Announcing the Daily Fintech Service: Book an Expert for an Hour

How many times have you read one of our posts and thought “I would like to pick up the phone and talk to the person with that knowledge and network”. Well now you can. You can book one hour for CHF 380 by simply sending an email to our Chief Commercial Officer (Julia Spiegel) requesting an hour’s consultation. We will schedule a time by email (we are in Europe, so we are time zone friendly for most of the world).  We will send you an invoice for your records by email and you pay for the hour by PayPal.

We start with one of the 6 Experts who write regularly on Daily Fintech. Bernard Lunn writes on Saturday from Switzerland about the Blockchain Economy. Bernard, CEO of Daily Fintech, is a serial entrepreneur, senior executive, adviser and strategic deal maker. He started in the engine room of Fintech for enterprise software companies (such as Misys, Temenos and ITRS). Bernard is the author of Mindshare to Marketshare and The Blockchain Economy and has used his media experience (for example as COO of ReadWriteWeb) to guide Daily Fintech since the first post on 29 June 2014. Bernard is a Brit who has lived in America, Singapore, India, London and Amsterdam and has done business in 40 countries. He currently lives in Switzerland.

We will be onboarding all the other people who write for Daily Fintech onto our Book an Expert for an Hour Service Service in the coming weeks:

Ilias Louis Hatzis writes on Monday from Greece about Blockchain, Bitcoin & Crypto. Ilias is an Internet entrepreneur who started his first company, an internet search engine, in the mid 90s during the dot-com era. Later on he founded several Consumer Internet and AdTech startups and went to work for Google and JWT. As well as still being an active entrepreneur, he mentors startups at the MassChallenge, MITEF and other startup accelerators and competitions. Having lived and worked in America, Ilias is currently back in his native Greece and is the Founder/CEO of Mercato Blockchain Corporation AG.

Efi Pylarinou writes on Tuesday from Switzerland about WealthTech and Capital Markets. Efi brings bold Wall Street experience (Salomon Brothers, Bankers Trust, SGCowen) in a broad range of asset classes (fixed income, structured products, hedge funds). She has lived and worked in the US, France, Greece, Canada, and Switzerland in investment companies, a university, an online education provider, and an executive consulting firm. She brings a strong academic background combined with a focus on breakthrough results. Efi is the author of Fixed income books with Frank Fabozzi.

 Jessica Ellerm writes on Wednesday from Australia about Small Business Finance. Jessica is CEO & Co-Founder of Zuper Superannuation, taking a new approach to superannuation savings. Previously she worked for Australia’s flagship Fintech startup and small business banking provider, Tyro. She is also a well-known expert on digital growth hacking and presents financial news and market updates for Australia’s leading online finance news provider, Finance News Network.

Zarc Gin writes on Thursday from China about Insurtech. Zarc is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

Arunkumar Krishnakumar writes on Friday from UK about consumer banking.Arun has the experience and global mindset to cover innovation wherever it comes from globally and is equally comfortable in the world of big agile companies as well as scrappy upstarts. His big company experience includes Barclays and PWC. In his current role at Angels Unleashed, StartUp Bootcamp and Funding XChange, Arun works in the world of the scrappy upstart.

For those not familiar with CHF (the famously stable Swiss Franc) it is about par with the US$ today.

Many people requested an easy engagement model for our advisory service. Now you can start working with us by simply paying CHF 380 for an hour with one of our Experts. One day all consulting firms will make it this easy.

Request one hour of Bernard’s time for CHF380 by sending an email to Julia Spiegel (our Chief Commercial Officer)

Amazon vs Alibaba – the clash of the mighty techfins in numbers

We may have to soon rename ourselves as Daily Techfin. We have been focusing on the breaking of banks and their resistance to the Fintech avalanche, while Techfins have been slowly but surely capturing the FS world. Lots of numbers coming your way – so be warned.


Image Source

Money 2020 opened up in China, Hangzhou – the home of Ant Financial – for the first time this year. China is really were Fintech is happening at scale, and just by sheer numbers, the West look dwarfed. This is largely driven by the growth of Alibaba and Tencent.

Alibaba did $31 Billion in sales on Single’s day, and Amazon had its best sales in history through the 2018 thanksgiving period with 180 Million transactions.

Amazon haven’t announced exact sales revenues, but using Statista’s average online transaction size in 2017 of $81, their total sales could have been $15 Billion.

That just shows the scale of China vs rest of the world. Also, the total ecommerce sales number on Cyber Monday in the US was $7.9 Billion, that is just about 25% of what Alibaba achieved.

While the US Ecommerce market is set to reach $630 Billion by 2020, China’s is projected to be around $1.7 Trillion. Its fascinating to see how these two giants compare against each other in the ecommerce space. But, by Alibaba (Ant’s) own admission ecommerce and payments are just a foot in the door.

Some of the metrics discussed at Money2020 in China this year for different financial services that Ant offered were the following:

“1+N” – Onboard the customer with 1 QR-code – as payment technology. Cross sell marketing, training, cash management, loans, insurance etc.

“310” –  These are their KPIs for SME loans: 3 minutes for processing application, 1 second for monies in the bank, 0 manual work.

“212” –  Their KPIs for Insurance claims – 2 minutes for processing application, 1 second for review, 2 hours for insurance settlement to the account.

Stats Source here

This is only managed by cutting edge technology used with alternate data on consumers, to model their behaviour and assess risks in real time. I had already written about how Amazon helped an SME I knew, with a loan decision on the same day. Ant are just doing it better.

Now who is winning the battle? Amazon definitely have the global advantage. As of 2017 they had 2 Billion visitors per month, whereas Alibaba was at about 900 Million visitors per month. But that doesn’t necessarily translate into Financial Services that are provided by these firms.

In 2017 the number of Alipay users were 400 Million compared to Amazons 33 Million users, and as of September 2018, there were 520 Million Alipay users. Comparing transaction sizes is almost meaningless, as Alipay is light years ahead.

And all this with just 55% internet penetration in China (vs 78% in the US), with Alipay conquering 54% of China’s mobile payments. If payment services that the largest Techfin in the West does, is about 10% of that of the largest Techfin (of the East), it should give a perspective of what it means to other ancillary Financial Services such as lending, insurance etc., And if that is the comparison between the US and China, UK and European Fintechs perhaps won’t even come close.

I must confess that, I started this article wanting to just talk about Alibaba, China and Money2020. But when I started to look at the startling number differences between Amazon and Alibaba, I had to make it more of a comparison (although there is not much of a comparison).

An American friend of mine who recently visited China, mentioned that going to China felt like visiting the future. With the numbers that I have managed to dig out, China does feel like Wonderland when it comes to Fintech, thanks to its TechFins.

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


Pension Tech alive and well in Edinburgh

One of the winning teams from the FCA’s tech sprint

Yesterday I had the privilege of flying to Edinburgh to take part in the UK Financial Conduct Authority’s Pension Tech sprint event. The day was aimed at bringing together creative minds from inside and outside the pension industry in the UK, to try and tackle some of the biggest problems.

I’ve spent a week in London, and it’s been a good chance to get my head around where the local pension industry is right now, and the current dynamics. It’s especially interesting when comparing to where Australia is in its journey, and how the two can possibly learn or guide each other. While there is no doubt Australia is more advanced on a number of structural areas – both on the technology and regulatory front – the attitude and embracing of innovation in the UK, as witnessed at the FCA event was certainly unique and encouraging.

Prior to the trip I was fortunate to be the benefit of a private research report into the local pension sector. Below are some of the highlights that are worth being across, should you be seriously interested in this space.

  • The UK pension sector has seen revenue increase over the last 5 years – revenue is calculated by combining contributions and investment returns
  • Automatic enrolment is driving growth. It is estimated that revenue will grow at a compound annual rate of 3.3% over the next five years from £143.8 billion to reach £168.8 billion in 2022-23
  • 54.4% of the UK’s pension funds are based in London, with Scotland the second most important centre for pension funding, with schemes mainly located in Edinburgh and Glasgow. The region accounts for 12.3% of all pension funds
  • Occupational pension schemes hold 81.4% of all industry assets. Thanks to auto-enrolment they are expected to grow faster than personal pension schemes
  • There are now 41.1 million pension members in the UK, up from 39.2 million in 2016 and is the highest level ever recorded

Engagement with pensions seems to be mired by a lack of compelling reasons or useful and convenient online options. As a result:

  • 38% of employees have never viewed their pension online
  • Of those that have, 20% only do it once a year.
  • 19% of employees check their pension once a month, compared to 88% of people who check into their online banking regularly

Surprisingly, or perhaps not so surprisingly, if you think about the increasing importance of a pension as a source of stable wealth creation for younger people, Generation Z employees that were surveyed, the youngest respondents, were more likely to check their pension online than any other group. Only 3% of this group believe they are saving enough into their pension.

My take-aways from the trip

Auto-enrolment is great – and we know default systems can work – but many of the younger people I spoke to complained about having to enrol in a fund each time they changed jobs. We know multiple accounts are a significant cause of balance erosion. Not linking the plan to the person, but to the employer will create problems, especially for younger workers. For me this is a huge red flag.

One young man I chatted to said one pension fund forced him to withdraw his money, because he had been with the plan less than two years. He of course could have somehow found a way to add it to a new plan, but once money is out of the pension system and in our hands, the temptation to spend today is significant. Money inside a pension fund should not typically be accessibly until retirement age.

The pensions dashboard, which promises a view of all your accounts, online, could be a game changer, but only if every pension fund reports into it. At this point in time, from the discussions I had, it doesn’t appear there is a standardised reporting format or an onus on providers to comply. I could be wrong though. In Australia, the ATO Supermatch and Supertick service that provides this see-through and visibility for super fund members has been a big driver in engagement and consolidation.

Needless to say, there is significant opportunity for innovation in the UK around pensions, and they have a chance to possibly leapfrog or learn from the mistakes other more advanced pension markets, like Australia, have made. I certainly have some strategic thoughts about where the most significant opportunities lie, and it will be interesting to watch this market from down under over the next 12 months!

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.

Insurtech Front Page Weekly CXO Briefing – China opening up


The Theme last week was Artificial Intelligence trends.

The Theme this week is China opening up its insurance market. This is actually a gradual process and now we are witnessing an upgrade from joint ventures to the approval of fully independent foreign insurers in China.

For more about the Front Page Weekly CXO Briefing, please click here.

Editors Note: Insurtech is normally Thursday. We changed to Wednesday this week because this news is big.

For this week we bring you three stories illustrating the theme of China opening up its insurance market.

Story 1: AXA to acquire the remaining 50% stake in AXA Tianping to accelerate its growth in China as the #1 foreign P&C insurer

Extract, read more on AXA press release:

“AXA announced today that it had entered into an agreement with the current domestic shareholders of AXA Tianping Property & Casualty Insurance Company Ltd (“AXA Tianping”) to acquire the remaining 50% stake* of the company.

Total consideration for the acquisition of the 50% stake would amount to RMB 4.6 billion (or Euro 584 million*), representing an implied 2.4x FY17 BV* multiple, of which, subject to regulatory approvals, RMB 1.5 billion (or Euro 190 million*) should be financed through a capital reduction of AXA Tianping to buy back shares from the current domestic shareholders.”

AXA Tianping was jointly founded in 2004 by AXA’s subsidiary in China and Tianping Auto Insurance. After 14 years, it has become the biggest foreign property insurance company in China. This purchase, if approved by Chinese regulators, will make AXA Tianping a fully-owned subsidiary of AXA group and help AXA move further in Chinese market.

Story 2: Allianz China unit given regulatory go-ahead

Extract, read more on Reinsurance News:

“Insurance giant Allianz has received approval from the China Banking and Insurance Regulatory Commission for the preparatory establishment of an insurance holding company in China.

Based in Shanghai, Allianz (China) Insurance Holding Company Limited will be the country’s first ever insurance company wholly owned by a foreign insurer.”

This happened a day before the AXA news. But Allianz’s plan was approved by the regulator already. The approach is different, since AXA is achieving it through equity acquisition while Allianz is starting from scratch. But the goal is same, to make presence in Chinese market.

Story 3: China moves closer to allowing foreigners to control insurance ventures

Extract, read more on Reuters:

“China will accept applications early next year from foreign insurers seeking to take control of their local joint ventures and is even weighing giving them full ownership earlier than flagged, people with direct knowledge of the matter said.

The regulator is expected to publish its final guidelines as soon as the first quarter of 2019 and would begin taking applications from interested foreign insurers soon after that, they said”

This article was released last Monday, and certainly it’s a signal. Our first two news proved that things are moving much faster in China.

China has already drawn its roadmap of opening up for the financial sector. Insurance industry is obviously executing the plans with efficiency and determination. I believe there are still huge potentials in Chinese insurance market and the future of insurance market in China will be shaped by Chinese and foreign insurers together.

Image Source

Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

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.

Can HODL5 help the SEC reverse the 9 denials of BTC ETFs?


Last week was the launch party of HODL5 at the Swiss SIX exchange. Deborah Fuhr, CEO of ETFGI, a leading independent research and consultancy firm on trends in the global ETF/ETP ecosystem, flew over from London and top management of the Amun Group, was on stage.

We will all be watching how HODL5 trades, as it has the potential to become a retail darling and or an institutional darling. The first day of trading – Friday 23rd of November – saw 27,244shares ($400k) of volume. Flow Traders is the official market maker and a leading liquidity provider of ETPs.

#HODL5 is NOT an ETF – Exchange Traded Fund. It is a kind of ETP – Exchange Traded Product. With over $5 trillion in assets in ETF/ETP markets, we don’t pay attention anymore to details, do we?

Highlights ETFGI reports assets invested in ETFs and ETPs listed globally reached a new high of $5.12 trillion at the end of July 2018

  • Total Assets in ETFs and ETPs listed globally reached a record $5.12 Tn at the end of July
  • Net new assets gathered by ETFs/ETPs listed globally were $41.1 Bn in July
  • 4 ½ years or 54 consecutive months of net inflows into ETFs/ETPs listed globally  

Warning, ETFs are ETPs but not the other way around. I am sure you don’t confuse IPOs with ICOs. No need to highlight the differences between those.

ETPs are not ETFs and the reason you should care is that even a very successful #HODL5 exchange-listed product, won’t budge the SEC to approve any of the Crypto ETFs that have been rejected nine times already.

HODL5 is an exchange-listed product. It is a tracker which derives its value from an underlying basket of cryptocurrencies, the Top 5 by market capitalization, which is actively rebalanced on a monthly basis. These digital assets are held in custody (so HODL5 buyers don’t have to deal with that) and every time HODL5 shares are bought or sold, the underlying basket is adjusted.

The Amun Cryptobasket (HODL5 ticker) tracks five major cryptocurrencies: Bitcoin (BTC), Ripple (XRP), Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC). Amun AG, is a Swiss startup and Amun Crypto Index is managed by VanEck, the German index unit of investment management firm. VanEck is also involved in the new Bitcoin OTC Index called as MVIS Bitcoin US OTC Spot Index.

“The new index is called the MVIS Bitcoin US OTC Spot Index (MVBTCO) and leverages price inputs from OTC desks at Genesis Trading, Cumberland, and Circle Trade. MVBTCO gives institutions a reputable benchmark to reference, rather than having to individually ping each OTC desk to receive price information before deciding which counterparty to transact with.” Excerpt from my subscription of Anthony Pompliano’s OffTheChain.

HODL5 is the 4th tracker listed on a traditional exchange. The first two are Grayscale Investment’s crypto-indices and Coinshares’ Bitcoin and Ether trackers, both of which rely on different legal structures. HODL5 is the first “Crypto-ETP” fully backed by digital assets. Despite the fact that HODL5 gives broader exposure to the crypto market, since it is a basket, and is fully backed by the underlying assets; I don’t think it will help alleviate the SEC reservations about Bitcoin ETFs.

After nine iterations and public feedback, which has now been closed, the SEC’s refusal to approve any Bitcoin ETF is based on the fact that the crypto market is plagued by fraudulent practices and price manipulation and investor protection is tricky.

ETFs have proven to be great financial structures and have become so ubiquitous that we forget what is happening behind the scenes in order to for these products to work their wonders. Two years ago, I wrote a post around this topic – which was not at all triggered by crypto asset trackers – Are ETFs Trackers that Fintech can turn into Trucks with No Brakes? – in which I go through the Creation/Redemption process that is vital for ETFs.

In summary, for each ETF, one has to think of the Issuer (e.g. Vanguard, Blackrock), the Authorized Participant AP (DTCC reports that there are currently 50 AP firms) and the Market Maker, and the Custodian (e.g. JP Morgan, State Street). The Authorized Participants (APs) are the entities that create and redeem ETF shares and are sometimes the same as market makers; but not always. They are the usual suspects (large broker dealers) and have signed AP agreements with the ETF issuers.

ETPs don’t involve Authorised Participants who are those that make the “magic” Creation/Redemption process of ETFs happen. ETPs are “subordinate” in the liquidity hierarchy to ETFs.

I always remind myself that a derivate structure cannot be more liquid than its underlying asset. Corporate Bond ETFs are the simplest and greatest examples in conventional markets of this. Since the Subprime crisis, corporate bonds have been plagued with illiquidity despite several noteworthy Fintech attempts to solve this fixed income conundrum. Even for equity ETFs, don’t forget that they become illiquid and mispriced in incidents like the surprising Brexit election results. Betterment, the largest standalone robo-advisor, had to suspended trading on Friday of the Brexit result for almost 3 hours[1] because ETFs became misprices

The growth of a basket derivative cannot improve largely the liquidity and mispricing of the underlying assets? Even though, derivatives do add to the maturity of a market (futures, options, structured products) trackers have never actually led a recovery of a distressed market.

The SEC’s concerns will not be alleviated even if HODL5 volumes show strong natural demand. The SEC is watching rigging, insider trading and any kind of 51% attack. A crypto ETF not only needs several market makers to play the roles of the APs but also to convince the SEC that insider trading is less feasible, price manipulation is naturally arbitraged away. Four crypto trackers are not enough to move those needles.

[1] The Betterment/Brexit incident

Source of image

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 Weekly Front Page: Silvergate Bank Plans to go Public


Last week our theme was “Bitcoin Bulls & Bears have a very noisy party & bring back that famous volatility.”

Our theme for this week is “Silvergate Bank Plans to go Public.

For more about the Front Page Weekly CXO Briefing, please click here.

Twenty-four years go, Netscape released the first free web browser, giving consumers an easy way to access the Internet. But, Netscape did more than just revolutionize our Internet experience, it also revolutionized the model on how to build disruptive companies. Netscape’s IPO kicked off for the Internet era.

While cryptocurrencies prices crashed further yesterday, with Bitcoin reaching a new low this year around $3,500, several major crypto companies are attempting public offerings in hopes of raising billions of dollars to secure market share in the highly competitive cryptocurrency industry.

One of them is Silvergate Bank plans to raise $50 million through the Initial Public Offering.  Silvergate provides financial infrastructure solutions and services to clients in the digital currency industry. Silvergate Bank has more than 480 digital currency customers, with 145 in the pipeline, and it estimates the financial services market for digital currency companies, to be $30-$40 billion. Silvergate Bank would be listed in the New York Stock Exchange (NYSE) under the ticker “SI”.

Bitmain, Canaan, and Ebang, the three biggest players in the crypto mining industry, are racing to be the first publicly offered cryptocurrency mining company in hopes of securing retail investors’ loyalty by being the first one offered on the public markets.

In August 2018, mining firm Argo Blockchain PLC, which offers consumers the ability to mine four cryptocurrencies (BTG, ETH, ETC and Zcash), became the first crypto company to join the London Stock Exchange (LSE), raising around $32 million on a valuation of $61 million. In Canada, HIVE Blockchain, with a market capitalization of $106 million today, when it debuted in September 2017, its stock price soared by 220%, from $0.30 to $0.97.

While we’ve all heard rumors in the past, about an initial public offering by Coinbase, the company announced that it won’t IPO any time soon. When Coinbase does decide to pursue an IPO in the U.S., it would give investors a way to gain exposure to a regulated crypto security.

The time is less than ideal for a public debut with crypto prices low, yet there is a clear trend unfolding among crypto companies to raise funds in the equity markets.

Its possible that the rise of crypto-fueled IPOs could shift the tide, as more exposure for the blockchain and leading crypto companies can benefit the industry. The decision by several crypto companies to pursue an IPO could add legitimacy to the industry. Public offerings by crypto companies could serve as a major step toward the mainstream adoption for the entire industry, enabling a large number of investors to get exposure to crypto-related projects on the public market.

Since ICOs became popular in 2017, there have been constant reminders of the financial risks involved for participants. Unlike ICOs, initial public offerings place regulatory scrutiny on companies and require them to meet certain transparency standards. Initial public offerings by crypto companies show an understanding by these organizations for a regulatory and legal framework, to attract long-term investment, legitimize their businesses, and accelerate growth.

When compared to last year, the last eleven months have been filled with so many positive developments. The first crypto IPO will be very important. The cryptocurrency market will bounce back and its first IPO could be the spark. It will serve as a very clear indication of what will follow and how the crypto industry will evolve.

Image Source

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

7 mega waves in the Blockchain Economy and the dams holding them back

RCC DAMS LONGTAN Dam Completion.jpg

This post is aimed at “buidlers”, to those in the Blockchain community who use a Bear Market to build solutions and to those who invest in those solution builders.

You can take these mega waves to the bank. More specifically you can take them to investors. These are trends that that are inevitable and we show why. This post also shows the dams that are holding back these waves today. Entrepreneurs look at these dams as their problems to solve by creating the sluice gates that let the water flow in a useful, controlled and profitable way. We also show the picks and shovels that are being used to build these sluice gates.

In each of these waves there are ventures who are building solutions. The sluice gates are under construction. This list is based on observations in the real world, not theory. Which ventures will win will depend on their execution capability, but we are confident that each wave will produce at least one big winner.

Wave 1:  Decentralized Exchanges

  • What:  A Centralised Exchange is an artefact of Legacy Finance and the Centralised Internet. If we went in that direction we would end with a duopoly like NYSE/NASDAQ. There are already hundreds of Decentralized Exchanges.The logic of decentralisation is that every wallet can exchange with another wallet or to put it another way that P2P Exchange is feasible. Although some Legacy Finance markets (such as Public Equities) work through Centralised Exchanges, many Finance markets today operate through decentralized OTC (Over The Counter) traders, so this is easy enough for Institutional Investors to buy into.
  • Why: Centralised Exchanges are a honeypot for thieves (even if the Exchange operator is honest). The only way to protect money when money is data is radical decentralization so that a thief only ever gets one person’s money (and if that is fairly hard to do, they won’t bother).
  • Dam = liquidity. If exchanges are decentralised how do we get best price when we want to buy or sell? How do we get the price transparency of a Centralised Exchange in a Decentralized world?
  • Picks & shovels: liquidity is fundamentally a broadcast messaging data problem and there are computer science solutions to this. There is likely to be a mix of offchain matching and onchain settlement. Hubs will  perform a critical aggregation function and not every wallet is equal – some buy and sell in huge quantities.  Data aggregation based on P2P broadcast messaging is a solved problem in computer science and does not require a scientific breakthrough.

Wave 2:  Decentralized Investing/Trading

  • What: The Legacy Fund Management fee model of AUM (Assets Under Management) plus Carry (aka profit share on exit) will move to a model of signals, decentralised exchanges, networks & syndicates. The big change is that the Legacy Fund Management fee model is based on first gathering assets from LPs then investing.  The Blockchain Economy Fund Management fee model reverses this. You start investing whatever you can afford, then you publish signals of your trades and people pay to follow those signals. The passive investor’s capital is kept under their control, there is no equivalent of AUM.
  • Why: Blockchain changes the rules of the game and the game has not been going on long enough for Legacy Fund Managers to show their track record. We need new compensation models for a new generation of Blockchain native active investors/traders.
  • Dam: How do you a) identify the new and emerging investors/traders b) how do you compensate them properly? How does a a new generation of Blockchain native active investors build trust with passive investors (fka LPs).
  • Picks & shovels: The Decentralized Investing/Trading world is being built using four tools – signals, decentralised exchanges, networks & syndicates. Signals are what an active Investor/Trader provides for a fee to passive Followers. Decentralised exchanges are critical so that we know what a signal provider actually bought and sold (avoiding the scammy promoters who say buy when they are selling etc). Networks are how Followers find Signal Providers. Syndicates are  how enough capital is raised quickly through these networks by aggregating Followers just in time; lets not forget that the purpose of Capital Markets is to fund innovation and new productive capacity.

Wave 3: Stablecoins and other hard asset Tokens

  • What: You can buy/sell them like any Token, on Exchanges, but their value is tied to hard assets in the Legacy Finance world (such as Fiat currencies, gold, diamonds, real estate etc).
  • Why: If you are trader/speculator, volatility is your friend. If you are using Tokenomics to fund a venture, volatility is also your friend; you sell Tokens into a rising market in order to fund the business. In most other situations (such as payments and investing), volatility is your enemy and stability is your friend.
  • Dam: Stablecoins and other hard asset Tokens exist at the intersection of Legacy Finance and the Blockchain Economy. It is not simply a matter of clever code. Interfacing to that Legacy Finance world is not easy.
  • Picks & shovels: a new generation of Stablecoins are entering the market to meet these needs. These exist at the intersection of  Legacy Finance and the Blockchain Economy and the winning formula seems to be “audit heavy/tech lite” (in the words Balaji Srinavasan, the ex Andreessen Horowitz Partner and now Coinbase CTO which he says around 37.40 to 42.3 during  this panel on YouTube with Vitalik Buterin).

Wave 4: Safe & Easy custody/storage

  • What: As easy as putting money in a bank, but as safe and unconfiscatable as your own private keys in your own vault.


  • Why: Safe must mean decentralised to avoid the centralised honeypot problem and to avoid the danger of confiscation. That is job number one. To cross the chasm from early adopters with their hardware wallets, brain wallets and other nerd friendly stuff, it must be easy to use for the mainstream.


  • Dam:  Insured banks don’t store crypto assets today, so the problem has to be solved technologically so that a trustless/uninsured ecosystem of custodians emerge.


  • Picks & shovels: we need digital version of the old bank vaults, hardened against both physical and cyber attack and an easy way for them to interface into the world of investing/trading.

Wave 5: Whitelisted Wallets = your ID

  • What: A self sovereign Digital ID wallet that stores all our assets including our personal data and our reputation assets. Part of our reputation defines what type of assets we can buy and sell.
  • Why: if every wallet can trade with every other wallet through Decentralized Exchanges, it is critical that some form of Whitelisting emerges where  we trust that the wallet we are transacting with is doing things legally and is owned by a person “of good standing”. Even if you are of the libertarian school and believe that the solution must be free markets not regulators, you want some quick and easy way to spot the good guys from the bad guys.
  • Dam: self sovereign Digital ID wallets exist today but are only used by a small number of very early adopters
  • Picks & shovels: Self sovereign Digital ID technology already exists, there is no scientific breakthrough needed.

Wave 6: Security Tokens particularly Early Stage Equity Tokens

  • What: Legacy Finance has Debt + Equity. The core building blocks of The Blockchain Economy are Utility Tokens + Equity. We already have Utility Tokens (albeit often controversially, with many that are scummy and illegal). What is coming are Security Tokens that enable Early Stage Equity to be traded like Tokens.
  • Why: Just ask a) any entrepreneur fed up with the current process of early stage fund raising or b) any early stage investor who wants liquidity and price discovery.
  • Dam: Security Tokens are regulated by Securities Law and this is complex and changes slowly.
  • Picks & shovels: Tokenisation is the easy part and Security Tokens will be able to use all the tools and techniques of the Blockchain Economy. The tricky bit, as with Stablecoins, is the interface with the Legacy Finance world which currently controls Securities.

Wave 7: Credit Card dominance era is coming to an end

Note: this maybe the most controversial mega wave. I am saying that the Peak Credit Card dominance era is coming, not that Credit Cards will soon cease to exist. It is like saying we may start using a lot less oil, but we will still be using some oil for a long time (ie oil will be less dominant but will remain part of the economy).

  • What:  Credit Cards are replaced by Blockchain based payment networks (on chain and offchain).
  • Why: Credit Card payments are expensive for both buyer and seller (which is why Credit Card Networks are so profitable)
  • Dam: integrating credit at the point of sale is hard and the reason why Credit Card Networks are still so dominant today). But it is a solvable problem.
  • Picks & shovels: the dam may first break in niches that are a) cross border (where fees are highest b) for digital products (where there is no return dispute resolution issue) c) where the buyer does not need credit.

There are two ways the water gets past the dam. One way is the regulated way – via the sluice gates in the dam. The other way is the unregulated way – there are no sluice gates and the water goes over the dam, eventually breaking the dam. Regulators and lawyers and technologists, conscious of the threat of a dam breaking are working overtime to build those sluice gates.

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).

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.

“Build It and They Will Come” – Security Tokens at the Gate


This post, the 4th in a series of 4, is written by Sheldon Freedman, a fintech and funds lawyer at Hassans in Gibraltar. Click here for last week’s post in this series.

2019 is widely anticipated by blockchain bulls to be the year of the security token. In Instalment 1 of this 4-part series, we described how security tokens are created through strong cryptography, able to digitally represent ownership in an asset, such as shares in a company or fund, real estate, rights to cash flow or financial instruments.  In Instalment 2, we looked at how security tokens are generated on Ethereum-based platforms employing blockchain technologies.  In Installment 3, we observed how new regulatory frameworks for these new securities called “security tokens” do not yet exist – that the issuance and exchange of security tokens is being conducted under existing, traditional securities laws of registration and exemption, while complying with comprehensive, overlapping, global anti-money laundering/sanctions regimes. Today’s concluding segment previews what lies ahead in the coming months for security tokens.

Exchanges, Trading and Liquidity. 

Markets can only operate effectively with liquidity. The creation, i.e. issuance, of a security token is a preliminary step, giving birth to the token. But for securities markets and security tokens to live meaningful lives, there must be robust secondary trading via exchanges which is fully-automated, reliable, inexpensive, scalable, rapid in trade and settlement, compliant, always-on, global. Just as company stock issuance boomed with the development of centralized stock exchanges, so too the security token industry would flourish as decentralized security token exchanges develop. “Build it and they will come” is the mantra that is usually mocking engineers who build nifty technology and assume without any basis in market reality that everyone will want to buy it because it is nifty.  However, if people want to trade security tokens, this mantra is in fact true for security tokens exchanges: demand will follow supply.  Building security tokens exchanges and secondary markets requires enormously complex business, legal and technical collaborations married to massive amounts of capital, but in the coming months we will see beginnings of this integration of blockchain markets into traditional finance.

In Europe, most notably Switzerland’s stock exchange owned and managed by SIX Group is building a fully-integrated trading, settlement and custody infrastructure for digital assets, known as a ‘digital asset ecosystem’ – SIX Digital Exchange.  SIX (acronym for Swiss Infrastructure and Exchange) operates the infrastructure of Switzerland’s financial center.  In USA, the Boston Stock Exchange and subsidiary BOX Digital Markets have announced a partnership with token platform tZero to launch the world’s first regulated security tokens exchange Q2-19. 

tZero is championed by super crypto-bull, Patrick Byrne, CEO of parent company,  Byrne is committed to integrating blockchain capital markets into the US National Market System (NMS). Byrne is, in effect, staking Overstock’s future on tZero, which is burning at least $2 million per month. “I don’t care whether tZero is losing $2 million a month, “Byrne was quoted yesterday in the Wall Street Journal. “We think we’ve got cold fusion on the blockchain side.” 

This is the creed of blockchain True Believers, which is powering the development of security token infrastructure.  Like other blockchain-related infrastructure companies, Overstock raised capital from the sale of its own security tokens:  $134 million to be exact.  Mr. Byrne is not alone, as investors and blockchain pioneers charge ahead. The Wall Street Journal reports in its article that, according to Overstock, Hong Kong-based GSR Capital has agreed to invest up to $270 million in tZero equity that would value tZero at $1.5 billion. GSR would not confirm this claim to the Wall Street Journal. 

Security Tokens Issuing Platforms.   

Security tokens issuing platforms are daily becoming faster, cheaper, smarter. Decentralized applications (DApps) with back-end code are being developed in every part of the globe where there is a developer-grade internet connection. Several outstanding, mostly USA-based, Ethereum platforms issue tokens, and manage the investor process and the tokens through the lifetime of the asset, such as Securitize, Harbor, Securency, Swarm and Polymath (Canada). tZero expects to be handling token transactions by Q2-19, beyond issuing and managing, as well as offering an alternative trading system moving into other investment sectors such as debt, real, estate and other tokenizable asset classes.

European platform, Token Market, based in Gibraltar, [disclosure – client of the writers]has this week become live as the first security tokens issuing platform offering to public retail (as distinct from private) investor markets. Token Markets was selected by the UK regulator to assist in carrying out security tokens offerings to test, measure and develop issuance of digitized equity in UK.  Lithuanian platform, DESICO plans in 2019 to launch a securities exchange that will provide immediate listing and liquidity for security tokens, operating in conjunction with the Bank of Lithuania.

Impressive platforms with breakthrough architecture/technology may move beyond Ethereum technology.  EOS is believed by many in the longer term to eclipse Ethereum with higher scalability and lower cost.  Distributed platform Cardano claims to be more scalable and more decentralized than Ethereum, as it scales through side-chains/horizontally. Cardano, administered by the Cardano Foundation in Switzerland, was created in Hong Kong, and is led by Charles Hoskinson, co-founder of Ethereum.

Regulation, Compliance.

Financial services represents about 15% of the world economy; inevitably, significant portions will be digitized and integrated.  Though counter-intuitive to some, in financial services industries intensive regulation and strict enforcement are key to establishing confidence, orderly operation and mass adoption. The stringent regulation and enforcement governing financial markets in the USA have helped make the USA financial markets the envy of the world, the model to emulate.  Securities industry regulators are the critical partners in any development of the security tokens industry.  All stakeholders, aware of this, – cheer regulators on to action, or condemn their inaction.

In coming months, there will be significant step-up in activity by issuers and investors under existing global securities regulation, smart contract-auditing procedures and disclosure practices, and evolving regulation of the blockchain-related ecosystem.  Enormous investments of time and acquisition of domain expertise are required for regulators to understand sophisticated systems, methods of capital formation and investor interfaces, and the complex financial services implications that flow from their deployment and development.  The SEC, for example, by its FinHub  is committing considerable resources to engaging ecosystem players.  In addition to being a resource for the industry providing information about the SEC’s views and actions in the FinTech space, FinHub is a forum for SEC staff to engage the public

UK has shown aggressive innovation in crowdfunding by providing exemption for equity offerings up to EUR8 million, stimulating the crowdfunding industry. It came as no surprise when UK regulators (Financial Conduct Authority) recently launched a dedicated regulatory sandbox which includes exchanges for security tokens.  Successful applicants benefit from lower regulatory thresholds and receive direct guidance from the regulator, while the FCA gains confidence and understanding working with new financial technology and processes.

Gibraltar, a first-mover in legislation for digital assets, is the world’s first jurisdiction to license distributed ledger technology for blockchain and fintech businesses. Next month, Gibraltar is publishing shovel-ready legislation for security tokens compliant with all EU directives, the fruit of unified efforts of Gibraltar regulators and local industry experts.


  Security tokens are theoretical game-changers for financial and ownership models, allowing any asset or fund to offer equity, debt, full or partial ownership or revenue share. Bulls and bears abound. For investors security tokens are secure, virtually incorruptible, and accessible to trade by anyone with an internet connection. In the longer term of three to five years, comprehensive fintech banks will have to emerge to conduct the securities token industry to act as traditional investment banks performing funding, underwriting, compliance, retail distribution, analysis, legal and advisory functions to manage processes, because the development of the security tokens industry going forward is about 20% technology, and about 80% regulatory/business. If security tokens will continue to provide access to compliance features for issuers, signs of liquidity for investors and a framework for oversight to regulators, then 2019 could belong to the security token.

Omri Bouton co-wrote this.  We are both at Hassans.

Recommended reading for further research: 

  • StartupEngine Summit – Tokenizing the World, with excellent panels from StartEngine conference October 19, 2018 Los Angeles

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).

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.

Could Blockchain help the dysfunctional crop insurance sector in India?

At the Singapore Fintech Festival last week, the Indian Prime Minister Narendra Modi, delivered an amazing key note speech with Financial Inclusion at its core. During the speech he touched upon several of his achievements, including Aadhaar. In the last 4 years, he claimed the banked population in India has gone up from 50% to almost most of the country.

Modi speech 1

Image Source

I am a big fan of Modi. He has managed to achieve some major milestones with Aadhaar and meaningful steps for a country where 70% of its population still earns from agriculture. However, in times of natural disasters, in a country dealing with 1.3 Billion people, one ambitious and dedicated leader can only do so much.

Earlier this month, my home state in India, and some of the neighbouring states were hit badly by a storm named Gaja. Gaja in the regional tongue refers to Elephant. In my state, the most hit districts were the most fertile parts, that are called the delta region (of the river Cauvery). On top of human casualties (33) and about 75,000 being relocated, the storm hurt farmers massively.

coconut trees

Image Source – Whatsapp

Many farmers in the delta region had moved from cultivating paddy to coconuts as paddy is considered water intensive. This farming tactic has heavily hurt them, as coconut trees took 10-15 years to grow, and the damage caused by the storm was to their decade of hard work – which were not insured.

I come from that part of the world, and had the privilege of going to school and University with many, whose parents were farmers. One of them sent me texts post the storm, this is the summary.

Tall coconut trees were just twisted and broken right in the middle. Wind speed seem to have been around 100 kmph. Interior delta regions don’t get exposed to this level of winds. Usually Only the coastline takes the brunt.

People weren’t prepared and seem to have been caught by surprise. The last time something similar happened in the interior areas was in early 50s. But back then this area primarily had paddy cultivation.

Years of effort in tending to them (coconut trees), watering them.. at least for us it was just additional income. For many farmers we know, the 10k or 15k INR, they get out of these coconut farms every month is their only income.

I understand, this is not a weather news channel – so back to crop insurance and Blockchain.

So what has been done by the Modi government for Crop insurance?

In January 2016, Prime Minister Narendra Modi launched a revamped crop insurance scheme, his government’s flagship scheme for farmers, the Pradhan Mantri Fasal Bima Yojana (PMFBY).

How does the insurance work?

The premium is subsidized for farmers who own less than two hectares of land. Insurance coverage is for two aspects,

  • Yield protection, which protects the farmer from a lower yield
  • Weather linked insurance that covers for disasters and other weather irregularities

The claim is calculated on the basis of crop cutting experiments carried out by agricultural departments of respective states. Any shortfall in yield compared to past 5 years average yield is compensated. In essence – a very manual process.

The insurance is mandatory for farmers who take loan for their needs. For the rest of the farmers it is not.

crop insurance

Image Source

What has happened to the Crop insurance industry since then?

These were the key findings,

  • Number of farmers covered has increased by 0.42%.
  • Premiums collected from farmers has gone up by 350%
  • Claims paid out have increased marginally. But time taken to pay claims is already hurting farmers.

Points one and two clearly highlight where the monies are going – insurance providers are having the last laugh – at the cost of the farmers.

Also, If one season fails, and farmers  didn’t get their claim money in time for the next season, they don’t have funds to buy seeds for the next season. So timing of the release of claim money is critical.

There are several other issues with the current process that include lack of transparency, errors in setting yield thresholds, poor awareness amongst farmers, complex criteria and documentation.

What could we do in future?

Well, we seem to have got a silver bullet in Blockchain. I have written about how Blockchain can help crop insurance before, but will revisit some of those points again. In an Indian context, this is how I see it working.

  • Every farmer has an Aadhaar, so use the biometric identification.
  • When a farmer opens a bank account, make it compulsory to get them on an insurance
  • Explain the criteria, payment schedule and agree on thresholds and how they could change.
  • Create a simple data driven smart contract to list the criteria that would trigger a claim – without the farmer having to claim.
  • Source the required information on weather and soil dampness from satellite data
  • When there is a natural calamity, automatically trigger the claim, in near real time, using self executing contracts.
  • Last but not the least – have strict guidelines for crop insurance firms profit margins.

This would still need state/crop level data on yield thresholds, which is apparently decided by the local authorities post every season. But apart from that data point, most other information can be automated. The customer (the farmer) should have a frictionless experience.

They don’t have to understand insurance, they just need to know they are protected and taken care of when disaster strikes. Blockchain can create that trust in the process.

Once the confidence in the system comes back, number of farmers enrolling for the scheme will easily go up.

During the Singapore Fintech festival, Mr.Modi mentioned how Blockchain was a hot trend amidst VCs. If he had advisors for his financial policies, who were half as good as his PR team that wrote his speeches, the nation should soon see some relief from its dysfunctional financial services.

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


Insurtech Front Page Weekly CXO Briefing – Artificial Intelligence trends


The Theme last week was P&C InsurTech trends in the industry.

The Theme this week is Artificial Intelligence trends in Insurtech. AI has always been a critical subject of not only InsurTech, but also the whole digital age. Let’s see some AI-related Insurtech news this week.

For more about the Front Page Weekly CXO Briefing, please click here.

For this week we bring you three stories illustrating the theme of Artificial Intelligence trends .

Story 1: German Insurer DFV Eyes IPO in Bid to Disrupt Allianz & Co.

Extract, read more on Bloomberg:

“With ambitions to challenge insurance giants like Allianz SE, newcomer Deutsche Familienversicherung AG needs 100 million euros ($116 million) in fresh funds to finance its expansion plan. An initial public offering is one path that Stefan Knoll, founder and chief executive officer, is considering.

DFV uses artificial intelligence to decide which insurance claims are legitimate and which are not. In partnership with Frankfurt-based startup Minds Medical GmbH, it developed an algorithm that can read so-called ICD-10-Codes, used by doctors and hospitals to categorize their bills.”

The news was from June, a recent interview on DFV founder Dr. Stefan M. Knoll was released on InsurTechnews, one of the biggest feature of DFV is that they use AI to process claims.

Editors Note: medical insurance claims has long been a hairball of complexity that causes a lot of pain for customers/patients. The most broken big market today is America, but the politics around Health Insurance are so divisive in America, that it is possible that the breakthrough will come from another market like Germany.    

Story 2: Insurers must think strategically about AI

Extract, read more on Digital Insurance:

“Much of executives’ enthusiasm is justified. AI is already being deployed in a range of arenas, from digital assistants and self-driving cars to predictive analytics software providing early detection of diseases or recommending consumer goods based on shopping habits. A recent Gartner study finds that AI will generate $1.2 trillion in business value in 2018—a striking 70 percent increase over last year. According to Gartner, the number could swell to close to $4 trillion by 2022.”

Despite the growth momentum, AI is unlikely to help insurers yield big results in the  short term. The decision on when and where to adapt AI will be a key decision senior executives have to make.

Story 3: Huge rise in insurtech patents

Extract, read more on ITIJ:

“According to analysis from global law firm Reynolds Porter Chamberlain (RPC), 2017 saw a 40-per-cent jump in the number of insurtech patents being filed worldwide. RPC found that 917 insurtech patents were filed globally last year, compared with 657 in 2016.

Telematics, artificial technology and machine learning, and P2P insurance were among the most frequent subjects of patent protection last year.”

Telematics, artificial technology and machine learning all involve a certain degree of AI. And the growth of patent numbers signifies a positive growth on InsurTech adaption.

AI application in Insurance is still premature, but Rome was not built in one day, there will be a process. And it’s good to see that insurers featuring AI have been well received by the capital markets. This can inspire more startups and insurers to adapt AI.

Image Source

Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

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.