FinTech Summary #49 – #Bots #Crowdfunding #Blockchain #Startups

FinTech Summary #49 - All The FinTech News You Need

Seth Godin, a famous marketing guru, said: “it’s far easier to sell someone on a new kind of fruit than it is to get them to eat crickets, regardless of the data you bring to the table.” FinTech is facing a similar issue – new challengers need to find a way to break the pattern. For that, they need to create new beliefs. For example, a belief that wiring your money with TransferWise is better than with your bank. It is easier to form these beliefs for companies that can directly prove the benefit to the customer (lower fees, more transparent). It is much harder to achieve for companies that are unique or provide indirect benefit – like blockchain startups where you need to do the ‘leap of faith’ integration first and hope the benefit is worth it. We, as a customer, play a crucial part in the disruptive innovation cycle by either forming these beliefs or rejecting the product. And this product could be the next Google Search.

Thanks for reading – you’re awesome!

Have a wonderful week,


This week’s summary


Equity Crowdfunding 3.0 – The ‘Killer’ Feature
By Alex Nech

What will Equity Crowdfunding 3.0 look like? A real ‘killer’ feature will be added – a secondary market that will enable investors to ‘cash out’ early. This feature will be particularly powerful with the equity crowdfunding model, where there is not fixed time frame for an exit and investors are unable to cash out if their circumstances change. Such mechanism has the potential to open up markets that were out of reach for most platforms. People will be more willing to ‘give it a try’ and potentially become big investors in the future. There are a number of challenges that both platforms and the companies will have to address around liquidity, valuations, funding and future of the employees.


On Tokens and Crowdsales: How Startups Are Using Blockchain to Raise Capital
By Demian Brener

We are in the early stages of a new chapter in the nature of work. The blockchain will enable us to do our jobs and be compensated inside new circular economies that have their own currency units and their own work units. Most work today is compensated via bilateral agreements between a worker and an employer according to a simple contract: you work in X job, and we will compensate you in Y currency. With more control, we would then be able to perform new types of tasks that may or may not resemble what is traditionally considered labor, and earn cryptocurrency instead of fiat currency. Already, a number of blockchain based businesses are compensating users for their ‘work’ via digital tokens. At the heart of making this possible, is the relationship between actual work done, the value created, and value received. These type of mechanics and operations will benefit and enable their users also to partake in their success via the sharing of network equity. What is happening here is the creation of mini circular economies that are self-contained.


Can A Bot Help Your Bank Speak Millennial?
By Eran Livneh

Millennials communicate differently than previous generations. They prefer texting over talking, emojis over words, and talking to Siri or Alexa over talking to a real human. Strange? Depending on who you are. These new communication etiquettes are second nature to those that have grown up with instant online chatting and texting. This is where a bot comes handy. Something about removing the human element, yet being able to communicate on a human-like level, makes certain processes and tasks more attractive and effective for millennials. Integrating guidance and service into chat and personal assistant bots provide a two-way advantage for millennials and banks.


Code is Law? Not Quite Yet
By Lukas Abegg

After The DAO experiment failed, a heated policy debate ensued about how to go forward with the development of ethereum’s blockchain. The positions ranged from holding on to the immutability paradigm with “code is law” as the most important rule to follow, to a more human approach of asking ethereum’s miners and developers what measures should be taken. Only little time, however, was spent on the question what a smart contract is actually capable of performing. But this very question, I believe, should be at the core of the debate and the respective answer is the only sensible foundation on which a sound policy for blockchain and smart contract development can be built.


5 things that made me smarter this week

The hidden economics behind deceptive on-demand pricing. Seems like Uber for anything business model may just not work for anyone but Uber.
The 2020 Tokyo Olympic medals could be made of discarded electronics. Gold and silver recovered from small consumer electronics in Japan has been estimated as equivalent to 16% and 22% of the world’s total reserves, respectively.
Eleven Reasons To Be Excited About The Future of Technology. There are many exciting new technologies that will continue to transform the world and improve human welfare. Here are eleven of them.
Do You Really, Truly Hate Your Office Printer? (Paywall) There’s a Bat for That. Workers destroy balky machines in a ritual act of catharsis; ‘glass fireworks’. A new form of team-building exercise.
Top 10 Happiest Countries in the World. Strong correlation with GDP per person… And they say money can’t buy you happiness.

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FinTech Weekly Summary | Aug 15 – 22

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.


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FinTech Weekly Summary | Aug 08 – 15

Protocols are very important. However, they are not a sexy topic and often misunderstood. We rarely think of email as SMTP protocol, but it is. The application that we see is just a ‘nice-wrapper.’ The reason we can send email from @gmail account to @yahoo account is because of the underlying protocols. They ensure that applications use the same language and can communicate. The recent appearance of blockchain (a  protocol) has enabled a completely new business model to create a whole deal of other protocols (nothing related to blockchain itself). This is a tremendous opportunity for innovation, and it will change many things – the first two summaries go into more detail about this. Protocols are a technical (potentially dry) topic to understand but understand it we must. It is a tremendous step in tech evolution. It is like taking medicine – not pleasant to do but will make us better later 🙂

Have a wonderful week,


Fat Protocols
By Joel Monegro

The previous generation of shared protocols (TCP/IP, HTTP, SMTP, etc.) produced immeasurable amounts of value, but most of it got captured and re-aggregated on top at the applications layer, largely in the form of data (think Google, Facebook and so on). This relationship between protocols and applications is reversed in the blockchain application stack. Value concentrates at the shared protocol layer and only a fraction of that value is distributed along at the applications layer. There are two things about most blockchain-based protocols that cause this to happen: the first is the shared data layer, and the second is the introduction cryptographic “access” token with some speculative value. Increasing value at the protocol layer attracts and incentivises competition at the application layer. Together with a shared data layer, which dramatically lowers the barriers to entry, the end result is a vibrant and competitive ecosystem of applications and the bulk value distributed to a widespread pool of shareholders. This is a big shift. It will prevent “winner-takes-all” situations and creates an entirely new category of companies with fundamentally different business models at the protocol layer.


The Theory of a Blockchain Circular Economy
By William Mougayar

We are in the early stages of a new chapter in the nature of work. The blockchain will enable us to do our jobs and be compensated inside new circular economies that have their own currency units and their own work units. Most work today is compensated via bilateral agreements between a worker and an employer according to a simple contract: you work in X job, and we will compensate you in Y currency. With more control, we would then be able to perform new types of tasks that may or may not resemble what is traditionally considered labor, and earn cryptocurrency instead of fiat currency. Already, a number of blockchain based businesses are compensating users for their ‘work’ via digital tokens. At the heart of making this possible, is the relationship between actual work done, the value created, and value received. These type of mechanics and operations will benefit and enable their users also to partake in their success via the sharing of network equity. What is happening here is the creation of mini circular economies that are self-contained.


Disruptive Mentality in Banking
By Vicente Quesada

The disruptive mentality for the digital transformation requires innovating, ideally without ‘muscle and money.’ What would disruptive mentally look like in banking? Charge at a 90% discount rate credit card services; link advertising performance with product demand; use voice robot financial advising; issue personalised financial products with 50 times less face value; be at least 10 times smarter with big data usage for product development and promotion, that will enable Amazon-like recommendations to increase product consumption; use machine-learning models for consumer credit risk management, etc. Disruptive mentality innovation can create a true competitive advantage for banks that embrace it.


Risks in the Crowdfunding Industry
By Vaishali Naroola

The UK’s financial watchdog is probing the crowdfunding sector for the second time in two years. The rationale behind this is that this sector is displaying signs similar to those that were displayed by market players in the lead-up to the financial crisis. Putting this in perspective, the global crowdfunding market is expected to reach between $90-96bn by 2025, which is approximately 1.8 times the size of the global venture capital industry today. Crowdfunding and its offshoot, peer-to-peer lending, come with inherent risks as any other financial product. These risks have to be uniformly communicated and understood by market participants before a market floor can be established. If the goal is to become better investors, let’s start by understanding these risks for what they are: pooling of credit risk, asymmetric information and limited liability and the role of the platform provider.


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FinTech Weekly Summary | Aug 01 – 08

There is a lot of talk about FinTech and the dreaded b-word. However, whether it’s a bubble or not (yes I just said it) it doesn’t matter. FinTech is enabling breakthrough and changing the industry that has hardly changed for the last century. I would like to share an extract from Tom Evslin‘s blog post (as highlighted in a recent Fred Wilson post) from January 2005, when the investment world was just waking up to the fact that the Internet bubble wasn’t the end of things, but just the beginning that really sums it up well:

“Historically, the results of bubbles have usually been more empowerment for more people.  Historically, bubbles have provided an explosion of funds which blasted away the entrenchments of an old oligarchy not only to the benefit of entrepreneurs but also to the benefit of consumers in general.  Think of the constantly falling price of transportation and communication. If we should find a way to stop bubbles, if we were to put the genie of irrational exuberance back in the bottle, the winners will be whoever are the incumbents at the time and the losers will be all those who could benefit from another great breakthrough in infrastructure like railroads, canals and the Internet.

Bring on the next bubble.  And invest in it at your own risk. I will.”

Have a fantastic week,


Crypto Tokens and the Coming Age of Protocol Innovation
By Albert Wenger

Historically the only way to make money from a protocol was to create software that implemented it and then try to sell this software (or more recently to host it). Since the creation of this software (e.g. web server/browser) is a separate act many of the researchers who have created some of the most successful protocols in use today have had little direct financial gain. With tokens, however, the creators of a protocol can “monetize” it directly and will in fact benefit more as others build businesses on top of that protocol.


The Golden Age Of Open Protocols
By Fred Wilson

Protocols are a geeky topic. It’s way more interesting to talk about applications. Open protocols are at the heart of many of the most important systems that we have. These are open systems that developers can build applications on top of. On the other hand, proprietary protocols tend to lock in users and drive value to the owners of the proprietary protocol, like Microsoft, Apple, Google, etc. One of the problems we have had in tech is that there aren’t large monetary incentives to create and sustain open protocols. If they are open they cannot be easily monetized by traditional means. However, that is changing with the emergence of blockchain technology and crypto-tokens. I believe that business model innovation is more disruptive that technological innovation. Incumbents can adapt to and adopt new technological changes (web to mobile) way easier than they can adapt to and adopt new business models (selling software to free ad-supported software).


The Three Value Propositions of Ethereum Classic
By Michael del Castillo

The value propositions for ethereum classic break down into three categories – moral, strategic and opportunistic value. Though the functionality of the two networks (Ethereum classic vs Ethereum affected by hard-fork) is at the moment exactly the same, the symbolic power of a ledger that hasn’t been modified proved enough for one developer to take lead on keeping the chain alive. I think it is very fortunate for ethereum ecosystem that there is now a choice for these people. Instead of giving up on the ethereum altogether, they self-selected into a separate ethereum community with a distinct set of values. For those looking to turn back the clock on the potential investment opportunity of early ethereum, ethereum classic has proven an enticing way to do so. Of course, with an increased susceptibility to a 51% attack and only a small number of developers actually building anything on ethereum classic, not everyone agrees that classic ethers could be valuable at all.


A good idea isn’t enough. 3 lessons from building Skype and TransferWise
By Taavet Hinrikus

A seed depends on a whole host of factors to grow — from the fertility of the soil to the right mix of rain and sun to not being eaten by a passing bird. The same goes for an idea. For an idea to really take hold, other factors come into play from timing to the emerging technology that makes it possible. In fintech, it is the perfect storm of a loss of trust in the banks, the rise of mobile and the experience of better in other sectors that means that consumers are willing and ready to embrace non-bank alternatives. But you can only reap what you sow. The most important thing is to just get on and plant the seed. 


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FinTech Weekly Summary | July 24 – 31

As Umberto Eco once said “You can not make a spoon that’s better than a spoon”. We are so clung onto an idea of FinTechs replacing banks. They won’t. We need banks and you can’t make a better bank than a bank. In my eyes bank’s main responsibility is to protect our documents and money, everything else is an add-on. These add-on services are what we can disrupt and improve, or encourage banks themselves to improve them. Money-transfer is a great example, you can do it outside bank; cheaper and better. Banks won’t disappear but they may change their face drastically over the next decade by losing some services, drastically altering others and, possibly, creating new ones.

Have a fantastic week,


Counting Down to the Bank of Facebook
By Lionel Laurent and Leila Abboud

The biggest risk comes when technology heavyweights like Google, Apple or Amazon really start to zero in on their business. These tech giants are relentlessly innovative, and their reach — Facebook alone boasts 1.65 billion monthly users — and grip on customers’ personal data is virtually unparalleled. For now, the tech giants have barely scratched the surface. Apple and Google have mobile payment tools, Facebook users can send money to friends through Messenger and Amazon is pitching student loans in partnership with Wells Fargo, but they’re not exactly setting the financial world on fire. Their Asian cousins are more advanced: WeChat and Tencent can now be used to pay for everything from rent to a taxi, and Alibaba runs mutual funds.


A Seven Year Old Idea Comes of Age: Bank-as-a-Service
By Chris Skinner

Bank-as-a-Service is an idea came from and point to banks opportunities to grow business by releasing more of their capabilities as APIs, as software, as apps, as widgets … as anything that can plug-and-play into anything else. Part of this is that it’s not just banks’ products, processes and designs that should plug-and-play, but we should be able to plug-and-play any other services into the BaaS model, such as Stripe, PayPal, Fidor, Moven or any other APIs, apps and analytics we want.


Ethereum’s Two Ethereums Explained
By Alyssa Hertig

What started as an attempt to rescue investor funds in a high-profile project has resulted in a schism that has effectively split the community on the second-largest public blockchain. There are now two slightly different versions of this platform available to users – ethereum, the ‘official’ version of the blockchain maintained by its original developers, and ethereum classic, an ‘alternative’ blockchain maintained by a wholly new team. Now that it’s happened though, and ethereum classic exists, the community has tons of questions. These include whether hard forking the blockchain, or rewriting the code to reverse transactions without near-unanimous consensus, is worth the risk, and if ethereum developers forked again to solve a similar problem, would it split again? Either way, it’s not clear if the rise of ethereum classic is a bad thing for the technology. The protest blockchain gave the minority a chance to build their own system, and some people think it’s an exciting development.


What Is FinTech And Where Does It Live?
By Vinod Sharma

Fintech can manage your money automatically for betterment or wealthfront and not pay for investment advice that may or may not outperform the market. Fintech companies whose line of business combines software and technology to deliver financial services – will reshape and improve finance by cutting costs and expanding access to financial services. FinTech companies can create a more diverse and stable credit landscape by gathering data from social-media and other sources to assess the needs of young businesses and borrowers on the fringes of the banking system. To model the Fintech enterprise, its better use a method rather than make things up on the go. A method guarantees results and increases the productivity, predictability, repeatability and reliability of the business modelling and transformation. Most of the FinTech companies wins on the principal of “The ability to relate to people, to inspire and motivate them is what you must ever work on as a leader”.


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FinTech Weekly Summary | July 03 – 10

The nature of financial service companies is to wait and see. Be prudent. Most of the technological innovation is adopted after it has already ‘gone mainstream’. This is a safe approach and is adopted across the industry. A prisoner’s dilemma of sorts. But what if one of the participants really committed to implementing the new big thing before everyone else, for example, Artificial Intelligence. Could that shift the balance of power within the industry? I would love tech to seen as a competitive advantage rather than compliance-driven implementations to provide reports of higher granularity.

Have a wonderful week,


Artificial Intelligence In Banking – A Pain In The Bot?
By Luis Rodriguez

The bots of today, regardless of the industry, are indeed a bit of a pain, and with very limited added value for me as user in comparison to alternative UI. But IMHO, they’ll undergo exponential improvement and will definitely become part of our overall banking experience, not as an either/or choice, but almost certainly as some kind of hybrid model. So, in spite of the hype and overload of bot-related articles (including this one), banks would do best to start thinking about not when, but how to design a user experience of a natural language interface that fits their institution, because AI technology for finserv is nearly ready for primetime.


The Future Of Financial News
By Scott Tindle

Most financial news remains inaccessible. The jargon-filled writing assumes its readers have a relatively sophisticated knowledge of financial markets. The articles are also of considerable length. The combination does not make for easy reading — and leaves most professionals unwilling to engage with the content, despite its importance to their work and their lives. We think the future of financial news consists of a trusted brand that provides high-quality content but does so in a way that’s easy for people to understand. Curation and explanation make financial news accessible — and relevant to our readers. There is a new wave of companies such as Finimize that do just that.


FinTech To Halt Or Grow After Brexit?
By Khojinur Usmonov

Many companies in the EU, including fintech companies, use a mechanism known as “passporting” to access Europe (the European Economic Area) by getting licensed in a EU nation to be able to sell products and services across the bloc. If the passporting privilege is lost, companies will have to submit applications in every single country they wish to operate in, which is time consuming and cost prohibitive. Brexit is likely to make it costlier and more complicated for start-ups to attract and retain talent. Plus, other EU members, such as Ireland, probably want start-ups and talent to come to their cities, not stay in the UK.


Blockchain: The Answer To Life, The Universe And Everything?
By Alex Hern

The core of the idea is to get computers burning energy in order to prove that they are trustworthy, and stamping that trust on the “blocks” of recorded transactions. You could still lie to the network – but you’d need to burn more energy doing so than every honest participant, combined. Even for those uses where it can be transformative, blockchain technology still comes with its downsides. More fundamentally, sometimes centralisation can be a good thing: a fraudulent credit card transaction can be reversed by the card company, but stolen bitcoins are gone forever.


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FinTech Weekly Summary | June 19 – 26

Two massive shocks last happened this week as far as FinTech industry is concerned. First of all – Brexit (it is too soon to judge the impact of this) and the second was the hack of the DAO losing over $50 million of ‘ether’. I’d like to speak about the second one. This is very important time for the crypto industry and fintech in general. Moments like this, and specifically, how are we going to deal with this, is what makes the industry mature.

Albert Wegner of USV venture capital firm, has phrased it really well – “both individually and collectively we learn more from our failures than from our successes. Failures make us question our assumptions, successes generally don’t. It is exposing a lot of assumptions and that is the path to learning. The hack will not be the end of smart contracts or blockchains. Instead, it will be more like the early failures in aviation. They are what gave us today’s safe air travel.”

Have a wonderful week,


Understanding The DAO Hack for Journalists
By David Siegel

I believe we can say that this event marks the beginning of a new era of ethereum’s public blockchain. While the agile approach of “ready, fire, aim” generally works best with new software, it can be dangerous when $150m gets loaded into the chamber. Ethereum was billed as a general-purpose computer and the harbinger of a new decentralized model for computing and for society. We will see, a bit sooner than we may have wanted, how all this plays out in the real world.


Brexit: Will London Lose Its FinTech Crown?
By Ian Allison

Consensus among the technology community is that Brexit will topple London from its position as the most favoured fintech hub on the planet; the view of many startups and venture capitalists. There are three main reasons for this – firms rely on rolling out products across Europe, many technology companies rely on developers from all over the EU, and the concomitant fear and uncertainly which will curb investment pouring into the capital’s tech scene.


Fintech: If You Can’t Beat Them, Join Them
By Richard Lumb

The question is how to deal with the challengers. Should banks collaborate or compete? The strategy of a head-on competition has fallen short. The banks’ legacy information technology systems are a major barrier, and hiring top tech talent for banks is difficult. Fintech too is finding it tough competing head on. Technology start-ups usually fail because the cost of acquiring new customers is not sustainable. Investors have also become more cautious after a spate of bad news in the sector, including reports of slowing loan volumes for some fintech companies and management issues at others.


Boom, Bubble or Bust for FinTech?
By Howard Lindzon, Sonny Singh

While fintech seems to booming, there appear to be some cracks developing in specific sectors like P2P lending and robo advisors. Like every other industry, there are no shortcuts, but fintech is even more challenging because of all the existing regulations and incumbent banks. However, all these challenges won’t deter the irrational exuberance of new founders from trying to disrupt the sector. As long as the money keeps flowing, investors and entrepreneurs are going to flock to fintech. Unfortunately, it won’t be as easy or as quick as they thought it would be… but then, it never is.


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FinTech Weekly Summary | June 05 – 12

Blockchain hype is on the rise (even 2 out of 4 summaries this week are blockchain related). The reality is, there are very few use cases or applications for blockchain, but there are a lot of promising startups in this space, for example, Ethereum with its smart contracts and DOA. But the developing a killer app is the biggest challenge blockchain is facing right now. However, we often forget a more important challenge – to develop a profitable, sustainable business from that app. While there isn’t any immediate need for that, since blockchain is incredibly well-funded by VC money but it is something we need to think about when evaluating possible use cases for blockchain.

Have a wonderful week,


Fintech Is Playing The Long Game
By Bernard Moon

Even with the recent hiccups within the peer-to-peer lending space, I believe this is just a minor setback and these new players will continue to slowly erode traditional consumer and commercial lending. The current leader, Lending Club, went public last year and has arranged more than $9 billion in loans since it launched in 2007. As a comparison, Bank of America’s consumer loan portfolio was $489 billion in 2014. Fintech is not an area where we will see the rapid changes and growth as occurred in mobile messaging, or even the mobile phone industry with Apple’s takeover of Nokia. Startups challenging the financial sector are playing the long game; there will be no overnight successes. I believe we won’t see comparable giants from these crops of startups until a decade out — but change is coming, and it is inevitable.


Here’s The Huge Question Facing FinTech Startups — Can They Make Any Money?
By Oscar Williams-Grut

Fintech startups in the consumer space have made promise after promise of doing things differently, reinventing business models, and putting customers first in a way banks never have. But these kinds of models aren’t exactly money spinners. Most fintech startups still run on the traditional infrastructure of mainstream banking. They may not have a big staff and branch network to maintain, but things like transfers and direct debits cost them the same as your Barclays or HSBCs. It is only VC money that lets them keep prices artificially low – at least that’s the argument.


Bring On the Blockchain Future
By Editorial Board (Bloomberg)

Could the technology behind bitcoin, the alternative currency much loved by anarchists and drug dealers, make the world less vulnerable to financial disasters? The blockchain really could change the world, making financial crises much less damaging and reducing frictions in global commerce. It could also fade into the relative obscurity of narrowly conceived technical innovation. The technology deserves to be properly explored. Regulators can make the difference by giving it some space.


Blockchain’s Hype Exceeds Its Grasp – For Now
By Clint Boulton

With too few merchants or consumers using blockchain, adoption raises more questions than answers – especially in a corporate scenario where CIOs are called upon to show a return on investment for emerging technology implementations. Blockchain is hardly the first emerging technology for which hype has exceeded its maturity. Indeed, every disruptive technology platform with the potential for significant adoption or network effects, has had its trial by fire.


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FinTech Weekly Summary | May 30 – 05

Two themes stand out in FinTech lately – blockchain and failings of P2P lenders. Blockchain is where P2P lending was 2-3 years ago – in a state of euphoria. Every major news outlet tries to cover it (even not financial oriented ones). None sees the challenges but only trying to rehash benefits copied from somewhere else. On the other hand, P2P lenders are in a polar opposite situation. There is pure negativity surrounding the industry with Lending Club and Prosper seemingly not doing well. We need to appreciate that each of these innovations will go through a cycle of building up unrealistic expectations then dropping to an unreasonable pessimism state. I’m not worried about P2P lending right now, once the cloud of ‘doubt’ will disappear realistic expectations will be built. I am more worried about the hype surrounding blockchain and whether it can be sustainable. We will see.

Have a fantastic week,


Will Blockchain Become The Internet Of Finance?
By Joe Harpaz

In many ways, the business opportunities enabled by blockchain technology are not dissimilar in concept from other disruptive technologies built on the peer-to-peer model, such as Uber and Airbnb. And that’s where things start to get really interesting for blockchain. Like these other types of peer-to-peer applications, blockchain has the power to significantly disrupt the status quo by removing administrative layers from the banking and finance process, ultimately streamlining labor- and cost-intensive functions across a wide array of financial services. While we’ve yet to really see the first real Uber or Airbnb of blockchain emerge, there are dozens of different firms working to develop solutions based on the technology. Imagine what will be possible when they get the recipe right.


Making Sense of Blockchain Smart Contracts
By Josh Stark

The lack of clear terminology in this field is an unfortunate reality. The different uses of the term illustrate a broader challenge in our industry. The interdisciplinary nature of blockchain technology, and “smart contracts” in particular, lead people to see the technology as primarily belonging to their own discipline, at the expense of the others. Lawyers often look at smart contracts and see marginally improved legal agreements, without appreciating the fuller potential of blockchain-code to extend beyond law’s reach. Developers, on the other hand, consider smart contracts and see the limitless possibilities of software, without appreciating the subtleties and commercial realities reflected in traditional legal agreements. As with any interdisciplinary field, both must learn from the other.


PayPal Isn’t a Bank, But It May Be the New Face of Banking
By Telis Demos

PayPal Chief Executive Dan Schulman said his firm doesn’t want to supplant banks and hopes it can provide products that also bring revenue to lenders. “What we mean to do is to extend traditional consumer financial services,” he said, adding that his target market is the two-billion-plus people who are outside the traditional banking system. Ultimately, one future for established banks could be to serve as regulated money vaults to connect to a variety of fintech services. That would be similar to what has happened in other industries in the past decade, such as mobile communications, in which pricing power for service providers eroded while smartphone makers such as Apple Inc. boomed. “Apple didn’t have to become a cellular carrier to launch the iPhone,” said Bill Ready, global head of product and engineering at PayPal. “A bank is the carrier behind a lot of the services we provide, and when we deliver value to our customers, we bring volume to banks.”


Chris Skinner: Beware The Mice Of Fintech
By Chris Skinner

I’m often asked whether banks should be afraid of the threat of fintech. My answer is that most fintech is enhancing what banks do, rather than threatening their core business. I sum this up as “wrappers, replacers and reformers.” I believe that the only fintech firms banks should really fear are those that replace core bank services, such as saving, investing, and borrowing. These are the fintech start-ups offering robo-advice and peer-to-peer lending. Now, already I can see some banks enjoying some schadenfreude as they see Lending Club trip up and Prosper stumble. But there is more to the picture than recent events.


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FinTech Weekly Summary | May 22 – 30

FinTech is certainly trending right now. All major banks and consultancies are rapidly building up their FinTech arms, VCs are investing eagerly and ads of fintech startups are everywhere (some very expensive). FinTech is very visible right now but can they transform their visibility into credibility? Can FinTech become credible trustworthy names that customers automatically associate with trust. FinTechs need to find a way to achieve this to make a lasting impact.

Have a wonderful week,


Ethereum, Explained: Why Bitcoin’s Stranger Cousin Is Now Worth $1 Billion
By Timothy B. Lee

For the first time since its creation, Bitcoin is in danger of losing its status as the world’s leading cryptocurrency. The new challenger is a Bitcoin-like technology called Ethereum that has seen a surge of interest from users, developers, and the corporate world. The network’s currency, called ether, is now worth more than $1 billion — that compares to Bitcoin’s total market value of nearly $7 billion. Last week, a leading Bitcoin startup called Coinbase announced it was adding support for Ethereum to its popular currency trading platform.


Venture Capital Funding Is Flowing Back To FinTech Startups
By Ian Kar

In March, funding for fintech startups fell dramatically. In retrospect, it looks like that quarter was more akin to a speed bump than a car crash. The report speculates that this could be a great year for fintech investments. The $4.9 billion invested in the first quarter is 96% higher than the $2.5 billion in the same quarter last year. With Alipay’s parent company Ant Financial recently closing a $4.5 billion financing round in April 2016, the report says to expect next quarter to “bring more of the same.”


The DAO Of Accrue
By The Economist

It sounds like a cult, but it wants to be a venture-capital fund of sorts. As The Economist went to press, the DAO (short for decentralised autonomous organisation) had already raised the equivalent of nearly $150m to invest in startups. This, say its fans, makes it the biggest crowdfunding effort ever. To understand the DAO it helps to keep in mind the concept of “smart contracts”. These are business rules encoded in programs that execute themselves automatically under certain conditions: for example, funds are only transferred if the majority of owners have digitally signed off on a transaction. Such contracts can also be combined to form wholly digital firms that are not based anywhere in the real world, but on a “blockchain”, the sort of globally distributed ledger that underpins crypto-currencies such as bitcoin.


The Internet of Blockchains, Or Something
By Dave Birch

I’ve said a few times that I think the Internet of Things is where mobile was a couple of decades back. Some of us had mobile phones, and we loved them, but we really didn’t see what they were going to turn in to. We’re in the same position now: some of us have rudimentary Internet of Things bits and bobs, but the Internet of Things itself will be utterly beyond current comprehension. The idea of shared ledgers as a mechanism to manage the data associated with the thingternet, provide a security infrastructure for the the thingternet and to provide “translucent” access for auditing, regulation, control and inspection of the thingternet strikes me as an idea worth exploring. That’s not to say that I know which shared ledger technology might be best for this job, nor that I have any brilliant insight into the attendant business models. It’s just to say that shared ledgers might prove to be a solution a class of problems a long way away from uncensorable value transfer.


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