Author: cburdsall

One of the interesting elements about Fintech is the growth of it it part of the world that is governed under Sharia law. Financials in these parts of the world are incredibly unique and must be catered to culturally appropriate regulations.

An aspect about this that makes finance harder in countries governed by Sharia law is the concept of interest. In nations governed under Islamic principles, the concept of interest is seen as favoring the lender and exploitive. Furthermore, the overall premise of lending must be to promote the principles established under Islam, rather than create wealth for an individual or organization.

Another important aspect of finance in countries governed under Islamic law is that the lending institution must also share in the risk of the financial instruments it creates. This governs the type of instruments that a bank can invest in with the money of others and its own and is aimed at creating a more equitable lending environment that protects the people.

Enter Malaysia. The majority muslim country recently announced that it will be providing “incentives” to companies willing to develop and test fintech products in the domestic market. Due to the fact that opportunities of profit from interest alone is far more difficult in a country governed under Sharia law, these countries have seen slower growth in the fast-growing fintech market. This offering may be an incredibly valuable proposition for an entrepreneur with a global mindset aimed at offering some of the benefits of fintech to different cultures across the globe. Malaysia is also a powerhouse country in a the fast growing ASEAN region of the globe and could provide unique opportunities for regional market entry.

 

Source: https://www.cryptocoinsnews.com/malaysia-woos-fintech-devs-shariah-compliant-islamic-finance/

Recently, Google Ventures, the venture capital arm of internet giant, Google, made its first investment in a fintech company. The company they invested in, CurrencyCloud is a service that allows companies to quickly scale international operations by handling the currency conversions and transactions in a transactional fee revenue model.

The CEO of CurrencyCloud mentioned that the demand for global transactional services is quickly growing as it allows fast growth startups to conduct business on a global scale without organically developing the capability.

Scalability

One of the major selling points that draws interest among the Google Venture partners is the ability to quickly scale business and help others do the same. This is one of the major draws for CurrencyCloud due to their APIs that allow for rapid expansion and quick integration.

Global

Now more than ever, businesses are seeking to expand internationally as soon as they can in order to grow at a quicker pace. One of the Google Venture partners commented on this, recognizing CurrencyCloud as a leader in international transactional services.

Overall, Google may look to expand their venture investments in the fintech sector as the industry is drawing in more and more customers. Look to see this trend increasing as new financial services that promote global markets come into play and reduce the barriers to international business.

With the recent slowdown in Fintech and venture allocations to Fintech startups the question that is beginning to be asked is “why?”. Aside from systemic factors such as the rapidly changing regulatory environment, the general business model of Fintech firms is starting to come into question.

In a recent article titled, “The trouble with fintech and why now is the time for dlt“, the author probes some of the issues with the Fintech business model and why it isn’t growing at a similar pace to pure technology companies. The answer lies in the nature of the products that the industry offers in the first place. Fintech companies often offer financial products that by nature take a long time to reap a profitable return. In a startup environment, this is a cause for concern as the companies typically have a limited amount of funds to sustain operations before being forced to seek additional capital. Additionally, financial products harvest large returns at scale rather than in smaller niche markets. Venture capitalists have begun to realize this, which has caused the funding pipeline to substantially shrink.

Still Hope Yet?

Although there has been a noticeable slowdown in capital, an area that is still growing within the Fintech community is the concept behind one of its biggest successes, Bitcoin. This technology is called Distributed Ledger Technology or DLT and essentially works by distributing a constantly changing ledger to all parties within a network. This dramatically reduces fraud risk by ensuring there are multiple correct ledgers that are automatically updated with each transaction. One can think of this concept as similar to the distributed computing trend of the cloud.

Looking to the future, we will likely see a disruption to the traditional providers of such services such as Swift and ACH as more and more companies switch over the the automated DLT technology. However, the fear of data integrity and sharing is still on the minds of many companies which may create a slower pace of change than originally anticipated.

 

Source: http://www.coindesk.com/the-trouble-with-fintech-and-why-now-is-the-time-for-dlt/

A recent article on Forbes entitled, “Three Reasons Fintech is Thriving“, brought up a few points about the recent growth and expansion of the Fintech market and some future predictions that come along with it.

Slow to Grow and Change

The article started with an overall analysis of the market which caught my attention when it brought up the point that technology and finance are typically at odds. One of the major points it brought up was that Technology is typically a fast moving industry focused on growth and new development, whereas finance is a much slower industry that changes primarily in response to improvements in efficiency, regulations and international and domestic financial climates.

The shift from traditional financial companies to those with more technology companies has begun to pick up pace as younger investors begin to accumulate wealth that was once nearly entirely concentrated in traditional financial services providers. Technologically aided financial services are not only affecting the consumer areas, but also in a business context where providers seek to reduce costs and increase value through technology.

Giants Still Control the Market

With all of the recent developments in financial technology, many would be surprised to learn that traditional providers have retained a large majority of the financial services market share. This has been done through a combination of organic developments along with a growth-by-acquisition strategy that has allowed the traditional providers to sweep up smaller, technology-driven firms to scale up and provide more value in their offerings. In addition to this, traditional service providers have expanded their market by developing products and services specifically oriented for small businesses and entrepreneurs.

Overall, the growth in the Fintech industry is exponentially increasing on many different facets. The future of the industry seems to be open to interpretation, but look for the traditional providers to seek to acquire smaller Fintech firms or face a loss in market share.

Source: https://www.forbes.com/sites/rohitarora/2017/02/22/3-reasons-fintech-is-thriving/#266f19da1017

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/

As tax season rolls around, many around the country will endure the monotonous and mind numbing task of going through their financials in order to determine their tax situation. However, there are many software based tax helpers that come at little to no cost and are widely available to anyone with an internet connection.

Of the many providers, the largest is Intuit’s TurboTax which provides a streamlined way to file and prepare taxes. In fact of the company’s revenue, Turbotax accounts for 89% of all of Intuit’s sales.

A new player in the field, CreditKarma offers users free tax preparation, receiving revenue for the customer’s data rather than charging them a fee for the services. The company also makes money by peddling other products to their users based on the information entered into their tax services.

As similar services begin to pop up, companies such as Intuit and H&R Block will begin to face competition for users seeking to file their taxes for free and may look to switch their revenue models to those similar to CreditKarma in order to keep their customers.

Source: https://www.wsj.com/articles/what-to-know-before-using-free-tax-return-services-1486722601

With nearly all of the big technology companies in the mobile hardware and software space providing a product, payment processing has become one of the hot technologies going into 2017.

There are a few key components of the payment processing industry to look at, including: Mobile Wallets, Gateway Vendors, mPOS(Mobile Point-of-Sale) and Mobile Peer-to-Peer.

Mobile Wallets

In the Mobile Wallets sphere we see some of the largest companies entering the industry such as Apple, Samsung and Google along with retail giant WalMart and Chase. The three technology companies use their mobile hardware as a platform for the Mobile Wallet services, where other entrants such as WalMart and Chase have entered the business through the mobile application arena.

Gateway Vendors

Gateway Vendors are an extremely fast growing area in the payment realm. These vendors provide front end payment collection services that allow companies to escape the hassle of setting up and maintaining merchant services for businesses (think Venmo for companies).

Mobile Point-Of-Sale

Mobile Point-Of-Sale has created a new payment area supporting small businesses. This technology allows businesses to collect payments through mobile devices rather than using the expensive and static traditional POS systems. In addition these companies provide other valuable information such as inventory and marketing analytics along with customer retention information and payroll data.

Mobile Peer-to-Peer

Mobile Peer-to-Peer technology is one that we are all probably most familiar with, giving rise to such companies and services like Venmo, Google Wallet and Square Cash. The largest players in this space have branched out from other payment processing areas which creates a dynamic marketplace for the competitors.

In 2017 look to see a shakeout in the different payment processing areas with the companies each securing their users and enticing new customers, while the weaker positioned entrants retreat into niche markets or return to familiar business areas.

Source: http://www.businessinsider.com/payments-ecosystem-data-and-business-potential-2016-7

The Mitsubishi Trust has recently announced that it will be pursuing legal action in response to the news that Toshiba has been inflating profits over the past 8 years, the group reports.

In the suit, Mitsubishi is asking for over $8.7M attributed to the client losses caused by the accounting scandal. The fraud was determined to have impacted over $1.3B dollars in revenue. The news of the scandal caused a large drop in the share price of Toshiba which affected the Mitsubishi pension fund.

In response the number of lawsuits, Toshiba has announced that it will sell off a portion of its memory chip business which will allow the company to finance the litigation and punitory costs associated with the suits. Since the discovery an announcement were made, over 15 separate lawsuits have been filed seeking compensation for losses attributed to the negligence and fraud within Toshiba.

This would be on top of the recommended $60M fine imposed by Japanese authorities and put the company in a difficult position.  This scandal causes shareholders and potential investors to be wary of investing in the company and devalues public perception which could hurt one of the company’s many lines of business. Similarly, inflating profits is looked upon poorly by investors who see a retroactive reduction in investment value as well as a betrayal to the company’s public owners.

Source: http://www.reuters.com/article/us-toshiba-accounting-idUSKBN15E03A?il=0

With loads of sensitive information at stake, financial institutions are a large target for those looking to commit financial and identity fraud crimes. However, there is a rising tool that these institutions may soon be able to employ to help catch fraudsters in the act: Artificial Intelligence. AI has long been considered useful for a wide array of unique application, however, the concept of using artificial intelligence to detect criminal patterns is new in thought.

One of the new tools being rolled out by the payment company, MasterCard, is called Decision Intelligence. This tool allows payment companies to analyze transactions on a real-time basis, allowing companies to combat fraud on the front lines. A core aspect of artificial intelligence in the concept of pattern recognition, something that the payment companies and financial institutions are looking to take advantage of in order to autonomously flag transactions that seem suspicious. This tool will also reduce the number of “false events” which are triggered when an authentic transaction is flagged as suspicious and the customer’s card is declined.

As more and more banks and financial institutions begin to invest in autonomous and artificial intelligence driven fraud detection systems there will be in immense change in how society finds and catches criminals and may even raise the debate for preemptive actions.

A new breed of developing technology has become prominent among the likes of Millennials and Gen Xers called Fintech (Financial Technology).  As the younger generations have become early adopters of the new technology there has been a group that more resistant towards this massive shift to nontraditional financial institutions; the Baby Boomers.

In an interesting article I read recently entitled, “Boomers, it’s time to embrace the power of fintech“, the author talks about some of the useful applications that the older generations may have for this new technology.

Paying Bills

Recently, there have been a number of mobile applications that assist with centralizing and automating the hassle of paying bills on a monthly basis. These applications could help simplify the monthly financial obligations faced by individuals into a simple interface that allows the user to be more cognizant of their current financial positions.

Health and Medical

Another use the author mentions for these new financial technologies is in the medical and health arena. From pricing out and managing medical prescriptions to test results and other health based information there are applications that assist with many different medicinal areas. With the benefits of secured, portable and accessible information, many people are beginning to take an active role in managing their health through the suite of free and paid for technology.

Investment and Cash Management

As the number of Boomer retirees is set to increase for the foreseeable future, the importance of wealth management is rapidly increasing. With applications such as Mint, which centralizes all your financial and investment information and provides analysis based on spending and investment return, retirees can utilize this information to make informed decisions about their finances.

Source: http://www.chicagotribune.com/business/sns-201701131830–tms–savagectnts-a20170113-20170113-column.html