Month: February 2017

With numerous P2P transaction apps, making payments to friends and customers has never been easier. The surprising thing is that for most small businesses in the US, the paper check is still the leading way to remit and accept payments from other businesses. Paper checks has always been messy, time-consuming and slow.

The concept of Symple is when a business gets an invoice, they take a picture of it and sent it to Symple. Symple will then parse the amount, due date, etc.– and notify whoever controls the budget that there is a payment pending. Then to fulfill the payment, with one click, Symple will then remit the payment directly to the vendor’s bank account. The app then has basic analytics to help users dissect their budget even further.

I think Venmo has capitalized on the P2P market extremely well, but the B2B transaction has largely remained untouched. The first application to successfully capture the B2B transaction market is going to have a significant advantage over any other apps that try and come after.

Reference: https://techcrunch.com/2017/02/07/symple-wants-to-be-venmo-for-business-payments/

Recently, there has been much talk on the entrance of large companies into the financial technology space, with companies such as Apple and Google entering into the payments arena and potentially looking to expand their businesses. However, according to a recent analysis by a VC partner at Andreessen Horowitz, Amazon may be the next large player to enter the marketplace.

One of the major explanations that the analysis gives is that Amazon specializes in low-margin, high quantity businesses. The company is able to add tremendous value and revenue by cross selling products across its different businesses to customers. This explanation offers a unique perspective that certainly rings true with Amazon’s current business model.

A key aspect that the partner mentioned in his analysis was the ability of the company to differentiate itself from its competitors. In the context of Amazon, this would likely come across in the form of platform portability, unmatched pricing and incredible scale.

Another driving point that the analysis went into is the fact that Amazon as a company is already designed on a primarily low-margin business. Payment processing is an incredibly low-margin business that reaches profitability when large quantities of transactions are conducted using the service, or if the provider has an alternate revenue model.

Overall, the thought of Amazon entering the payment processing market would push the company to expand beyond its core business areas, but would align with the operational balance that it currently supports.

Source: http://fortune.com/2017/02/14/andreessen-horowitz-fintech-alex-rampell-amazon/

This is a blog post about what the writer sees as a problem for some FinTech companies (especially ZestFinance) when it comes to a lack of caution when it comes to lending money. The writer argues that the main issues with these companies has been an over willingness to lend to anyone, and overconfidence in the power of technology and algorithms to make lending decisions.

 

It feels like the implied argument that the writer is making is that it is up to FinTech lending companies to slow down and adapt more of the norms and standards of the banking industry. While I understand the logic of this idea, it does seem to go against the very point of FinTech. FinTech, by it’s very nature, is suppose to be able to move faster and be able to take more risks than the status quo.

However, I do agree that since these lending FinTech companies are dealing with other people’s money, it would be smart of them to be smarter about who they give loans to. As the article points out, an over willingness to give loans to just anybody contributed to the 2008 economic meltdown. It is true that just because you can give someone a loan, doesn’t mean that you should. It may seem altruistic to give someone who was denied by a bank a loan, but this could do more harm to the recipient of the loan. One point that I more or less agree with is that FinTech companies do need to be careful about depending too much on algorithms when determining who to give a loan to. Ideally, there should be a way to use technology and still provide a human perspective with expertise to make a smarter decision.

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https://www.fool.com/investing/2017/02/08/lessons-for-fintech-from-the-history-of-banking.aspx

At the Technology Tools for Today (T3) conference this past week, integration of AI and VR into tech was seen all around and fintech was no exception to integration of this new technology. Fidelity has integrated AI of Alexa from Amazon into their eMoney platform, allowing real time AI answers to financial questions. This was amongst many other AI and VR integrations that fintech is looking to roll out to the general market as soon as possible. I think it is beneficial for fintech to continually remain on the cutting edge of today’s technology, so that they remain up to date with the technologies of the day that are popular and do not get run up by competition that comes in and does a better job of tech integration before they can.
Still, I think the industry should be weary of integrating every little new technology that pops up just to be relevant, because it could mean that a new addition ends up being more novelty than useful and will not provide long-term value as a feature for fintech companies. For example, I can easily see a VR feature of money management being very visual and appealing, but it may not actually add enough functionality to a fintech platform to make it viable to actually add, so companies should keep in mind they are adding novel features that will provide value to their consumers.

Link to article: http://www.investmentnews.com/article/20170217/BLOG09/170219905/financial-technology-companies-embrace-artificial-intelligence-and

While most articles in the class blog deal with Fintech as a disruptive industry for traditional financial institutions, the fintech festivals are common grounds of co-opetition for banks and fin-tech companies.Tech companies also help traditional banks to gear up to take on the new era of competition and integrate latest technology for their efficient running.

Let us discuss the merits and de-merits of few such examples that Microsoft CEO Satya Nadella cited at one such Fintech festival.

1. ‘MetLife is using Microsoft Azure to run complex actuarial simulation models, delivering  insights to decision makers around the globe’

Advantages:

• Complex risk assessment is aggregated in the cloud to complete in much lesser time.
• Faster business decision making process resulting in improved customer experience.
• 45-55 percent savings on infrastructure costs .

Disadvantages:

• Security of customer information is the most major concern when an on-premise data store is moved to a third party cloud computation engine.
• Once computation is moved to a particular cloud offering, the process develops platform dependencies that is hard to integrate with other systems or change in future.
• If there is a contract fallout, customer data can go into vendor lock where the parent company loses flexibility and control over data. This is why banks are reluctant to adopt cloud technology.

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2. ‘Emirates National Bank of Dubai is reinventing its customer relationship management with Azure Machine Learning and Microsoft Dynamics 365’

Advantages:

• Data mining and prediction helps identify how to spend time with customers, and targeted next-best actions and offers.
• 15-point conversion rate of customers to new services.

Disadvantages:

• Again there is a conflict over online vs on-premise solutions against Microsoft’s cloud-based bundle.Hence your data, algorithms, experiments and results would reside in the cloud. Depending on your data sensitivity, that may be a deal breaker.
• The Microsoft CRM and ERP solutions are in their infancy and there are lots of kinks to iron out.There are better solutions out there for a lesser price point.

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3. ‘Bank of America Merrill Lynch is working with Microsoft Treasury to use Azure Blockchain as a Service to transform and automate the processes for standby letters of credit’

Advantages:

• Reduces process time from 5-7 days to 5-7 minutes
• Reduces error rate down to zero percent.
• Significantly reduces the cost of process.

Disadvantages:

• Being a new technology there are challenges such as transaction speed, the verification process, and data limits.
• Control, security, and privacy are still cyber security concerns that need to be addressed before entrusting personal data to a blockchain solution.
• High initial capital costs : Blockchain proof of work implementation offer solutions that require significant changes or replacement of existing systems. In order to make the switch, companies must strategize the transition.
  

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  Thus we see the 2 sides of the coin while implementing fin-tech in traditional financial institutions. Financial institutions weigh all the pros and cons before trusting new ideas and technology. Fact that fin-tech is still percolating and accepted into such organisations is proof that widespread acceptance of fin-tech is starting.

REFERENCE:

Microsoft’s Xiaoice chatbot may be coming to English at Tay.ai

 

 

Big changes are in the wind. Oracle is committed to the Cloud solution for all their applications, the acquisition of NetSuite further demonstrates that the cloud is the destination.

Most of the finance teams spend up to 85 percent of their time on collecting and validating data, developing reports, and maintaining and updating spreadsheets, which leaves little time to develop real insight. Oracle ERP Cloud helps modernize and automate finance operations, and you can:

• Confidently expand into new markets with full multi-GAAP, multi-currency, multi-entity support
• Deliver multidimensional reporting from a single source of truth with shared reference data
• Eliminate the complexity of intercompany tax and payment transactions with a centralized architecture
• Comply with local regulations and reporting requirements using built-in, country specific localizations Many Oracle ERP Cloud

Based on my personal experience, SAP is detail oriented while Oracle ERP cloud is much more simplified and visualized. Oracle ERP Cloud provides real-time graphical indicators on dashboards and work areas to help draw users to items that require immediate action. Users can glance at the infotilets in Oracle ERP Cloud for a quick status summary, and then drill down for details about these metrics.

 

Source:

http://www.oracle.com/us/products/applications/enterprise-resource-planning/five-reasons-new-look-erp-cloud-3094646.pdf

If Fintech companies want to produce software for financial industry, they need to produce something that is easily customizable by the technical layman. Because nowadays, most of the Fintech products target at end clients or bigger dealer groups and institutions. For both end clients and groups dealers, they have different needs, which require Fintech software to provide customizations so that financial advisors do not have to spend money on customizations themselves.
According to the article, the trick to providing customized Fintech software is to release products that are targeted towards specific needs and in specific best-practice ways for financial advisors, but still give them the control in how they present themselves to their customers. Therefore, financial advisors can provide the best service to their customers with the help of Fintech software.
I think it is a very reasonable way to design Fintech software for financial institutions, but I feel it might not be as practical as it sounds. Because the economy world keeps changing and it is very likely that after you design a Fintech software with specific needs and launch it for a while, the trend of financial needs changes. When it happens, it would be very costly to financial institutions to change with correspondingly.
http://www.fintechbusiness.com/industry/643-ifas-being-left-behind-by-fintech-companies

One of the main reasons for the 2008 financial crisis was due to banks giving a number of sub-prime loans. Sub-prime lending means giving loans to people who have difficulty in repaying and have a high probability of financial setback. In the current banking system, the banks are not risking their money. The risk is on the depositor and depositors have no information about the risky loans given by their respective banks. A solution to this problem is p2p lending.

P2P lending is a great way of mitigating these risky loans because it is completely up to the individual on how much to lend and assess the risk factor. The problem arises when there is a non-payment. By insuring the lender’s money, people have a new way of investing as well as borrowing money rather than relying on traditional banks.

P2P lending is a space where I feel fin-tech has the potential for huge growth. P2P is a great way of borrowing small loans as well as an additional source of income for lenders Currently, there are a few popular p2p lending services such as Lending club, Prosper, and upstart. In the coming years, I expect a number of p2p lending services with the possibility of having p2p lending apps which make p2p lending as seamless as a p2p transfer. The primary success factors are going to be ease of borrowing money, the interest rate for borrowers/lenders and the risk factor involved.

References :

http://www.forbes.com/sites/oliviergarret/2017/01/29/the-4-best-p2p-lending-platforms-for-investors-in-2017-detailed-analysis/#6c2cccd73856

Documentary called Inside Job —https://www.youtube.com/watch?v=bYm_oEO5iyE

Square’s stock jumped 4.2% in the markets on Friday after Citigroup called Square a “‘disrupter’ that can convert ‘micro’ and small merchants to its payment technology.” This is a huge jump since the stock only increased by 4% last year. The article discusses how Citigroup views Square and how Citigroup has encouraged investors to invest in the company due to its market leader status. For those that do not know, San Francisco-based Square makes credit card readers that plug into mobile phones and tablets. Usually known for sticking to the small business market, it is starting to attract big business clients and has expanded into providing financing and banking loans to small businesses. Analysts estimate that Square’s Q4 revenue to increase by 20%, but I believe this may be a bit of a conservative estimate. I believe that Square will probably be around the 25% increase range as the usage of these mobile card reader products has quickly grown into many businesses around the country and the world.
Article link: http://www.investors.com/news/technology/citigroup-initiates-square-at-buy-ahead-of-earnings/

Austria’s largest regional energy company, Wien Energie, announced to join the industry partners and counterparts to participate in a “blockchain energy trading” pilot. The company will use Interbit platform, a multi-chain remittance distributed-ledger technology based platform provided by Canadian blockchain firm BTL. The new technology could improve both cost and time efficiency in the process of energy trading, by enabling faster and significantly cheaper transfers of funds and assets. With the use of blockchain technology, Wien Energie is expecting a significant cut in energy trading costs. The company’s executive, Peter Gönitzer, also expected that the new technology “could bring rise to entirely new business models”.

Though, the viability of commercial use and strategies of blockchain-based energy trading need further trail and experimental discuss, Wien Energie is confident with the future of blockchain-based energy trading, as one of its peer, Electron (UK),  already demonstrated “significantly faster energy transfers (20x) with notably lowered costs by simulating data from 53 million metering points from 60 energy providers” using its self-developed blockchain platform. Blockchain technology in energy industry will not only bring more opportunities for energy trading, also take us to a far-reaching new age for non-financial related industries. Energy companies should see and take advantage of this opportunity as quickly as possible, hence, to create entry barriers for other competitors in the industry.

Source: https://www.cryptocoinsnews.com/austrias-biggest-utility-company-to-test-blockchain-energy-trading/