SEC reducing signal to noise ratio for ICOs

1_RGTPvD9z6idguv5RP2Ijsg

Last week our theme was “Is a 51% attack a real issue?

Our theme for this week is “SEC reducing signal to noise ratio for ICOs.”

Bitcoin’s price has jumped close to 30 percent since last weekend, peaking at $5,300 on several big crypto exchanges. Reports in the news attest that the recent surge was triggered because of buy orders for 20,000 Bitcoins, worth $100 million. With 412 days to go until the block reward halving, some analysts are claiming this is normal and historically Bitcoin price tends to surge a year before its halving starts.

Last year was a brutal for everyone in the space. The free fall we witnessed, truly tested our beliefs in cryptocurrencies and their potential. While I think that at some point we’ll see Bitcoin and other cryptocurrencies go far beyond December 2017 prices, I don’t think that we’ll see it happen the same way it did before. I expect that we’ll see some bullish runs, followed by selling pressures that will make us take a couple of steps back, but always settling on higher ground, each time.

Despite the fact that most of the news this week is focused on crypto prices, the big story is about the SEC clearing the air about ICOs, that want to sell their tokens in the US. The SEC issued its first “no-action” letter, allowing ICOs to sell tokens in the US, under certain conditions.

TurnKey Jet, a jet-leasing business, got the SEC’s “approval” to sell its token in the US, without having to register with the regulator, as long as:

  • Token holders won’t be granted an ownership stake in the company.
  • Any funds raised from the token sale will not be used develop the platform or app.
  • When the tokens they are sold,  they must be usable immediately for their intended functionality.
  • Transfers of the TKJ tokens are restricted only to TKJ wallets. External wallets are not allowed.
  • TKJ tokens will be priced at 1 USD per token. Each token will essentially function as a pre-paid coupon for TurnKey’s air charter services. If TurnKey wants to buy back the token (coupon), it must do so at a discount (less than 1 USD).
  • The token must be marketed in a way that emphasizes its functionality, and not its potential to increase in value, over time.

The SEC’s letter resolves some uncertainty about ICOs, but at the same time hugely limits them. You won’t see TKJ tokens on an exchange like Binance or Coinbase. The non-transferable nature of TKJ tokens, makes their actual utility extremely limited.

Earlier this week, the SEC also released “Framework for ‘Investment Contract’ Analysis of Digital Assets.” The framework is interesting, because it gives some guidance to new token issuers, whether a token is or isn’t a security.

The crypto industry has been pressing the SEC for a set of rules that companies can follow. Both the No-Action Letter and the Framework are reasons only for reserved optimism, if that. They are non-binding, as far as future decisions are concerned. The Framework states: “… it is not a rule, regulation, or statement of the Commission, and the Commission has neither approved nor disapproved its content …”.The crypto market in the US can be harmed by lack of or bad regulations.

Does it make sense to do an ICO, STO or IEO?

In 2018, 1,132 Initial Coin Offerings (ICO) and Security Token Offerings (STOs) were successfully completed, twice as many as in 2017 (552 in total), as shown in the fourth ICO / STO report by PwC Strategy in collaboration with Crypto Valley Association (CVA). ICOs raised $11.4 billion in 2018!

Fundraising for Initial Coin Offerings in Q1 of 2019 has been declining, based on data from TokenData. ICOs only raised $118 million so far in 2019, a huge drop when compared to the $6.9 billion raised in 2018, in the same period. Dropping prices and volatility have been deadly for ICOs.

1_uOX1R5ivQKRSMq2fZn7Yhg.png

The declining prices of cryptocurrencies, were not the only reason people did not invest in ICOs. People found other vehicles… STOs gained popularity in the cryptocurrency industry. Although, STOs are not fundamentally different from ICOs, they are a more regulated version. In the end it boiled down to regulation.

The first 2 STOs that started the idea in 2017, raised around $22 million. In 2018, STOs grew exponentially to 28 and $442 million in funding. In 2019, the dominant trend is STOs and asset tokenization, the conversion of real-world assets to the blockchain.

But, the biggest problem for most STOs, is finding an exchange capable and verified to list security tokens. Imagine an STO by a company in Asia, listed on an exchange in the US and a trader from Europe that wants to buy or sell the security token… A regulatory nightmare!

We are seeing even more changes to the ICO landscape, because of the problems with both ICOs and STOs. Initial Exchange Offerings (IEOs) are like ICO’s, with one difference, fundraising takes place directly on a crypto exchange. At its core, an IEO is basically an ICO but run through an exchange, as the intermediary conducting the sale. The first ever IEO was Tron’s BitTorrent, that raised $7.2 million in 15 minutes on Binance’s Launchpad platform.

In 2018, a staggering 58% of ICOs did not manage to raise $100,000 and only 2% of all ICOs announced their token was listed on an exchange. Potentially IEOs could be a game changer for the crypto market.

The long-awaited SEC ICO framework and its impact on the ICO landscape (and IEOs), potentially makes it easier for startups to raise capital. But it has left many questions unanswered, so we’ll have to see how it plays out. There are plenty high-quality projects and teams in the crypto market right now. Clearly defined rules and regulations, make the process much more transparent, credible and let crypto investors sort through all the noice.

For now… baby steps, slow and steady!

Image Source

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

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

 

Blockchain Front Page: SEC reducing signal to noise ratio for ICOs

1_RGTPvD9z6idguv5RP2Ijsg

Last week our theme was “Is a 51% attack a real issue?

Our theme for this week is “SEC reducing signal to noise ratio for ICOs.”

Bitcoin’s price has jumped close to 30 percent since last weekend, peaking at $5,300 on several big crypto exchanges. Reports in the news attest that the recent surge was triggered because of buy orders for 20,000 Bitcoins, worth $100 million. With 412 days to go until the block reward halving, some analysts are claiming this is normal and historically Bitcoin price tends to surge a year before its halving starts.

Last year was a brutal for everyone in the space. The free fall we witnessed, truly tested our beliefs in cryptocurrencies and their potential. While I think that at some point we’ll see Bitcoin and other cryptocurrencies go far beyond December 2017 prices, I don’t think that we’ll see it happen the same way it did before. I expect that we’ll see some bullish runs, followed by selling pressures that will make us take a couple of steps back, but always settling on higher ground, each time.

Despite the fact that most of the news this week is focused on crypto prices, the big story is about the SEC clearing the air about ICOs, that want to sell their tokens in the US. The SEC issued its first “no-action” letter, allowing ICOs to sell tokens in the US, under certain conditions.

TurnKey Jet, a jet-leasing business, got the SEC’s “approval” to sell its token in the US, without having to registered with the regulator, as long as:

  • Token holders won’t be granted an ownership stake in the company.
  • Any funds raised from the token sale will not be used develop the platform or app.
  • When the tokens they are sold,  they must be usable immediately for their intended functionality.
  • Transfers of the TKJ tokens are restricted only TKJ wallets. External wallets are not allowed.
  • TKJ tokens will be priced at 1 USD per token. Each token will essentially function as a pre-paid coupon for TurnKey’s air charter services. If TurnKey wants to buy back the token (coupon), it must do so at a discount (less than 1 USD).
  • The token must be marketed in a way that emphasizes its functionality, and not its potential to increase in value, over time.

The SEC’s letter resolves some uncertainty about ICOs, but at the same time hugely limits them. You won’t see TKJ tokens on an exchange like Binance or Coinbase. The non-transferable nature of TKJ tokens, makes their actual utility extremely  limited.

Earlier this week, the SEC also released “Framework for ‘Investment Contract’ Analysis of Digital Assets.” The framework is interesting, because it gives some guidance to new token issuers, whether a token is or isn’t a security.

The crypto industry has been pressing the SEC for a set of rules that companies can follow. Both the No-Action Letter and the Framework are reasons only for reserved optimism, if that. They are non-binding, as far as future decisions are concerned. The Framework states: “… it is not a rule, regulation, or statement of the Commission, and the Commission has neither approved nor disapproved its content …”.The crypto market in the US can be harmed by lack of or bad regulations.

Does it make sense to do an ICO, STO or IEO?

In 2018, 1,132 Initial Coin Offerings (ICO) and Security Token Offerings (STOs) were successfully completed, twice as many as in 2017 (552 in total), as shown in the fourth ICO / STO report by PwC Strategy in collaboration with Crypto Valley Association (CVA). ICOs raised $11.4 billion in 2018!

Fundraising for Initial Coin Offerings in Q1 of 2019 has been declining, based on data from TokenData. ICOs only raised $118 million so far in 2019, a huge drop when compared to the $6.9 billion raised in 2018, in the same period. Dropping prices and volatility have been deadly for ICOs.

1_uOX1R5ivQKRSMq2fZn7Yhg.png

The declining prices of cryptocurrencies, were not the only reason people did not invest in ICOs. People found other vehicles… STOs gained popularity in the cryptocurrency industry. Although, STOs are not fundamentally different from ICOs, they are a more regulated version. In the end it boiled down to regulation.

The first 2 STOs that started the idea in 2017, raised around $22 million. In 2018, STOs grew exponentially to 28 and $442 million in funding. In 2019, the dominant trend is STOs and asset tokenization, the conversion of real-world assets to the blockchain.

But, the biggest problem for most STOs, is finding an exchange capable and verified to list security tokens. Imaging an STO by a company in Asia, listed on an exchange in the US and a trader from Europe that wants to buy or sell the security token… A regulatory nightmare!

We are seeing even more changes to the ICO landscape, because of the problems with both ICOs and STOs. Initial Exchange Offerings (IEOs) are like ICO’s, with one difference, fundraising takes place directly on a crypto exchange. At its core, an IEO is basically an ICO but run through an exchange, as the intermediary conducting the sale. The first ever IEO was Tron’s BitTorrent, that raised $7.2 million in 15 minutes on Binance’s Launchpad platform.

In 2018, a staggering 58% of ICOs did not manage to raise $100,000 and only 2% of all ICOs announced their token was listed on an exchange. Potentially IEOs could be a game changer for the crypto market.

The long-awaited SEC ICO framework and its impact on the ICO landscape (and IEOs), potentially makes it easier for startups to raise capital. But it has left many questions unanswered, so we’ll have to see how it plays out. There are plenty high-quality projects and teams in the crypto market right now. Clearly defined rules and regulations, make the process much more transparent, credible and let crypto investors sort through all the noice.

For now… baby steps, slow and steady!

Image Source

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

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

 

A Bitcoin Maximalist describes a real issue to worry about – it is not what the Bitcoin sceptics tell you

worry

TLDR. As somebody who is long term bullish on Bitcoin, I often speak to mainstream investors who are sceptical but interested. They want to know if the issues that famous  Bitcoin sceptics tell you about in the media should worry them. This chapter of The Blockchain Economy book tells you why these issues are not real worries. They are like straw man arguments – easy to knock down. However, this chapter describes another issue that few analysts talk about but which I believe is more of a real issue for a Bitcoin investor to worry about. This issue is how Node Operators are compensated.

Personal bias disclosure: I am a Bitcoin Maximalist, for reasons outlined in this chapter of the Blockchain Economy book.

This post addresses long term investors who look at the fundamentals of Bitcoin. Short term technical traders have many other resources.

The usual arguments from Bitcoin sceptics

  • Bitcoin does not have thousands of years of history as a store of value. So it cannot be worth anything. The first sentence is obviously true. The second sentence betrays a lack of understanding of disruptive technology. Many Tech giants, obviously worth a lot of money, have a lifespan of only a few decades.

 

  • Bitcoin cannot be stacked in physical piles like gold bars. So it will be useless if we no longer have the Internet. Both statements are true but in the unlikely event that we no longer have the Internet a) have a few gold bars/coins just in case (nobody says Bitcoin will totally replace gold) b) in that dark apocalyptic scenario you will have other worries that are much more pressing (such as shelter, safety, water, food). Lack of Internet is an extremely unlikely scenario. North Korea is an exception that proves the rule. Even when dictators attempt a shutdown (for example in Egypt in 2011) it is temporary.

 

  • Quantum Computing will make Bitcoin’s cryptography easy to crack. This can be fixed at the technical level using the same Quantum Computing technology, but there are some risks before Quantum Computing becomes commonly available. It is a nuanced issue, for a good discussion watch this video.

 

  • Nobody is in charge. Fierce battles and forks show that the governance of Bitcoin is totally broken. Ahem, nobody is in charge of the Internet. Trusting a free market is hard for some people. For more, please go to this chapter.

 

  • Bubbles prove that Bitcoin is a ponzi scheme. This also shows that trusting a free market is hard for some people (particularly those who have relied recently on Central Banks printing money to make sure market assets are kept at a high level). Bitcoin is like a startup where the market priced the startup’s valuation from day one. Imagine Facebook’s price volatility if the market had priced Facebook from the days when it was a Harvard dorm room project!

 

  • Bitcoin cannot scale. At Layer 1 this is true. Layer 2 technologies such as Lightning Network are now coming on stream which will enable scaling far beyond current payments rails. For more, please go to this chapter.

 

  • Bitcoin is not yet useful as a currency. This is true if you live in a country with a) a stable currency b) functioning bank payment rails. There are many countries where this is not true. For more, please go to this chapter

 

  • Lots of fraud. This also true in Legacy Finance (Madoff, Enron, Mortgages, etc, etc). Change is coming from a) the market (eg investors avoiding centralised exchanges) b) technology eg Decentralized Exchange protocols) c) regulation and insurance.

 

  • Wash Trading inflates trading stats. True, but even if you strip out all the fake trades you get a real number over $270m daily trading volume – not bad for an asset/technology that is only just over 10 years old!

Rear view analysis is not useful for investors

The Economist is a great magazine that I have been reading for decades. Occasionally they get it wrong – for example in their support for the second Iraq War. In their most recent edition, dated 30th March, their article on The madness of crowds gave a lot of reasons why cryptocurrencies are like tulip mania – worthless. A few days later the price started rising. Rear view analysis is not useful for investors, which is why our ambition at Daily Fintech is to be News Forecasters.

Lets see how many sceptic articles there are just before the next bear market appears.

The real issue to worry about is economic incentive for the people who run Bitcoin Nodes

Miners are  rewarded by receiving Bitcoin, but there is no similar incentive for running a full Node. This is a problem, because Nodes are vital to the Bitcoin network and, like mining, involve real costs. Bitcoin enthusiasts say that you “should” run a Bitcoin Node. The problem of course is that “should” does not work at scale. It worked during Bitcoin Phase 1 when the Cypherpunks, Anarchists & Libertarians (who created the early traction that got Bitcoin from an obscure message board to the possibility of mainstream adoption) were motivated by rewards other than money. Should is irrelevant to Bitcoin traders/investors today and to future mainstream users.

This is why Ethereum has Gas costs. When I first encountered Ethereum in 2014, just after starting Daily Fintech, I struggled to understand the difference between ETH and Gas. At that time it seemed like a needless complication. Now I can see that Vitalik Buterin had learned from studying Bitcoin. When you pay for something via the Ethereum network, you pay in ETH. That transaction is processed on a decentralized computer. You pay for that computation in Gas (and Gas is paid in ETH). If Bitcoin had something like that, then Node operators could get paid in fees. For more on how Ethereum Gas works, please go here.

Yes, Governance is a tough issue for Bitcoin.

This Chapter describes Why Non State Governance For Bitcoin Ethereum And Other Cryptocurrencies Is So Hard. Fixing some code in Bitcoin is relatively easy in comparison to fixing an economic incentive issue; there is a super competent team to fix code issues. The market will also fill in the gaps that Satoshi Nakamoto deliberately left in there (such as a User Interface). However it is possible that the economic incentive for full node operators was a mistake by that legendary founder(s). Many commentators say there should be fees for full node operators, but it is hard to see how such good exhortations get translated into reality.

This problem also applies to Lightning Network – which could fix it

Lightning Network also requires node operators to be compensated. The good news is that Lightning Network is a protocol where the governance allows the problem to be fixed at Level 2 (because Lightning Network is funded by commercial interests). It would not fix the problem at Level 1 but it would makes that problem smaller.

Do you trust the free market to fix this problem? How do you see this problem being fixed?

Image Source.

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

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

M&A on the rise as Visa & Mastercard go for the Trillion $ Cross Border Payments

The Cross border payments market was at $22 Trillion three years ago as per a research by the Boston Consulting Group. Certainly a market to go after, and Visa and Mastercard do not seem to be shy of throwing punches at each other in the process. So who got their nose ahead?

Image Source

Earlier this year, Mastercard and Visa were fighting it out for the acquisition of Earthport. In Dec 2018, Visa had made an offer of $250 Million to acquire Earthport, a UK based payments firm. Mastercard came to the table with a $300 Million offer for Earthport. The deal was too important for Visa that they upped their offer to $320 Million and pretty much closed it. Pretty much closed – because the Competitions and Markets Authority (CMA) yesterday said that they were investigating if the acquisition would create a “substantial lessening of competition” in the UK.

No deal is done until it is sold, signed and then signed again. At this point, the deal looks far from signed – however, the acquisition could help Visa’s dwindling fortunes with the cross border payments segment. Visa’s Q1 results showed that the growth of the segment was at 7% and Mastercard’s growth was at 17%. So, clearly desperate times for Visa, and no wonder they are willing to pay a bigger amount.

Earthport were considered leaders in disintermediating the cross border B2B payments space. Historically, this process saw monies taking several hops before it reached the target bank. Through Earthport’s network, the process would be simplified with just one hop, and clearly Visa see the advantage. Having backed out of the deal, Mastercard focused on acquiring Transfast, another cross border payments firm. Transfast boast a network of about 125 countries and integration with over 300 banks.

We believe Transfast gives us the strongest platform to immediately enhance our cross-border capabilities and further deliver on our strategy.

Michael Miebach, Chief Product Office, Mastercard

Mastercard have been more aggressive in driving growth through acquisitions in recent times. In Q1 2019 alone, they were involved in several other payments deals. They committed $300 Million as a cornerstone investor in the IPO of Dubai-based Network International. Network International is the largest payments processor in the Middle East and Africa, and are planning their IPO in London with a target valuation of $3 Billion. The transaction would see them take a 9.99% stake in Network International.

Mastercard are beefing up their Africa presence through their investment into Jumia, an Africa focused payments firm. Jumia and Mastercard have been working together since 2016, and the latest round would take Mastercard’s total investment into Jumia to $56 Million. The ambition is to expand aggressively across the 14 African markets that Jumia are already present in, and also help entry into other African markets.

Having taken care of Africa and the Middle East markets, Mastercard have also set sights on Asia. They have now taken part in the current funding round of Singapore based Bill.com, who handled $60 Billion in payments in the region. Bill.com raised $88 Million from several investors including Fidelity investments, Franklin Templeton, Tamasek and Mastercard.


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

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).


Innovation from the Customers’ Needs Backwards- InsurTech Startups that Found Service Nails that Needed Hammers

In the interest of full disclosure this column was not the
planned piece for this week, but as the original plan became an exercise in
distilling a wonderful volume of great information down into 1200 or so words,
I was thankful for a discussion with an insurance startup I had where this
observation was reiterated by a founder:

“We did not want to be
a hammer looking for a nail.”

That phrase reminded me why the research for a following week was conducted- there are InsurTech companies that have made great efforts in seeing customer or service needs- that exist- and devising innovative ways to deal with the respective issues’ pain points and taking the innovations to market.  So why not wait to publish that theme?  Well, because the industry needs constant reminders that innovation needs a purpose, and that there are startups who are purposing real service needs.  So I took my own advice with the topic- be the finder of the nail, first.

There are many InsurTech startups across the global market,
and one can’t place the spotlight on all. 
The approach for this column is discussion of four companies that in
their own unique way have found an unmet purpose (nail) by research or
accident, have dug into the issue, and produced a solution (hammer) that is
tech-based and somewhat unique.

Empowering Patients for Provider Choice

The unexpected needs of parents Cole Sirucek and Grace Park prompted
the sequence of events that resulted in the patient empowerment firm, docdoc
Now founders as well as parents, Cole and Grace identified a need for
medical patients to have better control over who provides them services than which
was traditional for the profession.  A
medical concern within their family highlighted that the medical profession
(including hospitals) held full sway over who provided service, even if the
provider was not the most apt choice. 
Working to ensure others wouldn’t have options when medical needs arose,
the company worked with a team of medical and tech professionals to develop the
largest, most comprehensive network of medical professionals in Asia, a network
that identifies professionals by characterizing what each does extremely
well.  Need knee surgery?  The network identifies a patient’s best
option, not only for an orthopedist, but a knee expert.  And why would this be important within the
medical services value chain?  Having the
best expert results in more positive outcomes, which results in less unexpected
cost and patient issues post op.  In the
bigger picture, docdoc has created a Knowledge Model that can be leveraged by
other health networks (not ‘here are the providers in your network,” but ‘here
are the best fit providers’).  Options
for the patient, networks for the providers, and less after-effects for the
insurers.  (contact:  Madhurima Dutta
)

Highest and Best Use of an Entrepreneur’s Time is not Getting Insurance Quotes

There are more than 7.5 million self-employeds in the UK.  That’s a lot of hard-working individuals (and
the number is growing), says Sherpa ‘s
CEO, Chris Kaye
.  And if averages are extended, each of
these folks shop for up to seven insurance policies annually, time spent
chasing what carriers provide, and not necessarily what the self-employeds need.   Chris Kaye (along with Sherpa founders Lachlan Gillies and
Greg McCafferty)
identified the need for these customers to have an insurance service that
covers them for all risks,
can be tailored to their lifestyle and keeps up-to-date as their life changes.  Not rocket science (seems intuitively like
what a good agent could do), unless one can promptly assess each customer and then
provide an AI-driven personal insurance solution. Here’s the firm’s tech
innovation- Sherpa’s “Brain,” a proprietary AI risk assessment
engine, takes data given by members and makes personalized recommendation
for what cover they need.  But- Sherpa is not an insurance plan, it’s a subscription
based membership organization, has a fully-digital process, wherein a Member
can be underwritten and get ‘on risk’ in about seven minutes, and Sherpa
charges a transparent, flat fee that gives members access to a personal
insurance solution that matches their advice. 
Of course the members benefit from cover provided by an affiliated
global insurance company, and have the comfort that as life changes occur their
personal choice for insurance cover remain. 
The firm’s intention is to not only broaden UK available lines from Life
and Critical Illness covers, but to other markets and other personal lines
covers.

Digitizing Life Insurance Claim Processes, No, Making Life Policies about the Beneficiaries

Benekiva founder Brent Williams had a
successful financial advisory business in which he continuously found issue- life
insurance settlements were an administrative nightmare for beneficiaries, typically
driving settlement periods to three months from the respective carriers’ notice
of policyholder death.  Brent served as
apologist for the carriers, and also found in addition to delays in benefits,
recipients of policy proceeds were reluctant to take that next step- financial
care of proceeds- because the claim processes were so convoluted.  In collaboration with the current Benekiva
team members and co-founders, Bobbie Shrivastav and Soven Shrivastav, (and after more
than two years’ research) Brent, et al, introduced a digital approach to claim
process that focused on beneficiaries’ needs backwards through the admin of the
policy.  In this case, an industry expert
collaborated with tech and innovation experts, jointly identified a customer
issue, developed universally applicable methods that carriers could implement,
and the end result is prompt payment of policy proceeds.  Sure, unclaimed property laws helped
facilitate the end result, but the digital answer to customer needs is the key.  Benekiva now works with carriers to streamline
what in great part are legacy process wrought with workarounds, and to the
benefit of the industry cut through the Gordian Knot of the paper chase.  Oh, and the firm is helping carriers with
Blockchain options for claim and beneficiary management.

Helping Leverage Customers’ Ownership of Data  

Customers don’t know what they don’t know, and for data collection and use (particularly telematics), that knowledge is lower in great part due to who has taken control of telematics- companies (including insurance carriers.)  If data are the next oil boom, then those who own the wells are not the current beneficiaries of the wells’ output.  That’s the identified service opportunity for RevdApp , best described by its founder, Filipe Pinto, thusly:

“to offer consumers a way to own and manage their
mobility records and to leverage them in a trustworthy marketplace where
service providers bid to offer them services without compromising their
privacy. We eliminate data silos and unleash value.”

What, you say, what has that got to do with InsurTech and insurance service?  Well, picture customer possession of an open ledger of performance within a digital ecosystem, data that can be provided by the customer to support value-based access to services?  Customer owns driving data, can leverage that data for insurance purchases, or perhaps more favorable lease pricing based on positive performance than someone who has a history of more risky behavior.  Telematics have to date been the bailiwick of companies who collect those data, and have been leveraged to the benefit of the companies in terms of user-based insurance (UBI), e.g., Metromile, Progressive (Snapshot), and Allstate (DriveWise), along with most other larger carriers.  RevdApp is developing a digital ecosystem where beyond UBI customers can benefit from the service value of trust- companies may extend favorable terms to those with relative good performance data ledgers, and surcharge those without.  Customers control their data, how it’s applied to services, and how it’s applied to pricing.  At this time the firm’s IoT data ledger service access is applied for exotic auto use, but customer focus can bridge to almost any partnered service.

Are there many solution ‘hammers’ in the InsurTech orb looking for nails?  Sure are.  But there are many customer service ‘nails’ just waiting for observant entrepreneurs that can be open to understanding what solution is being called for.  The four examples noted above have unique starting points, and certainly unique solutions, but each developed from the kernel of an idea-  the need to #innovatefromthecustomerbackwards, and in spotlighting those I could keep my journalistic hammer tucked in my work bag- for another week.

Image source

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

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

To license or not to license – are we asking the question?

In 2017, SME challenger bank OakNorth first came to the attention of Daily Fintech readers in a post from Bernard titled ‘Can challenger banks break the massive bank concentration in the UK?’.

Since then the bank has achieved some significant milestones, many of which have come to light in the press in the past few months. For starters, the bank has lent more than £2.5 billion to UK small businesses since 2015, and trebled its pre-tax profits in the past year, bringing in £33.9m in 2018.

Not bad going, and possibly why Softbank led a £440 million round into the fintech, which was announced back in February.

The company isn’t shy about expansion – who would be if you were making bank like they are. Oaknorth now plans to broaden its lending tentacles into the US. But rather than compete head to head with US banks, it wants to deploy its origination software, powered by its subsidiary OakNorth AI.

It’s very clever, and begs the question many of us in various corners of the world are thinking when it comes to challenger banking.

Is a license really worth it?

As more and more licensees for hire crop up to service the challenger banking space, and licensing is disconnected from platforms and technology, the value in owning the entire stack does need to be questioned. It’s counter to the way many investors and founders think – the ‘own it all’ mentality is strong and pervasive. In many instances it has been proven to work well and be a true value creator. But times are changing, and founders should continuously ask ‘why’ they are pursuing a certain product journey. In some instances, the vanity of being ‘full stack’ can be hard to shake.

In Australia, Up, a consumer facing digital banking brand born out of Ferocia, a financial software development business, has taken the front-end route. The interface leverages an existing banking license from Bendigo and Adelaide bank.

From a marketing and customer acquisition perspective, not having a license doesn’t seem to be preventing the company from acquiring customers. Many neobanks are hot on their footsteps, but most of them have had the added hurdle of overcoming licensing. Will it be worth it compared to time to market?

That, of course, is the multimillion dollar question many investors will be wondering.

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.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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Robo-advisory: Women, Freemium, and Subscriptions

subscription

Spring has brought lots of action even in the commoditized robo-advisory segment.

Three picks capture the flavor of the day in US robo-advisory.

  • Ellevest, the B2C standalone robo focused on women, raised $33million from a select group of investors[1].
  • Betterment, the hybrid standalone robo, drops account minimum for customized portfolios for retail clients too.
  • Charles Schwab adds a subscription-based financial planning offering (Not one size fits all).

Ellevest is in its 4th year and remains focused on empowering women. The offering includes a significant educational and coaching service for business women. What became clear from this recent funding round, is that the only viable part of the business is actually the HNW part. Ellevest Private Wealth Management is the premium service targeting HNW females and most of the capital raised will go into growing this business. This makes me believe that Ellevest doesn’t actually belong to the robo-advisory category but to the `Financial Wellness for Women in Business` category.

Betterment, on the other hand, has gone hybrid in two ways. Both in terms of offering a 100% DIY asset allocation service and with an advisor lite possibility; and having a B2C business parallel to a B2B business for financial advisors and for corporates (e.g. Uber). Financial advisors using the Betterment platform didn’t have an account minimum anyway. Now Betterment drops the 100k account minimum for individuals that want a customized portfolio allocation through the Betterment Flexible Portfolios offering. Their Premium service for 40bps now has no minimum. Betterment`s move comes in response to demand from existing retail clients to be able to customize their exposure in certain asset classes. The business decision of offering this flexibility at no cost, confirms that Customer is King and will remain so forever and ever.

Charles Schwab subscription service rhymes with Apple`s news service. For $30 a month, Schwab offers a financial planning package. Schwab Intelligent Portfolios Premium (rebranded name) is offered at $30 a month after a one-time $300 fee with a $25k minimum. Asset allocation is from a universe of 50+ ETFs, including a financial plan with a customized roadmap and unlimited one-to-one guidance from a CFP professional. Regulated financial-investment advice at $630 for the 1st year and $360 annually thereafter.

Schwab Intelligent Advisory (the original robo name) was at 28bps per annum 0.28% of assets.

Think of the 300,000 Schwab Intelligent Advisory accounts ($37 billion). Some will remain in the free, no-advisory offering. But a significant part will switch over to Schwab Intelligent Portfolios Premium and get advice. Evidently, any account with enough assets ($125k seems to be the magic number) will switch over.

What will this move do to the rest of the large players? When will Vanguard follow suit?

This is another discount brokerage moment in the investment industry. This is the subscription financial advice retail moment. Michael Kitces, the cofounder of XY planning Network XYPN, has deployed a successful subscription-based business for financial advisors, thus proving that it works at the B2B level. Now Schwab is pushing for a B2C implementation.

[1] Rethink Impact, PSP Growth, the Melinda Gates’s investment fund Pivotal Ventures; PayPal; Wynn Resorts co-founder Elaine Wynn; former Google and Alphabet chairman Eric Schmidt; former top aide to President Obama, Valerie Jarrett; and Mastercard. Source.

Sources: Schwab on Bloomberg; Betterment on FP; Schwab on ThinkAdvisor.

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

 I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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Blockchain Front Page: Is a 51% attack a real issue?

Is a 51% attack a real issue?

Last week our theme was “Can a Cryptocurrency replace the US Dollar to Become the World’s Reserve Currency?.

Our theme for this week is “Is a 51% attack a real issue?”

In 2018, cryptocurrency hackers earned $20M with 51% attacks, The report by Group-IB, showed that in 5 incidents last year, hackers walked away with $19.5 million worth of cryptocurrencies.

Hackers attacked Verge twice stealing more that $1 million, $550,000 worth of ZEN, Litecoin Cash was hit, and the biggest heist was Bitcoin Gold, when the attacker sent 388,000 BTG ($18 million) to their personal wallet.

This February,  Coinbase discovered that Ethereum Classic was attacked. Hackers accessing Coinbase’s network, rewrote portions of the platform’s transaction history enabling users to spend the same cryptocurrency more than once. The Ethereum Classic blockchain was rewritten by someone that controlled at least 51%. Over $1 million was lost as a result of this hack. On Coinmarketcap.com, Ethereum Classic is the 20th largest cryptocurrency, with a market cap of $526 million.

In “Once hailed as unhackable, blockchains are now getting hacked,” on MIT Technology Review, Mike Orcutt makes the argument that blockchains are no longer safe and that we’ll see more of these attacks in the future.

While these hacks took place on smaller blockchains, they are a very real. They show us that a 51-percent attacks are not just a theoretical concern anymore. And they are not the only way to hack a blockchain.

What is a 51-percent attack? It’s when an attacker controls at least 51% of the total mining power of Proof-of-Work blockchain. To make a simple analogy, you can think of it as owing 51% of a company’s shares, you are the majority owner. The same is true with blockchains.

Most blockchains like Bitcoin, Ethereum, use the Proof of Work protocol to verify and add a new blocks of transactions to the blockchain. To add a new block, a complex cryptographic math puzzle must be solved. The miner, that solves it first, adds the new block to the blockchain and receives a cryptocurrency reward for the work they performed. This process is called mining. If someone was able to get control over a majority of the computing power on a given blockchain, they would be able to impose their will on the rest of the network, including making changes to the ledger.

These attacks have become quite tempting, especially with services like NiceHash, that can give you instantly the mining capacity you need to take over a coin’s blockchain, like Ethereum Classic.

Crypto51 published research on how much you would need to spend, in order to take over the top cryptocurrencies. You can see the full list on Crypto51 on their website.

Screen Shot 2019-04-01 at 1.26.25 AM.png

In the case of Ethereum Classic hack in February, the cost is $5,437 an hour, $130,488 per day. In a 3 day period the attacker made $1.1 million. I’d say that it was a very nifty profit, when you compare it to the $391,464 cost.

Proof of Work blockchains are susceptible to 51-percent attacks, but not all blockchains are created equal. For smaller networks, 51-percent attacks present a real threat. But for Bitcoin and Ethereum, the risk is pretty low. The computing power and coordination that is needed to take over 51% of the hash power for large blockchains, would be enormous, making the chances of a successful attack very unlikely.

While Proof of Work is the most widely used consensus method, there are plenty of solutions that are trying to tackle the problem: Merged Mining, Penalties for Delayed Blocks, Notary Nodes, Permissioned Blockchains, Proof of Stake.

Blockchain technology is very simple and extremely secure. Is it fully secure? No. But what technology is. Can blockchain security be improved? Yes, it can. As cryptocurrencies and blockchain become part of our lives, hacks will become more frequent , challenging the legitimacy of the industry and the technology. The only thing we can expect is that the top cryptocurrencies, implement solutions to minimize the risk from potential attacks.

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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.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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The Path To Mainstream Adoption Of Bitcoin Is Not Through Legacy Finance Institutions, It Is Through The Excluded

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TLDR. The conventional wisdom is that Legacy Finance Institutions will lead the way to mainstream adoption of Bitcoin.  This post outlines an alternative thesis that the route to mainstream adoption of Bitcoin is by building a second leg as a currency for everyday spending among those excluded from financial services today, starting in countries with a Fiat currency crisis such as Venezuela

This is an update to this chapter of The Blockchain Economy digital book.

This post describes:

  • The conventional wisdom trajectory
  • Bitcoin’s second leg will be built from the wreckage of exotic Fiat currencies
  • When Bitcoin gets traction in developed markets, it will be via those who feel excluded by Legacy Finance
  • Traders are from Venus, Investors are from Mars and Martians need to study Venezuela
  • Profit comes from serving the excluded said Captain Obvious
  • Investors who understand Bitcoin users will do best
  • Serving the Bottom of the Pyramid is a lot easier when the marginal cost is zero and payment cost is close to zero
  • Blue and Red Ocean strategies of Legacy Finance Institutions in the Blockchain Economy
  • Watch what is happening in the Exotic Fiat Currency Countries.

The conventional wisdom trajectory 

The conventional wisdom trajectory has 3 phases – from past, through present, to future.

  • Phase 1. The past (still with us). Cypherpunks, Anarchists & Libertarians. This created the early traction that got Bitcoin from an obscure message board to the possibility of game-changing innovation.
  • Phase 2. The present. Speculators. This classic speculative bubble of late 2017 (followed by the bear market of 2018 and early 2019) brought in new players and new capital (and excited the Legacy Finance Institutions). 
  • Phase 3. The future. Institutions & Governments. This is when Bitcoin is supposed to grow up and put on a suit, to make it make it easy for the masses to use services offered by Legacy Finance. Conventional wisdom sees this like a pivot from Phases 1 and 2. In this pivot scenario, the Cyperpunks, Anarchists & Libertarians are thrown into the dustbin of history and the speculators are told to grow up and trust in the products sold by Legacy Finance. 

This chapter argues a contrarian thesis that bitcoin’s path to mainstream is not a pivot but rather a continuation of Phases 1 & 2. The conventional wisdom scenario plays well at Davos (World Economic Forum), the gathering place of those with wealth and power (Big Tech & Big Bank). This post shows why that conventional wisdom is wrong.

Bitcoin needs a second leg to be stable. Bitcoin’s first leg – store of value – will eventually become unstable if it has to stand on its own. Bitcoin needs a second leg – a currency for everyday spending. That second leg will not be built by Institutions or Speculators, it will be built by entrepreneurs (maybe with Institutional partners) who know how to serve the needs of those who have been excluded by Legacy Finance (who need Bitcoin as a currency for everyday use).

Bitcoin’s second leg will be built from the wreckage of Exotic Fiat currencies 

We can witness this happening today in countries such as Venezuela that are suffering from hyperinflation (as described in this post). This has reached Act 4 in the Creative Destruction 7 Act Play This is “when the going gets weird, the weird turn pro” (quote from Hunter S Thompson, who was certainly weird but also professional enough to write best-selling books).

It is likely that the Bitcoin habit, which we can witness in Venezuela, will spread to countries that are close, physically and/or culturally, to countries with hyperinflation. These neighbours will witness the horror of hyperinflation and see how practical Bitcoin is as an alternative. For example, Argentina and Peru, while not yet suffering hyperinflation, may follow the example of Venezuela. This has reached Act 3 in the Creative Destruction 7 Act Play. Act 3 is Denial. A famous example of the Denial Act 3 was subprime mortgages that blew up in the Global Financial Crisis in 2008. For a long time the surface numbers looked good until a few nonconformists looked below the surface (watch The Big Short movie for an entertaining take on that story). A more recent example in Finance was the Wells Fargo fake accounts scandal (which was going on for a long time before it was uncovered).

If Bitcoin is limited to countries with hyperinflation, those of us working in developed markets with strong Fiat currencies can dismiss it as a phenomenon (like wheelbarrows full of cash) that have nothing to do with “normal” countries.  The next bull market needs a use case story that more people can relate to.

If  Bitcoin spreads from Venezuela to other countries such as Argentina and Peru, the markets will have a story to relate to. There are 180 currencies listed as legal tender, of which only 8 are considered as “major” by the FX market. Contagion spreads rapidly.

When we see that contagion spread to developed markets with Fiat currencies that are perceived to be strong today, then we will have reached mainstream adoption. Again we need to look at edge cases aka those who feel excluded by Legacy Finance.

When Bitcoin gets traction in developed markets, it will be via those who feel excluded by Legacy Finance

This is Act 2 in the Creative Destruction 7 Act play. Act 2 is when we see Straws in the Wind. It takes guts to see a few straws blowing about and bet that this is caused by an invisible wind. The signs of change are far from obvious but “the answer my friend is blowing in the wind”.

The reason change comes from the excluded is obvious. Their needs are not being met by Legacy Finance. We see that happening today in Venezuela. When the issue is feeding your family, the clunky UI and risks of Bitcoin do not seem a big deal. Using Bitcoin gets onto your Must Do Today action list.

Are there markets like this in the developed world? Are there enough people excluded by Legacy Finance in the developed world to make sure that the Bitcoin contagion spreads to the developed world? I believe the answer is yes and that we can see this answer blowing in the wind of three niche markets in developed world that have excluded by Legacy Finance:

 

  • Financially excluded because they are poor. The Western underbanked, excluded from or ripped off by Legacy Finance market providers will see the appeal of Bitcoin. When told by Legacy Finance that “Bitcoin is bad for you” they may take the view that if Legacy Finance does not like it, then it must be good.

 

  • Excluded by Banks because they are Small Business. Daily Fintech has dedicated one day a week (Wednesday) to Small Business finance because Small Business owners are a good example of the Excluded – banks did not want them because they were neither Corporate or Consumer (the two models that Banks understood). This is why Square is such a big player in Bitcoin. Small Business owners who want to avoid problems with credit card networks (see here for more) will be motivated to accept Bitcoin and spend in Bitcoin.

Traders are from Venus, Investors are from Mars and Martians need to study Venezuela

The difference between traders and investors looks small on the surface – it is simply the length of the holding period. In reality, the approach is fundamentally and completely different.

Bitcoin traders look at price charts. Bitcoin investors look at how people are using Bitcoin.

Given that real Bitcoin usage today is quite limited, Bitcoin investors have historically looked at what products are being built today that will enable new forms of usage in the future. To give an example from an earlier era, an investor would look at an early version of Hotmail and extrapolate that mass use of email via browsers was possible.

The hope story on Bitcoin is getting a bit long in the tooth. The market needs to see real usage traction, not just products with potential use. For that we need to look outside the developed world.

So Bitcoin investors need to understand how Bitcoin could serve the Excluded

Traders need a story. Bitcoin as a one-legged stool (digital gold store of value) is not enough to power the next bull market. To reach the mainstream investor, Legacy Finance Institutions will need more than the how (things like Custody), they will also need a usage story. They will need to show why Bitcoin will change the world and how that is already happening.

Traders will still trade and their liquidity is essential. Some of the traders who got into Bitcoin during the last bull/bear cycle will get back into active trading during the next bull/bear cycle. Many will do this via Institutions, others will use startups.

Profit comes from serving the excluded said Captain Obvious

Question: which market looks more attractive?

  • A. Markets where customers have many options. You will need to persuade them to switch from their current way of doing things and the advantages you offer are not really life-changing.

 

  • B. Markets where customers have few, if any, good options. If you can deliver them a solution it will be  life-changing for them and they will take whatever steps are needed to get your solution.

You probably answered B, yet most solutions target A. A big reason is that most developers today work in developed markets (where Customer A is located) and we find it easy to build solutions for people who are like us.

Investors who understand Bitcoin users will do best

That is another Captain Obvious statement and yet most investors work in developed markets and feel comfortable investing in solutions for those markets.

We can see this in some early Bitcoin entrepreneurs such as Wences Casares of Xapo who comes from Argentina.

Serving the Bottom of the Pyramid is a lot easier when the marginal cost is zero and payment cost is close to zero

The Bottom of the Pyramid (BOP) is a socio-economic concept that allows us to group that vast segment  – in excess of about four billion  – of the world’s poorest citizens constituting an invisible and unserved market blocked by challenging barriers that prevent them from realising their human potential for their own benefit, those of their families, and that of society’s at large.

Technically, a member of the BOP is part of the largest but poorest groups of the world’s population, who live with less than $2.50 a day and are excluded from the modernity of our globalised civilised societies, including consumption and choice as well as access to organised financial services. Some estimates based on the broadest segment of the BOP put its demand as consumers at about $5 trillion in Purchasing Power Parity terms, making it a desirable objective for creative and leading visionary businesses throughout the world. One of the undeniable successes in this process is the explosion of the Microfinance industry witnessed in many parts of the world.

The first person to really focus on BOP was C.K. Prahalad (1941-2010), who in the process has inspired influential leaders and countless ordinary citizens sharing his vision, to joint efforts for the unleashing of their creative and productive potential as part of an inclusive capitalist system, free of paternalism toward the poor. Source

The iconic use case was Unilever with their single serving soap packages in India. That took real innovation.

Serving the Bottom of the Pyramid is a lot easier when the marginal cost is zero, for obvious reasons. You can deliver at the price point needed in the market without having a margin problem with cost of goods sold .

The advent of fast, low cost micropayments via offchain technology such Lightning Network also make it much easier to profitably serve the Bottom of the Pyramid. Credit Cards obviously don’t work in that market and physical cash has hidden costs (theft, time, handling etc).

Blue and Red Ocean strategies of Legacy Finance Institutions in the Blockchain Economy

The Cypherpunks, Anarchists & Libertarians who kick-started the Bitcoin Blockchain engine tend to relegate Legacy Finance Institutions to the dustbin of history. Clearly Bitcoin is a big bang disruption for Legacy Finance and many will suffer a Blockbuster/Borders/HMV/Kodak type fate.

We see two fundamental strategies for dealing with this kind of big bang disruption:

 

  • Red ocean. Beat your current Legacy Finance competitors, even at risk of disrupting your current business, by aggressively offering Bitcoin related services 

Institutions need help from a range of service providers such as strategy to code to legal. Serving the Institutions will always be a profitable business.

Watch what is happening in the Exotic Fiat Currency Countries

The bridge from hyperinflation “broken Fiat” Currency Countries to developed markets will be via “exotic Fiat” Currency Countries.

The 8 most traded currencies are

U.S. Dollar (USD)

European Euro (EUR)

Japanese Yen (JPY)

British Pound (GBP)

Swiss Franc (CHF)

Canadian Dollar (CAD)

Australian Dollar (AUD)

South African Rand (ZAR)

There are 180 current currencies across the world, as recognized by the United Nations. That is a lot of what FX traders call the “exotic” currencies.

Watch the currencies/countries that are physically and or culturally close to “broken Fiat” currency countries. For example, If Bitcoin spreads from Venezuela to Argentina and Peru, the markets will have a story to relate to and other countries may copy this way to avoid the horrors of hyperinflation.

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

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The battle of Fintech is over, the battle of TechFin is about to begin

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Jack Ma famously called Alibaba and their tech giant peer group – TechFins, declaring their intention to sneak into financial services. Banks were too focused on their battle with Fintechs then, that they perhaps were blindsided by the rise of TechFins. The first quarter of 2019 has been eventful, with major headlines from big tech firms like Facebook, Apple and Alipay.

Over the past few years, since the Fintech boom has been afoot, talks of Fintechs vs Banks have been rife. But only when China saw leap frog moments in its payments landscape, via, Alipay and WeChat, did the industry (both banks and Fintechs) pay any attention to the big tech giants. I have always said that the Tech giants had two big advantages.

They have what the banks don’t have – agility in innovation, and they have what the Fintechs don’t have – Massive Customer base (and their data).

The challenge in exploding into Financial Services for the tech giants was that, it was non-core to them. However, the evolution of Fintech use cases, and the seamless integration of these applications into consumer’s routine, have made them almost invisible. So, all the tech giants had to do was pick use cases where they could be mostly invisible – payments was a low hanging fruit.

Two weeks ago Barclays and Alipay announced their partnership. Alipay will now be available with several merchants across the UK, and allow for seamless payment experience for half a million Chinese residents, tourists and students in the UK.

Barclaycard, which processes nearly half of the UK’s credit and debit card transactions, today announced a new agreement with Alipay, the world’s leading payment and lifestyle platform, which will allow retailers to accept Alipay transactions in stores across the UK

The partnership is for UK retailers to accept Alipay payments without replacing their existing point-of-sale system. Alipay users on the other hand will enjoy the benefits of the seamless journey that they have at home.

The other key event of the last couple of weeks has been THE APPLE CARD. If you haven’t yet heard, good for you and I suggest you google at your peril. But atleast for me, the social media reaction was a bit too overwhelming. My take on the announcement –

THE GOOD

  • Secure card numbers – many of us have faced credit card frauds, but most of us wouldn’t have thought of getting rid of the card details from the face of the card.
  • No fees – Really? Is there a catch? I still can’t believe that. Especially on international transactions.
  • User experience in staying on top of expenses, card balance, interest etc.,
  • Data privacy – Apple have declared that they would stay away from customer data

THE BAD

  • Cashback of 2% is underwhelming. Many providers, including Amazon offer better benefits.

THE UGLY

  • Plastic cards? Let’s all go back to the cave. For how long are we going to hang on to plastic credit cards? That was perhaps the most disappointing thing about the launch for me. And the worst part is, the card only supports chip and pin and won’t support contactless.
  • No Android compatibility – of course, they have always been a closed ecosystem.

Irrespective of the disappointing aspects of the card, I believe, Apple has rocked the boat, and banks are feeling the heat. They are cash rich, know how to create digital+physical products, have a brand following, and can disrupt payments in a bigger way, if they chose to.

With IBM entering the remittance market through World Wire, Facebook testing out Whatsapp payments, Alipay entering the UK market in a big way, and Apple’s recent announcement, the Penny should have Dropped for the banks. And the realization should hit them that Fintechs were more of a distraction, the real battle has just begun.


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

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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