This Week in Fintech ending 14 May 2021

https://dailyfintech.com/2021/05/14/this-week-in-fintech-ending-14-may-2021/

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

Monday Ilias Hatzis our Greece-based crypto entrepreneur (Founder & CEO at  Kryptonio a “keyless” non-custodial bitcoin and cryptocurrency wallet, that lets users manage bitcoin and crypto, without private keys or passwords and Weekly Columnist at Daily Fintech) @iliashatzis wrote Is bitcoin Revolut’s path to profitability?

Neobanks and digital wallet providers like Revolut, Paypal, Robinhood and Square are already offering cryptocurrencies on their platforms. Millions of potential bitcoin buyers get access to crypto markets via PayPal, Robinhood, Square’s Cash App and Revolut. Bitcoin meteoric rise has spiked their cryptocurrency trading volumes and the number of new customers on their platforms. To illustrate this, Square’s CashApp traded $1.8 billion worth of cryptocurrencies in the fourth quarter of 2020 alone. Robinhood cryptocurrency service has added 6 million funded accounts in the first two months of 2021 only, when its total customer count was 13 million users a year ago. Revolut has never been profitable, at least not on an annual basis, but it’s always seen positive months when bitcoin’s price skyrocketed. Since November 2020, it’s been profitable every month.

Editor note:Revolut is becoming a full service bank and catering to crypto demand is one thing that full service banks do. Look out for Coinbase to get a lot of competition.

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Tuesday Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy wrote: DeFi Part 2 Investor Beware says Eeyore

At a decentralised conference entitled The Pooh Corner Debate on DeFi, Eeyore kicked off (having won the coin toss) by pointing out 7 points that investors considering DeFi should think about:

Editor note: If you thought Eeyore was being too negative, tune in next week  for DeFi Part 3. If it is broke then fix it says Tigger.

Wednesday Alan Scott Managing Director EMEA at 24 Exchange @Alan_SmartMoney wrote his weekly roundup of Stablecoin news.

Note, this week The Economist featured Govcoins on their cover. Daily Fintech subscribers have been shared of this curve for a while.

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Thursday

Rintu Patnaik, an Insurtech expert based in India, wrote: In a Tumultuous Year for Auto Insurance, Customers Seek Better Value

Latest customer survey findings on auto insurance trends during the last year show largely similar after-effects in most world regions. In the US, a JD Power 2021 Insurance Shopping Study revealed that the pandemic caused a 55% decrease in number of miles driven, inducing auto insurance customers to shop around for more personalized and cheaper policies. In UK, the Confused.com Car Insurance Price Index in association with Willis Towers Watson revealed that comprehensive car insurance premiums fell by 14% since the first quarter of 2020, the biggest annual drop since 2014.

Editor note: this is how innovation is supposed to work, digital claims mean lower costs which means lower prices/policies.

Christian Dreyer @x3er, the Swiss based CFA who focusses on how XBRL changes our world wrote his weekly roundup of XBRL news.

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Friday Howard Tolman, a well-known banker, technologist and entrepreneur in London, wrote: his weekly roundup of Alt Lending news.

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https://dailyfintech.com/2021/05/14/this-week-in-fintech-ending-14-may-2021/

Alt lending Week ended 14th May 2021

https://dailyfintech.com/2021/05/14/alt-lending-week-ended-14th-may-2021/

Companies to borrow £ 7 billion less this year as UK economy rebounds

New figures out from Leading accountants Ernst and Young suggest that companies will be borrowing less this year as the UK economy bounces back strongly. While this is not too surprising,  the Bank of England says that the UK has not seen such a bounce back in modern times. In the small print there is a suggestion that the rise in property prices might well be temporary and due to stimulus through the stamp duty holiday and pent up demand. This sector will undoubtedly slow during 2022 as reality hit home. In addition the suggestion is that interest rates will remain near to rock bottom during the next couple of years. This does not bode well for profitability in the medium term.

Malaysia’s 1MDB sues Deutsche Bank, JP Morgan and Coutts

The Malaysian Government has obviously not given up on trying to pin at least some of the blame for the 2015 1 Malaysian Development Berhad scandal on the global banking system. Last Friday they filed some 22 suits against banks and individuals involved in the scandal including Deutsche, JP Morgan and a subsidiary of Coutts with the aim of recovering some $ 23 billion. Years after Goldmans owned up to helping Greece cook the books during the Eurozone crisis these corruptions keep bubbling up to the surface. Of course given the sums of money involved the citizens of the countries who have been cheated would hope that the world’s premier banking outfits would try and act properly. Of course these are only allegations at this point but it seems to me that the more the worlds authorities try to regulate the bigger the scandals become. Personally I do not think that regulation is the answer. Integrity is lacking within some of these big financial institutions and making individuals take responsibility for their actions might be a good place to start. At the moment it looks like hiding the truth is more important.

Provident withdraws from Doorstep lending after 140 years.

The Bradford based lender has decided to throw in the towel on its doorstep lending business after posting a hefty loss citing regulatory changes and a change in client habits. Fair enough but when an outfit like this decided to pull out there is literally nothing left to take its place. Those punters who are not IT literate or cannot qualify for slightly more sophisticated forms of finance and there are still quite a lot of them still have a requirement but the 21st century has left them behind. They are then left to the loan sharks who are unregulated and take few prisoners. As is usual in situations like this it does not look like the social implications are important at all. Nevertheless it is a shame that our political masters don’t seem to provide any assistance to those who need it most.

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/2021/05/14/alt-lending-week-ended-14th-may-2021/

XBRL News about sustainability reporting and European banking

https://dailyfintech.com/2021/05/13/xbrl-news-about-5/

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

1  IFRS consults on constitution and sets digital agenda for sustainability reporting

A global sustainability standards setter is firmly on the way. The Trustees of the International Financial Reporting Standards (IFRS) Foundation have opened a consultation on proposed amendments to the Foundation’s constitution. These would allow the formation and operation of a new International Sustainability Standards Board (ISSB, previously dubbed SSB) within the governance structure of the organisation. The amendments expand the Foundation’s objectives and set out institutional arrangements for the ISSB. Comments are due by 29 July 2021, and the trustees expect to finalise the board by the November United Nations COP26 conference.

It’s hard to overstate the importance of this and the next piece of news in the domain of sustainability reporting, so we won’t say anything else but: Go read!

2 EU plans for sustainability reporting

An EU High Level Conference held yesterday on the proposed Corporate Sustainability Reporting Directive (CSRD) brought together a number of high level speakers to discuss the new reporting proposals announced two weeks ago. Digital reporting, unified and digital access, and the need for auditing all appear to be high on the agendas of – and find broad agreement among – policy makers and commentators. The need for a ‘building blocks’ approach to relevant standards setting, with Europe set to contribute to, use and yet not be constrained by coming International Sustainability Standards Board (ISSB) standards was a consistent theme. They will form the floor, but not necessarily the roof of the EU reporting requirements

We refer back to our comment above …

3 EBA updates phase 1 of its 3.1 reporting framework

The European Banking Authority (EBA) published today the phase 1 of its reporting framework v3.1. The technical package supports the implementation of the reporting framework by providing standard specifications and includes the validation rules, the Data Point Model (DPM) and the XBRL taxonomies for v3.1. In particular, the technical package covers the new reporting requirements for investment firms (ITS on investment firms reporting). 

We conclude our broadcast on a slightly lighter, but much more technical note this week.

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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/2021/05/13/xbrl-news-about-5/

In a Tumultuous Year for Auto Insurance, Customers Seek Better Value

https://dailyfintech.com/2021/05/13/in-a-tumultuous-year-for-auto-insurance-customers-seek-better-value/

Latest customer survey findings on auto insurance trends during the last year show largely similar after-effects in most world regions. In the US, a JD Power 2021 Insurance Shopping Study revealed that the pandemic caused a 55% decrease in number of miles driven, inducing auto insurance customers to shop around for more personalized and cheaper policies. The Confused.com Car Insurance Price Index in association with Willis Towers Watson revealed that comprehensive car insurance premiums in UK fell by 14% since the first quarter of 2020, the biggest annual drop since 2014.

LexisNexis Risk Solutions, which aggregates annual market data about driving behaviors, auto insurance shopping, underwriting and claims to help insurance carriers better understand shifting landscapes, in its 2021 U.S. Auto Insurance Trends Report, noted that auto insurance shopping data trends stayed turbulent throughout 2020. In certain African economies, insurance premiums were reported to have dropped to six-year lows as vehicles sat idle with drivers staying at home following Covid-19 movement restrictions.

The pandemic resulted in mid-term and renewal auto insurance shopping going for a rollercoaster ride. As various states began to issue shutdown orders, shopping declined initially and later rebounded when stimulus checks reached bank accounts of customers. As cities began to gradually reopen, shopping continued to take an upward trend, but dropped again during periods of civil and social unrest during summer and severe weather events. For those whose finances were adversely affected by the pandemic, a 6% rise in shopping activity was reported.

A notable insight from the J.D. Power survey was that while auto insurance customers shopped around more fervently than ever before, incumbents lead with higher gains. While insurtechs like Metromile and Root grew on the back of their data-driven policy pricing, incumbents wrested an even bigger market share. The past year alone witnessed a 3% year-over-year increase in auto insurance customer migration to the five biggest insurers, as incumbents dealt with customers’ pandemic distress as well as insurtechs did. The marketplace was found to be increasingly differentiated more so by price, underscoring the need for carriers to bring innovative customer solutions.

Liberty Mutual, for instance, offered blanket premium refunds and reductions to customers who drove less during the pandemic, where insurtechs like Metromile publicized their pay-per-mile offerings for discounted pricing. State Farm’s usage-based insurance offering, Drive Safe & Save, let customers earn discounts up to 50%, just as Metromile customers saved 47% on average via telematics capabilities.

On the claims side, empty roadways engendered dangerous driving with a significant increase in speeding first observed in mid-March 2020 that stayed 10% higher than 2019 figures for the rest of 2020. Driving under the influence (DUI) violations rose among younger drivers, with a near 50% increase in recorded violations in March-April. Collision claims reduced, but severity rose to a 3.7% year-over-year increase in 2020.

The pandemic saw insurance companies quickly adapting and implementing virtual car insurance claims, setting the path to contactless claims handling. Auto insurance claims dropped by nearly a quarter since the pandemic. With fewer claims, carriers were able to refine their customer experience. The results are still coming in, but the feedback has been positive. Customers who said they “definitely will” renew with their current insurer were higher: 76% during the pandemic versus 72% before.

While digital claims are becoming more mainstream, results show a large number of customers still seek quality customer service without adopting digital tools or want to supplement digital tools with personal interaction. Customers who did not use digital claims tools also experienced a similar level of customer satisfaction. When it comes to claims handling expectations, there seems to be a healthy appetite for both digital tools with artificial intelligence and good old fashioned guidance from real persons. Auto insurance customers want flexible options on how they communicate with their insurers.

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Stablecoin News for the week ending Wednesday 12th May.

https://dailyfintech.com/2021/05/12/stablecoin-news-for-the-week-ending-wednesday-12th-may/

Private sector or Public? 

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

This week’s stories seem to have a common theme, should we just have Public sector built and managed money or should we allow the Private sector in?

Accenture Plc will fund five private-sector pilots, pooling efforts from retailers, financial firms, NGOs, and more. The goal is to build data capable of informing U.S. policymakers when or if they do eventually develop a digital dollar. The Digital Dollar Project was founded in 2020 as a collaboration between the Digital Dollar Foundation and Accenture to investigate and promote research into a central bank digital currency (CBDC).

The US Just Announced Plans to Test Five Digital Currencies

The US Fed is taking an interest in other Private sector ecosystem of money developers.  A paper published by the Federal Reserve Bank of St. Louis has delved into the expansion of decentralized finance (DeFi) and Ethereum’s role in it.

The research, penned by Fabian Schär and published on Sunday, has taken a deep dive into the world of DeFi, hinting that if security concerns and risks can be addressed, it may lead to huge changes in the financial industry.

“DeFi uses smart contracts to create protocols that replicate existing financial services in a more open, interoperable, and transparent way,” Schär wrote, also hailing its efficiency, accessibility and composability.

‘DeFi may lead to a paradigm shift’ says Federal Reserve Bank paper

Finally, that so-called bastion of free enterprise (sarcastica font on), the Economist has come out with a major spread, titled GovCoin, saying that although there are dangers the Public sector should step up.

“Governments and financial firms need to prepare for a long-term shift in how money works, as momentous as the leap to metallic coins or payment cards. That means beefing up privacy laws, reforming how central banks are run and preparing retail banks for a more peripheral role.”

The rise of e-money The digital currencies that matter

So who will step up?  Will the current regulatory arbitrage between Digital (Crypto and Stablecoins) and the old way remain?  Or will the State become a power of innovation following in China’s path and build us a new financial system that works in our best interests?

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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/2021/05/12/stablecoin-news-for-the-week-ending-wednesday-12th-may/

DeFi Part 2 Investor Beware says Eeyore

https://dailyfintech.com/2021/05/11/defi-part-2-investor-beware-says-eeyore/

At a decentralised conference entitled The Pooh Corner Debate on DeFi, Eeyore kicked off (having won the coin toss) by pointing out 7 points that investors considering DeFi should think about: 

  • Blockchain transactions are irreversible and unregulated. If you lose money you have zero recourse, it is gone – poof! Irreversible and unregulated is a honey pot for crooks.
  • Software bugs can have the same impact as crooks. DeFi is technically complex, so there are plenty of coding errors and hacks. For example, Yam Finance quickly grew its deposits to $750 million in 2020 before crashing days after launch due to a code error. This is made worse by new services copying open-source software to create a competing platform, with problems as funds shift between platforms.
  • Modern crooks are expert at exploiting software bugs. Their gun is a computer and they know how to read code like ye olde bank robber knows how to open a lock. 
  • The DeFi FOMO is similar to the ICO (Initial Coin Offering) driver for the 2017 cryptocurrency bubble. A good story is NOT the same as a good investment. This will end in tears.
  • “Centralized DeFi” sounds like contradiction and it is. Binance Smart Chain (BSC) was pitched as a new paradigm of “Centralized DeFi”. You cannot have both Centralized and Decentralized; they are opposites.
  • Watching Wolf Of Wall Street does not give you the experience to invest in disruption. Yes, there is a lot of crookery and corruption on Wall Street. It is also possible that the next Wolf is scamming you by taking advantage of what you think about Wall Street.
  • It is simply too early. DeFi may change the world, but being too early equals being wrong. Saying “I told you so” in 20 years time does not make your money come back.

Some subjects are too complex for our short attention spans, so we do 4 posts one week apart, each one short enough not to lose your attention but in aggregate doing justice to the complexity of the subject. Here is part 1. Stay tuned by subscribing. If you thought Eeyore was being too negative, tune in next week  for DeFi Part 3. If it is broke then fix it says Tigger.

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/2021/05/11/defi-part-2-investor-beware-says-eeyore/

Is bitcoin Revolut’s path to profitability?

https://dailyfintech.com/2021/05/10/bitcoin-revolut-path-to-profitability/

Neobanks and digital wallet providers like Revolut, Paypal, Robinhood and Square are already offering cryptocurrencies on their platforms. Millions of potential bitcoin buyers get access to crypto markets via PayPal, Robinhood, Square’s Cash App and Revolut. Bitcoin meteoric rise has spiked their cryptocurrency trading volumes and the number of new customers on their platforms. To illustrate this, Square’s CashApp traded $1.8 billion worth of cryptocurrencies in the fourth quarter of 2020 alone. Robinhood cryptocurrency service has added 6 million funded accounts in the first two months of 2021 only, when its total customer count was 13 million users a year ago. Revolut has never been profitable, at least not on an annual basis, but it’s always seen positive months when bitcoin’s price skyrocketed. Since November 2020, it’s been profitable every month. In December and January, Revolut opened 300,000 new crypto wallets per month. When Revolut launched its crypto offering back in 2017, customers could buy and sell crypto on their platform for 1.5% per trade, but they didn’t actually control the bitcoin they purchased. Customers could not send their crypto to anyone outside of Revolut. To withdraw their digital assets, Revolut’s customers had to convert it to fiat. Earlier this month, Revolut announced that customers will be able to send their bitcoin to any other bitcoin wallet, outside of Revolut’s platform, up to 500 pounds per day and 1000 pounds per month. Also in April, Revolut made available another 11 crypto coins (Cardano, Uniswap, Synthetix, Yearn Finance, Uma, Bancor, Filecoin, Numeraire, Loopring, Orchid, and The Graph). It looks like Revolut is changing its Bitcoin strategy, and it’s not alone. Venmo has added the ability to buy, hold, and sell cryptocurrencies within its app, supporting four cryptocurrencies: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin. Venmo is positioning crypto trading to be a social activity, users can share transaction updates with friends via the Venmo feed. They will be able to trade by using funds stored with Venmo or by using their linked bank accounts. However, users cannot withdraw from Venmo’s mobile app. As the crypto market heats up even more, we’ll be seeing a slew of players with competing with each other and traditional banks. 

Ilias Louis Hatzis is the founder and CEO at Kryptonio wallet. Create your wallet in less than a minute, without seed phrases, private keys, passwords or documents. Keep your bitcoin and digital assets always secure and recoverable: https://kryptonio.com

Several crypto metrics are now measured in the trillions, including annual on-chain transaction volumes of stablecoins and annual spot volumes at major crypto exchanges. Latest figures put the value of the cryptocurrency market at almost $2.43 trillion in 2021, more than 10x the 2019 figure of $237 billion. Nearly 900,000 unique addresses now hold at least 1 bitcoin, with roughly 150,000 addresses holding at least 10 bitcoins.

As the industry has grown to new highs in terms of users, volumes, and overall market valuations, many large financial institutions, neobanks, banks, and payment companies have recognized this opportunity and are accelerating their strategic efforts to expand capabilities to provide financial services and product offerings built specifically for the digital asset ecosystem.

As the industry has grown to new highs in terms of users, volumes, and overall market valuations, many large financial institutions, neobanks, banks, and payment companies have recognized this opportunity and are accelerating their strategic efforts to expand capabilities to provide financial services and product offerings built specifically for the digital asset ecosystem.

Revolut aspires to provide a suite of services beyond basic checking and savings accounts to its clients to make it the center for their financial lives. Cryptocurrencies are on the top of Revolut’s list and a key element in its strategy to profitability and growing its ecosystem.

In 2017, Revolut sought to gain a competitive edge using crypto, and letting its customers initially buy bitcoin, and later assets including Ethereum, Litecoin, Bitcoin Cash, XRP and others. The lack of not being able to store holdings anywhere apart from Revolut has been a huge sticking point for users.

In 2021, Revolut decided to double down on crypto, adding bitcoin withdrawals with more features planned. This makes Revolut one of the leading cryptocurrency mobile apps offering Bitcoin withdrawals. Neither PayPal nor Robinhood currently allow withdrawal of digital assets.

Recently, Revolut partnered with Fireblocks, and with crypto analytics startup Elliptic to filter customer withdrawals . It is also looking ahead to adding more tokens and allowing crypto customers to earn income on their funds.

Some might argue that cryptocurrencies are the opposite of banking, but as more and more people are exposed to cryptocurrencies, the demand for easy and user-friendly digital wallets will grow too. Digital wallets are overtaking their traditional counterparts.

According to research by ARK Invest, digital wallets represent a $4.6 trillion opportunity and could replace physical banks. In China, mobile payments have multiplied more than 18x in just five years, from roughly $2 trillion in 2015 to an estimated $36 trillion. Meanwhile, in the US, digital wallet users are surpassing the number of deposit account holders at the largest financial institutions. At the end of 2020, the number of JPMorgan Chase deposit account holders totalled approximately 60 million, while Cash App’s and Venmo’s active users were 59 million and 69 million respectively.

Today, consumers are looking to use wallets that allow them to spend crypto just as easily as they spend fiat. It appears that digital wallets could entirely replace their traditional counterparts. Digital-native institutions like Revolt, PayPal and Square are aiming to become the digital banks of the future and win the trillion dollar pie.

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https://dailyfintech.com/2021/05/10/bitcoin-revolut-path-to-profitability/

This Week in Fintech ending 7th May

https://dailyfintech.com/2021/05/07/this-week-in-fintech-ending-7th-may/

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

Monday Ilias Hatzis our Greece-based crypto entrepreneur (Founder & CEO at  Kryptonio a “keyless” non-custodial bitcoin and cryptocurrency wallet, that lets users manage bitcoin and crypto, without private keys or passwords and Weekly Columnist at Daily Fintech) @iliashatzis wrote Ethereum – Ride the next rocket

The cryptocurrency market ended the week with a total market capitalization of $2.23 trillion. After one of its worst periods in 2021, this week ended with gains across the board (Bitcoin +14%, Ethereum setting a new ATH, XRP +52% and Binance Coin +28%). Ethereum was in the spotlight with a 30% increase in value and setting a new all-time high $2,976.42, setting the stage to break past the $3,000 threshold. At its current price levels, Vitalik at the age of 27 has officially become the youngest crypto billionaire. The price increase comes after the European Investment Bank (EIB) announced on Wednesday that it issued its first ever digital bond on the Ethereum blockchain, leading to increased speculation that Ethereun is gaining traction among mainstream financial institutions. Ethereum maintains the number two position with 15% of the current crypto market and its getting ready for a major upgrade that will allow faster transaction times and reduce the amount of power required to process transactions. While it trails Bitcoin significantly, Ethereum’s fundamentals seem stronger.

Editor note: A good case for allocating 50% of a crypto portfolio to Ethereum or 20% for the more cautious. The big game changer is Proof Of Stake which will appeal to Institutional Investors 

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Tuesday Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy wrote: DeFi Part 1. Introduction to DeFi

Some subjects are too complex for our short attention spans, so we do 4 posts one week apart, each one short enough not to lose your attention but in aggregate doing justice to the complexity of the subject. Stay tuned by subscribing.

The reason to pay attention to DeFi is  a)  capital is flowing into DeFi  and b) DeFi could disrupt legacy finance, which is a massive opportunity. Starting with capital, during 2020 there was a 10x increase in capital deposited in various decentralized finance networks and VCs (such as Andreessen Horowitz, Bain Capital Ventures and Michael Novogratz) were pumping money into their early stage equity. By January 2021, approximately $20.5 billion was invested in these DeFi networks.

Editor note: This is the first of 4 posts on DeFi.

Wednesday Alan Scott Managing Director EMEA at 24 Exchange @Alan_SmartMoney wrote his weekly roundup of Stablecoin news.

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Thursday

Rintu Patnaik, an Insurtech expert based in India, wrote: How far can behavioral economics nudge up digital innovators?

Nobel Prize winning economist Daniel Kahneman, in the 1970s, studied biases in economic decision-making and how people handle risk, challenging the belief that humans behave rationally when making financial choices. The ensuing body of work that it spawned – “Behavioral Economics” – has become entrenched in business parlance, as rigorous research has demonstrated that understanding and anticipating biases can guide interventions to influence consumer behavior.  As regards finances, health or diet, people need just a little nudge to get them moving in the required direction.

Editor note: This translates to growth hacking code that drives people to click which further down funnel leads to revenue.

Christian Dreyer @x3er, the Swiss based CFA who focusses on how XBRL changes our world wrote his weekly roundup of XBRL news.

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Friday Howard Tolman, a well-known banker, technologist and entrepreneur in London, wrote: his weekly roundup of Alt Lending news.

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

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To continue receiving ‘This Week in Fintech’, the weekly recap of our articles, you will need to fill this form to give us consent to send this to you. Please note that Daily Fintech requires your organizational email address (e.g. corporate, educational or government) and your LinkedIn URL. This information is required for subscribers who want ‘This Week in Fintech’ for free. If you prefer to not provide this information, you can still receive all our content by becoming a paying member.

https://dailyfintech.com/2021/05/07/this-week-in-fintech-ending-7th-may/

Alt Lending Week ended 7th. May 2021

https://dailyfintech.com/2021/05/07/daily-fintech-week-ended-7th-may-2021/

Eurozone facing mass bankruptcies

A leaked report from the The European Sytemic Risk Board(ESRB) which is chaired by Christine Lagarde and is the key risk watchdog within the EU is forecasting a huge increase in bankruptcies once COVID support facilities are unwound. While this is not totally unexpected many European banks were  already carrying large numbers of non performing loans before the impact of strict COVID lockdowns. This in turn is likely to impair the ability of many European banks to lend weight to funds needed to finance the essential recovery phase when economies open up once more. It is difficult to see how the ECB will react to this scenario but the usual default will be to kick the can down the road a little further.

Bank of England to simplify rules for UK’s smaller lenders

The Bank of England’s head of prudential policy  has signified that in a post Brexit move it is moving from being a rule taker to being a rule maker. Key to this will be the simplification of the EU’s one size fits all legislative framework which imposes unwarranted levels of compliance on smaller institutions. By doing so it is taking a leaf out of the US’s book which allows smaller lenders (non systemic) to operate with far less red tape. This will be good news to the Uk’s growing digital banking market which will find it much easier and less costly to obey the rules as well as stimulating competition in markets which are lacking in innovative structured finance.  Slashing red tape in the UK banking market is an obvious benefit of leaving the EU’s complicated regulatory approach which in the long run will probably do more harm than good.

Credit Suisse vulnerable to bid from UK major

In it’s weakened state following what seems an endless  run of unforced errors Credit Suisse is indeed vulnerable and Barclays is named as a potential suitor. Certainly it would be a strategic snip at current valuations but on the debit side what is actually going on under the hood. One thing that really bothered me was the conflation of Risk and Compliance which became apparent as the same executive which headed up both disciplines was given the heave ho after Archegos and Greensill along with the head of Investment Banking. Compliance only works if it is good for the overall objectives of the business. Risk and compliance should be debating the pros and cons of innovative ideas not operating as two halves of the same coin. What looks like a really good deal might end up looking less attractive under a more critical microscope.

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/2021/05/07/daily-fintech-week-ended-7th-may-2021/

XBRL News about Workiva’s ESG reporting, predictive value and Russian banks

https://dailyfintech.com/2021/05/06/xbrl-news-about-4/

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

1  Workiva simplifies and accelerates ESG reporting for companies across the globe

Workiva Inc. (NYSE:WK) announced it has extended its cloud platform capabilities to help companies meet the rapidly changing landscape of Environmental, Social and Governance (ESG) reporting with a fit-for-purpose ESG solution. The end-to-end solution allows businesses to keep pace with the demand from regulators, ratings agencies, institutional investors and other stakeholders for trusted, transparent data and proof of ESG forward-looking business goals.

Mandatory, standardised, audited ESG reporting prepared within a strict control framework and delivered as XBRL structured data – that’s what mainstreamed sustainability reporting will have to look like going forward. Now that Workiva offers an ESG reporting package, it’s time to show off its capabilities by starting its own ESG reporting. Note that the author has a commercial interest in the firm. 

2 Are XBRL data better at predicting future stock returns?

All US public companies submit their financial statement data to the Securities and Exchange Commission (SEC) in standardized XBRL format. These structured disclosures are based on the U.S. Generally Accepted Accounting Principles (GAAP) Financial Reporting Taxonomy, include values in the financial statements and footnotes, and can be tabulated to meet a range of data consumers’ needs.

Stock screening and portfolio management usually depend on normalised fundamental data, which breaks down individual companies’ differentiated reported data into simplified concepts. In that process, much information gets lost in translation. This piece provides evidence that there is alpha in working with as reported data.

3 Small files, lots of data: Bank of Russia launches xBRL-CSV reporting

Congratulations to our friends at the Bank of Russia! It has become the first regulator to collect data using the xBRL-CSV format, facilitating the submission, storage and analysis of large volumes of granular data. The use of the xBRL-CSV specification will allow filers to create report packages that capture granular information in accordance with the Bank’s XBRL taxonomy, whilst remaining streamlined.

The coverage of XBRL developments in the Russian banking sector continues. It’s great to see that the Bank of Russia is already adopting a new standard that has been released only quite recently.

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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/2021/05/06/xbrl-news-about-4/

How far can behavioral economics nudge up digital innovators?

https://dailyfintech.com/2021/05/06/how-far-can-behavioral-economics-nudge-up-digital-innovators/

Nobel Prize winning economist Daniel Kahneman, in the 1970s, studied biases in economic decision-making and how people handle risk, challenging the belief that humans behave rationally when making financial choices. The ensuing body of work that it spawned – “Behavioral Economics” – has become entrenched in business parlance, as rigorous research has demonstrated that understanding and anticipating biases can guide interventions to influence consumer behavior.  As regards finances, health or diet, people need just a little nudge to get them moving in the required direction.

Using principles of behavioral science, banks are creating experiences to sway account holders thereby strengthening community finances, loyalty and well-being. Merrill Lynch set out to apply these principles to persuade young people to buy retirement products, which aren’t as much a priority as education debt or saving up for their first home is for this demographic group. The bank had users upload their photo and processed it through an ageing algorithm so they could see themselves 10, 20, 30, 40 years hence. Seemingly odd for an investment bank to include in their digital product, it got users to realize they needed to prepare for the future and precipitated the desired behavior change.

From such nuanced understanding of human behavior, businesses employ techniques like anchoring (showing benefits or downsides upfront) and choice architecture (presenting choices differently to consumers) to exert stronger influence on how consumers choose to act. Nudging, a behavioral science approach uses “subtle interventions” to encourage people to make better decisions while respecting the freedom of choice.

Behavioral Interventions: Adapted from Center For Financial Inclusion Report

Over the past decade, nudging has pervaded government and private institutions, with the likes of Morningstar, Walmart, the UK and US governments, successfully applying nudging techniques. Several insurers have embarked on honing this tactic. In insurance, the benefits of nudging range from increased sales, reduced fraud to improved customer and employee satisfaction. Many insurers use nudging selectively, experimenting to optimize digital solutions. Some have deployed use cases anchored on behavioral science, in their organizational strategies.

The Vitality program at South African insurance company Discovery originated from the premise of such interventions. Leveraging personalized interaction, they incentivize customers to manage their well-being. Healthier behavior is promoted while achieving deeper, long-lasting relationships. Based on this economic science, customers are offered support to achieve their personal goals by: knowing their health, improving their health and enjoying rewards. Insurtech Lemonade asks users to sign a digital pledge of honesty at the beginning of the signup process rather than at the end, and captures it using a camera, thus reducing the likelihood of fraudulent claims. MetroMile uses an in-vehicle device to judge how safely its users drive and rewards them accordingly with higher or lower premiums.

Swiss Re’s Behavioral Research Unit, based on more than 500 client engagements, has identified five main areas for behavioral economics to create value along the insurance value chain:

The results from their trials were encouraging: 20% uplift in sales, 3% increase in underwriting disclosure; up to 10% reduction in claim padding and 3% reduction in cancellations.

It is now opportune for insurers to weave behavioral science into digital innovations to solve deep-entrenched problems of underinsurance, inaccurate disclosures and unhealthy lifestyles. Behavioral interventions have been helping carriers align strategies with true needs of customers. Using insights derived, the right interventions produce changes to real-world behavior that closely match benchmark scenarios. Combined with intelligent technology, insurance risk assessment is transforming to one that actively tries to reduce risk. Motivated consumers gain from lowered premiums and diminished risks, while insurers benefit from behaviors that result in fewer payouts. Though not fully there yet, the industry is inching closer to realize its vision of technology-driven automation and behavioral science driven improved decision making.

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https://dailyfintech.com/2021/05/06/how-far-can-behavioral-economics-nudge-up-digital-innovators/

Stablecoin News for the week ending Wednesday 5th May.

https://dailyfintech.com/2021/05/05/stablecoin-news-for-the-week-ending-wednesday-5th-may/

China, Germany and the U.S. 

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

At the 4th Digital China Summit held in Fuzhou on 25 April, China and the world’s biggest bank, ICBC debuted more than thirty Digital Renminbi applications that it has independently developed during its participation in Digital Renminbi trials over the past year-long period, including:

  • A complete product line of Digital Renminbi hardware wallets in the forms of cards and other devices that ICBC claims make it the “industry leader.” 
  • SIM card hardware wallets and Digital Renminbi 5G data applications developed via strategic cooperation with China Mobile.
  • Use of API, H5 and SDK to achieve multiple forms of payment using Digital Renminbi wallets, including voice recognition payments, facial scan payments and dual offline payments;
  • Exploration of innovative applications of Digital Renminbi smart contracts;
  • Exclusive implementation of prepaid transit cards in collaboration with Tianfu Tong for the Sichuan province capital of Chengdu

ICBC Debuts More than 30 New Digital Renminbi Applications at Digital China Summit in Fuzhou

Germany’s parliament approved a bill last week, which is expected to take effect on July 1 if it is approved by the upper house, the Bundesrat.  Under the legislation, wealth and institutional investment fund managers, known as Spezialfonds (special funds), will be able to invest up to 20% of their portfolio in crypto.

If they all did so to the 20% limit, nearly $425 billion would move from other assets into crypto, based on the total assets under management (AUM) of such funds in Germany.

Proposed Legislation in Germany Could Allow $425B to Flow Into Crypto: Report

At the same time, two cornerstones of the German financial landscape, Deutsche Börse and Commerzbank, announced they are working together to create a blockchain-based marketplace for real estate and art.

Deutsche Börse and Commerzbank will work with fintech firm 360X to build a digital asset marketplace with the first reference transaction (minimum viable product) for each tokenized asset class planned for later this year, the companies said Thursday.

Commerzbank, Deutsche Börse Team Up for Tokenized Real Estate and Art Marketplace

Also this week in the US the FED released a paper that concluded that with the GSC (Global Stable Coin) adoption scenarios they chose to explore, broadly point to modest implications for U.S. monetary policy implementation.

Global Stablecoins: Monetary Policy Implementation Considerations from the US Perspective

This week also saw the release of the CoinDesk Quarterly Review 2021 Q1 an overview of the state of the Crypto market.  Some stablecoin highlights:

Supply:  Now over 60 billion in USD is held within stablecoins, with Tether being the dominate player.

Not so stable:  Surprisingly there is a big variation in the stability of each coin.  Gemini’s (GUSD) has the lowest volume and liquidity and so is the most volatile.

So, in summary, we are seeing real tangible products being made available in China, the German government and industry are gearing up and private stablecoins (principally based in the US and in USD) continue to grow at a rapid rate.

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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/2021/05/05/stablecoin-news-for-the-week-ending-wednesday-5th-may/

DeFi Part 1. Introduction to DeFi

https://dailyfintech.com/2021/05/04/defi-part-1-introduction-to-defi/

Some subjects are too complex for our short attention spans, so we do 4 posts one week apart, each one short enough not to lose your attention but in aggregate doing justice to the complexity of the subject. Stay tuned by subscribing.

The reason to pay attention to DeFi is  a)  capital is flowing into DeFi  and b) DeFi could disrupt legacy finance, which is a massive opportunity. Starting with capital, during 2020 there was a 10x increase in capital deposited in various decentralized finance networks and VCs (such as Andreessen Horowitz, Bain Capital Ventures and Michael Novogratz) were pumping money into their early stage equity. By January 2021, approximately $20.5 billion was invested in these DeFi networks.

To understand the bigger picture of whether DeFi could disrupt legacy finance, read the bear case in Part 2, Investor Beware says Eeyore and the bull case in Part 3, If it is broke then fix it says Tigger and the moderator’s  conclusion in Part 4, Watch and wait for honey says Pooh Bear

This Part 1 serves as an introduction. If you are new to DeFi this will be useful. If you are deep in the DeFi business you can either skip this introduction or tell our community via a comment where I have got it wrong.

DeFi in 9 bullet points:

  • Short for Decentralized Finance.
  • Uses blockchain platforms such as Ethereum (which saw a rise in developers during 2020, partially due to the increased interest in DeFi).  
  • Transactions are done directly between participants, without any central financial intermediaries such as brokerages, exchanges, banks.
  • Uses smart contracts to execute a transaction between two or more parties.
  • Can be used for the full gamut of financial services – lending/borrowing, trading assets, insuring risk.
  • The most used traction-metric is TVL = Total Value Locked = total amount of assets locked in a DeFi smart contract.
  • Various descriptors are used – DAPP (Decentralised Application), Protocol, Network (we use this last one).
  • You access these networks through Web3 enabled browsers that enable users to interact with Ethereum and other blockchains such as MetaMask.
  • Many networks can be connected in order to “compose” new complex financial services

Leading players today include:

  • Specialist Media = DeFi Pulse. (Mass media coverage has appeared in The Washington Post and Bloomberg and many others).
  • Pioneering DeFi network = MakerDAO‘s stablecoin-based lending platform

Next week you can read the bear case in Part 2, Investor Beware says Eeyore

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/2021/05/04/defi-part-1-introduction-to-defi/

Ethereum – Ride the next rocket

https://dailyfintech.com/2021/05/03/ethereum-ride-the-next-rocket/

The cryptocurrency market ended the week with a total market capitalization of $2.23 trillion. After one of its worst periods in 2021, this week ended with gains across the board (Bitcoin +14%, Ethereum setting a new ATH, XRP +52% and Binance Coin +28%). Ethereum was in the spotlight with a 30% increase in value and setting a new all-time high $2,976.42, setting the stage to break past the $3,000 threshold. At its current price levels, Vitalik at the age of 27 has officially become the youngest crypto billionaire. The price increase comes after the European Investment Bank (EIB) announced on Wednesday that it issued its first ever digital bond on the Ethereum blockchain, leading to increased speculation that Ethereun is gaining traction among mainstream financial institutions. Ethereum maintains the number two position with 15% of the current crypto market and its getting ready for a major upgrade that will allow faster transaction times and reduce the amount of power required to process transactions. While it trails Bitcoin significantly, Ethereum’s fundamentals seem stronger.

Ilias Louis Hatzis is the founder and CEO at Kryptonio wallet. Create your wallet in less than a minute, without seed phrases, private keys, passwords or documents. Keep your bitcoin and digital assets always secure and recoverable: https://kryptonio.com

Market makers are turning their heads to Ethereum. This week it was on fire, reaching a new all-time high. Despite the high gas fees, Ethereum is still the most active and most used blockchain platform. Ethereum is still setting records in terms of usage, from number of active developers and number of applications that are built on Ethereum to daily transactions and total value locked.

Ethereum is younger than Bitcoin, but the Lindy effect still applies. At six, Ethereum has a better chance of succeeding on a long-term basis, as its popularity has grown over the years.

Ethereum has laid the groundwork for a decentralized version of the Internet, where users can enjoy self-sovereignty, without trusting the centralized authorities as in the case of Web 2.0. With the increasing use of the Ethereum blockchain, the demand for ETH will increase and the network will constantly break new all-times highs, in terms of network traffic and transactions.

Competition

Ethereum has become the blockchain of choice for many decentralized app developers. Its has by far the largest developer community, even more than Bitcoin, as it is much more tech-oriented and developer-focused.

For years, several “Ethereum Killers”, layer 1 blockchains have guaranteed a faster and sophisticated smart contract platform but have vanished into the wind. Nonetheless, recently there have been more and more serious projects that are trying to dethrone Ethereum, like Cardano and Polkadot.

While Cardano and Polkadot have certain advantages, neither has managed to topple Ethereum yet. Cardano is listed as the 7th largest currency by market cap, followed by Polkadot in the 8th place. A report by Outlier Ventures found that Cardano was the second most evolved protocol behind Ethereum, while Polkadot doubled the number of monthly active core developers between July and November.

Even if Ethereum manages to retain its crown, some competitors may find certain niches to flourish. Still, Ethereum has earned the trust of investors and as we see with Bitcoin, trust is a valuable price driver.

Moving from PoW to PoS

Like Bitcoin, the Ethereum blockchain operates on a Proof-of-Work (PoW) consensus mechanism. However, some big changes are on the horizon. In July, Ethereum will make a big transition to Proof-of-Stake (PoS) something that will affect how many ETH can be mined and how transactions will be validated. PoS will make transactions much more efficient by not rewarding miners with a block reward, but with the actual transaction fee. PoS will significantly reduce the network’s energy consumption and hardware requirements, potentially resulting in lower transaction fees, which are currently skyrocketing, and higher throughput.

PoS mining means that anyone can stake their Ethereum tokens in a specific wallet, which will enable them to win fees by verifying new transactions on the blockchain. The more ETH the someone stakes the higher chance they will have of getting this fee.

Even though the amount of Ethereum that can be created is infinite, the change in the consensus mechanism is expected to create a scarcity model for the cryptocurrency. Ethereum will become a deflationary asset, reducing the supply of coins which will drive the price higher and attract more buyers.

Layer 2 Scaling

Demand to use Ethereum has exploded over the last year. This shows that Ethereum’s base layer is extremely useful and that many developers are building secondary layers on top of Ethereum.

Layer 2 Scaling (L2s) are secondary blockchains that lay on top of another core blockchain, in which dApps can process transactions and state changes with only the occasional data reconciliation to L1.

The Ethereum L2s ecosystem has already bloomed, offering multiple and different avenues to scale Ethereum for the masses.

50/50 rule

Many crypto investors have been tempted to buy into Ethereum because of how it has outperformed Bitcoin. Many believe that this trend will continue, and some have even set a price target of $10,000 for ETH in the near future.

A few weeks ago, Balaji Srinivasan, a well known entrepreneur and crypto advocate, went on the Tim Ferriss Show to talk about the future of Bitcoin. When asked about how he would spend $100 million dollars as a crypto investor, he said the simplest thing to do was “50/50 BTC and ETH”.

For both networks, decentralization is the fundamental guiding principle. Bitcoin is the catalyst that introduced Internet finance to the world, while Ethereum has emerged and spawned a whole ecosystem of its own. While DeFi has seen exponential growth over the last year, there are many exciting developments happening in Web3. One of the most promising evolutions is the emergence of NFTs,  non-fungible tokens that offer provable ownership and scarcity of an asset.

DeFi, NFTs, Layer 2 scaling, EIP-1559 and PoS are elements that are solidifying Ethereum’s place in the Web3 world. As more protocols attach to Ethereum’s blockchain, the cryptocurrency’s price will increase tremendously in the process.

Both Bitcoin and Ethereum have dominated the market and you can expect that they will continue in the future. Keeping the largest part of your portfolio equally invested in these two coins is a great strategy.

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https://dailyfintech.com/2021/05/03/ethereum-ride-the-next-rocket/

This Week in Fintech ending 30 April 2021

https://dailyfintech.com/2021/04/30/this-week-in-fintech-ending-30-april-2021/

This Week in Fintech ending 23 April 2021During this last week of April, our experts brought you the following insights based on their experience as investors, entrepreneurs & executives.

Monday Ilias Hatzis our Greece-based crypto entrepreneur (Founder & CEO at  Kryptonio a “keyless” non-custodial bitcoin and cryptocurrency wallet, that lets users manage bitcoin and crypto, without private keys or passwords and Weekly Columnist at Daily Fintech) @iliashatzis wrote Is Bitcoin energy money?

Two weeks after bitcoin was created, Satoshi Nakamoto wrote: “It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self fulfilling prophecy. Once it gets bootstrapped, there are so many applications if you could effortlessly pay a few cents to a website as easily as dropping coins in a vending machine.” Twelve years later, this is still the best advice you can get. Today, there are only 100 million people using bitcoin. That’s only 1.3% of the world’s population and 2% of the banked population. The numbers are still extremely small when 98% still believe and use in fiat money. People invest their money in crypto, but they can wait to turn it back into dollars, when profit targets are met. As the cost of investing in bitcoin has skyrocketed, so has the potential profit from mining it and the debate about cryptocurrency and energy consumption. Bitcoin critics often assert that bitcoin mining consumes more resources, specifically energy, than the benefits it creates. Bitcoin and decentralization is undoubtedly the future of money, but many battlefields need to be won to grow awareness and drive usage.

Editor note: Required reading for anybody who believes that proof of work mining is bad for the planet.

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Tuesday Bernard Lunn, CEO of Daily Fintech and author of The Blockchain Economy wrote:4-part series on Digital Identity. Part 4 = The investor says this is a big opportunity.

Digital identity is a big market, worth USD 13.7 billion in 2019, forecast to grow at a CAGR of 17.3% to USD 30.5 billion by 2024 (according to Markets and Markets™). To quote Markets and Markets:

The increased focus on enhanced customer experience is anticipated to be a major driver, and the trend is expected to continue for the digital identity solutions industry. Additionally, the need of multi-purpose single digital identity and technological advancements in terms of Artificial Intelligence (AI), Machine Learning (ML), and blockchain have bolstered the potential use cases across verticals.

Digital identity impacts every vertical market but most immediately two big ones – Finance/banking  & Healthcare.

Editor note:This is the final in our 4-part series on Digital Identity, looking at the market from the investor perspective.

Wednesday Alan Scott Managing Director EMEA at 24 Exchange @Alan_SmartMoney wrote his weekly roundup of Stablecoin news.

Guest Author Jack Wright wrote:Following the Greensill Capital scandal, when will investors learn to stop trusting Softbank?

When you begin to scratch the surface, the number of red flags on show in the lead up to Greensill Capital’s declaration of bankruptcy last month is quite bewildering. As if Greensill’s related-party laden client list, it’s list of government procurement deals under parliamentary inquiry, or it’s murky syndication of subprime debt weren’t enough, Softbank were an investor.

By now, the market should not only be questioning the wisdom of following an investor with seemingly unlimited cash benchmarked in Japan, a negative interest rate jurisdiction where economic returns have been throttled by consumer price deflation since the mid 1990’s. It should also ask whether Softbank’s Vision Fund – the vehicle used to inject billions into Greensill and other high-profile failures like WeWork – exists solely to enrich the fund’s investors, or if it serves a different  purpose for Softbank’s founder, Masayoshi Son.

Editor note: This post, on the connection between Greensill and SoftBank, is by guest author Jack Wright who brings his perspective working on the distribution of  JPMorgan Chase’s Asian equity capital markets and equity research product to hedge funds in New York. 

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Thursday

Rintu Patnaik, an Insurtech expert based in India, wrote: Advances in Location Intelligence propel Property and Parametric Insurance

In property insurance, precision in assessing risks is a prerequisite for pricing policies competitively and curtailing excessive claim pay-outs. With better location intelligence, carriers minimize risks, accelerate claim procedures, improve fraud detection and expand their customer base. Location intelligence (LI) has become crucial to enabling organizations in several industries to achieve strategic business goals, with the LI global market expected to grow to $32.8 billion by 2027. Underpinned by geographic information system (GIS), LI enables businesses to map, analyze and share locational data. In parametric insurance, it forms the core technology when environmental perils are trigger points.

Editor note: Read this to understand a huge market enabler, rich with multiple opportunities, driving a big part of Insurance.

Christian Dreyer @x3er, the Swiss based CFA who focusses on how XBRL changes our world wrote his weekly roundup of XBRL news.

Bernard Lunn, CEO of Daily Fintech wrote:Daily Fintech Announces 3 Licensees Serving the Educational Market

Content is being delivered to Newsbank, Cengage, EBSCO using our NewsML export software.

Daily Fintech recently signed contracts with three leading licensees which serve the educational market. These new relationships provide libraries, professors, students and other researchers access to the latest information and insights on the world of financial technology (Fintech).

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Friday Howard Tolman, a well-known banker, technologist and entrepreneur in London, wrote: his weekly roundup of Alt Lending news.

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https://dailyfintech.com/2021/04/30/this-week-in-fintech-ending-30-april-2021/

Alt Lending Week Ended 30th April 2021

https://dailyfintech.com/2021/04/30/alt-lending-week-ended-30th-april-2021/

Horta-Osorio awaits Greensill legal battle in Credit Suisse in tray

Quite a problem for the incoming Credit Suisse chairman.  A group of investors who bought paper through Credit Suisse issued by Greensill capital is now considering a class action against CS for amongst other things mis-selling and misleading disclosure. So far CS has fired the Head of Investment Banking and the Head of Risk and compliance. It is like a chapter from Bonfire of the vanities. A couple of things strike me. There is obviously a question mark against whether the bank knew what Greensill was actually getting up to and the quality of the assets on its books. Words like reckless are being used. Pretty basic stuff actually. An action has already been filed in a US court alleging misleading investors and mismanaging risk. Greensill’s self styled activities were in Supply Chain Finance. This has been around for donkey’s years in the form of invoice factoring but Greensill took it to another level apparently lending against invoices that had not even been issued let alone accepted. There is a sense of déjà vu here. In the late 1980’s I arranged over £ 1 billion of CDO finance so I am familiar with the concept. The management of portfolio risk is not difficult but it does need attention to detail, plenty of due diligence, proper risk assessment and continuous monitoring. Investment banks are a bit like celebrity chefs cooking up meals that look very tasty but if they use toxic ingredients they do not get food poisoning: the investors however feel very sick indeed. Has anyone learned anything since 2008? Doesn’t look like it!

JP Morgan apologises for European Super league (ESL) fiasco

JP Morgan supremo Jamie Dimon clearly did not understand the PR disaster that would befall his bank following its decision to bankroll the failed ESP. It’s a bit late now but to be fair to him he is not the only one to look a bit over qualified this week. David Cameron obviously did not understand what he was doing lobbying for a company that was in deep financial difficulty. Neither did Credit Suisse’s management understand what is was into with the same company. Lending money does not need lots of technology particularly if you are in to larger amounts. But understanding simple things helps. What is the money going to be used for? How do we ensure that it is used for that specific purpose? Will this upset or hurt anybody else? How can we make sure that we get it back without embarrassment? On the last question the government is going to be on the hook for a mountain of bad debt on their COVID support facilities. I hope they have the answers.

Sovereign Debt and portfolio Management Issues

As Banks started to internationalise their businesses in the late 1960 they started to realise that some control should be exercised over their global exposures. I remember this well during my spells at Bankers Trust, Dresdner and BofA. The object of the exercise was, as usual, risk management and amelioration and it was important to the management of portfolios. Hence some kind of framework needed to be developed. This was recognised in spades during the sub prime crisis of 2008 where the United States exported a systemic collapse of its huge mortgage portfolio all over the world. The Telegraph today has a piece where Matthew Lynn points out that sovereign exposure is still important  to investors everywhere. Since 2008 the printed money that so called advanced economies have been throwing around has ended up all over the place and while individuals may no longer feel that they are affected something nasty could be coming to your pension pot at any time as well as to your hedge fund or family office. Banks are of course not as important as they were in this regard, the ECB excepted. However it is vital to know where risk concentrations are and how they might affect you. In this piece Mr. Lynn points out that France is now the third biggest debtor in the world after the US and Japan but with one large difference that debt is held across the globe and is therefore more volatile that France, Spain and Greece despite the overall lower debt to GDP ratios.

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/2021/04/30/alt-lending-week-ended-30th-april-2021/

Daily Fintech Announces 3 Licensees Serving the Educational Market

https://dailyfintech.com/2021/04/29/daily-fintech-announces-3-licensees-serving-the-educational-market/

Content is being delivered to Newsbank, Cengage, EBSCO using our NewsML export software.

Daily Fintech recently signed contracts with three leading licensees which serve the educational market. These new relationships provide libraries, professors, students and other researchers access to the latest information and insights on the world of financial technology (Fintech).

Investors know that the researchers served by these educational licensees are where a lot of innovation comes from. Many are students who later become the leaders in the global Fintech market that Daily Fintech has been serving since 2014. Bernard Lunn, CEO of Daily Fintech, said “we are proud to announce these relationships, secured for us by the people at Triumvirate Content Consultants (TCC) who are helping us monetize our content assets through new distribution channels and new markets.

“TCC were introduced to Daily Fintech by Paul Conley, our Content Advisor, who has been working with Daily Fintech since 2018. Bernard Lunn, CEO of Daily Fintech, commented that “we rely a lot on world class advisers such as Paul Conley and TCC, to help us navigate this fast-changing market”.

Daily Fintech is delivering content using the NewsML format. This is the enterprise friendly XML alternative to RSS.

Daily Fintech invested in building NewsML export software which it is now licensing to other publishers.

Paul Gerbino, President, Triumvirate Content Consultants, commented “Daily Fintech publishes original and insightful research that students need now and when they graduate. It is great that they now get access through their libraries via these 3 well respected licensees: NewsBank, Cengage, and EBSCO.”

https://dailyfintech.com/2021/04/29/daily-fintech-announces-3-licensees-serving-the-educational-market/

XBRL News about sustainability reporting and derivatives

https://dailyfintech.com/2021/04/29/xbrl-news-about-3/

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

1 The ESG interview: making climate data comparable

IOSCO Chair Ashley Alder believes we’re in sight of “a real step change” in sustainability reporting. The IFRS Foundation’s climate-first approach to globally standardised sustainability reporting offers the most efficient path to decision-useful, corporate-level ESG information for institutional investors, according to Ashley Alder, Chair of IOSCO and CEO of Hong Kong’s Securities and Futures Commission (SFC).

We couldn’t agree more. As sustainability reporting goes mainstream, it will have to be globally standardised, mandatory, audited and prepared using a control framework similar to financial reporting’s. Or as this fabulous piece expresses it in the most concise way possible: Measure less, better.

2 Big News! Europe to get mandatory digital ESG disclosure using inline XBRL

The European Commission has adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD), to amend and replace the current Non-Financial Reporting Directive (NFRD). It will require the use of Inline XBRL (or iXBRL) in reporting detailed and consistent structured data, and marks a new chapter in environmental, social and governance (ESG) disclosure, promising much more meaningful, comparable information for investors and other stakeholders. It was announced as part of a sustainable finance package intended to foster sustainable activity.

And yet another acronym to learn in the ESG pantheon: CSRD! While we certainly support the expanded scope of the reporting requirement as well as the data vector to be used, we are concerned that the lack of informational focus and standardisation as per the above comment will render that information less decision useful that necessary. But we’re open to be positively surprised!

3 A new path forward: global data harmonisation in derivatives trade reporting

Some suggest that, had data on over-the-counter (OTC) derivatives transactions been available before the financial crisis in 2008, the build-up of risk could have been foreseen and managed very differently. This is what led to G20 demands that all derivatives products be reported to trade repositories and made available to regulators.But as early as 2010, before the first repositories were live, regulators, the Depository Trust & Clearing Corporation (DTCC) and others in the industry had identified derivatives data fragmentation issues and began raising awareness of the need to implement standards at that time. Derivatives markets are interconnected and international — therefore, derivatives data needs to be consistent and readable across all jurisdictions.

Read this piece to learn many more arcane acronyms from the derivatives trading world! But more seriously: the article supplies a useful overview of the growing understanding around the globe that intergovernmental regulatory cooperation in the world of derivatives trade reporting is pointless unless broken down to the fine technical detail, because that’s where the devil is, as we all know.

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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. 

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https://dailyfintech.com/2021/04/29/xbrl-news-about-3/

Advances in Location Intelligence propel Property and Parametric Insurance

https://dailyfintech.com/2021/04/29/advances-in-location-intelligence-propel-property-and-parametric-insurance/

In property insurance, precision in assessing risks is a prerequisite for pricing policies competitively and curtailing excessive claim pay-outs. With better location intelligence, carriers mitigate risks, accelerate claim procedures, improve fraud detection and expand their customer base. Location intelligence (LI) has become crucial to enabling organizations in several industries to achieve strategic business goals, with the LI global market expected to grow to $32.8 billion by 2027. Underpinned by geographic information systems (GIS), LI enables businesses to map, analyze and share locational data. In the case of parametric insurance, LI forms the core technology when environmental perils are trigger points.

Interestingly, carriers stand to gain across a variety of processes, ranging from managing policyholder addresses to providing property risk coverages to handling claims logistics. By overlaying and modelling historical claims with weather patterns, high exposure areas are predicted. Rich location data such as region-specific theft rates, hyper-local weather conditions provide valuable insights that aid product development, marketing and pricing models. LI also helps identify fraudulent claims.

Breakthroughs in open data, artificial intelligence, visualization and LI APIs have all paved the way for brisk uptake in LI solutions by insurers.

Open Data

A substantial amount of environmental data is open. This makes possible easy access to rich data points such as weather data, earthquake reports and flood alerts, most of which is accessible through seamless APIs. Remarkably, satellite data has become much more affordable through sources such as Copernicus, NASA’s Global Flood Monitoring System and OpenQuake.

Location Intelligence APIs

Location Intelligence APIs integrate into existing workflows augmenting policy systems, underwriting and agency portals. The APIs expose key data and insights that aid risk assessment through several available data products and associated services. Cross functional teams share datasets to produce a consistent view of risk. RMS provides Location Intelligence APIs through cloud based Risk Intelligence, exposing geocoding services, hazard lookups and risk scores.

RMS Risk Intelligence

Visualization

Geospatial data visualization tools such as Map View by LexisNexis, offer visibility into risks encompassing flood, windstorms, fire and crime spanning a carrier’s book to help price better, plan strategies for extreme weather events and manage claims. Carriers have reported 50% reduction in flood exposure and 8% improvement in new business.

AI/ML with location data

While non-AI prediction tools have existed for some time, AI enriches the process with more variables to make accurate predictions. One major insurer has used AI-driven methods to generate smart routes for drivers—turn-by-turn directions for the safest path to a destination. To generate this routing, the program considers many variables – accidents for different locations, the time of day and the weather – engendering fewer accidents and lower premiums.

With thousands of attributes augmenting location data sets, it gives fillip to new discovery of causalities and correlations. For properties located along a coastline that are subject to greater risk from severe weather events, an insurer can more effectively determine risks by assessing the distance between insured properties and the nearest coastline. Similarly, wildfire risk can be understood based on distance to combustible vegetation, wind patterns, the direction of nearby roads, roofing material and elevation. With regard to earthquakes, the damage from risk is better understood by analyzing soil density.

LI and Parametric Insurance

An insurtech specializing in index insurance, Skyline has developed a solution for renewable solar energy. By combining its index modelling strengths with big data geospatial solution ARLAS from partner Gisaïa, Skyline provides quick cash disbursement upon the occurrence of adverse events. Their risk transfer platform lets clients monitor and insure the lack of solar radiation. Other environmental parametric products deploy IoT sensors to record environmental conditions (e.g. flood water levels). Device availability and monitoring via LI technology has provided impetus to this growth.

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https://dailyfintech.com/2021/04/29/advances-in-location-intelligence-propel-property-and-parametric-insurance/

Stablecoin News for the week ending Wednesday 28th April.

https://dailyfintech.com/2021/04/28/stablecoin-news-for-the-week-ending-wednesday-28th-april/

Will we ever see smart money?

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

It seems to me to be a waste of time and effort to build a new form of money that is basically the same as we have today, especially as the technology enables us to do so much more.

This week started with some muffled news on the Facebook front that they would be ready for a limited trial by the end of this year.  A full 18 months slip on original projections.

Facebook, Diem — the digital currency project formerly called Libra — has the potential to reach billions of people, solving issues like financial inclusion, digital identity, faster and more affordable payments, and more.

However, it is now very much a sibling of the national central banks who are powering ahead with pilots and trials of central bank digital currencies (CBDC), with 80% of countries already experimenting with CBDCs. A CBDC is a digital form of fiat money, backed by a suitable amount of monetary reserves like gold or foreign currency reserves. 

5 reasons why CBDCs and Facebook-backed Diem go hand in hand

This article got me thinking, why does a Digital Currency have to be a copy of existing money?  Why not unbundle the three features of money and just be good at one or two of them?  The three features of so called sound money are:

  1. Store of Value
  2. Medium of exchange, and
  3. Unit of Account

Bitcoin is really good at the first and third feature.  With the new capabilities of Digital Currencies such as smart contracts as we are seeing with DeFi which is good at the second and third feature we can now reimagine a whole series of different types of new money.

Ben Falk: The Future of Money Is Unbundled

Then this article explores what some of these new smart contracts could do.  “If our e-wallets can’t make some purchasing decisions, the promise of easier payments will melt like ice cream on a summer day.”  In other words, money should not just be the usual three features but also a fourth, smart!

Digital Currency Will Be Worth Spending When It’s Smart Enough to Buy Ice Cream

So in summary, unless we are making money smarter, why move to digital at all?  The current designs and implementations at Facebook, Central Banks CBDC’s and a number of stablecoins are no smarter than boring old Fiat and electronic money is today.

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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/2021/04/28/stablecoin-news-for-the-week-ending-wednesday-28th-april/