This Week in Fintech ending 27th November 2020

https://dailyfintech.com/2020/11/27/this-week-in-fintech-ending-27th-november-2020/

This week our experts brought you the following insights based on their experience as investors, entrepreneurs & executives.

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Your Editor is Bernard Lunn. He is also the CEO of Daily Fintech and author of The Blockchain Economy and occasional opinion columnist.

Monday Ilias Hatzis our Greece-based crypto entrepreneur (Founder & CEO at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech) @iliashatzis wrote Should You Buy Bitcoin Right Now? Buy, but Don’t Sell

Another week, another high. Bitcoin’s price is surging, nearing its all time high, as the year comes to a close. Looking at all of 2020, it’s been surging all year long. The largest digital currency is up 160% since January 2020, and up 190% since March 15, after a nose dive in the second week of March, when the price dropped 25%. As I write this post, bitcoin’s price is hovering around $18.5k and it’s market cap is at $343 billion. Thirteen hundred bucks… not that far from its all-time-high of around $19,800 at the end of December 2017.

Editor note: Ilias explains, with data, why this bull market is so different from 2017.

Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy wrote: Equity Crowdfunding Part 1: Consolidation always follows the Cambrian Explosion phase

The world is in crisis on many levels – economic, political, health, climate. Recovery from this crisis will require innovation and innovation requires risk capital. That is why we are publishing our next 4-parter (each post is a 3 minute read, one week apart) on the subject of equity crowdfunding, which shook up the capital markets by allowing the general public to buy shares in early-stage companies to help them raise money.

Editor note: Both entrepreneurs and investors will benefit from consolidation by creating an easier decision on which platform to use.

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Tuesday Efi Pylarinou @efipm our Swiss-based Fintech Adviser,  founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019 wrote Funding Diversity is still underestimated

`Women tend to transform, they tend to change the terms, they tend to bring innovation and diversity. And it is critically important, because that diversity itself, is conducive to innovation, is conducive to changing the way in which you look at things` Christine Lagarde at the Women`s Forum November 2020.

Editor note: To quote Efi “The female leadership style (this can be adopted of course by men) is still largely underestimated even though there is tangible evidence that it outperforms.”

Wednesday Alan Scott Managing Director EMEA at 24 Exchange @Alan_SmartMoney wrote Stablecoin News for the week ending Wednesday 25 November 2020.

This weekly snapshot is the news that matters in the Stablecoin market.

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Thursday

Rintu Patnaik, an Insurtech expert based in India, wrote: Chatbots with Blockchain – Plumbing or Showerheads?

Shopping for insurance or filing a claim can be arduous. But not so, when chatbots with conversational interfaces, mimic humans and respond with accuracy, speed and personality. PolicyPal is a Singapore based digital platform that launched a chatbot to allow customers to buy and manage policies conveniently. The bot took in-depth training on 9000 policies, enabling it to answer customer’s queries with impressive precision.

Editor note: Read this to understand hard core Insurtech innovation that actually changes the plumbing

Christian Dreyer @x3er, our Swiss based CFA who focusses on how XBRL changes our world wrote XBRL News for investors, Australia, and data quality

Editor note: This weekly snapshot is the news that matters in the XBRL market.

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Friday Howard Tolman, a well-known banker, technologist and entrepreneur in London, wrote: Alt lending for week ended 27 November 2020

Editor note: This weekly snapshot is the news that matters in the Alt Lending market.

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https://dailyfintech.com/2020/11/27/this-week-in-fintech-ending-27th-november-2020/

Alt Lending week ended 27th November 2020

https://dailyfintech.com/2020/11/27/alt-lending-week-ended-27th-november-2020/

JP Morgan eyes up UK digital banking scene

Well all you digital alt lending disruptors, watch out the Americans are coming! Couldn’t help but have a chuckle at this one. Apparently JP Morgan has appointed a high flying techie from its investment banking operations to be the CEO. We have of course been here before with our American cousins thinking that they can do it much better than we can. But they never quite made it largely, I think, because of the almost neurotic loyalty that UK banking client base displays to the established players and the very un-level playing field created by the Financial Conduct Authority. It is against this unpromising backdrop that the revolutionary achievements of UK start ups Starling Bank and Revolut need to be measured. I also note from the article that the Jobs for the boys ethic that has forever pervaded the City of London is alive and well. The Chairman of the new JPM entity is going to be one Clive Adamson ex FCA himself and this leads me on to the next item.

Bank of England urged to step in over Co-op Bank Bid

As reported in this column last week the struggling Co-op bank has received a bid from US private equity house Cerberus. Co-op’s USP is that it is an “ethical” bank and the juxtaposition of this entity to the practices of Private Equity seems to have upset the sensitivities of Tory MP Kevin Hollinrake who co-chairs the All-Party Parliamentary Group on Fair Business Banking. Calling Cerberus a “Vulture Fund” he has urged the BofE to intervene. Apparently Cerberus has form with the UK government having allegedly misled the government over the purchase of a £ 13 billion mortgage portfolio from Northern Rock back in 2018. Cerberus has always denied any wrongdoing. Nevertheless it just shows how upsetting someone can always come back to haunt you. Cerberus portrays itself as a turnaround specialist and the Co-op banks troubles stem partially to the 2013 appointment of a particularly unsuitable candidate as Chairman. Known colloquially as the “ Crystal Methodist “ because of the unlikely combination of being both a Methodist Minister and a Crystal Meth user this appointment was waved through by the FCA despite the candidate not knowing anything about either the bank of banking in general. I was told at a dinner at the Irish Embassy in London some 6 years ago by my dear friend and late ex banking bon viveur Martin (Jocky) Russell that it was the aforementioned Clive Adamson, who was known personally to both of us,  that was at least partially responsible. There is a health warning on this as Jocky was a terrible gossip?

Sainsbury’s Checks out of Financial Services

I briefly touched on this last week but the article this week puts quite a lot of flesh on the bone and I think highlights the principal reason why the Fintech community should take notice. The Sainsburys franchise is a really strong one. They have 23 million largely loyal clients who use their retail outlets each week. The trust and belief is already there. Logically they should be able to leverage this into financial services but the client count is a mere two million and it is up for sale. Sainsburys states a number of reasons why they failed but bad management is not one of them although there are strong contributory factors which have been outside of their control including ultra low interest rates, spiralling costs etc etc. But Clive Black an analyst at Shore Capital hits the nail on the head when he states that the regulator made it difficult to transfer bank current accounts and that is where most salaries are paid into. Without that you are doomed to failure and relying on once in a while transactional one offs. Unless this changes substantially then I fear that we will continue to see the big banks continue their dominance. The FCA is guilty here. It has stifled real competition and therefore harmed the people it is supposed to represent. The innovators should work on removing the FCA logjam and bureaucratic mindset. Account Transfer Technology ought to be the solution.

Howard Tolman is a well-known banker, technologist and entrepreneur in London,

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.

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.

https://dailyfintech.com/2020/11/27/alt-lending-week-ended-27th-november-2020/

XBRL News for investors, Australia, and data quality

https://dailyfintech.com/2020/11/26/xbrl-news-6/

Here is our pick of the 3 most important XBRL news stories this week. 

1 Investor Forum 2020: Ready for anything

Periods of crisis demand access to high quality, consistent, timely data, as the oil that keeps the cogs in our economic machine running. This half-day forum addresses how standards have been used to manage investment risk; and how they can and should be leveraged further, to plan for future crises. This year’s program will also feature practical, real world examples, of how individual and professional analysts can use XBRL data in their investment process. Post-conference, attendees will be invited to deep-dive training webinars on tools to access free, timely, granular, XBRL data.

This item alone would be worth all three item slots, as it covers the presentations from XBRL US’s investor forum. Speakers include an SEC commissioner and representatives from Morgan Stanley and CFA Institute. You can even find out how to get your hands dirty, metaphorically speaking, of course.

2 Digital reporting: the way forward for financial reports

When it comes to financial reporting, the Portable Document Format (PDF) has many advantages, but flexibility is not one of them. Retrieving data from PDF documents for analysis can be a slow process, for both internal and external users of financial information. In the US and several other jurisdictions, financial reporting has moved into the digital era. But Australian companies have yet to go down that path.

Down under has been notably absent from these columns, and with good reason: Just like the land of cheese and watches, it does not know an XBRL mandate. But perhaps not for too much longer, as this overview article posits.

3 ESMA’s new powers put to use on data quality

Revised regulation recently gave the European Securities and Markets Authority (ESMA) some new so-called “convergence” powers to identify and co-ordinate supervisory priorities in response to key risks across the Union. This coming year, ESMA has identified market data quality as one of its Union Strategic Priority.

Numerous digitalisation efforts at the EU level are all pushing in the same direction, not just in financial markets. But in that domain, a lack of focus on quality will become evident in the fastest way possible.

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Christian Dreyer CFA is well known in Swiss Fintech circles as an expert in XBRL and financial reporting for investors.

 We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

 For context on XBRL please read this introduction to our XBRL Week in 2016 and read articles tagged XBRL in our archives. 

 New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just USD 143 a year (= USD 0.39 per day or USD 2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

https://dailyfintech.com/2020/11/26/xbrl-news-6/

Chatbots with Blockchain – Plumbing or Showerheads?

https://dailyfintech.com/2020/11/26/chatbots-with-blockchain-plumbing-or-showerheads/

Shopping for insurance or filing a claim can be arduous. But not so, when chatbots with conversational interfaces, mimic humans and respond with accuracy, speed and personality. PolicyPal is a Singapore based digital platform that launched a chatbot to allow customers to buy and manage policies conveniently. The bot took in-depth training on 9000 policies, enabling it to answer customer’s queries with impressive precision.

Earlier, carriers piloted voice assistants. Liberty Mutual’s Safeco was first to get Alexa to offer connections to local agents. Allstate included the ability to retrieve next bills. Progressive was a first with Google Assistant voice app offering tips on buying. Nationwide gave away a million Echo Auto devices to new and existing customers while promoting its upgraded Alexa skill that featured calling roadside assistance. None, however, included outright purchase.

In an earlier post, Efi Pylarinou mentions, “As long as incumbent(s) .. refuse to change the plumbing and keep adding new showerheads with amazing capabilities like regulating water temperature and playing music or recording your thoughts in the shower, they will never be able to unlock the full potential..”

What follows are two examples, one an AI based insurtech and the other a digital life insurer, both of who have attempted the plumbing.

  • Vaiot developed bots powered by blockchain to sell insurance contracts. Using a leading AI platform integrated with Cosmos blockchain, it provides end-to-end sales for insurance. Customers use voice/text on mobile apps, answer questions and are offered suitable insurance options. Once signed, the contract is stored on Cosmos as a smart contract. An AI layer monitors the deal and coverage kicks in once payment is done. Vaiot recently raised $5.9 million, offering 30% of its VAI token.

  • A life insurer in Philippines has adopted a blockchain solution along with an e-wallet to offer low-cost life insurance. Digital first insurers use much automation, but smart contracts take it to another level. “Many insurers are struggling to become digital, constrained by legacy systems. Our tech enables whole life-cycle of insurance transactions, without touching human hands.” says CEO of Galileo, HK based blockchain platform that leverages Quorum, a permissioned enterprise version of Ethereum. Singapore Life in Philippines is the first full customer deployment of Galileo’s blockchain based core insurance platform.

In an earlier article, I had reported that the number of live insurance blockchain applications are in the low numbers. The reality today is that there are a number of insurance blockchain applications in concept and pilot stages, with relatively few being operational. In the next 2–3 years, we can expect to see more join the bandwagon with the promise of DLT trust, transparency and immutability.

As chatbots become more sophisticated, its value when combined with other technologies such as blockchain will continue to grow. Integrated across communication channels, they go beyond sales to service, ensuring claim handlers’ skills are called only where most needed. By reviewing old claims, chatbots learn to differentiate between simple and complex claims and what can be settled automatically or need to be referred. Manual servicing of  customers makes them endure long wait times during peaks, which are  streamlined by bots concurrently answering multiple calls.

Not surprisingly, most advanced chatbot solutions in the above infographic are provided by insurtechs. One reason for this advanced maturity is the target group of millennial and Gen Z segments, who are more open to disruptive innovation.

Increasingly, more consumers prefer chatbots for interactions –  in a survey, 69% respondents said they prefer chatbots for instantaneous responses and service-related inquiries. A quarter said they trust chatbot recommendations for product purchases. Combining the increasing acceptability of bots with efficiencies in blockchain technology is an exciting space to watch, as these gain maturity and deliver on their promise.

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https://dailyfintech.com/2020/11/26/chatbots-with-blockchain-plumbing-or-showerheads/

Stablecoin News for the week ending Wednesday 25th November.

https://dailyfintech.com/2020/11/25/stablecoin-news-for-the-week-ending-wednesday-25th-november/

Here is our pick of the 3 most important Stablecoin news stories during the week.

This week we saw some major advances in both the thinking behind new and developing stablecoins and the operation of existing ones.  The common theme is that maybe in the future we can imagine a world where the FX market is no longer bifurcated into wholesale and retail but one single market where we can all access as equal participants.

Firstly in Japan, more than 30 major Japanese firms will begin experiments next year towards issuing a common, private digital currency to promote digitalisation of the Yen in one of the world’s most cash-loving countries, the group’s organising body said on Thursday.

The group, consisting of Japan’s three biggest banks as well as brokerages, telecommunication firms, utilities and retailers, will conduct experiments for issuing a digital currency that will use a common settlement platform.

Private banks will be in charge of issuing the digital currency in the experiments, though the possibility of other entities issuing a digital yen will not be ruled out.

Japan Inc to begin experiments issuing digital yen

Another private stablecoin from payments startup Circle is getting political.  The stablecoin issuer is working with the U.S. government to bypass Nicolás Maduro and support the Bolivarian Republic of Venezuela led by Juan Guaidó.

Circle is using USDC (USDC, -0.05%), the dollar-pegged stablecoin it issues with Coinbase, to distribute relief funds to medical workers and other Venezuelan locals, it announced Friday

US Taps Circle’s USDC for ‘Foreign Policy’ Goals in Venezuela

For central banks contemplating issuing a digital currency, there could be advantages to getting it done soon, according to a European Central Bank study.  A country without a digital currency would lose some control over its monetary policy by being forced to react more strongly to spillovers from shocks in nations that do have such an instrument, researchers Massimo Minesso Ferrari, Arnaud Mehl, and Livio Stracca found.

It’s Better to Be First on Digital Currencies, ECB Study Finds

So in summary, maybe there is some advantage of being a first mover in the stablecoin business, as the future will be one where millions of people who do not have access to the wholesale FX market today, will have a choice and they will be influenced by brand and scale.  When the pandemic broke back in March trillions moved overnight in the wholesale market to the safety of USD causing a 20% appreciation in price (most of which has since unwound), but we may be approaching a future where the many can follow suit not just a few who have access to that wholesale market. 

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Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.  

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on stablecoins please read this introductory interview with Alan “How stablecoins will change our world” and read articles tagged stablecoin in our archives. 

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New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just US$143 a year (= $0.39 per day or $2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

https://dailyfintech.com/2020/11/25/stablecoin-news-for-the-week-ending-wednesday-25th-november/

Funding Diversity is still underestimated

https://dailyfintech.com/2020/11/24/funding-diversity-is-still-underestimated/

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

`Women tend to transform, they tend to change the terms, they tend to bring innovation and diversity. And it is critically important, because that diversity itself, is conducive to innovation, is conducive to changing the way in which you look at things` Christine Lagarde at the Women`s Forum November 2020.

Innovation happens at scale, after a narrative change at scale. One recent and tangible example of this, is around ESG investing. And both Lagarde, Greta, and Larry Fink are three advocates and leaders that have moved the needle towards making ESG investing the norm.

Female leadership is very different than male leadership. We are still operating in an era in which the male leadership style is the status quo. The female leadership style (this can be adopted of course by men) is still largely underestimated even though there is tangible evidence that it outperforms.

I am hopeful that this underestimated and overperforming power, will work its way and scale much like it happens in nature and not like things work on the battlefield of competition.

In Finance, the narrative around investing more in women founders has not scaled. Despite the facts & figures showing several favorable metrics for all-female led ventures and mixed ventures, the venture capital world overall is allocating capital mostly to men. There is incremental progress but at its core, the VC world is a small tight network of males that have no incentive to change the way they play the game.

The US and the UK are the worst in terms of dollars invested in all-female or mixed ventures. Whereas Latin America funnels twice the amount than Europe. Silicon Valley and its UK equivalent are entrenched fairly closed and non-transparent ecosystems.

Source: TechCrunch

In the US for example, 40% of businesses are owned by women, which is evidence that there are no gatekeepers stopping women from setting up businesses. In 2019, only 20% women-led businesses received VC money. And from the total dollars invested, only 4% went to all-female leaders.

In the UK, the numbers are dreadful. All-female ventures receive 1% of pounds allocated by VCs, 10% go to mixed led teams, and 89% go to all-male founders.

When we look at the number of women-led ventures, then the US and Latam are fairly close.

Source: TechCrunch

The Kaufman foundation and other research claim that female-led teams offer 35% higher ROI, 12% higher revenues, and an average time to exit of 6yrs when the industry average is 7.4yrs. The market is recognizing these facts but not at scale.

In 2019, there were 21 unicorns with at least one female founder from the start! This is more than double compared to 2015. But of course, dismal when we look at this as a percentage of the total unicorns. Many say that unicorns have become like rabbits. So, in 2015 there were roughly 140 unicorns whereas in 2019 over 450 unicorns. So, in 2015 women founded unicorns were 6.5% of the total and in 2019 this has dropped to 4.5%.

Source: GreensShores Capital

The facts are there, and the narrative isn’t. Change can come from a couple of different directions.

It can come from more women investors both in the Angel investor community and in the VC world. Currently, roughly 10% US venture capital partners are women. The angel investor percentage is better, 22%, and also encouraging as in crisis angel investments grow.

The ripple effect of a doubling (for example) of women as VC partners (to 20%) is largely because women tend to invest three times more in women-led teams.

Change can also come from a female-led disruption of VC funding mechanisms. There the hope (too early of course) is tokenization and decentralization of venture funding. 

New readers can see 3 free articles before getting the Daily Fintech paywall. After that you will need to become a member for just US$143 a year (= $0.39 per day) and get all our fresh content and our archives and participate in our forum.

https://dailyfintech.com/2020/11/24/funding-diversity-is-still-underestimated/

Equity Crowdfunding Part 1: Consolidation always follows the Cambrian Explosion phase

https://dailyfintech.com/2020/11/23/equity-crowdfunding-part-1-consolidation-always-follows-the-cambrian-explosion-phase/

The world is in crisis on many levels – economic, political, health, climate. Recovery from this crisis will require innovation and innovation requires risk capital. That is why we are publishing our next 4-parter (each post is a 3 minute read, one week apart) on the subject of equity crowdfunding, which shook up the capital markets by allowing the general public to buy shares in early-stage companies to help them raise money.

This is a super simple idea and the MVP (Minimum Viable Product) for an equity crowdfunding site can be created quickly for very small amounts capital and can have a huge impact. So it is no surprise that we saw a cambrian explosion of equity crowdfunding sites.  See this List Of The Best Equity Crowdfunding Sites (Classified By Country). Almost every country has multiple sites. Mostly they were founded in the wake of the 2008 Global Financial Crisis (GFC).

Which begs the question – what early stage innovation is currently being created to deal with the 2020 Pandemic Induced Depression (PID)? GFC mostly affected Banks. PID mostly affects small business.  GFC led to Fintech, using the SMAC (Social Mobile Analytics Cloud) tech created in previous decade. Will PID lead to SmallBusinessTech, using Fintech created in previous decade?

The proliferation of Equity Crowdfunding site is a huge problem for investors. Which site do you pay attention to?  It gets worse when you look at it from the entrepreneur’s point of view and see Equity as only one form of Crowdfunding. An upstart founder can also use:

  • Debt crowdfunding aka Alt Lending. This just makes it a bit easier to fund your venture based on your personal assets – a tactic only for the brave entrepreneur!
  • Rewards crowdfunding.  This already has a global leader =  Kickstarter, possibly because  (unlike equity). rewards crowdfunding, does not need to deal with a patchwork of country by country regulations.

Within equity crowdfunding, I would divide the market into:

  • Funding for “butchers, bakers and candlestick makers”. This is main street equity. Investing in the neighbourhood restaurant started by a trusted friend may appeal for some not totally financial reasons.
  • Funding for the next global unicorn. Maybe you will buy shares at the earliest stage possible in the next Revolut and make a fortune. Revolut raised in £3,927,802 from 4,260 investors in August 2017 on Seedrs after a  £1m crowdfunding campaign in 2015 was oversubscribed by over 10,000 would-be-investors who pledged to invest £17m, all of whom were Revolut users. Or more likely you will buy equity in one of the 9/10 ventures that fail and you lose all your capital. This is the highest risk/reward game in the capital markets.

Equity crowdfunding consolidation is already happening. In the UK, two market leaders,  Seedrs and  Crowdcube merged. This is a big deal for the UK. Revolut could be the big UK Fintech success story (see our analysis of Revolut here). If the top Fintech success story was launched on the top equity crowdfunding site, the UK tech scene will be well and truly on the map.

Consolidation is needed because these are two sided networks and the decision process should be simple for both parties. Both entrepreneurs and investors should have an easy decision on which platform to use.

It is easy to get excited at the cambrian explosion phase, when Tigger excited proclaims that we have hundreds of equity crowdfunding sites that will surely  change the world. Consolidation looks boring in contrast – lots of M&A, accounting and layoffs. One assumes that innovation and consolidation don’t go together.

Next week’s Equity Crowdfunding Part 2 will look at innovation and consolidation happening at the same time.

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.

https://dailyfintech.com/2020/11/23/equity-crowdfunding-part-1-consolidation-always-follows-the-cambrian-explosion-phase/

Should You Buy Bitcoin Right Now? Buy and Don’t Sell

https://dailyfintech.com/2020/11/23/should-you-buy-bitcoin-right-now-buy-and-never-sell/

Another week, another high. Bitcoin’s price is surging, nearing its all time high, as the year comes to a close. Looking at all of 2020, it’s been surging all year long. The largest digital currency is up 160% since January 2020, and up 190% since March 15, after a noise dive in the second week of March, when the price dropped 25%. As I write this post, bitcoin’s price is hovering around $18.5k and it’s market cap is at $343 billion. Thirteen hundred bucks… not that far from its all-time-high of around $19,800 at the end of December 2017.

Ilias Louis Hatzis is the founder and CEO at Kryptonio, a “keyless” non-custodial bitcoin and cryptocurrency wallet, that lets users manage bitcoin and crypto, without private keys or passwords.

Three years ago, the press had a feeding frenzy and bitcoin’s price was the topic of conversation around Thanksgiving dinner tables. People that had just heard of bitcoin, were getting into the market to make a quick buck, buying bitcoin, ethereum and anything they could get their hands on, only to lose their shirts when prices started to drop after mid January 2018.

This time around things are very different. On the surface they look the same, I mean the price is rising. But the reasons the price is rising are definitely not the same. Google search terms suggest that the retail investors aren’t paying much attention now. In 2017, there was a buying hysteria driven by retail investors. Bitcoin searches on Google exploded and the price followed the same trend. Today, Google searches are 86% lower than at the peak, yet the price is at a similar level to the price at the end of 2017.

This is an indication that bitcoin has matured as an asset. Yet, as people are seeing the price skyrocket they are wondering what to do. Some are thinking they’ve missed the boat, that it’s too late to buy. Others remember what happen the last time, after prices reached this level. Once bitten, twice shy.

Who is to say that today’s price is high?
Some of the people that called it a bubble last time, have gone from from Saul to Saint Paul.

Well, I guess if you compare today’s price to yesterday’s or to the price bitcoin had, when I wrote my November 2nd post, it certainly is high. You could have made around $3.5-4k a coin if you bough a bitcoin twenty one days ago. That’s 23% return, in less than a month.

When you scan the news to read what other smarter guys are saying about bitcoin, you’ll find stories like these:

The predictions go from $100k to $1 million bucks.
If they are right, worst case scenario is that you’ll make at least 5x in the next twelve months.

Cryptocurrencies have been in a state of rapid expansion over the past few years. This is definitely the next new frontier. But from the Wild West, bitcoin by bitcoin, the new frontier is moving into mainstream.

When you compare bitcoin to the Wild West, you find plenty of similarities.

The gold fever revolution started in 1848 when James W. Marshall discovered gold at Sutter’s Mill in Coloma, California. This eventually brought approximately 300,000 people into California from other parts of the US and from around the world. A similar gold fever revolution happened a few years later between 1896 and 1899 during the Klondike Gold Rush in the Yukon region of North West Canada. Over 100,000 prospectors arrived in the Yukon during this time. Why did the miners flock to these areas? They wanted to strike it rich. A few miners did become extremely wealthy. However, many of these prospectors suffered from the harsh conditions in the gold fields. Some died due to the extremely harsh weather conditions. Others died due to having their claims stolen by other prospectors. Even though a few of the prospectors did become extremely rich, those who prospered the most were the banks, saloons, hotels, tailors and equipment stores that provided the financing, food, alcohol, accommodations, companionship, clothing and equipment to the miners.

The history of cryptocurrencies begins somewhere between 1998 and 2009 when the first ideas of creating online currency emerged. The first actual cryptocurrency developed, originated as a result of a paper published by an anonymous individual under the alias of Satoshi Nakamoto: the framework for bitcoin came from the article “Bitcoin – A Peer to Peer Electronic Cash System” which was published in 2008.

In Bitcoin’s early days, the prospectors were the miners and speculators who engaged with Bitcoin before there were any marketplaces. They were the ones that presided over the development of the earliest exchanges, culminating in the first major exchange, MtGox. Some of these early prospectors would go on to establish their own trading posts, like the fur trapping companies of the Wild West, and companies like Kraken, Grayscale, or Blockstream emerged.

Most bitcoin price charts don’t show prices previous to MtGox, but bitcoin had a price since the first block was mined, when Satoshi exchanged a certain amount of electricity for the first 50 bitcoin reward. As the price of bitcoin has increased, several miners have become extremely wealthy. Today there are even bitcoin billionaires.

And even though 2017 was an important milestone in the evolution of Bitcoin and cryptocurrencies, it was still too early, because the infrastructure was missing. In 2020, everything is completely different. We are going through a phase where demand has been increasing and large corporate interests, like banks and others are building the needed infrastructure to profit from this demand.

As highlighted by JP Morgan in a recent report, investors are ditching Gold ETFs for bitcoin. Research by Citibank, “Bitcoin: 21st Century Gold”, talks about a price target of $318,000 in one year. Billionaire U.S. investor Stanley Druckenmiller, who just weeks ago was said to be shorting the dollar, is long on bitcoin.

Microstrategy was the first public company to announce their move into bitcoin.

But other publicly traded companies are putting bitcoin on their balance sheets. This means that bitcoin is much harder for any government to ban. Also, it means that millions of people are now indirectly invested in Bitcoin, because they hold stock of these companies.

The real problem with the advice that you normally hear, “buy low and sell high” is that its incomplete advice.
What is low and what is high? The key is not selling.

“Not selling” does not mean “never selling”.  That’s pointless, unless your sole objective is to build a big stock pile for that those that will inherit you, after you’re long gone. When I say “not selling”, what I really mean is HODL long-term, really long. Buying high, only makes sense if you buy the right asset, and if you’re patient enough to HOLD it long enough.

Here’s a stock with a steep price climb. I am not going to tell you what stock it is, but let’s look at the chart. Most people wouldn’t buy this stock, because they would expect the price to drop.

And it did drop, big time. If you had bought when it was high and had a faint heart, you would have lost your shirt.

Now, here is the chart for the same stock, after more time elapsed. 1,700% profit from the high!!!

The stock was Amazon. The only reason why you should have HODL Amazon was because company was linked to a new frontier of its time, the Internet and specifically to the Internet retail market.

With absolute certainty, bitcoin at $20k is going to look like a bargain in future, and not that far into the future. With the US election behind us, the markets have gone back to Covid-19, vaccines, and stimulus. The US dollar had a low in early September, and we’ll see more of that. Looking at the past four years, bitcoin has performed best when the dollar has dropped.

So don’t sweat over price volatility.

In August, I talked about the OCC allowing banks to provide cryptocurrency custody services to their customers. Paypal just got into bitcoin. PayPal has hundreds of millions of users that will have the opportunity to buy bitcoin and a number of other cryptocurrencies at the touch of a button.

Forget about charts, the dollar and everything else, trying to analyze what could affect bitcoin’s price. Just think about one thing. If the Internet was about the digitization of information, communication and commerce, bitcoin is the digitization of money and value. Think about how the Internet has changed you life in the last 20 years and image how bitcoin will do the same in the next 20 years. Only by understanding how early we are in its adoption and development, can we realize how much more development is ahead of us and what that means for its price.

Start with a small amount of money. Buy only what you can forget. Add some more, each week or each month. Go long and HODL. You can’t lose. And that is something you can take to the bank!

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https://dailyfintech.com/2020/11/23/should-you-buy-bitcoin-right-now-buy-and-never-sell/

This Week in Fintech ending 20 November 2020.

https://dailyfintech.com/2020/11/20/this-week-in-fintech-ending-20-november-2020/

This week our experts brought you the following insights based on their experience as investors, entrepreneurs & executives.

To continue receiving This Week in Fintech, you can either become a paying Member for $143 per year (and receive all our content in addition to this weekly summary) by clicking here.  If you just want to receive This Week in Fintech for free, you will need to fill in this form

Your Editor is Bernard Lunn. He is also the CEO of Daily Fintech and author of The Blockchain Economy and occasional opinion columnist.

Monday Ilias Hatzis our Greece-based crypto entrepreneur (founder and CEO at Kryptonio, a “keyless” non-custodial bitcoin and cryptocurrency wallet, that lets users manage bitcoin and crypto, without private keys or passwords)@iliashatzis wrote Bitcoin and Defi are bringing in more VC dollars

The coronavirus had a negative impact on investment in early stage crypto startups, early in the year. The economic uncertainty caused by the pandemic made venture capital companies hesitant to invest in the first half of 2020. Yet, there is reason for optimism, as things are starting to turn around. In the third quarter of this year. Crypto startups have raised $900 million in venture capital, more than 3x of what was raised in Q2 2020.

Editor note: VC investment in crypto tends to track Bitcoin price and as that is on a tear….

Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy wrote: Cross border payments part 4: opening the door to adjacent markets

The cross border payments market is big. As per McKinsey, global payments revenues were $1.9 trillion in 2018, a big part of most bank’s transaction banking revenues.

What happens when cross border payments moves to free?

It is possible that cross border payments price comes down by 90% and volumes increase by 10x ie the total revenue remains the same. However, the friction difference between very cheap and free indicates that cross border payments will become free. A price of even $1 creates friction; this will only change when micropayments goes mainstream.

So the more likely scenario is that somebody gets to scale by offering cross border payments for free and monetizes by becoming a platform for the adjacent markets.

Which is good news for upstarts and bad news for incumbents (such as banks) who are playing defense.

Editor note:  This concluding Part 4 looks the markets adjacent to cross border payments that will open up to any company that offers a free service.

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Tuesday Efi Pylarinou @efipm our Swiss-based Fintech Adviser,  founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019 wrote Reflections on core banking infrastructure as a moat

I admit that Twitter is an energy vampire. Don’t get me wrong, philosophically, there is no good or bad, black or white, ethical or unethical. All I want to say, is that I have become very much aware that more than 30min on Twitter at a time, drains my energy, clouds my mind, and takes me down a black whole (sometimes also gets our food burnt).

On the positive side, I get to e-meet and hear from people contributing insights and experiences and this excites me a lot. Maybe in 5yrs, I will have an AI that will support me in curating Twitter, Linkedin, News, and all my Fintech-Tech subscription threads.

Editor note: Efi looks at all the pieces needed to win in the market of banking as a service.

Wednesday Alan Scott Managing Director EMEA at 24 Exchange @Alan_SmartMoney wrote Stablecoin News for the week ending Wednesday 18 November 2020.

This weekly snapshot is the news that matters in the Stablecoin market.

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Thursday

Rintu Patnaik, an Insurtech expert based in India, wrote: A Confluence Of Evolving Themes In Insurtech

After eleven weeks of chronicling discernible trends and dominant movers in insurance and tech, I have barely scratched the surface of shifts this enormous engine of commerce is embarking upon. Meantime, I have covered upstart unicorns, innovating incumbents and those in between. The period saw more press go to extol virtues of the booming insurtech space, what with an IPO and few that announced plans. It also saw the culmination of a major presidential race, with decidedly some impact on the course the sector might take.

Editor note: A well informed tour of the innovation trends in Insurtech.

Christian Dreyer @x3er, our Swiss based CFA who focusses on how XBRL changes our world wrote XBRL News: ESEF, sustainability standards and business models

Editor note: This weekly snapshot is the news that matters in the XBRL market.

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Friday Howard Tolman, a well-known banker, technologist and entrepreneur in London, wrote: Alt Lending for week ended 20 November 2020

Editor note: This weekly snapshot is the news that matters in the Alt Lending market.

Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy wrote: Daily Fintech announces Quintin Gomez as technology adviser based in Silicon Valley

Daily Fintech is tapping the expertise of Silicon Valley based Quintin Gomez to help guide a transition to becoming a software enabled media business.

Daily Fintech is a globally decentralized business with readers and expert contributors all over the world. So it was natural that the company should not be constrained by location as it builds out it’s Global Non-Executive Advisory Committee.

Quintin joins Paul Conley, based in New York City and focussed on content.

Bernard Lunn told us “I have worked with Quintin in multiple companies and have a deep respect for his approach to building great software. Quintin has led software teams in well known firms such as Misys and Intuit.

Editor note: Daily Fintech is becoming a software enabled media business, so the company needs good advice about software.

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https://dailyfintech.com/2020/11/20/this-week-in-fintech-ending-20-november-2020/

Daily Fintech announces Quintin Gomez as technology adviser based in Silicon Valley

https://dailyfintech.com/2020/11/20/daily-fintech-announces-quintin-gomez-as-technology-adviser-based-in-silicon-valley/

Daily Fintech is tapping the expertise of Silicon Valley based Quintin Gomez to help guide a transition to becoming a software enabled media business.

Daily Fintech is a globally decentralized business with readers and expert contributors all over the world. So it was natural that the company should not be constrained by location as it builds out it’s Global Non-Executive Advisory Committee.

Quintin joins Paul Conley, based in New York City and focussed on content.

Bernard Lunn told us “I have worked with Quintin in multiple companies and have a deep respect for his approach to building great software. Quintin has led software teams in well known firms such as Misys and Intuit.

Currently Quintin is building Nest Payroll, which is the only mobile-first, 100% tax compliant payroll platform that makes it super easy to pay nannies, caregivers and housekeepers.

Quintin Gomez told us “it will be great to work with Bernard again to help him transition Daily Fintech to becoming a software enabled media business.”

https://dailyfintech.com/2020/11/20/daily-fintech-announces-quintin-gomez-as-technology-adviser-based-in-silicon-valley/

Alt Lending week ending 20th November 2020

https://dailyfintech.com/2020/11/20/alt-lending-week-ending-20th-november-2020/

Amigo Loans customer complaints soar.

While Amigo is only a minnow in the Alt lending scene it is in some ways a microcosm of what can go wrong during a Black Swan event such as a pandemic. In many ways it is almost textbook. For a starter this company will only lend to you because you are a poor risk in the first place. So it bases its credit assessment on the financial standing of a guarantor. But, as I have frequently mentioned, a guarantee is not security under the lenders control and is always subject to the possibility of challenge, misrepresentation you name it.  In fact it is a minefield which is why a guarantor might pay only a very slender margin for unsecured credit but Amigo charge an annualised rate of 49.9%. It is also a small loan provider, up to £ 10,000.  This huge difference in credit pricing may well have been adequate before COVID now  everything has changed. Small businesses have been hammered and this is its target market. Amigo’s share price has collapsed and is now around 3% of its IPO price just two years ago. The company are saying that they are now only lending to key workers and focusing on collections and complaints. I wonder if a pandemic was even considered when formulating the business model?

Feud between banking disrupter Boden and her protégé Blomfield goes public

In case you haven’t heard Anne Boden is the driver behind Starling Bank a UK digital outfit.  She is 60 and a veteran of the banking business having worked at RBS, Lloyds and UBS amongst others. Her protégé some 25 years her junior a founder of promising tech start up GoCardless joined Starling in 2015 but left within six months taking a crew of Key Starling executives with him. Six months later he founded Monzo a very similar looking digital rival to Starling. Boden has written a memoir on the episode and extract from which was published in the Sunday Times. Not surprisingly nobody comes out of this particularly well. What it does tell us, I think, is that banking and technology are very different industries and have different personnel requirements. Some degree of friction is always inevitable although the Starling situation looks worse than normal. Banks as a matter of course need to take a balanced and cautious view on how to progress. It is hard to do this with a CEO who is apparently not blessed with the wisdom of self doubt. I don’t know who will come out of this best in the end but it looks like a no win situation to me. Will anyone learn any lessons? I doubt it.

So much for UK Infrastructure

The story so far. As part of the recovery from COVID, infrastructure is going to be massively important. This is not just the UK but all over the western world so once again this is just a microcosm. Apparently this is because Transport for London the outfit that runs the show has essentially gone bankrupt because of COVID plus mismanagement and the Mayor of London who is in charge of this cluster has had to be bailed out by central government. Part of the terms of this settlement include the scrapping of Crossrail 2 an important, some would say essential, element of improving London’s massive mass transport problem. This was meant to follow on from Crossrail 1 the East West part of the plan which is now well over two years late, billions of pounds over budget and no end in sight. Both of these plans are desperately needed but the government don’t seem to be able to handle it. Instead we get HS2 a vanity white elephant reducing journey times from London to the North by 10 minutes or so which will make little difference but will cost us all dear. Is there any chance that we can learn how to finance and actually make infrastructure that works? I doubt it.

Howard Tolman is a well-known banker, technologist and entrepreneur in London,

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.

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.

https://dailyfintech.com/2020/11/20/alt-lending-week-ending-20th-november-2020/

XBRL News: ESEF, sustainability standards and business models

https://dailyfintech.com/2020/11/19/xbrl-news-esef-sustainability-standards-and-business-models/

Here is our pick of the 3 most important XBRL news stories this week. 

1 ESEF audit

The introduction of the new European Single Electronic Format (ESEF) includes a set of requirements around assurance of digital disclosures – but how will “ESEF audit” actually work? The European Commission (EC) has now published a long-expected explanatory note clarifying aspects of the rules, laws, and procedures associated with the preparation, audit, and publication of ESEF compliant annual financial reports.

The explanatory note provides a long-expected clarification of what should be obvious in the first place: the ESEF instance needs to match the legacy formats.

2 IFRS Foundation aims for coherence, not complexity

In my view, the IFRS Foundation’s Consultation Paper on Sustainability Reporting is the most significant development in accounting standard-setting since the creation of the International Accounting Standards Board (IASB) in 2001. This is big—and, therefore, crucial to get right.

The CEO of the SASB Foundation weighs in on the IFRS Foundation’s consultation about whether – apologies for the metaphorical cocktail – the 800 pound gorilla should throw its hat in the ring when it comes to its core business. I for one believe that in an upcoming body of Sustainability Standards, some wheels will have to be reinvented. This is because a standard that is to be audited and – in all likelihood – mandatory needs drafting that is quite different from a standard that is voluntary by nature.

3 Workiva announces Q3 2020 financial results

Workiva Inc. (NYSE:WK), the company that simplifies complex work, today announced financial results for its third quarter ended September 30, 2020. “We are pleased with our financial results, which beat guidance for revenue and operating income,” said Marty Vanderploeg, Chief Executive Officer. “We executed on our initiatives, resulting in record bookings in the third quarter.” “Both transaction volume and average deal size exceeded our expectations in the third quarter,” said Stuart Miller, Chief Financial Officer. “As a result, we are raising guidance for the fourth quarter.”

We missed this last week, but it’s still noteworthy that Workiva was able to beat both internal guidance as well as market expectations (WK trades 25% above the level before publication) in this environment, and keeps raising guidance for Q4. Their cloud-based subscription model hits a sweet spot in this pandemic economy, although their speed of growth may be constrained by their focus on use cases. The converse seems to be true for SAP: the market hasn’t taken kindly to the accelerated conversion from the traditional, short-term more profitable licenses model to a subscription model. It’s still the right thing to do, though. (Note that the author has a commercial interest in both companies). 

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Christian Dreyer CFA is well known in Swiss Fintech circles as an expert in XBRL and financial reporting for investors.

 We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

 For context on XBRL please read this introduction to our XBRL Week in 2016 and read articles tagged XBRL in our archives. 

 New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just USD 143 a year (= USD 0.39 per day or USD 2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

https://dailyfintech.com/2020/11/19/xbrl-news-esef-sustainability-standards-and-business-models/

A Confluence Of Evolving Themes In Insurtech

https://dailyfintech.com/2020/11/19/a-confluence-of-emerging-themes-in-insurtech/

After eleven weeks of chronicling discernible trends and dominant movers in insurtech, I have barely scratched the surface of major shifts the $5 trillion global insurance industry is embarking upon. Meantime, I have covered upstart unicorns, innovating incumbents and those in between. The period saw more press go to extol virtues of the booming insurtech space, what with an IPO and few more that announced plans. It also saw the culmination of a major presidential race, with decidedly some impact on the course the sector might take.

In my introductory article “Elusive Sweet Spots”, I unequivocally subscribed to the notion that winners far from being standalone innovators, work closely with other organizations and ecosystem players. With every week, business line and area covered, it became clearer that partnerships and ecosystems were the preferred route. Thus, it would be little surprise to the reader when I reported that Tokio Marine strategized to go with Tractable or that Lloyds of London collaborated with its entirety of syndicates. Both startups and legacy providers realize they gain from combining the former’s tech with the latter’s customer knowledge, risk understanding and capital strength.

We came across Professor Robert Shiller saying, “Radical innovation requires serious experimentation, serious effort to find the precise form of financial or insurance structure that performs well, serious effort to educate about new risk management tools and an involvement with other institutions and thought leaders to make the variety of changes possible to make the innovation succeed.” When later I wrote about Root Insurance’s IPO, it was no wonder there was tremendous effort involved in perfecting algorithms for its telematics as business grew and it had access to lot more customer behavior data. Building moats is grueling, as the telematics evolution at Root attests.

In “Ecosystem Rush“, Bill Song, COO of Zhong An was quoted, “We cannot compete with giants like Google. They understand the customer much better. They dominate the traffic. They will just let the insurance company bear the risk, if we don’t change. We can try to digitalize ourselves and set up new kinds of relationships through ecosystems.” This trend was amply visible in examples of Navi’s DHFL GI and PayTm’s Raheja QBE acquisitions as tech majors in adjacent markets build up positions in insurance and insurtechs become full stack carriers. Similarly, Tesla’s foray into auto insurance on the back of its autonomous mobility play was brought to bear in “Mobility Giants”.

I presented examples of innovation in core insurance areas of parametric coverage and insurance linked securities. While richer data helped Swiss Re’s Pop Storm offer parametric hurricane cover that is triggered based on precise wind speeds, new forms of risk were lapped up by the alternative ILS market. Innovation in other markets such as in mobility and healthcare is influencing the development of the insurance market. Whether it is AVs or micro-mobility solutions, insurance takes a key stake. In healthcare, cost inflation curtailment and digital health advances are increasingly piggybacking on insurance to inch forward.

The need to be smart with data and leverage intelligent tech was a recurrent theme. Be it startups in Asia or larger global players like MS&AD, there was a flurry of activity to get the data and AI houses in order. Last week, we saw the scale of endeavor a centuries old marketplace like Lloyds needs to become digital.

While these themes keep evolving and accelerating, the expectation is legislation will continue to play a major role, such as from the change of guard in the US. Be it from a refined focus on climate change or the narrative turning to risk based pricing, the insurance industry will keenly watch how this unfolds.

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https://dailyfintech.com/2020/11/19/a-confluence-of-emerging-themes-in-insurtech/

Stablecoin News for the week ending Wednesday 18th November.

https://dailyfintech.com/2020/11/18/stablecoin-news-for-the-week-ending-wednesday-18th-november/

Here is our pick of the 3 most important Stablecoin news stories during the week.

This last week we have heard quite a bit of “go slow” commentary on the pace of delivery of this future form of money.  Let’s try to summarize and make sense of it here.

Firstly, the European Central Bank President Christine Lagarde said she believes the region’s monetary authority will move to launch a digital version of the euro in the next two to four years.

“We might well go in that direction,” Lagarde said Thursday on a virtual panel with Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey. “My hunch is that it will come.”

ECB’s Lagarde Says Digital Euro May Launch in 2-4 Years

Also at the same conference, Bank of England governor Andrew Bailey has taken a side-swipe at Facebook’s (FB) cryptocurrency project Libra and others like it.

“The bar is set very high for private stablecoins, and I don’t think they have met that bar,”

Bank of England’s Bailey pours cold water on Facebook’s Libra

Later in the week, in this article the author argues that Central Banks will never be able to build a product that offers real benefits to clients without sacrificing privacy and control.  So in the end we as consumers will choose the superior Crypto solutions that are out there or in the process of being developed.

Central bank digital currencies are dead in the water

So, while in single party China we are seeing implementation moving ahead swiftly, it remains to be seen in the West if a Central Bank can thread the needle of conflicting efficiency, State and privacy concerns, regardless of the coin being issued by themselves or a private sector entity such as Facebook.

_____________________________________________________________________________________________________

Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.  

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on stablecoins please read this introductory interview with Alan “How stablecoins will change our world” and read articles tagged stablecoin in our archives. 

______________________________________________________________________________________________________

New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just US$143 a year (= $0.39 per day or $2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

https://dailyfintech.com/2020/11/18/stablecoin-news-for-the-week-ending-wednesday-18th-november/

Reflections on core banking infrastructure as a moat

https://dailyfintech.com/2020/11/17/reflections-on-core-banking-infrastructure-as-a-moat/

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019. 

I admit that Twitter is an energy vampire. Don’t get me wrong, philosophically, there is no good or bad, black or white, ethical or unethical. All I want to say, is that I have become very much aware that more than 30min on Twitter at a time, drains my energy, clouds my mind, and takes me down a black whole (sometimes also gets our food burnt).

On the positive side, I get to e-meet and hear from people contributing insights and experiences and this excites me a lot. Maybe in 5yrs, I will have an AI that will support me in curating Twitter, Linkedin, News, and all my Fintech-Tech subscription threads.

This week I went back to check what Simon Taylor was serving in his latest Fintech Brain Food  which led me to a Twitter thread around fintech infrastructure, innovation in core banking systems from the VC angle but not only. I enjoyed meeting Will Quist and Camera Obscura.

Check out the tread here.

My reflections

2020 as an outlier year has provided us with lots of new experiences, valuable data, and solid learnings. One of those concern consumer banking trends that showed retail valuing significantly large financial institutions. They moved cash and opened new accounts in the likes of Bofa, Chase, or Wells Fargo massively which is strong evidence that TRUST is an asset owned by incumbents of a large size. I should actually say, TRUST has been earned by these institutions over time, despite their occasional misdemeanors. In the case of Wells Fargo the scandals are significant and they keep Wells Fargo still on the penalty list of the Fed (see here).

It shows that size is connected with `Too Big to Fail` in the mind of consumers and it works especially for licensed financial institutions.  Which is evidence that A BANKING LICENSE is the other Asset.

Cornerstone Advisors 2019 US consumer survey shows that 44% of millennials (21-37yrs old) bank at the three large incumbents – Bofa, Chase, or Wells Fargo – and these are their primary bank providers.

They also reported statistics for Q1 & Q2 2020 what showed that checking account applications for the 3 US megabanks, rose. From levels c. 55% in 2019, to 63% in Q1 and 69% in Q2.

We also see that the re-bundling unstoppable Fintech megatrend is coupled with several grown-up Fintechs seeking a costly and cumbersome banking license in the US. As Ajit Tripathi declares in the last sentence of his `Bitcoin is Good for Paypal, but is Paypal good for Bitcoin?`

You live only once! Become a bank.

by @Chainyoda

Just to name a few, Varo got a banking license in September, Sofi got approval in October, Revolut has applied for a US banking license.

Now if we had to name the third asset, that could create a sustainable moat along with TRUST & BANKING LICENSE, what would it be?

I bet that most would say, is DATA. Meaning having large sets of customer data and using technology to meet the customer at the point of sale (embedded finance), to contextually, advise, and cross-sell.

I won’t disagree, but after reflecting upon the Twitter thread above, I say it is REAL-TIME DATA.

Existing Core banking systems used by most mega incumbents are not even capable of sharing real-time transaction data with their clients, be it business clients or retail. The core banking systems do produce the data but it needs cleaning and pooling to be shared. This means time delays, devoting resources, no real-time computing capability or seamless API connectivity. This is a core bottleneck towards building an open banking ecosystem with connectivity to Tech & media companies or e-commerce, or unlicensed fintechs.

As long as incumbents running on traditional core banking systems, see the above bottleneck as a DATA problem and not as a CORE BANKING problem, they won’t be able to unlock the full potential of the third asset REAL-TIME DATA.

Camera Oscura`s analogy hits a nail. As long as incumbent banks that have the TRUST, and the BANKING LICENSE, refuse to change the plumbing and keep adding new showerheads with amazing capabilities like regulating water temperature and playing music or recording your thoughts in the shower, they will never be able to unlock the full potential of the data that they process.

This line of thinking makes me believe that Goldman Sachs` recent launch of a cloud-native transaction banking offer is vital to Goldman`s digital transformation game. They are late in a market that is dominated by megabanks like Citi and JPM but they have the plumbing right and it will pay off once the open banking, open collaboration, and open innovation way of doing business takes off. Stay tuned and watch this combo, TRUST, BANKING LICENSE, NEXT GEN core Banking.

New readers can see 3 free articles before getting the Daily Fintech paywall. After that you will need to become a member for just US$143 a year (= $0.39 per day) and get all our fresh content and our archives and participate in our forum.

https://dailyfintech.com/2020/11/17/reflections-on-core-banking-infrastructure-as-a-moat/

Cross border payments part 4: opening the door to adjacent markets

https://dailyfintech.com/2020/11/16/cross-border-payments-part-4-easily-transferring-money-across-borders-will-open-the-door-even-bigger-markets/

The cross border payments market is big. As per McKinsey, global payments revenues were $1.9 trillion in 2018, a big part of most bank’s transaction banking revenues.

What happens when cross border payments moves to free?

It is possible that cross border payments price comes down by 90% and volumes increase by 10x ie the total revenue remains the same. However, the friction difference between very cheap and free indicates that cross border payments will become free. A price of even $1 creates friction; this will only change when micropayments goes mainstream.

So the more likely scenario is that somebody gets to scale by offering cross border payments for free and monetizes by becoming a platform for the adjacent markets.

Which is good news for upstarts and bad news for incumbents (such as banks) who are playing defense.

Parts 1 and 2 of this 4 part series on cross border payments described a beautifully broken market. Beauty is in the eye of the holder. For customers, cross border is an ugly mess of cost & hassle. For entrepreneurs that is a a beautifully broken market. For incumbents it is a nightmare. Part 3 looked at the disruption to this market coming from Stablecoins. This concluding Part 4 looks the markets adjacent to cross border payments that will open up to any company that offers a free service.

Securities 

When cross border payments are free and securities are tokenised what the IMF defined as Concurrent Delivery vs Payment becomes instant. I send you a security (Delivery), you send me cash (Payment). Any time lag between Delivery and Payment creates huge costs and processes to  manage risk. When both are done concurrently everything in the global capital markets will change.

Trade Finance

Analog Trade Finance sounds like it comes out of the Victorian era with wonderfully arcane terms such as Bill Of Lading and Forfait.

This is ripe for disruption by Digital Trade Finance, which will be enabled by free cross border payments.

Digital Trade Finance has big submarkets such as Supply Chain Finance, Payables Finance, Receivables Finance.

Offshore vendors

This could be a manufacturer or process outsourcer or individual offering personal services. They all need to get paid and their currency is different from the customer.

Philanthropy 

If you want to help somebody in a poor country, you have to get the money to them. Cross border payments is key to the Philanthropy market.

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.

https://dailyfintech.com/2020/11/16/cross-border-payments-part-4-easily-transferring-money-across-borders-will-open-the-door-even-bigger-markets/

Bitcoin and Defi are bringing in more VC dollars

https://dailyfintech.com/2020/11/16/bitcoin-and-defi-are-bringing-in-the-vc-dollars/

The coronavirus had a negative impact on investment in early stage crypto startups, early in the year. The economic uncertainty caused by the pandemic made venture capital companies hesitant to invest in the first half of 2020. Yet, there is reason for optimism, as things are starting to turn around. In the third quarter of this year. Crypto startups haveraised $900 million in venture capital, more than 3x of what was raised in Q2 2020.

Ilias Louis Hatzis is the founder and CEO at Kryptonio, a “keyless” non-custodial bitcoin and cryptocurrency wallet, that lets users manage bitcoin and crypto, without private keys or passwords.

Research from Block showed that in Q3 2020, there were 212 VC deals, with half of those being early stage (59) and seed stage (60). Outlier Ventures reported that crypto projects raised $227 million in September through 97 deals, $278 million in August in 24 deals, and $254 million in July with 29 deals.

The average deal size for early-stage startups was $7 million. These early-stage deals were about $272 million, or about 30% of the investment total for the quarter. Seed deals averaged $2.1 million and accounted for about 12% of investments for the quarter.

Since late June this year, Defi has been on the tear and it’s not surprising to see DeFi investments crushing it. In September, DeFi deals made up for two-thirds of the total funding, or $157 million. In August, they made up 62% of deals and in July 72.4%. Overall in Q3, VCs invested in DeFi aggregators and derivatives platforms, including a new sub-category called “Staking Derivatives”, with projects like Stafi, Bifrost, Reflexer Labs, and Kira Core.

Among the 23 DeFi projects, most are based on Ethereum and five of which are Polkadot-based with EVM compatibility, that raised $18.7M over the last three months.

When we look back at 2019, blockchain and crypto companies raised a total of $4.5, in all types of financing, including Bitfinex’s $1 billion token issuance. Equity funding accounted for 678 funding rounds, raising a total of $2.7Bn, with participation from 997 accredited investors, according to CrunchBase.

What we’re seeing in 2020, is that investments in centralized services are dropping. The competitive landscape for centralized exchanges, custodians, OTC and market makers has reached a level of maturity, investments in these categories are declining.

Between 2015 and 2019, annual VC-backed deals and financing into enterprise blockchain–defined as software for enterprise processes excluding holding or trading cryptocurrencies, was dwarfed by funding to cryptocurrency companies. In 2019, cryptocurrency companies received $2.3 billion in VC-backed funding while enterprise blockchain received $434 million. Furthermore, almost half of the funding for enterprise blockchain, around $200 million came from Ripple.

While I doubt the future of digital money could come out of a central bank and not a startup, government involvement in cryptocurrencies is set to grow. Central banks in the China, US, Europe and Asia are exploring central bank digital currencies (CBDC).

As IEOs have taken a back seat, the recent announcement by the SEC is an interesting development. The SEC raised the limit of the funds a crypto startup can raise through regulated crowdfunding campaigns from $1 to $5 million. Regulated crowdfunding allows startups to make securities offerings without having to register with the SEC. According to the SEC regulations, anyone can participate in this type of campaign. The restrictions will no longer apply to accredited investors, and the amount available to non-accredited investors will be calculated based on their annual income. This lets startups access capital, while ensuring investors still have access to various protections through regulations.

The blockchain industry is still at an early stage. Sentiment has always been a strong driver for investments and market. valuations. As bitcoin’s price goes up even more, we will see new interest, new ideas and use cases from new fresh startups, which will only lead to more funding. In the traditional venture capital, investments made in equity are illiquid for 3-10 years, but only those who will risk going too far can possibly find out how far it is possible to go.

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https://dailyfintech.com/2020/11/16/bitcoin-and-defi-are-bringing-in-the-vc-dollars/

This Week in Fintech ending 13 November 2020

https://dailyfintech.com/2020/11/13/this-week-in-fintech-ending-13-november-2020/

This week our experts brought you the following insights based on their experience as investors, entrepreneurs & executives.

To continue receiving This Week in Fintech, you can either become a paying Member for $143 per year (and receive all our content in addition to this weekly summary) by clicking here.  If you just want to receive This Week in Fintech for free, you will need to fill in this form

Your Editor is Bernard Lunn. He is also the CEO of Daily Fintech and author of The Blockchain Economy and occasional opinion columnist.

Monday Ilias Hatzis our Greece-based crypto entrepreneur (Founder & CEO at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech) @iliashatzis wrote I remember the last time Bitcoin hit $15k

When I wrote my previous post last Sunday, bitcoin was around $13.8k a coin. This week it has skyrocketed  past $15,000, for the first time since January 2018. The price increase was more or less synchronized with the vote count in the United States and the ever-increasing tension in the country. Bitcoin has gained 17% in the past week, 28% in October, almost 60% since the end of August and is up nearly 300% so far this year. The capitalization for the entire cryptocurrency market  has been bullish over the last 30 days, shooting up to almost $450 billion, its highest level since the spring of 2018. Bitcoin has more than tripled since the pandemic kicked off in March, when the financial markets were infected by the coronavirus. If we look back at the end of 2017, when bitcoin and rest of the market was setting new records every day, there was a complete mania, with coverage around the clock and everyone talking about bitcoin and digital assets. This time, no one is really surprised, things are a lot calmer and the hype is barely getting started. It’s as if everything that’s happening is normal and its suppose to be like this. As I write this post, bitcoin is hovering around $15,500 and everything points to a bull run that is going to be a lot longer and a lot bigger. More importantly, we’ve reached a critical point, where bitcoin is no longer considered an outsider, but has become a mainstream option for investors. 

Editor note: Ilias offers a good guide to the growing number of conservative financial investors looking seriously at Bitcoin.

Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy wrote:Cross border payments part 3: stablecoins is the nearly but not quite yet disruptor.

Quiz; what do USD Tokens, Libra, Single Currency CBDC, Synthetic  Basket CBDC all have in common?

(CBDC = Central Bank Digital Currency).

Answer: they are all Stablecoins

Stablecoins could disrupt the cross border payments business. Not today, when you still have to use the rails described in Part 1 & 2. Maybe tomorrow it will be possible. Stablecoins for cross border payments is a nearly but not quite yet story.

Editor note: Any investor or entrepreneur eyeing the cross border payments market should read this 4-part series.

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Tuesday Efi Pylarinou @efipm our Swiss-based Fintech Adviser,  founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019 wrote Curating the Q3 2020 Robo Report

The quarterly Backend Benchmarking Robo Report for Q3 is out and I am sharing my reflections after reviewing it.

Bear in mind that this is a US-centric sector in which several large incumbents have already stepped in. I don’t need to highlight that this year is unique in more than one ways.

In the robo-advisory sector we saw healthy fundraising starting with Stash as the main example and then Wealthsimple and M1.

We saw increased brand recognition for standalone fintechs in the micro-investing sector, like Acorns.

The hybrid business model (humans with machines – sorry Wealthfront) is being validated – JP Morgan is mentioned in the Robo Report as on a hiring spree for advisors that can serve digitally clients.

The most important takeaway for me, is the continued cross-selling trend in the robo sector which leads to connecting banking services with investing services. We are seeing from both the large incumbents with robo investing offerings but also from the grownup standalone Fintechs, more integrations and connecting capabilities for clients.

Editor note: Read this for a well informed analysis on the Robo Advisor market.

Wednesday Alan Scott Managing Director EMEA at 24 Exchange @Alan_SmartMoney wrote Stablecoin News for the week ending Wednesday 11 November 2020.

This weekly snapshot is the news that matters in the Stablecoin market.

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Thursday

Rintu Patnaik, an Insurtech expert based in India, wrote: Future At Lloyds: Digital Blueprint for a 330 Year Old Exchange

In Sep 2019, Lloyds of London published their vision for the Future at Lloyds (FAL) as Blueprint One. Amid a tumultuous world economy, Lloyds has refined its strategy and game plan to launch Blueprint Two last week, a bold two-year program to establish newer ways of doing business, driven by digital channels with advanced data collection and management. The ensuing solutions will equip market participants to operate at materially lower costs.

As a leading (re)insurance marketplace, Lloyds has throughout its 332 year history, pioneered coverage for different risks, from the first motor and satellite policies to today’s cover for cyber and sharing economy risks. It is most sought after for complex and specialty risks. With 80 syndicates, it reported a GWP of 36 billion pounds last year.

Editor note: During a year which put a spotlight on the need for Insurance, this post offers great insight into the future of Insurance. Lloyds was a business ecosystem before the term became digitally hip. 

Christian Dreyer @x3er, our Swiss based CFA who focusses on how XBRL changes our world wrote XBRL News about regtech, mostly (ESEF, UK, HK)

Editor note: This weekly snapshot is the news that matters in the XBRL market.

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Friday Howard Tolman, a well-known banker, technologist and entrepreneur in London, wrote: Alt Lending for week ended 13 November 2020

Editor note: This weekly snapshot is the news that matters in the Alt Lending market.

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https://dailyfintech.com/2020/11/13/this-week-in-fintech-ending-13-november-2020/

Alt Lending Week Ending 13th November 2020

https://dailyfintech.com/2020/11/13/alt-lending-week-ending-13th-november-2020/

Banking Fintech Stars tailor their strategies to get to profitability

Fintech Start ups Monzo and Revolut are the stars of digital banking as well as being bitter rivals. But they do have one thing in common in that they are both currently loss making and despite being popular with their newly acquired clients are now trying to focus on how to get to profitability. This article makes the somewhat obvious point that the banking business is largely based on lending and yet both of these banks are missing a properly developed set of lending products. This presents challengers with a conundrum at a time when pricing credit risk correctly is nigh on impossible. It also suggests that some of the employees of these start ups see the digital revolution as some kind of force for good and take a socialistic view of the way the world should work further complicating policy development. At the end of the day the same rules apply to the digital start up as to anyone else. They are selling service and they have to price it correctly or they will fail. The venture capitalists do not just want new customers they wasn’t customers that contribute to profits.

Banks feel pressure of flood of new Loan Applications

Not surprisingly the second lockdown has spawned a huge surge in loan applications from people and companies that had not even begun to recover from the first iteration. UK lenders have already doled out £ 60 billion under the governments various coronavirus loan schemes and that looks to climb significantly over the months ahead. Of course interest free loans like the hugely popular bounce bank loans which are guaranteed by the treasury are always going to be popular but unfortunately they are also a magnet to chancers and fraudsters who are savvy enough to game the system. The devil will be in the detail of these loans and the due diligence backing them when the lender comes to calling on the guarantor. The banks are of course worried about their reputations and have made their concerns known to the Treasury. They recognise that at some point they are going to have to pursue a whole load of bad debts from businesses that have been destroyed by the governments own policies and don’t want to be seen as the bad boys. At the same time the Financial Conduct Authority is signalling that it will act if borrowers are treated unfairly. Life however is sometimes unfair and it is going to be difficult to square this circle. In the words of the Kaiser Chiefs “ I predict a riot”

London’s Rental Market is in Freefall

Hardly surprising for anyone familiar with London which is shadow of its former self and feels strange with leisure facilities shut up and offices blacked out. Nevertheless a perfect storm has developed during the pandemic of people working from home, tourism vanished etc etc. So it is now a buyers market for the rental sector with prices down 5.2% on the same period last year and even steeper falls in premium areas such as  the City of London and Kensington and Chelsea. As far as lenders are concerned this is really quite important as a huge amount of lending is backed by property as security. Rents outside London remained robust rising some 1.7% but this is likely to be a reflection on the rise in prices of residential property outside the capital following the stamp duty holiday announced by the chancellor. Ultimately this is counter intuitive and a sharp fall in property prices seems almost certain but nevertheless it is going to be influenced by local factors which are of course totally subjective. More difficulty for the digital programmers?

Howard Tolman is a well-known banker, technologist and entrepreneur in London,

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.

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.

https://dailyfintech.com/2020/11/13/alt-lending-week-ending-13th-november-2020/

XBRL News about regtech, mostly (ESEF, UK, HK)

https://dailyfintech.com/2020/11/12/xbrl-news-about-regtech-mostly-esef-uk-hk/

Here is our pick of the 3 most important XBRL news stories this week. 

1 Global regulatory community lines up behind behind digital reporting

The global regulatory community has put its support behind digital regulatory reporting (DRR) initiatives acknowledging supervisors require the ability to collect better quality data more efficiently. The Bank of International Settlements (BIS), the European Commission, the European Banking Authority (EBA), the European System of Central Banks (ESCB), the Financial Stability Board (FSB), the U.S.’s Federal Deposit Insurance Corporation (FDIC), the Group of 20 (G20) and UK regulators have all either issued reports, hosted TechSprints or announced new work in September and October on the DRR topic.

Here’s to a good overview of recent developments in the regtech / digital reporting space around the world.

2 UK postpones ESEF

With unusual extra pressures stemming from the Covid-19 crisis, the UK’s Financial Conduct Authority has announced a one-year delay to the introduction of mandatory ESEF requirements in the UK. While the introduction of machine-readable financial statements and the mandatory tagging of basic financial information was scheduled for January 2021, they will now come into effect January 2022.

Unsurprising news – we’ll be on the lookout for a summary list of jurisdictions that postpone introduction.

3 Hong Kong announces data strategy and regtech roadmap

As Hong Kong Fintech week gets underway, Eddie Yue, Hong Kong Monetary Authority’s (HKMA’s) Chief Executive, has announced a raft of new initiatives designed to take advantage of tech innovation. A new data strategy was amongst the measures announced. Currently at concept stage, the new Commercial Data Interchange (CDI) will allow for easier flow of data between banks and sources, allowing, for example, alternative data to be used in credit scoring and trade-related data to facilitate trade finance applications. HKMA hopes this will help small and medium enterprises to benefit from access to their own data.

Roadmaps are seriously underrated! The problem is that their preparation requires a lot of forward looking, hard work, which it is not easy to free up resources for in the daily slog. But the payoff is that the issuing regulatory entity can easily assert their authority on a material level, i.e. without having to take recourse to authority.

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Christian Dreyer CFA is well known in Swiss Fintech circles as an expert in XBRL and financial reporting for investors.

 We have a self-imposed constraint of 3 news stories each week because we serve busy senior leaders in Fintech who need just enough information to get on with their job.

 For context on XBRL please read this introduction to our XBRL Week in 2016 and read articles tagged XBRL in our archives. 

 New readers can read 3 free articles.  To  become a member with full access to all that Daily Fintech offers,  the cost is just USD 143 a year (= USD 0.39 per day or USD 2.75 per week). For less than one cup of coffee you get a week full of caffeine for the mind.

https://dailyfintech.com/2020/11/12/xbrl-news-about-regtech-mostly-esef-uk-hk/