Daily Fintech is a global business that happens to be based in Switzerland. Our Subscribers (over 13,800 as I write) are from all over the world, pretty much tracking the growth of Fintech globally.
So we don’t take sides in the Fintech capital of the world debate. I have enjoyed living in London, New York and Singapore and have always looked to San Francisco for the new innovation. I moved to Switzerland for lifestyle reasons (great skiing and great place to raise kids). Daily Fintech now has the bonus that Switzerland is emerging as a major Fintech center.
So on Tuesday I bought a ticket and hopped on a train to Zurich (the train is part of the story) to attend the InsurTech 2016 event run by Finance 2.0.
The conference was about InsurTech, so I went looking for insights about Insurance as it relates to Bitcoin, CryptoCurrency and Blockchain. Zurich and Zug are the two ends of Crypto Valley. Zurich is also a leading center for Reinsurance and Zug is home to fast moving global capital pools (aka Hedge Funds) that are moving into Reinsurance. So this promised to be a stimulating conference.
Why Switzerland may be the first country where Bitcoin goes mainstream
Last year we reported on an event that took the innovation business by surprise – the first Silicon Valley company (Xapo) moving to Switzerland (as opposed to the normal flow going the other way) because the laws in Switzerland are better for the protection of cyber assets (which is what Xapo is selling).
Last year we also reported on a more obscure fact, but one that is critical to Bitcoin going mainstream in Switzerland. At a MeetUp in Geneva in March 2015, somebody mentioned Switzerland being officially a multi-currency country and that led me to understand the WIR. This is an obscure currency in Switzerland used by very few people that was created after the Great Depression. Despite its obscurity, it is legal tender. So other currencies can be legal tender. That includes the Euro; often prices are displayed in Euro as well as Swiss Francs. More interesting for us Fintechers is that Bitcoin is also a legal currency in Switzerland.
Adoption is NOT in countries with failing currencies
Many people were drawn to Bitcoin by dreams of stateless trust based on math replacing more authoritarian governance. So the meme got established that Bitcoin would first go mainstream in countries like Argentina; we debunked that theory here.
Then we indulged in science fiction fantasies around Greece or Scotland adopting Bitcoin in a breakaway from the Euro or the Pound.
None of this came to pass.
The use of Bitcoin in Switzerland could not be more different. The Swiss love the Swiss Franc, as do investors globally who are concerned with long term wealth preservation. The Swiss Franc is as far removed from being a problem currency as you can get.
Recent news from Switzerland indicate that exactly the opposite may come to pass – mainstream adoption happens first in a country where citizens have an unusually high amount of trust in their currency and the government that issues the currency.
Two news items show Bitcoin moving mainstream in Switzerland:
The latter is still a pilot and limited to one area. If it gets extended and is copied by other regions it will be a game-changer.
The former is a national rollout in a few days (11 Nov).
Swiss Railways and the toothbrush test.
Even rich people use public transport in Switzerland so it will always get investment. You can get to a remote part reliably in comfort with just a few changes. The mobile app that guides you through this process passes the toothbrush test.
That background matters for American readers who might be ready to dismiss this as Amtrak offering Bitcoin – that would be both unlikely and probably ineffective. SBB (short hand for Swiss Railways) is a core part of life in Switzerland.
So when SBB moves into Bitcoin it is a seriously big deal.
Settlement Latency in Insurance and Blockchain
Switzerland is a leader in a) Blockchain technology (Crypto Valley) and b) in Reinsurance. So it is natural that the two should come together. Two talks at the InsurTech 2016 event in Zurich focussed on this intersection.
One talk was from Burak Yetişkin (Accenture) and the other was from Paul Meeusen (Swiss Re). From this we learned about the Blockchain Insurance Industry Initiative (B3i), which has Aegon, Allianz, Munich Re, Swiss Re and Zurich as founding members. This is a bit like the R3 consortium in the banking realm. The aim is to work on standards to reduce the Settlement Latency in Insurance. The potential pay off is huge. Big processes and all the related costs will be eliminated. Even bigger is the pay off from reduced counterparty credit risk for all the players in the stack (broker to insurance to reinsurance). If settlement takes 4 months (from claim to cash), then all the companies in the process have to manage counterparty credit risk.
Even bigger than this is the big pay off for consumers. This is missing from the move to real time settlement in the capital markets. Going from T+ 2 or T+3 to real time is good but going from 4 months to a few days or few hours is massive. Imagine putting in an insurance claim and getting a message a few hours later saying “your claim has been approved, with some deductions detailed below, you will be paid tomorrow”.
Now connect to the Bitcoin story and and imagine an extension to that message that says “if you gave us a Bitcoin wallet address you should already find your cash in there”. When you have suffered a tragedy that kind of immediacy is critical.
This becomes feasible because we move from a consumer defining the event (crash, fire, hurricane etc) to those events being validated data events stored on the Blockchain. Then the consumer simply says “policy # xxx suffered a loss of yyy in event aaa”, with each of those being verified data points in an immutable database that all have access to.
All the participants – customer, broker, insurer, reinsurer – will apply their processes to those data points.
No amount of improved mobile front end will make much difference to the full lifecycle experience, but bringing the time from claim to cash from 4 months to days or hours will be a total game-changer. That is why we envision Blockchain getting its first big use cases in Insurance (before we see big rollouts in banking).