Month: February 2017

With every new disruption in the business world, if companies fail to a rapt, they will go out of business. In the banking industry, every company must now develop digital solutions or services in order to stay competitive. The article polled senior banking retail executives to see what they saw for the future of banking.

-49% of executives said that the traditional model of banking will be dead
-by 2020 people will value cheap services over human interactions for banking needs
-Cash will count for less than 5% of transactions as we move to a digital age
-Top priorities include customer segmentation to give customers of all groups exactly the right product

I mostly agree with the article. There are now apps to get mortgage and car loans through your phone and doing banking online has never been easier. The only reason I got to my bank is to deposit cash, which I never carry anymore. We could see a significant decline in brick and mortar banks as everyone becomes accustomed to banking online. Fintech startups that create their apps to target the future needs of these banks will most likely be some of the more prominent but unheard of companies in the coming years.

https://thefinancialbrand.com/63617/digital-banking-strategies-fintech-data-analytics/?utm_medium=email&utm_source=fintechweeklycom

Forbes contributor Chris Myers recently published an article (Myers, 2017) that outlined 3 reasons he felt FinTech is failing – 1) There is a fundamental strategic contradiction between tech and finance, 2) Market realities encourage short-term thinking, and 3) Incumbents in the market are powerful and resistant to change.

While I agree with Myers that the tech and finance industries have different timelines for success in the marketplace, I disagree that the three reasons cited are the only or even main factors that will determine the longevity of the FinTech market. I believe the major underlying factor in FinTech is deeply rooted in other societal factors. For instance, I believe the online lending market is fueled by the consumers desire to have a more streamlined loan selection, acceptance and closing process, as opposed to physically having to personally visit multiple financial institutions. For FinTech industries like digital wallets, the attractiveness to the consumer is once again the convenience, and not having to carry multiple forms of payment.  These consumer conveniences are not diminishing and I feel will continue to advance the FinTech market, thus offsetting any temporary declines most probably attributable to normal up and down business fluctuations.

 The uncertainty I have is more about how the change of the guard in the U.S. White House, along with the Republican majorities in congress, and the latest talk of relaxation of regulations will affect the FinTech industry – a topic I will save for a later date.

 Myers, C. (2017, February 7). 3 Reasons Fintech is Failing. Retrieved from www.forbes.com: http://www.forbes.com/sites/chrismyers/2017/02/07/3-reasons-why-fintech-is-failing/#639f869d7b6b

Up until recently, Bitcoin and other blockchain technologies have largely been seen as a niche segment of the transaction market. The technology has slowly been gaining more and more traction from the average user, but large businesses are hesitant to adopt the technology. Accenture has recently debuted a system that integrates technology called distributed ledger tech, with hardware security modules that corporate IT teams use to keep data safe. Many users of blockchain tech think it has the power to revolutionize the way back office systems in industries ranging from financial services to supply chain logistics.

The longstanding relationship between financial services and block chain is that they believe fundamentally in different methods for security. Financial services want to keep an closed off internal network whereas Bitcoin and other blockchain tech believe in a more free-for-all vision. The new security technology developed by Accenture seems to accommodate both parties. It lets large financial institutions use blockchain tech while still keeping their keys stored on a system that is inaccessible and incorruptable to the rest of the public. This new development could really change the landscape of blockchain users in the future as it allows larger financial institution to start investing and using currencies like Bitcoin.

Reference: http://fortune.com/2017/02/09/accenture-blockchan-security/

The Commonwealth Bank of Australia, Westpac, National Australia Bank and Bendigo and Adelaide Bank — have applied to the ACCC (Competition and Consumer Commission) to negotiate with Apple Pay in Australia.

They accuse Apple of trying to take advantage on their investment in Australia’s contactless payment infrastructure, claiming that Apple is seeking for exclusive use of Australia’s existing NFC terminal infrastructure.  The banks fear being sidelined as mobile wallets gain in popularity, with Apple having approximately 40% of the smartphone market in Australia.

Apple claims that opening up access to the NFC function would not undermine the security of mobile wallets is dismissed by pointing Apple’s experience in China and Japan, where they were forced to modify demands to maintain parity with Samsung Pay.

The banks also want price transparency on transaction costs. Apple Pay derives its income from a part of Merchant Service Fee (MSF) that merchants pay to the card issuers. In its deal with Apple Pay, ANZ has given up some of its interchange fees to Apple, but the actual amount has not been disclosed. The banks pointed out if Apple gained a dominant share of mobile wallet transactions in Australia, then consumers wouldn’t be aware of the costs that are associated with this method of payment. This would conflict with the RBA’s objective of improving signalling to consumers the price of each payment option.

 

References: http://www.abc.net.au/news/2016-10-20/australia-apple-pay-dispute/7946998

In this post I will review some strengths of Fintech and how it is changing our financial world. Also I will discuss how these changes will result to financial democratization. Based on almost daily interaction with FinTech companies, these are the general themes and impact we see which will define the future.

Anyone will be able to invest in anything or anyone: Investing in private companies and start-ups have been restricted to institutions and wealthy ‘angels’, but equity crowdfunding is already allowing investors to invest from small amounts in interesting businesses. The peer-to-peer investing space is just getting started.

In the past, while platforms like eTrade and Scottrade were able to open the high-volume markets to individuals, and electronic trading has allowed OTC trading through a browser, the new generation of fintech companies will allow investors to invest in almost anything, often through their smartphones. Moreover, the decisions will be completely controlled by the user, so investing in the next big thing, before it is even out of the garage, will be possible.

Customers could be your investors: With P2P investing, entrepreneurs can reach out to their customers first, instead of breaking their heads with potential investors, who may or may not understand their businesses.

Optimum utilisation of capital: For those of us who have dealt with venture capital and private equity firms, we know that such investing model is broken. With all the innovation in the P2P space, we’ll see that investors in Venture capitalists and Private equity firms, as well as governments, will find better ways to deploy their capital. The finTech firms are filling that gap in the market.

 

Your mobile phone will be your personal banker, financial advisor, wealth manager: Machine learning, chatbots, and other types of Artificial Intelligence are replacing the need to rely on humans for advice, and by 2025, we’ll be asking questions to our devices loaded with integrated third-party services that could answer those questions. Machines can access and process much more data much faster than humans ever could. Hence, inputting all your information will let you make better financial decisions without the need to hire an accountant, broker, and lawyer. They will also likely be much cheaper as the software becomes more widely available. This is not some distant future tech, this is happening now.

Conclusion: 

FinTech are starting a new chapter in financial services. Machine learning will play a huge part in this area. For the time being, the technology is nascent, so take the advice with a healthy amount of skepticism and do your due diligence, but there’s no reason to resist. With Fintech based on machine learning everybody has access to the data and can invest in the market. Limitations would be disappeared. Democratizing the market would conceal mysterious aspects of investment and lead toward justice and equity. This is the future.

References:

https://thenextweb.com/…/stock-market-and-p2p-investing-in-2025-thanks-to-fintech/

http://lending-times.com/2016/10/14/friday-october-14-2016-daily-news-digest/

https://plus.google.com/+Cityfalcon/posts/VcuSNzqvoa9

https://plus.google.com/+Cityfalcon/posts/VcuSNzqvoa9

As tax season rolls around, many around the country will endure the monotonous and mind numbing task of going through their financials in order to determine their tax situation. However, there are many software based tax helpers that come at little to no cost and are widely available to anyone with an internet connection.

Of the many providers, the largest is Intuit’s TurboTax which provides a streamlined way to file and prepare taxes. In fact of the company’s revenue, Turbotax accounts for 89% of all of Intuit’s sales.

A new player in the field, CreditKarma offers users free tax preparation, receiving revenue for the customer’s data rather than charging them a fee for the services. The company also makes money by peddling other products to their users based on the information entered into their tax services.

As similar services begin to pop up, companies such as Intuit and H&R Block will begin to face competition for users seeking to file their taxes for free and may look to switch their revenue models to those similar to CreditKarma in order to keep their customers.

Source: https://www.wsj.com/articles/what-to-know-before-using-free-tax-return-services-1486722601

While cloud computing has been on the rise in recent years, and SAP has made their service available through the cloud so that companies do not need to have their own data servers, Steve Singh, SAP’s president forecasts that microservices are going to be a key in the future. Microservices are essentially apps being developed smaller and in separate pieces, rather than one complete program, such as Concur, which is a travel and expense manager. I agree with Singh that custom tailored services that are smaller will probably become more popular, because one of the biggest drawbacks I see with SAP currently is it can almost do too much, so it is complicated to learn and apply. If instead SAP was formed in much smaller apps, I feel that it would be much more straightforward to learn and use, because apps would only do specific things that you needed them to, so a company could have their own custom products to use that meet their exact needs.

Link to article: http://www.geekwire.com/2017/sap-president-steve-singh-says-cloud-computing-yesterdays-news-microservices-future/

No industry moves faster than financial services sector. FinTech is coming to represent technologies that are disrupting traditional financial services, including mobile payments, money transfers, loans, fundraising, and asset management. The Fintech report 2016 has listed down some financial industry trend and investment.

1.     Payment Services Industry Trends

Tremendous funding rounds by Chinese Fintechs surged Fintech funding in 2016. Geography of fintech funding has changed as the rise of China and the move of European investments out of London. The payments segment is much more mature than other fintech areas.

2.     Banking Fintech Trends

Many retail banks are foregoing brick-and-mortar branches and ATM networks in favor of services delivered exclusively online and apps. However, digital-only banks are facing major problems of customer acquisition as more of them flood the market and customers hesitate to leave a well-known, established bank for a startup.

3.     Investment & Stock Fintech Trends

Robo-advisors are rapidly becoming the biggest disrupter in the investment and stock space. BI Intelligence forecasts that robo-advisors will manage $8 trillion in global assets by 2020.

4.     Currency & Markets Financial Services Trends

Blockchain, powering Bitcoin and other cryptocurrencies, can accelerate and automate transactions, create multiple copies of a ledger simultaneously, and enhance transaction security.

Source:

http://www.businessinsider.com/the-fintech-report-2016-financial-industry-trends-and-investment-2016-12

 

 

Starbucks is the most familiar name for coffee lovers in the US. It is also  a pioneer in getting consumers to pay for coffee with their mobile phones, and is boosting digital spending via its app in Asia, Europe and Latin America.

The App was introduced in 2015 nationwide at U.S. stores, and lets customers order and pay for beverages in advance and pick them up without waiting in the cashier line. Now it wants to roll out the Mobile Order & Pay program to China and Japan. Starbucks is also testing delivery through the app in the U.S., and offers personalized food recommendations.

In an industry where many mobile wallets have struggled to capture consumer markets, this app was an instant hit, and called “the most successful launch of a new payment type in history.” Starbucks introduced an app that used simple QR codes. And perhaps just as important, the chain offered rewards like free beverages for using it.

Within a few years, Starbucks’ mobile app accounts for more than 21 percent of all transactions in company-owned U.S. stores. About 7 million orders were placed through mobile devices in U.S. cafés.

Now, let us pit this payment application against all the other technologically complex e-wallets out there:

Google wallet: Uses a Secure element chip and NFC HCE(host card emulation) as base technology for it’s e-wallet. It is slowly gaining market.

Softcard wallet: comes with its own cash card which is preloaded with $10 to help you start spending. It works with an NFC-enabled Android smartphone and also allows you to manage your coupons, loyalty cards and redeem offers from merchants.The wallet is also PIN-protected and you can remote freeze your wallet and wireless connection if it gets stolen. If the smartphone gets recovered, you can just call to reactivate your wallet. It has a declining market growth as of today.

PayPal: Has rolled out NFC based mobile payment using existing infrastructure.Paypal has 188 m users but, NFC payment is an add on feature to Paypal’s ecommerce mPOS payment portal. Hence exact number of people using NFC payment is unknown.

Square Inc. is a financial services, merchant services aggregator and mobile payments company that has rolled out NFC based tap and pay functionalities.This app is quickly gaining market favour.

Samsung and Android pay: e-wallets have matching 5 m active users per month.They are the smallest players in the e-wallet space.

Apple Pay: NFC technology is coupled with biometric security and tokenization to make it the most secure payment transaction possible When you add your card in Apple Pay, a unique Device Account Number is assigned, encrypted, and securely stored in the Secure Element, a dedicated chip in iPhone, iPad, and Apple Watch. These numbers are never stored on Apple servers. And when you make a purchase, the Device Account Number, along with a transaction-specific dynamic security code, is used to process your payment. So your actual credit or debit card numbers are never shared by Apple with merchants or transmitted with payment.It also doesn’t store the details of your transaction behaviour.Your most recent purchases are kept in Passbook for your convenience and never sold to merchants.Even though it is so advanced it has 12 m regular users.Interacting/integrating with different merchant’s POS is the issue now.

Conclusion:

So this story should remind us that a ‘simple’ technology can overcome technologically advanced applications, but only using a smarter business strategy.

1)Starbucks leveraged it’s brand name in mobile payments by tying up all its franchises behind this payment technology.It correctly incentivized the customer by giving away free drinks and conducting personally tailored ad campaigns based on customer order history.

2) It also leveraged the fact that customers were paying in bulk upfront for their drinks, and redeeming the goods later. So it gains interest on the bulk payments , plus is saves the transaction fees that would have been incurred for separate in-store payments.

 

Reference:

https://www.bloomberg.com/news/articles/2016-03-30/starbucks-takes-its-pioneering-mobile-phone-app-to-grande-level

The Fintech industry has grown rapidly in recent years due to a number of disruptive technologies such as digital payments, peer to peer lending, and wealth management. However, if there is one industry that has managed to stay away from the disruption in recent years is the Insurance industry. The Insurance industry is still old school, where most of the business is run on paper. Home insurance companies haven’t adapted to the Air BnB model nor have the car insurances companies revamped their model to suit ride-sharing companies such as Uber, Lyft, Scoop. The good news is that off late there has been a huge spike in funding for insurance technology, which rose from $740m in 2015 to $2.7 bn in 2016.

The U.S. insurance industry would be the ideal market to target since it is the largest in the world, with annual revenue crossing a trillion dollars. The US insurance industry also has hardly had any technological innovations making it a perfect industry for start-ups.

The start-ups could target different parts of insurance, such as the use of analytics to make better decisions, Blockchain technology. Fintech’s disruption of the insurance industry has already begun, kicked off by two successful startups, Oscar in the field of health insurance and Metromile which offers pay-per-mile car insurance.

The success of the startups is a good sign and it is high time this industry changes for the good. The insurance industry has been way too old fashioned and the process of claiming insurance is a painstaking process. I expect a number of startups targeting this space, and it hopefully the disruption will cause a change in how the whole insurance process works.

References:

http://www.investopedia.com/articles/insurance/121416/could-fintechs-insurance-innovations-disrupt-industry.asp

http://www.businessinsider.com/fintech-hot-insurance-insurtech-vc-economist-finance-disrupted-2017-2017-1

Insurance Is The Next Frontier For Fintech