From a Blockchain based to a Blockchain inspired world, SWIFT could deliver verdict at Sibos


Image Source

This time last year, the dust hadn’t settled on the Blockchain hype, and several key players within Fintech and Financial Services were quite upbeat about the possibilities. However, as results of PoCs from various consortiums, central banks and payment providers emerged, the results were mixed. Daily Fintech covered an article on R3’s miseries towards the end of last year when Goldman Sachs left the consortium.

Since then, R3 publicly moved away from Blockchain, into a Blockchain inspired world using an open source distributed ledger named Corda. The R3 consortium lost three major banks towards the end of last year. This is vastly attributed to the fact that they chose to move away from a pure Blockchain implementation to a Distributed Ledger implementation for Corda.

The three banks Goldman Sachs, Santander and JP Morgan left the consortium and invested in Axoni that was a pure Blockchain firm. It got worse when R3 blogged that they were not a Blockchain firm, and had always been a distributed ledger company and got trolled on social media for that.

This was shortly followed by the news that SWIFT had launched its inter-bank payments platform that it believed would be the future of its cross border payments platform. The platform was called GPI (Global Payments Innovation), and had a founding consortium of 12 global banks. The GPI, at that time was based out of traditional technologies and not Blockchain. However, earlier this month, SWIFT announced that GPI was being beta tested on Blockchain with 22 new banks validating the system. Verdict on this PoC is going to be at Sibos later this year.

Swift GPI

Image Source

Apart from this, the Bank of England (BoE) haven’t delivered a conclusive verdict on the PoC with Ripple for Cross border payments. The detailed report on the PoC was released earlier this month. The key message was:

” Cross-border payments when applied to wholesale markets present different challenges than when compared with retail and corporate transactions, which the Ripple product is designed to handle. The availability of liquidity is one such challenge, and the PoC allowed the Bank and Ripple to begin exploring these questions. “

In other words “Ripple’s solution wasn’t fit for purpose”, although Ripple chose to see it differently.  A few days later, Ripple announced that a pure Blockchain based approach was not scalable for banks and advocated a “Hybrid approach”.

Wearing my technology hat on, I see some fundamental lessons here, and I may be repeating what has been so often mentioned.

  • Find technologies that can solve your problems – it may not have to be Blockchain.
  • Do not interchangeably use Decentralised Ledgers and Blockchains. You can photocopy on a Canon machine too (not just on Xerox).
  • Innovation doesn’t always have to be on sexy technology. SQL Server and Oracle can do the job too.
  • Simplicity is often overlooked and massively underrated.

I believe that SWIFT’s announcement of the results of their Blockchain PoC at Sibos could provide a decisive direction for Blockchain in Financial Services/Payments. And it might well be “Let’s Move On”.

Arunkumar Krishnakumar is a Fintech thought leader and an investor. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.


Wrap of Week #39: SIBOS, Goldman & Marquee, Fintech product ROI, Lemonade, Unicorns


Wow, what a week! Daily Fintech is delighted to share with you 10 takeaways from SIBOS and 7 insights directly from Palexpo. You can catch up on these conversations at your own convenience and add from your own takeaways on the Fintech Genome.

From our curated research, we shared two very unique insights.

One as we reflected on whether “The Sell Side, is still the Sell side and the Buy side, still the Buy side?” is presented in Goldman is leading the “Sell-side empowers the Buy-side” movement.

A second one, on why it is very important to continuously showing the return on investment your fintech product is delivering versus your competitors. Check out Fintech’s might be scalable but are they defensible?

As you review all this material, jump on the Fintech Genome to share your reactions, comments and snippets of insights.

We also revisited one of our predictions for 2016 around unicorn valuations: Fintech Unicorn pain as the public/private valuation inversion comes to an end.

Last but not least, Insurtech we had to focus on Lemonade in With Lemonade out of stealth, the Fintech Genome community has a P2P bellwether to analyze. Lemonade is surely the most talked about single Fintech on the Fintech Genome. Don’t hesitate to jump into any related conversation here.

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

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

#SIBOS Geneva 10 Takeaways


Coming down from a 4-day conference with 8,000 attendees and wrapping it all up in a blog post is hard, because one has to focus on the signal despite all the noise being so interesting.

Last year in Singapore, I had 6 takeaways, having not been to SIBOS for a long time. This year in Geneva I was a returnee.

So to give this some structure, here is the progress report from 2015 Singapore to 2016 Geneva based on those 6 axes (plus 4 more that became apparent this year:

1  Realism. A year ago: Fintech is leaving the Yellow Brick Road and going to Kansas. Throughout 2016 we have been tracking this move to realism in Fintech. Bankers have accepted that they need to take Fintech seriously and Fintechers are talking more about partnering than revolution. I suspect many more deals were initiated in Geneva than in Singapore thanks to this realism.

2  Real Time. A year ago: The one subject that got heads nodding in both echo chambers was the move to real time. In Singapore, it was talk and plans and slide decks. In Geneva it was also demos.

3  Blockchain. A year ago: Blockchain is at the top of the hype cycle. This was even more true in Geneva. Blockchain was the headline of many sessions and was mentioned in every session I attended; but the subject was mostly handled in a  pragmatic and non-hype way. The keynote by the IBM CEO was billed as all about Cognitive Computing yet she spent almost as much time talking about Blockchain. There was naturally some Blockchain fatigue and negative talk. My take is yes it is hyped and yes it will change the world.

4  Core banking. A year ago: The dream of the great core system renewal turns into the nightmare of end of life maintenance. This year we saw open source core banking software and platforms built from scratch using modern tools. In Geneva, core banking was like an embarrassing older uncle at a family party – we know he is there but we don’t mention him even though many of us depend on rich old uncle to help pay the bills.

5 Alternative Lenders. A year ago: The credit cycle will not save traditional lending models. There was less talk about disruptive Fintech (e.g alternative lenders) in Geneva. Those ventures were either not invited or chose not to attend. Fintech in Geneva meant either B2B or B2B2C. The Fintech ventures in Geneva were specifically there to do deals with banks.

6. Correspondent Banking. A year ago: Correspondent Banking will survive the transition to real time and SIBOS will always be key to Correspondent Banking. This was the overarching theme of SIBOS Geneva. The problem for a lot of attendees was that correspondent banks were being written out of the script by many technologists and global banks who anticipate a Blockchain future and desire to reduce the number of Correspondent Banks in a network to focus on those who can master Compliance. We covered this subject in more depth in this post on Fintech Genome.

7. Diversity. I noticed the lack of diversity more this year because I was walking around with my colleague and FinFemTech leader Efi Pylarinou. The preponderance of dark-suited males on stage was embarrassing in the 21st century, but it was also the lack of geographic diversity that was apparent. The geographic diversity of attendees was obvious – at one lunch table we counted 8 nationalities – but that was less obvious on stage.

8. Cross Border Trade. In Singapore this was a backdrop. It was why we were all there (it paid the bills), but it was not an explicit subject of conversation. In Geneva there were more sessions and demos about how to make this more efficient (whether Payments or FX or Trade Finance). I expect this will be more center stage by Toronto.

9. Innovation is mainstream. In Singapore innovation was much discussed, but it tended to still cluster around the Innotribe stand, with business as usual being the norm. In Geneva it was in every session and on every exhibition stand and business as usual was less evident (it was there of course but in background).

10. Interest Rates. The macro story that was implicit in a lot of talk, albeit seldom explicit, was the challenge of working in a low interest rate environment. The use of new technology and new models to address this challenge needs more attention.

Snippets of more specific insights are on the Fintech Genome. The conversations will be continued on the #SIBOS Insights topics.

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

Ripple may become real competition for SWIFT in cross border payments

Best Internet Concept of global business from concepts series


Image source.

Next week, 8,000 bankers and their vendors fly into Geneva for 4 days of talking about FinTech. Last year I had to fly to Singapore. This year, I can just hop on a train from Bern (sayonara jet lag).

Last year Emergent Fintech started to move onto the main stage at SIBOS and this year it really is center stage in a way that resonates with the people who come to SIBOS; there is less talk about disruptive business models replacing incumbent banks and more about how disruptive technology can help Banks make a quantum leap in processing efficiency.

However one Emergent Fintech venture that is active at SIBOS could give SWIFT (which owns SIBOS) some cause for agita. Ripple is emerging as a real contender in cross border payments, which is a business that SWIFT has dominated for decades.

Ripple Basics and Recent Momentum

To quote from Ripple information on SIBOS (Stand F60):

“As bank-grade distributed financial technology, Ripple delivers instant, certain, and low-cost settlement for all banks via a global network of banks and market makers.

 Ripple offers a real-time cross currency settlement solution and a FX market making solution, both available for license. These solutions enable you to settle cross-currency payments efficiently, by connecting your bank directly to other banks around the globe for direct bank-to-bank settlement.”

Ripple recently closed a $55m Series B and in today’s market, a Series B is a good proxy for momentum. The investors are mainly banks, which makes sense as they will be the users.

More importantly, they are making the first live payments on the network, talking about transactions completing in 20 seconds.

The recent problems with Ethereum play into Ripple’s hands. For a long time, many people said that Ripple might be easy to implement but that it was a commercially controlled currency. The Ethereum problems show that all new digital currencies have their issues.

Visa has also just thrown in its hat into the cross border SWIFT alternatives.

The cybersecurity challenges that SWIFT suffered earlier this year must be making banks more willing to look seriously at alternatives.

Whether cross border payments use Ripple, Ethereum or Bitcoin Sidechains remains to be seen, but it seems clear that we can expect cross border payments completed within seconds in the not too distant future. It is pretty clear where the puck is headed.

SWIFT’s own Blockchain initiative 

SWIFT announced they were looking at Blockchain almost a year ago. Since then there has not been a lot of news. SWIFT can certainly buy whoever gets traction, but will face a cannibalization challenge as new entrants will be cheaper as well as faster. Cheaper payments will increase volumes so I envisage a future where SWIFT still dominates cross border payments but using Blockchain technology, with lower prices and increased volumes.

The back office guys are getting ready

In my core banking days, the SWIFT module was critical. It still is. However we can see the vendors, consultants and oursourcers getting ready for payments via Blockchain. This announcement by Ripple, Deloitte and Temenos is an example of an industry positioning around a possible new value chain.

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

Back Office 2.0 using Blockchain promises Business Process Elimination (BPE)


Image source

That is why the Blockchain session at SIBOS Singapore last year was standing room only and at SIBOS Geneva next week I counted 10 sessions with Blockchain as the primary theme (it will probably be mentioned in at least half the sessions).

 This is the year when Blockchain vendors have to go beyond 30,000 foot promises and deliver value (or get relegated to the dustbin of overhyped technologies).

When Core Banking systems were introduced in the 1970s, they were revolutionary. They turned paper processes into computerized processes and the financial payoff for banks was massive and the entrepreneurs who built those Back Office systems became very rich.

Since then we have had over 40 years of incremental upgrades. Back Office has been boring. We have had a lot of Business Process Optimization & Outsourcing (BPOO).

Now we are entering the Back Office 2.0 era using Blockchain when we do not optimize old processes, we eliminate old processes. This the era of Business Process Elimination (BPE).

Equities Post Trade Processing After Concurrent Delivery Versus Payment

This is an example of Business Process Elimination (BPE). Concurrent Delivery Versus Payment (CDVP) is the more technically precise term for what usually gets called Real Time Settlement. For a description of real projects working on this, please see this post.

Bank of International Settlements (BIS) defined Real Time Settlement as Delivery Versus Payment (DVP) Model 1. That definition was 23 years ago in 1992, but we had to wait all this time for Blockchain technology to make it feasible. The key points as defined by BIS are:

  • Both securities and funds need concurrent settlement. Transfer has to be final & unconditional, without any time lag between the two. This concurrency requirement is absolute, because any time lag is an opening for fraud and that requires a lot of process to prevent.
  • Must be on a gross (trade for trade) basis. Any attempt at netting creates delay and creates a multi-tier market infrastructure that will impede innovation. We have Real Time Gross Settlement (RTGS) today – between Central Banks. The disruptive change is RTGS between individuals and companies in a permissionless network (ie the way that the Internet works).

The point about Business Process Elimination (BPE) is that most the things we do in Post Trade Processing are no longer needed when we move to Concurrent Delivery Versus Payment. The processes are not optimized, they are eliminated.

Equities Settlement is only one example. Almost every asset class will move in this direction. The notoriously complex triparty Insurance claims process (customer, provider, insurance company) will also move to a trustless blockchain network. We looked at one exotic transaction type – catastrophe swaps – in this post.

This is about value exchange in any market, not just banking and insurance.

The New Back Office Stack

User Experience is the visible part of the offering and will be the source of real innovation and value creation. The reason they will be able to innovate so fast is that the rest of the stack gives them so much value.

Business As A Service is a new type of entity that is being created as we speak. They could come from a bank or an emergent Fintech or a Traditional Fintech. The key is that they do not just offer technology. Of course they do that. They also offer service delivered by humans and may also offer a regulated layer. It is a complete business service delivered to the User Experience layer via an Open API.

Blockchain middleware is a nascent space where cross-cutting services dealing with concerns such as Identity or Security or Data Integrity play.

Blockchain platforms really means a consensus mechanism and transactional currency that enables entities that do not trust each other to transact. The main options today are Sidechains (using Bitcoin), Etherum (Ether) and Ripple.

The key about this emerging stack is that each layer isolates the layer below and enables a practical migration strategy. For example, at the User Experience layer you may use different Business As A Service providers and migrate from a conventional IT stack to this new Blockchain model. A Business As A Service provider may start by build services such as Identity or Security or Data Integrity using a conventional IT stack. Blackchain Middleware will be agnostic to which Blockchain platform they use.

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


The Convergence of Traditional & Emergent Fintech will enable more fruitful conversations


In a few weeks time, about 8,000 bankers and their vendors fly into Geneva for SIBOS (the annual “gathering of the tribes” that is organized by SWIFT each year in a different city around the world).

The bankers who fly in want to understand technology. The Traditional Fintech vendors want to sell them technology.  In many ways, SIBOS is not much different from decades ago when I attended with my Misys hat on.

Thanks to the tremendous efforts of Innotribe, Emergent Fintech (aka disruptive  Fintech aka the exciting stuff) has increasingly taken center stage at SIBOS. Sessions about Blockchain were oversubcribed.

However as we discovered at SIBOS in Singapore last year, it was mostly two different echo chambers. Traditional Bankers and their vendors spoke to each other and Emergent Fintech ventures and their investors agreed that disruption was coming.

A lot has changed in a year. Both Traditional and Emergent Fintech have changed and there is some convergence in the middle. That change is leading to more productive conversations. As both parties reach the same Level 3 of Partnership maturity, fruitful conversations can take place.

Level 3 of Traditional Fintech partnership maturity

1.0 was selling Perpetual Licenses. It was a great way to bootstrap a business as you got cash upfront. All the risk and all the reward went to the customer/bank.

2.0 was SAAS, priced per seat per month. VCs loved SAAS because a) the revenue visibility was better and b) it was very hard to bootstrap. This took away technical implementation risk but left business execution risk.

3.0 priced on a transactional revenue share basis. This is genuine risk/reward sharing. Traditional Fintech vendors are looking at this model as a) it could enable better revenue scalability – their revenue grows as their customers grow – and b) they can become a platform for consumer facing Fintech ventures. Many Emergent Fintech ventures are also moving to this model as they want distribution; to them, this is B2B2C.

Level 3 of Banks partnership maturity

1.0 Incomprehension, disdain and fear. This looks scary and strange. Either banks think that “its just hype and will soon pass”, or they think “this will destroy our business”. In both cases, the result is inaction.

2.0 Engagement via Corporate Venture Capital, Hackathons, Sponsored Accelerators and Innovation challenges. This is a safe way to engage and understand Emergent Fintech, but is only a prelude to doing a real deal and the actual deals banks do today are mostly at Level 1&2 of the Traditional Fintech partnership maturity.

3.0 Partnerships on a transactional revenue share basis. The vendor really becomes a partner, sharing risk and reward. Banks can move into new lines of business without waiting for IT to build something or a big capital budget to be approved.

When both vendors and the banks get to Level 3, productive conversations can take place and real deals get done.

Disconnect between Labs and Reality

Many big banks tell a great story in their Corporate Venture Capital, Hackathons, Sponsored Accelerators and Innovation Challenges, but then some of their real customers (who maybe Fintech savvy) contrast that with the actual experience they get in the real world. Banks who respond honestly say “these things take time”, but the pressure from Neobanks and other Emergent Fintech is increasingly taking away that luxury of time.

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

Happy Birthday Switzerland searching for crypto in valleys and alps


Image courtesy Eiger Hotel

Today is Swiss National Day, so although Daily Fintech is a global business and we do not take sides in the Fintech Capital of the world debate, today is a day to celebrate all things Swiss. First, a personal note, I chose to live here for family and lifestyle reasons and love being in Switzerland. The country is almost perfect, which makes it a lousy laboratory for startup experiments; entrepreneurs want problems to solve and so an almost perfect place is terrible. Switzerland is only # 19 in nominal GDP ranking and you would not describe the consumers here as early adopters.

However Switzerland is a great location for a global business (such as Daily Fintech Advisers).

Last year I wrote about the opportunity for Switzerland to take the lead in financial transparency for investors. While there are many interesting initiatives, progress has been disappointing. The core of the wealth management business has seen little change in a year.

SIBOS this year is in Geneva in lateSeptember. 8,000 bankers and their vendors flying in for 4 days. See y’all there. The last time it was in Switzerland was 2002 and before that 1993, very different eras. Last year while writing the Swiss Fintech birthday post, I was getting ready to moderate a session at SIBOS in Singapore (what many call the Switzerland of Asia) on Fintech Hubs. This year, we are in a post Brexit landscape where the Brits are looking to Switzerland to understand how to navigate the global economy as an independent country.

Crypto Valley

The confluence of expertise around Zurich and Zug has turned into a real ecosystem with bankers and crypto guys mixing easily and cooking up game-changing plans. Plus the regulatory environment is good (Switzerland has strong privacy and data protection laws and is formally a multi-currency country thanks to the strange history of the WIR). These were big factors in Xapo moving from Silicon Valley to Zurich and Ethereum setting up its Foundation in Zug. Oh and Zug has the biggest concentration of Family Office wealth in the world.

You can see some of the Crypto Valley leaders here.

These are global ventures that just use Switzerland as a base.

People here talk a lot about the lack of VC. I do not think it is a big deal where the venture funding is located. Capital flows to innovation. If it temporarily flows the other way, you can be confident that will change. Today we have that temporary dislocation, where Swiss investors fly to London to meet Swiss entrepreneurs to do a deal. With all those great Swiss hotels, one assumes that a congenial meeting place could be found within the country!

Is diversity a strength or a weakness?

There are now a reasonable number of Swiss Fintech startups as this recently published list shows.

The number of Fintech and Finserv associations, networks and accelerators has grown a lot in the last year. This diversity can be a weakness. If you fly into Switzerland for a day, who do you go and see? More basically, where do you go – Zurich or Geneva or maybe even Bern (seat of Govt and regulator)? If you go to London or Luxembourg, it is much easier – only one city and the techies and the bankers and the regulators are all there. However diversity can be a strength – innovation usually emerges from that messy brew called free markets. Somebody asked me which one of the associations, networks and accelerators was the “official” one. I looked at the person blankly, because there is no official one and I don’t think that matters.

I do still think that financial transparency for investors, based on rigorous engineering, will be the Swiss financial brand that scores big. It may use Blockchain technology and other technology to get there.

In the meantime, I am heading out into those lovely Alps (where I do not expect to see any crypto, that stays in the valleys for now).

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech & operates the Fintech Genome P2P Knowledge Network. Bernard Lunn is a Fintech thought-leader.