Month: February 2017

Greenlight is a startup company in Atlanta, Georgia that is trying to solve a problem that has plagued parents around the world. How to give money to your children to use without them losing it or using it to buy things that they should not be buying. Greenlight’s solution is to use a prepaid card that can alert parents to their children’s purchases and that can be reloaded with money by the parents all from an application on their smart phone. This idea from Greenlight seems very promising with all of the built in features that they have. One of the most interesting features is that Greenlight is able to allow parents to specify which stores or websites their children can shop at and how much they can spend there. This to me is the single most important selling point of this service. Being able to make sure that your children do not spend the money they are given on anything illegal or items that the parents would not want them to purchase is definitely a great selling point.

Reference: https://techcrunch.com/2017/02/03/greenlight-is-a-debit-card-for-kids-that-parents-manage-from-their-phones/

By the end of 2016, almost 1.81 million U.S. merchants had switched to card chips, which are supposedly harder to counterfeit. With the usage of credit-card chip technology, credit card thieves are turning to the internet. According to a report from Javelin Strategy & Research, there has been a 40 percent increase in stolen card data used to pay for merchandise online and mobile apps. U.S. government entities as well as retail companies alike had 1,093 data breaches last year, potentially exposing private customer and financial information and leading to identify thief. This forces retailers to spend and invest billions of more dollars to protect their sites and data. The fraud-fighting industry is blooming as more companies are trying to find solutions to prevent fraud and thieves.

It is good idea for companies to enhance their security systems and constantly improve their systems to stay ahead of online thieves because online fraud is very prevalent today. Thieves are constantly finding new ways of committing fraud and stealing customer information. Protecting data should be the number one priority for companies.

 

Source:

https://www.bloomberg.com/news/articles/2017-02-01/credit-card-thieves-move-online-as-chips-thwart-in-store-fraud

There is a huge untapped market out there that Fintech has yet to try and penetrate: the unbanked. The consumers that do not have bank accounts and whose financials are basically off the grid. However, with the vastly developing technological age that we live in, the unbanked have adopted the use of the smart phone.

In “Uber-Competitor Grab Plans $700 Million Fintech Investment in Indonesia”, Das stated, “Of Indonesia’s near 250 million people, only 75 million have bank accounts”. And with this huge untapped market, there is a huge potential for fintech.

“We see this huge, unbanked population becoming bankable. If we can…give access to those won don’t have access to credit, it’s a massive opportunity.”

– Anthony Tan, CEO & Founder

Grab, Uber’s number one foreign competitor, saw this opportunity and has invested $700 million dollars in Indonesia. They are planning on also investing in smart phone distribution to get more access to the working class people with emphasis on “mobile payment and financial services” (Das). To spread the work load of exposing an entire community to these relatively new ideas, they are also investing $100 million in start-ups in Indonesia. Indonesia is a perfect starting point for this new market penetration because it coincides with the government’s plan on becoming the largest digital economy in the area by 2020. With the support of the local and federal government, Fintech could explode in the region. However, if other countries want to follow this model, I don’t believe it would be viable because of the different political and economic levels of the different countries around the area.

Source: https://www.cryptocoinsnews.com/uber-competitor-grab-700-million-fintech-indonesia/

One theme that I have been seeing in weekly blog posts is discussion about the present and future of fintech and banking’s relationship and whether or not banks will produce their own fintech to compete, or if they would rather seek to work with fintech companies, seeing the importance of FIS integration. The article I chose this week discusses this exact issue, as UBS’s COO speaks about how he believes banking is beyond trying to compete with fintech and should instead incorporate fintech and work with financial information systems as much as possible, realizing that fintech is the future.
I think this joining makes a lot of sense, because in the post 2008 market crash era, many fintech companies came up and innovated the finance industry; however, these companies still do not have the capital to scale effectively, so integration and working directly with big banks could help fintech become more immersed throughout society. Still, on the side of the rise of roboadvisors that do wealth management digitally for people, UBS’s COO feels that humans still have an upper hand in the level of understanding that we have and its benefits in investment management. As a Finance major myself, I agree that a human touch from financial advising cannot be replaced by AI; however, I do concede that fintech can improve and streamline many other areas of FIS.

Link to article: http://www.businessinsider.com/ubs-dirk-klee-fintech-roboadvice-china-2017-2

R3 is an innovative distributed database technology company based in New York. It was founded in 2014 by David Rutter, and now provides financial system service to more than 75 of the world biggest financial institutions, including Bank of America, Wells Fargo, Citi Bank, HSBC, Morgan Stanley and etc. Its main duty is to design and deliver advanced distributed ledger technologies to the global financial markets.

Key features of R3’s strategy provided are so called “3 pillars”:

“Pillar 1: Financial Grade Ledger—the base layer reference architecture to underpin a global financial-grade ledger

Pillar 2: Lab and Research Center (“LRC”)—Deploy secure, multi-institution collaborative lab to test and benchmark blockchain technologies

Pillar 3: Product Development—Run use cases to identify and design ‘up the stack’ commercial applications”

The reason R3 is taking the lead in this renovation of financial system technology is that it aligns similar interests from different users, and pushes distributed ledger and blockchain technologies to solve real-world problems with payments, settlements, regulatory burdens, etc. But one thing R3 should really keep up with in this fierce rival of financial system technology upgrade: put their platform into production ASAP to build entry barriers for other competitors.

Source: http://www.r3cev.com/

Technologies and applications are constantly coming out that simplify and better consumers financial lives (the article names Venmo, Betterment, and Digit as a few examples). These new technologies allow people to make their money management more convenient, allowing for better and more informed investment, saving, and loans for consumers. With the increase of online banking, technology that enables easy data access, such as account balances or identity verification, to help make these decisions is vital.

However, some financial institutions are looking to cut off consumer access to this data when using third-party applications. Motivations range from security, competition, and control, but have countless effects on developing Fintech. While allowing data access undoubtedly has business repercussions, it also generates economic benefits that would otherwise never happen. I believe consumers need to be allowed access to their own data through trustworthy third party apps, as it allows much more personal control over their finances. Once people are more informed, they can make better financial decisions. Our economy and many people’s well beings would clearly benefit from being more financially informed consumers.

Source: http://www.forbes.com/sites/forbestechcouncil/2017/02/03/the-importance-of-data-access-for-fintech/#47b6d1771a69

NYCA Partners, a New York based venture capitalist firm, announced its closing of the latest venture capitalist fund (125 million dollars) aimed at backing financial technology startups. The company continues to seek out the latest Silicon-Valley startups to make a quick penny in such an aspiring industry. Following its initial $30 million backing in 2014, the firm has continued its growth while providing financial support for a number of companies, including a few public ones. The first wave of financial technology was focused on building brand name products and services, but now the hype is around partnering with local startups to find the newest technology.

I find this topic very interesting and relevant given how common startups are around the Silicon Valley. The upward trend in large investments is very fitting given how much such technologies and ideas can sell for. While, the article did not go into specific details about the companies they have backed in the past, I am interested to research the sort of returns that its investors have received. While, 125 million dollars may sound like a lot, I expect this number to keep rising at exponential rate in the next few years.

 

http://www.reuters.com/article/nyca-fundraising-idUSL1N1FH01U

Anthony Murgio operated an unlawful internet-based Bitcoin exchange which violated federal anti-money laundering laws and regulations. He and his co-conspirators engaged in substantial efforts to evade detection by operating through a phony front company called “Collectables Club.” Coin.mx, the internet-based bitcoin exchange, was able to open bank accounts through “Collectables Club” and trick financial institutions into believing that the exchanges were a “members-only” association that bought and sold various items. This scheme is just another example of how the changing technologies are opening society and companies up to increasing security issues. Money laundering and other banking regulations loopholes are becoming harder to track and can go on undetected for a very long time until someone gets too greedy or makes an error or even potentially throughout a person’s lifetime.

https://www.justice.gov/usao-sdny/pr/operator-unlawful-bitcoin-exchange-pleads-guilty-multimillion-dollar-money-laundering

Digital wallets are considered in most tech circles as the future of real-world payment technologies. With major players like Google,Apple,PayPal and others jumping on the bandwagon and developing their own mobile-first payment technologies, a shift in consumer payment technologies is on the horizon.

The problem is, adoption has been rather slow, and until retailers start embracing the technology to process the payments, no one will be able to leverage the benefits of e-wallets to the full extent. Future is beginning to look like one that will feature the digital wallets in some capacity.

Here’s what we know:

NFC isn’t the sole option

The first phone with NFC technology was released in 2006 (Nokia) and it was billed as a game changer for mobile devices. Since that time, we’ve seen rather slow adoption of the technology and some analysts think that it’s being overtaken by other technologies.

The problem with NFC, aside from only a handful of popular phones coming equipped with it, is the fact that retailers have to change their existing POS systems in order to accommodate the newer payment technology and retailers are worst with adoption.

Luckily, NFC isn’t the only technology in town. The “big three” (Google, Apple, PayPal) in the digital wallet space, as well as a host of newer companies are all exploring digital wallets that utilize technologies outside of NFC. Wi-Fi, Bluetooth, or even QR codes are all being explored as possible options to replace NFC.

The most exciting of these technologies, is the latest iteration of Bluetooth 4.0 which compared to NFC offers more efficient use of phone battery, longer range, and a higher bit-rate for data delivery.

Security

The process of processing a digital transaction through modern encryption technology is safer and far more efficient than using an ATM machine or swiping card at the local retailer. The biggest risk isn’t that of data interception by a third-party, but instead physical loss of the device containing mobile wallet. While “turning off” the device after reporting the cards stolen should remain relatively simple, we’re not at all aware of how security protocols exist in order to protect the consumer should a thief attempt to use the card. All of this is easily preventable with a strong password or using bio-metric security devices available on some current smartphones.

Another risk involved in digital wallet adoption is one that has yet to be answered; who accepts the burden of personal liability in the unlikely event of fraud? Most credit card companies currently shoulder this risk, but this fraud insurance doesn’t exist when the card is tied to a mobile wallet.

to be contd…

Reference: https://sites.google.com/a/utexas.edu/digitalwallets/secur

The rise of financial technology companies, has pushed the growth of other industries, which now see strong potential for change and innovation. For example, we can look at the real estate industry. Companies like Redfin and Realtyshares, allow to make the transactions more efficient, and less time consuming, often saving the users thousands of dollars. We can also look to the payments, industry and the rise of alternative digital wallets than Paypal. This includes Square, Dwolla, Skrill and others. These all offer different benefits, and have been used on a more worldwide scale than Paypal. The lending industry is also changing, as the often tedious task of getting a loan has been simplified and streamlined. They match borrowers with investors through a smooth easy process. They have figured out ways to pull from a pool of “investor cash” and by doing that they can lower margins and rates and make the data easily integrated and accessible through their platform. Essentially they are cutting big banks out of the equation, and can reduce costs greatly.  We can see that these changes often come as a benefit to the consumer and a detriment to the existing members of the industry. Fintech has the potential to do so much more to these industries, and will be affecting many more industries as time goes on.

http://www.nasdaq.com/article/industries-where-fintech-is-changing-the-game-cm740805