T-Zero sings “Love me do” to the SEC with its Blockchain Series A Preferred Shares

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Wonders are still happening in America!

Who would imagine that an online retailer who started out as an e-commerce business liquidating merchandise of failed companies, would be the first publicly traded company offering Blockchain Shares.

Let me introduce to you Overstock, a Nasdaq listed online retailer (OSTK) based in Utah and founded by Patrick Byrne.

Tee-zero (t0.com) is a majority owned subsidiary of Overstock that is focused on using blockchain technology in capital markets. Last summer, we covered the issuance of a private crypto-currency denominated bond that settled on the T0 platform. It was a symbolic move, demonstrating that it is possible to issue, trade & settle (synonymous in the future T0 world), and have very fine divisibility of a bond and fast transferability. The trading activity of this bond was not the point of the implementation.

This December an even more important symbolic implementation happened. After the SEC approved in early Fall the issuance of a blockchain public stock offering; Overtstock will go down in history as the first publicly traded company that offered blockchain shares trading on an Alternative trading system (ATS).

The historic offering: Overstock Preferred Shares

Voting Series B Preferred Shares

  • 560,333 @ $15.68 (roughly $9mil)
  • Trading on NasdaQ OTCQB

Blockchain Voting Series A Preferred Shares

  • 126,565 @ $15.68 (roughly $2mil)
  • Trading on ATS under the symbol OSTKP

The above offering (total roughly $11mil) was handled by Keystone Capital, a conventional broker-dealer that worked diligently and closely with the regulators to obtain the required approvals.

Existing shareholders had the right to participate in the offering as follows: One subscription right for each 10 shares of common stock owned. Each share of the preferred stock has a preferential right to a 1 percent cumulative annual cash dividend.

The symbolic significance of the Blockchain Series A transaction is all about the

Transparency of the transaction and the fact that it boils down to the verification of two blockchain addresses.

What’s next?

I wasn’t an Overtsock shareholder on the required date and therefore didn’t participate in the offering. The broker-dealer, Keystone Capital handled the onboarding of the buyers (existing shareholders that exercised their right to buy the Series A preferred stock) of the digital securities. They created digital wallets and accounts for them and are now continuing to onboard outside buyers who will be matched on the T0 platform to sellers (those that participated in the first placement). Any individual that qualifies under the Title III Jobs Act, can participate.

Nasdaq is watching and probably nodding its head, since a large-scale adaption of such a process is not imminent. However, it is threatening to its core business.

Stock exchanges are one of the main three categories of players involved in capital markets; Brokers and Central Securities Depositaries handling settlements, are the other two main categories. The million-dollar question here, is who of them will embrace the T-zero or some such blockchain based platform and make the other two obsolete?

T-Zero is actually a viable product that targets the capital markets B2B vertical and is out there for the first mover to embrace it. Ironically T-zero is a private blockchain. In addition, this first symbolic implementation was accomplished with the participation and collaboration of market players and intermediaries that will be directly affected should this technology prove to change the capital markets infrastructure. Broker-dealers for example, which were instrumental in obtaining approval from the SEC and effectively laying the seeds for the growth of such an ecosystem of digital assets; will be cannibalized.

At the same time,

T-zero with Keystone Capital, are bringing up to speed the SEC and holding their hand towards Full Regulatory Transparency in public markets.

For me, this symbolic transaction is the first public performance of “Love me do” from T-zero to the SEC. Right at the time that the SEC has committed to a plan to spend $1.5billion to create a consolidated audit trial (CAT), T-zero is echoing loud and clear to them “Love me do”

T-zero can offer a freemium service to the SEC, if they adopt the T-zero platform which will naturally include a Consolidated Audit Trial.

If T-zero manages to seed an ecosystem of publicly traded digital assets (even if it starts small); then I foresee Lykke, the frictionless global marketplace for digital assets, accelerating its growth. Lykke, an open source platform, has started with frictionless, transparent, immediate settlement of FX, ICOs and cryptocurrencies, but is ready to broaden its assets base (anything digital can be on boarded).

The transformation in capital markets is here. Timing is uncertain but the trend is clear.

Sources: T zero news; Nasdaq news

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.

Wrap of Week #2 of 2017: P2P, Cloud computing, Next Money Aussie fintechs, Lemonade, Dabbawals.

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We started the week reporting from the original and genuine perspective of lenders on P2P platforms. In Back to the future of P2P Lending, we interview one of those peers, Hector from New York shares his journey.

We looked into the positioning and involvement in Fintech of cloud computing providers like AWS, IBM, Microsoft and Alibaba.

We reported on the Australian Fintech finalists that will participate next week in Next Money Fintech Finals 2017 in Hong Kong.

Don’t miss out on our thoughts on Insurtech in Parsing Lemonade PR to see if P2P insurance is game changer or a mirage.

We ended the week with a global theme around Food and Fintech. Enjoy The dabbawalas in India point to future e-commerce and payments.

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

Check the latest topics that include bitcoin, crowdfunding, social trading, index funds.

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Fintech moves of the cloud computing providers

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The cloud computing providers are going center stage in financial services in 2017. Some are public (all apps and data on the cloud), some are hybrid (some apps and data on private centers). We will be monitoring how these giants grab share from the financial sector as it grows (Fintech startups) and as it transforms (incumbents and their suppliers).

Our watch list includes (not limited to) the cloud computing providers below that are global and are no longer under the radar screen in terms of their strategic moves in the financial industry.

Google Cloud, Amazon Web Services, Microsoft Azure, IBM Bluemix, Aliyun

Salesforce, Accenture, Oracle, CSC, Rackspace

AWS strikes

Amazon Web services are 100% public. Pay as you go outsourced services from AWS are growing (total 100,000 customers, 10,000 new in 2016). Once you are onboard, you can shop on their marketplace for all sorts of apps and additional services. International data centers (to address data security concerns) are being planted globally as we speak.

Singapore’s DBS bank partnered with AWS as they accelerate their digitization journey (Pirates with Ties interview with Olivier Crespin of DBS Digital Bank).

What caught my attention is their recent launch of AWS Financial Services Competency which will certify technology and consulting partners that specialize in the financial industry. The current certified list of AWS Partners is:

  • Core Systems: Avoka (digital sales), Calypso (capital markets on demand), Corezoid (process mgt), EIS Group & Guidewire (cloud insurance), Mambu (cloud deposit taking & loan offering), Moven (mobile banking)
  • Risk Management: FICO, FIS-Prophet, NICE Systems
  • Data Management: IHS Markit
  • Consulting Partners: 2nd Watch, Accenture, Capgemini, Cloud Technology Partners, Cloudreach, Cognizant, Infosys, REAN Cloud, Sopra Steria, Wipro

The rest

Google Cloud has been mainly focused on consumer banking and the retail experience. Unless I have missed some enterprise level collaboration, Google Cloud is last on the Western cloud computing financial sector penetration (for now).

Microsoft Azure, a hybrid provider (i.e. clients can keep some data in their own data centers), has announced new UK data centers as part of its move to grab a share of the Fintech market. Startupbootcamp, the international accelerator with a significant Fintech component, offers its members access to a variety of cloud providers (e.g. Amazon Web Services, Microsoft Azure, and Google Cloud etc).

Cross River Bank, a leader in the digitization of banking (see post) and the first incumbent bank to be funded by a VC much like a startup, is being built on Microsoft Azure.

Bank of America Merrill Lynch and Microsoft Azure announced a collaboration at SIBOS on blockchain technology to host the Bofa transformation of trade finance transacting. The R3 consortium, hosts its lab and research center on Microsoft Azure. Seems like Microsoft Azure is the preferred provider for blockchain related projects?

IBM Bluemix is being used by incumbent banks to interact with the startups (seems like they are the preferred provider for the accelerators run by banks, for now). The largest deal is with ANZ, which has a 5year development contract with IBM Bluemix. Citi is also using the IBM Bluemix cloud services to interact with startups, Nordea Bank in the Nordica, Tangerine bank in Canada, Adelaide Bank in Australia, and Bank Sohar in Oman.

Alibaba strikes

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Aliyun, the cloud computing arm of Alibaba (hybrid), continues to open data centers in Japan, Germany and Australia. The opening of the second US data center caught my attention. 2017 will be the year that Aliyun will strike international partnerships (beyond Intel, the Singaporean Telco, and Equinix, US data center provider) and grow further in Asia as the digitization of financial services continues.

Kapronasia reports that in 2013, Alibaba verticalized their cloud with the announcement of Ali Cloud for financial services. Aliyun is the only cloud provider that developed industry specific applications in the cloud (more like Salesforce). Ant Financial developed a cloud based core banking solution, of course on Aliyun that they used and then sold to other banks. Kapronasia’s estimate is that around 40 organizations in China are using the Ali Financial Cloud including, banks, payment providers and even P2P platforms.

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.

 

 

 

Wrap of Week #52 of 2016 & Week #1 of 2017

2016-2017

Happy New Year. 2017 will be faster than 2016, and we will all be held accountable for managing the fast pace of change. Financial services will continue to transform in various regions at different paces.

Daily Fintech crossed the 15,000 subscribers mark before Christmas and the P2P knowledge platform, the Fintech Genome, is growing with impressive engagement in great global conversations (check out the conversations with the highest engagement rate – Replies).

For the last week of 2016, we traveled to India and covered the main reasons it has gained and will continue to maintain a special spot in the Fintech evolution – read Why India is the country to watch in Fintech. We discussed Indifi & the rise of the Indian SME lending matchmaker; covered more than one Indian mobile provider in Mobile Wallet Sumo wrestlers face off in India; and focused on Mobile Microinsurance in India.

To begin the New year with an entertaining money playlist, check out the January 1 Daily Fintech post and enjoy.

On the first business day of 2017, we could not but cover a bitcoin related subject as the unbelievable steep ascent of bitcoin continued. Check out Another bitcoin ecosystem health check as we slide into 2017 and engage in the global conversation on “Help refine this bitcoin ecosystem health check methodology” on the Fintech Genome.

On the second business day of 2017, we chose to discuss about “Our Data” as a major topic that we, the GAFA people, should be aware of. Read Fintech solutions to problems of #GAFA people.

On the third business day of 2017, we chose to highlight the unstoppable automation trend through the AmazonGo grocery store example.

On the fourth business day 2017, we reviewed Insurtech Exits enabling Claims Management As A Service.

We ended the first business week of 2017, with a look into the huge mortgageTech market mostly in the US.

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

Check the latest topics that include bitcoin and crowdfunding.

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Fintech solutions to problems of #GAFA people

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Happy New year to all. We are all #GAFA (Google Amazon Facebook Apple) people with different passports and IDs.

Our predictions “2017 Tech, Strategic, and Investment trends in WealthTech” are already out there for testing. In this first post of the year, I want to focus on a complicated topic that concerns all #GAFA people (and please stand out, if you are from another planet).

Personal data monetization is the GAFA business backbone and I foresee that in 2017 we will be hearing more about the ethics of monetizing our data in Fintech too.

I also have a wish list that includes seeing more Fintechs focused on “gating” our data, empowering us with a choice, and sharing subsequently revenues with us.

Three picks for a 2017 watch list

I picked three companies that are worth watching because they recongize our problems as #GAFA people and intend to help us.

A Telco

In September 2016, Spain’s Telefonica announced that in 2017 they will roll out a platform to enable their users to manage the use of their personal data from Google and Facebook and WhatsApp. Users will be able to block or require compensation through the OTT platform.

The Spanish carrier Telefonica is involved in many ways in the 4th industrial revolution. Telefonica owns a startup incubator based in the UK, Wayra, focused on digital business ventures since 2012 and offering the potential to access the 300million Telefónica customers globally.

Telefonica Germany (a subsidiary of the Spanish Telco) is launching O2 Bank, a digital bank, in partnership with Fidor Bank. This will allow German clients in a few minutes to open an O2 bank account (Fidor has the banking license which is valid all over Europe). The identity check will be done via a video on the customer’s smartphone. To transfer money, customers have to enter the mobile phone number of the recipient in the address book and select it for a transaction. The O2 Banking MasterCard can be activated or deactivated directly at any time via the app, and the card details can be presented for online shopping, without having the physical card in hand. A financial planning tool provides an overview of their spending and on request they can be notified in real-time of transactions and events by app push messages sent to their smartphone. Smaller consumer loans will be available directly via the app. O2 banking phone contract holders will “also benefit from a variety of perks and add-ons” when using O2 Banking, such as increased 3G or 4G data allowances (Source).  

In 2017 we all need to watch how the OTT platform that empowers users with the monetization of their personal data, will be combined with the O2 Banking services.

A true digital bank

September 2016 was also when SeccoAura started accepting registrations on their alternative way of monetizing personal data. SeccoAura launched in the fashion industry, allowing customers, to earn Tokens if other users “Like” what they are wearing. If “Likes” on SeccoAura lead to a “Buy”, then the SeccoAura customer who wore the “Liked” item, will earn a referral bonus. The concept could be applied to any retail purchase and wealth can be created through these tokens.

We covered the concepts behind this breakthrough business model in Secco Bank and the Future World of MyDigitalAssets.

A chatbot Fintech

Novastone Media is a UK-based tech firm in the space of information security (similar in a way to the space that Symphony, the Wall Street darling, operates in). Novastone Media’s financial services offerings are targeting private banks, financials advisors, robo-advisors, retail banking and corporate banking.

Solutions include secure messaging platforms that empower conversations, increase engagement, offer security and compliance accountability. Novastone Media prospect clients can choose to use their messaging, chatbot, WhatsApp-like solutions, in a more conventional way. That would result in simply offering finserv end-customers protection from #GAFA using personal data.

In 2017, we will be watching whether any Novastone Media finserv client will choose to monetize their customer data securely collected through these solutions and share revenue with the end users.

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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.

Reflections on last year’s WealthTech predictions

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Evaluating our predictions in wealth management from last year with a correct, incorrect, nothing material happened.

  • Regulators will innovate; SingaporeUKandAustralia, seem to be the most likely frontrunners. Correct but stronger and more global than predicted.
  • Regulatory risk for Fintechs will increase in 2016; Regulating Innovationis in the 2016 Fintech constellation. Correct (new charters) and will continue.
  • “Doing nothing is not Safe any more”(The Icarus deception). Correct (more collabs) and will continue.
  • Fintechs will be confronted with the reality that in some verticals, they simply have to become another arm of the “monster” they set out to replace. Correct 100%; we saw more collaborations and more funding to ventures with collaborations potential.
  • Central Banks have been the least involved stakeholders in the Financial transformation underway. In 2016, they will publicly join in some lite way, as their ties with regulators tighten and citizens become even more mobileSingapore and India, seem already leading the way. Correct and this will continue.
  • More Supranationals, like the Financial Innovation Now(FIN), will be born. Correct (e.g. Google, Facebook, Microsoft, Amazon and IBM formed Partnership on AI) but the impact of these coalitions is yet to be seen.
  • Micro multinationalswill become more common from launch as scaling geographically but also into adjacent product/services will be vital. Not that strong a trend; scaling didn’t accelerate significantly due to the tough political and macro environment.
  • The Freeway for stock tradingwill become busier. Robinhood is leading the way to free online brokerage of stocks and ETFs. Online asset managers, investment advisors, social trading platforms will start integrating free brokerage into their offering. Correct (the Robinhood Baidu summer partnership).
  • % of DIY investorswill increase; % of passive investors will remain stable; Alpha robo-advisory will be the focus instead of Beta robo-advisory. The new norm for fees will be around 50bps, and 12bps respectively (e.g. Quantopian is one leading example the DIY space; Motif Investing in the Alpha advisory space). Nothing really happened (i.e. no significant increase in DIY or major switch to alpha etc). Fintech didn’t manage to penetrate in 2016 these long engrained behavioral patterns.
  • Picks and shovels & Home Depot style stores for wealth management B2B solutions, will open everywhere. We will see growth in this space as part of the scaling up sprint process (e.g. SigFigis one example; and Investcloud is another type). Correct; B2B was the name of the game in 2016 in the US and Asia (Future Advisor; Bambu).
  • More Buy side and Sell side bridgeswill be built in 2016, to solve liquidity and market making problems that will become more acute (e.g. Algomi is one leader in this space). Incorrect prediction for the bond market. Relevant more in asset management; Goldman is leading the way and there is a long way to go.
  • Conventional wealth managers will shift from experimenting with incremental innovation (PA consulting reportsthat roughly 2/3s of financial services globally focus on incremental innovation rather than radical) to a more strategic adaptation of the new business practices. Didn’t happen; wealth managers remain the big laggards.
  • IT firms wanting to move into Digital Wealth management, will become aggressive in their offering even though it may cannibalize their existing offering (e.g. Why Salesforce chose Wealth Management as first vertical market). Didn’t happen; we only saw microservices added.

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.

Wrap of Week #51: Daily Fintech week of 2017 predictions

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A thematic week on Fintech trends in all the areas that we track. Ahead of the New year that will be exciting and complex, we dedicated the entire week to general Fintech trends, to WealthTech and Consumer Banking predictions, to Small Business and InsurTech forecasts.

Enjoy the holiday season.

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