Banks have been forced to open their APIs to third-party organisations. The regulator claims that this will benefit the customers since they will receive tailored services, and will have the opportunity to switch banking products easier. I buy that. Data is power, and now customer will own it, not the bank. However, as the old cliche goes – with great power comes great responsibility. There are number (valid and not so much) concerns about the security of the data and opportunistic behaviour that some third parties could engage in. Again I totally agree. But there is a bigger opportunity here for us as a society. Whether we like it or not our lives are becoming more and more digital and in turn, data driven. All the data points that are collected by the plethora of apps that we use, health trackers that we were, banking products that we use. We shouldn’t debate IF it is secure to give customers access to their data (and/or third-parties with customer’s permission) but we should debate HOW to make it secure to store and manage the ever-growing personal database.
Thank you for reading. You’re awesome!
Have a fantastic week,
China Is Disrupting Global FinTech
By Joshua Bateman
Going forward, declining technology costs and China’s inexpensive labor market will ensure it remains a fintech axis. Regulations are also supporting the industry. Appropriately regulating financial services is challenging. If policies are too lax, investor risk increases. Too stringent, innovation is stifled. Unlike developed markets where regulations were instituted prior to technologies being invented, Chinese regulators are relatively young and are evolving with fintech. They do not need to re-write existing regulations, an arduous task. Although more stringent regulations could temper growth, the trend is toward greater fintech adoption in China, driven by technology companies.
The Subtle Tyranny of Blockchain
By Stefan Thomas
Project Xanadu (started in the 60’s) was a competitor to the World Wide Web (WWW). Xanadu has been around for longer and had more ambitious feature set such as two-way links. Both Xanadu and the web are decentralized, but the web was much simpler. All it required was a minimal protocol and simple data format. No interaction was needed between websites, which meant that they could evolve independently from each other, and rather than waiting for the Xanadu creators to add a feature. There are parallels to the blockchain, lets look at payments as an example. Bitcoin is a replacement for existing centralized ledgers like the credit card networks. But Bitcoin still has a lot of shared rules that participants must agree to such as the proof-of-work mechanism, currency distribution function, block size limit, lack of anonymity. By contrast, in adding one more layer of abstraction, the Interledger Protocol allows me to choose options that I like and still seamlessly transact with someone who has made different choices in each of these categories.
Ethereum Scaling Advances With ‘First’ Off-Blockchain Payments
By Alyssa Hertig
Ethereum and bitcoin currently each support only a fraction of the transactions seen daily on centralized payment networks like Visa or MasterCard. As developers seek to take on this challenge, scaling is widely seen as a fundamental issue yet to be solved. Raiden draws inspiration from the Lightning Network, an in-development off-chain transaction network that’s often trumpeted as a fix for scalability on the bitcoin blockchain. If success this could open up the floodgate to much wider adoption and incredibly more efficient use of blockchain. These include making micropayments for seconds spent watching online videos or facilitating trade in Internet of Things-enabled markets, where machines pay other machines for chunks of bandwidth or temperature sensor data.
UK Banks Ordered to Digitalise or Else
By Chris Skinner
On Tuesday the Competition and Markets Authority (CMA), a UK Government Agency, told British banks that they must digitalise or suffer penalties. In a report entitled Making banks to work harder for you, they have ordered the UK banks to digitalise within two years or face regulatory fines. The key headlines include, under what the CMA calls its “Open Banking programme”, that banks must share their customer data with third-party app providers. The second headline is that all banks will be required to introduce a Maximum Monthly Charge (MMC) to limit the costs of an unarranged overdraft. Third, the CMA has ordered new measures to encourage more people to switch their accounts to other providers.
FinTech Summary makes it easier to stay informed. Join the thousands who start their week with FinTech Summary digest.