asia

The Jarvish smart helmet IOT Insurtech from Taiwan is another First the Rest then the West story

Jarvish

Jarvish is a Taiwanese company that is doing a lot more than making it easier to buy insurance. They are using hard technology innovation to reduce accidents and therefore reduce the cost of insurance, using smart helmets that can monitor your driving.

We are seeing the same thing in the West with sensors embedded into cars. Jarvish is doing this in the Rest of the World where a motorbike is the first automated transport that a family can afford. Rather than selling into a motorbike market in the West with tens of millions of hobby bikers (they also have a car but just love to bike for fun), Jarvish is selling to the hundreds of millions of bikers in the Rest who use motorbikes as their primary means of transport.

Rather than having to negotiate with car manufacturers, Jarvish simply make the helmet and sell it to consumers.

That is why Jarvish illustrates a megatrend we have been tracking for a while that we call “first the Rest then the West”.

In doing so they are solving a Catch 22 for motorbike insurance. If driving a motorbike is so dangerous then claims will be high so premiums will be high, so the poor people who rely on motorbikes as their primary means of transport cannot afford insurance.

First the Rest then the West

This is one of the big stories of our time. It is the end of what historians have called the Great Divergence, when the Western economies rose to dominance.

For most of the 20th century, technology was limited to the West. Countries in the Rest (formerly known as developing, then emerging, then rapid growth economies) were “tech deserts” until those economies started to open up (first China, then India, then Africa). Then technology adoption started to flow from the West to the Rest; the last decade has been a boom time for Western tech firms selling to the Rest.

Now the flow is reversing as technology adoption starts in the Rest and then goes to the West. For example, look at Xiaomi to see the future of mobile phones and Alibaba for the future of e-commerce or Paytm for the future of mobile wallets.

This megatrend is not limited to Fintech. Within Fintech, mobile payments and mobile e-commerce is the big disruption and that is happening first in the Rest and then will flow to the West.

Technology adoption starting in the Rest rather than the West is one of the big 21st century megatrends.

Note that I am referring to technology adoption. Where something is invented matters a lot less than where and how it is adopted, as Steve Jobs taught us after wandering around Xerox Parc and seeing the first graphical user interface and using that to create a PC with a much better UX. What really matter is innovative customers and customer innovation is driven by blue ocean markets with big unmet needs and lack of legacy technology constraining innovation.

If you need a smart helmet to keep your family safe, you have a big and so far unmet need. That is why we think Jarvish is a company to watch.

The Asia Inurtech story 

We have already tracked Insurtech innovation coming from India, Korea, Singapore, China. This is the first we have seen from Taiwan. Asia has all the ingredients to become the locus of Insurtech innovation:

  • Big blue ocean markets with lots of unmet needs
  • Lack of legacy technology constraining innovation
  • Hard core technology skills linked to manufacturing expertise (so they can build physical products and are not limited to digital innovation).

Technology innovation not just UX layer digital innovation

The idea of a smart helmet is not new, but like so many Taiwanese companies, Jarvish competes through technology innovation. This is not just another digital UX layer startup. Jarvish has invested years and lots of Ph.D level resources to create a smart helmet that does not require Bluetooth. Even more critical from a safety POV, the Jarvish helmet does not use lithium batteries (which can overheat and explode) and they use “military-grade ceramic anti-explosive batteries”. First do no harm – the helmet has to be safe.

The best way to think about the Jarvish smart helmet is like the black box system that crash investigators extract from commercial aircraft, except that this black box is tiny, cheap and cloud-connected.

Like Apple, this is innovation from technology to consumer marketing and Jarvish is not shy about making the comparison:

“Much like smart phones, at first they were only cool high-tech gadgets, but quickly became an essential part of everyone’s daily life. In the near future, smart safety helmets will definitely be as common as smart phones.”

Illustrating the “first the Rest then the West” megatrend,  the Jarvish roadmap includes products we can envisage also getting traction in the West:

“all types of smart headgear, with such applications such as smart helmets for skiing, diving, firefighting, cycling, drones, extreme sports, and entertainment. All of which will include smart functions and module designs, as well as all the incorporated software needed. We also provide a cloud platform, and international-level third-party value adding services to users.”

The Art of the Chef – combining ingredients

You don’t need to look too hard to see a revenue model. Jarvish sell helmets to consumers with their smart helmet technology embedded. This is simple but powerful.  It illustrates what I call the Art of the Chef business model in my book Mindshare to Marketshare. The chapter entitled Turn Secret Sauce Into Unfair Advantage describes how Fast Moving Consumer Goods (FMCG) companies grew to dominance by avoiding commoditization by combining commodity ingredients into a differentiated package. The book uses companies like Coca Cola selling sugared water at high prices or Gillette charging a premium for razor blades that cost very little to illustrate how to combine commodity ingredients into a product that is highly differentiated. The book then goes on to show how companies such as Apple and Visa used this in technology. Jarvish is on the same path.

I liken this art of combining to cooking. You have lots of components that go into a dish. You might even have a secret ingredient that defines it. Yet the whole is obviously more than the parts.

It gets more interesting when you move from FMCG to technology driven businesses:

”Consider the greatest entrepreneur the tech world has ever seen – Steve Jobs. 

Steve Jobs innovated by combining multiple commodity ingredients into a very tasty dish. He was a technology chef.

At one level he combined multiple commodity ingredients to create unique devices such as the iPod, iPhone and iPad. He combined lots of commodity components sourced from all over the world into a uniquely beautiful and useful product by adding a touch of design magic. However, if he had only created “insanely great devices”, Apple’s business would be more vulnerable to competitors like Samsung and Xiaomi. The reason that Apple is so valuable is that Steve Jobs combined great physical devices with digital services like iTunes and AppStore into a combination that still mints money long after he died. That is why Apple has massive amounts of Unfair Advantage (aka moat, aka competitive advantage). 

You  also see this art of combining in payment network such as Visa, Mastercard and Amex. Yes, these payment networks have software at the core. Yes, they own the hardware servers that the software runs on. Yet they don’t license that as a SAAS product to banks. They wrap it into other services to deliver transactions to consumers via Banks. That is how Visa, Mastercard and Amex turn their secret sauce into Unfair Advantage. 

What Coca Cola, Apple, Visa, Mastecard and Amex have in common is the art of the chef – to combine commodity ingredients into value.”

I see this same art of combining in Jarvish. At one level they combine their proprietary smart helmet technology with the commodity components and manufacturing process of making helmets to create their own differentiated helmet. They combine their own yeast with water, flour and salt to make bread. The next step, akin to Apple moving from iPods/iPhones devices to device hooked to iTunes is to create a digital product that reduces accidents and thus reduces insurance costs.

Image Source.

Bernard Lunn is a Fintech deal-maker, author, investor and thought-leader. 

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SIBOS Day Four – the FinTech story in Asia

By Ravi Patel

Ravi Patel is contributing to Daily Fintech as a Guest Author. He is the co-Founder and CEO of YoloPay, a Singapore-based mobile payment company developing payment solutions for families. Prior to this, he was a consultant and business strategist in the financial services industry.

Ed Note: I asked Ravi to cover SIBOS as a reporter as I was busy as a speaker/moderator and connecting with clients for Daily Fintech Advisers. 

SIBOS is truly a global Financial Services event with bankers traveling across all corners of the world to connect with banks, payment service providers, technology vendors, ‘FinTechs’, consultancies, regulators and more. This year, with the event being held in Singapore, there was a strong representation from Asian participants and Asian representatives of global organizations. So what is the Asia FinTech story? Is there one?

In this post, I will outline some of the themes, specifically relevant for Asia, that emerged most consistently.

1) Asian markets play catch-up but few are driving local innovation yet

Not many will disagree with the notion that the ‘FinTech’ phenomenon began in the US and Europe after the 2008 Global Financial [banking] Crisis where the significant turn in consumer sentiment propelled a drive for change. (Needless to say, there were many notable ‘FinTech’ innovators before but they were isolated.) However, there has been no such trigger for Asia where the majority of Asian banks, Financial Institutions and their customers were not directly impacted.

This means that there have been no external shocks to drive an urgent response in Asia – often the key ingredient to a significant shift in an industry. I would argue China is the only exception due to the Government siding with the large Tech companies, e.g. Alibaba and TenCent in an urgent attempt to challenge the rampant shadow economy, above working with the slower-moving state banks.

When I started my FinTech in 2013 in Singapore, there was almost zero interest in FinTech. In fact, even the word was unfamiliar to most. However, only after the emergence of the high profile ‘Unicorns’ such as Lending Club, Credit Karma, Square, Transferwise and many others, now banks, investors and entrepreneurs in Asia are starting to pay attention. In 2015, several accelerators were set up such as Startupbootcamp, InspirAsia, Spaze in Singapore and NestVC and FinTech Innovation Labs in Hong Kong and many venture capital firms have announced a new focus in FinTech. Even some governments are responding. The Financial Sector Technology and Innovation (FSTI) scheme that was introduced by the Monetary Authority of Singapore (MAS) in June 2015 with a commitment to invest S$225 million over the next five years.

So these are clearly very early days and there will need to be new large companies having impact before success can be called. It is imperative that suitable local problems are be identified, and not just extrapolations of Western market problems, before we can expect anywhere the near the same impact.

2) Unique consumer opportunity with the ‘Underbanked’ and the ‘Digital Native’

A very unique feature of the Asian opportunity is the demographic and socio-economic profile of the population and the ‘localized’ problems that exist or that are emerging. Two themes spoken about on multiple occasions were the 2.5 billion ‘unbanked’ or ‘underbanked’, a significant chunk being in Asia. Also the leap-frogging digital natives who were born with a mobile device (not literally) who may never see a bank branch in quite the same light as their older western counterparts. Interestingly there is a large overlap between these two segments.

This drives a local demand for new solutions, but again, it seems that the Asian Financial Services community are in the very early stages of identifying a proposition supported by a robust business model in order to target and serve these new segments.

I discussed this in more depth on my #SIBOS Day Two Figuring out how to profitably serve the Underbanked post. I believe the millenials and their younger friends will also have expectations that will demand a new sustainable business model. The early hopefuls seem today to be focused on mobile-only digital banking and payment services, new online credit services using social information and various crowd-funding platforms. The common thread between them is providing easy access to instant services on a mobile platform – minimum expectations for a ‘Millenial’ – just ask any ‘Baby Boomer’ with kids.

3) Real-time payments and remittences

Given the fragmented state of payment systems both domestically and internationally in Asian markets, building a new payment infrastructure supported by mobile wallets and mobile point of sale is extremely important. And extremely valuable. And therefore should be attractive.

Some countries in the region have made large steps forward in creating a domestic real-time payments infrastructure, such as Singapore and Australia. However, the majority are still operating multiple independent payment systems that make the cost and efficiency of money transfer, in many cases, prohibitive. I talked about some of the developments in my post on this SIBOS Day Three Real time payments going mainstream but this certainly remains very high on the agenda for most Asian markets given the status quo.

There are a lot of new local players now competing with the US giants on the merchant acquiring side, e.g. mobile Point-of-sale operators such as 2C2P, Coda Payments, SoftPay. Access to issuing licenses means that independent general-use wallets are more difficult to launch. We can expect much more growth here as these solutions can enable economic growth.

In addition, remittences is also centre stage in Asia. With more communities traveling across the region, more businesses expanding to have regional coverage and with online commerce lowering physical barriers, the opportunity for remittences is large. Given the poor infrastructure that the incumbent banks operate, the cost of moving money is extremely high. While companies like Transferwise and Azimo are making headlines in Europe where they have the scale to grow afforded by large domestic markets in the SEPA (Single European Payments Area), the complexities for Asian cross-border remain challenging, not least the growing regulatory burdens of KYC (Know Your Client) and AML (Anti-money Laundering) on innovating and operating cross-border business operations.

In summary, the Asian FinTech story is very young and only starting to emerge driven by strong local drivers and the ‘disruption’ apparently taking place in the US and Europe.

There are clear indications of the need to build propositions for new customer segments, supported by sustainable business models and also numerous opportunities to improve operational inefficiency for large financial institutions through improvements in process standards and also new technologies altogether. For example, distributed ledger technologies are being heavily explored in Singapore and Australia by both public and private sector initiatives as a means to improve processing capabilities. There is a lot of work to do.

Whether this comes from true disruption, i.e. new players replacing incumbents, or through greater collaboration, the tone of the conversation at SIBOS seemed to suggest collaboration would be the way forward. But that may not be a surprise given that it is a conference by SWIFT for banks. In any case, the Asia FinTech story is only beginning and its trajectory may end up being very different to what we see happening today in the US and Europe.

SIBOS Day Three Real time payments going mainstream

By Ravi Patel
Ravi Patel is contributing to the Daily Fintech as Guest Author. He is the co-Founder and CEO of YoloPay, a Singapore-based mobile payment company developing payment solutions for families. Prior to this, he was a consultant and business strategist in the financial services industry.

Ed Note: I asked Ravi to cover SIBOS as a reporter as I was busy as a speaker/moderator and connecting with clients for Daily Fintech Advisers.

One of the most heavily discussed topics at the SIBOS 2015 conference in Singapore was regarding the arguably utopian state of any payment system – ‘Real-time’ payments. Maybe this is not so much of a surprise since the event was organised by Swift who essentially have a monopoly on inter-bank financial communication networks. So definitely the right place to have the discussion.

But what I found interesting is the divergence of solutions to the problem. Broadly speaking, there are two camps here: The old guard who believe we have come a long way and still have much more to do to get to the utopian state. And the new FinTechs who believe their alternative solutions can fundamentally rewire the system using the new distributed ledger technologies. And do it quickly.

Whether this becomes a race or we see an evolution towards different solutions for different requirements, we will need to see. But I summarise below some of the key trends I saw:

1) Volumes are steadily growing – According to McKinsey & Co, payment volumes, payment revenues and the percentage of total banking revenues had all been increasing with a healthy growth projected from 2014-2019. Total payment revenues is projected to grow by 6 percent per annum each year through to 2019 eventually accounting for 40 percent of banking revenues. This is driven by continuing economic growth in a more globalised world, the growth of mobile as a new payment medium and also the growing inclusion of payment capabilities to new segments, in particular developing economies in Latin America and APAC.

This suggests that the demand for payment solutions and the need for efficient payment operations will notably increase. So this validates strongly the call to action.

2) New standards and technologies – There is a clear appreciation that the initiatives to deliver real-time payments in some countries such as the UK, Australia and Singapore can be considered a success. And general desire to expand this across other markets was very apparent. For example, Japan had announced that in the next year it will be implementing a real-time payment system and Thailand had also just recently announced it will be partnering with VocaLink (the company responsible for implementing Faster Payments in the UK, FAST in Singapore and a similar system in Sweden) to deliver a real-time mobile payment system. Sadly the US was highlighted as being a very difficult market to implement real-time payment on the current infrastructure due to the federal banking structure and thousands of banks within.

There were multiple sessions on the implementation of ISO 20022 specifically, a new standard with new business processes for electronic data interchange between financial institutions. (ISO 20022 was the basis of Singapore’s FAST payments solution.) One thing remained clear throughout, the complexity of banking infrastructures and regulatory pressures meant that implementation was going to take time. According to one survey by a consultancy Dovetail, over a third of banking executives surveyed believed that it would take more than 2 years to implement instant payments.

3) Alternative solutions – And unsurprisingly, the FinTech also had an approach. Both Earthport and Ripple were on site presenting their distributed ledger technologies (“DLT”) to bypass traditional networks and settlement processes and deliver real-time payments far more efficiently and cheaply using their API-accessible platforms. While still very early days, the banks appear to be interested. For example the Consultancy R3, is working with 9 banks across the world to explore how to implement distributed ledger technologies to impove operations (read here).

After speaking to several traditional technology vendors (meaning they have been around the block a few times) some were truly embracing the potential of DLT to transform multiple aspects of the financial services industry. IBM specifically mentioned DLT as one of their two areas of focus (the other being ‘Cognitive’, its deep learning capabilities). There may well be a race in the need to build capabilities including the technical human resource pool who will be called in to transform the financial services industry…. Once they have worked out exactly what the problem is; and got permission from the regulators to go ahead; and prioritizing with the increasingly tough regulatory burden; and making the business case on an increasingly competitive marketplace with thinning margins. Needless to say, while this is certainly a high point in the hype cycle and whether it continues to grow or we get bored and move our hype elsewhere, the DLT is clearly a strong contender for driving the sustainable and long-term growth of the industry.

The question is now, will it make more sense for the incumbents to transform or for a new challenger to rapidly disrupt in particular product/niche. Once again, the reigning theme at SIBOS 2015, at least for me, is one about business model – What does the bank of the future look like? These are exciting times.

#SIBOS Day Two Figuring out how to profitably serve the Underbanked

By Ravi Patel

Ravi Patel is contributing to the Daily Fintech as Guest Author. He is the co-Founder and CEO of YoloPay, a Singapore-based mobile payment company developing payment solutions for families. Prior to this, he was a consultant and business strategist in the financial services industry.

Ed Note: I asked Ravi to cover SIBOS as a reporter as I was busy as a speaker/moderator and connecting with clients for Daily Fintech Advisers.
The ability for a bank to serve the ‘unbanked’ might just be a contradiction as there may be a very obvious reason why banks haven’t served them to date – possibly, they can’t profitably serve this segment. So the better question is, what is required to serve this segment?

A question all startups face as they establish themselves is “What is your business model?”What the questioner is trying to understand is what are the forces that will allow you to sustainably grow your business.

For banks, a very succinct answer might look a little like this…

Banks broadly make money by earning the interest differential between what they pay on the deposits they receive and what they earn on the loans they make to customers. They additionally make money by earning fees from services provided including transaction execution, advisory and management. These can be applied across customer segments and across channels.

At SIBOS 2015 Singapore, and especially when we think about the developing and emerging economies of Asia Pacific, Financial Inclusion (which we call the Underbanked market on Daily Fintech) is a very hot topic. We often hear about the circa 2.5 Billion people who are ‘unbanked’ and do not have access to quality financial services.

But of course when we think about this more, the unbanked can easily extend to young people (aged less than 18, the common age before credit can be offered to minors), those who cannot work for reasons such as disability or those with a tarnished history incompatible with the narrow parameters firmly held by a very old credit scoring industry.

Whether poor or disadvantaged, if you cannot pay the interest income on credit or the fees, there has not really been an interest by banks to offer services.

And compounding this unfortunate exclusion has been the rising wave of regulation aimed initially at fraud and now extending to anything remotely linked to terrorism, even by association of country. New regulations on KYC (Know-Your-Customer), AML (Anti-money Laundering) and more recently establishment of new bodies such as FATF (Financial Action Task Force), an independent inter-governmental body that develops and promotes policies to protect the global financial system against terrorist financing

On the SIBOS Day 2 Innotribe panel on Financial Inclusion, we heard from some leading thinkers in the space. There was a mix of optimism and enthusiasm that the industry could innovate its way profitably into this segment. However, there were also concerns, due to the compounding strains on banks, whether this was a realistic expectation.

I want to present some options that could promote inclusion by developing a new business model that could sustainably serve, initially, some of the huge unbanked populations (note that almost all examples will involve a mobile device to reach the customer):

1) Smart credit profiling – The banks are losing ground very quickly to new innovative online credit services, FinTechs, who are able to rapidly use widely available digital profile information to intelligently determine credit worthiness. Facebook was a suggested digital identity platform and with biometic idenitfiers. New startups in this space were well represented at SIBOS with Kreditech, Iwoca, Cignifi and Modeall presenting their new capabilities, and opening up financial services to various customer segments. But as was wisely pointed out, they have yet to see a down cycle so the jury is still out. Notwithstanding, better credit profiling will open financial services to a larger population.

2) Micropayments and alternative low-cost payment systems – Broad industy innovations can lower the cost of financial services to increase access to those on the lower, but maybe not bottom, segments. New peer-to-peer models mean that capital can be transferred to pay those who deposit and charge those who borrow much more efficiently without the intermediary earning the “interest differeniatial”. Also enhancements to payment systems include new distributed ledger systems that bypass the archaic payment systems operated today by incumbant payment service providers.

3) New business models – A saying that has often been quoted in startup world goes, ‘if you’re not paying for the product, you are the product’. That may not be such an unethical outcome if socially responsible companies are able to deliver new inclusive services such that customers can access and suppliers are able to create a profit. Some examples include Nextbillion who provide Mobile Movies to show movies and educational content while collecting data to document positive impacts. Another is Wobe who provide an App for women in rural Indonesia to earn commissions from reselling mobile phone credits. While these are isolated examples, they are indeed setting a precendent for creating self-sustainable business models to serve what we describe as being ‘unbanked’.

So question is not how can banks serve the unbanked, rather, what is the optimal business model to serve this segment to improve the welfare of this excluded segment. This could involve Banks, FinTechs, TelCos, or maybe even someone else.

SIBOS Day One – return to a new looking Singapore

By Ravi Patel

Ravi Patel is contributing to the Daily Fintech as Guest Author. He is the co-Founder and CEO of YoloPay, a Singapore-based mobile payment company developing payment solutions for families. Prior to this, he was a consultant and business strategist in the financial services industry.

Ed Note: I asked Ravi to cover SIBOS as a reporter as I was busy as a speaker/moderator and connecting with clients for Daily Fintech Advisers. 

SIBOS, the preeminent Financial Services conference organised by SWIFT, returns to Singapore after 12 eventful years. You may forgive many of the returning veterans (out of the estimated 8,000 attendees, a preliminary estimate) for not remembering too many local landmarks for much has changed; in both Singapore and not least the Financial Services Industry.

As a guest contributor to the Daily FinTech, I want to share some observations and themes that emerged from Day 1 of the conference, the most memorable being the use of the word “disruption”. (Please note that as a self-proclaimed “FinTech entrepreneur”, I have a bias to sessions on the future state of payments and digital innovation.)

The conference agenda seemed to cover the usual areas of payments, securities, cash management and trade, however, it did not take long until the word “FinTech” was bandied about referring to the new generation of challengers driving new innovation and growth. There seemed to be a serious desire for debate about the future business models for the industry whether it was ‘disruption’ or ‘collaboration’, need for technology or a revamp of culture, whether something new (e.g. blockchain) or a retrofit of the existing world (e.g. real-time payments).

Here are some of the key take-aways from Day 1:

1) “An emerging divergence.” There seemed to be a slight divide between the SIBOS loyalists and a small new generation, made visible not least by their attire (Ed, in past years suit and tie was mandatory for men and that was the practice for about 98% by my rough count). While the banks and traditional technology vendors set their stalls across the exhibition floor with lavish displays, Italian coffee machines and closed glass rooms for private meetings, the Innotribe section (Insights on innovation) was open, loud and most certainly over-subscribed.

2) “Going back to the drawing board on the business model.” There were multiple discussions on innovation across the different fields whether looking at new models, new entrants replacing the incumbents, new policies or regulations to improve service standards or some suggestion of collaboration. There was a fiery debate between FinTechs and Banks at the “Future of Money: A burning platform?” panel. A good example was regarding new online credit services leveraging new social data sources to make intelligent approvals and improve service delivery and inclusion for credit services. Such evolutions were suggested to be exciting and in some cases best delivered by startups with their single focus, but it was noted that many models were still untested through economic cycles.Would it be disruption or collaboration?

3) “Finding use for the Blockchain.” No FinTech conference in 2015 can escape the mention of the Blockchain and the sweeping potential to transform the financial services industry. Beyond the high level sensationalism, the panel “New kids on the Block(chain)” raised some good points about potential use cases for banks highlighting how trade invoicing could be effective, however clearing and settlement functions would not work due to privacy requirements. It was therefore very clear that a lot more investment was required to understand how to implement and operate the blockchain to improve the efficiency of the business operations and also the customer service levels.

Ed: this session was so overbooked that they created an overflow room connected by real time video and that too was standing room only. Many commented that Blockchain was top of the Hype cycle meaning that in a year we will be wondering how it disappeared so fast and then x years later we will all be using it even if most of us are not aware we are using it (like VOIP).

4) “APIs as a product.” Fidor Bank, Silicon Valley Bank and BNY Mellon presented some interesting examples of progressive banks opening public APIs as a new product offering to front-end solution providers with great advice on how to build and operate. A noteworthy consideration was the importance of a new developer to developer culture that will be front-line in financial services. It was suggested that this may be the strategy to survive and emerge successful in the next phase of digital banking, in addition to new regulations such as PSD2 which will require in any case for banks to have certain public APIs in Europe.

5) “Regional disparities are prominent.” In the context of real-time payments, it remained clear that the different regions were at different stages of evolution and faced different challenges whether looking at the USA, Europe, SE Asia, Australia or Japan. Such structural differences will remain to be a challenge for harmonisation and eventual optimisation. However, the locations have implemented or have plans to implement real-time payment systems with some markets paving the way forward, such as the UK’s Faster Payments system.

There were numerous other panels, workshops and meetings all fully attended throughout the course of the day covering the above and many more topics. Some sessions reached capacity and wouldn’t let more people in. While there is broad consensus of the need to innovate more in the financial services industry, given the significant changes in the consumer landscape, the technologies available and the regulatory environment, the debate is still on to explore what are the best ways forward. I’m looking forward for another 3 days. And I am sure there are a lot more deals to be made in those shiny glass offices.

Singapore takes top slot in latest Fintech Capitals rankings

By Bernard Lunn

A week from today, on Wednesday next week, I will be moderating a session at SIBOS in Singapore entitled Why Banks need Fintech Hubs, where representatives of 8 Fintech Hubs will be presenting:

  • New York, USA. Maria Gotsch,President and CEO, Partnership Fund for New York
  • Singapore. Markus Gnirck,Co-Founder and Global COO, Startupbootcamp
  • Switzerland John Hucker, Founder, Swiss FinteCH / finteCH meetup.

I had earlier published a ranking that put London top of the pops. As in any ranking things change and it is part of the pleasure of an open source research site such as Daily Fintech that good data from experts comes in from the community.

So I have reissued the rankings using only data points from two fairly objective sources:

  • Global Financial Centers Index. This has been reissued since I posted about London being top of the pops. London has now displaced New York as the number one slot.
  • Doing Business Rankings. This is compiled by World Bank and the summary number is an extract of 10 individual scores all related to the ease of doing business.

One way to view these two rankings is that Global Financial Centers represents the present and Doing Business Rankings represents one aspect of the future. Singapore gets top score on Doing Business Rankings and # 4 on Global Financial Centers.

There is a data normalization issue because Global Financial Centers is based on a City and Doing Business Rankings is country based. The USA has multiple Financial Centers of scale (New York, Boston, Chicago, Washington DC and San Francisco) and Switzerland has two (Zurich and Geneva).

Comparing these two metrics does surface some interesting outliers:

  • New Zealand does not even get into the top 85 on Global Financial Centers but is # 2 on Doing Business Rankings. I can think of Xero as a great Fintech venture (small business accounting) from New Zealand.
  • Other outliers that score low on Global Financial Centers but high on Doing Business Rankings include Nordic countries and I do not think it is a coincidence that three great Fintech ventures from this region include Klarna, Saxo Bank and Basware.
  • Tokyo is the other way around. It scores high on Global Financial Centers but low on Doing Business Rankings.

Here is the current ranking (top 20) that puts Singapore on top:

Hub Global Fin Center Doing Business Score
Singapore 4 1 5
Hong Kong 3 3 6
New York 2 7 9
London 1 8 9
Seoul 6 5 11
San Francisco 9 7 16
Washington DC 10 7 17
Chicago 11 7 18
Boston 12 7 19
Australia 15 10 25
Zurich 7 20 27
Frankfurt 14 14 28
Geneva 13 20 33
Montreal 17 16 33
Tokyo 5 29 34
Vancouver 18 16 34
Stockholm 32 11 43
Los Angeles 49 7 56
Amsterdam 36 27 63

New York and London are tied in 3rd place.

The “Captain Obvious Insight” is that this is the Asian Century and there are 3 Asian cities (Singapore, Hong Kong and Seoul) in the top 5. American cities on West (San Francisco and Los Angeles) may benefit from this and it may explain the Canadian city that is almost an Asian city (Vancouver) appearing in the list.

I am currently researching other metrics that can be used to rank Fintech Hubs. One that looks promising is the Global Innovation Index. Another is a ranking of great Higher Education with a focus on science & tech (based on the Paul Graham notion that all you need is nerds and rich people, great Higher Ed creates a funnel of great nerds). This requires a bit of data normalization work so we can get an aggregated score and that will have to wait until after SIBOS.

At the SIBOS session on Wednesday, each Hub will self rate on 5 criteria:

  • Regulation. (Regulation that favors innovation while still protecting customers).
  • Other country’s startups coming to yourHub.
  • Proximity to customers who will try something new. (Could be consumers or business customers).
  • Proximity to subject matter business expertise.
  • Innovation Culture (Hard to define but includes habits such as paying it forward, collaboration, risk taking, meritocracy).

However Doing Business Rankings represents only one aspect of the future. In a world of purely sustaining innovation these two scores would tell the full story. However the wild card is disruptive innovation. San Francisco (and Silicon Valley) was hardly known for its expertise in transportation until Google Maps, Uber, Autonomous Vehicles and Tesla came along to change our world. Without doing any exhaustive analysis, it is pretty obvious that Silicon Valley wins the game based on value created to date. The question that people want to know is where will the value be created in future.

It is possible that the mysterious but hard to define category called Culture is what really matters.

The SIBOS session should create an interesting debate.

Daily Fintech Advisers (the commercial arm of this open source research site) can help implement strategies related to the topics written about here. Contact us to start a conversation.

11 New Banking Licenses approved in India show the future of banking 

By Bernard Lunn

In 1994 I was running the Misys Asia banking division from Singapore when I got a call to bid on a core banking system project for a new bank in India. I knew Misys needed to get into either India or China (we did not have the resources to do both at the same time) and I was leaning towards India (rule of law and English language), so this opportunity made that decision for me. In short order we closed deals with Centurion Bank, Times Bank and Indusind Bank and so began a long association with India for me.

This batch of new bank licenses looks very different. The facts are here on the Reserve Bank of India site.

The 11 licensees are:

  1. Aditya Birla Nuvo Limited
  2. Airtel M Commerce Services Limited
  3. Cholamandalam Distribution Services Limited
  4. Department of Posts
  5. Fino PayTech Limited
  6. National Securities Depository Limited
  7. Reliance Industries Limited
  8. Shri Dilip Shantilal Shanghvi
  9. Shri Vijay Shekhar Sharma
  10. Tech Mahindra Limited
  11. Vodafone m-pesa Limited

The reason for granting new bank licenses is the same now as in 1994 – to promote competition and financial inclusion for the Underbanked. However this is a totally different list from 1994. First, note two mobile telecoms companies (Airtel and Vodafone) and one conglomerate (Reliance) that operates one of the big mobile phone companies. If the future of banking is mobile (little dispute on that) it is natural that Telecoms firms will compete with banks (as I outlined in this post in November). In the West, Telecoms are dipping their toes into the banking waters. In India, they are diving in fully.

India is where we will see the battle between m-pesa and other forms of mobile money play out. Vodafone m-pesa Limited is one the firms granted a banking license. If they open up m-pesa, it could take off in India and become the global standard for mobile payment.

The Underbanked is one of the biggest opportunities in Fintech (here is an index to all the Underbanked posts on Daily Fintech). The Underbanked market is playing out in Africa, China and many other big countries, but India is one of the most interesting markets for the Underbanked because India is also so strong in software technology.

China is also making some interesting moves in this area. For example, China’s Tencent (operating the WeChat messaging app) has launched its banking arm called “WeBank”. Facebook will probably do this with WhatsApp but it has already happened in China. This is one more example of “First the Rest, then the West” leapfrogging of innovation by the countries formerly known as emerging.

In a few weeks, I will be in Singapore for SIBOS for a session on Killer Platforms, the Chinese road to platform disruption. The panel of speakers include people who know what is happening in China. I wll be chipping in to contrast that with what is happening in India.

It is exciting that SIBOS is in Singapore this year. I will be returning to my old stamping grounds but more importantly, Singapore is increasingly a hub for innovation around the Underbanked as it has deep connections into both India and China as well as other big markets in the region such as Indonesia. We reviewed some Singapore Fintech ventures on the Fintech Global Tour back in February. To that list, one should add Kyepot and Skolafund.

Mobile payments are taking off in India because it solves a real problem (as we explore in this post about Paytm).

M-pesa is huge in Kenya where it accounts for over 40% of GDP. It will be interesting to see if it can take off in a bigger market such as India. However I don’t see this happening unless it becomes an open standard as payments is all about network effects and you only get network effects when a whole ecosystem benefits.

Daily Fintech Advisers (the commercial arm of this open source research site) can help implement strategies related to the topics written about here. Contact us to start a conversation.