Month: February 2017

More and more airline passengers are using smartphone and other mobile devices to book airline tickets and other travel arrangement. Airline industry is getting more competitive . There are three factors(passengers, payment, profitability) that are very important to airline companies.

 

1. Passengers:

There is a significant large demand of passengers booking through mobile phones. Based on the source[1], 84 percent of travelers requires to access their travel information as they travel, even 60% needs internet even on vacation. About 20 percent of passengers book flights over mobile phones, and there is a potential of increase of the percentage. Over 70 percent of people plan a trip with mobile phones. Airline companies must provide payment methods over mobile devices to earn the revenue.

2. Payment:

The mobile payment industry is growing really fast and airlines should catch the revenues from mobile payment ecosystem and transfer from credit/debit card payment. Airlines shall work with mobile payment providers who are already in the market to be more cost effective.

3. Profitability:

Traditionally, airlines’ book depends on travel agencies, but airlines have to share its profit with those travel agencies. Now, airlines keep it profit through direct-channel sales and loyalty programs. However, in order to keep mobile users into their direct sale network, airlines shall also include mobile payment as their strategy planning.

 

https://www.mobilepaymentstoday.com/blogs/3-success-factors-behind-airlines-and-their-mobile-payments-strategies/

Small businesses are increasingly looking to remove the option of cash in favor debit and credit cards to secure transactions. Many small businesses face difficulties of theft and loss directly correlated to cash. The use of cash has been traditional due to its ease, but 2016 was the first year where credit cards surpassed cash transactions.

Services such as Square and Venmo are making it easier for small businesses to accept card payments and for friends to settle debts. These technologies are removing the need for cash as seen by total sum of card transactions. Other countries are also embracing cashless societies as ways to reduce black market activity and increase tax revenue. Consumers also face losses through ATM fees that reached out $8B last year.

It appears that a cashless system will continue to rise. Consumers realize the convenience factor of credit cards and there will be many tech companies who help with this transition who will make millions in fees.

Source: https://www.wsj.com/articles/why-your-business-should-ditch-cash-1485698400

Traditionally, access to financial data has been limited to several parties: consumers, the government, and banks. However, with the rise of financial technology in recent years, fintech companies are pushing for a reform in the way financial data can be shared. Leaders in the fintech industry created a new group called Consumer Financial Data Rights (CFDR), to promote the sharing of financial data. This includes using open application program interfaces (APIs) to share data, and pushing cybersecurity to better manage the risk for the users of the data, especially for consumers. However, there are still many problems that still need to be addressed.

The Federal and Banking Perspective:
Both the government and the banking industry both believe that financial data should be limited. This is due to the following reasons:

• There should be a need for more control, rather than open access of financial data. This is because if financial data were to fall into the wrong hands, the parties involved, especially the consumer can be tragically affected. Which leads to:
• Questions about security. Is cybersecurity in a state where access to financial data can protect all parties involved? Who will be responsible if financial data were to fall into the wrong hands?
• And finally, competition. If the financial data were to open to more parties, companies can use this financial data to target consumers. Therefore, the customer’s privacy will not be protected.

The Fintech Perspective:
Leaders in the fintech industry are pushing for third party access to financial data. Reasons include:

• Better access to data allows consumers to benefit and better understand their financial situation and their options. This includes faster payments, and even letting vendors approve more loans to consumers.
• The sharing of data between financial institutions and third parties allows a more unified financial system.

Regardless of which side the argument lies, the questions of data privacy lies on the consumer. Financial institutions want stricter data access so that consumers can be protected from unwanted threats. And the Fintech industry want looser data access so that consumers can benefit from the technology that is available. The answer ultimately still lies in data privacy. If fintech companies and CFDR can prove that a cybersecurity system with the involvement of third parties is secure, then maybe both sides of the argument can come into agreement.

Sources:
– http://www.forbes.com/sites/forbestechcouncil/2017/02/03/the-importance-of-data-access-for-fintech/2/#57e3d0e56f28
– https://www.americanbanker.com/news/fintech-companies-form-lobbying-group-focused-on-data-sharing
– http://www.businessinsider.com/us-fintechs-are-lobbying-for-access-to-customer-data-2017-1

With FinTech becoming widespread, it may be hard to integrate all new technologies within a business. What this article, “Three Fintech Trends Worth Adopting” by Mitchell Caplan, does is suggest the top 3 essential financial technologies that will help financial advisors support their existing work and create a better relationship with their clients.

The three technologies suggested by the article include “holistic fintech evolution”, “planning and risk management integration”, and “customer experience priority.” Each of these categories connects to the integration of fintech into financial advisory. The first technology describes a way to see the big picture without using “roboadvisors.” What this article suggests is to use fintech as a way to assist the advisor rather than replacing the advisor with technology. The next fintech mainly connects to retrieving realtime information of “macro risks.” Lastly, the final fintech suggested is “customer experience priority” which advocates an easy interface to ensure transparency from the advisor to the customer.

These three technologies definitely have been on the rise since the development of fintech. It advocates a strong bond between a human advisor and client. With better prediction methods and transparency, it’s much easier to optimize investments which leads to a happy client.

http://www.financial-planning.com/opinion/three-fintech-trends-worth-adopting

Banks are lobbying against the EU legislation, which may cause a power balance shift between European FinTech firms and banks. A Financial Times report discusses PSD2, the second payment-to services directive that intends to improve competition between banks and FinTech by getting banks to allow third parties to access customer data. Banks want more regulation on FinTech and access to customer data, but FinTech believe that having to go through the bank for any customer query will overly slow down transaction lead times.

I believe that security should be prioritized over convenience and instantaneous transactions. As mentioned last week, all of my friends who do not use mobile banking or money transfer apps avoid doing so for security purposes. They likely do not know how the digital money transfer/management works well enough for them to feel safe using these technologies, no matter how convenient they may seem. At the same time, however, I believe there should be a balance between security and response time. If an online transfer is secure but takes longer than traditional banking, which is allegedly safer, I may opt to go to a bank. There should be a reasonable balance between security and speed.

Source: https://www.cryptocoinsnews.com/fintech-firms-big-banks-are-lobbying-to-block-change/

I would like to focus on fin tech that improves the traditional credit card payment process by eliminating the use of physical credit cards. Credit card theft and skimming of PII can be drastically minimized by using Near Field Communication(NFC) technology in your mobile device and converting it into a contact less payment system.

Near-field communication (NFC) is a set of communication protocols that enable two electronic devices, one of which is usually a portable device such as a smartphone, to establish communication by bringing them within 4 cm of each other.It has three modes of communication but the one significant to us is:

• NFC card emulation: This enables the NFC device to behave as a standard Smartcard.

A contact less card requires only close proximity to a reader. Both the reader and the card have antennae, and the two communicate using radio frequencies (RF) over this contact less link.There is no set-up required. The connection is more reliable and does not suffer problems of contact wear, corrosion and dirt experienced by systems using physical connectors.

In Apple Pay, NFC technology is coupled with bio metric security and tokenization to make it the most secure payment transaction possible. Traditionally a card-present transaction is considered more secure than a card-not -present transaction over the web or during in-app payment. Unlike popular belief, research shows that Apple payments (a card-not -present transaction) is more secure than the traditional card-present transactions. This is because of the inherent security that is built into a transaction that can occur only at 3-5 cms distance.

When a card is added Apple Pay, a unique Device Account Number is assigned, encrypted, and securely stored in 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 behavior. Your most recent purchases are kept in Passbook for your convenience. Apple pay currently has around 12 m patrons.

https://globenewswire.com/news-release/2016/10/25/882686/0/en/IoT-Device-and-Data-Security-Challenges-and-Solutions-Headline-the-Smart-Card-Alliance-2016-Security-of-Things-Conference.html : articles by Prof. Imran Hajimusa

Deutsche Bank has a history of skirting regulations to pad profits and personal bonuses. Wealthy Russians were sent money overseas by through a group of Deutsche Bank executives arranging stock trades that had no purpose other than disguising the fraud. In one case, a supervisor in the Moscow office was paid $3.8 million for “consulting agreements” by one of the companies.

Over $10 billion in laundered money was directed to London and New York form Moscow, and the Deutsche executives didn’t crack down on the schemes despite their opportunities to do so. Despite its history of fraud, Deutsche’s New York bank still has inadequate compliance and monitoring systems.

Deutsche agreed to hire an independent monitor to be approved by the Department of Financial Services. The monitor will review the bank’s relevant compliance system.

Bank of America, UBS, and Morgan Stanley are leading the traditional global wealth-management industry, with each responsible for managing more than $1 trillion in investors’ assets. These firms continue to draw multimillion-dollar clients, however, at the same time, many other leading wealth management firms are working on adopting robo-advisor along with their human financial advisors to help increase value for clients across different wealth spectrum.

Wells Fargo expects to launch its robo-advisors service early 2017, aiming to capitalize on its rich bank resources, intellectual capital and investment unit. Wells Fargo currently has more than 15,000 advisors with $1.4 trillion in client assets. The company believes that their clients are ready for this type of investment choice. Wells Fargo’s approaches to robo-advisors is a tremendous opportunity for the consumer and the financial advisor to utilize the robo-advisor platforms.

In the near future, certain amount of large firms will build their own platform of robo-advisory service, while mid-sized firms might buy independent robo-advisory firms. Smaller firms or start-ups may incorporate a branded industry solution.

 

Source: http://www.investopedia.com/articles/insights/072216/wells-fargo-launch-roboadvisor-2017.asp

 

Payment technological startup, Square, paired with Apple recently to encourage its merchants to accept Apple Pay. Encouraging in this case actually means allowing the merchants to accept Apple Pay for free for each transaction. How Square makes money is through a transaction fee per purchase incurred on the merchant. This fee is quite small and applies to all credit/debit card swipes that occur using their product. Square wants their merchants to accept Apple Pay and encourages them to do so by not charging them a transaction cost. Apple receives more awareness for Apple Pay for free and with the literature and campaigning for Apple Pay that Square is going to provide its merchants, usage for Apple Pay will increase as what happened in Portland, OR earlier. What Square gets out of this is the ability to provide a better service for their merchants and make them more marketable to other small businesses in the now crowded payment hardware business. I believe that Apple actually benefits the most from this partnership. While merchants in plugged-in communities like the Bay Area are more likely to have people use Apple Pay to purchase items, these areas are few and far between. As seen in Portland where a campaign to increase Apple Pay worked quite well, this campaign to encourage people to use Apple Pay will pay off in other parts of the country. Apple will get this usage increase without having to pay a dime, which makes them the big winners of this pair-up.

Article Link: http://www.pymnts.com/apple/2017/square-and-apple-who-is-the-big-winner-of-their-payments-pair-up/

Ever since the creation of Bitcoin in 2008, its underlying technology, blockchain, has been shifting how the world does business. Essentially, blockchain facilitates peer-to-peer transactions without any middleman such as a bank . It also keeps the user’s information anonymous, while validating and keeping a permanent public record of all transactions. The benefits of this are that personal information is secure, while all activity is transparent and incorruptible.

As we’ve seen the use of blockchain technology in real estate, insurance, and money transfers, there is a new growing need for blockchain to serve ERP. ERP software integrates all the different functions in an enterprise together by providing a single version of the truth in real time throughout the organization cutting across departmental boundaries. Blockchain technology is also similar in that it is a real time common database that provides a single version of the truth to all participants.

As we’ve learned in class there is sometimes confusion and lack of trust within the company by departments due to perhaps different formats and processes across departments. Blockchain seems like a neutral solution that everybody in the organization can adopt.

This article highlights one company in particular called Finlync that is developing what it claims to be the “world’s first technology to integrate blockchain into ERP systems like SAP.”

Sources:

• http://www.pymnts.com/news/b2b-payments/2017/finlync-blockchain-erp-data-integration-b2b-payments-automation-document-invoice-management-processing-ar-ap-buyer-supplier-banks/
• http://dontapscott.com/2015/06/blockchain-revolution-the-brilliant-technology-changing-money-business-and-the-world/