Insurtech Front Page Weekly CXO Briefing: Cross-Industry expansion

Cross-industry

The Theme this week is cross-industry expansion. This indicates that insurance is getting a higher degree of integration with our lives.

The Insurtech Front Page Weekly CXO Briefing is all you need to know for the week, jargon free for executives, entrepreneurs and investors who want a piece of this huge, fast changing market. Each week we select one theme illustrated by 3 news items, because we know that you are busy. Our job is to filter out the noise, so you can read the signal. We bring you the raw news plus our take on why it is significant.

For this week we bring you three stories illustrating the theme of cross-industry expansion:

Story 1: Credit Karma Makes Significant Move with New Insurance Experience

Extract, read more on Business Wire:

“Credit Karma today announced its expansion within insurance. Launching today in California and Texas, Credit Karma’s members will be able to see what they could be paying for auto insurance based on what members like them are paying for the same coverage.

This move will address the mis-pricing issue of Americans’ auto insurance policies and will soon arm its more than 80 million members with the information needed to make the best decision on their insurance policy, without the headache. Credit Karma estimates that Americans overspend on auto insurance by nearly $21 billion per year.”

Credit Karma is already providing auto-related services to its users such as loans and evaluation of their cars. This move into insurance is apt and can be effective.

Story 2: Flipkart forays into insurance space, teams up with Bajaj Allianz

Extract, read more on The Economic Times:

“E-commerce major Flipkart Sunday said it is foraying into the insurance segment after securing a corporate agent license. To begin with, Flipkart has partnered Bajaj Allianz General Insurance to offer customised insurance solutions to power its mobile phone protection programme for all leading mobile phone brands that are sold on its platform, Flipkart said in a statement.”

News from India that is globally significant because it is one more example of an e-commerce giant moving into insurance. Amazon from America and Alibaba from China are already making this move. India is a big market with it’s own local champions like Flipkart, but what makes India such an interesting market to watch is that it is a market that big global players, such as Amazon and Alibaba, are fighting over. India is a battleground market. If any of these e-commerce giants can make the user experience of Insurance as easy as the user experience of e-commerce, they will change the lives of billions and make fortunes.

Story 3: WeWork taps Lemonade to offer insurance to WeLive members

Extract, read more on Techcrunch:

“WeWork has partnered with Lemonade to provide renters insurance to WeLive members.

WeLive is the residential offering from WeWork, offering members a fully-furnished apartment, complete with amenities like housekeeping, mailroom, and on-site laundry, on a flexible rental schedule. In other words, bicoastal workers or generally nomadic individuals can rent a short-term living space without worrying about all the extras.”

This is a great example of two big innovative ventures innovating together to deliver unique customer value. It is a fine example of the art of the partner.  When your customers are almost from the same group, a partnership would be great to improve the quality of your service. That’s what Lemonade and WeWork are trying to accomplish. It is also another example of how Insurance is central to our lives and how if one makes what is essential but boring easy to buy and consume, then customers will buy.

Cross industry expansions can be actions like establishing a new business as well as building a partnership with players in other fields. Integration can amplify the value propositions for insurance industries. Tech giants like Amazons and Alibaba have done this in earlier times and I’m sure we will see more and more integrations between insurance and other industries.

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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.

Kiwi fintech FNZ lands deal with Al Gore’s investment fund

You’ve got to love the Kiwi entrepreneurs for just getting on with it, and quietly building billion dollar businesses from the middle of nowhere.

And it seems they have a penchant for financial services businesses. While Rod Drury and his team have built a billion dollar SaaS accounting behemoth in the form of Xero, from Wellington, another Kiwi, Adrian Durham is hot on his heels. And his billion dollar wealth management business just landed what is possibly the biggest fintech transaction of the year.

Canadian pension fund CDPQ and Generation Investment Management (Al Gore’s fund) have jointly acquired a stake in FNZ that values the company at £1.65 billion.

Since 2003, FNZ has acquired a stunning £330 billion in assets under administration. It is the caretaker of 5 million investors, courtesy of its partnerships with the likes of Santander, Lloyds Bank, UBS, Barclays and many more. The platforms reach extends across 60 financial institutions across the globe.

What is remarkable about the business – and possibly speaks to the fast-tracked success, which requires intense focus and energy – is that around 400 employees remain shareholders, and will continue to own about one third of the equity of the company going forward.

The platform has also taken on building out Vanguard’s direct-to-consumer platform, which is a significant coup, and something BlackRock will no doubt be watching closely.

Platforms are a big play, and wealth management is grappling with how to bridge the expensive, advisory driven world and the new digital, millennial driven AI advice space. The majority of platforms are still trying to find ways to accommodate the old model while re-skinning for the new.

The big question is can you do both? My intuition says no – at least not particularly well. Which means there is a huge opportunity for a digital wealth platform that doesn’t have to retro-fit to the old.

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.

In the EU Blockchain Resolution we Trust

Bictoin EU

It was my name day on September 20th – a significant day for a Greek Orthodox – but I was by no means going to miss the “Blockchain: Building Trust in Society” event with Dimitrios Psarrakis, a Greek leading specialist in European regulatory policy. This was the first event in PwC Switzerland’s joint thought leadership series with the blockchain hub Trust Square. I was not disappointed; on the contrary, both the speech, the panel discussion with Daniel Gasteiger, Founder, Trust Square & Founder, Procivis, Doris Fiala, Chairwoman, Swiss Control/Parliamentary Oversight Committee & President, Swiss FDP Liberals Women, Guenther Dobrauz, Dimitrios Psarrakis; and the party; were unique.

Greeks built the principles of Democracy. Eva Kaili, is the Greek EU parliamentarian that is leading a team with a mission to raise awareness in the European Parliament on the revolutionary potential of Blockchain and how to grab the opportunity to lead in the 4th industrial revolution with relevant and powerful policies.

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At the opening of his speech, Dimitrios Psarrakis, spoke about their team work in the EU parliament to educate, raise awareness and understanding about blockchain. They slowly but surely managed to obtain nearly 750 votes in the parliament for the Blockchain Resolution, a long and detailed policy for the EU which is based on the principle that Blockchain holds the potential to build Trust in our society in a different and better way, at many levels.

Driven by the fact that the internet has been a technological development that has undoubtedly created more convenience and connectivity, but has fallen short in creating more fairness and trust; Blockchain presents an opportunity to build trust and fairness in a very different way.

Driven by the belief that Blockchain will restructure several sectors: energy, healthcare, capital markets, Intellectual property etc.; the EU wants to mobilize capital to fund this revolution – the 4th industrial revolution.

The Blockchain Resolution includes several articles and aims to be fully in place in 2019. It has no intention to regulate any instruments – like coins, tokens etc-. It will only regulate the use of them on the newly created platforms. The Blockchain Resolution sees these new digital assets as legitimate instruments and does not attempt to categorize them as securities or commodities. The Blockchain Resolution sees them as alternative investments or contractual arrangements. Therefore, applying the Regulation in the EU for alternative investments, which is fairly flexible, is appropriate. The due diligence process on the platforms should be similar to the due diligence process in crowdfunding.

In Europe there is no consensus on the definition of a Security. Europe has MIFID, without a standard definition of a Security.

The Blockchain Resolution sees digital assets as alternative investments and the regulatory framework that applies is fairly flexible. Europe, through the Blockchain Resolution, wants to create policies that will mobilize capital to fund the next wave of restructuring the way several markets / sectors function.

The view of the EU is to present regulatory principles that are Technology neutral, Business-model neutral, and pro-Innovation.

The main principle is to allow for Disintermediation Economics that build Trust. Such economics promise to (a) reduce transaction costs and create new efficiencies, (b) reduce operational frictions by increasing liquidity, (c) automate monitoring processes with limited informational asymmetries (e.g. agency frictions, moral hazard, adverse selection).

The Blockchain Resolution is brave enough to look into the promise of Blockchain for Public infrastructure. The view is to restructure (a) traditional public services like land registries, licenses, certificates etc. (b) ways to reduce tax evasion and fraud, (c) cross-border transactions, regulatory reporting, data transactions between European citizens via smart contracts.

The Blockchain Resolution just got support from the Strasbourg Plenary.

“Blockchain has united this House, as all the parties in the Committee on Industry, Research and Energy (ITRE) voted in favor of the resolution under the principle of being technology neutral and innovation-friendly in Europe.” “One of the core messages of our text was to signify that the European Union aspires to become the global leader in the fourth industrial revolution,” said Eva Kaili.

The European Commission will be next in November at the European Parliament Blockchain event. This will be followed by the Blockchain and international Trade Report. In December, the Crowdfunding Regulation will be updated.

Some of the recommendations that the resolution makes are[1]:

  1. For member States to establish non-profit “innovation hubs” to promote research, education and training among their citizens
  2. For the Commission and ECB to identify dangers for the public and incorporate cryptocurrencies into the European payment system.
  3. To develop technical standards for Distributed Ledger Technologies
  4. Conduct a clear analysis of legal enforceability of smart contracts among EU member States
  5. Decentralize the storage of EU citizens’ data in preventing the misuse of data
  6. Decentralize infrastructure to ensure no monopolies are held, for instance the storage of nodes and servers
  7. Use blockchain for tracking EU funding to achieve greater accountability
  8. Evaluate blockchain-based e-voting systems as a use case for the EU
  9. The creation of funding opportunities from the EIB, EIF and EFSI 2.0
  10. The creation of an Observatory for the Monitoring of ICOs and clarification of utility tokens and security tokens as unique asset classes
  11. For any regulations on blockchain to remove barriers and founded on principles of technology neutral and business model-neutral

In Q1 2019, the Blockchain Resolution will be seen and hopefully adopted by ESMA. Europe is leading the way.

We live a world in which Trust is lacking, Trust is being re-defined, Trust has to be re-built.

[1] Excerpts from EU Parliament Passes Blockchain Resolution

Efi Pylarinou is an independent trusted Fintech and Blockchain advisor

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: Decentralized Exchanges (DEX)

darth-kermit

The Blockchain Weekly Front Page is a CXO level briefing. Our mission is to serve the mainstream business community by selecting one major theme in the Blockchain Economy each week and three news stories to illustrate that theme. This is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world, in your email inbox each Monday at 7am CET. 

For more on the format please click here.

Last week our theme was “Bridge to Blockchain mainstream adoption via the next bull market”.

There is no doubt that centralized exchanges (CEX), such as Coinbase and others, helped us reach this point. Centralized exchanges have been an important stepping stone in the development and adoption of cryptocurrencies.

Centralized exchanges are easy for new digital currency traders and some act as gateways, which allow fiat to crypto transactions. But philosophically, these centralized platforms couldn’t be further apart from the decentralized nature of blockchain and cryptocurrencies.

There are four main issues with centralized exchanges:

  • Trust: The root problem with conventional currency is all the trust that’s required to make it work. Satoshi never envisioned centralized exchanges.
  • Personal Documents: Centralized exchanges often require personal information and proof of identity, in order to deposit or withdraw to and from the platform.
  • Security: With a single point of entry, it means they are accessible to hackers easily. If something goes wrong, on a CEX could end up losing all your crypto.
  • High fees: Many well-known exchanges charge anywhere between 0.20% to 3% in fees, whereas a decentralized exchange mostly requires a small fixed fee, or in some cases no fee.

Today the bulk of cryptocurrency trading takes place centralized exchanges, yet more than 30 of them have been hacked, since 2013. According to ConsenSys: “99% of cryptocurrency transactions still go through centralized exchanges; this trend is expected to be reversed in the coming years.

Currently, there are over 200 exchanges, compared to 70 exchanges in March 2015. Every day, billions are being traded on cryptocurrencies exchanges. Centralized exchanges generate massive profits from trading fees. In exchange for their services, traders are charged different fees, such as trading fees, withdrawal fees, deposit fees, etc. The top 10 exchanges generate as much $3 million a day in fees, according to estimates by Bloomberg.

The biggest problem for centralized exchanges is security. There are lots of examples of high profile thefts, the biggest being Mt. Gox in 2014, when 850,000 Bitcoins belonging to customers and the company were stolen, an amount valued at more than $450 million at the time.

Decentralized exchanges (DEX) are gaining popularity, because they enable users to trade peer-to-peer in an automated way and ensure that funds are not vulnerable to thefts.

We are already seeing this shift take place. In fact, two of the largest centralized exchanges are planning on launching decentralized versions of their platforms.

Bithumb, currently the world’s sixth largest by daily traded volume based on CoinMarketCap, will launch a decentralized crypto exchange in 2019. Bithumb is planning to use R1, a decentralized exchange protocol that was developed by OneRoot Network.

The Bithumb announcement follows that of  Binance, which is also set to launch a decentralized exchange by 2019. Binance CEO, Changpeng Zhao, on an interview at CNBC’s Crypto Trader (youtube video), said  that he believes decentralized exchange is the future of the crypto market:

“I believe that decentralized exchange is the future. I don’t know when that future will come yet. I think we’re at an early stage for that so I don’t know if it’s a year, two years, three years, or five years. I don’t know but we got to be ready for it”

Another key difference between centralized and decentralized exchanges is the middleman. On a decentralized exchange, a middleman doesn’t exist. Smart contracts power everything, and a decentralized exchange is able to operate autonomously. Smart contracts on a DEX, allow buyers to connect directly with sellers to trade, without the need for a third party.

In the case of DEXs, fees still apply to use the exchange, but they are often less than their centralized counterparts and in some cases zero.

In a recent article I read about Plutus, that is enabling users to convert and spend their cryptocurrencies without paying any fees through their decentralized exchange. PlutusDEX is a decentralized exchange on the Ethereum network, that facilitates the trading of Bitcoin, fiat currency and their token, the Pluton. PlutusDEX allows users to purchase cryptocurrencies directly from each other on the exchange without paying any fees. I love a free lunch, but there are not free lunches in this world. As stands now, this platform is cost-efficient for users, especially when you compare it to other centralized and decentralized exchanges.

While decentralized exchanges offer more security and control, investing through a DEX is even more complex than investing through a centralized exchange. Most DEXs struggle with liquidity, and lack fiat payments.

Liquidity is a vital element for any of the marketplace. Trading volumes on decentralized exchanges are minuscule and there is always the risk that traders will not get the best price for their trades. Bancor, the most liquid decentralized cryptocurrency exchange,in the last 24 hours had less than a $1 million in trades, a very small fraction of the volume of other exchanges.

Theoretically, governments and regulators cannot shut down a DEX because it is decentralized. While centralized exchanges are scrambling to get licenses in order to keep running, for now decentralized exchanges don’t really have to. It’s difficult for regulators to hold these exchanges accountable, since traded funds never pass through a centralized wallet and the entire process is peer-to-peer.

Decentralized exchanges represent a very small fraction of trades, which is why they are not on regulators radar. But as their trading volumes grow, we can expect regulators to take notice and try to regulate their transactions.

While decentralized exchanges are relatively new, most market participants agree they will be a big part of the future. As we evolve from centralized to decentralized, transactions will get faster, fees lower and security higher. Centralized exchanges dominate the market, but as DEXs mature they will become an appealing alternative and both will co-exist, each fulfilling its own unique purpose.

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

India debt market turbulence – Challenges and Opportunities for Fintech

The free money era is over. Atleast until the next recession. Its time India and its financial markets woke up to that. If they didn’t before, atleast the IL&FS crisis would have been a shock to the system. Infrastructure Leasing and Financial Services (IL&FS) are one of the top corporate debt issuers, and have 3% of the market.

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Let’s first look at the wider market factors before delving into the issue and its implications for Fintech.

Interest rates rise across the world has become the norm, and India is not alone. The Reserve Bank of India have already raised interest rates twice since June, and there is an expectation that by the time this article gets published, there might be another rate hike.

Rupee has taken a tumble this year. A 13% fall from the start of the year with a record low of 73.8188 recorded this week against the USD, doesn’t help. Rising oil prices is another factor. With all these macro factors stacking up, its hard for corporate borrowers, who have perhaps got a bit spoilt with the free money decade we have had since 2008.

Now, coming to the IL&FS crisis, these are the key points:

  • Infrastructure Leasing and Financial Services (IL&FS) provide infrastructure finance in India. With the push for infrastructure projects that happened in the last few years, they exploited the first movers advantage.
  • In August when IL&FS defaulted on a few repayments, panic hit and markets went into a selling mode.
  • The markets have taken a fall of about 6%
  • This has increased the risk of a contagion effect, and the Indian government has stepped in.

But the bigger worry, and probably the relevance for Fintechs is the failure of credit agencies that saw IL&FS as a safehouse. India Ratings and Research (A Fitch subsidiary) corrected their ratings on IL&FS from AAA to D after the defaults happened. Pointless.

There were so many warning signs. The debt size of IL&FS was $12.6 Billion. Infrastructure loans were notorious for non performance for the past three decades. And these infrastructure projects have been largely funded by short term debts. DEJA VU.

Its a failure in governance and is just a repeat of what we saw 10 years ago. If only the credit agencies had better technology to perform better analytics on firm, market and alternate data, this crisis could have been addressed differently.

What Lehman Brothers episode did to the Western world in the form of Fintech, the IL&FS saga could do to India.

My view is that the ripple this will create in the non banking financial services in India will open up new Regtech and Fintech opportunities. Some of the hyped up Fintech players in the lending space who are poorly capitalised and have bad credit models will disappear, and the fittest will survive. Better credit engines and underwriting mechanisms well supported by data analytics covering a bigger set of data to perform real time diagnosis would start to emerge.

I hope IL&FS is a blessing in disguise for Fintech in India. Once the dust settles, Fintechs should make the most of the inefficiencies in the debt markets.

 

Arunkumar Krishnakumar is a VC investor focusing on Inclusion, a writer and a speaker.

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.

 

What recent InsurTech early stage funding deals reveal about the market

Early Stage

The Insurtech Front Page Weekly CXO Briefing is all you need to know for the week, jargon free for CXO level business leaders and investors who want a piece of this huge, fast changing market. Each week we select one theme illustrated by 3 news items, because we know that you are busy. Our job is to filter out the noise, so you can read the signal. We bring you the raw news plus our take on why it is significant.

The Theme this week is early stage funding. This indicates that investors expect a robust growth for InsurTech.  A few weeks ago we looked at Insurtech Exits. The Exit is when all the hard work pays off. This week we travel back up the innovation funnel to look at 3 early stage funding deals in Insurtech, which may pay off in good Exits at some point in the future.

For this week we bring you:

Story 1: Slice Labs Raises $20M in Extended Series A to Globalize its On-Demand Insurance Cloud Platform

Extract, read more on Slice blog:

“Slice Labs (Slice), a leading on-demand insurance cloud platform provider, today announced it has raised an additional $20 million in Series A funding, led by The Co-operators with participation from XL Innovate, Horizons, Munich Re/HSB Ventures, SOMPO, Veronorte, the investment arm of Grupo Sura, and JetBlue Technology Ventures. This sizable, extended round will be used to execute on the higher than planned global demand for Slice Insurance Cloud Services (ICS).”

Hey! Compared with consumer-facing services, insurer-facing services like ICS seem to be better received among insurers. Incumbents want to be improved rather than disrupted.

Story 2: Insurtech Socotra Raises $5.5 Million Series A

Extract, read more on Crowdfund insider:

“Socotra has raised $5.5 million in a Series A funding round bringing total raised for to date to $12.8 million for the InsurTech startup. 8VC led the funding round with 8VC founding partner, Joe Lonsdale joining the Socotra board.

Socotra is a cloud-native backend with open configuration and APIs allowing insurers to deploy backend technology with their own engineering resources.”

Hey! Similar with the first piece of news. The next big leap for insurance might first be made by SaaS solution providers rather than direct-to-consumer ventures.

Story 3: Concirrus closes £5 million funding round to service customer growth

Extract, read more on Concirrus blog:

“Concirrus, the London based InsurTech company leading the Marine and Motor Analytics market change, has raised £5 million in equity funding, bringing the total raised to £12 million. The raise was co-led by Cambridge-based deep tech venture capital firm IQ Capital and specialist InsurTech investor Eos Venture Partners.

Concirrus, who have brokers, insurers, major fleets and reinsurers as clients, announced a global agreement with EY in April this year which sees the two working together to drive adoption of Concirrus’ technology in the market.  EY themselves are investing heavily in the insurance market through their Insurwave blockchain venture.”

Hey! Three in a row!  B2B SaaS solution providers seem to be resonating with early stage Insurtech investors.

The market  is open to B2B SaaS players with many different specialties. Insurers have strong demands in numerous aspects of their back offices. The digitization of core systems, scalability of internal engineering resources and data analytics offer many opportunities for startups.

 

Petal a flowering example of brand led fintech

Petal is a fintech startup to follow if you are hungry for brands using sophisticated design and unconventional approaches to positioning their product.

The brave startup has taken on an industry with a bad reputation – credit. Which means dislocating the visual experience is key, from the brand experience, right the way through to the product itself. This can’t feel like credit. It has to be credit, but feel like something else.

Like Starling Bank, Petal’s vertical credit card is a deceptively simple differentiator that shows the power of looking at something afresh, through a design first lens. In addition, the clever positioning of the card-holders name echoes the move towards personalised and monogrammed accessories amongst the insta-first generation.

The fintech startup, which uses ‘cashflow underwriting’ to score and set its customers credit limits, announced it had secured a $34M credit facility this week. American Banker’s catchy headline about the launch of the card to the masses – Startup lender Petal launches its subprime credit card – certainly made us chuckle. Not exactly the headline you’d like to see about your business, and somewhat of a slight on companies like Petal’s mission.

The reality is tens of millions of Americans don’t have credit scores, because they’ve either eschewed credit altogether (this is prevalent in younger demographics) or the systems designed to capture and record their ‘scores’ are hugely deficient. Many old bureaus have woefully inadequate technology and scoring algorithms, especially in the age of big data. That is a goldmine of opportunity for the right risk adjusted system.

So who else is in this space worth watching?

Keep your eyes on Deserve, another competitor in the space. Not quite up there in the branding stakes like Petal, but building a similar proposition.

Petal is smart. You don’t need to invent something new to be successful. Sometimes rearranging the furniture works just as well.

The key is obviously making sure the business growth incentives are aligned with the customer. Currently Petal makes money from interest charges, a typical approach – although it is fee free in every other regard. However in our debt fuelled economy, let’s just hope this isn’t a case of rearranging the deckchairs on the Titanic.

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.

AI algorithms – takeaways from Fintech+

The Fintech+ conference with its AI thread was unique. The morning sessions included presentations from Nvidia and Google, and use cases and learnings from Zurich Insurance. Leading into the sustainability & Fintech panel that I moderated just before lunch.

Marc Stampfli, Swiss country manager at Nvidia took us on a journey of AI Fall, Winter and into Spring. He explained neural network concepts borrowed from biology and the initial difficulties of neural network computations outperforming statistical approaches. The 1st tipping point came with increased data availability through the internet, and only then we had evidence that neural networks could outperform statistical models.

After that point, we ran into the next problem which was the lack of computing power to process all this data and multi-layer neural networks. And this is where GPU – a kind of parallel computer –  was created and first used in vector mathematics. This is the technology of Nvidia’s processor.

For me, this historical thread is another example of a solution designed for theoretical mathematics that finds a real-world application that takes us to the next level of the 4th industrial revolution. I associate it to the zero-knowledge proof in cryptography, now used in some blockchain protocols, that allows to verify & validate data without having to trade-off privacy[1].

We are living in a world in which, more or less unconsciously, we increasingly “Trust in Math”. After the GPU adoption in business, we moved to new hardware that is not only faster but also smaller in size. We basically reinventing how data rooms looked.  And this the world from Nvidia’s angle. They have facilitated the growth and new value creation, all powered by #AI tools.  The use cases in Finance are immense. Fintech solutions for:

  • Operations: automating claims processing and underwriting in insurance
  • Customer service & engagement: alerting customer for fraud, chatbots, recommendations
  • Investing/Trading: automating research, trading signals, trading recommendations
  • Risk & Security: fraud detection, credit scoring, authentication, surveillance
  • Regulatory & Compliance: AML, KYC, automating compliance monitoring and auditing.

Evidently, the biggest but fundamental problem that incumbents face in adopting any of these potential use cases, is that they first need to find ways to integrate their data and then to upgrade their data rooms to be able to handle the required computing power.

Having said that, Zurich insurance, one of the large Swiss insurers, shared with us their AI projects and research which started as early as 2015. Gero Gunkel spoke about their very successful AI applications in automating the review of medical records with the aim to arrive at a valuation. A process that entails reviewing reports ranging from 10-40 pages and that may take on average 1hour. They used AI algorithms that reduced this to 5 seconds! That is nearly real time for a business process that is Not low hanging fruit.

Zurich Insurance has also been using AI to automate the time-consuming process of collecting publicly available information towards opening accounts for large corporates. This automated web search can not only offer efficiencies but also become a new service provided to the underwriters of these types of insurances.

“Don’t look for the Swiss army knife”, said Gero Gunkel as AI may seem so promising that one can think it can take care of everything.

Dr. Christian Spindler,  IoT Lead and Data Scientist at PwC Digital Services, raised the important question on how to develop Trust in AI. This is a tricky topic as it beckons for answers around the limits of technology. For now, it is recommended to develop AI algorithms that can also provide explanations for their “Answers”.

I would say that “In Math we Trust” to develop algorithms that Answer “What & Why”.

“Improving lives through AI” is Nvidia’s motto for their Corporate Social Responsibility. See their initiatives here.

[1] Zero-knowledge proof allows a someone to re-assure a validator that they have knowledge of a certain “secret” (data) without having to reveal the secret itself. Zcash is an example of such a blockchain protocol.

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

 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: Bridge to Blockchain mainstream adoption via the next bull market

BLOCKCHAIN-GOING-MAINSTREAM

The Blockchain Weekly Front Page is a CXO level briefing. Our mission is to serve the mainstream business community by selecting one major theme in the Blockchain Economy each week and three news stories to illustrate that theme. This is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world, in your email inbox each Monday at 7am CET. 

For more on the format please click here.

Last week our theme was Gaming on Blockchain.

Cryptocurrency prices have been tumbling since the beginning of the year and many are debating if they will recover. In the last nine months, even after an 80% correction for cryptocurrencies and a 69% drop in the price of Bitcoin, the cryptocurrency industry has continued to grow stronger, with the stakes remaining very high.

The sentiment about long-term potential for cryptocurrencies and blockchain, still remains bullish. At least 59% of accredited and 72% of retail investors confirm they are planning to buy more coins in the next 12 months, according to a survey published  this summer by investment platform SharesPost.

This is driving many companies to double down. The big bet is on how to bring in the next wave of retail crypto traders and investors.

Let’s face it, despite the allure of owning digital assets, most people don’t want to, or don’t know how to safely manage their private keys. Most people need something fast, reliable, mobile and intuitive, that will make it easy to get into the crypto market. And what we’ve been seeing is exactly that. Crypto companies creating mobile-friendly fiat on-ramps.

Coinbase is one of of the companies, and it recently announced the Coinbase Bundle, a market-weighted selection of the five cryptocurrencies. Users can buy a bundle of five cryptocurrencies (Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Ethereum Classic) for as little as $25.

On Twitter the Coinbase posted“Bundles are a new way to buy crypto on Coinbase. You decide how much to spend. We deliver a market-weighted distribution of assets in your wallets.”

The Coinbase Bundle will launch in the United States and Europe over the next few weeks. Functionally it’s almost just like the Coinbase Index Fund. The main difference is that the Coinbase Index Fund is designed for accredited and more sophisticated investors, that want to spend a lot of money on crypto, while Coinbase Bundle is for unaccredited and unsophisticated investors. The name alone denotes its a cheaper investment vehicle. Investing in a Coinbase Bundle might be a quick and easy way to buy crypto, but it doesn’t necessarily minimize the risk, if for example the coins in the bundle take same downward direction.

We have also seen other companies, Revolute, Robinhood, Square and eToro, integrate crypto in their retail offerings, resulting in huge growth to their customer bases.

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The Coinbase announcement is strategic for their position in the retail market, especially when you couple it with the announcement of Coinbase Learn,  which tries to give basic knowledge to cryptocurrency newcomers, and Coinbase Asset Pages, a service similar to Coinmarketcap, that has detail information about the top 50 coins in the market.

This launch comes in the middle of fierce competition, which is going to get even more fierce. I think we can expect for the rest of 2018 to see more and more crypto custodians, with unique service offerings that cater to the retail crypto investor.

We are also seeing a lot of mobility from crypto companies, with plans to IPO. This week, Bitmain, the largest mining company in the world, filled for an IPO. Some are claiming that Bitmain is trying to untangle itself from the mess they’ve created and they see the IPO as a means to an end.

But, we’ve also been reading about Binance, Robinhood, Huobi, Canaan, Ebang. Lets not forget all the speculation and rumors about the Coinbase’s IPO in 2018. Also, in August, we had Argo, a mining operation, that listed on the London Stock Exchange, raising £25 million (USD $32.5 million) in investor capital.

If blockchain is the “internet of money”, then an IPO by unicorn crypto company, overseen by very serious regulators on an exchange like Nasdaq, would be a Netscape moment for the entire market. It would add another level of legitimacy to cryptocurrencies and blockchain, bring in serious money from both institutional investors and average consumers and potentially drive mainstream adoption by millions worldwide.

Yet, the single hardest problem in all of crypto is the on-ramp. Taking people’s money and handing them crypto for it. A couple of ex-USB bankers are trying to make it easier and bridge the crypto and fiat worlds.

They launched Seba Crypto AG, a Zug-headquartered company and secured 100 million Swiss francs ($104 million) from private and institutional investors. Their goal is to launch the world’s first regulated bank, that lets consumers easily swap dollars and euros into cryptocurrency.

Seba wants to be just like a normal bank, offering clients asset management products and investment banking services, but also allowing them to have both their crypto and fiat accounts under one roof. Investors will be able to securely use fiat cash from their accounts to invest directly into cryptocurrencies, while receiving full protection.

Banks have been hesitant to work with an industry, in which due diligence checks were rarely performed during ICOs a year ago. This has caused an enormous strain to crypto startups, that have faced problems with banks that refuse to open bank accounts for them, primarily because of concerns related to anti-money laundering rules.

The challenges of integrating into the traditional financial system, has driven many startup to seek out alternatives in countries such as Liechtenstein, Gibraltar and Malta. While there are some banks in these jurisdictions that allow cryptocurrency companies to open a bank account, the process can be grueling and the fees much higher than for normal accounts.

In an effort to ease the pain of cryptocurrency startups, the Swiss Bankers Association (SBA) published new guidelines for opening corporate accounts for blockchain startups. The aim is to make it easier for banks to deal with cryptocurrency startups, while lowering the risks involved in offering services to the crypto industry.

In the crypto world, SEBA is not the only company that is trying to build a crypto bank.  Bank of America has filed a patent related to cryptocurrency custodian system. BoA is proposing a computing system that will act as digital vault storage for the crypto assets of large-scale enterprises. Also, Circle is attempting to secure a banking license in the United States.

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