Month: March 2017

One of the most basic and often used systems to reduce and detect financial fraud is by using a system of checks and balances. While this is great, the one problem with a system of checks and balances is that some companies never follow it. Purchase requisitions, payroll, and other tasks that require authorization all fall onto the shoulders of a single or a couple people in most companies. The majority of businesses are usually small and so most of the time the person or people in the human resources department end up perform multiple duties. This type of process counteracts the basic principles and rules that a check and balance system would put into place. Too much power is placed into the hands of a single or couple individual and from there they will be able to manipulate and cover up the data that would incriminate them. So is there a way to prevent fraud from happening in situations like this? The best way is to make sure that the upper management team works closely with the people doing these tasks. It is a hard balancing act since you do not want to make them feel that they are not trusted.

Reference: http://www.abfjournal.com/articles/minimizing-fraud-checks-balances-vigilance-go-a-long-way/

Beehive is the first peer to peer lending platform to set up offices in the Dubai International Financial Center and becoming authorized and regulated by the Dubai Financial Services Authority. This new regulation is the first for the region and it is an important one because it signals some future growth for the fintech industry in this region of the world. The regulation will provide clear governance for fintech businesses, added protection and peace of mind as peer to peer lending is becoming an increasingly important avenue for small to medium business in the region to get funding. The UAE has been embracing fintech as the wave of the future to help their region grow. Their regulation has allowed them to grow their fintech industry and follows up the recent launch of the FinTech Hive accelerator program in the Dubai International Finance Center that will allow them to grow their fintech industry and help others get funding to finance the region’s growing economy. This will really get the region’s economy going and allow small businesses to take off.
Article link: http://finance.yahoo.com/news/fintech-business-beehive-first-peer-040000553.html

https://squareup.com/townsquare/emv

Again, for this blog post, I am using Square’s resources in defining how and what certain financial transaction technologies, such as EMV, that are in place within small businesses.

EMV is a fairly new term that has been thrown around the business world. It stands for “Europay, MasterCard and Visa” and it “uses computer chips to authenticate (and secure) chip-card transactions” (Square).

Banks are migrating to EMV because they are able to encrypt bank information, making transaction-making much more secure. Originally, “if businesses ran a fradulent card, the banks would absorb the cost … [but now] if there is a fradulent card and the business isn’t set up with an EMV card reader, it’s possible that the banks are no longer liable” (Square). As Square and I anticipate, the lag in the EMV payments, which are significantly more noticeable than using the magnetic strip, will usher in a faster adoption of NFC payments which are contactless payments that are faster and just as secure.

I predict that most consumers will prefer to use NFC payments over EMV style payments in the near future, especially with the “instant gratification” of the future generations.

When an industry transitions from using one or more “smart” and centralized networks to using a common, decentralized, open, and dumb network, it provides a significant benefits to the industry.

First of all, the internal costs shrink considerably. The costs of contracting are reduced via software contracts which take care of policing, timely payments, transaction execution, bargain, etc. On this foundation a tsunami of innovation that was pent up for decades is suddenly released. All the applications that could never get permission in the closed network can now be developed and deployed without permission. At first, this change involves reinventing the previously centralized services with new and open decentralized alternatives, which involves the removal of entire layers of intermediaries which are no longer necessary.

The Internet effected such disintermediation by replacing brokers, classified ads publishers, real estate agents, car salespeople, and many others with search engines and online direct markets. In the financial industry, the Blockchain creates a similar wave of disintermediation by making clearinghouses, exchanges, and wire transfer services obsolete.

Therefore, this will enable Peer-to-Peer exchange of values where significant values can be held by people involved in value creation, then those involved in capturing of values. As internet reduces the cost of search and co-ordination, Blockchain cuts the cost of bargaining, contracting, policing, and enforcing the contracts. Thereby, decentralization will also create a truly sharing economy.

Source: https://www.linkedin.com/pulse/blockchain-real-sharing-economy-uberisation-dr-mihaela-ulieru

 

The Depository Trust & Clearing Corporation (DTCC) is a financial institution specializing in clearing and settlement services in the financial market, about $1.5 quadrillion transactions per year.

Last year they held the first ever Blockchain Symposium surveying the audience made of industry leaders on the future of blockchain. Among the concerns of the industry are data privacy and security (12%), scalability (21%), business case and cost of integration (32%), and legal concerns (12%), and other concerns (4%).

This year however, while business case and cost of integration still remains a concern for the industry (33.8%), a new category: Interoperability (20.3%) is a concern for many in the industry. In essence, interoperability for blockchain is the ability of different institutions, organizations, and companies to create a consortium. Due to the nature of blockchain, there needs to be a set of standards with the use of the technology. The biggest problem is how do we decide who gets the most influence in setting these standards for blockchain. This is mainly due to the fact that there are a lot of players in this new technology, and that there are many companies who wish to have the most influence in setting these new standards.

In my opinion, whether or not a consortium is able to take place, there is no doubt that apart from legal regulations, that there needs to be a standard for blockchain. Having a standard minimizes duplicate efforts, and promotes innovation and competition on an even playing field. This allows us to push beyond the boundaries of what we can actually achieve with blockchain.

Sources:
http://www.coindesk.com/blockchain-adoption-optimism-fades-at-dtcc-fintech-event/
http://www.coindesk.com/double-standards-the-push-for-blockchain-interoperability-could-get-messy/

FinnovateAsia is a one-day event in Hong Kong (HK) hosted by the Finovate Group, Inc to showcase the thriving FinTech industry in HK. The event is part of a weeklong FinTech conference hosted by InvestHK, which is a department of the HK government responsible for Foreign Direct Investment (FDI). Both HK FinTech Week and FinnovateAsia show that Hong Kong is promising to be an increasingly FinTech hub as the government facilitates the gathering of such companies. Hong Kong has seen a growth of 38% in the number of FinTech startups establishing their business in the area.

I’m not surprised that Hong Kong is a new FinTech hub, as it has always been a center for financial services. As a child of immigrant parents from Hong Kong, I have spent much time in the Central district, which is the main business district. Some of Hong Kong’s most recognizable buildings are the two razor shaped skyscrapers called the International Finance Centres One and Two. Both house a vast number of offices and headquarters, as does the entirety of Central. Investment banking is also huge in Hong Kong, providing more opportunities for merging technology and financial services.

Sources: FinovateAsia, HK FinTech Week Videos, InvestHK

Alibaba rival JD Finance is going independent after raising $1 billion from external investors last year.  The companies are rivales in China’s e-commerce; while Alibaba holds a 54% market share to JD.com’s 23.2%, the percentage gap has narrowed.

JD.com is divesting its entire 68.6 percent stake for 14.3 billion RMB, or around $2.1 billion USD.  The move essentially hedges any risk that JD.com investors may feel around JD Finance, which was valued at $7.1 billion at the time of last year’s financing.

Meanwhile, Alibaba’s fintech affiliate, Ant Financial, is out doing deals to expand its global presence and raising a $3 billion war chest for further M&A.  Ant Financial raised $4.5 billion at a valuation of $60 billion last April, and will likely go public this year or the next.

 

https://techcrunch.com/2017/03/03/jd-finance-spin-out/

http://www.investopedia.com/articles/investing/030516/alibaba-vs-jdcom-battle-china-baba-jd.asp

There is a lot of buzz about how FinTech technology is already transforming areas like the traditional banking industry, with even more potential to grow. However, FinTech technology also has a lot of applications in less developed areas where there may be less access to banks and other financial institutions, like what is available in the United States. 80% of adults in Africa do not have access to banking services, leaving the majority of the continent unbanked. This type of aspect to Fintech in developing countries is very beneficial, as waiting for traditional banking infrastructure to become widely available would take longer than the more accessible route of adopting Fintech solutions. Specifically in Africa, this opportunity not only gives individuals access to bank accounts, but implements banking infrastructure and services for a market that would otherwise not be able to interact with a bank. One of Kenya’s prominent Fintech uses is a mobile wallet called the M-Pesa. Over 50% of adults in Kenya own this type of account, and surprisingly the transaction volume on the system is roughly equivalent to up to 50% of Kenya’s GDP. One recent issue that is now being fixed is being able to use these money between multiple platforms and across countries with cooperation and interoperability agreements.

Link to article: http://www.iafrikan.com/2017/02/10/fintech-in-afrika-is-much-more-than-just-mobile-money-and-remittances/

Starbucks and Tencent Holdings Ltd., a leading provider of internet value-added services in China, have announced a strategic partnership to create a new social gifting feature on Tencent’s WeChat in early 2017. Starbucks said in a press release that the partnership positions it as the first retail brand to combine with WeChat in China in order to bring a locally relevant social gifting and digital payment experience to users.

In my option, Mobile payment is not just a way for users to pay merchants. It is also a way for merchants to promote their goods through gift advertisement. Wechat incorporate both the social network features and payment features together so that users can use apps in one place for multiple purpose. Starbucks can benefit this partnership with Wechat to obtain more customers with more direct advertising through social gifting.

https://www.mobilepaymentstoday.com/news/starbucks-gifting-comes-to-wechat-users-in-china/

This articles starts out by showcasing a recent report by Accenture. This report highlights the development various countries can see within their economies with the further development and use of AI. The author then debates the potential effects of AI within fintech. AI is still considered new to fintech thus making Accenture’s findings not directly relatable to fintech. The one aspect that fintech and AI needs to tackle first is customer acceptance. Many of fintech’s products are consumer products, but consumers are still skeptical of AI and therefore uptake on this technology may take more time. Despite this, millennials generally uptake such technology which will help the transition. Additionally, augmented reality is posed to include functionalities to manage financial accounts.

Considering there is already a move to simplified banking, I think that the introduction of AI into fintech will be met with less resistance. Of course this will take an uncertain amount of time, but considering AI engines such as Finie, Amazon Echo, and Google Home, are already integrating new capabilities, this amount of time will be lessened. The one aspect that may be an issue is that of security across these AI engines.

 

https://www.forbes.com/sites/madhvimavadiya/2017/02/27/artificial-intelligence-human-fintech/#70da870346a1