News > FinTech

Bitcoin Island: The UK haven leading a revolution
FinTech
<p>Before the birth of Bitcoin, the Isle of Man - a tiny tax haven in the Irish sea - was famous for three things: motorcycle races, the Bee Gees, and a breed of tailless cat. Today it’s becoming synonymous with cryptocurrencies and fintech.</p> <p>This is largely linked to the island’s low taxes, relaxed regulations, and high-speed internet connections which have helped fuel a boom in financial services and online gambling on the island. The Economist reports that these two sectors now account for a third and one tenth of the territory’s income, respectively.   </p> <p>Given the potential applications for Bitcoin in both these areas, its no surprise the island is adopting Bitcoin in a big way. Many of the island’s hotels, taxi firms, restaurants and cafes now accept it as payment. </p> <p>The island’s tax structure, with no corporation, capital gains, or dividend taxes, has also been a draw for bitcoin startups, including exchanges and gambling platforms. </p> <p>In addition to assisting with the  formation of the Manx Digital Currency Association, the local government has encouraged its adoption by bringing in a legal foundation for Bitcoin. </p> <p>In April, the Isle of Man government changed it Proceeds of Crime Act to cover bitcoin exchanges operating from the island so that business have to comply with the territory’s anti-money laundering (AML) laws. </p> <p>While this means companies face greater oversight and more filing requirements, it has broadly been seen as positive news for bitcoin business seeking credibility with consumers and financial institutions. It's no wonder then that regulators around the world now have their eyes on this tiny pioneering island. <br /> Photo: Steve Conover<br /> &nbsp;</p>
Fintech fights abandonment with easy access
FinTech
<p>&nbsp;</p> <p>Fintech startups are taking a page from online retailers to keep users from leaving the site before they have completed their transactions.</p> <p>"Abandonment" is the bane of the industry. Potential users often leave apps before they complete the signup process or before they hit the "buy" button for all kinds of reasons. Today's startup entrepreneurs are working to improve the user experience by focusing on simplicity. The big hit of 2015 -- trading app Robin Hood -- has won big kudos for its streamlined look.</p> <p>Users want financial products that look and feel similar to the apps they're using on a daily basis, from Gmail to Facebook to Amazon, says Nikita Filippov, managing partner at Octoberry and developer of banking app Sense. Right now, "when you go down to the mobile bank [app], it looks like the 90's."</p> <p>At recent Finovate conferences, presenters hawked apps and ideas that focused on "frictionless" experiences. Here's what some of the hot startups are doing:</p> <p>&nbsp;</p> <p>Hedgeable (Best in Show, Fall 2015)</p> <p>"People don't like complicated," says Mike Kane, CEO and Master Sensei at Hedgeable. Hedgeable, private banking for millennials and Gen-X, displays the dozens of menu options a traditional private bank would, but with bright colors, symbols like a gas gauge for setting risk tolerance, word clouds, and bold, easy to click boxes. "People like visualizations," says Kane. The Hedgeable platform is social, a la Venmo. It also takes the online social offline, inviting users who invest on the platform to parties and events.</p> <p>Avoka (Best in Show, Spring 2015)</p> <p>"We create a very simple environment," says Don Bergal, Chief Marketing Officer at Avoka, which boasts one of the fastest mobile credit card signup processes -- a mere 90 seconds. Bergal says the company tries to figure out what will send users away prematurely. It's not totally intuitive. Sometimes it's just one question too many. Other times it's asking for a photo too early in the process. Retail sellers are the best at managing abandonment,  says Bergal. (But even retailers struggle: one study suggests the abandonment rate averages about 67%.) Financial service are also struggling to make the sign-on process fluid between units and services. "We try to create a user interface that doesn't look like the classic mobile bank," he says.</p> <p>Payswag</p> <p>"You have to take fintech and apply to the average, everyday person," says Max Haynes, CEO of mobile app PaySwag. For PaySwag that means reaching the under-banked. Haynes was "stunned" to find that nearly half of under-banked people don't have an email address they check on a regular basis. But they do have a smart phone they use daily. "It's a simple revelation," he says, explaining that these mobile users also expect 24-7 coverage for everything from messaging to banking.</p> <p>Blooom (Best in Show, Fall 2014)</p> <p>The 2014 hit in New York still</p>
Learn from those who brew beer how to be a better financial advisor
FinTech
<p>Wherever large enclaves of European immigrants settled in America, it would not take long for a handful of breweries to open for business in the local community. These breweries distributed their fermented concoctions to the local taverns and clubs within close proximity to where the beer was produced. Unlike the Internet companies of today, brewing beer for most of the 19th century was not a scalable business model. Unpasteurized beer with active yeast has to be consumed within a short period of time after the fermentation process is completed. Otherwise, these liquid bread products become moldy and give off a rank odor.  Nobody likes to drink stinky beer pumped out of vintage kegs that have been stored for who knows how long.</p> <p>After a large wave of German immigrants settled into Saint Louis in the mid-1800s, brewing beer became a major local industry. Determined to expand his distribution base outside of the local community, Adolphus Busch in the 1870s incorporated several technological innovations at his Saint Louis brewing plant. Busch was the first American brewer to pasteurize beer, which enabled the suds to have a longer shelf life than did most of the local fare consumed within a short distance around the Saint Louis area. Busch also introduced refrigerated rail car technology. Temperature-controlled rail cars enabled beer to be transported over longer distances without sacrificing a significant loss in quality upon arriving at its final destination. Both the pasteurization and refrigeration technologies enabled Budweiser to grow into a national beer brand, giving Anheuser-Busch the right to call itself the “King of Beers.”</p> <p>These disruptive technologies in the beer making industry would seem to be a force majeure for the smaller craft breweries forced to compete against it. It is counterintuitive to imagine a rinky-dink microbrewery remaining in business against a fermented tide of technological brewing innovation located wherever beer is produced in large quantities. Despite the increased efficiencies of a national brewery due to its economies of scale, microbreweries are opening at a faster rate than ever. Creative Biermeisters are experimenting with different flavors and hops, selling their fermented creations to evermore hipster patrons eager to escape the bland, watered-down alcohol products sold by evil multinational corporations. Fancy refrigeration and pasteurization technologies be damned. Brewing large quantities of beer in oversized Lauder Tubs and shipping the swill cross-country from a centralized location isn’t going to cut it for this finicky subset of hop-heads who frequent their local microbrew joint.</p> <p>In the Internet era, where scalable business models disrupt entire industries, the gurus experimenting with different fermented potions in the dungeons of their local brewpubs have found a way to not only compete against but also thrive in the midst of scalable technology. These smaller establishments have found a niche, avoiding being tapped-out even if drones in the future can drop sanitized kegs of cheap corporate beer on the back porch of a college frat house at breakneck prices.</p> <p>Those in the investment advisory business can learn a thing or two from these small microbrewers. With robo-advisors gaining a foothold in the investment advisory space, embracing a niche form of investing may be one route that financial advisors can embrace in order to compete against cloud-based scalable Internet technology. In a previous blog, I wrote about the challenges that a robo-advisor faces in an expensive stock market (see Benjamin Graham’s Value Investing versus the Robo-Advisor). One way in which a human f</p>
Fintech funding surge: $1.3 billion in a week
FinTech
<p>Fintech startups are seeing a surge in funding. According to Finovate, The past week  has seen 19 start-ups raised $1.3 billion - and that's not including the $1 billion SoFi round led by Softbank, which despite wide coverage this week, actually closed a few weeks earlier.</p> <p>Here is Finovate's run down of funding for the past week:</p> <p> Paytm, e-commerce and payments, India - $675 million<br /> Avant, consumer lending , U.S. - $325 million<br /> Kreditech, consumer lending, Germany - $92 million<br /> Elevate, consumer lending, U.S., - $70 million<br /> PushPay, mobile payments, New Zealand - $18.7 million<br /> Ellevest, investment platform, U.S. - $10 million<br /> Credible, student lender, U.S. - $10 million<br /> Zameen, real estate hub, Pakistan - $9 million<br /> Cloud Lending Solutions, enterprise lending platform, U.S. - $8 million<br /> Qualpay, payments, U.S. -  $8 million<br /> QuanTemplate, reinsurance platform, Gibraltar - $7.6 million<br /> MMKT Exchange, loan syndication platform, U.S. - $5.9 million<br /> InForcePRO, insurance analytics, U.S. - $4 million<br /> MX (MoneyDesktop), loan syndication platform, U.S. - $4 million<br /> AboutLife, retirement planning, U.S. - $3 million<br /> Orb (Coinpass), payments, Japan - $2.3 million<br /> Safe Cash Payment Technologies, paynents, U.S. - $1.2 million<br /> BloOom, wealth management, U.S. - $50,000<br /> Adyen, payments, Netherlands - N.D</p> <p>Photo: Ed Ivanushkin<br /> &nbsp;</p>
China Development Bank joins angel round for P2P lender
FinTech
<p>China’s economy may be in the doldrums but its appetite for peer-to-peer (P2P)lenders sure looks stronger than ever.</p> <p>According to China Money Network, state-backed behemoth China Development Bank (CDB) has just joined a $34 million angel round for Kaixindai Financing Services.</p> <p>How much it invested in the firm was not disclosed, and neither were the identities of CDB’s co-investors, and neither was anything about the identities of CDB’s co-investors, other than the fact they are from Jiangsu province. What we do know though is that Kaixindai, a Jiangsu-based P2P lender, was created by the provincial government and CDB back in 2011, and that it has racked up nearly $2 billion in transactions since then.</p> <p>It apparently plans to use the proceeds from the round to expand into other areas in China, a tall order for most given that there’s nearly 2,300 P2P companies fighting for their share in the region.</p> <p>With backing from the state however, something tells me Kaixindai is going to do fine.<br /> Photo: uberof202 ff</p>
HKMA rejects criticism of its approach to Fintech
FinTech
<p>Fintech entrepreneurs are not shy about criticizing Hong Kong for a perceived Luddite attitude to their innovative products and services. At the Cyberport and NexChange Fintech O-2-O Meet up last week, panelists and delegates compared the city’s regulators unfavorably to their more accommodating counterparts in the US, UK and even usually cautious Singapore.</p> <p>Well, on Friday the Hong Kong Monetary Authority (HKMA) hit back at its detractors.</p> <p>Speaking at the Hong Kong Institute of Bankers conference, Arthur Yuen, deputy chief executive, insisted that the HKMA welcomed fintech development, recognizing that it intensified competition in the financial service industry and empowered customers, reports  AsianInvestor.</p> <p>It was the first time for a while that the regulator had clarified its stance on an industry that attracted more than $12 billion of investment in startups last year.</p> <p>He rejected criticism that conservative restrictions inhibited fintech companies in Hong Kong, and argued that although it wants to ensure consumer protection HKMA does not want to stifle innovation.</p> <p>“We want to be technology-neutral,” and allow banks to adopt new technology while retaining safeguards for customers, he said.</p> <p>However, perhaps a little ambiguously, Yuen added that “the same customer protection requirement will more or less remain relevant regardless of the channel used to deliver it,” he said. </p> <p>He is most concerned about new entrants and whether the regulatory framework is sufficiently robust to supervise and the public sophisticated enough to understand the risks.<br /> Photo: Martin Ng<br /> &nbsp;</p>
Wall Street’s takeover of peer-to-peer lending almost complete
FinTech
<p>Big banks are excellent at creativity and innovation, some of it a legitimate component of the business that helps the economy, and creativity in other areas has proven to be less than beneficial to the economy and market security. This includes finding and exploiting regulatory cracks and arbitrage opportunities, as a recent Financial Times piece observed, applying a sense of historical reflexivity to the recent dominance of the peer-to-peer lending revolution by banks and Hedge Funds.</p> <p>With peer-to-peer lending, sharp-eyed readers might feel a sense of déjà vu<br /> “Sharp-eyed readers might feel a sense of déjà vu,” Gillian Tett, U.S. managing editor of the Financial Times observes today. While discussing Wall Street’s ascendancy to dominate several angles of a “peer-to-peer” lending process that was advertised as a method to disintermediate banks, Tett, in a piece titled “The sharing economy is now a playground for Wall Street,” observes what what algorithmic traders might otherwise call a confirmation pattern. A confirmation pattern is a re-occurring event that often ends with the same conclusion. For Tett, the combination of banks operating in regulatory cracks is something that will end in "tears."</p> <p>"History suggests that whenever innovation and regulatory arbitrage are combined in an era of ultra cheap money, it often ends in tears — somewhere. If nothing else, that also suggests that policymakers need to find ways to stop activity falling between the regulatory cracks; not least because financiers are endlessly creative at dancing in those gaps."<br /> Peer-to-peer lending operating in regulatory cracks as a business model<br /> While she did not specifically identify it, Tett was peeling back the onion on a highly evolved business model. "The idea of using innovations to dance around tough capital rules is hardly new: in the early years of the past decade, banks used structured investment vehicles and collateralised debt obligations in the same way,” she writes, noting a unique relative value strategy. “They also took advantage of cracks in regulatory structures to create products that policymakers could not easily monitor or control (it was unclear, for instance, who was supposed to oversee mortgage derivatives).”</p> <p>This big bank issue has occurred on a frequent basis and can be tied back to 1998 with a man at the center of assisting in creating big bank “cracks” that can be exploited, one who is also at the center of the peer-to-peer revolution today: Larry Summers.</p> <p>In 1998 Summers fought hard to punish then CFTC Chair Brooksley Born, who wanted to study unregulated derivatives that would eventually have a significantly negative impact on the economy on more than one occasion. At that point, regulatory confusion and allowing banks to operate in the “cracks” seemed like the point, as the unwritten rules against questioning questionable bank behavior on derivatives were later codified into law in the form of the Commodity Modernization Act of 2000, stripping away common sense derivatives</p>
Square's imminent IPO could leave its CEO spread thin
FinTech
<p>Payments start-up Square could file the first documents for its IPO in as little as two weeks, according to Fortune.  The news comes packaged with two big unknowns.</p> <p>Firstly, there are the macro-economic issues stemming mainly from fears over the stability of the Chinese economy and the prospect of the Federal Reserve raising interest rates before the year is out.</p> <p>The second issue is how Square co-founder and CEO Jack Dorsey - who is interim CEO of Twitter, which he also co-founded - will handle running two public-listed companies.</p> <p>As Fortune points out, an executive running two public firms is rare. Someone running two firms, when one is actually going through the process of an IPO, is rarer still.</p> <p>Dorsey was a previously rumored to be a favorite for the full-time CEO gig at Twitter, but the company's board has since said it would only consider a full time CEO in a “position to make a full-time commitment to Twitter.”</p> <p>What is certain is that Square will need to clarify Dorsey's commitments before hitting the road to raise money. Until then, the prospect of handling the workload of two public companies is going to make Jack is a very dull boy indeed.<br /> Photo: George Redgrave</p>
Is the Islamic State responsible for Android Pay?
FinTech
<p>At first glance, the notion that Islamic State - formerly ISIS  (Islamic State of Iraq and Syria) - has a part to play in the birth of Android Pay is absurd, but its not impossible. No one is suggesting that the Islamic terrorist organisation  has a secret cell of programmers moonlighting  in Mountain View, however the group's mere existence may have set off a chain of events that inadvertently brought us Google's latest payment's platform.</p> <p>This is what's suggested by fintech blog Mobile Payments Today which insists that to understand Android Pay one must start with ISIS. Why? Because the IP behind the Smart Tap technology that is at the center of Android Pay's value proposition was actually acquired by Google when it bought a company called Softcard in 2013.</p> <p>Softcard was a joint venture created in 2010 by AT&amp;T, T-Mobile and Verizon back when it was called Isis, at a time when name was more closely associated the Egyptian goddess. It was only when the terrorist group ISIS came onto the scene they were forced to change their name. Supposedly the brand never recovered from the name change, making it easier - so the logic goes - for Google to acquire them and their IP, and eventually bring us Android Pay.<br /> Photo: FutureTrillionaire</p>
Soros steps into the fintech arena
FinTech
<p>George Soros, the original posterboy of the swashbuckling global macro arena, isn’t exactly the first person who comes to mind when you think about fintech.</p> <p>He just joined the space though, and as always, his bet looks like a winner.</p> <p>According to Business Insider, Soros Fund Management has just backed TruMid, an electronic corporate bond marketplace which aims to provide superior liquidity for its users via “swarms.” What are swarms? Here’s what TruMid says about them on their website:<br /> Trading occurs in “swarms” - well-publicized trading sessions that are focused on a specific set of related or topical securities. We will attract a critical mass of traders and investors to our swarms. This robust forum will generate superior liquidity and pricing efficiency for everyone.<br /> And it plans to do this – and more – all under “a shield of anonymity with zero information leakage.”</p> <p>Soros’ bet could not have come at a better time. Years upon years of zero interest rates have led asset managers to snap up all the corporate bonds they could get, and now that the Fed is about lift rates, people are having a lot of problems trying to move them.</p> <p>Industry heavies such as Jamie Dimon, Steve Schwarzman, and Bill Gross meanwhile have all sounded the alarm on bond market liquidity. If they’re right, the man who broke the Bank of England just make another killing again.<br /> Photo: International Monetary Fund</p>