Author: xtran

According to the article, fintech industry is reaching maturity as there are fewer new startups and it has observed a steady development from 2015 to 2016. It is not surprising that 3 segments that have had largest growth from 2015 to 2016 are cloud and core processing solutions; artificial intelligence, machine learning, blockchain technology; and customer segmentation and product personalization solutions. Their strong growth is thanks to the evolving technologies and customer willingness to adopt new offerings. Three segments that saw a declining trend are retail payment solutions; robot advisor so-called empowered investors; and emerging payments because firms in these areas have established strong positions and entry barriers.

It is predicted that we will see a lot of partnerships between startups which have been disrupting decades-old practices and traditional, larger players who have been rigorously developing their own innovations to adapt with those game-changing technologies. I believe that the convergences rather than fierce competitions will be beneficial for not only both parties but also consumers as they can offer more handy services at cheaper costs and become more profitable.

Source:
http://www.businessinsider.com/these-are-the-fintech-segments-most-likely-to-grow-in-2017-2017-3

WorldRemit, based in UK, is an online platform for sending money overseas just in minutes and at a low cost by employing online and mobile technology. To compete directly with Western Union, MoneyGram, it offers low transaction fees, no minimum transfer amounts, and better exchange rates.

WorldRemit offers users in 50 countries to remit money by paying into bank accounts or into mobile wallets which can be used for airtime top-ups, or even cash pick-up points; and let people in more than 100 countries to receive remitted money.

The company is also thinking to integrate its services with messaging platforms like Facebook, Viber, Skype but it has not publicly disclosed any plans yet. I believe this integration, if any, will be very successful because it does provide a fast solution of international communication and remittance at low cost.

I think this service is particularly helpful for people who want to transfer money with good causes as it is more timely, convenient and cheaper than Western Union or MoneyGram. However, as WorldRemit allows transactions to be processed immediately and transfers can be received instantly depending on the transfer method, it opens door for frauds or money laundering activities. Thus, the company should do background check for every client when they register and set the limit of maximum transfer amounts in order to prevent frauds.

Source:

WorldRemit Raises $100M To Take On Western Union In Money Transfers

https://www.compareremit.com/money-transfer-companies/world-remit/

Tilt is a crowdfunding and peer-to-peer payment platform. It provides the services not only in the US, but also in Canada, UK and Australia. Its main target customers are anyone who is 18-24 years old. By using the app, users can collect money from a group of friends/colleagues/family members by creating a project in Tilt application, setting the amount of money desired and then inviting those contributors. Contributors make payment in just a few taps. The app also allows everyone to see who has or has not paid. I don’t think this is a good feature to be embedded because of privacy protection. It should make the information visible to only the organizer.

There are 3 ways for Tilt to make money. First, it charges 2.5% of the total amount raised in “Fundraising” and commercial campaigns. Second, it charges 3% of processing fee if contributors use credit card. Third, it makes money by providing businesses with access to its extensive API.

I think compared to Apple Pay, Venmo, Square Cash, Tilt does have a competitive edge of social engagement which is a great selling point to its target. However, I do not see yet how it can compete with Facebook and Viber payment. I believe in the future of mobile payment but I’m not confident in Tilt making successful profit by transaction fees. Nonetheless, Tilt has a high potential to sell useful insights regarding customer behavior to businesses which are extracted from its data.

Source:
https://www.fastcompany.com/3062668/tilt-wants-to-be-venmo-but-everywhere
https://www.gobankingrates.com/personal-finance/tilt-payment-app-replace-venmo/
http://fortune.com/2014/11/12/tilt-future-crowdfunding/

Based in New York and founded in 2014, Cadre is an online platform that connects investors and operators of real estate. It is also known as Amazon for commercial real estate deals. Its main target clients are group of investors, such as endowments, foundations, institutions, and other high net-worth individuals. By leveraging its proprietary technology, Cadre brings more transparency, efficiency and liquidity to the real estate investing market by providing investors with access to the same information across deals. For an annual fee, members of Cadre can enjoy access to due diligence information and standardized financial data of assets which have been approved for listing on the platform after a comprehensive deal vetting process. Cadre makes money by collecting fees for access to the service as well as a portion of the deal profits based on its own investments. I believe this platform would definitely change the experience of sellers and buyers in such a historically opaque industry. It also creates an opportunity for more people to make investment in commercial real estate. However, Cadre would have to come up with a solution for such a challenge that after some time of interaction, buyers and sellers can make deals themselves to save charges from Cadre.

Sources:
http://www.businessinsider.com/what-is-cadre-and-how-to-invest-in-its-real-estate-deals-2016-6

http://realestatetechnews.com/blog/real-estate-tech-startup-cadre-brings-in-massive-fundraising-round

https://rctom.hbs.org/submission/buy-an-office-building-online-with-cadre-amazon-for-commercial-real-estate-deals/

Based in San Francisco, California and founded in 2011, Metromile has been disrupting auto insurance industry by providing users with a pay-per-mile insurance solution and a driving application. By using a device called Metromile Pulse which is hooked up to your car’s diagnostic port, the company keeps tracks of your miles to determine insurance premium. In addition, the Pulse records your driving routes and advises accordingly how to optimize travel time and gas usage. More interestingly, Metromile won’t charge you more than 150 miles a day if you go for a road trip. In terms of coverage structures, Metromile offers the same as other auto insurance companies. In terms of pricing, you get charged monthly by the actual miles you drive plus a fixed rate determined by your driving history, age and coverage selection. Despite those benefits, the claim process has been reviewed to be slow, troublesome and not satisfactory.

Thus, Metromile is a best fit for seniors who do not often drive and tend to drive carefully or for those who own several cars which they rarely use. Also, anyone who has a tight monthly budget and doesn’t mind the unresponsive claim process should consider Metromile. I believe Metromile will succeed if it could improve its customer service and additionally consider partnership with conventional insurance companies to create synergy.

Source:
1. https://www.valuepenguin.com/metromile-auto-insurance
2. https://www.crunchbase.com/organization/metromile#/entity

Blockchain is described as a kind of database with built-in validation; however, its ledger is not stored in a master location or managed by anybody. Instead, it is distributed, existing on multiple computers simultaneously so that anyone who are interested in having a copy of it can easily do so. More noticeably, the block validation provides a security system in such a way that “old transactions are preserved forever and new transactions are added to the ledger irreversibly”. In other words, the data is immutable. As a result, it provides a wonderful benefit for FIS fraud detection and great help for not only auditors both internal and external but also financial regulators to generate useful analytics. Beyond financial sector, the system is also invaluable for “managing the provenance of assets, date-stamping events, geo-stamping those events in a specific location, establishing identity, and so on.” Nonetheless, as being a distributed nature, it requires constant computational power in many multiple locations, which could be a big challenge when volume and velocity of data increase quickly. With highly valuable potentials it brings, I believe that blockchain will soon become the norm for data records applied in many industries. There are already startups engaging in this blockchain-based cryptocurrency such as Bitcoin, Ethereum and Ripple.

Source: https://arstechnica.com/information-technology/2016/11/what-is-blockchain/

While originally many startups tried to compete with traditional financial institutions, currently, there has been a shift toward collaboration between them through partnerships or acquisitions. Thanks to technologies like robotics, cloud computing and data analytics, “we are now in a golden age of fintech”. Globally, the number of investments in fintech startups competing against the traditional financial institutions versus that of investments in startups pursuing to collaborate with them has remained steady over the past five years (“with 62 percent of deals going to competitive companies”). The move is pretty much obvious in North America, especially at New York. It is surprising that “in the first quarter of 2016, New York received more fintech financing than Silicon Valley for the first time ever. I do agree with the article that collaboration, and eventually a real adoption instead of competition will strongly continue and help fundamentally change the banking ecosystem. Of course, there are still definitely a lot of work for banks and regulators to seamlessly adopt new technologies which provide solutions for many problems simultaneously.

Source: https://www.accenture.com/t20160724T221504__w__/us-en/_acnmedia/PDF-26/Accenture-FinTech-New-York-Competition-to-Collaboration.pdf#zoom=50

While artificial intelligence (AI) has been adopted by non-financial institutions for many years, most financial institutions are just at the early stage to employ the technology due to the following reasons:
– Lack of knowledge about the technology
– Lack of clarity of business goals: how much the existing infrastructure needs to be changed to adopt new technology and whether benefits outweigh costs
– Shortage of talents to analyze big data and provide meaningful insights
– Data governance is not well established
– Data is distributed in isolation
– Concern with regulated compliance as “Bankers won’t want to answer extra questions later like, ‘Why did you use this type of solution here?’”
Though we see many hurdles preventing financial services from quickly adopting the technology, there are many increasingly important benefits AI will bring such as efficient fraud detection and cost reduction. As a result, in the near future, AI is expected to be a must-have weapon to compete in the market. Financial institutions need to put more efforts into catching up with the technology by working with regulators to ensure they are comfortable and acquiring talents. Certainly, AI will reduce human work a lot but it cannot completely replace human as hackers are oftentimes smarter than machine and we need people to detect things machine miss or fix things machine wrongly recognize.

Source:
1. https://thefinancialbrand.com/63322/artificial-intelligence-ai-banking-big-data-analytics/
2. https://www.americanbanker.com/news/how-paypal-is-taking-a-chance-on-ai-to-fight-fraud

This article mentions a very interesting point regarding the predicted futures of marketplace lenders such as Lending Club, OnDeck. It states “if the funding pressure continues, large banks could end up acquiring the marketplace lenders, or pieces of them.” I share the same opinion and also believe such synergy is the appropriate way this industry should operate. I personally never believe in the success of those marketplace lenders. Even though, they help more people gain access to needed financing more quickly and cheaply compared to traditional banks, they are more prone to adverse selection problem due to less time of doing sufficient due diligence about their borrowers. Consequently, it will lead to increasing defaults and more seriously, bankruptcy of those lenders. The synergy will help combine banks’ extensive expertise of screening and managing loans, and marketplace lenders’ disruptive technology. As a result, it will not only benefit both banks and marketplace lenders but also secure the lending industry.

Source: https://www.nytimes.com/2016/05/10/business/dealbook/as-lending-club-stumbles-its-entire-industry-faces-skepticism.html

This article is about how WorldCom’s failure happened. According to the article, “more than $9 billion in false or unsupported accounting entries were made in WorldCom’s financial systems in order to achieve desired reported financial results”. As an example of corporate malfeasance, the fraud was deliberately executed by CEO and Board of Directors due to their unrealistic business goals and personal interests. As the article mentioned, one of the measures could have saved WorldCom from bankruptcy was “formalized and well-documented policies and procedures, including a clear and effective channel through which employees can raise concerns or report acts of misconduct.” I totally agree because if every accounting entry had been required by law to made in the company’s financial systems with adequate, transparent and sufficient supporting documents, the fraud couldn’t have had horribly accelerated and could have been stopped. This case also made me wonder how the company’s auditors who were both internal and external did their jobs. Were they not skillful enough to suspect unreasonable accounting entries; or were the financial systems not designed in a systematic and secure way for them to fully inspect; or did they uncover the issue but for some reasons they could not raise the truth? Here comes the significant importance of well-designed & managed financial information systems and business ethics.

Source: http://www.ecommercetimes.com/story/45542.html