Author: cgwong

8 AM, Friday morning – Bitcoin investors waited with anticipation to hear the SEC’s decision of the first Bitcoin ETF, which would be known as the Winklevoss Bitcoin Trust. It seemed many were confident that the SEC would approve of the exchange-traded fund, as the price of a Bitcoin reached $1,325. If approved, Bitcoins could be bought and sold on the open stock market and push the price even higher. Investors were then told that, no, the SEC would not approve of the Bitcoin ETF, and the Bitcoin price slumped to $980.

The SEC defended their decision by stating that Bitcoin trading could be subject to “fraudulent or manipulative acts and practices.” This is not entirely without merit – in 2014, the Mt. Gox Bitcoin exchange was hacked and dropped the value of Bitcoin so much that it has taken three years to recover. With reports of massive cyberattacks on the rise, the SEC decided that it was simply too risky for a purely digital currency to be put on the stock market.

Additionally, there is some skepticism surrounding whether the Bitcoin ETF would have even been successful. The Winklevoss brothers have an index tracking the price of Bitcoin called WinkDex, that averages “the price of Bitcoin across multiple exchanges,” and provides an approximation of how the Bitcoin ETF would have performed. However, over the years, the performance of WinkDex has been behind Bitcoin, so it is unclear whether the Bitcoin ETF would have represented the true value of Bitcoin.

Overall, I think this is a good move by the SEC. I have previously written that adoption and regulation of cryptocurrencies like Bitcoin by governments is a step in the right direction to making all transaction digital. However, putting Bitcoins on the stock market without subjecting it to some form of regulation first mirrors how a lot of new emerging technologies enter the market today – before the government even has time to draft regulation for it, a new technology arrives to disrupt the market. Right now, with the spotlight on Bitcoin and the SEC, there remains time for regulators to find a way to regulate cryptocurrencies, and for Bitcoin to prove their currency is secure and valuable enough to be traded on the stock market.

Source:

http://fortune.com/2017/03/10/bitcoin-price-etf-winklevoss-approval/

With smartphones seeing improvements every year, mobile payments increasingly offer a convenient and secure way for smartphone users to make payments. Simply take out your phone and scan it at a compatible terminal, and within a few seconds you’re done. And let’s be honest, we were probably using our smartphones while we were waiting in line anyways.

However, there are several different mobile payment solutions on the market today. Android Pay and Apple Pay aside, there are “mobile wallets” such as PayPal and the new Rambus Unified Payment Platform, and more proprietary or brand-specific solutions such as Starbucks’ mobile app and McDonald’s’ upcoming mobile app. In fact, a report shows that PayPal’s and Starbucks’ apps are the most used mobile payment apps.

In an ideal world, you would be able to make payments at any major retail store or restaurant from a single application, for example, Android Pay over NFC. The consumer would be able to store all their credit cards and rewards programs on a single, secure app and make payments at any NFC-compatible terminal. In reality, the non-standardization of mobile payment solutions means that consumers have to load multiple apps onto their phones, making mobile payments overall less convenient. Additionally, doing so may be less secure if you have to store credit card information across multiple apps with questionable security. As an example, having to wait for the Starbucks app to load when I’m waiting for my tasteless caffeine boost is less than ideal, and I do question having my credit card information not being stored behind a virtual number like it is in Android Pay. Making a general standard for all mobile payments to adhere to and allowing consumers to pay and earn rewards all from a single, convenient, and secure app.

That being said, standardizing the whole mobile payments industry is probably not the easiest thing in the world, as illustrated by XKCD:

 

 

 

 

 

 

Sources:

https://www.mobilepaymentstoday.com/news/paypal-starbucks-top-consumers-mobile-payments-preferences-study-says/

https://www.mobilepaymentstoday.com/news/mcdonalds-gets-in-the-game-with-mobile-order-and-pay/

http://www.pymnts.com/news/mobile-payments/2017/rambus-launches-unified-payment-platform/

https://xkcd.com/927/

The mobile payment market in China reached $5.5 trillion last year, as reported by People’s Daily. The prevalence of mobile payments is evident in Nieslen’s survey estimating 86% of Chinese consumers paid with mobile apps, outnumbering other countries, with the People’s Daily quoting that 60% make small payments weekly. Even those in remote villages can make purchases. Being simpler than other payment solutions also allows smaller businesses to accept payments, and some Internet finance companies have begun spreading overseas. Alipay by Ant Financial Services Group now offers online payment and tax refund services for Chinese tourists. It will be interesting to see if the Chinese mobile payment industry will affect how other countries handle mobile payments.

The article does not make it entirely clear whether these mobile payment numbers only account for payment solutions like Alipay or Apple Pay, or whether they include proprietary options from individual businesses. Personally, I’m an advocate for the former, as having multiple apps to make mobile payments at different stores can be dangerous, since you’re storing your credit card information in multiple, potentially unsecure locations. The popularity of mobile payment solutions like Android Pay and Apple Pay in the US also largely depends on the willingness of businesses to adopt such payments. While I do shopping at Safeway a lot, for example, their terminals don’t accept mobile payments, even though they accept the new chip cards (which are theoretically more secure than the magnetic stripe). That being said, I’m encouraged by the growth of mobile payments in China and hope that more businesses will begin to adopt mobile payments.

Source

http://economictimes.indiatimes.com/news/international/business/china-third-party-mobile-payments-climbs-to-usd-5-5-trillion/articleshow/57344545.cms

A consortium of Australia’s biggest banks aims to gain access to the iPhone’s NFC antenna, which is what makes contactless payments on mobile phones possible. Initially attempting to negotiate a bloc with Apple, the banks responded to Apple’s claims of them attempting to block the expansion of Apple Pay into Australia by calling such claims “conspiracy theories.” Even though the banks have invested in their own payment technologies, they fear that any competition with Apple Pay will be severely one-sided. The banks are also attempting to gain permission to negotiate together, boosting their negotiating power, a move the Australian Retailers Association supports. Apple claims that restricting access to the NFC antenna to their own apps is crucial to the security and usability of the system.

Apple Pay is not the only mobile payment application on the market – Android Pay, Samsung Pay, Chase Pay, and Bronco Pay (OK that last one doesn’t exist yet) are other mobile payment services that are being accepted at more and more businesses, though Apple Pay is probably the most ubiquitous. As mobile payment services become more popular, it would be remiss for banks to not try and get a foothold in the market as well.

However, I do think that the banks may be wasting their time trying to get Apple to grant them access to the NFC antenna on iPhones. Doing so could set a precedent forcing Apple to grant other banks across the world similar access. This probably wouldn’t hurt the iPhone’s usability, but it would negatively affect their ability to maintain their competitive advantage of using their closed app ecosystem to better maintain a quality standard of apps on their app store. It is difficult for me to see Apple folding on this just because the banks demanded them to, but at the same time Apple needs the banks’ cooperation to bring Apple Pay to Australia. Whether the banks may be better off fighting Apple or giving up and relying on the open ecosystem of Android must be a question on the banks’ mind.

Source: https://www.bloomberg.com/news/articles/2017-02-12/apple-pay-dispute-about-tech-access-not-fees-aussie-banks-say

At the Economist’s Finance Disrupted event in London, COO of UBS’ Wealth Management Arm, Dirk Klee, wants banks to collaborate with fintechs rather than compete with them. According to Klee, “We are embracing fintechs and actually we believe that there is great innovation. We need to find very smart ways to partner up and improve our existing business model.” Klee also references roboadvisors, who are online wealth managers that “rely on a high level of automation to adjust portfolios,” and how UBS is building its own roboadvisor product that leverages human investment experience to bring more value to clients.

We’ve seen traditional banking systems adjust to the modern technology environment in different ways – some banks allow you to deposit checks from your phone, and some, like Chase, even have their own mobile payment products. With the rising popularity of fintech, it makes logical sense for banks to leverage automation to bring greater value to clients.

However, regarding Klee’s aim to use both automation and human experience to improve investment advice, I would caution that human experience only goes so far. When comparing index and managed funds, many investment professionals find that passively managed index funds (where the portfolio mirrors the market index) are simpler and often outperform actively managed mutual funds (where the portfolio is managed by managers who try to beat the market). I believe that experience is not a crystal ball, and that experienced managers can completely predict where the market is going to go next.

Sources:

http://www.businessinsider.com/ubs-dirk-klee-fintech-roboadvice-china-2017-2

http://www.investopedia.com/university/quality-mutual-fund/chp6-fund-mgmt/

Cryptocurrencies have come a long way since the first use of 10,000 Bitcoins to buy 2 pizzas in 2010. According to coinmarketcap.com, there are 7 different cryptocurrencies with a market cap of over $100 million, though none come close to Bitcoin with a market cap of nearly $15 billion. With companies like Microsoft now accepting Bitcoins as payments, the future of cryptocurrency is important to pay attention to. Kathleen Breltman, COO of a new blockchain platform called Tezos, offers her five predictions for cryptocurrency in 2017. Here I will touch upon a few and offer my own views.

“Investment funds will look to invest in cryptocurrencies”

It is important to understand that cryptocurrencies are still currencies, subject to wildly fluctuating economic forces. Though Bitcoin’s value is rising right now, its value fell significantly after its last peak in 2013. That said, some cryptocurrencies may be more stable than some real currency.

“Exchanges will become a source of scrutiny”

If cryptocurrencies want to be legitimized, then governments must be involved for the sake of regulating and protecting consumers – assuming governments can keep up with rapidly evolving technology.

My brother often says he regrets not investing in Bitcoin earlier. Of course, hindsight is 20/20.

Source: https://techcrunch.com/2017/01/23/whats-next-for-blockchain-and-cryptocurrency/

https://coinmarketcap.com/