Month: February 2017

The United States has been falling behind the rest of the world, especially Asia in the area of mobile payment technology. The main reason that I believe that the United States is so behind is because every company and retailer wishes to make their own mobile payment application. While some retailers have succeeded better than others, the main issue I see is that because everyone wants their own application, it reduces the effectiveness of mobile payment applications as a whole. By having their own individual application, each retailer will always want to support their own application, however because of this, other generalized applications like Apple Pay and Android Pay are supported less and the growth of the mobile payment application is stunted. Like the saying go, “divided we fall, united we stand”. For example, in China, WeChat has a digital wallet service where uses can pay for goods and services and also sent money to other people on their contacts list. In the United States this would be a total of three or more applications instead of just one.

 

Reference: https://techcrunch.com/2017/01/24/target-will-launch-its-own-mobile-payments-system-this-year/

Recently, Alex Rampell, a general partner in the VC firm, Andreessen Horowitz spoke at Goldman Sachs’s Technology and Internet Conference. He said that in the long term, Amazon could be an industry leader in the payment and services sector. This is because Amazon already has preexisting loyalty and customer data from their Amazon Prime services. With the introduction of music and e-books into its Amazon Prime lineup, Amazon could potentially do the same with banking and payment services. Amazon could achieve this by offering low-debt payments or a no-frills bank (no minimum balance necessary) account to their customers.

Personally, while Amazon could potentially follow the footsteps of Apple (Apple Pay) and Google (Google Wallet) in which a major corporation shakes up the financial industry, I do not believe it would be wise for Amazon to offer low-debt payments or a no-frills account to their customers. What makes Amazon unique is not only  because of its online shopping services, as well as its other Prime offerings, what makes Amazon unique is their R&D in future technologies. With the introduction of Amazon Alexa, the use of voice recognition and Artificial Intelligence to act as a customer’s daily assistant is an idea that can be expanded into Fintech. Recently at CES, Amazon has partnered with many companies to use Alexa as a voice assistant in home security systems, cars, fridges, and much more. As a growing industry leader in digital assistants, coupled with their data on customer’s spending habits, they could potentially create a Fintech solution that helps customers with their spending, and provide even lower offerings to them.

Sources:
http://www.readitquik.com/news/fintech/amazon-to-be-a-fintech-leader/
http://fortune.com/2017/02/14/andreessen-horowitz-fintech-alex-rampell-amazon/

OpenFin is a startup company that helps electronic-trading firms build their desktop applications with an emphasis on integrating and connecting everything. The startup has raised $15 million with renowned backers such as JPMorgan, DRW, as well as Euclid Opportunities. OpenFin has 25 employees in New York and London and they plan to expand to 50 employees by the end of this year. Openfin strives to be like iOS and Andriod in the mobile application industry but in the financial application world. OpenFin’s software helps financial companies create and upgrade trading applications using HTML5. HTML5 is popular on Wall Street because it allows software to run on various types of devices. OpenFin focuses on easily downloaded and updated apps, security, and interoperability.

I think OpenFin has a lot of potential to grow and succeed. OpenFin is capitalizing on software and information system solutions for financial companies which is a very profitable industry since all financial institutions would eventually need or want better, faster, and more information. Financial market changes extremely fast, with stocks, currency, etc. changing within seconds. It is crucial for financial companies to have information and data quickly to provide adequate information for traders and investors.

Source:

https://www.nytimes.com/reuters/2017/02/16/business/16reuters-openfin-investment.html?_r=0

http://www.businessinsider.com/a-bunch-of-wall-street-trading-startups-have-one-connection-on-common-2016-12

 

Honda introduced the first demonstration of in-vehicle payment for parking and fuel. The payment process is partnered with Visa checkout. The companies are working with Gilbarco Veeder-Root(a fuel pump manufacturer) and IPS Group ( a parking products provider) to install beacons that will communicate with Honda via Bluetooth to complete payment through Visa Checkout.

In my option, it is not an innovative way for payment. First, it has limitation of the place of use. In-car payment is only limited to car-related places, such as gas station and parking lot, and it may be extended to drive-through restaurants. It has narrow customers relatives to other mobile payments. Furthermore, with the current mobile payment, people have already used mobile payment for parking or drive-through. Customers already are used to this methods of payment. It is very hard to switch to another method of payment. This idea will not give Honda too much advantage over other manufactures. The idea of moving from mobile to car payment is not really innovative.

Reference: https://www.mobilepaymentstoday.com/blogs/are-in-car-payments-innovative/

With the Fintech industry grossing over $8 Billion globally. It is interesting to note that venture capital has had more impact in Asia than in the US in the recent years and the reason is policy. The US has many innovative fintech startups that are very interesting to potential investors, however, the political hoops created, seem a little too much for the investors to get behind and so they have been investing in Asia more so than America or Europe.

America’s legal system can be a pain to many foreigners. It not just about what rules, but whose rules. There are federal and state laws and understanding what each state entails can be a daunting task. And another issue is that the government does not make a substantial effort to better communicate and integrate with the innovative fields.

The government has tried to address this with the Financial Service Innovation Act of 2016. However, the traditional financial institutions are notorious for their influence over government policies in the financial sector and this is not a good outlook for Fintech.

The frustrating issue is that people in high positions tend to look out for their best interest and do not see the bigger picture of advancing and moving forward and many times that means change and leaving “traditional” ways of doing things behind. I’m looking forward to the bright future of Fintech, but it seems, others are looking to line their pockets.

 

Source: https://techcrunch.com/2017/02/16/us-regulatory-environment-threatens-the-rise-of-fintech/

China’s Fintech market booms as mobile payments in China rise. In 2015, WeChat Pay announced that it was accepting bitcoin for its concierge services. At the beginning of the year, Starbucks revealed that it would also start accepting WeChat Pay at its China stores.

As a person who come from China, I can see how China dominates the mobile payment market. The credit card use in China is smaller comparing that in the U.S. because China’s credit card security system is not as well-developed as the U.S. Most people complete mobile payments through third party such as Alipay and Wechat Pay – the two companies that operated by Ant Financial and dominated the market. Recent research found that Alipay received the biggest investment in 2016 at $4.5 billion as FinTech funding increased in China. Research from iResearch in China has found that Chinese third-party mobile payments more than tripled in 2016 to $5.5 trillion.

There are good opportunities for Fintech companies targeting at China’s mobile payment markets, providing the best technology and collaborating with the Chinese firms. However, the policy in China tends to protect and benefit local Fintech firms and will be very hard for the U.S. companies to compete with the local firms.

 

https://www.cryptocoinsnews.com/research-china-fintech-booms-mobile-payments-outpace-us-50x/

PayPal has agreed to acquire the Toronto-based bill payment firm TIO Networks, a major player in the North American bill pay market, for $233 million. Currently, the bill pay market has $3.9 trillion transactions each year, according to data from ACI Worldwide. TIO will help PayPal grow its market share in the bill pay market.

TIO can also help PayPal gain access to a new segment of customers who do not have affordable access to traditional financial services. These “underserved” customers are living paycheck-to-paycheck and many do not have bank accounts. The acquisition will allow PayPal access to customers who currently pay their bills at unmanned kiosks, and allow customers to pay bills in a simpler, faster, and more affordable manner. Although no specifics on integration plans have been provided, PayPal has been working on bringing cash transactions to PayPal digital accounts (PayPal Cash), which makes it more convent to covert cash into digital payments.

While I think that it is a great idea to help the “underserved” community and make bill pay more convenient and affordable, I am reluctant to believe that this community has the financial and technological resources to use this future product.

Reference: https://techcrunch.com/2017/02/14/paypal-buys-tio-networks-for-233-million/

Reference: http://www.businessinsider.com/paypal-acquires-tio-in-bill-pay-push-2017-2

Workday Enterprise Strategy VP Mark Nittler explains the limitations of current financial technology.  The fintech that was originally made to automate transactions and financial accounting is now preventing finance departments from realizing its ultimate goal, to be a better business partner.  He views today’s financial function as having three areas of responsibility: Transaction processing and accounting, business partnership, and compliance and control. Finance leaders face frustration as their teams have little time to nurture the partnerships their companies truly need since they focus on the other areas.

In this data-driven age, finance is being asked to provide the broader company with contextual information that can actively influence decision-making and the current technology is not able to do this, so it’s seemingly hopeless.  That is, unless you throw money at Workday, and Nittler would really like to let you know that it enables business agility by combining planning, transaction processing, governance, accounting, reporting, and analytics into a single, easy-to-manage system. Promotional rhetoric aside, I do see the value in this new approach into the digital transformation of fintech is advantageous.  Companies that can quickly bring together actionable information about their money and people in a system that can evolve as their business changes are sure to have a competitive advantage.

http://www.forbes.com/sites/workday/2017/02/13/back-to-the-future-building-financial-transformations-missing-link/#6873ee602974

Recent data form KPMG has shown that the total amount invested and number of deals in America fintech companies has dropped significantly whereas in Asia there is continual growth in fintech investments.  The third quarter of 2016 was the second time this year where North America fintech companies attracted less venture capital funding than Asian firms.  A big reason for the the American fintech hubs ranking very low in terms of “policy” is because they are subject to regulation at the state level.  Investors are worried about the persistent confusion regarding the regulations and the uncertainty that is evolving with them.   Some of the speculation is around the question of whether the Fintech firms should be regulated as financial companies or IT service platforms. With the new administration in office, there is a lot of speculation about the administration’s economic plans, which is likely to slow investment in the sector. I believe the lack of clarity with regard to Fintech regulation among both the State and Federal Government will have some negative effects on the growth of Fintech.  With that being said, I think the importance of Fintech will continue to make it a growing market in the U.S.

 

US regulatory environment threatens the rise of fintech