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The buzzsaw aimed at blockchain
FinTech
<p>Karen Petrou's memorandum to Federal Financial Analytics clients on the buzzsaw aimed at blockchain.<br /> &nbsp;</p> <p>Earlier this week, an NPR story fired up a campaign to force banks to absorb customer losses when business accounts are hacked. It remains to be seen if legislation will change the Electronic Funds Transfer Act, but the campaign is a sharp reminder of what happens when law falls behind technological reality. Regulators know this all too well – see our analysis of Treasury’s new inquiry into online marketplace lending as a critical case in point. Blockchain processing, take warning. The most exciting change in years for clearing and settlement will come to pass only if regulators come to love it.</p> <p>There’s been a lot of buzz about blockchains in the past few months, and buzz turned into a strong signal when nine global banks earlier this week announced a new consortium to figure out ways to make blockchain processing work for them. Several freestanding start-ups are also attracting significant industry and investor interest, with all of these ventures aimed at turning digital ledgers into the double-entry bookkeeping of tomorrow.</p> <p>Regulators really like this in theory – current market infrastructure is prone to breakdowns that pose severe operational risk, cost a lot, and concentrate risk into the hands of the largest dealers and exchanges. Banks used to make buckets from their central role across the clearing-and-settlement spectrum, but a raft of new rules has combined with an array of empowered competitors (CCPs, anyone) to restructure clearing-and-settlement into a losing proposition. In theory, large banks could simply shutter clearing-and-settlement operations, but then the lights would go out across the financial system.</p> <p>The upside of blockchain processing thus is evident, especially to the largest banks and their regulators. Customers need to have clearing-and-settlement services and banks have long perched higher-margin products atop their infrastructure edifices. Regulators very much want banks in the clearing-and-settlement business – if banks don’t do it, then others – such as they may be and whatever bits and pieces of the business they might do – won’t be under strong prudential supervision (if any).</p> <p>What’s the downside? In thinking through blockchains, it’s critical at the start to work through what it fixes and how its fixes could go wrong. For starters, skeptics will look at the new big-bank venture, review research about collusion risk in anonymized, digital-ledger systems, and think LIBOR. That’s the first thing an expert in this field asked me about when the word “banker” came up, and he didn’t even know until I told him just how big they are.</p> <p>Another unanswered question is the extent to which counterparties – especially banks – will aggregate data when using digital ledgers. Data aggregation is a top regulatory priority not now faring well at any of the big banks. Will blockchains make this better? If so, that’s a big plus, but if so isn’t it even harder to tell one systemic counterparty from another until losses warp out of control?</p> <p>An even bigger plus would come if blockchain design addresses operational risk and, thus, systemic resilience. It is possible – certainly hopeful – that digital ledgers could erase all the speedbumps that can destroy financial-market axles under stress. However, would blockchain processes rev up high-frequency trading across the markets to the point at which trades couldn’t be halted by automatic stays in a regulatory resolution? If it does, then orderly resolutions are even more remote.</p> <p>Blockcha</p>
Apple Pay gets ready for war in China
FinTech
<p>Apple looks set to take on internet giants Alibaba and Tencent by launching its Apple Pay platform in China to compete with theirs.</p> <p>The Wall Street Journal reports the mobile-payment service registered an entity in the Shanghai free-trade zone in June. Called Apple Technology Service (Shanghai), its operations will include technical consulting and services and system integration in payments.</p> <p>It comes as no surprise. Apple CEO Tim Cook has said the company wants to launch payments as soon as possible. But the doesn't mean it won't have a heck of a fight on its hands.</p> <p>Alibaba and Tencent have already been in the payments space for at two years. E-commerce giant Alibaba has AliPay, while Tencent has payments functionality  bundled into its WeChat platform. Like Apple Pay, both are based on near-field communication (NFC) technology.</p> <p>Apple is not incapable of pulling a China incursion off. Apple's other products have taken China by storm, its most recent result showed revenue in  Greater China rose 112% in the fiscal third quarter ended June.</p> <p>Also, iPhone sales in the region rose 87% versus 5% in the broader smartphone market. This is important as the Apply Pay service is restricted iPhone and Apple Watch owners.</p> <p>Breaking China's  payment market will not be like breaking the smartphone market, and Apple can expect a lot more fightback from well-established domestic players and, potentially, local regulators.<br /> Photo: Dan DeChiaro</p>
Full house for the Cyberport NexChange Inaugural Fintech O-2-O Meetup
FinTech
<p>Innovators, investors, finance professionals and media gathered in Hong Kong's Cyberport yesterday for the Inaugural Fintech O-2-O Meetup co-hosted by Cyberport and NexChange. Nearly 200 people in total attended the event which featured three presentations and a panel discussions on fintech trends in Hong Kong.</p> <p>The event kicked off with an introduction from Cyberport CEO Herman Lam, followed by brief presentation from NexChange CEO and founder Juwan Lee. Chris Dark, president international  at working capital marketplace C2FO, gave the keynote speech and set the tone for the event, talking about digitial disruption in the finance industry and how innovative start-ups can work with industry incumbents.</p> <p> The panel was chaired by NexChange associate managing editor Rupert Walker and included:</p> <p> Dominic Wong, head of large merchant acquisition, PayPal<br /> Jame McKoegh, partner, KPMG<br /> Mukesh Bubna, founder and CEO of Monexo.<br /> Van Ta, founder of STP-Suisse Tech Partners</p> <p>The lively discussion covered the evolution and revolution brought about by fintech and Hong Kong's role in developing the industry in Asia. Participants also had an engaging debate over the distinction between fintech - the leveraging of technology to create new financial products - and so-called "tech-fin" - using technology innovation  to support and grow the existing financial service ecosystem.</p> <p>Here are the social media highlights in full:</p> <p>[View the story "Inaugural #fintechO2O Meetup | Presented by Cyberport and NexChange " on Storify]<br /> &nbsp;</p>
Is fintech feeding on Wall Street's brains?
FinTech
<p>&nbsp;</p> <p>&nbsp;</p> <p>Is fintech partly responsible for a perceived Wall Street brain drain? It comes as no surprise that the legion of fintech start-ups coming onto the scene are gobbling up talent with gusto, but is it really to the detriment of industry incumbents?</p> <p>UK financial rag City AM came to this conclusion earlier this year. It noted that since the financial crisis a career at a major financial institution might not hold the same appeal for high-flying young go-getters.</p> <p>Data from top business schools like Chicago Booth, Wharton, London Business School, and Insead showed a 20% drop in MBA graduates entering finance between 2007 and 2013. This contrasts sharply with what's going on in the technology sector which has roughly doubled its intake of MBA graduates over the same period.</p> <p>Then again, correlation does not always equal causation. Mukesh Bubna, founder of Hong Kong-based P2P lending platform Monexo, told NexChange he has mixed views:<br /> "In Asia it is still about working for big names, but I think it is changing. A lot more people call Monexo (from the financial services space)  to say, 'Hey, we heard about you, can we join you?', but we are also very choosy about who we bring in,  because coming from a corporate world you are only doing one thing; in a start-up you do 20. Some people can't make that transition easily."<br /> It is worth noting at this point that Bubna quit his job with Citigroup to launch his fintech start-up.</p> <p>What is clear at least is that the fintech sector is hungry for talent, to the point of cannibalization. The Australian Financial Review accused the UK government not too long ago of "pinching" the best and brightest of Australia's nascent fintech industry by flying them over to London -- triggering a "global war for innovation talent".<br /> Photo: Charis Tsevis</p>
21 Inc's bitcoin computer seeks to redefine the internet
FinTech
<p>Cryptocurrency startup 21 Inc. unveiled its latest project, a bitcoin computer that went on sale Monday and will ship in November. The computer, which sells for $400, is able to mine a constant stream of bitcoins and allows users to buy and sell "anything to anyone." The computer is the first of its kind, and though 21 Inc. says it represents a unique opportunity for bitcoin enthusiasts, the firm is hoping that the machine will pave the way for more of its kind and eventually rework the way people use the Internet.<br /> Adding Bitcoin ...<br /> Full story available on Benzinga.com<br /> Photo: Antana</p>
Highlights from the FinTech O2O keynote speech
FinTech
<p>More than 200 people gathered in Hong Kong for the inaugural Fintech Initiative meet-up at Cyberport. Chris Dark, President International of the fintech juggernaut C2FO, gave the keynote speech. The initiative aims to nurture the fintech ecosystem in Hong Kong and was co-sponosred by NexChange, publisherof this app, and Cyberport.</p> <p>Highlights:</p> <p>Chris Dark ,Pres Int'l, C2FO: "You have to take risks - the real disrupters are the risktakers" #fintech #fintechO2O<br /> — NexChange (@NexChanger) September 22, 2015</p> <p>"Rule number 1 for #startups is to focus" -Chris Dark from @C2FO #fintechO2O @NexChanger @cyberport_hk pic.twitter.com/361UKaHVLp — W Hub (@WHubhk) September 22, 2015</p> <p>"Do things 10 times better than everyone, otherwise, go home" - Chris Dark, CEO of @C2FO at #FinTechO2O pic.twitter.com/pWzv9gUO4n</p> <p>— Nest.vc (@NestIdeas) September 22, 2015</p> <p>Chris Dark, Pres Int'l, C2FO: "Banking is not going away, they are not the enemy, and you can work with them" #Fintech #FintechO2Oup — NexChange (@NexChanger) September 22, 2015</p>
Fintech expected to pull in big bucks even as stock market collapses
FinTech
<p>The stock market may be in a sad, dark place right now, but fintech is riding high.</p> <p>In the week ending August 20, 25 fintech companies raised $1.63 billion, reports Finovate. Lending company Sofi was the biggest winner, bringing in a whopping $1 billion and edging toward a $4 billion valuation. Avant and Dianrong were runners up, raising $340 million and $220 million respectively. And fintech doesn't want to slow down any time soon.</p> <p>"Fintech is such a big market, and it's still so early in terms of some of these companies gaining traction, there's still room to grow," says Matthew Wong, research and data analytics at venture capital database CB Insights. Startups in general don't seem to be slowing down, and fintech is one of the hottest areas right now. Lending companies like Sofi, payments, and personal wealth management are all popular, says Wong. And investors especially love technology that appeals to millennials, such as easy apps. Funding is expected to continue to be strong for the rest of the year. Andreessen Horowitz's recent hire of a young, startup-founding partner is a prime example of where venture capitalists are looking in the future.</p> <p>Mobile payment provider Square moving to IPO will be a good lightening rod for the industry, and one that everyone will be watching, says Wong. If the IPO isn't well received, it may show that valuations for fintech are too high.</p> <p>Fintech firms are taking on the big banks and each other, but there's limited direct competition that is seen in other industries. Fintech firms typically carve out a niche, focusing on wealth management for instance, and not trying to be a giant bank. And the banks aren't stupid. Goldman Sachs has jumped fully into investing in fintech, particularly data driven companies like Motif Investing. Other banks, including JPMorgan, are close behind, looking at fintech opportunities to enhance their own businesses and show them what competition is coming. "We are seeing more banks invest now in these companies and trying to see what this technology is looking like," says Wong.<br /> Photo: Joe Ross</p>
Culture: An essential ingredient in success. Just ask any startup. Or Amazon
FinTech
<p>"Nearly every person I worked with, I saw cry at their desk." -- Bob Olson, former Amazon employee who worked in books marketing</p> <p>The New York Times<br /> Anyone who has ever worked in an office knows this for sure: culture matters. Over the weekend, The New York Times published a major expose on the culture at Amazon, depicting a workplace pushing employees to achieve unreasonable goals. The piece garnered 4,264 comments (and counting). As is the way of the digital world, the story has spawned a mini-publishing ecosystem. Amazon employee Nick Ciubotariu published a post on LinkedIn dismissing the Times story as half-truths and nonsense. That in turn prompted an assessment by Inc.: Who is right? Nick or the Times writers?</p> <p>And then what should happen to land in my inbox this afternoon? "The 3 Ways Culture Enables Startups To Scale," by Tomasz Tunguz, a partner at venture capital firm Redpoint (which has funded one of my favorite fintech companies, Expensify). To someone betting their money on a new venture, culture is not just a point of philosophical debate. It is a guiding light, a window into the likelihood of success.</p> <p>Tunguz explains that culture influences who a company is more likely to hire and daily decisions as well as the direction of a business. Tunguz writes:<br /> Contrast Google’s notion “Fast is better than slow” with Apple’s “Don’t ship until it’s perfect.” Neither philosophy is superior to the other, but they will attract different types of people. One encourages risks, while the other champions craftmanship. Google’s culture works for the web, where code pushes are immediate. Apple’s fosters better results in hardware where small mistakes can cost tens or hundreds of millions of dollars. Each philosophy works to maximize the advantages of the company given their constraints.<br /> Can you summarize your culture in one sentence? Do you know its strengths and weaknesses? At NexChange collaboration is a key tenet of our workplace. Let us know in the comments the philosophy drives your business.<br /> Photo: Dennis Skley</p>
Do you understand the difference between online banking and digital banking?
FinTech
<p>Fidor Bank is at the cutting edge of digital, social banking. Frank Schwab, CEO of Fidor TecS, offers these insights into the key differences between online banking and true digital finance. What do you think are the key differences?</p> <p>Some thoughts on Traditional (Online) Banking versus Digital Banking. - More to come soon … pic.twitter.com/JQZWbjaoGy<br /> — Frank Schwab (@FrankJSchwab) August 26, 2015<br /> Photo: ©iStock.com/hakkiarslan</p>
What commodity status means for Bitcoin
FinTech
<p>It’s official, Bitcoin is now a commodity after getting the nod from the US Commodity Future trading Commision (CFTC) last week. But what does that mean?</p> <p>The ruling came in the form of a slap on the wrist for US startup Coinflip, which was alleged to have allowed users to trade options based on bitcoin via its platform; Derivabit. By ruling that Bitcoin is a commodity, the CFTC brought Coinflip under its purview.</p> <p>On the plus side this extra oversight can help clean up trade in Bitcoin, and bring the crypto-currency even closer to legitimacy. It also means less chance of blow ups like Mt. Gox, the Japanese bitcoin trading platform that lost 850,000 Bitcoins (then worth $500 million) when it imploded early last year.</p> <p>At the same time Bitcoin startups can expect greater pressure from regulators, which means the cost of doing business with Bitcoin could creep higher. Here is what Aitan Goelman, the CFTC’s Director of Enforcement, had to say:<br /> “While there is a lot of excitement surrounding Bitcoin and other virtual currencies, innovation does not excuse those acting in this space from following the same rules applicable to all participants in the commodity derivatives markets.”<br /> Photo: BTC Keychain</p>