Author: kasimshaikh

There has been conversation about banking and its role in the expansion of FinTech. Many have been looking for major banks to provide them with cutting edge solutions for their mobile lifestyle. While most banks have taken strides in the mobile arena, artificial intelligence is left undiscovered.

I believe that the outcry for artificial intelligence is futile. Currently, major banks have mobile apps that allow you to manage accounts, deposit checks, and even check your FICO score. This technology came out years ago, signaling that we might have already found the Uber of banking. Artificial intelligence can spark a new trend in mobile banking, but might not be practical. When it comes to personal finance, automation can seem irresponsible and lazy.  It is up to users to trust AI to execute IFTTT processes on bank accounts. Personally, spending a few extra seconds on a mobile app in exchange for peace of mind is worth it. I do believe that banks are utilizing most consumer friendly FinTech innovations, and calls for more technology in the fields are baseless.

Link: http://bankinnovation.net/2017/03/is-bankings-uber-moment-coming/?utm_medium=email&utm_source=fintechweeklycom

Keyo, a biometrics-based payment start up, have been making great strides in eliminating payment methods. Currently, biometrics are primarily used for NFC payments. It requires you to carry your phone and use your finger. Keyo eliminates the need for a device altogether.

Keyo works by mapping the blood vessel patterns in users’ palms. The users can wave their hand over updated POS systems and see transaction options. Keyo allows users to store multiple cards and see transaction history via an iOS app.

I believe this a great thing for electronic payments. Although, fingerprint sensors are secure, they can be falsified by removing people’s thumbs or using scotch tape. Keyo uses blood flow patterns that cannot be replicated. It eliminates the needs for cards and keys. This product is destined to be ported to more grand items, such as cars and homes.

Keyo is in early stages of testing in Japan. It will take a few years for big retailers to use this technology at store locations. Until then, this is a cool but impractical technology. This company will pioneer this new payment method.

Since 2015, Barclaycard’s touchless payment technology, bPay, has been used in over 1 million transactions totaling £6.6m. Their proprietary technology has been used in wristbands, fobs, and loops. Barclaycard has many partnerships with fashion brands to embed bPay into articles of clothes and wearables.

There has been new deals. The first includes a partnership with DCK, who source 60 million pieces of jewelry each year. They plan to turn their high-end bracelets into mobile wallets. Their second deal is with Tappy Technologies. They will turn luxury timepieces into payment devices.

I believe this is a great thing for mobile payments, although I think that there some barriers to overcome for fashion-oriented products. First, the existing market share of the Apple Watch might deter people from paying premiums for bPay integrated jewelry. Apple partners with fashion brands to provide its customers with fashion trendy bands. So Barclaycard’s need to be aggressive in their product integration and rollout. Furthermore, the wearables have a transaction limit of £30 at a time. It makes sense to have a low limit in case you lose your wearable. But there are two-factor authentication systems available. Apple uses its biometric sensors. Perhaps the fashion bands can use a token system and authorize all transactions for a period of time. Users could deactivate the band as a failsafe.

Barclaycard is making good strides in the right direction, but might be late to the game.

https://www.finextra.com/newsarticle/30190/barclaycard-strikes-new-wearable-deals-for-contactless-jewellery-and-watches

Point-of-Sale (POS) systems have been transforming since the invention of Square. Most modern restaurants have adopted this more simplistic, yet sophisticated, form payment. They has gotten more intuitive by asking our signatures by using our fingers on screen. This usability is now going global.

Visa and IBM are partnering to provide Watson IoT customers with Visa Token. This essentially turns all smart devices into payment terminals. For example, if you have a car, you can use your car touchscreen to pay for gas when you’re at the station. In a more complex situation, you’ll be able to pay for the miles you use on your car instead of the base 15,000k/yr lease. Your shoes can track how many miles you have run and alert you to buy new ones.

I believe that this is a great thing. However, I am concerned about security. Each device will have access to your payment information. Each device that utilizes this token service should be well encrypted. Two-factor authorization is an absolute must, including a biometric password. Privacy can also raise caution. These tokens will track your purchase history and personal habits. This technology has the power to automate Amazon Dash, which is scary. It can decide when you run out of a good, and automatically order it for you. But in the end, it is your choice to use the services. I certainly will.

https://www.finextra.com/newsarticle/30150/ibm-and-visa-join-forces-to-turn-billions-of-connected-devices-into-points-of-sale

Legal Entity Identifiers (LEI) are unique codes assigned to companies during financial transactions. Similar to blockchain technology, LEIs would allow for greater analysis for historical transactions. These identifiers were first used in 2012 and have reached over 480,000 participants. However, it is important to note that the number of new registrations have dropped exponentially. In 2016, there was a net loss of 12,000 identifiers.  There is no incentive to renew because lapsed identifiers can be reported in financial transactions under current regulations in the EU. And in the US, lawmakers are opposed to making LEIs mandatory in anything other than the swap market.

LEIs have become irrelevant in business because of its loopholes. In an ideal world, companies would use them to maintain financial integrity. I believe that lawmakers should rethink their view on LEIs. After all the financial crises in the last decade, it would make sense to have an extra checks and balances. It works well with swaps. CUSIP numbers allow for secure and legit transactions. This can be easily translated to other markets as well. The idea of LEI sounds good on paper, but will only come to fruition if practiced by all.

 

Link: https://www.finextra.com/newsarticle/30117/global-lei-initiative-struggles-for-momentum

The People’s Bank of China has completed a trial run for its iteration of digital currency. Different banks in China participated in transactions involving the currency. They are a world leader in testing and implementing this technology. After ironing out a few kinks, the People’s bank plans to have a country-wide rollout. It will be a legal tender and backed by the government. Since, the digital currency will be floating in the money market, the bank will closely monitor it to avoid inflation.

I believe this is a good thing for fintech. Physical monies have been becoming irrelevant since the credit card. We deposit our physical money into banks and are able to have a digital representation of it on our devices. This digital currency will implement aspects of blockchain technology. Banks will be able to see the transaction history and detect fraudulent activity. They will also be able to account for all digital currency in the market when determining cash levels.

Look out in the next few years for banks adopting a similar currency. It will move finance into a new era.

The use of physical security tokens during two-factor authentication has been a fairly common practice in corporate America. It creates a more secure system. An annoyance of this process has been the need to carry the physical token. There are many form-factors, but resemble key fobs. If you forgot or lost the token, you would need to contact the IT administrator to login to your computer.  Imagine if you are about to present at a meeting, but unable to login. Awkward…

Citi Bank is now rolling out a soft-token system for their clients. Instead of a key fob, users can download a Citi Bank app to generate login credentials. This has many advantages. One is less likely to lose an essential item like a mobile device than a keychain. Most people have their phones with them constantly, so users have the power to login to their financial systems whenever they want. They will not have to wait to receive a physical token, which can take days if you work in a geographically dispersed company. Finally, less paperwork! The process of getting physical tokens at a company takes signatures. Soft tokens have great advantages that Citi Bank’s clients will benefit from.

Link: https://www.finextra.com/newsarticle/30048/citi-ditches-physical-tokens-for-app-based-login-to-corporate-platforms

2016 has been a very eventful year for technology hacking. According to a new report from CyberScout, there has been a 40% YoY increase in 2016 of US data breaches. This might have been overshadowed by claims of Russian hackers tampering with our election, but it is very alarming.

The reports elaborates stating hacking, phishing, and skimming attacks accounted for 55.5% of instances. Many of these cases involved CEO’s being phished for sensitive information. One would believe that executives overseeing a corporation have the capability to discern cyber threats. Unfortunately, this is not the case. In 2015, Mattel was phished for $3 million. Chinese hackers posed as the new CEO and ordered a wire transfer to a bank account. The email looked valid and received the proper approvals almost immediately. This technique is used in conjunction with knowledge of a company’s financial procedures.

This is the status quo — technologically illiterate executives lacking the critical thinking skills of a teenager. I propose that all executives must pass a cybersecurity course each quarter. These tests would update frequently to capture all developments in hacking technology. This should be a mandated training exercise to prevent further data breaches. This report should be alarming for all industries.

Link: https://www.finextra.com/newsarticle/30014/number-of-us-data-breaches-jumps-40-in-2016

McKinsey conducted a study that estimates there will be significant monetary impact for those using Distributed Ledger Technology, with widespread adoption in 5 years. Their adoption will save global financial industries more than $100 billion. This technology change in the way FIS are developed. Finextra believes there will be a “blockchain” gold rush in the next few years, and I believe the current trends are supporting that.

As discussed in class, Bitcoin is founded on blockchain Technology. Each block in the chain contains data that cannot be altered, but can be added upon. This creates a transaction history and consistency for Bitcoin. This concept is derived from Distributed Ledgers. Blockchain is just another form of it.

Distributed Ledgers are often implemented in the form of permissioned ledgers. They allow for the ledger to be a secure, dynamic, and collaborative data source that only certain members of an organization can see. This keeps the ledger secure while keeping intact its intrinsic efficiencies. There will be growing pains with new systems, but companies who can utilize this technology properly will be swimming in their savings.

 

Link: https://www.finextra.com/newsarticle/29977/blockchain-impact-timeline-speeds-up-massive-cost-savings-forecast