Climate Change Concerns Require a New Look at Property Insurance on a Macro Scale

Climate change is no longer just the concern of flood-exposed coastal residents, or those who inhabit potential wildfire areas; there is growing indication from insurance companies that the cost of events related to climate change will spill over in significant ways to property insurance in total.  Global insurer Munich Re’s Chief Climatologist, Ernst Rauch, recently discussed the issue with The Guardian, “Climate change could make insurance too expensive for ordinary people”, indicating that the rising financial effect of catastrophes could spill over into rates being taken across the  spectrum of property insurance policies. 

“If the risk from wildfires, flooding, storms or hail is increasing then the only sustainable option we have is to adjust our risk prices accordingly. In the long run it might become a social issue,” he said after Munich Re published a report into climate change’s impact on wildfires. “Affordability is so critical because some people on low and average incomes in some regions will no longer be able to buy insurance.”

Low and average incomes?  If one agrees that Munich Re’s outlook is correct it might be said that affordability will be an issue for ALL incomes in some regions if no carrier makes insurance available due to excessive risk;  if there is no property insurance available (or it’s not purchased by customers- interesting perspective on earthquake insurance here) this problem spills over to financial markets in terms of loss of mortgagee casualty protection for real property loans.  Take the spillway further, and riskier areas become less viable for economic activity in the big picture.  Consider even further- reduction in occupied properties, reduction in property tax revenues, public revenue… now there’s trouble.

What’s to do?  Wring hands, rend garments, wail and gnash teeth?  How about some real change of thought for property insurance?  Let’s look at coverage, coverage amounts, indemnity, parametric options, and connected properties (IoT).

If property insurance policies covered just fires or probable maximum loss (PML) perils, insurance would be significantly less costly.   Correspondingly, if those PML perils had a ‘floor’ severity amount beneath which the customer held responsibility (not unlike windstorm or earthquake perils in the US), insurance would be less costly.  If policy coverage for frequent claims, e.g., water losses, was capped at a known amount, insurance would be less costly.  Continuing, if frequent insurance claims were payable essentially on demand (no claim inspection needed), insurance would be less costly.  Even further- if insurance products were more available with less cost of acquisition (customer or company cost), premium volume would rise, making insurance less costly.  Customers have become accustomed to the granular indemnity response that today’s policies provide, and that may need to change.

So what’s the point?  Again, the industry is at a potential tipping point- natural and manmade losses are growing faster than expected ($500 billion in 2017-18 alone, per insurer Swiss Re , estimated $200 Bn insured), and the purpose of this article is not to focus on what is a given- increasing cost of insurance due to the expectation that the pattern continues.  Of course absent the presence of insurance to indemnify at a time of loss, what matters the cost?

What if:

  • Connected devices became ubiquitous, not just as features in devices, but as data collectors?  Simple, inexpensive moisture sensors for example that not only serve to turn off water supply, but also as aggregators of damage information.   A leak occurs, triggers a parametric cover response from the property owner’s policy.  Sensors that recognize material obsolescence, prompting maintenance by the property owner.  Roof sensing that anticipates not only wear, but damage due to sudden perils.
  • Property insurance policies became hybrid indemnity/parametric risk management vehicles, with higher frequency, lower severity claims paid upon occurrence, at a predetermined coverage limit with no need (other than fraud vetting) for expensive claim investigation?
  • Mortgage holders held part of the risk for major losses in areas where climate risk perils, e.g., coastal flooding, wildfire, etc., are known elevated risks?  Mortgagees do this now to an extent as those property owners without adequate risk cover will walk away, and the mortgagees are left with the property.  Change the mortgage payment risk from an upfront portfolio percentage to anticipate walkways, to a loan ‘premium’ to help cover the elevated insurance policy premiums.
  • Governments held parametric disaster response insurance policies that triggered when events occurred, jump-starting financial response to community-wide disasters?
  • There was an acceptance that pollution is contributing to climate change, and pollution tax paid by firms was used to fund disaster recovery efforts?

Just some thoughts, but holding key ideas- broadening responsibility for risk management beyond just the individual property owner and changing the expectation of property insurance from a full indemnity model to one that recognizes a loss but doesn’t hold one party to the contract (the insurer) solely responsible for determining the amount of loss and working to identify every detail of the financial loss.

If property insurance is to remain viable from an industry basis it seems the product needs to be considered from a loss/disaster perspective backwards, from a who is at risk from a ‘no recovery’ aspect, and then from a who benefits from helping fund risk management efforts.  There are plenty of data available to the industry to calculate the probable cost of individual high-frequency claims, and by extension the premiums needed for a parametric basis for settling that nature of claims.  Individual investigation of smaller claims is simply not a highest and best use of expensive human capital, and if AI is to be applied to those claims, why not carry the knowledge to preemptive claim resolution (loss is detected, payment is made?)  Sure, the policy forms that exist today would need rework (as would customer expectations), but in the face of pricing risk sharing beyond many property owners isn’t radical thinking needed?

Wildfire losses like those experienced in California or Greece exposed the nature of who and what is insured, the haves and have nots, and also the difficulty in rebuilding (or not) areas that have had regional destruction ( see Paradise California’s wildfire recovery challenges.)  Significant wind and flooding damage in Hong Kong, Japan, southeast US, and southern Africa produce ripples that extend materially well beyond those regions.  Confidence that risk is being apportioned and shared will serve to stabilize capital that is being made available as a backstop for significant risk (catastrophe bonds, insurance linked securities, and traditional reinsurance- with an interesting ECIS regional perspective Seeking Alpha view here ).

Climate change effects highlight the big responses to big events, but whether there’s a clear bread crumb trail between change in climate and change in property insurance the anticipated path is clear- the cost of insurance is rising along with global tides.  And the effect that all benefit from a viable, affordable insurance industry is also clear- risk management is a keystone factor that if absent ripples through economies on a macro scale, and as such needs a unique macro approach to ensure we are all not insurance poor.

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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).

What makes a fintech unicorn?

It’s not every day you hear about a unicorn prancing about in your neck of the woods. This week in Australia, a new one horned beast was spotted, with B2B cross border payments startup Airwallex crowned (or should I say horned) with the enviable title of  fastest ever unicorn status downunder.

There are now 326 Unicorns in the world, according to CB insights, or I guess 327 now, given Airwallex’s announcement.

Fintech Unicorns are rarer than some others, occupying 4th place by category:

Category Count
Internet Software Services 82
Other 45
e-commerce 44
Fintech 32
Healthcare 30
On Demand 23
hardware 14
Social 11
Data Analytics 11
Auto Tech 11
Media 8
Travel Tech 7
Cybersecurity 7
dataanalytics 1

The US dominates as the home country for Unicorns, followed by China, the UK and India, and then a very long tail.

Country Count
United States 156
China 91
United Kingdom 17
India 13
Germany 8
South Korea 6
Indonesia 4
France 3
Hong Kong 3
Israel 3
Switzerland 3
Brazil 2
Colombia 2
South Africa 2
Australia 1
Canada 1
Estonia 1
Japan 1
Luxembourg 1
Malta 1
Nigeria 1
Philippines 1
Portugal 1
Singapore 1
Spain 1
Sweden 1
United Arab Emirates 1

You’re most likely to be a Unicorn if your cap table contains SoftBank Group, Tencent Holdings, Sequoia Capital China and Tiger Global Management. I cut funds with 1 or 2 Unicorns from the list.

Funder Count
SoftBank Group 29
Tencent Holdings 29
Sequoia Capital China 21
 Tiger Global Management 20
 Fidelity Investments 19
 Andreessen Horowitz 18
 DST Global 18
 Goldman Sachs 16
 Kleiner Perkins Caufield & Byers 16
 Sequoia Capital 16
 Institutional Venture Partners 15
Tiger Global Management 15
 GGV Capital 14
 Google Ventures 14
 Temasek Holdings 14
Sequoia Capital 14
 Hillhouse Capital Management 13
 Index Ventures 13
 Baillie Gifford & Co. 12
 Kohlberg Kravis Roberts & Co. 12
 Sequoia Capital China 12
 Tencent Holdings 12
 Wellington Management 12
GIC 12
Goldman Sachs 12
 Accel 11
 Coatue Management 11
 Founders Fund 11
 ICONIQ Capital 11
 Khosla Ventures 11
 T. Rowe Price 11
Accel 11
 capitalG 10
 General Atlantic 10
Alibaba Group 10
 New Enterprise Associates 9
 Qiming Venture Partners 9
 Alibaba Group 8
 Bessemer Venture Partners 8
 J.P. Morgan Chase & Co. 8
 Shunwei Capital Partners 8
 Spark Capital 8
 Y Combinator 8
Andreessen Horowitz 8
General Atlantic 8
New Enterprise Associates 8
 Battery Ventures 7
 General Catalyst 7
 IDG Capital 7
 Insight Venture Partners 7
 Morningside Venture Capital 7
IDG Capital 7
 Ant Financial Services Group 6
 CMC Capital Partners 6
 Data Collective 6
 Matrix Partners China 6
 Sequoia Capital India 6
 Yunfeng Capital 6
Qiming Venture Partners 6
Warburg Pincus 6
 CDH Investments 5
 Greylock Partners 5
 Lightspeed Venture Partners 5
 Redpoint Ventures 5
 Ribbit Capital 5
 Silver Lake Partners 5
 Thrive Capital 5
 Warburg Pincus 5
Baillie Gifford & Co. 5
T. Rowe Price 5
Temasek Holdings 5
 Daimler 4
 DCM Ventures 4
 Greenoaks Capital Management 4 4
 JOY Capital 4
 Legend Capital 4
 Polaris Partners 4
 Primavera Capital Group 4
 Qualcomm Ventures 4
 SIG Asia Investments 4
 SoftBank Group 4
 Source Code Capital 4
 TPG Growth 4
 Venrock 4
 ZhenFund 4
Founders Fund 4
Lightspeed Venture Partners 4
 Altos Ventures 3
 Benchmark 3
 BlackRock 3
 Capital Today 3
 CCB International 3
 China International Capital Corporation 3
 China Renaissance 3
 DFJ 3
 FirstMark Capital 3
 Foundry Group 3
 Foxconn Technology Company 3
 Gaorong Capital 3
 Genesis Capital 3
 GIC 3
 H Capital 3
 Intel Capital 3
 K2VC 3
 Matrix Partners 3
 Ping An Insurance 3
 Revolution 3
 RRE Ventures 3
 Shenzhen Capital Group 3
 Silicon Valley Bank 3
 True Ventures 3
 Valor Equity Partners 3
Access Industries 3
GGV Capital 3
Insight Venture Partners 3
J.P. Morgan Chase & Co. 3
Kleiner Perkins Caufield & Byers 3
Silver Lake Partners 3

But if you’re chasing Fintech Unicorn Status, while Tencent and Sequoia Capital China are still a good name for the cap table, landing money from Accel, General Atlantic, ICONIQ Capital and Kleiner Perkins are the names to look for, compared to the general VC population.

Name Count
Sequoia Capital China 5
Tencent Holdings 4
 Accel 3
 General Atlantic 3
 ICONIQ Capital 3
 Kleiner Perkins Caufield & Byers 3

There is over $1 Trillion worth of value that’s been created in the birth of these Unicorns, for founders and shareholders. It would be fascinating to calculate what value has been delivered per dollar invested/created in productivity gains or cost savings for the community of users they serve.

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.

The 5 Banking commandments for your own Bezos moment

Dear Banks,

It only takes an internal memo to ignite your own Bezos moment.

Five clear and crystal commandments[1] (“good artists borrow, great artists steal”) that you can steal from Jeff B.:

  1. All teams will henceforth expose their data and functionality through service interfaces.
  2. Teams must communicate with each other through these interfaces.
  3. There will be no other form of inter-process communication allowed: no direct linking, no direct reads of another team’s data store, no shared-memory model, no back-doors whatsoever. The only communication allowed is via service interface calls over the network.
  4. It doesn’t matter what technology they use. –(tech neutral)
  5. All service interfaces, without exception, must be designed from the ground up to be externalizable. That is to say, the team must plan and design to be able to expose the interface to developers in the outside world. No exceptions.

Bezos ended his 2002 now famous mandate with a chilling little twist:

  • “Anyone who doesn’t do this will be fired.  Thank you; have a nice day!”

Just 17 years later, you can feel free – I would say you should feel inclined to do so – and steal this. You can end your internal memo with a kinder twist:

“Anyone who doesn’t do this will no longer be with the team.  Thank you; have a nice day!”

2019 in Finsev

I am using `Banking` to refer to financial institutions that have traditionally been in the business of serving retail, institutional, and corporate clients across all the spectrum of their needs. The Banking business model has been a PUSH operating model and the opaqueness and regulatory barriers to entry have allowed them to morph into a predominantly product business.

I am celebrating this month 4 yrs with Daily Fintech, during which I have been writing every single week on global innovations in Capital markets, wealth and Asset management[2].

I can safely say by now, that the only sustainable banking model is a PULL operating model that at its core becomes a platform as a service business. Much like Bezos transformed Amazon from a digital bookseller business, into a platform as a service.

For this to happen, the core transformation needed is in the `middle office` (conventional parlance) via APIs. Unless banks realize this, they will become suicidal and victims of a `lemming effect`. Their herd behavior to keep up with digitizing the `front office` to improve their customers` experience and even their engagement; will prove futile. The reason being, that as long as the culture remains that of selling products eventually; banks will find themselves in a commoditized business with margin going to zero.

`Any bank that does not transform its `middle office` via APIs; will become extinct. Thank you; have a nice day!”

 The good news about this transformation is that it has lots of possibilities and variations. But a bank has to start its platformification process, first internally.

Think first Private APIs that enable each and every department to access data and workflows in real time. Then, one can think of Public APIs, Partner APIs, and the Open Banking obligation or opportunity. Banking transformation needs to look more like 2/3 internal APIs in the first phase.



Chris Skinner and Jim Marous, have been preaching relentlessly about these issues. But it seems that it is difficult to convince `Doubting Thomas`[3]. There is no reliable data (to my knowledge) on this topic that is essential, despite the fact that it may seem a `detail`. The devil always hides in the details.


Over the past 3yrs, I have been monitoring the Financial APIs from the Programmable Web and there is clearly an increase. From 2016 to date, we have gone from 1700+ to 3800+ financial APIs. Of course, there is no quality differentiation or usage stats with this doubling. And none of these stats, are related to the paramount internal transformation measured by Private or Internal APIs, and their usage.

The one piece of evidence that I can share with you, is from Goldman Sachs. Marquee[4], is the GS sophisticated freemium platform for its institutional clients, which I have used as a great example of `Empowering Asset Owners and the Buy Side` WealthTech Book, 2018 Wiley.

Adam Korn, who has spearheaded the project of giving out Marquee for free, reported late last year that:

` After months of work, Marquee now fields more than 100 million API calls each month, about 5 million of which come from outside Goldman’s four walls. Marquee now has roughly 12,000 monthly active users, split evenly between internal and external clients. And the number of users is beginning to increase, according to Korn.`

[1] The API Manifesto Success Story


[3]doubting Thomas is a skeptic who refuses to believe without direct personal experience—a reference to the Apostle Thomas, who refused to believe that the resurrected Jesus had appeared to the ten other apostles, until he could see and feel the wounds received by Jesus on the cross.

[4] Named in honor of CIO R. Martin Chavez, known by everyone as “Marty”.

Book one hour with Efi – Ask me anything (AMA) for 0.10BTC –

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.

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).

How the UK could become the early stage Fintech capital of the world post Brexit thanks to Securities Tokens


This week is Brexit week. Personal disclosure: I think Remain was the right option. However, as a business person I know that you have to work with whatever actually happens, rather than what you hope will happen and that you look for opportunities in problems that the world delivers to you.

At Daily Fintech we look at world events through the narrow lens of “is it good or bad for Fintech?”

So, here amidst the doom & gloom, is my optimistic case for Fintech post Brexit.

I specifically wrote early stage Fintech capital of the world. The tremendous tax incentives in the UK for investing in startups via Seed Enterprise Investment Scheme (SEIS), is a big driver for early stage. Other places may have bigger pools of capital for doing later stage deals (Silicon Valley is dominant there) but in few places are the incentives as good for early stage – and ventures have to go through early stage to get to late stage (said Captain Obvious).

SEIS offers unparalleled incentives for high income people to invest in startups. Even if a venture fails they get a lot of tax back immediately. On exit, they get zero capital gains tax, after 3 years minimum holding.

SEIS has been around a while. So has Fintech. What is new is the emergence of legal Securities Tokens. Look at these from the perspective of that early stage investor. The investment is priced by the market and can be traded (if Securities Token exchanges get their act together with some reasonable liquidity/spreads). Perhaps more important is it becomes harder for big Funds to come in at the next round on terms that disadvantage you as an early investor (not impossible, just harder).

For the entrepreneur/capital raiser, the fact that SEIS offers zero capital gains tax after 3 years minimum holding puts a de facto lock-up into the terms (because any investor selling before 3 years loses this tax advantage).

If the UK is the place where investors can go from angel/seed to exit within 3 years, the UK is where the best entrepreneurs will want to be – and where the best entrepreneurs want to be will be where jobs and prosperity is created.

What about access to Europe? Entrepreneurs can choose jurisdictional locations and strategies that give access to investors in different locations around the world. Many ventures today are decentralised with people in multiple locations. Consider Ethereum as an example (with developers and other employees all over the world. Talent can choose where they want to live; entrepreneurs and investors follow talent.

What about all those Banks relocating out of London due to Brexit? For those losing jobs and those who depend on them, it is 100% bad news. For Fintechs looking for talent and users it is good news.  Many of the jobs will be automated anyway and an HR policy of “relocate due to Brexit” simply avoids having to fire people due to automation.

So, London could become the early stage Fintech capital of the world post Brexit thanks to Securities Tokens.  There are lots of policy, regulatory, legal and technical issues to make this happen, but nothing that is rocket science. 

The real issue is London as a diverse, fun talent magnet. The passporting/regulatory issues are far more manageable. If Brexit means entrepreneurs cannot recruit talent from around the world regardless of country of origin, religion, colour, sexual orientation, then all bets are off.

The solution is simple. Every startup given SEIS status should have the right to offer work/residency permits to whoever they want, from anywhere, no questions asked.

It is a real opportunity, but we should never underestimate the ability of politicians to snatch defeat from the jaws of victory. 

What are you seeing? How will this play out? Please go to this thread on Fintech Genome to comment.

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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).

Blockchain Front Page: Can a Cryptocurrency replace the US Dollar to Become the World’s Reserve Currency?


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 “Lightning Network is the Bitcoin story that matters in 2019.

In an article on Medium, Facebook isn’t just thinking about just creating his own crypto, it wants to replace the U.S. dollar according to Ted Livingston. The founder and CEO of the Kik messaging app, predicted Facebook’s crypto coin could eventually replace the US dollar.

After the end of WWII, the U.S. dollar has dominated the global financial system, just like the British pound before it, and the Spanish dollar before that. But, some of the major economies around the world may want a new digital currency to function as the reserve. The US dollar’s share of global central-bank reserves hit a 5-year low, according to the International Monetary Fund.


How much U.S. currency is out there? According to the Federal Reserve Board of Governors, approximately $1.70 trillion in circulation as of January 23, 2019, of which $1.66 trillion was in Federal Reserve notes.  That figure could drop to as low as $501 billion within 10 years, as Bitcoin, and cryptocurrencies in general, become more widely used for transactions.

Bitcoin, Facebook Coin or another crypto could be a clear alternative to traditional government-backed currencies, at a time when governments’ abilities to manage their finances are coming into question.

Could Bitcoin replace the U.S. dollar as the global reserve currency?

Cofounder/CEO Brian Armstrong, the answer is yes. He predicted that the digital currency may very well supplant the greenback by 2030. For that to happen, Bitcoin needs to overcome several obstacles: 1) it must be an effective medium of exchange, so we can buy goods using it 2) it must function as a store of value 3) it needs to function as a unit of account.

Private companies, banks and countries around the world are racing to lead the next revolution in financial technology. Currently, there are more than 1,400 digital currencies and tokens out there, serving a variety of uses.

What would happen if a dominant market force like Amazon entered the cryptocurrency market and began accepting crypto as a payment method? Image a cryptocurrency from a company like Amazon. An Amazon cryptocurrency wouldn’t just change the face of the world’s largest online retailer. It would change the world.

Central banks from China to England and Uruguay are considering issuing their own crypto. I think state-backed cryptocurrencies are pointless, but they can serve as a stepping stone to complete decentralization. State-backed cryptocurrencies represent a break away from US dominated fiat financial hegemony.

Russia has begun a major research and development in blockchain, so that financial transactions can be processed and verified without reliance on Western-controlled banks.

One catalyst for the erosion of the US dollar hegemony is the development of SWIFT alternatives. This year has also seen a rash of crypto-based solutions proposed or utilized by Argentina, Russia, and Germany.

The International Monetary Fund, IMF, has already announced efforts to put its world money, the special drawing right, SDR, on a distributed ledger. This would make the SDR a global cryptocurrency for settling balance of payments transactions among China, Russia and other IMF members, also without reliance on the dollar payments system.

I don’t know if it will be Bitcoin, Facebook coin or some other peer-to-peer digital currency that will replace the US dollar. But it will be a cryptocurrency. The dollar’s death will be on blockchain and I believe that it will be Bitcoin.

While most people today are not ready to give up their bank accounts for Bitcoin wallets, blockchain, the technology behind Bitcoin, is nothing less than the operating system of an entirely new economy. For the first time in the history of mankind, this technology could render politicians, central banks, governments and large corporations as we know them obsolete when it comes to our money.

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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.

How Family Offices aka “muppets on steroids” are writing the future of Fintech & Blockchain & Wealth Management.


This is an update to the chapter on investing in The Blockchain Economy digital book.

“Muppets” is the derogatory term coined by Wall Street for the “dumb” retail investors. The people who invested early in Bitcoin and Ethereum are retail in the sense of being individuals and not part of the Legacy Finance world. Yet they are now (even at these bear market prices), seen as smart wealthy investors.

This is a huge inversion. It now looks like “dumb money” from retail muppets has become “smart money” (which used to come from institutions). The reality is that Bitcoin & Ethereum “investors” could evaluate tech and market risk. They might have known nothing about investing but they did know that the technology was feasible, the team was good and if the team developed something that worked it would change the world and make a lot of money. That is normally the job description of VCs, but after Sand Hill Road became more like Wall Street, VCs ran from such early stage risk, leaving the field open for technology oriented investors who put money into Bitcoin and Ethereum in the early days.

Warren Buffet in his early days was another dumb retail muppet – who made a fortune. There are many other famous examples; these were all from an earlier era; for some reason it is viewed as impossible today. Here is an interview on Daily Fintech with a recent example who is not famous (and made money lending not equity investing).

What all of these dumb retail muppets share is that they have no explanation risk. If a “smart money” intermediary makes a bet that goes wrong they have to explain themselves to their investors. If a retail investor makes a bet that goes wrong they have to learn from their mistake and move on; mistakes are part of the learning process.

Family Offices are like retail investors in that they make their own decisions and have no explanation risk. The difference is obviously that Family Offices invest far bigger sums than classic retail investors. Family Offices are Retail investors with clout. Watch what Family Office do in Blockchain Finance to see the future.

Let’s look at a recent example – the pre IPO round for Silvergate Bank.

We wrote about Silvergate Bank when they first filed for IPO at end November 2018.

The recent news is a pre IPO round. Forget the usual roster of Big VC Funds. This deal was done by a Family Office:

The Witter Family Offices announces its investment in Silvergate Bank, in advance of the bank’s Initial Public Offering announcement. Silvergate is a provider of innovative financial infrastructure solutions and services to participants in the nascent and expanding digital currency industry. The Company filed documentation for an initial public offering on November 16, 2018, to raise up to $50 million.

Sherry Pryor Witter, Managing Partner, Co-founder and CIO of the Witter Family Offices, welcomed the opportunity to partner with Silvergate. Given the explosion of digital currencies and blockchain technology in recent years, Sherry was aware that the space was ripe for opportunity.Taking an equity stake in Silvergate was a way to invest in digital currency with less risk of the volatility often associated with the emerging technology. “We believe that finance-related technology and solutions need to continue to advance to support future economic, demographic and global changes,” Sherry said. “One area that we are looking at is crypto, not only the asset itself, but the supporting infrastructure to increase its velocity and application. We believe that Silvergate saw an opportunity to bank cryptocurrencies by providing technology solutions to exchanges and crypto companies when others only saw risk.”

Getting into the Pre IPO round of a leader in Blockchain Finance is not easy

Big VC sell their access to deal flow as a USP. Getting access to quality deal flow in Blockchain Finance is a big deal because Blockchain Finance is Version 3 of Finance:

  • Version 1 was Analog Legacy Finance. This was the era of investors such as Warren Buffet and Peter Lynch, when stockholders painstakingly researched the fundamentals of individual companies and held those stocks for a long time.
  • Version 2 was  Digital Legacy Finance. This is what is often called Fintech; our definition at Daily Fintech includes Version 3.  Digital Legacy Finance was when computers took over trading and long term hold meant more than a second. In this market, the individual retail investors were derided as muppets and individuals invested through institutions rather than directly. Due to Buybacks and Mega Private rounds, there were fewer individual companies to invest in and the whole game moved to trading indices based on reading Central Bank tea leaves or front-running retail investors using High Frequency Trading.
  • Version 3 is Blockchain Finance. One key difference is that in Version 2, everything changed except the business of investing, trading and value exchange. In Version 3 Blockchain Finance, the Funds themselves are having to deal with disruptive change to their own business. This is when we will see tokenised assets go mainstream and when the old fund intermediary model (first raise funds, then invest) will be disrupted by an inverted model (first invest, then get passive investors to follow you for a fee).

Family Offices feel no threat from this disruption because they invest direct and are not trying to make money as intermediaries.

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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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IBM World wire – the inevitable rise of Centralized Blockchains

72 countries, 47 currencies, 44 banking endpoints and more than 1081 unique currency trading pairs. IBM Blockchain World Wire is here.

IBM Press release on World Wire

In the last four weeks, we have had JPM Coin announcement by JP Morgan, followed by Facebook’s ambitions to plug crypto payments into Whatsapp, and now IBM have announced the launch of World wire – a cross border payments platform on Stellar protocol. I tried to call them permissioned Blockchain, but couldn’t resist calling them “Centralized”.

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When I blogged about JPM Coin a few weeks ago, and how it could affect both Ripple and SWIFT, one unanimous comment I received was that JPM Coin couldn’t be considered a cryptocurrency. I have had several philosophical arguments over the years on why a permissioned Blockchain, preferred by enterprises, do not/do qualify as Blockchain as they are centralized.

For all practical reasons, we have seen the rise and fall of decentralized Blockchain. Most of us would like a utopian decentralized world without these too-big-to-fail firms throwing their weight around, or central regulators calling the shots, or tech giants monopolizing industries with their data might. However, it is hard to make the leap from a highly centralised system (we have today) to a new decentralised way – not just philosophically, but also pracically.

The focus has shifted from ICOs to the more conservative STOs, with stable coins showing up in most use cases. Several startups I have met in the last few months have even stopped using the term ‘ICO’. The resurgence of Blockchain is now being led by big firms like IBM, Facebook and JP Morgan. I wouldn’t be surprised if this becomes the norm in 2019, where we see more Blockchain based production use cases from enterprises.

IBM have been working in partnership with the Stellar Foundation for quite sometime now. When I spoke to Lisa Nestor, the Director of partnerships at Stellar in Q4 2018, she mentioned that they had a strategic partnership with IBM. She stressed the importance of working closely with incumbent organisations across industries to make Blockchain usage mainstream.

We’ve created a new type of payment network designed to accelerate remittances and transform cross-border payments to facilitate the movement of money in countries that need it most

Marie Wieck, General Manager, IBM Blockchain

As a result the IBM World wire, focused on the cross-border payments market has already enabled payment locations in 72 countries, with 48 currencies and 44 banking endpoints. It supports Stellar Lumens and a USD based stablecoin – thanks to their work with Stronghold. The network will also support stablecoins issued by several of its consortium banks. The list includes stablecoins based on Euro, Indonesian Rupiah, Philippine Peso, Korean Won and Brazilian Real. How will this affect Ripple?

Credit Ripple for the vision of using a digital asset in order to enact immediate settlement with finality. I think their implementation followed one path. Our implementation is a little bit different. We are not the issuer of an asset. In fact, what we believe is that there should be an ecosystem of a variety of digital assets that provide the settlement instruments that enable these cross-border payments.

Jesse Lund, IBM’s VP of Blockchain and Digital currencies

IBM’s strategy of keeping the platform agnostic to any kind of digital asset is a master stroke. The platform will work through the following steps,

  • Institution A chooses USD to execute a transaction with to Institution B in Euros
  • Institution A converts USD to XLM (or any other digital currency of their choice)
  • IBM Worldwire converts XLM to Euros and records the transaction on the Blockchain
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The new world of international payments look pretty disintermediated, near real time and efficient. Bringing on-board new markets is cheaper; micro payments support and end to end transparency are all benefits too. Are we still going to be hung up on “It is not really decentralized”? Do we care?

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).

Parametric Insurance- The Least Known Best Response to Unfortunate Happenings

What if a policyholder could be immediately paid when an event or circumstance occurred, with no claim to file, no investigation other than confirmation that the triggering circumstance did happen?  This type of payment does happen now- consider travel insurance hybrids that provide benefit for delayed flights, and pay immediately based on a delay parameter. Could the same be accomplished for natural disasters, failure of crops, or other situations that can be set as a parameter?  Yes, it can.  Welcome to the world of parametric insurance.

Insurance is a known product- in return for payment of a premium a policyholder can expect (within the terms of the insurance contract) indemnification for a covered loss.  The loss occurs, a claim is made, the claim investigation proceeds, an estimate of loss is made, and a claim settlement is paid.  Outside of health and life cover this is the typical framework of the contract that is insurance.  The value of the insured property is determined at policy inception, a premium is generated based on underwriting guidelines re: probable loss characteristics for covered perils, and the insurance contract is bound.

A nagging problem with that centuries old framework is the need to prove a value of property, to experience an occurrence or claim, prove the claim, and wait for indemnification- if the claimed damage is covered by a policy.  There are many perils that are not covered by most policies, e.g., flood, earthquake, long-term effects of weather (drought), wear and tear, and so on.  Additionally, in some circumstances the nature of the damage exceeds the ability of individual policyholders to adequately respond- of particular note flooding, cyclones, earthquakes and agriculture issues where damage is a regional problem that simply requires regional response.

Parametric insurance, or, “a type of insurance contract that insures a policyholder against the occurrence of a specific event by paying a set amount based on the magnitude of the event, as opposed to the magnitude of the losses in a traditional indemnity policy” (NAIC) is becoming the insurance option that allows a policyholder a payment for an occurrence or circumstance that can be defined and established at the inception of coverage.  An apt example of a parametric option is provided by Jumpstart, a firm that will make payment to U.S. policyholders when a seismic event occurs and reaches a ‘peak shaking intensity’.  The firm simply monitors US Geological Survey data, when a trigger event occurs the firm identifies policy holders within the affected area and sends them a payment.  No claim action needed by the customers- the agreed parameter occurrence happens, the policy pays.  Traditionally an earthquake would need to damage covered property, the respective property owner would need to have earthquake coverage (an optional cover in most jurisdictions), a claim be filed, investigated and settlement made.  Indemnification for damage.  Parametric products simply promise payment if an agreed parameter is met- in Jumpstart’s case a ground shake of a certain magnitude.

One must keep in mind that parametric insurance is not intended to be a full ‘indemnification style’ coverage- it’s meant as a first payment option for traditionally covered perils, and an alternative/immediate recovery source for perils that may otherwise not have practical insurability.  Prudent insureds may even layer parametric cover onto traditional policy coverage, almost to act as a hedge against a large deductible.

Applying the method to the market is not as simple as generating the policy- there must be an identified, measurable trigger for the respective policy, and the carrier needs to be able to conduct that ages-old act- apply probability of risk to the potential payout.  What makes that exercise more direct than with indemnification policies is that there is a specific trigger, and there is an agreed payment.  If X occurs, amount Y is paid.  Claim adjustment expense is administrative cost only, and customers may not even have to report or confirm the triggering event as the carrier may have methods in place to automatically confirm the triggering event.  Consider if the parametric agreement is captured as a smart contract in a distributed ledger format- perhaps an inroad into Blockchain as an equal to other methods in administering insurance?  (see Etherisc )

So what uses are there for parametric cover?  Not everyone is in a high frequency earthquake zone, and awareness of parametric cover is relatively low.  If we look to the current placements of the cover there can be an understanding of where the industry sees opportunities.    Travel insurance options have been noted, and exemplify how the cost of inconvenience can be reimbursed. There are insurance organizations that have established themselves as industry experts, e.g., Swiss Re, who have initiated parametric plans in collaboration with individuals and governments in many areas for:

  • Earthquake
  • Cyclone
  • Crops  (Better Life Farming) – also includes comprehensive agricultural advice
  • Wildfire

And the firm’s thought process does go beyond individual policyholders to regional parametric programs that partner with government agencies, for example, Sovereign Insurance (options for regions across the globe), or other organizations such as Hiscox Re ILS with ongoing involvement  in a variety of initiatives including the linked Philippines plan.

Broad spectrum parametric programs have been in place for some years to assist governments in more prompt recovery from disasters:

  • Caribbean Catastrophe Risk Insurance Facility (CCRIF)- provides post-disaster assistance to nineteen Caribbean and Central American countries, is funded by various governments and government organizations, and makes payments to participants’ governments for earthquake, hurricane and excess rainfall triggered events
  • African Risk Capacity (ARC)- planning and guidance program that also funds/administers a primarily agriculture parametric cover for participating countries

And in addition- there are initiatives being developed as this article is written where counties in China are being used as model plans for regional parametric cover, particularly earthquake-prone areas and regions subject to landslides (see Insurance Asia News ).

Are there also funding opportunities for parametric insurance, both from a provider and recipient standpoint?  One would think so as this cover fills a gap for recovery, and, in combination with existing schemes for catastrophe and disaster bonds capital can be encouraged to make a foray into parametric plans.  Insurance linked securities (ILS) that have taken some hits during the last few years with unexpectedly frequent and unexpectedly severe cost events might have more stability functioning within a more predictable loss environment of parametric programs.  Improvements in data collection, analysis, AI and immediacy of event data have all contributed to the increasing viability of the programs.

So the unexpected benefit and under-publicized parametric insurance industry may be the best hedge for many against uninsurable (in a traditional sense) perils, and for almost anyone that needs a source of immediate payout when a trigger event occurs.  Picture the coastal towns of the U.S. after a major hurricane as recipient of a parametric cover distribution, a ‘prime the pump’ amount to give some immediate recovery light for residents, or tsunami victims whose livelihoods have been washed away receiving funds to re-establish businesses, or wildfire victims who need immediate distributions until primary insurers can catch up.  Yes, insurance payments can be made without the burden of proving a claim- set the trigger point/parameter, and count on the underutilized benefits of parametric insurance.

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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).


If you can’t build it, acquire it

Pumped up valuations mean a growing number of fintechs will increasingly feel the pressure to show some serious revenue streams in 2019, not just user acquisition and hockey stick numbers growth.

For many the only route to achieve this will be through acquisitions.

Earlier this month Wave, an SME accounting platform announced they had acquired Every, a Toronto-based fintech company that provides business accounts and debit cards to small businesses.

Wave is a free accounting platform that targets freelancers and micro businesses, helping them generate professional looking invoices and manage their payments. I use it myself for the odd piece of contract work, and it works brilliantly – for free.

For an extra fee I could technically speed up invoice payments by allowing clients to pay me by credit card, however given I’m not generally too fussed about something taking an extra day or so, I don’t activate that feature, choosing instead to just list my bank account number in the invoice, and have them pay me ‘the old fashioned way’.

Which must be a bit annoying for Wave. I’m not really an ideal customer given I generate $0 revenue. In fact, I’m probably a cost for Wave, as would be the other thousands of free users on the platform who ‘platform squat’ but still demand to be supported.

So what’s to be done? How can they move me up the lifetime value ladder, and get something out of me?

Well, they could own more of my banking relationship – hence the tie up with Every.

It’s smart, and it follows a trend we’ve seen in the likes of Square and other SME neobanks. The difference with the neobanks is they are thinking banking first, then simple invoicing after, not the other way around like Wave.

Every hasn’t launched in its own right, so we’ll see its full functionality once the Wave + Every tie up gets going.

Either way, I think it’s a sign of things to come, as fintech’s realise the true value story isn’t in waiting for banks to acquire them, but generating a few quick wins by bolting on other fintechs to try and drive revenues. Got to feed the vulture capitalists with something new and tasty come board reporting time!

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.

Digitizing employee benefits towards Goal-based investing: the case of Moola.(JLT)


Call it a hidden bias, or coincidence, the fact is that I have mentioned the UK `robo` in three posts over the past 3 years. Gemma Godfrey, CEO and founder, is an ex-Goldman Sachs personality who was in the City A.M.’s Power 100 list the 2017  and was also chosen to join Arnold Schwarzenegger advisory on The Celebrity Apprentice (alongside Jessica Alba, Warren Buffett and YouTube celebrity Justine “iJustine” Ezarik).

In early 2016 as I was searching for robo-advisor actual performance, I spotted as one of the promising female-led robo advisors along with  Sallie Krawcheck`s Ellevest. Call this another bias? Maybe, since Sallie and Gemma are both ex-Wall Street female leaders with significant investment experience. See here.

In late 2016. was already included in the Top50 European Fintechs.

 In Feb 2018, I included Gemma in my monthly `Women and Fintech – The Feb. playlist of 10` for a very explicit reason.  Gemma’s venture was addressing the savings crisis problem in the UK. Her message was loud and clear and based on her belief that the domination of men in finance is a problem that can only be solved by us women becoming raw models for others.

In Spring 2018, came across my path again as I met Paul McNamara, the CEO of Evalue, the sophisticated UK financial planning and advice software company. I could not resist sharing on DailyFintech Paul`s excitement on the launch of their API platform and their participation in the 2nd cohort of the FCA with a focus on regulated advice. was one of the Fintech partnership examples with Evalue that I reported. While is a savings platform and one that caters to all those that are intimidated from the investment lingo and the confusing product choices; they wanted to offer their clients realistic, visual scenarios for the inexperienced to become comfortable with their investment choices. Evalue offered a piece of mind to that behind the scenes, the scenario analysis was as sophisticated as it can get.

On the other hand, Gemma had made a business choice to offer a limited menu of investment choices. Three kinds of investment plans and one additional pure ethical portfolio. There is no `luxury` of customization and the focus is on offering comfort for the pre-designed investment choices. The philosophy behind this, is to focus on the customer experience which is mostly driven by emotional comfort or discomfort (leading to panic when least needed).

Four investment options that are well understood will work wonders for customers versus 44 investment options that are not well understood.

As is not an investment advisor, Evalue`s software also makes sure that all is fully compliant. The limited menu also allows to keep costs low. Savor`s knowledge center with insights and education for all levels in a language that is natural.

Last summer, was acquired by JLT Employee Benefits (JLT), one of the UK’s leading employee benefits providers. This acquisition should not be seen as a just another Fintech M&A transaction. It is actually a purposeful strategic ecosystem move, whose success should be measured beyond the dry numbers. First and foremost, becomes part of a business (and running also standalone) that is in complete alignment with their philosophy. JLT’s strategy is focused on helping UK businesses deliver better performance through the improved financial, emotional and physical wellness of its people.

This acquisition is at the service of Goal-based investing. will also be integrated in JLT`s Benpal platform. Fintech from an angle of employee benefits in all industries is a great example of sustainable innovation. Robo services that are not just about the low cost but predominately about retentions, engagement and well being of the employees. BENPAL is an evolving next generation rewards and benefits platform that JLT offers its corporate clients. It is designed to help attract, retain, engage and reward the workforce. It allows employers to manage employee reward and benefit program in a digitalized era.

Last week won the City of London’s ‘Best Goal-Based Investing Service’. We are already designing the world we have been dreaming of; slowly and steadily. An investment world that is not only about the monthly reports of our investments but also about our progress towards our goals

In this spirit:

Efi-Book-Review paolo1

Book one hour with Efi – Ask me anything (AMA) for 0.10BTC –

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.