Wrap of Week #3 of 2017: Fintech trends, Australian Fintech, T-zero, UK Challengers, healthcare insurtech

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We started the week echoing loud that in 2017 everything will change. Read carefully, Fintech is entering the third wave and this will be a wild ride.

From this thought provoking piece, we switched to the second significant and symbolic move from T-zero platform in capital markets: T-Zero sings “Love me do” to the SEC with its Blockchain Series A Preferred Shares.

A look at the Australian fintech ecosystem as it heads to Hong Kong for the Next Money event: Gazing into the crystal ball of Australian fintech.

Up to the northern hemisphere to other significant island, the UK, to inquire whether Challenger Banks break the massive bank concentration in the UK?

In Insurtech we looked at 4 of the companies positioned to do well from uptrend in the healthcare consumer and pay per outcome. Check out

Prevention & pay per outcome could be the key to Healthcare InsurTech post Trumpcare

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Happy New Year with some music about money

This blog is about the business of money, so for some light relief on New Year’s Day here are my top 11 songs about money:

The Romantic view:Money can’t buy me love

The lazy view of money:

The practical view: Take the K.A.S.H

Anticipating derivatives: You never give me your money

What we all want: Money for nothing

Jaded realism: You can’t always get what you want

The yuppie anthem: Opportunities (Let’s Make Lots Of Money)’ by Pet Shop Boys

Sadly real: Private Dancer

Paycheck blues: Working for the Clampdown

Celebrating the practical:

Ask and ye shall receive Oh Lord won’t you buy me a Mercedes Benz

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.

2017’s small business banking trends

French futurist and industrialist Gaston Berger said the purpose of looking at the future was to disrupt the present. So for what it’s worth, here are our thoughts – in no particular order – on small business banking trends in 2017.

Banks will bite back

Globally, banks spent a good deal of 2016 consolidating their financial influence over the small business fintech sector under the banner of collaboration and partnership. This was done either through direct investment into start-ups or at arms-length via their VC arms. The Tradeshift/Santander as Innoventure deal typifies this. Down under Westpac took a stake in online small business lending broker Valiant via its VC conduit Reinventure. There are countless other examples of banks stepping into this space.

Bank sponsored funding of fintech startups to cement new distribution channels for either their existing bank products or to simply clip the ticket will continue in 2017. My prediction is that emboldened by their ‘behind the scenes’ fintech learnings, some banks will move out from behind the curtains to reclaim the entire value chain once more. NAB QuickBiz is one example.

While a Business Insider report suggests 54 per cent of incumbents have seen fintech partnerships boost revenue, no one seems to be able to satisfactorily answer the question as to whether these same partnerships are proving beneficial for small businesses. What is the fintech metric of success?

The cloud accounting war will heat up

Xero has dominated the cloud accounting conversation for some time, however industry commentators are have noted the likes of Intuit and Sage are waking up to the threat. Intuit in particular is responding to the rise of the gig economy, which is transforming the way accounting software is consumed and expanding the addressable market beyond pure small business owners. Companies like Intuit are recognising 9 to 5ers who also drive Ubers in the weekend or pick up odd jobs on Air Tasker have very different needs to full time business owners.

Cloud accounting expert Sholto Macpherson noted the shifting dynamic in a recent article:

“Intuit’s a big ship and it takes a long time to turn around. In 2016, it’s clear that not only has CEO Brad Smith turned the ship around, it is picking up speed. And in answer to the most important question: Can Intuit move as fast as Xero on the dev side? For the first time, the answer is unequivocally yes. Intuit is in fact moving faster, in some areas.”

For those of you who are keen for more insights into the cloud accounting space, also check out cloud accounting and futurist Matt Paff’s 2016 review.

Chatbots will drive the personalisation of small business banking

Personalised banking services and financial advice for small businesses will be delivered at scale via chatbots. Most will emerge/pivot out of the PFM sector, which is already over serviced by non-differentiated startups. Sage launched Pegg in 2016, while Xero previewed its chatbot at Xerocon.

However the juicy stuff will be when chatbots don’t just surface account information but can actively transact on your behalf. Fintech startups are eager to play in this space but for the most part continue to be blocked by banks and access to data.

Mobile payments will become a business mainstay

In its last earnings call Apple announced YoY growth in Apple Pay transactions of 500 percent, with global penetration of Apple Pay acceptance in store slowly increasing. While they’re unlikely to have an overnight Pokemon Go moment, mobile payments will move from being a fringe payment method to edging on mainstream by the end of 2017. Businesses will need to adapt and upgrade tech infrastructure to cope, or risk being left behind.

Dave Birch’s cardmegeddon is still a while off though.

Techfin tsunami will continue to show no mercy

The subtle yet significant shift in the bargaining power of banks verses tech giants was nowhere better exemplified in Australia, where the local competition authority denied the incumbents request to collectively bargain against Apple to improve deal terms and gain NFC access.

Small business owners will increasingly turn to tech providers who can enable them to accept payments via new payment methods – Alipay and WeChat being the most obvious. This will further fragment the banking relationship for business owners, as retailers look at banking from a payment perspective first, rather than deposits and lending. More innovation continues to happen on the payments front than on the deposits and lending side, thus is a strong driver in purchasing behaviour.

Governments will wake up to social impact of enabling small business finance and banking

The growing wave of populism and main street revolt is underpinned by the financialisation of economies worldwide and the stagnation of growth in the small business engine room of the economy. This is probably a super optimistic prediction, but it would be heartening to see governments connect these dots better than they do today, and stand up to vested interests more strongly. If they don’t do it, chances are the voters will do it for them.

For a radical approach to how this could be actioned, economist and policy advisor Nicholas Gruen offers a blueprint for central banking disruption here.

API access to banks will be more common place

The movement for open data is gaining traction and more and more banks will start to provide basic API interfaces. More API first banks like Cross River will also start to emerge as they attempt to make the platform banking play ahead of the heavy footed incumbents.

Innovation around digital identity will accelerate

Without a commitment for a shared KYC platform between regulated entities, innovation in digital identity will separate the banking haves from the have-nots. Fintech startups like Hashching who embrace new digital ways to KYC new customers and find clever ways to strongly and securely authenticate customers will slash their acquisition and compliance costs, giving them a competitive edge.

Wrap of Week #43: Marketplace Lending, Simplesurance, Market Data feeds, Tink, ICOs

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IPO or ICO or IEO (briefing on Colored Coins):

The last day of the week focused on Innovations in capital funding and particularly on the Initial Currency Offerings (ICOs) and demystifying the Fintech jargon around. Lots of commentary to indulge in, too.

Why did Allianz invest in Berlin InsurTech startup Simplesurance?

A post around the questions of Why did Allianz, Germany’s largest insurance group, buy a minority stake in Berlin based startup Simplesurance? And will this be a good experience for the founders of Simplesurance and the shareholders of Allianz?

Creating the virtual bank – Tink makes the Fintech 100

Picking from the Fintech 100 KPMG report, one possible candidate for becoming a virtual bank, Tink.

Stock exchanges are aggregators of market data feeds, not playing to the Fintech rhythm

When and why did stock exchanges become profits centers? And did you know that they have been increasing the price on real-time market data feeds?

Market Place Lending is simply automated Asset Liability Management and that is a big deal.

MPLs are not like banks that have an asset liability mismatch when lending out out deposits. Asset Liability Management 101 and the value in MPLs.

The Fintech Genome

Check out the recent conversations on the P2P Fintech knowledge platform. Engaging can earn media for you personally, your company, or your clients.

Simply register, view and share your insights and points of view.

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Stock exchanges are aggregators of market data feeds, not playing to the Fintech rhythm

A check on stock exchanges before Halloween makes sense. We covered stock exchanges in a two part series in May, with a focus more on Fintech innovation and naturally, we found Blockchain parties and concerts all over the planet. These activities continue to spread but today I want to highlight the major source of the extended revenue growth over the past 5yrs of Stock exchanges. Lets not fool ourselves by believing that the revenue growth is due to some innovation. It is heavily due to a government created oligopoly that exploits customer transactions data!

When and why did exchanges transform into profit centers?

Exchanges before the turn of the century were serving a global service and were operating very much like utility companies or social servicers. They were scaled versions of Jonathan’s Coffee house in London (original site of LSE) and the Button wood tree in New York (agreement that started the NYSE).

It all changed in the very first few years of the 21st century, not because they were waiting to make sure that computers could overcome the Y2K problem. It was mainly due to the wide adaptation of electronic trading for stocks at least, which led to setting up clearing and settlement businesses like DTCC. These for profit businesses post trade companies led the way to raising capital by accessing the public markets. In the US, it was NYSE In 2005; and in Europe, Deutsche Börse and LSE, in 2001.

The next pivot in their business model of these publicly traded ex-social servicers happened 100% because of regulation. SIP (Securities Information Processor) resulted in an unintended consequence that many believe as a government-led oligopoly of stock exchanges. SIP was conceived to protect end-investors from being taken advantage from those operating the electronic trading circuits. It created a filter, operated by the exchanges, in order to ensure that the best quotes get fed to the broker dealers. Simply said, exchanges which act as aggregators were also crowned with another role, the filtering SIP role.

In addition, the subprime crisis resulted in reduced trading activity and shrunk the market-maker activities. The revenues from trading volume shrank and the business shifted its focus to increasing charges on Market Data feeds. This was and is a captive market – Real-time access to Market Data feeds – is absolutely necessary for brokers, and market makers etc.

Stock exchanges are the aggregators and are continuing to charge an arm and a leg for real-time access to these feeds. In fact, they are the only aggregators that have increasing these charges.

Tabb group reports that the revenues from US stock exchanges have climbed 16% over the past 5yrs, largely due to data revenue. Of course, the acquisition spree that has been happening is very much contributing to these figures too.

 

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From “Costly data battle heats up between traders and equity exchanges

 Lawsuits on Market data feeds are dragging

 There have been multiple lawsuits around this issue. However, the rulings take very long and in the meantime, the exchange sector continues to consolidate, leading to further strengthen of the oligopoly and resulting in fewer and fewer players. The most recent announcement of the BATS exchange acquisition from CBOE takes an innovator out of independent action. ICE is a huge conglomerate with a global web that makes the space very tough to disrupt.

The most significant lawsuit saga continues for more than 10yrs. SIFMA (Securities Industry and Financial Markets Association) and a coalition of Internet companies filed a lawsuit against the exchanges in 2006. In 2013, the U.S. Court of Appeals for the District of Columbia instructed the SEC to reexamine its approval of data fee increases and require the exchanges to justify the price hikes. Since then, the case was  awaiting review by the SEC’s own administrative court. This summer, the SEC judge threw out the case and SIFMA has stated that they will appeal the ruling.

The double disruption from IEX: speed bumps and free real-time data

IEX, the sole disruptive force left in the stock exchange space, got approval to operate just 3months ago.

Remember this is the only such business that isn’t heavily influenced and tied to the Sell-side; contrary to all others who came out of a Sell-side membership type of organization before becoming public. IEX is a membership held organization but from the Buy-side! It’s first positioning was-is to use a speed-bump in the way it operates the electronic circuits of the IEX exchange. The purpose is to protect the market from HFT rigging and serve the interests of the Buy side.

The second move, which is upcoming will be-is to offer free access to real-time data to its customers (Kurt Dew, an industry veteran has been covering these issues in Seeking Alpha as they unfold). This is a direct and major disruption to the other players that count on such data feeds constituting a major source of their revenues.

How soon will the data source of revenue disappear for exchanges? Will technology solutions and private markets become the areas of revenues for the exchanges?

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 #42: China Marketplace Lending, Fintech book, Health Insurance, the Australian payments platform

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On the aftermath of Lendit Europe, we looked at the Chinese Marketplace Lending scene with the following inquires in mind:

Part I: The Big and Scary prize

Will China MPL follow the Uber Didi trajectory?

How will global lenders get in on the action?

How is the progress from Wild West to Settler phase?

In Part 2: Which Chinese players will emerge from Consolidation

What role will BAT (Baidu Alibaba TenCent) play?

We reviewed the new  book Fintech Innovation: from Robo-Advisors to Goal Based Investing and Gamification in our analysis “Fashionista Sironi speaks about Fintech Innovation in Investing”.

In the insurance space, Health Insurance InsurTech innovation may start with dentists and a P2P network of providers as we looked at the old-fashioned organizations of Cooperatives that we call today P2P networks.

From the Southern hemisphere, we looked at the New Payments Platform (NPP), the Australian equivalent of the UK’s Faster Payments Service.

The Fintech Genome

Check out the recent conversations on the P2P Fintech knowledge platform. Engaging can earn media for you personally, your company, or your clients.

Simply register, view and share your insights and points of view. Sample conversations:

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This week we celebrate the 2 year anniversary of Daily Fintech by launching a peer to peer knowledge network, the Fintech Genome (ala genetics).

 

Join, engage, interact by clicking here.

 

We extended an invitation to the growing Fintech community and explained the concept in “Help us decode the Fintech Genome”.

 

This was done without any interruption of the regular schedule of our insights. This week too, it was another trip globally.

 

A first look at the most hard hit public valuations in the Daily Fintech Index, after the Brexit.

 

A first look at the Fintech recruitment scene with the input from Nicole Curtin and Fintech Recruiters; and some disruptors.

 

Over to Australia, where there are three fintech IPOs in the pipeline and we look at the real time KYCexpert serving financial institutions, which is a re-branding of the Global Business Register.

 

A two day coverage of innovation in the Life Insurance space. First part more focused on categorizing innovation players within life insurance. Second part, more focused on the pain points of the industry and the opportunities.

 

 

We mentioned

Nicole Curtin, Fintech Recruiters, Angel list, efinancialcareers, The Banking practice, Ashmore Stark, New Finance

Global Business Register Limited (GBR), @KYCexpert, @ChimpChangeMe @CoAssets, @OnMktBookBuilds, @ASX, Kyckr, KYC.com, AvoxClarient and SmartStream

Hearsay Social, Smart Asset, Policy Genius, Slice Labs, InforcePro, Haven Life, VitalityNew York LifePacific LifeFarmers and AXA.

 

 

 

 

 

,

 

 

, a UK based a 2yr old practice which positions itself as a online talent platform for financial services.

New Finance, the financial network operating out of London via Meetup, is also stepping into the jobs space.

Ashmore Stark, i

 

 

 

 

 

Robo-advisors, Blockchain; Insurtech and Small Business; in-store mobile payments; Marketplace lending

 

The UK is in the spotlight for many reasons (some good, some bad). We gave it first position this week but we also traveled from Australia to the US.

 

21 #roboinvesting ventures in the UK & the Blackrock tale. Sizing the UK robo-advisory market, which seems on the way to triple its size.

 

An in depth look at the important B2B niche in Small Business Finance: How to tackle the Approved Payables Finance. Could this be an example of a permissioned network that makes sense, Blockchain

 

The 4 US based Small Business Friendly InsurTech Ventures that are filling in the gap that Zenefits left.

 

Growing conversion rates via a superior customer experience; focus is on in store mobile payments. A growth opportunity; a problem to be solved.

 

An insightful look at the value chain in marketplace lending. Where is the value in the ecosystem?

 

We mentioned:

ETFmatic, Nutmeg, FiverAdat, Money On toast, Money farm, EValue, Wealth Objects, Wealth Wizards, Wealth Horizon, Wealthify, Wealth Kernel, Net Wealth, Swanest, Scalable Capital, Alpima, Quantstore, Zen Assets

ApplePay, Clover, Paypal, OneTouch

CoverWallet, Embroker, Insureon, FounderShield, Zenefits

OnDeck, Kabbage, Flexport, Fluent, Credit IQ, Provenir, EOriginal, Meridian Link, Cunexus Solutions, Web Bank, Cross River Bank, CBW Bank, NSR Invest, Lending Robot, Orchard Platform, DV01, Monja, Orca Money, Kreditech, Prosper, Lending Club, Funding Circle

 

 

 

 

 

 

 

 

 

 

 

 

,

 

 

 

 

 

 

Kansas: A global alternative exchange that IPO’d; BATS exchange.

Austin TX: An alternative credit history builder running in a bank; SelfLender.

Global: Western Union an incumbent innovating in payments and more; Podcast.

Global: Distribution strategy alternatives for Online business lending;

Global: 21 Insurtech Ventures changing the Auto Industry (continuation of coverage)

Global: One way that marketplace lending could thrive; watch Warren Buffet’s lips.

 

 

https://dailyfintech.com/2016/05/31/credit-history-is-a-digital-asset-in-an-underserved-market/

@selflender

@nerdwallet

https://dailyfintech.com/2016/05/30/fintech-opens-ipo-window-with-bats-and-says-sorry-about-earlier-ipo-fluffs/

@Batsglobal

https://dailyfintech.com/2016/05/29/pirates-with-ties-interview-with-david-thompson-of-western-union/

WU Edge

@WesternUnion

@WesternUnionCIO

 

https://dailyfintech.com/2016/06/01/whats-the-trojan-horse-distribution-strategy-for-online-business-lending/

PayPal Working Capital, Square Capital and Shopify Capital.

@PayPal

@Square

@Shopify

@Fundera @OnDeck

 

https://dailyfintech.com/2016/06/02/21-insurtech-ventures-changing-auto-insurance/

https://dailyfintech.com/2016/05/05/insurtech-comparison-sites-transform-to-robo-brokers-as-insurance-value-chain-shifts/

 

AccuScore Telematics

DriveWay Telematics

Metromile Telematics

Octo Telematics Telematics

RootInsurance Telematics

TheFloow Telematics

TrueMotion Telematics

Wunelli Telematics

OkChexian Telematics

Acculitx Telematics

DriveSpotter Telematics

Telematic Telematics

Citymile Telematics

Goji Robo Broker

Cuvva Just In Time

CoverHound Comparison

Insurify Comparison

RenewBuy Comparison

TheZebra Comparison

ClaimDi Claims Process

SnapSheet Claims Process

 

https://dailyfintech.com/2016/06/03/marketplace-lending-depends-on-savers-moving-on-from-bank-deposits/

 

 

The IPO window is open but only the best can get through. The headwinds are still there for Fintech but skilled sailors are needed to ride the wind through turbulent weather. One of the first ventures to go through is the BATS (Better Alternative Trading System). We covered BATS in an earlier research note on Fintech in action on Western Stock Exchanges. The key point is that BATS is number 1 in ETFs. This is important because ETFs are powering Robo Advisers.

 

One of the largest underserved segments in the US, are individuals that don’t own this Digital Asset – Credit history. SelfLender is the first all-online credit builder loan; ideal for students, young adults especially those in no-mans land 18-21yrs old, foreign students, immigrants, H1-B visa holders, and others with zero credit history who need to establish credit.

 

What options do small business lenders have to maintain healthy margins, as the popular channels are failing?