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The world’s largest financial technology company, Ant Financial Services Group, is in the process of acquiring U.S. money transfer company, MoneyGram International Inc. for about $880 million. Ant Financial Services Group is affiliated with Alibaba Group Holding Ltd. Ant is also the leading the online payment company in China and worth about $60 billion. China’s fintech companies are on the rise and it is said that China’s fintech companies are accounted for 46 percent of all venture capital investment globally in 2016. The combination of MoneyGram’s expansive networks and Ant’s technological knowledge, can create a strong and competitive multi-national company. However, Ant Financial Services Group has to get approval by the Committee on Foreign Investment in the United States (CIFIUS) in order to acquire MoneyGram International.

It is great to see fintech companies and traditional financial services companies converge as we are headed to an increasingly technology enhanced world. It will be interesting to see the transformation of the fintech industry especially since there will be more overlaps between domestic and foreign fintech companies.

 

Source:

http://www.nytimes.com/reuters/2017/01/26/business/26reuters-moneygram-intl-m-a-ant-financial.html

FIS, a global leader in financial services technology, and PayPal created a partnership to increase customer engagement and increase spending with FIS’ banking partners.  This partnership will make it easy for consumers who bank with FIS clients to link a payment card or other financial account to their existing PayPal account.  It will also allow these users to display the financial institutions’ brand within PayPal, and allow the customers of financial institutions to set their default funding source in PayPal.  With digital commerce showing no signs of slowing down, this move by FIS and PayPal seems very strategic.  By enabling the bank branding within the checkout process, customers will be reminded of the ease with which they can shop, which will make them more likely to use PayPal accounts to shop, benefitting both the merchants and consumers.  Avidia Bank and the 15 chartered banks of Wintrust Financial, two FIS clients, will begin account linking in the first quarter of 2017.  This service will be available to all FIS clients beginning in the first half of 2017.

https://www.finextra.com/pressarticle/67467/fis-strikes-paypal-deal-to-embed-fi-clients-in-digital-payments

Below tips will assure your company has a robust internal monitoring strategy:

1. Hiring a CPA and tax attorneys to “Self-audit” your business  not only improves your business but also protects you from an IRS audit.CPA can ensure information is valid and in accordance with accounting standards (like the Generally Accepted Accounting Principles, or GAAP) .
2. Hiring a tax attorney, an accountant or installing accounting software program,will ensure you are following General Accepted Auditing Standards (GAAS) .They can also provide education to the business owner about how their business is running and how it can be improved.
3. Financial audits make sure all legal and tax rules are being complied with, which can prevent different legal issues that can arise when fraudulent or incorrect information is presented to the public or investors. In the U.S., keep tax receipts on hand for at least 7 years, as this is the statute of limitations on tax fraud.
4. If you have physical products or use equipment in your business, you will need to conduct physical audits as well. For example, inventory or equipment should be counted and visually inspected.
5. Cross-reference each part of your company’s accounting system. If you have a very large number of transactions, make use of statistical sampling.
6. Ensure your use of expenses for business meals, travel, and entertainment are believable. Daily commuting to work at a regular job or claiming any personal expense as a business deduction is not a valid. A good rule is if the spending is required to make money, then it can be deducted.Be sure you have proper receipts and records for any and all deductions.
7. Note major discrepancies between years and have documentation supporting why. If you contribute much more to charity one year than another, include an explanation as to why when you file your return, and include any receipts or other associated documents.
8. Determine whether your business has a sufficient accounting audit trail: Does your accounting software store associated documentation for every transaction, with relevant explanations for transactions that will be used for deductions?
9. System should monitor your company’s internal controls , and do reconciliation checks regularly on financial documents.
10. Separate accounting duties as much as is reasonable.Try tricks like internally numbering checks. Safes should be locked when not in use, and company software and computers should be password protected. Camera systems are beneficial for monitoring the execution of internal controls at retail businesses.

Reference: http://www.wikihow.com/Perform-a-Basic-Accounting-Audit

A startup in Africa has begun an attempt to stop property fraud through the use of blockchain technology. This service allows users to search for specific land information and perform property transactions. The goal behind the service is to provide people with the ability to receive land transactions like mortgages. This makes it easier for financial institutions to lend to people in emerging countries. The startup, BenBen, believes that secure land information with fast transactions will encourage property investments. Without the service, the process of registering land can take two years, which allows individuals to commit the fraud.

Blockchain is becoming a popular tool in countries with unsecured financial systems. Allowing people to feel safe when transferring money or applying for loans is a major step in developing a country. Blockchain refers to a ledger of transactions that can only be changed through consensus among the users. I find the concept interesting given the fact that there is no overseeing authority but the system is still so secure. I am interested to see if new forms of fraud will infiltrate the new transaction process.

 

 

https://www.cryptocoinsnews.com/blockchain-tech-used-prevent-property-fraud-africa/

Ripple, a silicon-valley based fintech company, specifically a distributed ledger start-up, has been elected to fill 1 out of the 16 seats in the Federal Reserve’s Faster Payments Task Force, a US regulator’s flagship of payments modernization, in June 2015.

The company is mainly utilizing distributed financial technology, built around an open and neutral protocol, to enable banks using different ledgers send real-time global payments across networks. The technology is secured by cryptography, where transactions flow end-to-end immutably with information backed-up redundantly. Moreover, it is designed to fit within a bank’s existing infrastructure, so that banks are the biggest potential customer and beneficiary for the company.

The key features of Ripple Networks include “direct bank-to-bank settlement with no central operator, capacity to process the world’s cross-border payments volume, complete transaction privacy for each financial institution, PII data stays behind each bank’s firewall, integration with existing systems and standards, ability to connect traditional and emerging financial networks”. The company already gained customers that are from 9 countries and 1/3 out of world top 50 banks for all these high-performance services, with one of its most important features–lower processing costs, as a huge plus .

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Source: https://ripple.com/

The Mitsubishi Trust has recently announced that it will be pursuing legal action in response to the news that Toshiba has been inflating profits over the past 8 years, the group reports.

In the suit, Mitsubishi is asking for over $8.7M attributed to the client losses caused by the accounting scandal. The fraud was determined to have impacted over $1.3B dollars in revenue. The news of the scandal caused a large drop in the share price of Toshiba which affected the Mitsubishi pension fund.

In response the number of lawsuits, Toshiba has announced that it will sell off a portion of its memory chip business which will allow the company to finance the litigation and punitory costs associated with the suits. Since the discovery an announcement were made, over 15 separate lawsuits have been filed seeking compensation for losses attributed to the negligence and fraud within Toshiba.

This would be on top of the recommended $60M fine imposed by Japanese authorities and put the company in a difficult position.  This scandal causes shareholders and potential investors to be wary of investing in the company and devalues public perception which could hurt one of the company’s many lines of business. Similarly, inflating profits is looked upon poorly by investors who see a retroactive reduction in investment value as well as a betrayal to the company’s public owners.

Source: http://www.reuters.com/article/us-toshiba-accounting-idUSKBN15E03A?il=0

MetroMile:
While not exactly a fintech company, almost closer to an insuretech, MetroMile offers car insurance for drivers on a pay per mile system and offers different packages by . This is best for drivers who drive very little because rates start at five cents a mile and a $35 monthly fee.

Stash:
Stash is a portfolio and wealth management app that help users manage their investments and suggest new ones. They allow users to invest with as little as $5 and allocate their money as they wish.

Tilt:
Tilt tries to combine peer-to-peer payments, crowdfunding, and event tickets together in one app. They charges a fee for commerce sales but other transactions are free, much like Venmo. Tilt claims they are the fastest growing app on college campuses, a very coveted market.

What these start-ups all have in common is that they try to disrupt a system already in place. Payments, purchases, and portfolio management are primed to be taken over by tech companies as they try to bring services that seemed more white collar, to the blue collar and younger workers. The insurance industry has been using tech to gather data about drivers, but this is the first time the data is being used by a tech company to offer insurance.

https://www.fastcompany.com/3066666/startup-report/5-fintech-startups-to-watch-in-2017

It hasn’t been long ago since the time when companies actually realized the importance of Data when making decisions. It is rare to image a time when executives from the top management of a company met and did not discuss the company’s finances based on the data. But here lies the problem with this data globally – IT IS INCREASING EXPONENTIALLY. And the systems that we have been using till date to store this data (with no hard feelings) are simply incapable of matching the rate of data generation. And any FinTech is no exception to this.

Sure the Data Warehousing and Business Intelligence is well supported by the age old Relational DataBase Management Systems (RDBMS) but with that came the problem of Data Redundancy and Data Flexibility questions.

I feel that, moving forward, for newly formed organizations or those that plan to expand their reach [and expecting to generate terabytes of data in the future], it is important to consider making changes at the grass-root level for adapting the technology that employs the use of In-Memory-Databases. Sure they come with a price and a good one too but it could certainly be considered as a one-time investment that will bear them an ability to reduce the overall Data Volume without compromising on the performance and great data flexibility.

The automation that tech will bring to finance will help banks be able to reap larger profit margins, thanks to the cost savings of fintech. Many experts feels that digital payments will begin to blur the lines between technology and finance, as companies continue to push the limits of using technology to streamline financial information systems.
One huge benefit of the added technology is the fact that fintech can handle large amounts of data easily, allowing the ability to make credit decisions not only better but more quickly than ever before. A possible concern for people currently in the industry is that employment will most likely decrease in finance/banking due to the bulk of the work being done by technology. Furthermore, the jobs that do exist will be very different than the present, as you will most likely need an MIS background along with accounting/finance in order to be successful.
Last, as many other blog post have discussed, banks Implementing blockchain will allow for a reduction in costs thanks running ledger that is auto generated and keeps all history of digital transactions. Looking into the future, I think while competition will increase initially, long term, there will be consolidation in the industry, because only the companies that master fintech the best will last.

Link to article: https://www.ft.com/content/2f6f5ba4-dc97-11e6-86ac-f253db7791c6

The financial technology sector is a quickly growing and could carry with it ‘systemic risks’ for the banking sector and broader economy. At a recent conference in Germany, the Bank of England’s Governor Mark Carney recognized the efficiency benefits from financial innovation while highlighting the risk it could pose for stable bank funding, credit quality, money laundering, terrorism financing, and data protection.

Carney said in his speech, “The challenge for policymakers is to ensure that fintech develops in a way that maximizes the opportunities and minimizes the the risks for society.” The Financial Stability Board pulls together bank regulators from across the world. The FSB is currently assessing the suitability of existing rules and regulations in regards to financial technology risks. The results of their study will be presented to Group of 20 leaders later this year.

Financial technology has the ability to cause rapid changes in finance with the existence of technologies like mobile phones, the Internet, high speed computing, and machine learning. As most leaders and experts are urging, I too believe the need for proactive regulation is crucial. Any potential risks not proactively managed could spell disasters for today’s interdependent financial system and economy.

http://www.businessinsider.com/mark-carney-on-fintech-and-systematic-risk-2017-1?IR=T&utm_medium=email&utm_source=fintechweeklycom