Open Banking in Brazil

Open Banking has made banks open up their customer data to authorized third-party providers via APIs. It has largely been initiated in banks globally as a result of various compliance and standards being introduced by regulatory agencies like PSD2 (Europe), UPI–IndiaStack, and CDR. Banks are the providers of this service, and consumers vary from FinTechs offering value-added banking solutions to end customers, challenger banks, neobanks, payment processors, transaction aggregators, and other third-party providers (TPP).

Brazil is the latest FinTech economy to adopt Open Banking

Brazil represents half of Latin America’s economy with a $3-trillion+ GDP and the largest FinTech market. There are about 500 FinTech startups in Brazil that have collectively raised billions of dollars in funding.

Keeping the lead, Brazil has been one of the first countries to legislate crowdfunding and P2P lending …

Behind the Idea: Kidbrooke

By distilling decades of research in the fields of quantitative analysis, behavioural economics and portfolio management into easily accessible B2B APIs, Kidbrooke enables fintechs and financial institutions to build next-generation digital customer experiences. Their cloud-native APIs allow banks, insurers and Fintechs to create engaging and reliable customer and advisor journeys alike in a fraction of the time and cost that it would take to develop them from scratch. Currently, their API – OutRank, is running the digital pension planning service for Skandia, one of the largest life insurers in Sweden. 

Fredrik Davéus is the CEO of Kidbrooke

After nearly 20 years of an international career within insurance and capital markets, Fredrik Davéus and his co-founders set off on a journey to equip the industry with faster, more affordable and transparent offerings, powered by cutting-edge technology.

Passionate about innovation and driven by the expert operational knowledge of large incumbents’, Fredrik and the team has been able to leverage their experience in design and implementation of large scale distributed systems to build high performing solutions addressing some of the key challenges within the digitalisation of modern banking and insurance businesses. Today,  Fredrik and his team carry on creating technology improving financial decision-making processes for millions of consumers through Kidbrooke’s banking and insurance clients, driven by the corporate vision of a world where everyone can make educated financial decisions. 

What has been the traditional response of the financial industry to technological innovation? 

It is fair to say that the financial sector is conservative in its nature. Banks and insurers manage peoples’ and firms’ hard-earned financial resources, and therefore it has traditionally been an area that requires an extra layer of security and resilience. At the same time, the conservatism of the industry tends to deprive financial institutions of flexibility,  which is a necessary element of any innovation process. Therefore, banks and insurers tend not to be the first adopters of emerging technology, drawing their motivation from regulatory scrutiny or customer demands.  

How has this changed over the past few years?

The past couple of years have been characterised by an increased regulatory scrutiny – MiFID II and IDD directives have been an impactful force to change for the European banks,  insurers and wealth managers. These regulations required the financial institutions to increase the transparency of their decision-making and encouraged them to put their customers’ interest first while advising them on their financial situation. Another large trend is the shift in customer’s expectations towards more comprehensive digital experiences,  which has of course been even further amplified by the COVID-19 pandemic. 

Is there anything that has created a culture of change inside the institutions?

The digitalisation trend, which had already been unfolding in the industry, has been significantly accelerated by the Covid19 pandemic. In this rapidly changing, uncertain environment, insurers and wealth managers have had to find new ways to interact with their customers, and many incumbents have made digitalising of their operations a priority.  

What Fintech ideas have been implemented? 

There is a growing consensus among the institutions that the hybrid approach to financial services is the most flexible way of interacting with consumers. Therefore, some players have started looking into digitalising their value chains. In particular, we see many financial institutions looking into complementing their offerings with reliable and intuitive digital wealth and insurance experiences: digital pension planning, mortgages, savings and investments as well as insurance. Many such firms choose to own, personalise and manage the user experiences of these services, while leveraging Kidbrooke’s analytics through our versatile APIs. This has been the case for Skandia, one of the largest insurers in Sweden,  who recently went live with their hybrid pension planning offering. Among the main themes discussed at the recent Singapore FinTech Festival, an API approach has become the growing consensus for the most popular way to add desired functionalities and design truly bespoke services for the rapidly evolving financial sector. 

What benefits have these brought? 

Primarily, the development of digital and hybrid wealth and insurance journeys has helped to greatly improve the ROI of these businesses, which has suffered greatly as a result of the new regulations. The intelligent automation of some of the processes within the value chain has helped to improve the cost-to-income ratio, which in turn has opened the opportunity to reach and serve more customers, making the traditionally exclusive industry more available to everyone. Secondly, consistent, high-quality digital channels have enabled these firms to better reach and address the issues of their customers even before they know they need help. For instance, our financial calculation engine allows our customers to constantly monitor the financial situations of all their customers, equipping the advisors with up-to-date lists of clients who need their attention, and suggestions of the next best actions for each of them. Finally, the cutting edge technology at the heart of the offering allows our customers to easily build more financial journeys to extend their offering over time. 

Do you see any other industry challenges on the horizon? 

The introduction of Open Banking in Europe has prompted banks to concentrate on the myriads of data and infrastructural challenges to make the change technologically possible.  We believe the next step could be based on deriving value from all this data, and that is an area where we believe traditional banking and insurance firms would face another challenge. Most traditional banks and insurers provide siloed services, keeping functional divisions separate from one another, leaving it up to the customer to consider a holistic picture of their financial health. The era of open finance is likely to play an important part in destroying these siloes, requiring the banks and insurers to consider their customers comprehensively and individually.  

Can these challenges be aided by Fintech?

These challenges can of course be aided by a number of emerging technology companies within the financial industry. For instance, Kidbrooke has always been very mindful of how the customer needs would be perceived in the era of open finance. Therefore, we placed the simulation of the holistic balance sheet of the end-customer at the heart of our API,  OutRank. This way OutRank can simulate, optimise and advise on any financial decision that has a modellable pattern of cash flows, meaning it’s well-equipped to drive the financial institutions’ digital decision-making into the “open” future.

Final thoughts… 

We believe that technology driving core business processes within the financial sector needs to be aligned with the long-term vision of how the industry would develop. And we are convinced that in the next period, the ability to easily extend your offerings to support a  holistic picture of the customers’ finances will be a deciding factor for being competitive in an open finance world.

  • Gina is a FinTech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

Movers and shakers: Notable December hires in fintech and banking

Financial institutions rounded out 2020 with new faces filling
C-suite positions. WSFS Bank and Google Cloud named new technology
and security chiefs while API provider Galileo appointed a chief
revenue officer, and automated investing platform Wealthfront
filled out its banking advisory group with regulatory heavyweights.
Here are the most notable December hires: WSFS taps new […]

The post
Movers and shakers: Notable December hires in fintech and
first appeared on Bank Innovation.

US Payments: Smart Pension, Episode Six, PAAY and Paya in View from the Top

There are plenty of defining years in the history books, and as
2020 draws to a close, it’s almost certain that the global
pandemic will ensure that this year is featured prominently. With
events cancelled, launches delayed, and country-wide lockdowns, the
way we work has changed forever. Still, for financial technology
and surrounding industries, this was also a year of challenge and

This December, The Fintech Times is asking
industry leaders for their ‘View from the Top’ to gain an
insight into the decisions behind the last 12-months. Today,
we’re looking at the issue of US Payments, hearing from
Jodan Ledford, John Mitchell, Yitz Mendlowitz and
Andrea Kando on their 2020 thoughts, plus a look
ahead to 2021. Will there be a Happy New Year? Read on…

Payments have been a hot topic this year as they have had to
evolve to meet the demands of consumers in light of the Covid-19
pandemic. This has been no different in the US, which has seen its
own transformation throughout 2020, shifting to alternative payment
methods other than just cash. In this View from the Top, companies
Smart Pension, Episode Six, PAAY and
Paya outline their own 2020 experience.

Jodan Ledford, US CEO,
Smart Pension

Jodan Ledford is the US CEO of Smart Pension, a pensions and
retirement technology business. He advises that, despite the
challenging global environment, 2020 was “an outstanding year for

“We launched our US business off the back of a foundational
win with a fantastic partner. The recent passage of a seminal piece
of legislation, the SECURE Act, enabled the creation of Pooled
Employer Plans (PEPs), the US equivalent of a UK Master Trust.
Building on its extensive UK and global experience, Smart has been
selected as the technology partner to a large financial services
organisation that is launching a PEP in Q1 2021.

“Turning to 2021, Smart USA will focus on delivering the full
PEP operating system to our partner in the first half of the year.
Beyond our initial mandate, Smart is focused on delivering PEP
solutions to the broader marketplace, as well as forming new
partnerships in the retirement technology space. We will also be
launching our retirement income solution, Smart Retire, which is
designed to offer a user-friendly, guided retirement journey that
will allow participants to plan for retirement and flexibly spend
down their assets with confidence. Our mission in 2021 is to ensure
that people saving for retirement can do so in comfort as their
parents and grandparents have done.”

John Mitchell, CEO, Episode

Episode Six are providers of a financial technology
platform for creating innovative and differentiated financial and
payments products for consumers and businesses. For CEO John
Mitchell, he believes that the payments industry has evolved
towards digital due to the ever-growing demands of the

“There’s no doubt that the events of 2020 have been a global
wake up call in many regards. From a payments perspective in the
US, financial service providers are finally adapting at a pace to
meet heightened demand from customers for truly digital solutions
– for example, QR codes to bring up helpful information such as
payment options in restaurants are becoming not just the norm, but
expected. And this isn’t just demand from young customers, it’s
all ages. A more digitised payments landscape has been the
direction of travel and talked up for many years now, it’s
accelerating quickly.

“The problem in US Financial Services has been for too long
new digital payments services have been bolted onto dated and
complex banking systems. The challenge – and opportunity – for
these digital payment service providers is to ensure they have the
right infrastructure behind their innovative front-end
functionalities, so they can continue to expand their user base
without risking technology disruption, and the customer journey is
as seamless as possible. The companies that ignore the back-end
infrastructure risk complications that will erode trust from the
customer base and could face even great problems. What’s next?
For those that can do this, they’ll be reaping the rewards of
fast-growing consumer uptake for years to come.”

Yitz Mendlowitz, CEO, PAAY

Yitz Mendlowitz is the CEO and Co-founder of PAAY, a
consumer authentication service. He founded PAAY to give merchants
choice and control of their destiny and thinks that the pandemic
has sped up the shift to contactless payments. 

“Looking back at 2020, there has been an unprecedented amount
of innovation & change in fintech, especially in my area of
expertise; e-commerce payment security. There’s no doubt that
Covid-19 has accelerated the shift to remote commerce, and
contactless payments. In Q1 of 2020 Mastercard reported a 40%
increase in contactless payments. The global pandemic has caused
many merchants who were traditionally selling products in a brick
and mortar environment to pivot and change their business model to
have an e-commerce first approach.

“From a fintech perspective, specifically looking at payment
security – It’s been a big year. The increase in e-commerce has
led to a significant increase in fraud. Hackers go where the money
is, and moving transactions online makes their job easier. In
addition to hackers, we are seeing merchant’s bottom line
suffering because of “friendly fraud” aka chargeback fraud.
Legitimate cardholders are calling back their credit card companies
saying they never made purchases – just to keep the items.

“All of this has pushed fintech companies to focus on building
fraud and payment security solutions for merchants. This is where
we are seeing unprecedented innovation. The demand for payment
security and fraud tools is at an all-time high. I am a technical
associate on the EMVCo board, a governing board that facilitates
worldwide interoperability and acceptance of secure payment
transactions and this year we have been laser-focused on building
security solutions to help protect remote commerce merchants.
Perhaps the most important is the adoption of EMV 3DS (also known
as 3DS2) throughout the payment ecosystem. 3DS allows merchants to
authenticate cardholders at the point of interaction on the web,
and as a result, shift the liability for fraudulent chargebacks off
the merchant and onto the card issuer.” 

Andrea Kando, Head of
Product, Marketing, and Communications, Paya

As the Head of Product, Marketing, and Communications
at Paya (a payment solutions provider), Andrea Kando manages
Paya’s solution portfolio, oversees the company’s marketing
assets, and champions client and employee engagement. She sees the
shift towards integrated payments as a major trend of the

“Within the payments space, one trend stands out amid a year
of widespread shutdowns: the increasing need for cloud-based
business management software with integrated payments capabilities.
Many verticals had of course been moving in this direction, but
those who lagged behind quickly found themselves at a disadvantage
as the pandemic forced shutdowns and accelerated remote purchasing
and management use cases. 

“This year, more organisations moved toward integrated
payments, which fold payment collection and processing into their
existing business management software. During the pandemic in
particular, this integration has offered companies the ability to
seamlessly move from paper printed invoices – which were often
being mailed to empty offices – to online invoicing services,
with recurring billing, flexible invoicing, and customer portals to
manage all parts of the payments process. For many organisations,
this has proven to be an invaluable way to maintain revenue
collection during shutdowns.

“In the next year, the payments space will see providers
continuing to broaden their capabilities to support the expanding
needs of distributed organisations, including robust and
instantaneous reporting of information about companies and their
end customers, to simplify and virtualise back-office
reconciliation. In-person payments are also accelerating the use of
contactless acceptance. Providers offering EMV cloud services will
also stand to gain, as companies with those capabilities can
seamlessly upgrade their hardware and software to support
contactless payment methods.

“With businesses and their customers becoming more accustomed
to the ease of use and flexibility of integrated payments, this
technology has gained a steady foothold even in sectors, like
nonprofits and local governments, that have traditionally been slow
to digitise – and its adoption and usage is only set to trend
upward in 2021.”

The post
US Payments: Smart Pension, Episode Six, PAAY and Paya in View from
the Top 
appeared first on The Fintech Times.

Takeaways from an old Bitcoin fan watching  “World’s first ever Bitcoin bank” on Fox News

Happy New Year. I had not planned a post today but this news is
important. In case you missed it, a young entrepreneur called
@jackmallers appeared on mainstream TV to talk about a
revolutionary new bank based on Bitcoin. No, I do NOT watch Fox
News – not my tribe, despite my age. I got […]

The post
Takeaways from an old Bitcoin fan watching  “World’s first ever
Bitcoin bank” on Fox News
appeared first on Daily Fintech.

This Year in Fintech: TFT Initiatives Roundup

Twice a week, The Fintech Times News Roundup highlights the latest international fintech stories. Here we take a look back at some of the initiatives supporting the growth of fintechs in 2020.

DIFC unveils innovation licence

Dubai, Dubai Marina, Jumeirah, Expo 2020 Dubai, Skyscraper, Cityscape

Dubai, Dubai Marina, Jumeirah, Expo 2020 Dubai, Skyscraper, Cityscape

September saw Dubai International Financial Centre (DIFC) unveil a new licence for startups, entrepreneurs and technology firms wanting to operate in Dubai.

It has high hopes that the ‘exciting new offering’ would attract technology-led, sector agnostic startups that will disrupt the fintech sector.

Businesses have access to DIFC’s co-working and flexible desk spaces and can also secure up to four visas when renting desk space. That’s as well as a 50 per cent subsidy on additional visas.

Help for expanding into Saudi Arabia

Riyadh (pictured) is the capital and largest city of Saudi Arabia IMAGE SOURCE GETTY

Riyadh (pictured) is the capital and largest city of Saudi Arabia IMAGE SOURCE GETTY

Meanwhile, AstroLabs unveiled in September to help companies set up 100 per cent foreign-owned entity in the Kingdom of Saudi Arabia.

The online resource aims to simplify the complex business establishment procedure through a 16-step process.

This includes detailed information on requirements and offers a dedicated specialised operations team in Riyadh to manage end-to-end processes for businesses.

Fintech recognition for Singapore and China talent



AMTD and Global FinTech Institute joined forces to ‘support and anchor’ the Chartered FinTech Professional (CFtP) qualification.

AMTD will also offer 20 scholarships to the Singapore University of Social Sciences and the Shanghai University of Finance and Economics.

The CFtP aims to promote the fintech sector, while raising the level of professionalism within the industry.

Tel-Aviv drives innovation through data



Meanwhile, the Tel-Aviv Stock Exchange aimed to attract high-tech and fintech entities following the launch of a new data system.

The API-based TASE Data Hub offers daily data, end-of-day data and historical data, using customised parameters.

Ittai Ben Zeev, CEO of The Tel-Aviv Stock Exchange, said: “We expect [the Hub] will be conducive to innovation in the capital market and attract high-tech and fintech entities to TASE.”

Transforming fintechs in capital markets

Christian Frahm

Christian Frahm

Christian Frahm launches United Fintech to transform banks and fintechs in capital markets.

Finally, United Fintech launched with the plan to acquire and scale up a range of small to medium-sized engineering-led fintech companies.

The brainchild of fintech expert Christian Frahm, United Fintech is aimed at addressing ‘the issue that it is typically both complicated and resource-intensive for larger institutions to onboard new technology solutions’.

Over the next five years, United Fintech plans to acquire and scale up a range of innovative SMEs and engineering-led fintechs, all with a proven capital markets product.

Look back on all our Bi-Weekly News Roundups here.

A Human Touch Will Be a Competitive Edge After COVID-19 Says Niels Pedersen

One of the major trends that has emerged out of 2020 has been the rapid push to digitalisation. Promoted by the challenges of the Covid-19 pandemic, businesses and organisations had to move online in order to continue operation, with fintechs being no different. 

Niels Pedersen is a Chartered Accountant and Senior Lecturer at Manchester Metropolitan University, the home of England’s first, and longest-running, post-graduate financial technology course. Before coming to academia, he worked at PwC and the Bank of England. His thoughts have been featured in Newsweek and on BBC Radio Scotland. His first book, ‘Financial Technology: Case Studies in Fintech Innovation’ was released on December 3 2020.

Here he shares his thoughts on how, despite the rapid digitalisation seen this year, businesses utilising “the human touch” will have a competitive edge after Covid-19.

Niels Pedersen, Author and senior lecturer at Manchester Metropolitan University

In spite of accelerating digitisation, we humans will still require personal contact in a world without social distancing. The last time someone asked how you were, did you respond with a platitude such as ‘not bad’ or ‘fine’? If you are like most people, you probably did.

Now, let me guess: that exchange was definitely not the highlight of your day. So what happens if you change a variable in a routine interaction like this?

For example, I recently ordered a coffee by addressing the barista as follows: “Hi Alex, can I get a black Americano to go?” He smiles, and I get a coffee on the house. By reading his name tag and using his first name, I had broken the algorithm.

Breaking the algorithm of day-to-day life

On the surface, it should be easy for machines to automate such interactions. However, computers still struggle to understand (and respond to) the messages that people, consciously and unconsciously, express with their tonality, rhythm of speech and facial expressions.

That’s why I got a free coffee. When we interact through routine social patterns, life becomes predictable and boring. So if someone breaks a pattern – even in a small way – it makes an impact.  As the saying goes: people remember how you make them feel, not what you say. How many customers use the barista’s first name when ordering coffee?

Not many I suspect, and therein lies the point: we form genuine connections with other people (and brands) via unique, and personal, interactions with them. Even though lockdowns have accelerated digitisation in many sectors, customers still want to engage with other human beings, not just digital interfaces.

Don’t neglect human interaction

Thus, many fintechs are missing a trick. If they focus too much on optimising digital engagement, they risk neglecting a core part of the customer experience: the human touch. Moreover, with more people working from home because of the pandemic, screen time is through the roof. As a result, engaging customers on a human level is an opportunity for fintechs to differentiate themselves in the tired eyes of their customers.

Indeed, some academic research suggests that apps employing a human touch outperform purely digital-only solutions in terms of customer retention. No surprise then that Starling Bank has a partnership with the UK’s Post Office, which allows users to deposit cash at one of its 11,500 branches. As this network has more branches than the UK’s top five banks combined, it enables Starling to offer its customers the convenience of longer opening hours, not to mention a human touch.

Maintaining focus on what users need

What’s more, as similar design interventions are used to optimise digital engagement across the industry, there is a risk of overuse. Consumers notice patterns: exposing them to engagement techniques that they have seen before will only bore them.

For this reason, the colour scheme of Microsoft’s Teams app is a mistake. The white ‘T’ on a dark-blue background is all too similar to Facebook’s logo, not to mention the stress-inducing red circles that notify users of new messages. Whether deliberate or not, this apparent mimicry of Facebook is jarring.

After all, a messaging app for work and a social medium are two very different things, even though the types of user input (i.e. clicks, files and messages) may be very similar. Thus, treating all digital engagement as the same is a non-starter. In doing so, we risk losing sight of user needs.

In this way, there is a fundamental problem in fintechs relying exclusively on digital interfaces: this biases them towards defining their users in terms of their engagement with an app, rather than by their individual needs and preferences.

Addressing issues on a practical and emotional level

So how can fintechs address this? According to a global PwC survey of more than 19,000 people, businesses can gain the favour of consumers by prioritising their well-being and innovation.

As part of this, fintechs can take a task-based approach to product design. This involves looking at the customer’s reality as a series of ‘jobs’ that need to be completed and come up with solutions that facilitate these. However, this approach must address customer needs from both practical and emotional perspectives.

For example, Starling Bank does not charge its current account customers for making payments or ATM withdrawals abroad. What’s more, it applies benchmark exchange rates, so customers do not face excessive currency spreads. On a practical level, this helps users reduce their holiday expenditures; on an emotional one, it decreases uncertainty, as they do not have to worry about unforeseen transaction costs.

Understanding customers as we emerge from Covid is key

When designing solutions like these, fintechs must be keenly aware of what consumers are looking for when seeking a human touch. As an example, I recently walked past a bank branch one rainy winter morning, which had a long queue outside. Seemingly, the fear of Covid is not enough to dissuade some people from going to the branch, even when it rains. That said, many of these people probably didn’t have a choice: according to a recent study by Lloyds Bank, 9 million people in the UK are unable to use the internet without assistance. That rules out a lot of fintechs.

Whether it is a matter of preference or necessity, some customers will continue to require a human touch; for fintechs, the key is to understand why. This question will become increasingly pertinent after the pandemic. While British banks were reducing their branch estates at a rate of around 7-9% a year before Covid-19 came along, this trend cannot continue indefinitely. Indeed, some institutions were expanding: in 2019, C. Hoare & Co. opened its first branch outside London, to get closer to Cambridge’s entrepreneurial community. After roughly 350 years in business, perhaps this small, family-run bank knows more about the importance of a human touch in finance than most fintechs do.

Intro to Fintech: Artificial Intelligence

Though the fintech industry is getting more and more mainstream globally, there is still a learning curve for many people as to what fintech actually is, and a lot of jargon which can be hard to understand if you’re not in the know. In this new series of articles, The Fintech Times plans to breakdown all aspects of fintech to help those interested to learn and understand the industry, making it more accessible for all. 

While not limited to the fintech world like some of the other topics we have looked at so far, Artificial Intelligence is a crucial aspect for many fintech start-ups and organisations in many different ways. Put as simply as possible, artificial intelligence is intelligence demonstrated by machines. This can take place in a variety of ways, whether it’s the other player in a computer game or even your Alexa, as well as having wider implications in the financial industries, among many others.

AI certainly isn’t a new idea, and his been around since at least the 1950s, and for a lot longer in science fiction terms. Of course, computers weren’t quite the same as they are now, and were big machines that filled rooms rather than being able to sit on your laptop. However, at that time people were starting to broach the idea of what artificial intelligence could be. Claude Shannon published the article “Programming a computer for playing chess”, and Alan Turing first proposes “the imitation game”, later known as the Turing test (the test of a machines ability to exhibit intelligent behaviour equivalent to that of a human. The first artificial neural network is built in 1951 by Marvin Minsky and Dean Edmunds, and in 1952 Arthur Samuel develops the first computer checkers-playing programme and the first programme to learn on its own.

AI has of course come a long way since then and is now used for a wide variety of activities. It is particularly of interest to fintechs, either to develop it or use it themselves, as it has so many beneficial use cases. In this article, we’ll take a look at some of them and help you to understand what AI really is. 

The Difference between AI and Machine Learning

Even though the two terms are often used interchangeably, AI and Machine Learning are two different things, and though very similar have slightly different ways of operating. Artificial Intelligence is actually the umbrella that Machine learning comes under, making ML just one type of AI. To put it as simply as possible, ML refers to any analytics that “learn” patterns in data without being guided by a human analyst. So, for example, you need your machine to be able to tell the difference between pictures of dogs and cats. Initially, you would present the bot with a set of pictures and tell it that one is a cat and the other is a dog. It’ll go through and sort the images into “cat” and “dog” finding statistical patterns within the data that enable it to do so and creating its own algorithm. The computer might get a few wrong, so you go back and correct it allowing the machine to learn. In the same way a human can use experiences to learn, so can a computer and the more data the computer receives the more accurate it will become. That, in the most basic of nutshells, is how machine learning works, and the process is very widely applied in our everyday lives in places you may not think. For example, filtering our spam emails, autocorrect suggestions and even in your Netflix recommendations.

Artificial intelligence on the other hand mimics human intelligence, to the point where it would be impossible, or at least very difficult, to be able to tell the difference between the two. You would not need to have to pre-programme AI like with Machine learning and uses algorithms that can work with their own intelligence. AI’s can perform various complex tasks, whereas machine learning has a limited scope, only performing the tasks you have trained it to do. In theory, AI’s will keep on learning and can perform any tasks the same way a human would (if not better). Some applications of AI in the real world are Voice assistants like Siri and computer-generated players in games and even autopilot in planes.

Use cases of AI

AI has a whole host of practical uses not only in the fintech industry but in the wider finance world, and even the wider world beyond that. The general gist of Ai is that it solves problems; it allows companies to save both time and money. According to the prediction of Autonomous Research, AI technology will allow financial institutions to reduce their operational costs by 22% by 2030. Adopting AI enables the industry to create a better environment for the customer, providing better customer service through a variety of different activities.

In many instances, the practical use of AI is to do with data and enable companies to analyse that data in an efficient advantageous way. Organisations, particularly financial institutions, will often have streams of data on their consumers, but will rarely do much with it due to the time it would take to go through and analyse in order to find anything meaningful. This is where artificial intelligence comes in, as AI and machine learning are very effective at analysing large amounts of data in real-time, then taking that data and drawing conclusions or recommending actions.

One particular example of applying AI with data is for banks to decide whether someone is creditworthy. Banks and other financial institutions want to be able to offer credit to their customers, but they want to be able to price for it accordingly, i.e. they don’t want to overcharge trustworthy customers or undercharge customers that may be more of a risk. Traditionally, to determine someone’s creditworthiness you would look at their credit scores, credit bureau data kept by agencies like Experian. However, by utilising AI these institutions can look at their own customer data that they have and draw conclusions from there. From these large portfolios of consumer data AI can infer different kinds of relationships. Details like your job, where you live or where you work are more obvious sources, but there’s an argument that even details like who your email provider is can show more or less creditworthiness.

Another way AI’s data analysis can be used to for fraud detection and prevention. As previously said, AI and machine learning solutions can react to the data they are presented in real-time, finding patterns and relationships and even being able to recognise the fraudulent activity. As you can imagine, this is hugely beneficial to the financial world as an unbelievable amount of digital transactions take place every hour, with heightened cybersecurity and successful fraud detection a necessity. AI takes the brunt of the work away from fraud analysts, allowing them to focus on higher-level cases while the AI ticks along in the background identifying the smaller issues. An example of how AI can detect through is by detecting anomalies, so going back to our banking scenario, perhaps a person has tried to apply for 10 identical loans in 5 minutes, the AI computer would be able to detect this as an anomaly and flag it up as suspicious. The machine has a baseline sense of what is “normal” and when something deviates from that it is able to identify it and review it.

Other use cases of AI include automated customer support. We’re all used to seeing chat boxes pop up at the bottom of our screens when we’re browsing the internet, and these are of course AI bots primed and ready to help out. Companies can simply load up their most commonly asked questions and tell the bot what answers to give, also instructing it to refer the customer elsewhere on more complex issues. Being able to answer frequently asked questions about the company or the product/ service it provides gives a better experience for the customer, as they get the answer to their query straight away, as well as saving the company time and money from not having to employ someone to sit and type responses, or can have a worker direct their attention elsewhere.

Trovata brings automation to cash management

Trovata, a cash management automation platform, is poised for growth in 2021, with plans to quadruple its client base, founder and CEO Brett Turner told Bank Innovation. The San Diego, Calif.-based startup, which launched in the second quarter of 2019, develops software that tracks cash movement, normalizes data and automates forecasting, reporting and analysis. The […]

Why StableCoins are so important (but also so hard to get right)


Originally posted 25 May 2019. Reposted during holidays to give our experts a break.

TLDR. When Vitalik Buterin and Balaji Srinavasan were asked whether certain trends were either underrated or overrated, they both said that StableCoins were underrated. This post is my explanation of why I think they are right. Yet we have already seen some high profile StableCoins fail, which is why the headline also refers to why StableCoins are also so hard to get right.

In the image above you see the usual path to a currency – from Store of Value to Medium Of Exchange to Unit Of Account. Bitcoin could be all three but today faces a volatility chasm, with wild bull and bear markets. A StableCoin is designed from the start to be all three.

Today Bitcoin is a speculative Store of Value (the digital gold thesis). I am on the record saying that Bitcoin has more upside than downside and have been a buyer, but it is certainly a speculative bet. Even though it is speculative, Bitcoin has some credibility as a Store of Value.  However Bitcoin is weak as a Medium Of Exchange (there is not much you can buy directly in Bitcoin) and Bitcoin is not credible at all as a Unit Of Account. You will know when Bitcoin becomes a Unit Of Account – we stop referring to how much something costs in Fiat currency and only refer to the cost in Bitcoin or Satoshi units.

Watch Vitalik Buterin (Ethereum) and Balaji Srinavasan (Coinbase and A16V) talk about StableCoins around minute 38

This update to The Blockchain Economy digital book covers:

  • Mixing SpeculativeCoin and StableCoin in one venture does not work
  • StableCoin for JP Morgan, Facebook & Samsung is just the tip of the iceberg
  • Why a StableCoin has to be multi-currency basket
  • Don’t bet against Government backed CBDC.
  • Low volatility is essential for Cross Border payment rails
  • Bitcoin as a Medium Of Exchange faces hurdles that will take a long time to overcome
  • You cannot manufacture a stable result out of unstable/volatile base
  • Audit heavy/ tech lite is simple key to trust in redemption
  • StableCoin can be a currency for passionate global communities
  • StableCoin can be bridge into crypto for conservative adopters
  • Context & References

Mixing SpeculativeCoin and StableCoin in one venture does not work

We call them StableCoin to differentiate from coins/cryptocurrencies that are speculative. So I coined (sic) the word SpeculativeCoin.

SpeculativeCoins have benefited from a great business model, defined as Tokenomics (funding via coins that you sell into a rising price). The idea got discredited in the ICO hype and got nailed by the SEC (details here).

Ripple has been masterful at using Tokenomics to boost XRP. Whether that means XRP has value is more debatable, but there is no question that Ripple has done well with this model. It is debatable how many Altcoins will do well, but what is absolutely certain is that you cannot mix SpeculativeCoin and StableCoin in one venture.

Speculative Coin/Tokenomics might work. StableCoin might work. An investor might mix SpeculativeCoins and StableCoins into a portfolio just like you might have Facebook and Exxon Mobil in the same portfolio. However, the two models are totally different. It would be like combining Facebook and Exxon Mobil in the same operating business.

StableCoin for JP Morgan, Facebook & Samsung is just the tip of the iceberg

It is hard to keep up with the flurry of PR from big companies offering their own branded StableCoins. Without trying too hard to stretch the memory banks, we have seen StableCoins launched by JP Morgan, Facebook & Samsung. Other big banks, social media networks and consumer electronics companies will soon have to issue one to compete. Soon we will have a StableCoin for each Global 2000 corporate and then it may move to SME.

When every company has their own StableCoin, it will add about as much competitive advantage as having your own .com address.

Why a StableCoin has to be multi-currency basket

A single Fiat currency StableCoin, whether USD or EUR or CHF or any other reasonably stable Fiat currency is not good enough for two reasons, one of which is critical:

– a multi-currency basket is more stable than any single Fiat currency. Even if a Fiat currency has been stable for a long time, smart investors don’t like betting that politicians won’t do something stupid in future. Printing money is a pretty big temptation!

– a single Fiat currency could be seen as a threat by the nation state that issued that currency. Although governments cannot shut down Bitcoin or Ethereum (for more, read this chapter in The Blockchain Economy), they have more  control when it comes to a single Fiat currency StableCoin. This is an existential threat to a StableCoin venture pegged to a single Fiat currency. As the news of Basis shutting down shows, this is not just a theoretical risk. Basis shut down, despite raising over $100m from top tier investors, because of regulatory pressure.

Don’t bet against Government backed CBDC.

CBDC = Central Bank Digital Currency. A CBDC cuts out the FX Interbank market but not the Central Bank. It is a more efficient Fiat currency; still Fiat but faster and more efficient. Governments that are frustrated by their ability to shut down Bitcoin (because it is decentralised and there is no Bitcoin company) will not hesitate to shut down any threats that are easy to shut down.

That is why a single Fiat currency, which could be seen as a threat by the nation state that issued that currency,  faces existential risk from Governments.

Low volatility is essential for Cross Border payment rails

Daily Fintech wrote about this back in October 2015:

“Use case # 3 is using Bitcoin as an invisible interim store of value. Neither sender nor receiver cares about Bitcoin. If you wanted an interim store of value for this purpose, the last thing you would invent is Bitcoin. You would create something that was almost a mirror image of Bitcoin:

  • Had the lowest possible volatility against the major Fiat Currencies.
  • Was not perceived as a threat by the Governments that issue those Fiat Currencies.”

Look at the 10×3 problem. Imagine getting paid for a product with a 10% margin and in the 10 minutes to settle on-chain, the price declines by 10%. You just lost money on that sale, even if fees are zero.

Bitcoin as a global Medium Of Exchange faces hurdles that will take a long time to overcome

We may pay for most our purchases with Bitcoin at some point in the future. The problem is that may be so far in the future that we a get our space flight to Mars before Bitcoin becomes a global Medium Of Exchange.

Our theory is that it will happen first via the excluded in countries suffering a currency crisis (for more, read this chapter in The Blockchain Economy). So we may see local networks where Bitcoin crosses the chasm to become a Medium Of Exchange (for example in Venezuela). Then it may replicate in other failed states who lost control of their currency.

For Bitcoin as a Medium Of Exchange to cross the chasm in the developed world, we will need a wave of startups to create services to meet needs that consumers are not even aware of yet.

Both will take time.   

Cryptocurrency derivatives

These cryptocurrency derivative solutions use algorithms to match supply & demand of an existing volatile cryptocurrency such as ETH to create a cryptocurrency derivative that is stable.

Can you manufacture a stable result out of unstable/volatile base?

The idea sounds a bit  like creating Triple A mortgage bonds out of junk loans – and we know how well that ended in 2008! Some well funded startups are working on this approach, so we shall wait and see if it works. 

Audit heavy/ tech lite is simple key to trust in redemption

These ventures match each Stablecoin purchased with a corresponding deposit in a Fiat bank account. The Fiat bank accounts are audited so that investors can be confident that the Stablecoin is a real asset.

If there  is no tech solution that byepasses the Legacy Finance economy, the best solution may be the audit heavy/ tech lite approach that we define in this chapter of The Blockchain Economy book:

“Fiat collateralised (Fiat deposits held in custody). This is the most popular and easy to understand and used by most StableCoins. For example, Tether/USDT pegs to the US Dollar via reserves held in custody. So if you buy $1 of USDT, you are told that it is backed by $1 of US Dollar held in a bank. This obviously requires some confidence that the StableCoin operator really does have the assets properly custodized; there has been serious concern whether Tether/USDT was doing this. Confidence measures include an audit by a reputable firm. StableCoins will increasingly fall under regulatory scrutiny as they are deposit taking and need at least AML/KYC processes. This model has been described as “audit heavy/tech light”. It is operationally complex, because you need all the Legacy Finance relationships; bridging the worlds of Crypto and Regulated Banks is not easy.”

StableCoin can be a currency for passionate global communities

We live in a world where more people are members of Facebook than are citizens of even huge population countries and where we often have as much in common with “tribes” across the globe than we do with our physically close neighbours. People who are passionate about something (diet, fashion, religion, whatever) want to find others like them when they travel and when they want to give cash to that person, a multi fiat StableCoin can be trusted by both parties.    

StableCoin can be bridge into crypto for conservative adopters

On a panel at a conference, I told the panelist next to me (a senior banker) that I was a Blockchain and Bitcoin bull. The banker asked me if that meant that I was an anarchist. I laughed and said “look at me, I have grey hair and wear a suit, how can I possibly be an anarchist?” The point is that when you leave the cryptosphere and talk to mainstream business people and investors, they look for something that feels more normal and less mind bending than Bitcoin – like StableCoins.

Context & References

Investing In Payment Tokens And StableCoins AKA New Currencies.

Mega Waves In The-blockchain Economy And The Dams Holding Them Back

Is Bitcoin suitable as an interim store of value for a payment rail?

Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO of Daily Fintech and author of The Blockchain Economy.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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December Tidings Edify The Year That Was 2020

It’s in rare lifetimes that people, businesses and economies get to witness a year like the one that ends today. Part pandemonium, part perturbing, the pandemic swooped over many in its wake and brought umpteen enterprises to a grinding halt. But, resilience triumphed and as businesses swung back, many found new opportunities to surge ahead.

For this end-of-the-year post, I have selected three entities for their recent announcements that represent the best of what happened in 2020 in the insurtech space.

Lloyds of London along with Insurtech Parsyl, launched a new vaccine shipment insurance coverage, called the Global Health Risk Facility (GHRF). Transporting vaccines is high risk, with around 30% of vaccine consignments globally lost to damage or theft. Covid-19 vaccine distribution is a hurdle as stakeholders fret over extra-cold temperatures required to transport vaccines. Theft and cyberattacks on the supply chain are inevitable.

GHRF is being supported by $26.7 million funding from the US International Development Finance Corporation. The loan will serve to capitalize a new public-private Lloyd’s syndicate and allow offering cost-effective insurance policies for shipments of vaccines and medical products to developing nations. It will begin underwriting in January. Called Syndicate 1796, it is the first public-private partnership to address a global health emergency in Lloyds’ history. Through this year, such public private partnerships for systemic risk coverage have been a topic of intense interest, with breakthroughs transpiring in earlier months.

The DFC loan will allow to offer cost-effective insurance coverage for storage and transit of medical supplies. Coverage is currently available to eligible low, lower-middle and upper-middle countries. It has the backing of 14 global (re)insurance companies. Lloyds plans to deploy Parsyl’s IoT sensors to protect and monitor critical shipments.

In Europe, neobank Revolut announced its partnership with Belgian insurtech Qover to provide embedded insurance to account holders. This comes close on the heels of its partnership with NTUC Income’s micro-insurance platform to offer flexible insurance.

Revolut is a US$5.5 billion challenger bank with 13 million customers, offering banking services including forex, travel services alongside stock, crypto and commodity trading. Rated as the most successful neobank on the European scene, its CEO says, “Revolut is not a marketplace, but (we) are a superapp.”

The neobank chose Qover to offer embedded insurance across 33 European countries, through one single technical integration, a feat that incumbents had difficulty pulling off. Insurance is now fully integrated into its banking app.

Embedded insurance is a $3 trillion market opportunity and is part of a wider movement towards embedded finance, writes transformation specialist Simon Torrance. As Efi Pylarinou summarizes very well, “Super Apps are the natives in the East and their approach has been strongly validated during the recent crisis. The West in on its own journey that is focused on re-bundling which varies by region and is shaped by regulations and culture.”

US insurtech Oscar Health, the latest with plans to go public, has confidentially filed for IPO. Started in 2012, the company is headed for a traditional IPO instead of SPAC. Operating in more than a dozen states, it sells individual, family and small-group plans, with more than 420,000 clients.

Till date, it has raised $1.6 billion and recently completed a $140 million funding round. With $2 billion in annual revenue, Oscar is the first health insurer to offer 24×7 telemedicine services for no extra fee. Current estimates show that 30% of its members turned active telemedicine users this year, compared to 10% in the rest of the US.

LMND stock went public this year with great hype. The stock is up more than 150% since its July debut. The ease, digital access and focus on younger customers made it exceedingly popular.  Investors will pin hopes on Oscar’s IPO, as it promises to digitize health insurance.

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SwiftPass and Wallyt to partner with Findora on Payments Network

Findora, a blockchain network, announced it will be integrating its solutions with Swiftpass, a leading mobile payments service provider in Asia and Wallyt, a Hong Kong based fintech that provides international mobile payments and open banking solutions, according to a press release.

Findora supports confidential transaction processing, verification and asset issuance for any cryptocurrency or financial asset, such as equities, derivatives, debt and cash. Combined with Wallyt’s global presence and SwiftPass’ expansive platform and user base Findora is expected to provide enhanced data safety and privacy for the financial institutions and other clients it serves.

“Among its peers, Findora has a unique approach to financial systems, with a balance between transparency and privacy for building a large-scale transaction network. We are excited to partner with Findora and, together, provide more fintech solutions,” said Tong Liu, CEO of Wallyt in the press release.

RBR report puts NCR as global leader in restaurant POS software

NCR Corp. leads the global restaurant point-of-sale software market according to research and consulting firm RBR. The GlobalPOSSoftware2020Reportconducted by RBR indicates that NCR POS software has a 25% market share in the restaurant segment, according to a press release.

NCR’s POS software for restaurants features the company’s signature NCR Aloha POS platform, Aloha Essentials subscription package and the NCR Silver Pro to help restaurants run their business, boost efficiency and increase growth.

“NCR software helps our customers run the restaurant,” said Dirk Izzo, president and general manager, NCR Hospitality. “The pandemic has made digital transformation a necessity, and for restaurants that increasingly means using software to stand up and optimize mobile ordering and payment, curbside and drive-through capabilities, all while providing great customer experiences,” said Izzo in the release.

The Global POS Software 2020 Report is based on analysis of more than 2,000 projects, by more than 100 vendors and comprising 8 million POS installations. The report includes commentary and insights into the grocery, general merchandise and hospitality segments, at an individual country level.

Paysend welcomes new US customers as demand for International digital money transfers soar

Global end-to-end payments provider Paysend reports that more than 150,000 new U.S.-based customers have used its platform during the last three months to send digital money transfers across borders, according to a press release.

“During times of uncertainty, individuals in emerging economies are even more reliant on fast and affordable cross-border payments from those in the United States. Digital transfers offer a much-needed alternative to traditional money exchange methods,” said Paysend CEO, Ronald Millar in the press release. “Since the start of the global pandemic, more than one million new global users have joined Paysend’s platform to send money to friends and family around the world. Our successful entry into the U.S. market in Q3 is certainly helping to fuel our global momentum.”

Following the company’s stateside launch in September amidst the pandemic, Paysend experienced a 25% increase in U.S. outbound transfer activity between September and October. This rapid growth occurred as American residents, including large populations of immigrants, expatriates and foreign exchange students, adopted the platform to securely transfer funds to international accounts located across more than 70 countries in minutes — without visiting a physical bank location.

“With hundreds of American financial institutions shuttering physical branches or limiting access due to COVID-19, it’s now even more difficult for consumers to send money to family and friends across borders,” said Matt Montes, Paysend’s U.S.-based general manager in the press release. “Paysend’s platform fills the void that has long existed in America for a low-cost, convenient method to send money abroad, without charging the erroneous fees that have become synonymous with traditional transfer methods.”

China gives 'rectification' plan to fintech the Ant Group

Chinese fintech, the Ant Group, was given a plan to “rectify” its regulatory violations by The People’s Bank of China, according to reportin TechCrunch.

The banking authority gave a five-point compliance agenda which included: having the group return to its payments roots and bring transparency to transactions; obtain necessary licenses for credit businesses and protect user privacy data; establish a financial holding company with sufficient capital; revamp key businesses (credit, insurance, wealth management) in accordance to the law and increase compliance for its securities business.

The Ant Group, which began as a payments processor for Alibaba’s online marketplaces, could have had a record-setting initial public offering but was stopped 48-hours prior to going public by regulators citing compliance issues.

The fintech said it will be working on meeting all the regulatory requirements which could take months to comply.

Concurrently, Jack Ma’s e-commerce giant Alibaba is also under investigation by regulators for alleged monopolist behavior.

Contactless Technology: Phos, Elavon Europe, Paynetics and Judopay in View from the Top

There are plenty of defining years in the history books, and as 2020 draws to a close, it’s almost certain that the global pandemic will ensure that this year is featured prominently. With events cancelled, launches delayed, and country-wide lockdowns, the way we work has changed forever. Still, for financial technology and surrounding industries, this was also a year of challenge and opportunity. 

This December, The Fintech Times is asking industry leaders for their ‘View from the Top’ to gain an insight into the decisions behind the last 12-months. Today, we’re looking at the issue of Contactless Technology, hearing from Brad Hyett, Scott Frisby, Ivo Gueorguiev, and Jeremy Nicholds on their 2020 thoughts, plus a look ahead to 2021. Will there be a Happy New Year? Read on…

During Covid-19 contactless payments have seen an incredible increase, with 709 million contactless in the UK in August alone. A lifeline in the time of social distancing, it makes sense that we have seen exponential growth in the contactless uptake, increasing the already emerging shift to cashless societies. In this View from the Top, companies Phos, Elavon Europe, Paynetics and Judopay outline their own 2020 experience.

Brad Hyett, CEO, phos

Brad Hyett is CEO of phos, a UK based fintech enabling contactless payment technology for global banks and payment businesses. In his opinion, Covid-19 has merely accelerated the shift to a cashless society that was already happening.

“Recent data from cash machine network Link shows that, in the UK, ATM transactions fell by 60%since last year, as we entered our first national lockdown in March.

“Even before the pandemic, cash was predicted to account for just 9% of all payments by 2028. But, given the widespread adoption of cashless technologies during the Covid-19 pandemic, we now need to rethink these estimates.

“The convenience of cash alternatives and the growing rate of online purchases had already initiated our transition towards a cashless society, prior to 2020. Covid-19 has simply accelerated this shift, with social distancing and stringent health and safety measures becoming a major contributor to the surge in contactless payments.

“Forward-thinking businesses are now investing in technology, such as mobile and software Point of Sale (POS) platforms, that enable them to receive contactless payments from customers more efficiently. It is these firms that embrace such digital transformation initiatives that will both deliver a better customer experience and protect, or grow, their revenue more quickly in the race to a new, cashless normal.

“The proliferation of e-wallets has also been building momentum this year and is set to explode in 2021. The global mobile wallets industry is predicted to jump by nearly 50% to reach a value of $1.47tn amid the Covid-19 pandemic, with over 1.7bn people using mobile wallets by 2024.

“While most of us are familiar with Apple Pay and Google Pay, these won’t be the only e-wallets available moving forward. Companies are increasingly developing their own solutions to enable customers to make payments directly on their website, mobile app or in physical stores. This is in clear response to the changing demands we have seen for contactless and cashless payments during the pandemic.”

Ivo Gueorguiev, Co-Founder and Executive Chairman, Paynetics

Ivo Gueorguiev is Co-Founder and Executive Chairman of Paynetics, a regulated e-money institution. He agrees that we’re going to see even more uptake of cashless and contactless payments as we move forward to 2021

 “Before this year, we wouldn’t have thought twice about handling cash or using Chip and PIN machines, but we live in a more contactless world now, where lockdowns and decreased footfall have forced businesses to go online in their droves. We won’t go back to ‘normal’ in 2021 – the rates of online transactions will continue to rise and consumers will expect businesses to offer cashless payment options. 

“It’s been interesting to observe the resurgence of QR codes as part of this mix. A technology that was once written off is now being employed by a host of different businesses, from restaurants to gyms, and even the NHS. QR payments are an important addition to a payment portfolio for a merchant, as they can offer faster and better customer experiences when incorporated into online shopping platforms and loyalty programmes.

 “The concept of ‘paying’ has changed rapidly over the past year. We are increasingly not even present when we pay for things – take Uber as an example, where you register your card in a wallet and can buy a service, but are not actually in the car when you pay.

 “Self-checkouts are not a new phenomenon either but, in 2021, we will see their full potential realised and a much wider adoption of this kind of technology. Companies like Amazon have been leading the charge here, with their autonomous ‘Go’ stores where you wave to pay for your goods. This might once have seemed far-fetched for mass adoption, but, in an increasingly touch-free and digital world following the effects of the pandemic, I expect that we’ll start using this technology in a whole host of new settings sooner than we might have imagined.”

Scott Frisby, Chief Strategy Officer, Elavon Europe

Scott Frisby, Chief Strategy Officer at Elavon Europe, a payments company with an international processing platform. He believes 2021 will see the payments landscape constantly change for consumers.

“We expect to see small, local businesses develop similar offers to the Pret A Manger coffee subscription services to build loyalty with customers during this difficult time. However, they will need more support from payment providers to offer this functionality through digital wallets or loyalty apps for example.

“There will be a wider blurring of the in-store and online shopping experience for consumers in 2021 and beyond. Where people pay for and receive goods is continuously changing to meet the need for convenience. For example, in-store, a consumer might check online reviews of a product, pay for it by scanning a QR code and choose to ship home if it’s bulky.

“Open Banking has the potential to enable businesses to personalise services and offers to consumers. They may be able to browse in-store and use their smartphone and be alerted to offers or better prices from physical stores nearby.

“Additionally, social commerce is a valuable opportunity for small and large businesses to grow through platforms such as Instagram with simple, one-click purchasing options, allowing companies to build customer loyalty and boost sales on a local and global scale through their users.

“Alternative Payment Methods (APMs) will continue to grow in popularity. We’re already seeing digital payments options such as QR codes, digital wallets, digital assistants, buy-now-pay-later and in-app payments taking off, but there is plenty more space to grow. Recent research shows that offering even three different payment methods can improve sales conversion for businesses by more than 30%.”

Jeremy Nicholds, Chief Executive Officer, Judopay

Jeremy Nicholds is Chief Executive Officer of Judopay, an enabler of mobile web and app commerce – helping companies across multiple sectors serve their customers with a better way to pay. For him, 2021 is going to see the rise in popularity of app-based services for making payments. 

“2020 has been a difficult year for many businesses and a transformative one for the payments industry. With lockdown restrictions and social distancing measures in place at varying degrees since the start of the pandemic, businesses have had to adapt, altering how they take payments in order to put the health and safety of staff and customers first.

“Reducing the use of cash and the number of touchpoints at the point of sale – such as PIN pads – has been the go-to for many and we’ve seen the use of contactless payments rapidly escalate, with the payment method being adopted by customers that previously wouldn’t have used it.

“Early on in the pandemic, the UK government took notice of the benefits of contactless payments, and the industry increased the contactless spending limit from £30 to £45 to encourage people to use the payment method for more transactions. And with the UK hospitality industry reopening on Independence Day, one tool that became particularly important was app-based commerce, with ‘order at table’ functionalities and other beneficial solutions.

“Not only are apps excellent for minimising contact during the payment process, but the data they offer provides huge benefits over anonymous cash and card payments when it comes to tracking customers if an outbreak occurs at an institution.

“In 2021, the widespread adoption and acknowledgement of the usefulness of apps will likely spur on the growth of app-based commerce. It will continue to play a vital role as we emerge from the pandemic and allow businesses to reduce unnecessary contact during sales with contactless capabilities.

“Judo has continued to innovate throughout the year, and over the coming weeks, as a company we’re excited to be releasing new touch-free payments solutions to businesses that will offer a simple and easy way to pay without the expense of additional hardware.”

Royal Park Partners: The UK Needs to Create VC Funding to Support Early Stage Fintech Businesses

The UK’s fintech industry is booming, but is VC funding just going to the big few or are there opportunities for the brave, innovative and new?

Someone with a lot of experience helping fintechs secure funding is Aman Behzad, the founder and managing partner of fintech-focused corporate finance advisory firm, Royal Park Partners. Aman is a corporate finance professional having worked in the space for over 15 years, starting his banking career and interest in fintech at Citigroup.

Here he outlines some of his concerns with regards to the lack of depth of the VC funding market In the UK with most funding pouring into a handful of well-established or well-backed names

Aman Behzad, founder and managing partner, Royal Park Partners

The fintech industry has continued to grow at pace despite the pandemic. This is especially true for later-stage fintech businesses offering digital solutions that help consumers manage the effects of the pandemic. We’ve seen companies such as Klarna double their valuations as consumers look for more flexible and affordable payment options to see them through. Klarna, as an established fintech category leader, will never struggle to raise capital, newer start-ups however aren’t getting the same opportunities to secure funding.

The pandemic has driven investors to become even more cautious, shunning Seed, Series A and even Series B investments in favour of later-stage companies. More mature businesses on the continent are also attracting UK investor capital that would otherwise have gone to supporting earlier stage UK businesses. It’s worth noting that the businesses that do manage to successfully secure streams of funding are typically those that manage to find backing early on from high-profile investors. Businesses that do not, face a much more perilous journey to scaling.

It is well-known that early-stage fintech businesses in Europe don’t have much room for error. The VC industry in Europe is generally more risk-averse than in the US, so signs that a company’s fortunes may be wavering are that much more detrimental to the ability to raise further funding. By and large, US-based businesses are able to perform multiple pivots that enable them to find the right product-market fit or leadership configuration before investors start losing their appetite. This continuous process of ‘creative reconfiguration’ introduces newer ideas that grow into the fintech category leaders of tomorrow. This kind of leeway can only be supported by very deep VC funding markets.

London still attracts the largest proportion of VC funding in Europe and it is imperative that we build on our successes in nurturing fintech businesses and work to grow our dominance globally – the most significant ingredients to this are maintaining a favourable regulatory environment and deep pockets of VC funding. The current environment provides a vast array of opportunities that our indigenous fintech businesses can capitalise on. In years to come however, London could start falling behind other major cities if we fail to aggressively grow our pool of venture capital funding.

Government policy and regulation will play a major role. The UK government has many initiatives in place to support early-stage fintechs as well as consultation groups looking to create a more favourable environment. More investment is needed in these types of initiatives to support the big fintechs of tomorrow.

It should also be noted that successful exits of fintech businesses once at scale creates its own fly-wheel effect: investors see the potential that UK-based companies have at achieving great scale, they then have more confidence in investing. Once a sale takes place, the entrepreneurs and funds that Invested, go on to recycle their capital and re-seed the market. Multibillion-dollar fintech exits in the US have driven the creation and funding of thousands of fintech businesses. For example, the sale of PayPal to eBay almost two decades ago created significant sums of money for the founders and early employees to spin out with and create new business ventures.

The UK remains a major fintech hub on the global stage; this is likely to continue at least in the short term. But to protect the long-term growth of Britain’s fintech industry we must not get complacent and ensure that we remain actively engaged in supporting our founders and start-ups through providing access to more capital through more VC funds.

Intro to Fintech: Regtech

Though the fintech industry is getting more and more mainstream globally, there is still a learning curve for many people as to what fintech actually is, and a lot of jargon which can be hard to understand if you’re not in the know. In this new series of articles, The Fintech Times plans to breakdown all aspects of fintech to help those interested to learn and understand the industry, making it more accessible for all. 

Regtech, like most of the other portmanteaus in the fintech universe, is exactly what it says on the tin – regulatory technology. Simply put, this technology is used to achieve and manage regulatory requirements in the financial industry, with Regtech companies helping businesses comply with the relevant regulations efficiently and cost-effectively.

After the 2008 financial crisis there was a global surge in financial sector regulation. Eager for the economy to recover and to ensure it never hit rock bottom again, regulators put new rules in place to improve risk management and safety in the industry. These rules, regulations and requirements are changing constantly with banks and financial institutions under continuous pressure to keep up. Between 2008 and 2016 there was a 500% increase in regulatory changes in developed markets. Not only is the regulatory landscape moving rapidly but fines for non-compliance are costly and constant, and something companies are going to want to avoid. Global financial institutions have been fined over $36 billion since 2008, with about $10 billion of those non-compliance fines awarded in 2019.

This is where Regtech comes in, as its products and services facilitate the compliance of businesses to these various regulatory requirements. Rising to particular prominence in around 2015 when the actual term “Regtech” was created by the Financial Conduct Authority, Regtech has a particular emphasis in regulatory monitoring, reporting and compliance, which are all facilitated through technological advancements. These tech companies often use cloud technology through software-as-a-service (SaaS), as well as utilising big data for reporting.

Generally speaking, regulations for financial institutions fall into one of four categories:

  1. Regulatory: Data distribution and regulatory reporting through big data analytics and real-time reporting.
  2. Identity management: revolving around Know-Your-Customer (KYC), Customer-Due-Diligence (CDD) and Anti-Money Laundering (AML) requirements.
  3. Compliance: Real-time monitoring of compliance and any upcoming regulations
  4. Risk management: detecting risks in compliance and anticipating any future issues.

There are many benefits to financial institutions that engage in Regtech, mainly – and perhaps most obviously- the ease of complying with necessary regulations. Another big draw of Regtech is that they can offer this compliance at a relatively low cost, usually by automating processes and reducing the need for manual intervention. Regtech can streamline processes through these automated solutions, allowing users to access data for reports where they may not have been able to previously. This allows both its users and the regulatory bodies themselves to look forward in risk management as better insights are available through the “big data” the tech can provide, even being able to sniff out market abuse and financial crime. By using automated processes, they enable compliance staff to take up other activities rather than manually checking, compiling and analysing.

Regtechs aren’t only applicable to financial institutions either but can also be utilised in other regulation heavy industries like health care. Some examples of Regtechs include cleversoft, who optimise and automate business processes for regulatory documents and back-office processes; Enveil, a data security company protecting Data in Use; and token, an open banking and PSD2 compliance platform.

Why is Regtech important?

Regtech is important because it allows companies to meet regulatory requirements and reporting obligations they have. As stated, compliance can also be incredibly costly, with HSBC spending $2.2 billion on their regulation and compliance in 2015. It can be even more expensive on the other side though, with fines and penalties costing companies and arm and a leg should they fail to comply. In 2019 alone global banks amassed over $10 billion dollars in fines due to violations, with US Goldman Sachs fined $3.97 billion, and Wells Fargo $2.96 billion. This makes Regtechs a crucial commodity in the industry, and near essential to the ongoing operation of banks and financial institutions.

Regtech can also prove useful in the ongoing Covid-19 pandemic, as it plays a role in security through analytics. With an increase in remote working, there is also a potential increase in the amount of “opportunistic” cybercriminals looking to exploit people through scams, schemes and laundering money through legitimate financial institutions. With regulatory technology in place, financial institutions can flag suspicious activity and combat financial crime.

UK Regulation Compared to Elsewhere

When it comes financial regulation in the UK, there are two key regulators: the Prudential Regulation Authority, responsible for the financial safety of banks; and the Financial Conduct Authority, responsible for how banks treat their clients and behave in financial markets. The main framework followed is the Financial Services and Markets Act 2000 (FSMA) that prohibits a financial service business being created without having the relevant permissions. Regulated activities include deposit-taking, consumer credit and investment funds amongst others. UK financial regulation benefits from the reporting and analytics that technology can provide it, as it supports risk management and security.

When compared to other countries, the UK’s regulations are comparatively light according to a report by the UK government. Investigating other regulatory regimes to feedback into UK policy, the study found that some of these countries applied a “heavier regulatory touch”, contributing to stronger business practices and better risk management by regulated entities. This leads to better protection and fewer significant failures in the regulated market. It also noted that heavier regulation did not lead to less innovation, with tech companies thriving despite the need for stricter compliance. This is where technology can also be of use, as Regtech can support companies through tighter regulations, allowing for the same amount of creativity and competitivity in a market. If the UK were to adopt a similar system, it is likely Regtech would see a surge in uptake.

Digital sandboxes

A digital sandbox, or regulatory sandbox as they are also known, is a framework created by a regulator that allows fintech’s, start-ups and other innovators to test their product or solution in a controlled environment under the supervision of the regulator. Rather than a physical place where kids can make sandcastles, these sandboxes are testing grounds for new business models that not only help emerging start-ups get closer to releasing their solutions to the world but also helps regulators adapt their rules to the growth and evolution of the market, ensuring new companies stay compliant.

The UK financial conduct authority, in 2015, published a report as to why sandboxes were needed, coining the term itself. Their sandbox began in 2017 and was required to have a clear objective and to be conducted on a small scale, with a limited duration and a limited number of customers.

In addition to these sandboxes, there are other systems that some countries have put in place to support financial innovation, such as fintech hubs, incubators and accelerators. These all provide similar support levels to fintech start-ups, all with the goal of getting them off the ground.

Sandboxes are established for various reasons, but often the main goal of their creation is to promote competition and innovation within financial service markets. They can also foster relationships between financial services providers and the regulators themselves, leading to communication and possible collaboration on future regulations. Sandboxes encourage fintech regulation as well as for Regtechs, creating a vast, competitive market with a variety of solutions for financial institutions to choose from, in addition to creating a safer market through sandbox programmes.

Fintech from 2008 to 2024

2020 is nearly over; it is time to celebrate and look forward. In this case I am starting by looking back on the history of Fintech from 2008 to 2020 and then looking forward to next year and the distant future of 2024.

The 2008/9 start date is obvious as it was when the Global Financial Crisis (GFC) tsunami hit banks and it was the time of Fintech Cambrian Explosion including the most significant startup (Bitcoin). The 2024 end date is peering into the future and is more idiosyncratic as it is 10 years after I wrote the first post that started Daily Fintech.

During the dark days of the GFC, I recall a presentation outlining a thesis that the debt tsunami was obviously massive but that the technology wave that will follow will have an even bigger impact. I thought at the time that it was probably true but did not do anything about that insight until 2014.

2014 was when Daily Fintech started. Bitcoin was in a bear market but startups using traditional centralised SMAC (Social Mobile Analytics Cloud) technologies were getting to scale and getting on the radar screen of bankers.

2020 was the Pandemic Everything Crisis (PEC). It impacted our health, politics and finances. It also accelerated digital disruption leading to my forecast for 2021.

2021: Bad news for finance incumbents. The combination of digital acceleration, bloated cost base  & pandemic induced debt crisis will hit many finance incumbents hard; some will reinvent themselves but many will face a Kodak/Blockbuster/Borders like fate.  During this time, expect to read a lot of well written articles expressing scepticism about the disruption hitting incumbents. When you read these “don’t forget Amaras law”.

2024: Amaras law becomes obvious. By obvious I mean like saying today that the Internet impacts our lives. By 2024 it will be obvious that the technology wave that followed the debt crisis of 2008 was even bigger and changed everything in finance.

Roy Amara (computer scientist & head of the Institute for the Future) coined the “law” that we tend to overestimate the impact of a new technology in the short run, but we underestimate it in the long run. As Matt Ridley advises in his Rational Optimist blog to be “wary of the initial hype but wary too of the later scepticism.”

Happy New Year. Four things to celebrate – a new year, vaccines, Bitcoin price & Fintech going mainstream.

Bernard Lunn is Editor and CEO of Daily Fintech and author of The Blockchain Economy

Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.