The Financial Services Stack

Editor’s Note: this is the very first post on Daily Fintech. 

To give our authors a break over the holidays, we are re-posting from our archive of over 1,000 articles. Rather than pick favourites we elected to simply  repost the first 8 articles (as that was over 5 years ago you may have missed them; we were pretty unknown then). 

As we close out 2019, make a resolution to be smarter about Fintech in 2020 by subscribing for just US$143 a year (= $0.39 per day). You will get all our fresh daily insights and participate in our forum. You can also read our archives with over 1,000 articles, an example of which you are reading from over 5 years ago.

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The combination of digitization (Social, Mobile, Analytics, Cloud, cryptography), globalization (Rise of the Rest) and demographics (younger Digital Natives) creates a shift in the Financial Services Stack akin to the transformation that happened when the PC stack replaced mainframes. We moved then from vertical integration (mainframe vendors controlled the whole stack) to horizontal layers (Intel, Microsoft, Applications, PC Manufacturers).

Now we are moving from vertically integrated banks that control the whole stack to a horizontal stack with services at the application layer currently controlled by born-digital ventures in areas such as  Lending, Payments, Trade Finance, Foreign Exchange and Wealth Management.

This is fundamentally different from the first wave of Emergent Fintech, which created a lead flow engine for banks by adding a better User Experience on top of existing bank services. Those services (such as Simple) were non-threatening to Banks and made easy acquisition targets.

Both Banks and Traditional Fintech vendors to those banks will face wrenching change to adapt to this big shift in the financial services stack.

Banks that do not change at a fundamental level risk becoming “data centers with fancy lobbies”.

Banks that do not transform at a radical level risk becoming a commodity product with high costs in a market with low cost digital-first alternatives. That is a recipe for declining profitability.

The VC community has already woken up to the massive opportunities at the application layer of the financial services stack, to create category-defining ventures in areas such as Lending, Payments, Trade Finance, Foreign Exchange and Wealth Management.

Many banks will thrive by partnering with the born-digital startups that become dominant in an area of the application stack that they consider non-core.

These banks will leverage their brand, balance sheet strength and low cost of capital to combine products to deliver new experiences for their customers.

These biz dev partnerships will be driven initially by the born-digital startups via APIs. However in the second phase we may see some Banks seize the User Experience challenge to create a whole wave of new consumer-facing services that use data and services from the middle layer via APIs.

Smaller banks may thrive in this new environment because they are used to outsourcing their IT and partnering to deliver services; they see their core competency being their local brand and customer relationships; they know that relationships are the one thing that does not become commoditized.

A few mega banks will try to own the whole stack. However even the biggest banks are starting to exit business lines where they recognize that they cannot get a dominant market share. So these mega banks may be vertical in some markets and horizontal in others.

IT vendors serving the banks face a hard grind in this environment. It is really hard to sell to middle management when an industry is going through this kind of “transform or die” change. Traditional Fintech vendors will have to either move up the stack or down the stack. Moving up the stack means becoming a trusted adviser at Board level, making change happen from strategy down to code. There are already very strong vendors such as Accenture and IBM in this rarified air, so it is hard to break in here. Moving down the stack is equally hard because you have to become the disrupter in a market you are already in, with a 10x better, faster, cheaper solution. Vendors that don’t make either move – up or down the stack – will be “rolled up” into tech conglomerates and the product will slowly fade away.

It is unlikely that we will see anything like a Wintel level dominance of the bottom of the stack. Regulators will be concerned about this and VCs will bring their lobbying power (including modern digital lobbying) to remind politicians not to kill the goose that lays the golden egg of innovation. So the bottom of the stack is likely to be open source and standards-based using technologies such as Blockchain.

The bottom of the stack in application terms will be deposit taking. This is so ripe for fraud, that you will have to be regulated as a Bank to get FDIC Insurance (or equivalent in other countries); without that protection consumers won’t trust you.

The fundamental shift at the consumer level is:

“We don’t go to the Bank, the Bank comes to us.”

In all the earlier generations of technology we went to the Bank:

1.0 we went to the Bank’s branch.

2.0 we went to the Bank via an ATM.

3.0 we went to the Bank via their web site.

The current wave of technology means that Banks need to be there and relevant at the point when the custommer is considering a transaction (whatever that transaction might be – buying/selling a product/service, buying stocks and bonds, etc) on whatever device the user has at that moment in time. This experience has to be real time, event driven, powered by recommendations from personalized data, in context and mobile.

Context is king & queen because context is what drives User Experience

As we close out 2019, make a resolution to be smarter about Fintech in 2020 by subscribing for just US$143 a year (= $0.39 per day). You will get all our fresh daily insights and participate in our forum. You can also read our archives with over 1,000 articles, an example of which you are reading from over 5 years ago.

We look forward to welcoming you to the Daily Fintech membership community today!

The post The Financial Services Stack appeared first on Daily Fintech.

This Week in Fintech 20 December

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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.

Arunkumar Krishnakumar is a VC investor, podcast host & writer focused on deep technology & sustainability.

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 a Fintech deal-maker, investor, entrepreneur & advisor. He is 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 Is Cryptocurrency the Future of Money?

According to Deutsche Bank the current money system is fragile. Deutsche Bank sees that by 2030 digital currencies will rise to over 200 million users. In the “Imagine 2030” report, Deutsche Bank suggests that digital currency could eventually replace cash one day, as demand for anonymity and a more decentralized means of payment grows.

Editor note: When I first dove down the Bitcoin rabbit hole in 2014, the idea that it could compete with Fiat money was only a pipe dream of cypherpunks. In 2019, one of the world’s biggest banks is voicing this opinion.

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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 Mortgages for `Branch-Never` clients is the next re-bundling item  

Allocating capital and managing the risk on the debt side of our personal balance sheet is larger, more complex, and determines whether we reach our goals or how far away do we end up. This is primarily where we all need advice (human, bionic, hybrid) in the first place, and subsequently in the investment segment of our finances`

Editor note:Mortgages and home ownership is key to wealth management for the rest of us. Earlier, Efi had explored how mortgage lenders are moving into robo advisory. Now she shows the intersection coming from the other direction. 

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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 Coconut builds new offering on the ‘banking commons’

SME current-account and bookkeeping tool Coconut recently announced that along with the company’s baked in current account, provided by Prepay Solutions, customers can now connect up their existing business current account.

Editor note: It is hard to get more boring – and lucrative – than helping small business owners invoice and manage their bookkeeping more effectively. SME Finance is moving from an underserved market to one that is hot and scaling fast.

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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 The InsurTechs were nestled all snug in their beds, with visions of 2020 dancing in their heads

It’s the end of 2019, an auspicious year for insurance and InsurTech, and it’s the end of the year with expectations in the business world for business results and (hopeful) bonuses.  And of course there is the wondrous shadow of December holidays over all, with visions of sugarplums dancing in heads.

Not everyone celebrates a Christmas holiday, Chanukah, or Eid, but one cannot avoid the end of year holiday gifting and hopes.

In keeping with that spirit this final InsurTech column for 2019 wishes all well for the season and bright things for 2020.

Editor note: A great round up of the movers and shakers in Insurtech as we move to leave behind tired old 2019 and go to fresh clear eyed 2020. 

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Friday Arunkumar Krishnakumar @karunk, our London based Fintech investor, (Venture Capital investor at Green Shores Capital focusing on deppp technology & sustainability) wrote Financial Identity could add $250 Bn to Asia and Latam

These days, I hear headlines on Financial Inclusion so often that, it makes me wonder if Financial Inclusion is the new Fintech. The past three years in India, with the rise of payments, Aadhaar and last mile access to financial services is a great example.

We have also had Nubank from Latin America that won Softbank’s investment, and the Grab and GoJek story in South East Asia. Some of them are taking the digital banking route to genuinely address an unbanked population, while others are simply using their lifestyle apps to provide sticky financial services.

Editor note:The emergence of billions of people in the Rest of the World into a global middle class is the story of the 21st century for investors, entrepreneurs and governments. These billons need an on ramp to the financial system, a process labeled financial inclusion. 

Good wishes to all our readers around the world for for whatever holidays you celebrate. May 2020 bring you everything you hope for.

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Financial Identity could add $250 Bn to Asia and Latam

These days, I hear headlines on Financial Inclusion so often that, it makes me wonder if Financial Inclusion is the new Fintech. The past three years in India, with the rise of payments, Aadhaar and last mile access to financial services is a great example.

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We have also had Nubank from Latin America that won Softbank’s investment, and the Grab and GoJek story in South East Asia. Some of them are taking the digital banking route to genuinely address an unbanked population, while others are simply using their lifestyle apps to provide sticky financial services.

This is in stark contrast to the overbanked West, where we see challenger banks, trying to win brownie points using ‘financial inclusion’ as a marketing ploy. There are several arguments about their scalability and viability due to the overbanked markets they are going after.

Most Fintech events these days have a panel on financial inclusion. I recently came across an event planned in India, and the objective was to make it as grand as the Singapore Fintech Festival. I understand there are several panels focused on Financial Inclusion. It’s not surprising as Asia is seen as the hub of financial inclusion.

However, in several of these instances, trying to achieve financial inclusion before getting a financial identity to the unbanked is like placing the cart before the horse.

One of the first articles I wrote on Daily Fintech was about a firm called BanQ. They were working on providing economic identities to women farmers in Africa. They were also using Blockchain to achieve that.

It wasn’t just BanQ, another startup Agriledger led by Genevieve Leveille is looking at solving inefficiencies in the food supply chain. The transaction data that Agriledger would capture in the process would act as an economic identity for the farmer. As a result they can avail other financial services, thanks to their track record on the ledger.

Even when Libra was announced, one of my biggest hope and ask from the project was solving the identity problem. It was positioned as offering financial inclusion at scale – but they were in a perfect position to first solve the social and economic identity issue as the first step towards getting to inclusion at scale.

If identity solutions are globalised, refugees can be offered jobs in their countries of refuge – a farmer in Africa, seeking refuge in Spain, could find it easier to get a loan to start or work in a farm in Spain. All he needs to show is his track record as a farmer.

It should be the same as an executive moving from one country to another for employment, without having to start from scratch completely.

On that note, I came across a report by Oxford Economics and identify firm Juvo. The report highlights the following countries and the potential GDP growth in those countries with proper financial identity initiatives.

    • India – $7 Bn
    • Indonesia – $15 Bn
    • Philippines – $15 Bn
    • Pakistan – $9 Bn
    • Mexico – $31 Bn

In essence, tapping into mobile operators and providing financial identities to one and all would add $250 Bn to the global GDP and make available about $408 Bn worth of credit.

These numbers feel too low to me, perhaps the numbers are just an immediate benefit, and not a weighted or discounted average across years.

The projection that caught my attention in the report was that identities could increase the per capital GDP by $25 in South and South East Asia. This is a massive value-add when put into perspective.

While I wish Juvo all the very best in achieving their goals on financial identities, I believe it has to be a big player like a facebook or google, who would be best positioned to launch an self sovereign identity platform. It could perhaps be centralised on day 1, but evolve into a self sovereign network of identities.

When that happens, there would be onboarding of people onto financial services like never seen before. At this stage, it is all just wishful thinking though!

The post Financial Identity could add $250 Bn to Asia and Latam appeared first on Daily Fintech.

How Security Tokens may seize the day after SEC bans direct primary listings.

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

The news 9 months ago was unexciting and seemed like a no brainer. On February 8, 2018, the headline (from a law firm called Skadden) was SEC Approves NYSE Rules to Facilitate Direct Listings

Who would not want direct listings?

Then on December 10, 2019, the headline from another law firm (Cooley) was SEC fast tracks a “no” to NYSE primary direct listing proposal.

Huh?

To understand what is going on we have to go below the headlines.

What this reveals is a different point of view between Wall Street West (aka Silicon Valley) and Wall Street East (aka New York).

To understand this, start with the basics of direct primary listings vs investment banker underwritten offerings.

Direct primary listings vs banker underwritten offerings

A direct primary listing means an SEC registered/regulated sale of Securities directly into the public market and here is the difference, without intermediary underwriter commissions or roadshow expenses. Direct listings puts the marketing responsibility onto the issuer, without relying on the bankers.

Although everybody refers to direct listings, the more precise term should be direct primary listing. Primary means that the  issuing company collects funds for selling securities; secondary means existing shareholders sell securities and collect the money. Direct secondary is permitted now.

Using the Daily Fintech Qui Bono/Qui Amisit Analysis:

  • Qui Bono. Direct listings are good for some issuers/entrepreneurs who have plenty of capital and a well-known consumer brand. The best articulation of this point of view comes from one of the leading purveyors of capital for entrepreneurs, the always articulate Bill Gurley of Benchmark Capital. In short, get your capital from private funds and do your own marketing. This makes sense because a modern IPO is much more of a marketing event than a capital raising event.
  • Qui Amisit. Direct listings are bad for Investment Banks who lose some of those underwriting commissions. Most other players in the ecosystem are neutral or positive about direct listings. Many lawyers for example, anticipate growth from direct listings.

Issuing public stock is more than a marketing or capital raising exercise. Two key advantages are that it provides a public stock currency for M&A, and enables employees to see and get value from public stock bonuses. The third reason helps explain why VCs are so keen on this and why the SEC reversed course – a direct listing does away with lock-up periods at the offering for insiders.

A direct listing works well for consumer brands such as Spotify. Many companies that are less well known (such as enterprise ventures) may rather have an underwriter/banker doing the work for them of selling the shares of an IPO into their network, pricing, taking them on road show and creating an aftermarket.

A direct listing also works well for unicorns, where the the NY underwriters are not essential to creating demand/liquidity. The unicorn in the IPO pipeline that might have been pondering a direct listing is Airbnb.

So, what does all this have to do with Security Tokens? To understand this, understand three three letter acronyms – ICO, IEO, STO

ICO IEO and STO

ICO = initial Coin Offering = unregulated offerings using Ethereum that the SEC declared to be Securities. Big in 2017 as entrepreneurs bypassed the traditional gatekeepers.

STO = Security Token Offerings = regulated offerings using Ethereum that are officially Securities. These were big on the hope front in the early days of 2018 as the crypto market crashed and ICOs were deemed no longer valid.

IEO = Initial Exchange Offering. This makes the Exchange into the gatekeeper. That could mean legacy exchanges such as NYSE & NASDAQ or the new breed of crypto exchanges such as Binance. The more liquidity offered by  the Exchange, the more they can charge for their gatekeeper role.

All these with O are designed to evoke IPO. A direct primary listing is different and maybe coming to the token world.

Direct primary listing applies to both shares and tokens

Our thesis is that the direct listings vs IPO debate will come to the token world. What we call a Security Token + Direct Listing remains to be seen. It could be something like STL = Security Token Listing.

You simply list your offering using Ethereum and do a lot of marketing to ensure that it gets noticed so that there is liquidity. If that comes to pass, we can redo the Daily Fintech Qui Bono/Qui Amisit Analysis. Qui Bono is all the entrepreneurs and their investors – same as with direct primary listings. Qui Amisit is some of the Investment Bankers eager for underwriting fees.

Most direct token offerings will be by unknown companies, who will still need some form of Investment Bankers who will market the offering to investors.   

If our thesis is correct that the direct listings will come to the token world, the regulation will be critical. The SEC slamming NYSE primary direct listings may simply serve the function of slowing it down until the rules and risks are studied better. Watch this space. We may see SEC approved direct primary token listings in 2020. 

As this is so driven by legal and regulatory issues, we reached out to Sheldon Freedman for comment. Sheldon Freedman, who is a Fintech Lawyer at Hassans International Law Firm, a multi-services law firm based in Gibraltar with a strong Fintech and Blockchain practice and also a DailyFintech Dean told us:

“The hunger among issuing companies and investors for a shorter path to funding and liquidity is a powerful driver for Security Token capitalization (whether via IPOs or Direct Listings). Those entrepreneurs will of course need to commit capital for legal/regulatory as well as for marketing to effect successful offerings.”

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The post How Security Tokens may seize the day after SEC bans direct primary listings. appeared first on Daily Fintech.

The InsurTechs were nestled all snug in their beds, with visions of 2020 dancing in their heads

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It’s the end of 2019, an auspicious year for insurance and InsurTech, and it’s the end of the year with expectations in the business world for business results and (hopeful) bonuses.  And of course there is the wondrous shadow of December holidays over all, with visions of sugarplums dancing in heads.

Not everyone celebrates a Christmas holiday, Chanukah, or Eid, but one cannot avoid the end of year holiday gifting and hopes.

In keeping with that spirit this final InsurTech column for 2019 wishes all well for the season and bright things for 2020.

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

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There are some friends and businesses for whom its hoped that Santa/Father Christmas/whoever finds holiday gifts.  All deserving, all have been good this year.

  • Parametric insurance– better understanding within the industry of its opportunities for cover and dramatic growth
  • John Bachmann, Social Survey– more vowels so his customer experience video series can carry on into 2020
  • Zurich Insurance- Mark Budd and Nicola Cannings– full subscription for its innovation contest
  • Erika Kriszan– recognition as the founder of the quietest best InsurTech conference- MOI Vienna
  • IRDAI– prudence in choosing the twenty participants in the Indian insurance sandbox
  • Coverager– all the respect they deserve for keeping the insurance industry informed

Holidays – any holiday – are such a great opportunity to focus on bringing the family together.  Lidia Bastianich

  • Paolo Sironi– a platform to expose his finance and economics ‘chops’ to a broader audience
  • The Daily Fintech– continued recognition as a best-in-class Fintech/InsurTech/blockchain/crypto resource, and being seen as the best value within the respective blogs’ world
  • Michael Porpora– a project for 2020 that outdoes his 2019 365 days of connections
  • Robin Kiera– a championship for the Hamburg football team
  • Nomaan Bashir– 2% insurance cover penetration within the Pakistani market
  • Lloyd’s of London– a balance beam to help the venerable institution integrate business and org change into its 300-year-old club
  • Insurance Nerds– continued traction advocating for insurance and continuity of the many of are privileged to work in insurance jobs

The holiday season is a perfect time to reflect on our blessings and seek out ways to make life better for those around us. Terri Marshall 

  • Benekiva– beneficiary first in every life insurance company’s stocking
  • Ukrainian InsurTechs– realization that there are great things happening in the industry there that have nothing to do with global politics
  • Intellect SEEC– more storage capacity to hold all those data
  • The California Dept of Insurance– an understanding that best intentions can produce unintended consequences
  • Lemonade Insurance– markers of many colors to try as an alternative to magenta
  • Rahul Mather– rest.
  • Road Warriors– time at home

Merry Merry and Happy New Year.

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Coconut builds new offering on the ‘banking commons’

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 current-account and bookkeeping tool Coconut recently announced that along with the company’s baked in current account, provided by Prepay Solutions, customers can now connect up their existing business current account.

It marks an interesting pivot for the business, away from a what would have been expected of a quasi-neobanking player, that is to double down on building a large footprint of its own current account users.

Instead, it’s focusing on the problem at hand – helping small business owners invoice and manage their bookkeeping more effectively. Something banks and larger accounting platforms have failed to do on their own, at the micro-SME level.

Coconut’s move is just one example of new business models emerging as banking data becomes openly available to any software application. Defining exactly what new businesses like Coconut are is hard – they aren’t a bank, but they do bank like things. They’re also not an accounting provider, but they do accounting like things.

So just what are they? More to the point, does it even really matter?

Not really. So long as people are buying.

Coconut have 16,000 freelancer and small business owners using its co-joined product offering today. But what could they possibly bring on board by uncoupling the best parts and joining them to the commodity part, the bank account?

Well, that number could run into the millions. And that’s no doubt the SaaS market Coconut wants, leveraging the infrastructure and investment of the banks and their responsibility to bear the costs of keeping current accounts alive.

The ‘banking commons’ that many startups like Coconut are drawing on, represents a very real new threat for the banking sector.

The post Coconut builds new offering on the ‘banking commons’ appeared first on Daily Fintech.

Mortgages for `Branch-Never` clients is the next re-bundling item  

`Allocating capital and managing the risk on the debt side of our personal balance sheet is larger, more complex, and determines whether we reach our goals or how far away do we end up. This is primarily where we all need advice (human, bionic, hybrid) in the first place, and subsequently in the investment segment of our finances`

This is an excerpt from a post I wrote nearly 3yrs ago The vertical integration of SoFi has the core entry point right! One of the points I was making is that offering mortgages first and then expanding into wealth management, is the way to go during this digital transformation and cannibalization of several financial products. Simply because the value add of advice on the debt side is significant and easier for the end customer to understand.

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.

Since then, the digital mortgage market has evolved – US players like Roostify, Mojo mortgages, or ElliMae – and several partnerships have been established. For example, Ally Financial partnered recently with digital mortgage disruptor Better.com; or HSBC with Roostify.

Since then, the market reality is that several Fintechs in the investment part (e.g. robo-advisors) have cannibalized products and services, while increasing customer acquisition costs. As a result, they have been forced to expand their initial laser focused offering. Which brings me to the recent announcement of Wealthfront, the digital-only standalone robo-advisor, that plans to add mortgages to its offering.

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Wealthfront started on the asset side of our personal finances and is now enriching its offering on the liability side. Sofi did the reverse. Wealthfront, however, has been analyzing data for its clients around home pricings and mortgages, as part of their saving goals towards mortgage down payments. So Wealthfront is not starting from zero. They see demand (they always have been) on customers that are `Branch-Nevers` as they call them.

At the same time, Varo Money the mobile-only banking app (with no banking license yet) has been offering unbeatable free checking and high-yield savings accounts, and plans also to add mortgages and more once they get a banking license. Both Sofi and Wealthfront have added cash and savings accounts.

What a mashed-up market!

From unbundling, integrating, then re-bundling and consolidating. Over and over again.

The post Mortgages for `Branch-Never` clients is the next re-bundling item   appeared first on Daily Fintech.

Is Cryptocurrency the Future of Money?

 

Cryptocurrency-to-Replace-Cash-By-2030.pngAccording to Deutsche Bank the current money system is fragile. Deutsche Bank sees that by 2030 digital currencies will rise to over 200 million users. In the “Imagine 2030” report, Deutsche Bank suggests that digital currency could eventually replace cash one day, as demand for anonymity and a more decentralized means of payment grows.

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

Usually this time of year, we start to read price predictions about Bitcoin going to a million bucks a coin. I’ve never been a big fan of price predictions. Some get them right, and most get them wrong. Price predictions are about short term gains, that are usually very fickle.

But a week ago, I read an interesting prediction in the news. Deutsche Bank made a very bold statement. The German bank published a research report called Imagine 2030. In this report the bank says that cryptocurrencies are currently just additions to the current money payment system. However, in the next decade they could be replacements.

Deutsche Bank predicts that the number of cryptocurrency users will grow 4x in the next ten years, reaching 200 million. This growth is almost same as that of Internet in its first 20 years.

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The parallels between the Internet and crypto are stunning. Until Mosaic, the Internet was publicly funded and primarily used an academic setting. But enlightened policymakers decided to legalize commercial activity on the Internet. While, the Internet’s commercial use started with most people and businesses not knowing how to connect or use the Internet, the rails were put in place that would eventually change the future of everything.

The breakout years of simplified usage and huge user growth are not far away. The talent is abundant, the capital is here and the conditions like economic inclusion and freedom are ripe.

But, for all this to happen, there is one big uncertain x-factor. How will governments approach cryptocurrencies? For Deutsche Bank’s prediction to come true, we need enlightened policymakers that will legitimize cryptocurrencies. The report states: “First, they must become legitimate in the eyes of governments and regulators”. Very, true!

Crypto regulation could be just around the corner. As regulatory hurdles are surmounted, cryptocurrencies may become legitimate substitutes for fiat currency. Many governments will not sit by and lose control of the money supply without a vicious fight. Libra and other stablecoins may ultimately provide the road map to more widespread adoption, with stronger oversight by government regulators.

What’s even more remarkable about the report is a section that’s entitled “The end of fiat money?” That’s pretty wild, when you consider that this report comes from a huge global bank. What people in the cryptocurrency community have known for a while, banks are starting to realize now. But that’s good news!

The real victim of crypto may not be fiat, but plastic cards. For decades now, we’ve been slowly phasing out cash. Cash, credit and debit cards are slowly becoming obsolete and may continue on this course, as crypto acceptance increases. When you think about the evolution, we moved from paper money and coins to online transactions and debit/credit cards. The rise of mobile payments through WeChat Pay, AliPay and Paypal already makes plastic cards redundant. Blockchain offers plenty pf advantages over plastic cards, but the basic difference between the two, is that all payments and transfers are done with the user’s full consent. Deutsche Bank believes that plastic cards could die. As cryptocurrency adoption increases, it’s only logical to assume that credit cards will disappear. We simply won’t need them anymore.

Deutsche Bank is spot on with its prediction.

But, predictions are always tricky. Hindsight is 20/20. Right now, everyone wants to believe. We can taste the decentralized future. Things take time, but the countdown has begun. Cryptocurrencies have become more popular than you think. According to a survey, approximately 18% of students based in the US either own at least one digital currency or have owned one in the past.

Crypto can be both good and evil, like everything else in life. Many people fail to understand the real value of cryptocurrency, because they’re only focused on speculative trading, driven by price and volatility.

Crypto offers a unique solution that renders fiat currency obsolete. Cryptocurrency empowers people to be their own bank and payment method. The primary challenges are regulatory and technical. The deciding factor on whether crypto will replace cash is user-adoption. But, once fully booted and integrated in our lives, cryptocurrency will make the world will look completely different, in ways we can only begin to understand.

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Christmas shopping? Track your carbon footprint with Mastercard and Doconomy

Alibaba’s Single’s day sales hit $38 Billion in 24 hours. The US Black Friday Online sales was $7.4 Billion and Cyber Monday sales were even stronger at $9.2 Billion. Do we know the impact of this mindless consumerism on our planet?

We will, and soon, thanks to Mastercard’s investment and collaboration with Doconomy.

Only last week I wrote about Climate change and how Fintechs should wake up to the changing global landscape and act. We are witnessing and combating the biggest crisis that humanity has ever faced. It is critical that we come together and address it.

On that note, I proposed a few solutions that financial services and fintechs could come up with to track climate impact of business decisions.

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One of the solutions was to track the carbon footprint of businesses using alternative data and disclosures. Firms will be provided a rating on how green their business models are, and banks could price their product and service offerings based on the ratings.

In essence, a greener firm could have a lower interest rate when they borrowed versus a high carbon footprint company. As a result, banks risk management will also be based on these methodologies, where their capital allocation will be higher when they do business with high carbon footprint companies.

This would create top down pressure on the entire business community and the markets to ensure they are acting in the best interest of the planet. We would also need a clear auditing mechanism to ensure firms don’t exaggerate metrics in their favour.

Now, that’s a top down approach for businesses. However, something similar can be done at the consumer end too. One of the fundamental mindset changes I would like to see is what is called “conscious consumerism” – of their carbon footprint when they splurge money in mindless shopping spree.

If we captured the Carbon footprint of purchases at the transaction level, that would be an important dataset to fix the mess we are in. This data can help gamify the process of capturing carbon scores for customer transactions.

If I did my Christmas shopping and came up with a Carbon score X and if my friend or colleague did their Christmas shopping with a carbon score Y, that could be gamified using a simple app and a leaderboard. The person with a lowest carbon footprint could be rewarded.

When we capture transaction data, and score customer behaviour, it makes them more conscious of their action on the planet. This would take time to scale, but it would start changing behaviours of customers.

As customer behaviour changes at scale, businesses have to pivot their approach to everything from sourcing the right raw materials, following sustainable manufacturing practices, using logistics with the lowest possible carbon footprint, and using the right packaging. This will have its feedback effect on competition as businesses that embrace sustainable practices quickly will have a competitive and a first mover’s advantage over their peers.

If it was China, I would even go one step further to ensure that the consumer’s social credit score includes climate points based on their spending. This would show results in a shorter span of time, and would help change business behaviour quickly.

Now, what if I did buy something which increased my carbon footprint? You should be able to compensate for that by spending money on environment friendly projects across the world, or investing the money into green assets.

So what are Doconomy doing and why are they special? First of all, DO is how they call themselves.

DO have two cards on offer, a white and a black credit card. The white card allows you to track and measure your carbon footprint as a consumer. The Black card has a built-in CO2 emissions limit – helps you become a conscious consumer (as they call it).

Behind the scenes they use an index called Aland to track the CO2 footprint of every single transaction. The index can categorise your transactions and identify its impact on the environment.

They also have a partnership with a firm called Trucost, which is a part of S&P. Trucost are experts in assessing risks relating to climate change and ESG factors. I have gone through Trucost’s clientele, and they have several big names like AXA investment managers, RBS, and several funds listed there. So clearly, they are all using Trucost to understand the climate risks of their portfolios.

In my last week’s article  I discussed about rating agencies who acted at climate bureaus for corporates. This is a very similar idea too.

We all have a responsibility to contribute to the solutions for the climate emergency we are experiencing. Time is running out. Many individuals are willing to do their part, but in many cases they find it difficult as they don’t know what else they can do. Through our collaboration with Doconomy, we hope to provide clear, effective channels to support these individual’s daily climate action.” –

Niclas Svenningsen, manager, Global Climate Action, UN Climate Change Secretariat

Coming back to DO’s offering, they are also providing compensation schemes should you break bad from time to time. Customers can cleanse their guilt by investing into green bonds or projects approved by the UN and aligned to their Sustainability development goals (SDGs). Thanks to all their efforts, DO are also a named partner to the United Nations Framework Convention on Climate Change (UNFCC).

For more information please do check out their website, I have added myself to their credit cards waiting list!

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No Elephant is an island- resources maketh the beast

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No one can know all in an industry, and surely that thought applies to insurance and InsurTech.  The Insurance Elephant knows the business is comprised of many parts that in aggregate lead to the insurance customer.  It’s the end of 2019 and as such seems an apt time to list and appreciate the many persons who are resources for me, and surely can be resources for all.  Please do review the list, gain an understanding of the unique contributions each in the list brings.

 

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

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Here are my 2019 InsurTech/Industry respected resources, in no particular order, and certainly not an exclusive list:

  1. Kate Stilwell– CEO and founder, Jumpstart Insurance, earthquake parametric cover, advocate for disaster preparation and resilience. https://www.linkedin.com/in/stillwellkate/
  2. Kobi Bendelak, CEO- InsurTech Israel. Big brother to Israel’s many start-ups, advocate and investor.  https://www.linkedin.com/in/kobi-bendelak-a7011230/
  3. Hari Radhakrishnan- insurance broker, consultant and Socrates figure for the Indian insurance industry https://www.linkedin.com/in/hari-radhakrishnan/
  4. Robert Collins– Crossbordr brokers and consultant, Asia InsurTech guru, has forgotten more about insurance than most know. Poser of good points. https://www.linkedin.com/in/robertcollinsinsurtech/
  5. Amber Woullet– insurance marketing whiz, hangs out with Penguins, rocks insurance videos. https://www.linkedin.com/in/amber-wuollet/
  6. Mica Cooper– CEO and President, Aisus/InsureCrypt, insurance systems and cyber tilter.   https://www.linkedin.com/in/mica-cooper/
  7. Lakshan De Silva– Partner and CTO at Intellect SEEC, knows the depth and breadth of the SEEC data lake. First to build a restaurant rating algorithm.   https://www.linkedin.com/in/lakshan-de-silva-8908172/
  8. Anand R- senior researcher at Lucep, facilitator of conversations and cheerleader for omnichannel customer experience methods. https://www.linkedin.com/in/anand-r-b305a8146/
  9. Hugues Bertin– CEO at Digital Insurance LatAm, knower of all happenings in the growing LatAm InsurTech world. Brings the global perspective to LAtAm.  https://www.linkedin.com/in/anand-r-b305a8146/
  10. Grace Park and Cole Sirucek– co-founders, DocDoc Pte , patient intelligence company, advocates for patient knowledge, connecting optimum providers, and spreaders of the word regarding same.  Have innovated from their young daughter’s needs backwards.  https://www.linkedin.com/in/graceparksirucek/, https://www.linkedin.com/in/cole-sirucek-044290/
  11. Karl Heinz Passler– wearer of many InsurTech hats, speaks of InsurTech/incumbent collaboration. Also has day jobs as product manager and insurance startup mentor (he knows things).  https://www.linkedin.com/in/karlheinzpassler/
  12. Nigel Walsh– co-host of the InsurTech Insider podcast (cohost Sarah Kocianski of 11:FS, https://www.linkedin.com/in/sarahkocianski/ ) and partner at Deloitte. Knows things. Travels widely but loves all things London.  Is wise to let Sarah lead the podcast convos.  https://www.linkedin.com/in/nigelwalsh/
  13. Denise Garth– SVP at Majesco, Strategic Marketer. Prepares articles of depth and breadth on the InsurTech industry, insurance, and what is coming next.  https://www.linkedin.com/in/denisegarth/
  14. Walid Al Saqqaf– founder at InsureBlocks, knows more than I ever will on practical insurance applications of Blockchain, video selfie guy, biggest smile in the InsurTech space. https://www.linkedin.com/in/walid-al-saqqaf/
  15. Matteo Carbone– founder, IoT Observatory, co-founder Archimede SPAC, 150 trips per year guy, advocate for insurance use of IoT. Challenger of the irrational exuberance of insurance startups. https://www.linkedin.com/in/matteocarbone/
  16. Hugh Terry– founder of the Digital Insurer, insurance blog that grew into the global virtual meet up that is Livefest. Finger on the pulse of Asia InsurTech https://www.linkedin.com/in/hughterry/
  17. Shefi and Avi Ben Hutta– Coverager,   keeper of the InsurTech companies’ data, hoster of industry get togethers, challengers of marketing pitches, cheerleaders, probers of BS, innovators in their own right.  Sibs, not married (don’t make that mistake!) https://www.linkedin.com/in/shefibenhutta/, https://www.linkedin.com/in/avi-ben-hutta-a62a1429/
  18. Robin Kiera– founder, Digital Scouting, consultant, attention hacker, video blogger of the first degree. Able to interview a dozen influencers in one session.  Wearer of blue shirts.  https://www.linkedin.com/in/dr-robin-kiera-33536931/
  19. Lutz Kiesewetter– PR and vendor relations, Deutsche Familienvesicherung (DFV_AG), unabashed marketer of the firm’s path through InsurTech, IPO, and digital customer experience. Speaks of a model other firms should imitate. https://www.linkedin.com/in/lutz-kiesewetter-mba-5aa600134/
  20. Nick Lamparelli– CUO of rethought Insurance, knows a thing or two on underwriting and reinsurance, listens to my babble on parametric, part of the foundation of the Insurance Nerds, podcaster extraordinaire. https://www.linkedin.com/in/nicklamparelli/
  21. Juliette Murphy– CEO and co-founder, FloodMapp, advocate for resilience, flood awareness and tech, social do-gooder, engineer from Down Under who pivoted to being an engineer who is trying to build understanding of flood risks. https://www.linkedin.com/in/juliette-murphy/
  22. Assaf Wand– CEO and co-founder, Hippo Insurance, building an insurance org (great staff) that is customer proactive, holistic approach to insurance service, also a lover of large gray animals. https://www.linkedin.com/in/assafwand/
  23. Rahul Mather– consulting analyst at Accenture, tireless info tracker, keeper of startup data, preparer of longitudinal reports, stats guy. Eager sharer of what he knows (which is a lot), eager listener to tenured industry folks.  https://www.linkedin.com/in/rahul-jaideep-mathur/
  24. Daniel Schreiber– CEO and co-founder, Lemonade Insurance, thick-skinned point man for the firm, adherent to the principle of Ulysses contracts. Neophyte (not so much now) in the insurance world but unafraid to learn.  Discusser of AI innovation for customer benefit.  Defender of the Magenta.  https://www.linkedin.com/in/danielaschreiber/
  25. Christopher Frankland– InsurTech Partnerships at ReSource Pro, InsurTech everyman (who doesn’t know him?) Founder at InsurTech Heartland, industry expert at ‘getting it’.  https://www.linkedin.com/in/csfrankland/
  26. Frank Genheimer– consultant with New Insurance Business, actuary (what!?!?), owner of the best hair part in InsurTech, podcast host (field settings with Influencers- cool!) https://www.linkedin.com/in/frankgenheimer/
  27. Ekrete Ola Gam -IKON– (this is his acronym- I don’t know his proper name ?? )- @olagamola in your Twitter feed, Nigerian economist/insurance guy, cheerleader for regular folks having insurance, for regulators and legislators to do their jobs, for the industry.
  28. Tony Canas– (can’t get that ~ to place over the ‘n’)- client advisor with the Jacobsen Group, Insurance Nerds Super Man, dynamo, all the alphabet items after his name. Supporter of all, never a discouraging word.  https://www.linkedin.com/in/tonycanas/
  29. Sridhar Subbaraman– Managing Director, Oasis Insurance Group, greenfield builder of an InsurTech Hub, United Arab Emirates, builder of insurance business model consensus. https://www.linkedin.com/in/sridhar-subbaraman-73ab7345/
  30. Pat West– Managing Partner, Hedge Quote, agency/agents’ thought leader, see-er of the need for a change in the insurance sales paradigm. Frank speaker, veteran of the big carrier sales machine.  https://www.linkedin.com/in/patrick-west-977501102/
  31. Adrian Jones– Deputy CEO, SCOR, really smart business strategist and understander of the arcane but interesting financial make-up of insurance companies.  And now a happy NYC dweller.  https://www.linkedin.com/in/adrianjo/

There are so many more who I respect and follow, learn from every day.  You know who you are.

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