More than 54% of millennials make purchases online, and often do not consider the payment platforms that power these transactions. As these marketplace companies become more popular, the more important it is for robust payment solutions. In marketplaces the payment process is more complex, and these complexities are reflected in chargebacks. This occurs when a seller is forced to return funds to the buyer, which can be manipulated by fraudsters. On a global aspect, these marketplace companies also have to deal with varying legislations. Many marketplace companies, such as AirBnB and Uber, use financial technology to provide a secure platform for consumers. Not only do these companies process transactions, they also ensure security and legal compliance.

With the complexities of online transactions, I think it is important that marketplace companies have a reliable platform to provide secure payments. With millions of vendors having to be paired with millions of users, transactions can be vulnerable to attacks on security. It is important to use financial technology that can carryout the general business of the company, and specialize in security online. It is also helpful that financial technology companies know the tax codes and laws of other countries, to ensure marketplace companies are within regulations.

 

Source: How Fintech is Bridging the Gap With Marketplace Companies

Are You Taking Your Online Security Seriously Enough?

In an article written by Banking Tech, the Internet Registry SIDN reported that only “6% of online banking websites were using Domain Name System Security Extension.”

Mobile Banking and Financial Information Systems both contain sensitive and confidential information. Big banks and those who develop FIS should take security seriously.

The article focused specifically on the UK Banking market, however this issue is well prevalent in the US market.

Online banking is on the rise and unfortunately banks aren’t able to gain a security advantage over the hackers.

How does security vulnerabilities affect the FIS? Hackers take advantage of security loop holes or vulnerabilities in the system. If banks have poor online banking security, then it would make it easier for a hacker to exploit the Financial Information System.

While hackers have had unfortunate success in stealing consumer’s bank accounts, if hackers can get into the bank’s master data they can do a lot of harmful transactions.

While 100% immunity from hacking is impossible, it is possible for banks to make it very difficult for hackers to exploit their systems and ultimately deter online hacking.

Tilt is a crowdfunding and peer-to-peer payment platform. It provides the services not only in the US, but also in Canada, UK and Australia. Its main target customers are anyone who is 18-24 years old. By using the app, users can collect money from a group of friends/colleagues/family members by creating a project in Tilt application, setting the amount of money desired and then inviting those contributors. Contributors make payment in just a few taps. The app also allows everyone to see who has or has not paid. I don’t think this is a good feature to be embedded because of privacy protection. It should make the information visible to only the organizer.

There are 3 ways for Tilt to make money. First, it charges 2.5% of the total amount raised in “Fundraising” and commercial campaigns. Second, it charges 3% of processing fee if contributors use credit card. Third, it makes money by providing businesses with access to its extensive API.

I think compared to Apple Pay, Venmo, Square Cash, Tilt does have a competitive edge of social engagement which is a great selling point to its target. However, I do not see yet how it can compete with Facebook and Viber payment. I believe in the future of mobile payment but I’m not confident in Tilt making successful profit by transaction fees. Nonetheless, Tilt has a high potential to sell useful insights regarding customer behavior to businesses which are extracted from its data.

Source:
https://www.fastcompany.com/3062668/tilt-wants-to-be-venmo-but-everywhere
https://www.gobankingrates.com/personal-finance/tilt-payment-app-replace-venmo/
http://fortune.com/2014/11/12/tilt-future-crowdfunding/

Industry insiders believe that the Winklevoss Trust, the first exchange traded fund that deals with Bitcoin, will become SEC approved on March 11th. The Winklevoss brothers applied for SEC registration four years ago, and now that investors believe it will be approved the value of bitcoin has skyrocketed. So far this year the value of the Bitcoin has increased by 30% due to the likelihood that the Winklevoss Trust will become SEC registered as well as other bitcoin entities.

Powell, governor of the Federal Reserve warns against investing in this surging currency.  He worries about the cybersecurity and privacy risks that are involved in using digital currencies. Powell acknowledges, “there may be important trade-offs between payment and privacy”, and warns users might not want to give up their privacy to the FED who would use that information to track the currency.

I agree with Powell that privacy risks should be a real concern, but I think the bitcoin is protected from cybersecurity attacks. Blockchain, the mechanism that protects bitcoin’s integrity should be a legitimate defense against cyber criminals.

http://www.reuters.com/article/us-bitcoin-value-idUSKBN16A2FG

http://www.reuters.com/article/us-usa-fed-powell-idUSKBN16A23G

P2P leader Venmo has a serious competition coming. Nineteen banks including Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo etc. are teaming up to launch Venmo like mobile application called Zelle. For a long period of time, millennials have been using third party application like Venmo to split checks and shared utility bills. In response now, banks are trying to draw these younger customers that are currently beyond their mainstream audience.

What is the difference?

As a P2P payment method, Venmo stands as a middle-man between any transfer. Amount sent first goes to receivers Venmo account and from there, they need to cash it out to their bank account. Using Venmo Instant cashing out is chargeable. With Zelle, banks propose to eradicate the need of this middle-man, so when any transaction, the amount sent from the sender would directly get transferred from his bank account into receivers account.

I believe inspite of banks efforts, Venmo has huge advantages because of its popularity and widespread user adaption. Venmo processed $17.6 billion in transactions last year, a 135 percent increase from the previous year. Now-a-days, “to Venmo” has become a common vernacular, meaning to move money to and from friends and family therefore, I believe it’s difficult for people to give up their habits of “to Venmo” soon.

Reference: https://www.bloomberg.com/news/articles/2017-02-22/big-banks-declare-war-on-venmo

The biggest concern of any Fintech company is to prevent fraud and ensure safety. Several companies are unable to do so. Most companies rely on other companies to prevent fraud from happening on their company. This sometimes doesn’t work out well as there are several frauds still occurring in todays world. A Fintech startup, PromisePay, has tried to solve this issue. Their service ‘enables payments to be held in escrow, so a customer can pay for a service online, with the funds only released once it has been satisfactorily completed.’ They are doing this with online market places. There main aim is to prevent fraud and building trust between customers and online services. This model in Fintech could prove to be very useful. Several online platforms could benefit from this as this reduces the risk of frauds as they only payout the sum once the transaction between the users has been completely finished. Innovations in Fintech which are making online services more secure and efficient are paving a way for customers to increase their use of Fintech as security of use of Fintech is growing.

 

https://www.forbes.com/sites/jlim/2016/07/20/promisepay-is-solving-probably-the-biggest-problem-of-online-payments-trust/#444d45f93ce9

 

https://techcrunch.com/2016/06/14/australias-promisepay-a-payment-platform-for-online-marketplaces-raises-10m/

 

This article talks about the relationship between FinTech and the banking industry in 2017. The writer argues that while many FinTech companies initially were all about disrupting the banking industry (which was slow, aging, and not customer friendly), many FinTech companies have now changed to working with banks in a mutually beneficial relationship.

In my opinion, this article doesn’t say anything too new, but it does demonstrate how both the upstart, faster moving industry (FinTech) and the established by slow moving industry (banking) have had to adjust to one another in order for both industries to evolve. Two of the common reasons given why FinTech hasn’t toppled the banking industries has been lack of credibility and inexperience dealing with complicated regulations. It makes sense that by partnering with banking companies, FinTech companies can either learn how to deal with the regulations or simply let their banking partners  take responsibility for them. In addition, partnering with banks gives FinTech companies more money without having to ask VC’s, and gives them higher brand recognition and trust (the article is correct when it says that people are more risk averse when it comes to money as opposed to things such as ride sharing). One potential downside for FinTech companies working with banks is that they might lose name recognition. For example, a product from a FinTech company that has partnered with JP Morgan Chase might be considered by the public has a Chase product, and the original FinTech company might not get the credit it deserves. On the other hand, traditional banks don’t have much to lose from a big picture perspective in partnering with FinTech. These partnerships allow banks to save money, come up with faster solutions, but the downside could be that people could lose their jobs as a result of being essentially replaced by the FinTech solutions.

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https://www.forbes.com/sites/forbesfinancecouncil/2017/02/13/is-2017-the-year-bank-fintech-partnerships-hit-productmarket-fit/2/#326c9f35112d

According to a report recently released by the consulting firm Accenture, overall investment in FinTech companies was up almost 10 percent to a total of 23.2 billion dollars. According to the report, the year over year increase was attributed in large part to investments in China and Japan. In Japan fintech investments doubled in 2015-2016 alone. In China, this number tripled to 10 billion and accounted for almost 90 percent of all FinTech ventures in Asia. Japan also became of the first country to enforce a regulation of virtual currency on a national level. This demonstrates that Japan has trust in the fintech companies, and sees potential for them to expand at an even more rapid pace. On the other hand, looking at China, much of the fintech investment centers around the use of blockchain technology. China was also host to some of the biggest fintech deals of 2016, such as 4.5 billion into Ant Financial Services group.

 

http://cio.economictimes.indiatimes.com/news/corporate-news/global-financial-technology-investment-up-10-in-2016-report/57407723

Atom is UK’s first fully digital bank. In fact, Anthony Thomson who started the bank believes it is not a bank at all, and it is a data-driven company which has a banking license.

Banking in the UK was mostly dominated by banks such as HSBC, Barclays, RBS, and Lloyds. However, a number of startups are opening off late and Atom is one of them, which is completely online. Atom currently offers only savings account and with 2 percent interest, it is the highest in the market. All the banking features are expected to be launched this year. What is different about Atom and similar banks is that they are using data analytics to drive customers. Traditional banks give you the previous month’s statement whereas these so-called banks are using predictive analytics to give you the next months statement. Even, in the US there is a wave of such startups which are trying to disrupt the whole traditional banking system. The question that arises is what are the traditional banks going to do respond to such disruption? Or can we envision a future where we completely ditch our bank??

Banks, I feel are definitely responding by coming with their own apps but they are still lacking when it’s come to ease of use and the services they offer. The only option for such big banks is to acquire these startups, match them or slowly fade away. Depending on the action taken by these banks, the future of banking will be decided. I believe the day is not too far away when we decide to completely ditch our bank.

References:

https://wesh.uk/domain-name/why-2017-will-be-the-year-youll-finally-ditch-your-bank/

One of the biggest topics that surround any new financial technology is security. The reason for this is because of the private information that financial technology provides, transfers, and creates. While Venmo is not new, its popularity is continuing to grow and thus questions of its security are constantly raised. The application was launched in 2009 and began as a text messaging service but was soon transformed to a financial payment service. The service allows an individual to transfer money with the tap of a button, but with ease for users comes ease for hackers. Venmo has set a number of security checks in place to prevent any malicious behavior from taking place. These check include bank level security and data encryption as well as the option to set up a pin. Venmo also takes responsibility for any account losses if an individual’s information is compromised.

This application has become popular among young people as it is common for groups to use the app to split bills. It is comforting to know the sorts of precautions that the application takes to protect my information. One tactic that is used by fraudsters is sending the money, which provides a notification to the receiver. In the meantime, the sender can cancel the payment without the receiver finding out. These sorts of tactics should be made aware to users so they can be wary of these types of strategies. All in all, Venmo is a very useful application and as long as there are no major fraud cases, I would expect the usage to continue. It will be interesting to see if the app will start charging individuals for individual transactions or instead offer advertising for the app.

 

http://www.kcra.com/article/is-venmo-actually-safe-to-use/8989323