Daily News Digest Featured News

Tuesday October 18 2016, Daily News Digest

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United States

United Kingdom

Australia

China

India

Africa

  • Africa is undergoing some interesting FinTech changes. In fact, technology is revolutionizing how money is handled and business is conducted in one of the most unexpected places of the world. AT: “It will interesting to see how FinTech transforms banking in Africa and whether it could lead to an increase in power and posture for a part of the world that has long been on the underside of the global power structure. This analysis is a must-read.”

News Summary

 

United States

ABA, Accenture Release ‘Playbook’ for Banks on Fintech Strategy (Banking Journal), Rated: AAA

As banks continue to grapple with a rapidly evolving technological environment and the massive growth of fintech startups — and with billions of dollars in revenues at stake — the American Bankers Association and Accenture today released a members-only Fintech Playbook to help banks understand how and when they can most profitably partner with fintech companies. ABA also launched ABA Fintech as an online hub for all the association’s resources on fintech.

According to Accenture, banks that invest in fintech stand to gain up to $20 billion collectively in operating income by 2020, while those that don’t could lose as much as $15 billion in revenues during the same period.

The playbook offers a four-phase approach — establish a baseline, close gaps, focus on the customer and drive transformational change — that addresses channels, lines of business and bank platforms and processes. It also includes sample worksheets to help identify strategic priorities, identify top IT investment priorities and select potential fintech partners.

How to win in the game of odds in the next fintech frontier — insurance (TechCrunch), Rated: AAA

Insurance technology is getting very popular among founders and investors, yet, as a category, is little understood.

Insurance is one of the most difficult businesses to start, because, well, the regulators don’t actually want new players in the market. The reason for this is risk — insurance is all about having a strong system and balance sheet to manage risk. However, as a result of its difficulty, insurance is now behind the times in terms of technology. This leads to a perfect storm to disrupt the industry.

Oftentimes product development cycles can be 3-5 years. In startup world, that’s an eternity and back. Meanwhile, there is $1.2 trillion in insurance premium written every year in the U.S.

The key to unlocking the insurance industry is understanding behavioral economics. Behavioral economics is the study of behavior and how it impacts purchasing.

Given the size of the market you clearly can create a win-win situation. For example, in auto insurance, even out of those who shop for carriers, more than 71 percent of people stayed with their carrier in 2015.

The most successful players in insurance tech will win by rounding the edges on existing products.

Hanwha Life acquires 4% stake in US loan company Lending Club (Korea Herald), Rated: A

Hanwha Life Insurance has acquired 4.1 percent stake in Lending Club, a US peer-to-peer lending company for 75 billion won (US$66.24 million), it reported on Oct. 17.

The insurance arm of Hanwha Group has a strategic partnership with Lending Club and “thought that its stocks were undervalued after its stock price was slashed due to the recent scandal involving its CEO, and purchased the stake,” said an official.

The distinct advantage of utilizing section 1031: The taxes could be deferred indefinitely (New York Real Estate Journal), Rated: A

A real estate investor, if fortunate comes to a point where they want to sell a property at a profit. Many investors know they may be able to utilize Internal Revenue Code Section 1031 and exchange their property for a replacement property, in turn deferring the capital gains. This has been one of the cornerstones of real estate investing because the deductions taken to make income tax deferred while owning a property also reduces cost basis. Distinct advantage of utilizing section 1031:  As long as the rules are followed each time an investor sells and subsequently buys a property, the taxes can potentially be deferred indefinitely. At the time of death, your heirs will generally receive a stepped up cost basis to the current market value of owned property, regardless of how many exchanges the investor may have done in the past (depending on the total market value of the estate).

Now, while most real estate investors know how to take advantage of a 1031 exchange in the traditional sense, there is an option to invest in an alternative structure and still defer the gains.  This is called the Delaware Statutory Trust or (DST). A DST gives investors another avenue to take advantage of the tax code while still staying within the parameters of the 1031 requirements.

The underlying real estate in a DST may be any asset class including, multifamily, office, retail, self-storage or industrial properties.

FTC Announces Agenda, Panelists for Oct. 26 FinTech Forum on Peer-to-peer Payments and Crowdfunding (FTC), Rated: A

The Federal Trade Commission has announced the agenda for its upcoming FinTech forum examining peer-to-peer payments and crowdfunding. The forum, which is the second in an ongoing event series, will take place from 1:00 p.m. to 4:30 p.m. on Oct. 26 in Washington, DC.

The half-day forum will feature two panel discussions. The first panel will explore peer-to-peer payment systems, the online services – often mobile apps – that allow consumers to exchange money electronically. The second panel will examine crowdfunding, the use of online platforms to fund a project or venture by raising money from a large number of people. Both panels will discuss the important trends in these industries, as well as their benefits and potential risks for consumers.

In addition to these panel discussions, the FTC’s Office of Technology Research and Investigation will give a presentation examining crowdfunding practices and the types of information available to consumers about crowdfunding campaigns.

Full details are available on the workshop’s webpage. The workshop will be webcast live on the FTC’s website.

Fintech Trends: Collaboration (FinLeap), Rated: A

With Fintechs growing stronger every day by taking a bigger part of the financial market, banks have become more open to collaborations with these young companies. Those collaborations present a great opportunity for banks not only resulting in increase of revenue, but most importantly innovation.

Studies show that many banks have already established partnerships with Fintechs. According to the UBS bank management survey of 61 big banks, 38% have a partnership already – a number that’s only going to rise in the upcoming year.

Not only do Fintechs gain benefits from collaboration, but also banks. The first benefit is simple: revenue.

Collaborations between banks and Fintechs can be very beneficial, but they are also very challenging as the organizational cultures between the two differ greatly.[5] This means that culturally, banks and fintechs will have to adapt to each other while trying to avoid unnecessary dependence.

fintech trends

How To Value Boston’s Faneuil Hall And Other Questions Fintech Could Answer (Forbes), Rated: A

Ryan Williams surveys the room: how many people could put a price tag on this building?

His question, it turns out, is a bit of trick. This building is Boston’s historic Faneuil Hall, which will never come up for sale.

On Monday, the market building constructed in 1742 was host to the Forbes’ Under 30 Summit where Williams spoke on a panel about how financial technology is shaking up stodgy industries. Williams’ co-panelists hail from different segments of fintech, but each touched on variations of  his broader point: technology is expanding access to financial information and in turn broadening financial opportunity.

Vlad Tenev argues that Robinhood, the free mobile stock trading app he co-founded, exists to get people investing as young as high school. This way they won’t be so clueless when it comes time to invest for retirement. Daniel Aisen, head of quantitative strategy at stock exchange IEX Group, notes that his company is pushing institutional investors to look closer at what is happening behind the scenes of their trades with the ultimate goal of making buying and selling stocks fairer for everyone. And SoFi, where Michael Tannenbaum is senior vice president of mortgages, is part of a group of new lenders using expanded data sets to broaden who they can give money to.

While financial technology has gained clients, accolades and venture capital dollars in recent years, high stakes separate these young financial leaders from many other young technology stars. If they get it wrong real peoples’ livelihoods, retirements and homes could be at stake. This is why all four panelists agreed that gaining domain expertise is key before starting a fintech business. They also largely agree that the evolution of finance will not come from throwing out everything that came before.

fintech panel boston

Class is Back in Session at Fintech University (BBVA), Rated: B

Some of the best-known names working on finance’s new frontiers come together this Monday in one of technology’s most important cities for the second edition of Fintech University.

The one-day gathering at San Francisco’s Bently Reserve is hosted by BBVA’s Open Innovation team, and features fintech entrepreneurs from around the globe.

Some of the hottest topics in fintech will be discussed at the second edition of Fintech University, including payments, lending, Know Your Customer (KYC) and authentication, and regulation. Fintech luminaries such as Socure’s Johnny Ayers, Prosper’s Ron Suber and Coinbase’s Fred Ehrsam will be leading and participating in the discussions.

While Fintech University has sold out, interested parties can follow along by checking out #FintechUniversity on Twitter.

United Kingdom

Amazon Echo and the future of financial advice technology (Professional Adviser), Rated: A

Amazon Echo is a hands-free speaker you control with your voice. In case you missed the news, having been available in the US for two years, its long anticipated UK launch took place at the end of last month to much fanfare and excitement.

So what does a speaker have to do with financial advice?

Today, an adviser business may need to enter the same data 21 times into 21 different systems. This sounds mad but, worryingly, it is not that unusual.

In drawing together multiple systems and tools, Echo demonstrates the potential of a connected advisory world. A single system, for example, that links to multiple investment platforms, keeps you informed about tasks and diary events, provides client information, manages business finances – and all though a single interface.

Can we expect a financial adviser version of Echo any time soon? The concept of integrated technology is available in the adviser world already.

Robo-advice would have flourished without RDR (FT Adviser), Rated: A

Robo-advice and the drive to automation would still have happened even without the catalyst of the Retail Distribution Review, experts have claimed.

Steve Thomas, professor at Cass Business School, said the disrupting advance of technology would have still forced a change in the financial services sector, even if the RDR had not taken place.

He highlighted how the advisory marketplace had shrunk from approximately 200,000 advisers in the UK in 1990 to approximately 25,000 qualified regulated financial advisers today.

Landbay launches new range of lending products for professional landlords (Property Wire), Rated: B

Peer to pear lending platform Landbay which specialises in buy to let mortgages has launched a new range of limited edition lending products aimed primarily at professional landlords.

The new tracker products have a competitive rate, no Early Redemption Charges (ERCs) and will be available exclusively via Landbay’s approved broker partners, in addition to the existing suite of both Fixed and Tracker rate products.

Landbay champions a bespoke, flexible and fast lending process, which it believes benefits borrowers in its speed of service and its competitive pricing. To date, Landbay has lent over £42 million since 2014, over 241 loans with 0% facing repayment difficulties.

Established in 2013, Landbay was the fastest growing online peer to peer lending platform in 2015.

Rebuilding the financial services industry takes the best of both (Real Business), Rated: A

The financial services sector is broken. However, it is not broke. It still generates enormous revenue, but it does so within a system that is quickly becoming unsustainable.

From Santander referring businesses to peer-to-peer lending platforms, to Zurich’s creation of a digital workplace – established players are looking to create new efficiencies, and provide greater convenience, customisation and reduced costs.

For something to become truly, disruptively innovative, it must be embraced by the mass market. And although fintech is booming, I’d argue that it still remains the province of early adopters. Many promising fintech startups have already failed due to the big gap between those early adopters and the mainstream market, and the gulf in behaviours between the two.

How come? Well, in financial services, probably more than in any other sector, it’s especially difficult to overcome the forces of inertia and trust. After all, there are few things in life more serious than money – and if someone’s going to place their savings or investments in the hands of a company, they’ll want to have confidence that the company they choose has the scale and longevity to keep their hard-earned cash safe.

SME’s beginning to rely on alternative finance in post financial crisis Britain (Huddled), Rated: A

Recent studies have shown that the Alternative Finance industry is providing SME’s with more flexible funding opportunities and much better terms for businesses. Back in 2015 Nesta revealed that the market had grown by £3.2 billion, highlighting its rapid expansion, and things look set to continue in a similar fashion.

A lot of SME’s struggle with having their invoices tied up for up to 90 days. This can create a problematic cash flow gap which can hinder businesses on a day-to-day basis. Market Invoice is becoming one of the main providers enabling businesses to release up to 90% of their invoices before the typical 90-day period.

The UK government has invested in a variety of different recent schemes and programmes to support SMEs financially. There are now a variety of different options available, from loans to investment schemes and development programmes, which businesses can take advantage of to help them out.

Short term business loans offer a much more flexible alternative for businesses, giving SME’s the opportunity to draw the funds as and when needed as opposed to taking a lump sum in one go. This proves to be a handy resource and quick fix for SME’s experiencing unexpected cash flow problems.

Crowdfunding platforms are more popular than ever before. With so many different online platforms available for donation crowdfunding SME’s can reach out to people around them and other via the power of social media to ask for any donations towards their cause.

With interest rates set to stay low and so many different types of alternative finance now available, there is a huge potential for new businesses to establish themselves in 2016.

Oinky focuses on ways to automate and simplify saving (Pensions & Investments), Rated: B

Conrad Holmboe left his position at U.K. investment consultant Redington over the summer, where he was a director in the investment consulting business, to work on Oinky, a digital piggy bank. Oinky connects to an existing bank account, determines how much a user can safely afford to save every week, and automatically transfers those savings to the piggy bank.

Mr. Holmboe is chief operating officer, chief financial officer and co-founder of Oinky alongside Ivan Soto-Wright, who also is CEO. Mr. Soto-Wright left Redington last year, where he was an investment consultant.

Oinky also has a “discover” feature, which lets savers explore peer-to-peer lending opportunities, investment platforms and other savings products.

Australia

Banks, AMP baulk at cost of financial advice watchdog (The Australian), Rated: A

The big four banks and AMP will contribute nearly $16 million to fund the creation of the federal government’s professional standards body for financial advisers, part of reforms unveiled yesterday by Financial Services Minister Kelly O’Dwyer.

The $15.6m bill to cover the first four years of the program has ­already faced resistance from the banking industry, which constitutes only 25 per cent of the financial advice market.

AMP, which represents Australia’s largest network of financial advisers, is also pushing to expand the financial burden of the standards body to be shared by the rest of the industry.

An independent standards body will be established as a commonwealth company and a nine-member board will seat three consumer advocates, three industry members, an ethicist, an education specialist and a chair. The professional associations, such as the Financial Planners Association, will compete to run the body, which will oversee the country’s 22,500 advisers.

FPA head of policy Ben Marshan said the reforms provided ­financial planners with an appropriate amount of time to adjust to the new system. The education and professional standards regime will come into force at the start of 2019.

Australians are using peer-to-peer loans to consolidate their debt (Finder), Rated: A

Peer-to-peer (P2P) lending, while having first been introduced in 2012, is still a new concept to many Australians. However, the idea seems to be catching on. The P2P lending space is becoming more competitive, with new lenders being announced all the time, and more Australians are starting to take advantage of the competitive rates on offer. According to new data, these rates are being utilised by borrowers looking to reduce the interest they’re paying on current debts.

RateSetter customers that are using their loans to consolidate debt:

  • $20,666 – Average loan amount for debt consolidation
  • 8.23% – Average annual rate for debt consolidation loans
  • 725 – The number of people earning between $50,000 and $100,000 that held debt consolidation loans
  • 64.5% – Percentage of males applying for debt consolidation loans

Move to lift professional standards of financial advisors backed (Professional Planner), Rated: B

The SMSF Association strongly endorses the Federal Government’s decision to legislate to improve the professional standards of financial advisors.

Association Head of Policy Jordan George says improving the educational and ethical standards of financial advisors has been a long-term policy of the organisation, especially as it relates to the $622 billion self-managed super fund (SMSF) sector.

China

Stored Value Facilities : Changing the fintech landscape in Hong Kong (Bryan Cave), Rated: AAA

Last November the Clearing and Settlement Systems Ordinance was amended and renamed as the Payment Systems and Stored Value Facilities (SFV) Ordinance (“Ordinance”). The Ordinance sees the implementation of a mandatory licensing system for stored value facilities, and was subject to a one year transition period. This grace period will end on 13th November 2016, after which any stored value operator not holding a licence will have to exit the market or face heavy penalties.

In general, a SFV involves the pre-payment to or storage of the value of money (or money’s worth) on a payment facility, which may be used for paying for goods or services or to another party. This includes smartcards, such as gift cards or top-up cards, through to wearable technology such as watches to non-device based SVFs that store the value of money on mobile and internet based accounts, such as e-wallets.

The Ordinance requires all multi-purpose SVFs to be licensed. Single-purpose SVFs do not have to adhere to the Ordinance, so you may rest assured your pre-paid coffee card will still work after 13th November.

The implementation of the Ordinance sees a significant shift in Hong Kong’s payment’s landscape.

More than 20 companies have applied to the HKMA for SVF licenses with 50% Hong Kong-domiciled companies and 68% engaged in the prepaid card business. Howard Lee, senior executive director at the HKMA, advised that the decision to include only five operators at this point did not mean the remaining applicants had been rejected. We expect to see more licences granted before or after 13th November.

SuperCharger FinTech Accelerator Renews Partnership with Hong Kong Exchange & Clearing (Crowdfund Insider), Rated: A

Hong Kong-based SuperCharger FinTech Accelerator has renewed its partnership with Hong Kong Exchange and Clearing (HKEX).

SuperCharger FinTech Accelerator was launched in January 2016 with big success seeing a USD $71 million capital investment in accelerator participant MicroCred secured for its expansion in China and the development of their internet finance strategy.

Applications for SuperCharger FinTech Accelerator 2.0 are open until 20 October 2016 both early stage and later stage Fintech firms may apply.

India

Barclays launches fintech accelerator programme with 10 fintech startups (The Economic Times, India Times), Rated: AAA

Rise Accelerator, a FinTech- focussed accelerator programme started by Barclays announced its first cohort today, comprising 10 FinTech startups.

The fintech accelerator will provide the selected startups with access to the bank’s technology, insight and expertise via onsite mentors and advisors. It will also enable them to access the international markets.

The 10 shortlisted startups included 4 from Bangalore, 2 each from Mumbai and Delhi and 1 each from Chennai and Hyderabad. The startups focussed on a host of areas like Artificial Intelligence, Data Integration, Predictive Lending etc to solve real time problems associated with the banking and financial sectors.

The London headquartered lender is also planning to support these nascent financial technology companies as an early stage investment which can reap them big returns if they go on to make it big in the emerging fintech space both in India as well as globally.

Online P2P lending marketplace Rupaiya Exchange fast emerging as a game changer in India (The Hindu Business Line), Rated: A

Putting an end to redundant lending processes in India, Rupaiya Exchange, a leading online peer-to-peer lending platform, is changing the face of the money lending industry. With its pan-India presence, Rupaiya Exchange serves as a marketplace for a wide range of peer to peer (P2P) lending activity including Consumer-to-Consumer loans, Business-to-Consumer loans, and Business-to-Business loans. The service portfolio of the company includes short-term as well as long-term loan instruments which can be either be secured or collateral-free, as per the user requirement.

The platform also holds the distinction of being the first company to introduce a lender’s protection scheme in India.

Fintech companies like BankBazaar promise smarter profits from mutual funds (The Economic Times, India Times), Rated: A

Investing in a mutual fund is considered a smart option, especially for first-time investors, and several fintech startups are looking to make the process simpler and attractive for individuals.

BankBazaar, which has a Sebi-registered investment-adviser licence, is set to use robo-advisory technology, which entails minimal human intervention in financial advice, to help customers invest in the right mutual funds. The feature will be live internally on October 30 and can be used by the public from November 17, CEO Adhil Shetty told ET.

Digital payments startup Trupay will launch a feature this month for real-time investment in mutual funds using its UPI integration.

Zerodha offers a choice of the bestperforming mutual funds, which Nithin Kamath, CEO of Zerodha, said the company is allowed to do using its stockbroker licence, and also uses a simulated systematic investment plan (SIP) to let users customise their investments based on markets instead of fixed periodical investments.

Fintech firm Lendingkart acqui-hires loans marketplace KountMoney (Tech Circle), Rated: B

Fintech startup Lendingkart Group has acqui-hired KountMoney, an online lending marketplace for personal loans, to boost its technology and data analytics capabilities.

Acqui-hire refers to the buyout of a company primarily for the skills and expertise of its staff, rather than for its products or services.

KountMoney connects borrowers and lenders, besides vetting loan applications through an algorithm. It forwards the vetted loan applications to suitable lenders in its network, who take the final call. It also helps borrowers in choosing lenders and submission of documents.

Africa

NFC FinTech Banking Technology and Speed (Finextra), Rated: AAA

Abstract – African financial services industry is in the midst of extraordinary change more and more of the population is becoming part of the formal financial system with mobile technology driven inclusion but still large portion of the market still remains untapped. The race/efforts by nonbank organization’s are still on to find innovative ways to get excluded customers on board. Included consumers are looking for everyday convenience, while businesses are looking for a competitive edge thus resulting in a new breed of products and next-generation payment options. At the same time many consumers still needs to answer for their questions like what do I do on Internet banking, with NFC sticker on back of my $10 mobile phone, with easy solution, open and integrated design technologies?

Introduction- With NFC any device can be a payment device.

NFC or any similar technologies are neither new nor a revolutionary innovation its in existence on this planet since decades, but not all of us are aware to make use of this for payments (Ok I agree most of us are). Mobile payment using NFC has been around for a long time but banks and retailers are hesitant to participate due to fear of low adoption rate.

Main Story – Using combination of technologies like mobile device, bitcoin, blockchain, fintech companies are building Internet of value. The question then is what does this means for financial institutions, governments and citizens.

The challenge to NFC is the cost of devices (Handsets & Receiving devices). Some brands do not take time to invest fully as Apple does.

Security is an integral component of all payments, as sensitive data need to be protected from any fraudulent parties. The card associations have created a set of rules and security standards, which must be followed by anyone with access to card information including gateways. This set of rules and security standards is called the Payment Card Industry Data Security Standard. To add security for both subscriber and merchant (Yes at business cost), as in any financial transaction that’s the golden Key.

Banks will certainly have to judge whether the massive investment they could make, in order to challenge the spreading popularity of payment systems such as PayPal, will be worthwhile, given that PayPal has gained ‘first mover’ advantage and that as highly-regulated financial service companies with duties to both national and continental authorities, they have to abide by stricter rules and security protocols. They must also judge whether their customers will move with them into a new more agile, flexible and electronic future, or whether a majority of people actively prefer the new, low cost (or free) services that have sprung up as part of the digital revolution.

Conclusions- Although we have made great strides to expand access to financial services through new technologies and innovative business models, the gender divide stubbornly persists in most emerging markets.

Time has now come for banks and other entities with an interest in financial service provision, to step up as one single team, exploit technology and leverage on existing MNO infrastructure to acquire customers, enrich use cases, lower costs and increase revenue especially in markets where regulators (such as reserve banks) play a dominant role.

Authors:

George Popescu
George Popescu
Allen Taylor
Allen Taylor

About the author

Allen Taylor

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