Author: exwu

Blockchain, a digital ledger in which transactions made in bitcoin or another cryptocurrency are recorded publicly and  chronologically, will challenge and disrupt present centralized business models and the financial services sector.

The core fabric of the blockchain network which has the ability to potentially remove intermediaries or disrupt their current operating models, while allowing transactions to be securely maintained.  By removing layers of intermediation, banks are more likely to cooperate.  Furthermore, systemic risk can be reduced by moving towards a tamper-proof decentralized ledger where there is a single point of truth.

The core business model of banks is constantly being disrupted, and the blockchain is sure to be a driver of change in the years to come.  By moving money in different ways, there will be an increasing number of new financial products, as well as lower barriers to entry and greater competition in a more globalized marketplace.

https://www.finextra.com/blogposting/13823/how-blockchain-will-change-the-future-of-financial-service-sector

GV, formerly called Google Ventures, participated in a $25 million investment round in Currencycloud alongside existing investors Notion Capital Ltd, Sapphire Ventures LLC, Japanese technology company Rakuten Inc and venture capital firm Anthemis Group.

Currencycloud, launched in 2012, is a platform that allows companies ranging from banks to popular payments startups to offer international payments services without having to set up complex and costly cross-border infrastructure.  The money will be used to support the company’s global expansion plans. To date, around $25 billion has been sent through the company’s infrastructure to over 200 countries.

Google looked at us as a tool that is used in globalizing domestic businesses.  This is an investment in the right step, as this fintech company aids in the globalization of payment services in an increasingly globalized marketplace.

https://www.nytimes.com/reuters/2017/03/09/business/09reuters-google-currencycloud-investment.html?_r=0

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

Author Rohit Arora offers his alternative view on Chris Myers’ depiction of fintech as a bloom that “is finally coming off the rose”.  The first reason Arora thinks FinTech is going to be around for a long time is because traditional players are adopting the technology, and when big players adopt a new way of doing things, it shows long-term potential.

The second reason is that the realities of the marketplace encourage short-term thinking.  Myers cites fintech companies’ use of funds for quick growth over innovation as the reason for riskier and less desirable loans.  However, Arora states that this applies to all sectors.

Finally, Arora combats Myers’ statement that financial institutions are resistant to change with the fact that the marketplace is demanding it, and these instututions have no choice but to follow.  I agree with Myers, as competition necessitates keeping pace with the advances in technology.  The advent of mobile payment systems is just one example of revolutionary change in the marketplace, causing companies to divert their focus to eCommerce over brick-and-mortar stores.

https://www.forbes.com/sites/rohitarora/2017/02/22/3-reasons-fintech-is-thriving/#16d886e31017

Workday Enterprise Strategy VP Mark Nittler explains the limitations of current financial technology.  The fintech that was originally made to automate transactions and financial accounting is now preventing finance departments from realizing its ultimate goal, to be a better business partner.  He views today’s financial function as having three areas of responsibility: Transaction processing and accounting, business partnership, and compliance and control. Finance leaders face frustration as their teams have little time to nurture the partnerships their companies truly need since they focus on the other areas.

In this data-driven age, finance is being asked to provide the broader company with contextual information that can actively influence decision-making and the current technology is not able to do this, so it’s seemingly hopeless.  That is, unless you throw money at Workday, and Nittler would really like to let you know that it enables business agility by combining planning, transaction processing, governance, accounting, reporting, and analytics into a single, easy-to-manage system. Promotional rhetoric aside, I do see the value in this new approach into the digital transformation of fintech is advantageous.  Companies that can quickly bring together actionable information about their money and people in a system that can evolve as their business changes are sure to have a competitive advantage.

http://www.forbes.com/sites/workday/2017/02/13/back-to-the-future-building-financial-transformations-missing-link/#6873ee602974

While Nasdaq is best known for running stock exchanges around the globe, it is also one of the largest providers of technology to other exchanges and companies involved with trading. Nasdaq plans to set up a venture capital arm to invest in financial technology companies that can help grow its own businesses. It isn’t the first financial firm to set up a venture arm as a way to stay competitive: CME Group Inc, JPMorgan Chase & Co , Citigroup Inc and Banco Santander SA have similar units.

A venture arm would formalize some of the investing Nasdaq is already doing in fintech companies that are just starting up. It was one of the earliest supporters of blockchain, which is a record-keeping tool that some expect will fundamentally change the cost, speed and accuracy of trading. Nasdaq’s current investments include San Francisco-based blockchain startup Chain.com and artificial-intelligence company Digital Reasoning.

The move aligns with the goals of Nasdaq’s chief executive, Adena Friedman, who wants to increase the company’s focus on technology. Friedman states that “It’s a matter of making sure that we continue to take all of the new technologies that are available in the marketplace and … offering them to our clients.”

https://www.nytimes.com/reuters/2017/02/09/business/09reuters-nasdaq-venture.html?_r=0

Deutsche Bank has a history of skirting regulations to pad profits and personal bonuses. Wealthy Russians were sent money overseas by through a group of Deutsche Bank executives arranging stock trades that had no purpose other than disguising the fraud. In one case, a supervisor in the Moscow office was paid $3.8 million for “consulting agreements” by one of the companies.

Over $10 billion in laundered money was directed to London and New York form Moscow, and the Deutsche executives didn’t crack down on the schemes despite their opportunities to do so. Despite its history of fraud, Deutsche’s New York bank still has inadequate compliance and monitoring systems.

Deutsche agreed to hire an independent monitor to be approved by the Department of Financial Services. The monitor will review the bank’s relevant compliance system.

Cleo, a London-based startup, has developed a chatbot that helps people manage their finances. The company has recently received funding from a number of angel investors, including Skype founder Niklas Zennstrom. Zennstrom has invested his personal assets instead of going through the VC firm he founded, Atomico.

Cleo can be accessed either through the Cleo app or Facebook Messenger, and through integration with Google Home and Amazon’s Alexa. This AI-powered financial assistant allows you to ask it about your current bank account balance, how much you’ve spent at what store, and set budget or spending reminders. CEO Barney Hussey-Yeo wants to make “managing your money incredibly simple” and says that typical users are young professionals and graduates. He also notes that the “manage your money” space is increasingly competitive. With companies racing to become the financial interface of this generation, Cleo has managed to make money management mobile, which I feel has a lot of potential for the millennial generation. The concept seems very convenient and easy to use, however, I would be concerned about the security of the application handling banking information.

Skype’s Niklas Zennström backs London fintech startup Cleo

The efficiency and security benefits that fintech companies have brought to developed nations have largely bypassed developing nations.  However, fintech players are starting to disrupt the existing financial order in these markets as an increasing number of people own mobile phones.  Since there is less of a digital footprint, the sophisticated algorithms that some fintech companies use to generate personalized offers or risk scores in developed countries aren’t useful.  Thus, in order to succeed in this environment, companies such as SERV’D in India build apps that encourage users to expand their use of technology.  SERV’D helps households and its workers, such as nannies, drivers, and cooks, create simple work contracts and get paid online.  The data that is generated captures the wage and payment info of over 400 million workers who would otherwise have no way of demonstrating their income for loans and other benefits.

Another struggle consumers in developing countries face is the lack of a steady paycheck; many only have temporary jobs, which can be selling produce one month and picking tea the next.  They also have unpredictable expenses which means the standard, rigid insurance premiums in developed countries are not a viable option.  To combat this, companies such as Uber’s Xchange allows drivers to participate in very short-term leasing programs that are a few months long and have a low down payment.  In this sense, Xchange tries to meet consumers’ flexible earnings with flexible financing.  By adapting to developing countries’ infrastructure and integrating financial technology in a way that plays to the lives of the people, these companies can play a crucial role in bringing these countries into the digital space.

 

https://hbr.org/2017/01/fintech-companies-could-give-billions-of-people-more-banking-options

Cloud Elements is receiving its second round of venture capitalist financing, led by Harbert Partners. The company builds API integration tools for developers, and the company attempts to tackle the data deluge by building integrated systems directly into a company’s application. They differentiate themselves from competing companies such as SnapLogic and MuleSoft, which have a separate, external integration product aimed at IT.

This relates to our in class discussion on how enterprises must face the issues that arise from sharing data across multiple systems. As opposed to investing in a single system, which is both costly and risky, an enterprise can opt for Cloud Elements’ API integration platform. If developers need to connect multiple financial systems in order to synchronize fiscal data across an organization, they would use the company’s application to create a financial hub. The company wants to expand the number of systems it can connect to, and with an ever expanding amount of data and systems, that number is limitless.

Cloud Elements scores $13 million Series B to advance API integration tools