Will the next financial crisis be caused by finance or cyber? | FinTech Summary Issue 78

The Crypto Sector FinTech

Cyber security is one of the biggest ‘new’ global problems that have arisen lately. During financial crisis everyone wanted to buy as much property, sell as many financial products; make as much money. The currency has shifted from dollars, pounds, and yen to ‘innovation’. The financial sector is trying to score as many innovation points as possible. FinTech is trying to get as high on the ‘new and cool’ scale as they can. Are we taking the necessary precautions building these new features and products? Are we cutting corners to ship as soon as possible? These corners tend to be things that are not identifiable right now, such as security holes, until they are the only thing that matters. Global reliance on data and the internet is growing exponentially. Is it likely that next major crisis will be caused by cyber security failures, not finance? (Hint: watch Mr. Robot on Amazon Prime Video for some clues – great show!)

Thanks for reading; YOU are awesome! Just hit reply if you want to get in touch 🙂

Have a wonderful week,


How hackers hijacked a bank’s entire online operation
By Andy Greenberg

The traditional model of hacking a bank isn’t so different from the old-fashioned method of robbing one. Thieves get in, get the goods, and get out. But one enterprising group of hackers targeting a Brazilian bank seems to have taken a more comprehensive and devious approach: One weekend afternoon, they rerouted all of the bank’s online customers to perfectly reconstructed fakes of the bank’s properties, where the marks obediently handed over their account information. Kaspersky researchers believe the hackers may have even simultaneously redirected all transactions at ATMs or point-of-sale systems to their own servers, collecting the credit card details of anyone who used their card that Saturday afternoon.


Why insurers need insurtechs to improve digital experience
By Danni Santana

Large insurance incumbents are not agile enough to build out top-notch user experiences without the help of insurtech startups. There are two answers to insurtech disruption: build capabilities in-house or partner with industry newcomers with an option to buy at a later date. The latter submits all user experience control to insurtech startups. However, it is a risk Munich Re feels it has to take. Most consumer-facing websites do not ask customers for basic information they can easily scrape of Facebook profiles. They are also mobile-first and include some sort of chat function. In return, Munich Re offers startups capital, product design capabilities, and global multiline capacity—the ability to expand businesses across state and country borders. At some point startups will want an exit and we will think about whether we will be their exit.


Sweden going cashless
By Chris Skinner

For as long as I can remember, I’ve been hearing about a War on Cash. The war, as illustrated by India’s recent demonetization, is not on cash itself but on the illegal use of cash and, by association, the fraudulent creation of cash. Both fraudulent notes and coins along with large cash denominated amounts transferring between criminals, spurs the governments of the world to try to get rid of cash. Things have changed in the last seven years though, thanks to mobile and contactless payments. And astonishingly, about 900 of Sweden’s 1,600 bank branches no longer keep cash on hand or take cash deposits – and many, especially in rural areas, no longer have ATMs. Circulation of Swedish krona has fallen from around 106 billion in 2009 to 80 billion last year. This is why the world’s oldest central bank, has now announced that it’s exploring the concept of a digital currency (the eKrona) to accompany its Swedish kroner notes, which could ultimately save tourists a trip to the currency exchange desk.


Finding common ground between legacy systems and insurtechs
By Joe McKendrick

“Worlds colliding” seems like an apt way to describe the meeting of the minds between insurers and Silicon Valley’s free-wheeling digiterati. But it’s been happening lately, big time. The verdict? Insurers have ‘no choice’ but to get on board. True to the spirit of disruption, many of these new technology ventures have made their moves fulfilling needs the large established insurers have been overlooking. Large insurers are sitting up and taking notes. Of course, it should be noted that Silicon Valley is just as much a state of mind as it is a physical location in California. All across the world, companies are seeking to deploy technology to address business opportunities and problems in new ways. By all recent indications, insurance is becoming part of this movement. The spirit of Silicon Valley lives in Chicago, Boston, Berlin and Bangalore as much as it does in San Jose.

How has fintech transformed regulator – proactive vs reactive approach

Proactive regulator fintech

Regulators perceived slow, inefficient and reactive. This would be best visualised by 1000’s of pages long tomes of regulatory frameworks such as Dodd-Frank Act. However, the role of the regulator has changed significantly. The regulator is under a constant spotlight to make sure that financial crisis of 2007 does not repeat itself. Equally, it is pressured to foster innovation, which, in turn, fosters competition. Having many small players reduces system risks and is fairer to the customer.

To do this regulator can’t simply be reactive anymore, i.e. you mis-sold insurance products – pay a fine and refund customers. The regulator is encouraged to become much more proactive to prevent the misconduct from happening in the first place. For this, the regulator needs to have a hand on the pulse of the market, lots of data and access to the innovators of tomorrow. Sandbox by the Financial Conduct Authority (FCA) is a great example of embracing forward-looking innovation. However, a sandbox is as much of proof of concept for the regulator as it is for the startups. It serves as a forum for discussion, a way to capture data and keep a hand on the pulse of cutting-edge innovation. Arguably, because of this the regulator will be much better positioned to take action when its needed next time.

Thanks for reading; YOU are awesome!

Have a wonderful week,


Brexit is not the death knell for UK fintech
By Oliver Bussmann

To be clear, I’m not saying that Brexit has sounded the death knell for UK fintech. Quite the contrary: there will doubtless be opportunities as well as challenges. Outside the larger EU framework, the UK government may have more room to introduce fintech-friendly regulation, or pursue policy to make it easier for these firms to find financing. It would also find it easier to enter into bilateral agreements with other countries. If the UK can, for instance, get closer to the US administration on the fintech topic, bringing each country’s fintechs and investors closer together, UK fintechs would no doubt profit. The shock may also prove to be a catalyst, pushing UK-based entrepreneurs and tech talent to work harder to produce the increased efficiencies and lower costs that fintech promises. Yet, there’s no doubt that Brexit has upended the apple cart. As long as the current uncertainty remains, concern is more than warranted.


Bitcoin vs Gold: which is a better long-term bet?
By Aaron Stanley

Imagine that you have $100,000 at your disposal. You must spend all of it on either bitcoin or gold – no mixing and matching – and the assets will then be stored in a trust that cannot be accessed again for 50 years. Which option would you choose? With the two commodities now in roughly the same price range, it’s worth putting aside some of bitcoin’s short-term volatility and liquidity concerns to compare them as long-term stores of value side by side. Sure, you might argue bitcoin is newer and flashier, and that it has arguably more utility in the digital era than gold. But, gold has the indisputable track record, having been a cherished store of value for thousands of years across human civilizations. However, bitcoin’s traits have led to those backing the cryptocurrency to believe it could potentially unseat gold over the long haul.


What does FinTech investment success look like?
By Rupert Bull

CBInsights quote “Venture Capital Funnel Shows Odds of Becoming a Unicorn Are Less than 1%” seems to imply everything else is failure. I strongly disagree. They reinforced this impression by saying further down in the article “70% of companies end up either dead, or become self-sustaining (maybe great for the company but not so great for investors).” This is wrong. I think FinTech investment success means creating a self-sustaining company. Becoming self-sustaining is good for the founders, the early stage investors and the employees. It is also good for the broader economy if more companies survive and grow – just think of all the spin off professional service revenues that ensue. If this were to happen at scale it would also mean less capital was wasted and therefore less capital would need to be raised and invested.


Rethinking capitalism with the blockchain – part II
By Kary Bheemaiah

As we move into a more digital world with faster technological evolution providing strong headwinds of change, it is important to realize that adapting to this change will not simply be a case of investing in the new tool or updating one’s skillset. Capitalism has always been a renegade, whose greatest impacts have been born out of conflict and change. At every turn, this has required that tough questions be asked, and our notions and conceptions be rewritten. If we are to continue growing with hedonistic sustainability, we need to better understand capitalism. The unison of complexity economics and the blockchain is a step in that direction and will entail the creation of new cultural forms, institutions and a new vocabulary for education. But with a better understanding of capitalism, people in democracies can play a much more positive and vigorous role in shaping their economic institutions. There would be no capitalism without a culture of capitalism and there would be no culture if the existing ideologies were not challenged and overcome. At a time when information is so abundant that we can get the answer to any question, the real responsibility becomes asking the right question. If we fail to ask these questions and leverage the power of decentralization and transparency, we risk starting a conversation with the next generation by beginning with an apology.

Why bankers like sour grapes; bank-fintech partnerships that work; bitcoin fork – FinTech Summary 76

fintech bankers sour grapes

A few weeks back I have mentioned about a small FinTech dinner I’m hosting. We have an impressive group of people who have expressed interest in joining. I have one more slot left, let me know if you want to join. The dinner will be in London, at some point in April (we’ll agree on the best date with the group).

I’m planning to host this every month so even if you can’t make April let me know and I will add you to the list.
Thanks for reading; YOU are awesome!


Making a bank-fintech partnership actually happen

By Anna Bennett

It’s no secret that fintech companies can easily get caught between a rock and a hard place when trying to grow their businesses. They know that getting their proposition into a bank is likely to be the only realistic way to achieve mass market scale and, crucially, deliver their backers the returns they expect on their investments. But they also won’t have to go far to find a fellow fintech with grisly war stories to tell about the bitter and brutal experience of trying to navigate a bank’s due diligence process, and demonstrate that they are fully compliant with all relevant regulations. Some fintechs have been broken entirely by the process, and plenty of others brought close to the brink. But why is the process such a nightmare and what practical steps can fintechs take in order to minimise the risks, maximising their chances of securing a business-defining deal with a bank?


The banker and the sour grapes
By Duena Blomstrom

Fintech these days has become like an immensely fast-paced game with absurd levels of difficulty thrown in for ever-diminishing (or at least largely unclear) pots of gold. No one has to bear the stress more than those working in large incumbent banks. I’ve said this many times before: no other industry behaves quite like ours, or has been affected by the sharp advent of technology and its effects on customer experience in quite the same fashion, so we’re experiencing unprecedented levels of discomfort in many ways irrespective what part of the industry we’re in. All of us – bankers new and old, technology makers and commentators – we are all impacted by this spectacular time in the growth of digital and the money retail business. There’s no time to complacently relax into anything – deep conceptual thinking is nearly banned if we wanted to keep up, there is definite uncertainty to accompany ever growing demands, and it feels like the more we learn and the more we try, the harder it is.


War of the words: who’s said what about a bitcoin fork?
By Alyssa Hertig, Stan Higgins & Garrett Keirns

Bitcoin is abuzz with chatter about the prospects of a possible network split, a development that could drive the emergence of two separate blockchains. It’s an eventuality that has businesses in the industry weighing in again on a long-standing impasse over the digital currency’s future direction. What’s more, the nature and tone of the scaling debate appears to have sharpened, driven by animosity between those who support one vision over another. As such, a range of bitcoin startups (exchanges, wallet providers, miners and hardware makers) have weighed in on where they stand on the issue. Perhaps unsurprisingly, much of the preparation seen comes from companies that would find themselves in possession of handling two separate bitcoin assets on behalf of customers should the network split.


InsurTech industry has grown by 25%
By Igor Pesin

InsurTech is a relatively new industry. However, it’s developing quite fast and becoming one of the most booming verticals in the FinTech space. First of all, don’t pay too much attention to the 34% drop in the InsurTech market in 2016; it actually grew up by 25% considering the number of deals. The year 2015 showed an abnormal rise in the InsurTech market, which was mainly driven by Chinese large and extra-large deals, including $1B USD invested into the world’s largest InsurTech startup Zhong An. More and more investors are being attracted to InsurTech/HealthTech segment. It turns out that insurance companies are more active in InsurTech than banks used to be in FinTech; it seems that they have learned from the unsuccessful experience of the latter to not to resist changes or ignore them.

FinTech Summary 75 – Apple Bank, Expensive Bitcoin, Bots, PSD2 Effects

FinTech Summary 75

Every so often a new hype cycle comes around, it was bitcoin, then it was blockchain now it’s bots. We are early into development circle and expectations currently set out by the public are unlikely to be met. It won’t feel like talking to a human any time soon, not you can’t just chat to your banking bot when you’re bored at 3am about the game you saw yesterday. It will feel more like an advanced Q&A box where you don’t need to use keywords but the bot implies them from your sentence. There are challenges that we need to overcome, particularly the data ownership. If you’re using a bot a banking bot on Facebook, everything you say about your banking life will now be with Facebook. That’s a problem for me, and for many others. It is still a huge technological advancement and it will be huge, someday, just not tomorrow.

Thanks for reading; YOU are awesome! Just leave a comment if you want to get in touch 🙂

Have a wonderful week,


How PSD2 Will Change Europe’s Banks For The Better
By Artem Tymoshenko

Open APIs will change this by forcing banks to give the same access to your banking information that their website has. Banks will still be required to authenticate users and provide the same level of security that they do now, but they will not be allowed to restrict account owners to accessing it only through their services. This will allow third-party financial service providers to build services directly on top of banks’ data and infrastructure. This means that banks will no longer be competing just against other banks, but against everyone who wants to offer financial services.


Hello, May I Speak to My Personal Bot?
By Eran Livneh

By and large, customers want to better manage their finances, but they don’t have time to stay on top of it all. That’s where the chatbot can lend a helping hand, by automatically executing money management tasks on behalf of customers, dutifully working to improve their financial well-being behind the scenes. Because of its ability to always be available, predictive, understand compliance, and work autonomously, a chatbot can become a critical – even if not an exclusive – channel for customers interacting with their banks. At the end of the day, if a customer receives excellent customer service, he/she won’t care if it comes from a human employee or a chatbot.


Will Apple Bank be the first new American #Fintech Bank?
By Chris Skinner

On Wednesday the American Office of the Comptroller of the Currency (OCC)* followed up on its promise last December to introduce a national bank charter for Fintech bank startups by issuing a white paper on how to apply for a licence, the evaluation process and what will be involved. It’s a massive move towards allowing Fintech firms like Square, Stripe and Simple to become full banks in the USA, if they want to be, plus any other firm who fancies a shot like Apple, Wal*Mart and even Ant Financial. It doesn’t mean they’ll get a license, but it does mean they can apply for one through one agency rather than having to deal with 200. This is a significant step towards encouraging Fintech banking competition in the USA and reflects similar moves made in other geographies.


But, but… I thought Bitcoin was supposed to be cheap?
By Izabella Kaminska

Total transaction fees in bitcoin are on the ascent, challenging a key claim put forth by bitcoin acolytes in the early days: that the bitcoin payments network could compete with the mainstream banking system on cost. Reality, however, is finally catching up with bitcoin. Fees are escalating due to capacity constraints being imposed on the network on account of blocksize limitation as well as the reduction in bitcoin mining awards. If unresolved such constraints will impede further scaling of the network and make bitcoin prohibitively expensive for day-to-day transaction use. Thus far, however, a have-your-cake-and-eat-it solution has escaped the developer community with all options on the table introducing some sort of compromise, whether that’s to bitcoin’s security or its decentralised and trustless nature. And, naturally, because this is the anarchic utopia bitcoin, nobody can agree on how to proceed anyway


Blockchain Needs To Become Boring To Become Mainstream

blockchain boring

I finally got to reading Warren Buffet’s annual letter to shareholder. It is interesting to see how the world’s most successful investor thinks. One piece about their sizeable insurance business really struck me – how to build a successful insurance business:

“At bottom, a sound insurance operation needs to adhere to four disciplines. It must (1) understand all exposures that might cause a policy to incur losses; (2) conservatively assess the likelihood of any exposure actually causing a loss and the probable cost if it does; (3) set a premium that, on average, will deliver a profit after both prospective loss costs and operating expenses are covered; and (4) be willing to walk away if the appropriate premium can’t be obtained.”

Thanks for reading; YOU are awesome!


This Week’s Summary


The promise of blockchain is a world without middlemen
By Vinay Gupta

The blockchain is a revolution that builds on another technical revolution so old that only the more experienced among us remember it: the invention of the database. First created at IBM in 1970, the importance of these relational databases to our everyday lives today cannot be overstated. Literally every aspect of our civilization is now dependent on this abstraction for storing and retrieving data. And now the blockchain is about to revolutionize databases, which will in turn revolutionize literally every aspect of our civilization. We’re going to see the potential for a trajectory of radical change in all industries. As a society, we’re experiencing a time of unprecedented technological change. It can feel like an insurmountable challenge for leaders to stay on course in such rapidly changing tides. And yet, with each passing generation, we are acquiring more skill and expertise in navigating a high rate of change, and it is to that expertise that we must now look as the blockchain space unfolds, blossoms, and changes our world.

Lost in translation – how to talk to a robot
By Michael Weinreich

Well, quite a lot. 2017 is the year of the bots, and many companies are trying to jump on the train, creating showcases to illustrate that they’ve not missed the “new trend”. From Amazon’s Lex, the technology that powers the virtual assistant Alexa, to the integrated news, shopping and weather bots in Facebook Messenger, the conversation with a ‘roboter’ seems to be the next big thing, and perhaps soon our most common way of communication, especially in the customer service field. So how do you achieve this? Bots are great, but even greater once they’re part of an integrated customer service platform. Clearly, all human agents need to be empowered to fully follow and understand transaction history and create a seamless customer interaction experience. By integrating bots into your customer service strategy and platform, you can avoid getting lost in translation.

Blockchain needs to become technically boring
By Daily FinTech

“Communications tools don’t get socially interesting until they get technologically boring.” Two examples of boring technologies having a big impact on Fintech are QR Codes and Prepaid Cards. Blockchain is definitely not boring. It will probably have a bigger impact than QR Codes and Prepaid Cards, but it may still fade into the sunset of overhyped technologies. It is exciting because that is a huge delta – change the world or dustbin of history. I incline to the former – that Blockchain will change the world. However, that promise won’t be fulfilled until Blockchain becomes technologically boring. This post looks at why that is true and at efforts to make it technologically boring.

Why can’t digital identity be easy, like payments?
By Dave Birch

I have often seen payments (especially card networks) used as an analogy for digital identity. There is, however, one key difference between payments and identity: you cannot sell stuff online without a means to receive payment, and normally this means integrating with a payments scheme that works for your customers. You can, however, sell stuff without leveraging an external identity scheme – you just give the user an ID and password specific to the service. This is, however, bad news for users, resulting in the fragmented personal data and password mess we find ourselves in today. Merchants are going to have to be a lot more careful with personally identifiable information in the future. One thing they could do is use an identity provider to hold that data, and in the process reduce their risk. Individuals also need to realise that their personal data is valuable, just like their money. This is going to require some education, because so far they’ve been taught to share data without considering the consequences.

Finance 2.0: How We Will Build The Future of Finance – Part 2

future of finance

In part 1 we have discussed what underlying shift in mentality needs to happen for Finance 2.0 to really kick-off. To an extent a lot of these changes are already happening. Entrepreneurs starting new companies are adopting finance 2.0 mentality:

Risk Assessment will change

We are starting to look beyond traditional historic credit history to guide the future. Traditional credit scoring looks to the past and present as a guide to the future. But what would it be like if many data points, from psychometric testing to posts on Facebook or LinkedIn, could be used to build up a more accurate portrait of creditworthiness? What if instead of analysing past behaviour we could create an accurate persona of the customer that has predictable patterns. Hamburg-based start-up, Kreditech does just that.

risk assessment - fintech


Settlement and transaction time decline

Carrying out a payment is inefficient, it takes time and costs money. A typical international payment with ‘mainstream’ currencies takes anywhere between 2 and 5 days. It also costs a lot. Local payments are cheaper, and quicker. Some countries, like the UK already have instant payment systems in place, however this is more of an exception than the norm. Blockchain technology enables us to minimise transaction costs to bare minimum and makes settlement times near instantaneous, locally or internationally, creating a sound infrastructure for a layer of micro-transactions that were not viable before. This would change the way we pay for things, or even who pays for things. In Finance 2.0 people will only set up the logic for when the payment should occur (we run out of milk -> order new bottle) for the vast IoT network. Objects will do the micro payments, fridge in this case. Another immediate area that will change is the way we remunerate creators of their content. A network of microtransactions will enable us for pay for content as we consume it – pay for every page of the book you read or for every minute of the movie that you watch rather than the whole book or movie. A lot of business model will turn upside down as a result.

network - fintech


Data sharing and customer stickiness 

Banks currenly enjoy very high customer stickiness, well above a decade. Until very recently, it was a pain to move a bank but it is no more. In the UK the banks will transfer all you schedule payments for you and reroute all the payment to your old bank account to the new bank account. However, this is only half of the job. What we lose is all the data we have generated with the banks over the years. With upcoming PSD2 regulation, this will also change. Customer will be in charge of his data, he will be the gatekeeper and give the keys to who and when he considers fit. This will change the balance of power significantly. Rather than using 1 provider (bank) for most of your needs customer will be able to have many providers and use them as specialist for their one best function. Data generated by all these providers will complement each other. The layer of aggregation will likely to appear, that will simply plug all the APIs into one and provide great user interface.  

data sharing - fintech


Banks will turn into platforms

A bank won’t be a closed garden but rather a bustling bazaar. A placemaker for creators and innovators to meet their clients – a platform. AirBnb is the biggest hotel chain but they don’t own a single hotel, Uber is the biggest Taxi company that doesn’t own a single taxi. Can bank be the biggest financial institution without any financial products? Can banks simply become the gatekeepers of the bazaar, ensuring product quality, security and taking money for opening the gates to new vendors? Pascal Bouvier and David Brear have discussed the pros and cons of such platforms and Chris Skinner has laid out the steps that these banks need to take. I won’t summarise this better than they already have so do read their articles.

fintech bazaar


Change in regulatory mindset and approach

Regulators are perceived slow, inefficient and reactive. This would be best visualised by 1000’s of pages long volumes of regulatory frameworks such as Dodd-Frank Act. However, the role of the regulator has changed significantly. The regulator is under a constant spotlight to make sure that financial crisis of 2007 does not repeat itself. Equally, it is pressured to foster innovation, which in turn fosters competition. Many small players competing with each other reduces system risk and is beneficial to the customer in terms of price and quality. The regulator is encouraged to become much more proactive to prevent the misconduct from happening in the first place. For this, the regulator needs to have a hand on the pulse of the market, lots of data and access to the innovators of tomorrow. Sandbox by the Financial Conduct Authority (FCA) is a great example of embracing forward-looking innovation.

regulators fintech


Robots will transform finance business model

The corporate structure and headcounts will change drastically in finance over the coming years. Robots can already do many jobs better than humans can. Robo-advisors are better, and cheaper, at allocating assets. They can’t, and likely never will be, to provide behavioural coaching private banker can but this is only relevant for the ultra wealthy. Other parts such as compliance, accounting, modelling and other will be slowly transformed, or even outright replaced, by machines too. Machines don’t do mistakes. In the next term years banks will change from large employment hubs to lean operations. Many functions will be automated, many parts of the business will be lost to the marketplace. Banks will maintain their core functions and employees associated with that.


The dawn of new finance is upon us. As a crucial element of our society this changes will have a ripple effect across many functions and industries. A more efficient financial system will make our overall lives more efficient, more transparent and more fair.

Finance 2.0: How We Will Build The Future of Finance – Part 1

future of finance

This is the part 1 of the 2 part series, for part 2 click here.

In 2004 we witnessed the shift towards the ‘Web 2.0’. Mentality and assumptions of web developers have shifted from ‘everyone has very limited internet connectivity and limited browsers’ to ‘lots of people have broadband and modern browsers now’. This meant to techniques could be applied to start creating stuff we never had before. This lead to the webapp era. 2016 was arguably the start of ‘Mobile 2.0’ era. Our mindset is shifting from ‘people don’t have good mobile internet and limited smartphone penetration’ to ‘there are a billion people with high-end smartphones now constantly connected to the internet’.

Banking system is one of the underlying core systems of our society and it has always followed the evolution in our lifestyle, even though lagging behind. Web 2.0 brought limited banking capabilities online. Mobile era brought it to our smartphones, often leaving much to be desired but the capability was there. A perfect storm of increased smartphone penetration, big data, blockchain and fintech have put is on the doorstep of Finance 2.0, do we dare to enter?

finance 2.0 doorstep

The year 2017 is the year where our financial system will start to change noticeably for a mainstream user, not just the early adopters that played with P2P loans, blockchain or digital banking. A new set of startups are maturing and reaching the critical mass where they will start reaching everyday users. Here are the assumptions that the dawn of Finance 2.0 brings:

  • Past financial performance (credit check) is not the best metric to reflect likelihood of future repayment; new models are developed
  • Banks are open to collaborate and have changed from walled gardens to bustling bazaars
  • Technology can do a lot of the jobs better, quicker and more reliably than humans can
  • Regulator is not a stop break but an enabler who truly wants to encourage innovation, transparency and competition
  • Customer are willing to share their personal data, and it is easy to do and there are vast amounts of data to create personalised models
  • Settlement times and transaction become so negligent that we can power a network of instant microtransactions


Finance system is one of the underlying foundation of our civilisation, without finance trade would not be possible and without trade we couldn’t specialise in any of our activities – we would still have to produce all our food, clothes, shelter and, even our iphones, ourselves 🙂

In part 2 I discuss each of the assumptions in more detail and how will they change our day to day life.

How Payments Will Change One Of The Underlying Foundations Of Our Society

The way we pay and transact is one of the underlying foundations of our society is one of our basic utilities. I believe we are going to see some drastic changes in this foundation in the coming 5 to 10 years. Because of the transaction cost and settlement time we try bulk our orders, we don’t pay for a page we read we buy a book. Once transaction cost disappears and clearance times will drop to minutes and second and not hours and days a lot of business models with change. Many payments will become more granular. New business model will become possible like paying 1 cent for every article you read online, instantly and automatically will change how content producers are rewarded. Instant free transfer to a foreign country will change how we employ people for our businesses. Decentralisation of payments will fuel the changes even further. Fintech is at the forefront of this evolution and I’m really excited to witness these changes shaping up first hand.

Thanks for reading; YOU are awesome!


Summary for this week


A Brief History of Blockchain
By Vinay Gupta

Many of the technologies we now take for granted were quiet revolutions in their time. Just think about how much smartphones have changed the way we live and work. It used to be that when people were out of the office, they were gone, because a telephone was tied to a place, not to a person. Now we have global nomads building new businesses straight from their phones. We’re now in the midst of another quiet revolution: blockchain, a distributed database that maintains a continuously growing list of ordered records, called “blocks.” These changes, and others, represent a pervasive lowering of transaction costs. When transaction costs drop past invisible thresholds, there will be sudden, dramatic, hard-to-predict aggregations and disaggregations of existing business models. For example, auctions used to be narrow and local, rather than universal and global, as they are now on sites like eBay. As the costs of reaching people dropped, there was a sudden change in the system. Blockchain is reasonably expected to trigger as many of these cascades as e-commerce has done since it was invented, in the late 1990s.


How Blockchain Is Changing Finance
By Alex Tapscott and Don Tapscott

It begs the question: Why is our financial system so inefficient? First, because it’s antiquated, a kludge of industrial technologies and paper-based processes dressed up in a digital wrapper. Second, because it’s centralized, which makes it resistant to change and vulnerable to systems failures and attacks. Third, it’s exclusionary, denying billions of people access to basic financial tools. Bankers have largely dodged the sort of creative destruction that, while messy, is critical to economic vitality and progress. But the solution to this innovation logjam has emerged: blockchain.


In Praise Of Cash
By Sam Haselby

The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge. The defence of cash will be simple and intuitive. As unsexy and analogue as cash is, it is resilient. It is easy to use. It requires little fancy infrastructure. It is not subject to arbitrary algorithmic glitches from incompetent programmers. And, yes, it leaves no data trail that will be used to project the aspirations and neuroses of faceless technocrats and business analysts into my daily existence. It comes with criminals, but hey, it’s good old friendly normal capitalism rather than predictive Minority Report surveillance-capitalism.


How Insurers Can Implement Tech Companies’ Tactics
By Joe McKendrick

In 2011, venture capitalist Marc Andreessen famously coined the phrase “Software is Eating the World” in a Wall Street Journal article. The point: Companies across industries are doing so much digital and tech work that they are, essentially, becoming software providers in addition to their original businesses. And, we’re seeing that happen in the insurance industry as well. Disruptions are coming in fast and technology-savvy companies are moving to shake up the insurance business. While there are signs all around that as insurers are moving ahead in adopting digital technologies to streamline and energize their businesses, we’re also seeing insurance business models being altered by the tech sector. Insurance, in some ways, is becoming another data-driven service that can be added to digital platforms.

The Innovator’s Dilemma: Is It Always About Technology? The FinTech Perspective

fintech innovation

The thing that intrigues me the most is the business model and how it evolves influenced by innovation. Every business I interact with I try to understand how do they make money, what is their unique angle. I had one such conversation with a friend of mine, Antoine Baschiera, cofounder of Early Metrics. They have analysed and scored over 1000 innovative companies in the last two years. We had a debate on what innovation is. Too often associated with just the technology but innovation is so much more. We have agreed on 4 main pillars – process & customer service, route to market, product & service and technology. So how do they all come together?


Technology innovation – embedding new technology into your stack such AI or visualisation to empower the other 3 pillars  

Process & Service – using process and technology improvements to improve customer experience or critical internal processes to gain competitive advantage, such as pricing engine in insurance

Product – creating new products that didn’t exist before, such as Apple Watch

Route to market – addressing new markets, finding ways to reach your customers differently, for example servicing banking clients via facebook chatbot


Let’s look at each of these in more detail:

Technology Innovation

Technology innovation in banking is often trivialised to a simple question – can we use this new technology to remove enough friction from the process that savings/profits would justify the costs, i.e. can we get a positive RoI. Often you can’t, at least initially, quantify innovation as RoI. There are much bigger benefits to technology than just cost saving – it acts as an enabler in the evolution of the company.

Technology in itself normally brings marginal improvements rather than disruption. The disruption comes from a change in the other 3 pillars as a result of this new technology. Let’s take Uber as an example, the company is so disruptive not because of their technology, if anything, it’s pretty basic, slick and well functioning, but basic. What is special about Uber is their business model innovation – creating a marketplace for transportation. This is very disruptive. They couldn’t achieve this without their technology but technology is not the value add here, just an enabler that leads to disruption of the taxi industry supply chain.  


fintech innovation


Process & Customer Service Innovation

Process innovation is less sexy than product innovation. It is not focused on creating new products or reaching new markets but sometimes it can be the best competitive advantage of all. If you can open a bank account in 5 steps while your competitor is taking 3 days you will win that game every time despite how many cool and sexy products your competitor has. Process Innovation is all about improving internal and external processes to provide better customer experience. It’s about improving existing products and business critical processes transforming the business model of the company.

Customer service often defines business models. High touch high-end product with great customer service is associated with low volume high margin business and low touch high volume approach with good price. You rarely get both.


FinTech Customer Service

A true process innovation would be to provide high touch customer service with good price. Some industries are approaching this possibility. Let’s take a look at wealth management industry. Previously we had private bankers who would manage money on behalf of the very wealthy. Then the robo-advisors came around, addressing the gap in the market at the bottom end. But two services are very much different, the end result may be similar – you get a diversified portfolio but the route to that result is very different. Adjusting a dial on risk-meter vs dedicated private banker talking you through all the options available at all hours of the day.

There is a middle ground here, providing good service but cheaper – do you need a private banker with a fancy office? Can his service be provided via skype? Can a good amount of queries be answered by a bot? Could we mash these two together? This would be a great example of using technology to improve your critical processes – customer service to gain competitive advantage. A robo-advisor with a human touch and a similar price would beat robo-advisor without human touch.


Roboadvisor Fintech


Same as with Uber, technology is not the game changer here. The game changer is the application of that technology. The code for a bot is available as open source and is hardly revolutionary but the application of this code is.


Route to Market Innovation

Finding new routes to market can drastically increase your market share. Let’s take travel insurance for example – you can sell it via brokers and price comparison sites but cross-selling it on airline websites is a new route to market. Acquiring customer in FinTech is notoriously expensive. For that reason FinTechs are often exploring different ways to market rather than taking the incumbents head on and the answer is a B2B2C model. A company plugging into existing players back-end and using their channels to acquire customers or add value saves millions of pounds in marketing expenses. The maths are simple here – acquiring customers in FinTech can be very expensive – some of the banks I’ve worked with were looking at anything between £300 and £400. That is a lot of money if you want to scale. Let’s take an example – a company has raised Series A of £10mil, ignoring all costs, this company could only acquire 25,000 customers. This is hardly enough to make a dent in the fintech space. This is why we see banks like Atom raising hundreds of millions of pounds. To achieve any sensible scale you need a very large amount of capital. Few startups will ever be able to raise this kind of money and therefore a much better way is to partner with an existing player, usually a bank, and use their channels to acquire customers. It is lower risk lower reward option but certainly still a lucrative one since you can nearly bootstrap a business that is using a B2B2C model, while it would be very hard to do that with a B2C business, at least in FinTech.


FinTech Route to Market


Insurance is another interesting example of finding a new route to market. Insurance as a product is becoming a commodity – people are less willing to buy insurance as a standalone product anymore. They want to buy an insured car rather than a separate car insurance. It is becoming a part of a larger bundle, there are a number of companies looking to enable this. This will have an effect on insurance business model.

Product & Service Innovation

Product innovation doesn’t necessarily involve creating new products like autonomous cars, smart watches or new social media app. A lot of product innovation surround repositioning products for specific verticals and tailoring your product to watch that markets needs – data visualisation for retailer, marketplace loans for SMEs, document management for lawyers.

Because the verticals keep on constantly evolving we can find gaps created in the market by current providers and innovate to fill them; much like Atlassian created a perfect ground for Trello to grow. Dimitri Tarasowski wrote a great post on this, here’s a short extract:

Trello brings a different value proposition to the market. Its value proposition is collaboration and simplicity. Jira’s value proposition is different. It seems that Atlassian is a well-managed company. Its managers did everything according to the books. They listened to their customers, and created a better and more complicated product. By adding new features, they sought to capture new customers. They went upmarket.

While the company’s revenue grew, its product became overly complicated and difficult to maintain. By moving upmarket, Atlassian created a vacuum at lower price points into which competitors with disruptive technologies could enter. This is what Trello did.
Atlassian vs Trello


Creating new services and products will most certainly have affect on the business model as the company will evolve and fine-tune its product offering to suit their desired customer segment, much like Atlassian did.

So what is innovation?

Business model innovation, particularly in FinTech, is not just technology based. The technology is frequently an enabler of other elements rather than the cause of the disruption. When looking to innovate and disrupt, we can’t simply focus on technology. Start with an end goal in mind of what you will show your customers, how will you access your market or what your processes will look like. Fit technology afterward.

Insurtech On The Rise – Transforming A 5000 Year Old Industry



Insurance business model is one of the oldest business models out there dating back to Chinese and Babylonian traders as long ago as the 3rd and 2nd millennia BC, respectively. The principle of distributing the risk among many players is unchanged but the surrounding wrapper of services is changing rapidly. As an offer, insurance has been commoditised. It has become a part of the bundle. Whenever you buy a car, you want that car to be insured. Insurance is not a product anymore, it is becoming a service add-on that is bundled up during the buying process. This is further fuelled by the rise of sharing economy, where transaction frequency has increased dramatically and a new way to serve insurance is needed. New routes to market will emerge and distribution channels will see major changes.

Thanks for reading; YOU are awesome! Just hit reply if you want to get in touch 🙂

Have a wonderful week,


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