Author: mkatira

During his presidency and campaign, President Donald Trump strives himself behind making America competitive in industries where they don’t have a competitive advantage, specifically manufacturing. However, his focus for deep change causes him in this area has caused him to lose focus on the potential in other industries like fintech. The U.S is adapting perfectly to the rise in fintech but its the government regulators that are late to the party and aren’t capitalizing on the monetary value in fintech. Other countries such as Switzerland, UK and Singapore have benefitted from regulations such as advance blockchain technology, new testing places where new financial technologies can be used first hand, prior to release, and more foreign relations are created for transactions and foreign exchange base. There are a lot of things like the SEC and bank regulators can do with the resources that the U.S has that no one else does. One suggestions would the be the utilize the highly invested artificial intelligence technology for automated financial advising to ensure SEC regulations and codes are followed. We already invest billions of dollars in AI and its only a matter of time before it starts its revolution in the states. By starting early, you are putting the U.S at a huge advantage against every other country and could make millions off of regulations or taxes when the technology is properly harnesses, it just needs more attention from government in order to come to fruition.

URL: http://www.nasdaq.com/article/mr-trump-dont-miss-the-fintech-boat-cm759822

The San Francisco/Silicon Valley is considered the hub for technology, but more specifically, the fintech industry. Many of the innovations and different companies that are growing are now spreading toward the Asian Market, as they look to start and grow their fintech industry. Some of the key trends include the amount of people who pay from their phone for purchases and transactions. In fact, China has 50x more people using online apps on their phone than the U.S. Both the banks and the regulators have adapted the block chain technology and digital currencies to improve lending and supervision behind larger transactions. It also slashes remittance fees for lower income families so that they can benefit from fintech as well. This helps shrink the tech gap between the high and low income families. The rise of “sandboxes” (places to test our new fintech in a controlled environment) and better access to credit for small businesses make Asia the most rapidly growth market for fintech. They will actually benefit more than the U.S since there are more people to bring into the market and a wider variety of people can use it as well. Alongside the U.S, Asia will be a huge powerhouse for fintech innovation and wouldn’t be surprised if it passes the U.S as the hub of all fintech.

URL: http://www.frbsf.org/our-district/about/sf-fed-blog/5-fintech-trends-shaping-finance-asia/

Chinese bankers are adapting to the new blockchain technology to help combat financial fraud in their country. The idea came from the non-transparent and non-automated process that Chinese banks use to verify documents and other statement that come through their doors. Demand for the recent bitcoin defined technology has been on the rise in China, having sharp increases in YoY growth and over $1.5 billion in total investments over the years. Transactions become more parallel and transparent by storing back data in crypto-encoded blocks away from corruption. Some of the fraudulent acts that occur include replacing real documents with newspapers to use the documents to increase margin or tampering with transaction detail that happens and cannot be traced. The conception of blockchain technology would eliminate the amount of fraud that occurs in a certain corporation but would many of the corrupt economies follow the same trend as technology? China, U.S and other developed nations that fight fraud within finance benefit from this technology but those who don’t prioritize countering fraud would actually benefit from not using blockchain technology. There is no doubt that more and more banks will adapt to blockchain only those who practice finance ethically will know to properly use it.

Edited 2/27/17 URL: http://venturebeat.com/2017/01/26/chinese-banks-are-using-blockchain-to-fight-fraud/

In 2015, the volume of fintech deals done peaked at $14.6 billion with 848 different deals, but has now reached a declining state in the amount of deals and investments made from VC firms. In 2016, those numbers have declined to $12.7 billion and 836 different deals, which is a YOY% of -13% for the value of all deals. This drop was due to smaller deal sizes done by investors whose hesitance is caused by political instability and the future of the economy with a new regime. This has caused more startups to struggle since most upcoming fintech businesses rely heavily on VC funding to operate with a profit. It is predicted that this trend will continue for most of 2017 and suggested that fintech startups evaluate and adapt their business models to the current economic condition. Those fintech firms who do not rely on VC backed funding are rapidly growing to above $19 billion. While there is room for caution to invest in the future economy, one must evaluate how fintech currently compares to its competition in traditional banks. Fintech companies offer the same services as normal banks but with lower rates and fee with greater efficiency. They also introduce Peer-to-Peer transactions that many institutions are trying to adapt for their clients. If you consider that the startups not funded by VCs are lucrative, then any VC or investor shouldn’t worry about any outside factors and focus on the high returns they will have.

URL: http://www.businessinsider.com/fintech-deal-sizes-are-shrinking-2017-2

The biggest form of debt for millennials is the student loan from undergrad or graduate school. Roughly $1.3 trillion in student loan debt was issued last year and most of them were stuck in a lower-wage job, which made is difficult to pay off the debt. One advantage they have is that they utilize technological apps to help finance payments, track investments and gain financial advice to help grow and maintain wealth and credit. A startup company called Mint allows users to create budgets, track spending and check credit scores all on their mobile device. Another application called Acorn automatically rounds up your payments up and invests your change, which can be quite lucrative with everyday purchases and payments. These companies exemplify how the millennial generation are utilizing financial technology to help with their every day financing. However, an issue of security always looms when you trust your bank and credit information with an application. Many people stray away from this technology because of this issue and is something that can’t be dealt with until acquired by a larger banking institution. Nonetheless, the continuing growth of the fin tech industry will heavily impact millennials due to the tools and advice that young adults can use to grow their money.

The small business industry is one of little interest to large banks due to their risk-averse outlook on investing in companies. A recent study has been conducted where it was discovered that smaller institutions were 18% more likely to invest in smaller businesses and those that partnered with larger banks had a 51% satisfactory rate. With the recent rise in fintech companies and attributes, competition in the banking industry has grown significantly due to the success of the technology’s processing method and rate. Companies such as Kabbage and Trustly have processed over $1 billion in small business loans each and have provided a more cost effective and efficient way to process payments. Other SMEs are the ones taking advantage of fintech and disrupting the market for the larger institutions. It operates all under one contract for all market, thereby lowering admin costs and performs other functions such as refunds and splitting payments. Fintech allows you to eliminate the middlemen and save the extra money it would cost to process. Its no surprise that fintech is disrupting the status quo of the investing business and that banks are paying the price for it because of its inconvenience. In order to reclaim the market they are slowly losing, large institution must utilize a way to adapt fintech to their advantage and the place to start would be the small business market. I believe in the future we will see larger corporation invest more in the smaller businesses and soon will reclaim the market they have lost.

URL: https://smallbiztrends.com/2017/01/fintech-trends.html

After the recent takeover of the fintech industry, analysts have been attempting to identify which financial sectors can benefit the most. In a recent fintech conference in London, VC’s unanimously said that the insurance sector would desperately need technology guidance to further advance the field. With the rise of artificial intelligence and more efficient bank transaction processes, insurance falls behind in innovation and user experience. Insurance is seen as old-fashioned and rely primarily on brokers and paper while not being adaptive to the changing auto and home industry. Insurance Technology or “InsurTech” has seen a sharp increase in interest from VC firms due to its scalability and early profit projections. Startups such as Cuvva, a 150 million pound valued pay-as-you-go car insurance app and Trov have been the benefactors of an opportunistic market for insurance. With the high volume of startups appearing both in the U.S and internationally, we can assume that a wide variety of them will attempt to saturate and revolutionize the insurance industry. While InsurTech may be in line to replicate what fintech did to the market, some struggles initial struggles will occur. Insurance requires a more personal approach as it deals with humans and situations that are out of their control and too unique to automate. Auto payments are expected but it is believed that innovation will illuminate a discovery that technology can improve with insurance. Overall, it will be a few years until we see a substantial impact in insurance publicly but it’s important to know how early to target InsurTech companies for investment purposes.

URL: http://www.businessinsider.com/fintech-hot-insurance-insurtech-vc-economist-finance-disrupted-2017-2017-1

The sudden blossom of “blockchain” technology is becoming the new talk in the business world due to its revolutionary technology that make all aspects of a business more efficient. With its abilities, blockchain will make tasks such as payment verification and the implementation of “smart contracts” that automatically enforce policies and procedure, more simple and enforces all legal activity amongst an organization. Many companies have adopted this technology, such as Microsoft, who has launched their “blockchain as a service” amenity to actively and accurately record any amounts of company transactions digitally in blocks of data. While blockchain is revolutionary, a lot of debate has begun about the enforcement level of its technology. For example, Toyota Financial Services has toyed with the notion of a smart contract for their customers and their cars. If payment for a car isn’t received, the smart contract would notice and legally transfer ownership back to the company and shutting off the car for the driver. Many people view this as a transfer of power from human to machines and eliminate the need for human hierarchy with its easy accessibility across all users. It unites different ideologies of how soon blockchain will be commonly used amongst most businesses. With the force that blockchain technology has and the impact it’s ready to make on our society, we must find way to control the technology before it controls us. A more automated approach also eliminates the need for some jobs such as accountants, lawyers and bankers if their roles can be done on a computer. We must utilize its skills meticulously and not heavily rely on its purpose to operate a business in order to reap its true value for our business cases and situations.

Link: https://www.bloomberg.com/news/articles/2016-08-25/this-is-your-company-on-blockchain

In a recent article posted in Forbes magazine, the growth and future of the Fintech industry is analyzed by reviewing its performance in the market over the last 6 years. Fintech investments jumped from $1.8 billion in 2010 to $5.2 billion through Q1 2016 from seed investments to bank takeovers and acquisitions. It is the advancements in traditional banking that Fintech startups are trying to impact positively.
While this industry has massive room for growth and opportunity, many analysts believe that the opportunity for growth is hindered by the amount of increasing regulations within the insurance and corporate finance sector. The more “tightly regulated” a certain avenue of finance is, the more longer it will take to express growth. One of the ways to counter the sluggish rise of these sectors are through the increasing amount of Fintech startups being created in different cities/regions such as London, Zurich and Singapore. These cities are very attractive for any Fintech entrepreneurs due to the more “friendly” governmental and business regulations put into action. Because of this disparity, the current hubs such as New York and Palo Alto may lose their titles of premier financial capitals if regulations continue to roughen and those abroad remain more friendly.

http://www.forbes.com/sites/nikolaikuznetsov/2016/11/22/the-next-phase-in-fintech/#477a982a4a29