How Traditional and Emergent Fintech could converge and change Finance



Traditional Fintech is so boring – and so profitable. The question is whether these vendors will use some of those profits to transform themselves or let nimble startups with modern technology and new business models eat their lunch. 

Two years ago, in December 2014, we took a look at the Traditional Fintech market. TL:DR Traditional Fintech was 82% of the market, much bigger than Emergent Fintech.  

Eons ago I worked in Traditional Fintech. Now I work in Emergent Fintech. So I can see that they are two sides of the same coin.

My simple definition of the difference as seen by Banks – Traditional Fintech cook your lunch (and bring you the bill) while Emergent Fintech aims to eat your lunch. A converged world will be more nuanced cooptition and revenue sharing deals around platforms and Open APIs, with shared risk & reward (i.e real partnerships).  

This post focuses on how these two worlds will converge in the future.

Many Emergent Fintech ventures went through turmoil in 2016, in a difficult funding environment, so a lot of those firms are open to partnering (or being acquired). As a few Emergent Fintech ventures achieved real success and started to challenge the banks, the banks are also more open to partnering.

This willingness of both Emergent Fintech and Banks to partner puts Traditional Fintech in a great position – unless they emulate Blockbuster and snatch defeat from the jaws of victory.

Blockbuster’s demise was not inevitable

Market share can evaporate very fast during times of disruption – ask Blockbuster, Kodak, Barnes & Nobel and many media and tech firms.

With 2020 hindsight, it was inevitable that Netflix would replace Blockbuster. The real story (as revealed in this great article in Variety) is much more interesting.

Blockbuster could have bought Netflix for $50 million (current market is over $50 billion). Reed Hastings (Netflix founder) was ready to sell, but as Variety put it:

“Blockbuster chiefs lacked the vision to see how the industry was shifting under the video rental chain’s feet”

Big bang disruption as explained by HBR

We might not pay attention when Variety writes about strategy. So listen to Harvard Business Review (HBR) describe why:

“the strategic model of disruptive innovation we’ve all become comfortable with has a blind spot. It assumes that disrupters start with a lower-priced, inferior alternative that chips away at the least profitable segments, giving an incumbent business time to start a skunkworks and develop its own next-generation products.

That advice hasn’t been much help to navigation-product makers like TomTom, Garmin, and Magellan. Free navigation apps, now preloaded on every smartphone, are not only cheaper but better than the stand-alone devices those companies sell. And thanks to the robust platform provided by the iOS and Android operating systems, navigation apps are constantly improving, with new versions distributed automatically through the cloud.

The disruption here hasn’t come from competitors in the same industry or even from companies with a remotely similar business model. Nor did the new technology enter at the bottom of a mature market and then follow a carefully planned march through larger customer segments. Users made the switch in a matter of weeks. And it wasn’t just the least profitable or “underserved” customers who were lured away. Consumers in every segment defected simultaneously—and in droves.”

What HBR describes as the first step in countering Big Bang disruption is:

“see it coming”.

That is why senior leaders in banks and insurance (along with startups and their investors) subscribe to Daily Fintech and consult with us. We help you to “see it coming”.

The “it” in the case of Traditional Fintech is how Business Process Optimization and Outsourcing is being replaced by Business Process Elimination thanks to Blockchain.

Business Process Elimination

This post explains how Blockchain will lead to Business Process Elimination thanks to the elimination of Settlement Latency. This is Big Bang Disruption. It starts with the top tier banks, not creeping up slowly from the bottom tier.

The new stack that is emerging

  • User Experience is the visible part of the offering and will be the source of real innovation and value creation. The reason they will be able to innovate so fast is that the rest of the stack gives them so much value.
  • Business As A Service is a new type of entity that is being created as we speak. They could come from a bank or an emergent Fintech or a Traditional Fintech. The key is that they do not just offer technology. Of course they do that. They also offer service delivered by humans and may also offer a regulated layer. It is a complete business service delivered to the User Experience layer via an Open API.
  • Blockchain Middleware is a nascent space where cross-cutting services dealing with concerns such as Identity or Security or Data Integrity play. This is also the realm of interoperable data standards (which are totally essential for Blockchain systems to work)
  • Blockchain Platforms really means a consensus mechanism and transactional currency that enables entities that do not trust each other to transact. The main options today are Sidechains (using Bitcoin), Etherum (Ether) and Ripple.

Cloud and open source is traditional disruption

Traditional Fintech has learned how to handle disruption from cloud and open source using what HBR calls “the strategic model of disruptive innovation we’ve all become comfortable with”. 

Cloud and open source falls into what HBR calls “lower-priced, inferior alternative that chips away at the least profitable segments”.

Cloud and open source is not the problem. Indeed, they are part of the solution.

Emergent Fintech Startups do Core Banking byepass surgery

Emergent Fintech Startups are not waiting patiently for Traditional Fintech to open their doors. They understand that Core Banking is like the heart – an essential pump. Not being confident that the pump is available to them, they are choosing byepass surgery using modern technology such as Microservices and Open APIs.

The Business As A Service opportunity

Emergent Fintech Startups would prefer to work with a well functioning heart. Traditional Fintech could serve that role.

Traditional Fintech can leverage cloud and open source to move up the value chain to Business As A Service, letting startups innovate on their platform at the User Experience. That means they can bring the massive benefits of Business Process Elimination (enabled by Blockchain) to their customers.

Image Source

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge platform.

Wrap of Week #48: R3CEV, Ayondo, DBS Digital Bank, CoverWallet, Fintechs with no customers


We started the week sharing our insights on Why the R3CEV Blockchain consortium is splintering & what that signals (three departures in one week).

We moved over to Singapore were Ayondo, a European social trading platform will IPO. Our insights on Ayondo’s pre-IPO moves (a Fintech acquisition and an RTO).

We highlighted Why having no customers could be the best thing for your fintech startup in banking. If you follow our thinking then listening to the Pirates with Ties interview with Olivier Crespin of DBS Digital Bank, will make more sense. The Singaporean Digital bank who launched first in India and Indonesia.

In Insurtech we used CoverWallet as an example of a Low touch and Customized service. Read more in CoverWallet could define the Insurance Robo Agent space

The Fintech Genome platform

Join the conversations on the Fintech Genome. The global community is sharing insights, creating great conversations, and business is starting to happen.


If you enjoy reading the Daily Fintech insights by our experts then Subscribe to this newsletter.

If you want to engage and converse with the Fintech community then Register on Fintech Genome. 


Pirates with Ties interview with Olivier Crespin of DBS Digital Bank

In the Pirates with Ties interview series, we are interviewing people who are leading digital transformation and innovation in major Financial Institutions, tech and telco companies.

Olivier Crespin, is the Head of the DBS Digital Bank in Singapore. In this interview, he explains their strategic positioning which is built on an open architecture. We discuss their Digital customer-centric apporach, in India and Indonesia.  DBS Digital Bank is receiving recognition of their transformation as we speak, through mutliple awards.

 Pirates with ties


Fintechs mentioned: Kasisto, Moneythor, V-key.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Efi Pylarinou is a Digital Wealth Management thought leader.

CoverWallet could define the Insurance Robo Agent space



InsurTech is in its Cambrian Explosion phase, with lots of new ventures being created. However, we all know how tough the Series A Crunch is (data hounds can get their fix from Pitchbook, which shows 1,891 Angel/Seed rounds going to only 647 follow on deals).

So we pay attention when we see a Series A deal from top tier VC. In this case it is the $7.8M Series A on November 17 for CoverWallet, led by Union Square Ventures.

Small Business Focus

We briefly covered CoverWallet in this roundup of InsurTech focussed on small business.

In addition to CoverWallet we also covered:

  • FounderShield. (They also did a $12.2m Series A in May led by Canaan Partners)
  • Insureon. (They did a $31m round just over a year ago).

It looks like this space is hot. This makes sense for 2 reasons:

  • The ageing of the traditional agent means the insurance carriers are motivated to work with new digital channels.
  • The process complexity (all those paper-spewing fax machines) lends itself well to the kind of UX magic that digital startups excel at.

Robo Agent is more than a Comparison site

The first job of an agent is comparison. You go to a broker to buy Insurance and as long as they are independent (not tied to one carrier), they can give you an unbiased comparison.

We did a roundup of Insurance Comparison sites here. Our takeaway was that they are thriving in developing markets (such as India and China) where many consumers and small business are getting their first Insurance. In those markets, just having a comparison of different quotes is a breakthrough. In more developed markets such as America (where CoverWallet is focused), more is needed.

Using an analogy from wealth management, the comparison site is like going to a Broker and getting prices of the stocks/bonds that interest you. You get the prices, but not a lot of advice. For that you need an Adviser who understands what you need; the advice is customized & personalized. That is why Robo Advisers have done so well in wealth management. They took an expensive high touch service and offered an entry level, cheap no/lo touch service.

That is why we are seeing the emergence of Robo Agents in Insurance. That is the market that CoverWallet could define and lead for small business insurance.

Lo Touch and Customized, rather than No Touch 

CoverWallet looks like a Lo Touch rather than a No Touch service as they also offer phone support to complement a digital service. That is a) essential to keep customers happy and b) expensive to do well. So CoverWallet will need the capital that they are raising.

Insurance is too complex and mission critical for a pure digital service. CoverWallet aim to cut through the complexity by offering Insurance that is tuned to the specific type of business. As they put it:

“The coverage you need depends on the type of business you run. A restaurant owner needs to be covered against customers possibly getting food poisoning while an accountant needs to be covered against calculation errors.”

If they can deliver on that promise at scale, CoverWallet will do very well. It is possible that with good data they can do this. A good UX is only as good as the data. UX without great data is often just lipstick on a pig.

Data comes from customers. If you get a good sample size of say restaurants, you will have the data to understand the insurance needs of restaurants.

So CoverWallet will need to scale fast and offer great rates from all the big carriers.

That is why we now dig into a boring old open data standard called SEMCI.

Is SEMCI ready for prime time?

SEMCI has been around for ages. SEMCI stands for Single Entry Multiple Company Interface (SEMCI). It is an open standard that is used to submit the same information to multiple companies. Insurance Agents have used this for a long time to request quotes from several carriers at once. (At time of writing the site was not available, hopefully it is back now).

Like XBRL, SEMCI uses XML and has been one of those subjects that excites the nerdy among us, but has had relatively little real world impact to date. For the Insurance Robo Agent market to flourish, SEMCI will be critical.

Complex Products

An open interface standard such as SEMCI is critical to rapid scaling because, beneath a simple-sounding “buy/renew Insurance” on the to do list of a business owner, lies all these different types of Insurance that small businesses need by law:

  • General Liability
  • Workers Compensation
  • Commercial Property
  • Business Owners Policy
  • Professional Liability
  • Errors & Omission
  • Medical Malpractice (healthcare specific)
  • Directors & Officers

The Zenefits Elephant in the Room

We covered the dramatic rise and fall (and possible rebirth) of Zenefits a few months ago. Like Health Insurance for employees, Business Insurance is a boring but essential task for business owners. The takeaway from the Zenefits story is that agents need to have a reasonable understanding of what they are selling. CoverWallet needs to scale fast, without a regulatory blow up.

From Series A Crunch to B a Hero

If you think Series A is hard, try doing a Series B. Now your metrics have to be perfect (better than you needed do an IPO say 20 years ago). And you need to do that in about one year. The opportunity is huge but so is the challenge – its like a speed assault on Everest (getting to the top is not enough, you need get there faster than the other climbers). CoverWallet just left base camp looking strong.

Image Source

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge platform.

Why having no customers could be the best thing for your fintech startup


In Malcolm Gladwell’s book “David and Goliath: Underdogs, Misfits, and the Art of Battling Giants”, Gladwell asks his readers to reframe the classic biblical battle of David and Goliath. Rather than say David won despite his disadvantages in height and size, he argues David’s disadvantages should rather be seen as direct advantages, they’re just not as obvious. He argues there is a fundamental psychological difference to viewing the world in this way that as humans and entrepreneurs, we shouldn’t ignore.

The ultimate purpose of Gladwell’s book is to parallel David and Goliath’s battle with that of entrepreneurship in the face of incumbents. No more so is this evident than in the realm of challenger banking.

So, taking Gladwell’s approach, if you were to start a challenger bank from scratch, what is one classic disadvantage that could be reframed into an advantage that in fact gave you more than a fighting chance?

An obvious one is that banks have customers while challenger banks and fintech startups have none

Many fintech startups consider partnering with banks as the swiftest route to market, mainly because of the existing customer base that can be tapped into. Given the option to become a bank or not themselves, this can be a big consideration to weigh up.

Of course there are plenty of other concerns, like compliance overheads and capital requirements – and these are not trivial by any means. But from a strategic go to market perspective, the opportunity to co-market and have your products pushed to new customers by a bank’s marketing and sales teams looks like a great deal – on paper.

To challenge this obvious advantage, my suggestion is to consider the following:

  • How energised and engaged is a banks customer base today and do they really trust the messenger?
  • Are banks effective at distributing the products they already have? And if not, what makes you think your product will fare better?
  • How many people, from how many different banking divisions are going to have to get into a room to agree on a distribution strategy for your product? And, if it eats away at their business line’s margin, how will you prevent them from sabotaging it?

Executive buy-in into fintech partnerships is one thing, mobilising a bank’s troops around a common goal is another. We’ve already seen this flounder massively in the push for banks to become more accountable through business lines when it comes to acting in a customer’s best interests from an ethical standpoint. Intent versus execution has been a gap you could drive a truck through. Wells Fargo is the latest to spring to mind.

Flipping this around as a challenger bank, it’s interesting to throw around how you could use your perceived disadvantage of not having customers to your advantage.

  • You can create energy and enthusiasm around your products and vision, rather than spend marketing efforts trying to re-energise a jaded customer base
  • Not having customers allows you to only choose profitable customers you want on your books, not those you don’t
  • You can have complete creative control over your distribution strategy, rather than be locked into some archaic commissions driven hierarchy within a bloated, unproductive sales team
  • If something isn’t working, you can move fast. I challenge any non-challenger bank to deliver on that one in a fintech partnership

There are stories of fintech startups who tried the challenger banking route and quasi-failed, like Tungsten in the UK. And these lessons should be learned from – Bernard covers some of them here in this post from 2015.

Having the ability to look through a disadvantage to see its possible advantage cuts across all aspects of building a successful fintech business. This includes product design, pricing, sales and marketing.

As Jack Ma, founder of Alibaba famously said when he decided to take on online shopping behemoth eBay, “eBay is a shark in the ocean. We are a crocodile in the Yangtze. If we fight in the ocean, we will lose. But if we fight in the river, we will win.”

And if Alibaba’s estimated market cap of $237 billion is anything to go by, let that be a lesson.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business.

Fast and Cheap IPO on SGX: Ayondo


Are you preparing a roadshow, the conventional way of accessing public markets by selling shares? Are you using an investment bank to take care of the messaging, positioning and pricing of the deal?

This capital raising route typically means aiming for a listing on one stock exchange, which is typically in the home base of the company and the region out of which it scaled up. Foreign listings in the equity market have been mostly successful at a second stage (i.e. after successfully listing in the home origin market). All this is especially true for businesses that are B2C or B2B2C.

Pre-IPO pipeline wanting to be dressed as Fintech

We have covered the trend of declining IPOs in tech and in Fintech and the reasons companies choose to stay private for a prolonged period.

In our Daily Fintech global index, we have been tracking publicly traded incumbents and startups that qualify (based on our criteria) to have a strong Fintech component.

In this post, we are more interested in pre-IPO companies that are looking to and would desire to be seen as candidates in the Daily Fintech global index. We want to interpret their under-the-radar screen steps, even before they engage in a formal roadshow.

The Ayondo pre-IPO Fintech journey

Ayondo is a Swiss broker with headquarters in Germany, London and Singapore founded in 2008. Its customer base has grown to 200,000+ users in 195 countries with a heavy tilt towards social trading.

Ayondo was listed on Berne stock exchange under the name of Next Generation Finance Invest AG as an investment holding company in the early years. Ayondo has been accelerating its business positioning and offering. Its brokerage offering includes extra insurance in case of adverse conditions.

The company has an Asian footprint and has received funding from a Singapore-based private equity group Luminor Capital. Ayondo has entered into partnerships with KGI Fraser Securities, a Singaporean brokerage.

Since 2013, Ayondo has received three awards in the Fintech space. It has restructured its operational side to align with its changing strategic positioning.

Two facts caught my attention this month, the acquisition of Tradehero by Ayondo and the soon to-be-completed listing of Ayondo on the SGX via an RTO. Social trading has been around more than 5yrs and in What was your first impression with Social Trading?, the Fintech Genome community has been discussing about this vertical. Is Social trading, rather a form of Signal providing and Social analyzing; as per Filippo Ucchino of Investingoal? Is it simply to complement Charting tools, as Henry Schwab of TradeIt points out? Is it the digital trading floor to bread micro-managers, as I like to think of the potential of Social trading and as Marek Trepa of t-financials broadens the space, by including Motif investing?

The acquisition of Tradehero, a Singaporean Fintech mobile app for gamified trading, on the Ayondo platform gives a strong positioning to the company to tap into the beginner social trading market segment. It makes the training phase required on any social trading platform (e.g. eToro, Zulutrade etc) less intimidating and aims to reduce conversion time and rate (from a registered user to a paying user). Virtual trading and academy training on the Tradehero platform, increases customer engagement. The TradeHero weekly awards are one of the ways to award prizes.

An acquisition before listing however, doesn’t qualify as an alternative approach.

The first Social trading Fintech listing

Starland is a Singaporean property developer that will enter into an RTO with Ayondo. The consolidated group will carry Ayondo’s name. Starland will pay $157.5 million for Ayondo and this will be done through the issuance of new shares priced at 18.7 cents.

Reverse mergers are a cheap and fast way to get listed. RTO, reverse takeover offering, can be used if the regulatory environment allows it. Essentially, an active private company (like Ayondo) takes over a dormant public company (Starland).

Through this transactions the time to market and the costs are reduced to close to half or more. The consolidated Ayondo group will have a market capitalisation of S$210 million (US$155 million) with Ayondo shareholders owning 75 per cent of the new consolidated group. Ayondo gets an injection of new capital.

RTOs are a cheap and fast way to raise capital in the public markets, especially for small size companies that have a 2C type of business. It also allows the owners to maintain significant control of the company.

Will the RTO route become trendier in Singapore, as Western companies look for fast ways to tap into the large Asian market potential?

I researched the SGX RTO market for other Fintech or tech with social tilt type of deals. I found Yuuzoo a Singaporean social media firm that listed on SGX in 2014 via an RTO with W corp an electronic equipment manufacturer (market cap of RTO deal was around S$400mil; roughly double the Ayondo size but still small). Yuuzoo maintained 80% ownership through the RTO.

Will Zulutrade and eToro, accelerate plans to tap into the public markets? Both leaders in the social trading Fintech vertical, have been growing by broadening their product offering (from FX, CFDs, to indices, and equities). Rumors about an EToro IPO were floating around 2 years ago but have not revived recently.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network.  Efi Pylarinou is a Digital Wealth Management thought leader.

Why the R3CEV Blockchain consortium is splintering & what that signals


First it was Goldman Sachs to leave R3CEV. Then it was Santander. However you spin it, this is not good.  As Anna Irrera reveals (from her new job at Reuters in New York), R3CEV “has reduced the amount it aims to raise from bank members in its first large round of equity funding to $150 million from $200 million and is changing the structure of the deal”.

Once means nothing, twice is coincidence, three times is a trend. R3CEV cannot afford a third defection.

R3CEV was one of the big Fintech stories of 2016, signalling that banks were embracing Blockchain and making it “respectable” by getting rid of Bitcoin and making it “permissioned” (meaning only banks can participate). 

The R3CEV news is signaling a big shift that we shine a light on in this post.

Bitcoin climbs out of the slough of despond

2016 was the year when Permissioned Blockchain rode to the top of the hype rollercoaster and Bitcoin fell deep into the slough of despond (other than for a few true believers). As we move into 2017, Bitcoin is getting more traction and there is more skepticism about Permissioned Blockchain. The R3CEV news signals this shift under way; but it is not the fundamental reason why we are seeing defections.

The massive payoff from eliminating Settlement Latency in Capital Markets

There is massive payoff from implementing Permissioned Blockchain to eliminate Settlement Latency in Capital Markets (aka Real Time Settlement ). That can lead to Business Process Elimination and huge cost savings. In simple terms, this could give Banks the same efficiency as a born-digital startup. So there is no lack of motivation for the banks.

Who will be the Visa & Mastercard of the Blockchain era?

R3CEV was going for that prize. The idea was a cooperative owned by the banks that would deliver the Settlement Latency prize. In a different era, that is what Visa and MasterCard did.  Dee Hook of Visa explains the Chaordic Organization business model in this paper.

Some of the issues at R3CEV may simply be a haggle over what % founders and management get vs the banks. Given the size of the payoff, this could be resolved with some negotiation. However, there are more structural issues at work as well.

Look at B3i in Insurance

The payoff from eliminating Settlement Latency in Insurance is even bigger than the payoff from eliminating Settlement Latency in Capital Markets.

That is why, in October, Aegon, Allianz, Munich Re, Swiss Re and Zurich launched the Blockchain Insurance Industry Initiative (B3i). At first glance it looks like R3CEV except that it was created by the Insurance/Reinsurance companies directly; there is no profit-seeking company in the middle.


It is no coincidence that Goldman Sachs was the first to leave R3. Not only is Goldman Sachs the best at technology among the Wall Street Banks, they are also shareholders in Digital Asset Holdings which owns Hyperledger.

Hyperledger is a cross-industry collaborative effort, started in December 2015 by the Linux Foundation to support blockchain-based distributed ledgers.  Linux Foundation is a trusted, independent entity as far as the banks are concerned. If you need a place to hash out standards and protocols, Hyperledger is a good alternative to  R3CEV.

Qui Bono?

The key point is that while the Banks definitely want to eliminate Settlement Latency in Capital Markets using Blockchain, they don’t care who will offer the service. It could be an existing intermediary (Exchange plus Clearing firm) or a startup. Owning shares in that startup if it is R3CEV, is only icing on the cake.

SWIFT – far bigger than R3CEV in Membership and not asleep at the Blockchain switch

SWIFT, derided by many as a dinosaur, has 11,000+ Members in 200 countries. R3CEV had 15 as of August 2016. SWIFT could make it easy for 11,000 members to use Blockchain – and seems determined to do so.

Richard Gendal Brown

I don’t care whether R3CEV goes into the dustbin of history. I do hope that Richard Gendal Brown (CTO at R3CEV) continues blogging about Blockchain and Bitcoin. He is my go to source when I want to understand something complex in that domain. I suspect others rely upon him the same way. Explaining complex subjects in simple ways is hard to do and essential for the ecosystem to develop.

On his blog he is currently writing about how Corda from R3CEV is going open source. This may help, although it might be too late (everything significant in Blockchain is already open source. For a discussion on patents in Blockchain please see this conversation on Fintech Genome.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge platform.