a total of $3 billion since a low-key launch in 2011. In 2016, Facebook secured an electronic money license in Ireland.

Rakuten may be launching a cryptocurrency soon. An earning report from February 12 states there is a major update coming next month, mobile app platform Rakuten Pay may potentially start supporting cryptocurrency payments, including all payment solutions embedded into one platform.

The banks you know today might disappear altogether over time. When today’s customers evaluate financial institutions, they compare how easy, instant and seamless the experiences is. With data based services offering personalized solutions and voice-activated Alexa and Google purchasing, the entire experience is changing.

A survey carried out by strategy consultancy Bain found that nearly 60% of bank customers were willing to try a financial product from tech company they already use. Amazon and PayPal were the two brands consumers would most trust with their money, the survey found, ahead of Apple, Google, Microsoft, Facebook and Snapchat.

Big tech players can leverage the open banking opportunity. Open banking brings significant changes to banking. It’s an immense opportunity for fintech startups, and any technology company to make use of open APIs to access customers’ accounts. With open banking, a bank’s competitors have unprecedented access to a bank’s data. This means that when Amazon asks for access to your bank account in return for an extra month of Prime, there’s nothing the bank can do to stop them

As cryptocurrencies and altcoins become more mainstream, we will see big tech companies making them part of their strategy to disrupt the financial industry. Facebook, Google and Amazon might become the banks for the next generation, but it wont happen overnight. Alipay has 400 million users, WeChat’s WeBank is very successful. If done right, this could be great for consumers, as they will gain access to a much wider set of financial products at lower prices. It will also cause a real shock to the most banks’ revenue.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday.

Real Time Settlement of Cross Border FX is now a 3 horse race with JPM Coin & more will join soon

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Here is the Chapter in The Blockchain Economy digital book on Real Time Settlement, updated with this post

Until recently, there were 2 horses in the race for Real Time Settlement of Cross Border FX:

  • Swift using DLT. SWIFT could do this easily at a technical level (any of the permissioned Blockchain systems will work) and as they are owned by the banks, they will get through the right doors.  This is SWIFT’s game to lose.
  • Ripple XRP. Never underestimate the ability of legacy bureaucracy to snatch defeat from the jaws of victory; so SWIFT may blow it and hand victory to a brash upstart like Ripple XRP which is publicly fighting SWIFT for banker’s attention. However, there are serious questions about a) whether a speculative coin like XRP is useful addition to a messaging system (Ripple ILP) and b) whether a speculative coin like XRP could be classified as a Security by regulators. 

Now JPM Coin is the third horse in the race that will take business away from both the other players:

  • Swift will lose volume as big banks emulate JPM and settle using their own Coin. Expect something like CitiCoin, GoldmanCoin, HSBCCoin, DeutscheCoin, etc to announce soon.  They may choose a) different branding b) different base currencies (eg EUR), but this is low hanging fruit for the Big Global Banks.
  • Ripple XRP will be forced to pitch for smaller banks (who will tend towards loyalty to SWIFT) as the Big Global Banks go for their own Coins.

Image Source.

Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

Check out our advisory services (how we pay for this free original research).

To schedule an hour of Bernard’s time for CHF380 please click here to send an email.

Wolf Wolf!! Recession is coming – but can AI help?

These are interesting times with Brexit around the corner, an Indo-Pak (China) war looming, and a disastrous trade relationship between the two largest economies of the world.

This week I delivered a speech at Cass Business School on how and if AI could help in dealing with recessions. There is so much noise about the next recession, that I wonder, if people prefer a recession to cool down the economy a bit.

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And the expectations on Constantinople is pushing up crypto prices again – although I don’t believe for a second that, the crypto market is big enough yet, to trigger recessions.

Assume you are driving a Ford Fiesta, can the speed indicator on your dashboard keep you from having an accident? Upgrading your car to a more sophisticated, intelligent one would definitely help. But that doesn’t prevent you from having an accident either. Even self driving cars could be hacked, or could have a bug that causes accidents.

AI/Machine learning or any variation of data driven intelligence, as we know them today, can provide us suggestions – and clever ones.

But if a market filled with irrational exuberance from humans have to be fixed by rational machines, it is a tall ask.

The dot com bubble burst and the subprime mortgage crash happened because of too much liquidity in the market leading to bad lending and spending decisions. And it only took a trigger like a policy change or a crash of Lehman Brothers to sap liquidity off the market. So, what are the signs now?

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How can we get intelligent with the data around us and spot recessions? An analysis of Consumer data should provide us with a view on consumer behaviour, and almost predict where inflation would be heading. One of the firms I recently met, used open banking to collect consumers data, enrich it, and help them manage their finances. But the intelligence they gather from millions of transaction level data are used by their institutional clients to understand customer sentiments towards a brand.

Those insights combined with macro economic data should give these institutions the intelligence to choose their investments. The applications of open banking have largely been focused around selling services to customers in a personalized fashion. However, open banking data should help us understand where the economy is heading too.

Risk management functions in banks/FIs have been beefed up since the recession. About £5 Billion is spent in the UK alone on risk and regulatory projects every year. The ability to perform scalable simulations in a Quantum computing ready world will help banks provide near real time risk management solutions.

In capital markets, we model the risk of a position by applying several risk factors to it. Often these risk factors are correlated to each other. To be able to model the effect of a dozen or more correlated risk factors on a firm’s position is hard for conventional computers. And as the number of these correlated risk factors increase, the computational power required to calculate risks increase exponentially. This is one of the key issues of simulations (not just in financial services) that Quantum computers are capable of solving.

11 years ago, when the recession happened, regulators were ill-equipped to react due to the lack of real time insights. Today they have regular reports from banks on transactions, and better ways to understand consumers’ behaviour. That clubbed with macro economic data trends, should provide enough indicators for regulators to set policies. So, when there is a tax law that would trigger a collapse is being proposed, they should come up with strategies to bring the law into effect with minimal damage to the economy.

In the machine learning world, there are two different approaches – supervised and unsupervised models. If you understand the problem well, you typically go for the supervised model and see how the dependent variable is affected by the independent variables.

However, I believe, recessions often have the habit of hitting us from a blind spot. We don’t know what we don’t know.

It’s important for regulators and central banks to run exploratory analysis – unsupervised models, and assess the patterns and anomalies that the algorithms throw.

Data from consumer behaviour, geo-political events, macro economics and the market should give these algorithms enough to identify patterns that bring about recessions. This may not necessarily help us avoid a recession, but could definitely reduce the impact of a sudden recession, or help us engineer a controlled recession when we want a cool down of the economy.


Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email


Interview with Pat Kelahan about the future trends in Insurtech particularly in Claims Processing.

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Our earlier research told us that what customers really care about in Insurance is Claims Processing. Getting paid, promptly, without a lot of added stress after  a traumatic event, matters a lot more to customers than attributes such as quality of user interface. Seen from the other side, claims can often have fraud and so managing the Claims Process properly is one key to running a profitable Insurance business.

In short, the details matter, so we decided to interview somebody who really understands the Claims Processing details – Pat Kelahan.

Q. Please tell us a bit about Pat Kelahan

I am a father of seven, husband, multi-tasker and someone who strives to see and communicate the need to keep customer service as the focus of business, including insurance.  Having been involved in insurance claims assessment and management for almost twenty years, retail and business ownership for another decade and one half, and construction/disaster work, my customer-focus has seen many iterations.  In addition to the direct work of insurance I have remained a student of the industry, gaining understanding of how the ‘pieces’ fit together, and how effects on one facet affects the others.

My current role is as Building Consultant/Forensic Market Strategist for H2M architects + engineers, a large engineering firm located in Melville, NY.  How does that keep me in the insurance world? Well, the firm has an active division that assists property insurance carriers with forensic cause and origin work, including assessing mold, asbestos, and environmental damage claims, and consulting with adjusters for understanding of what causes claims.  In addition, I am charged with helping the firm anticipate changes in property insurance and what comes next.  Toward that end I network extensively with insurance stakeholders across the globe, and have introduced the insurance persona, ‘The Insurance Elephant’, to better focus the industry’s need to keep customer service in all it does, particularly as InsurTech efforts evolve.  My duties also include presenting at industry conferences, conducting industry training, and consulting on building damage with insurance adjusters and others within the industry.

I have a graduate degree in business from a top 50 university, have served as mayor of a village in upstate, NY, and been seated as a member of boards for not-for-profit organizations.

Q. In which segments do you think we will first see big breakthroughs in Claims Processing?

Significant changes are being seen in claims processing now, but since insurance is comprised of many lines in many markets and in the many facets of the business, the changes need to be looked for.  Also, the InsurTech (the integration of digital innovation and the insurance business) impetus currently active within insurance is well-known within the industry, but not so well known by its customers.  The point?  Processing innovations have been in general transparent to customers.  Sure, there’s online access and application-based transactions, but considering most customers only interact with their insurer at the point of purchase, claims processing changes have not been the primary focus of carriers.  Much has occurred on the expense side of the business- underwriting, distribution, and sales, but not as much on a cost-equivalent basis for claims.  If claim costs are 75% of the business, that portion of the business has been sorely under-represented in innovation efforts.  Industry watchers celebrate the $40 billion or so that has been invested in InsurTech efforts over the past few years; that sum while large, is insignificant compared with the $10 trillion or so in premium volume accounted for by carriers during the same period.

What will we see, therefore, as the big breakthrough in claims processing?  The recognition that the administrative handling of claims remains generally unchanged even in the light of InsurTech efforts.  Efforts to date with ‘tech-ing up’ claim assessments, drones, virtual damage capture, vendor access to systems through APIs have been a good start but remain mired in the rote of manual process and repetitive admin liability.  Pair the inertia of admin with the still huge volume of unstructured data and like an addictive person, the industry needs to recognize the problem before it can move to a resolution.  All along the insurance customers’ needs must remain paramount and need to be the starting point of all innovation.

Q. What do you consider to be the most important InsurTech innovation that you have seen in the last few years?

There have been many significant innovative ideas brought to the insurance industry since the InsurTech impetus followed FinTech’s success three to four years ago:

  • API interfaces between carriers and stakeholders
  • the advent of the use of mechanical/digital assessments of claim damage
  • application of new and greater breadth data sources in underwriting, catastrophe preparation and assessment,
  • granular hazard assessment and categorisation
  • robotic process automation
  • integration of artificial intelligence and machine learning within all aspects of insurance, application-based sales and service for customers
  • policy and sales aggregators that provide immediate and varied choices for customers
  • suggestions that blockchain/secure chain distributed ledgers and smart contracts will revolutionize insurance data validation, the Internet of Things will pre-empt the need for claims, among many other innovations.

However, what I suggest is the most important InsurTech innovation has been the advent of the ecosystem-based, application leveraged sales of micro policies that have added hundreds of millions of previously uninsured persons to the ranks of insureds, primarily within the China market.  Absent the advent of AI and tech infrastructure to support underwriting, processing and sales of these policies through a central, accepted platform these hundreds of millions could not be served.  And, the technology is promising in terms of carrying the methods into other markets where additional hundreds of millions are under-served.

In what country do you see the most important InsurTech innovation?

The prior response suggests this answer is China, and I would not dispute that.  I would say that China represents the greatest importance in terms of scope, but I would also remind the reader that similarly important, less wide -spread successes have occurred elsewhere.  For example, app-based bicycle insurance is taking hold within India where bicycles are a key form of transport, and a firm in Germany has introduced a very effective health insurance platform where customers can through online actions submit and be paid for health and accident claims.  Natural hazard risks have been assessed and made available to carriers and insureds in manner that allows detailed assessment of insurance needs.  Carriers can take proactive steps, even creating claims,  when an insured’s dwelling is in immediate risk of damage, solely based on data analysis.  Farmers in remote regions of the world can obtain parametric cover to protect against financial loss of crops.  The list is long, but I retain the right to support that based on the volume of previously uninsured persons now having cover due to InsurTech innovation, my answer remains China.

Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.

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The law of the fintech jungle is changing

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

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

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

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

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

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

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

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