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There is ample evidence that 3 is a magic number. It dates back to the old times and is well captured in the Latin phrase[i] Omne Trium Perfectum – everything that comes in 3s is perfect. I bring this up not only because I chose to provide three examples in my post today but also […]
The post Convergence as a trend in the re-bundling phase of financial services appeared first on Daily Fintech.
Governance, Financial Inclusion, India, Tier 3 economies, remittances, payments, currencies, tokens, coins,…
These and more terms have been tossed around over the past few days, as we consumed facts and interpretations, triggered from the Libra white paper and all the related communications around it. As the dust settles down from the initial reactions, there are several overlooked aspects of the LIBRA plan that merit looking into.
Confession No. 1
There has been an explosion of cynical, partisan, and hyped threads of discussion. I include myself in the humans that reacted rather emotionally to the communication of the LIBRA plan. My `button` was pushed when the `financial inclusion` intention seemed to be the branding and PR storyline.
Dr. Cathy Mulligan and her collaborators called for caution in their Digital Cooperation report for the UN High-level panel (UNHLP) about using vulnerable communities to experiment on with #digitaltechnologies. Of course, `experimenting` is subject to interpretation and in the case of Facebook, maybe they can argue that this will be their second attempt in financial inclusion – as they did attempt to launch in the booming Indian market to offer seamless, cheaper payments like in any messaging app. Admittedly, payments are the very heart of any economy and we do live in a world that customers expect payments to be like WhatsApp messages[1].
Confession No. 2
We are not ready yet for DAOs. Thomas Power, rightly says that we need a Face to each and every scalable unicorn (every system needs a Face, at 8:30 BloxLiveTV). And the truth is that there is a problem with the Face behind Facebook, even though #DeleteFacebook led nowhere.
However, sentiment is not on our side, on this one. We, the ones that don’t forget Cambridge Analytica, fake News, propaganda, and what Chris Hughes or Sean Parker or Chamath Palihapitiya said; we are outnumbered. Let’s admit it.
The masses that send and receive remittances, and the masses that spend online to buy inexpensive items – micropayments – value access and convenience. While we, the ones that have a problem with the Face, are in another phase altogether, with more choices and the luxury of discussing governance, social responsibility, public scrutiny etc.
We have to acknowledge that foundations and associations (two different legal entities) setup in Switzerland have credibility and thus, the registration choice for LIBRA association. However, we need to also admit that this Swiss branding that has been deployed in another `alternative` use case – to accommodate legally the needs of blockchain startups to launch ICOs – still has to prove itself in the governance field and in the ways it links to the for-profit businesses that are their raison d` ȇtre.
As Kathryn Haun, general partner at Andreessen Horowitz (one of the 28 founding members) pointed out[2], the Libra Association, will focus on governance issues debating decisions around how the new digital currency will be overseen etc. Swiss associations and foundations are not legal structures that were meant to spearhead such large business initiatives and that is the reason that Kathryn Hauna says “I think of it as a constitutional convention; you have all these different states coming in trying to form this union.” Dianne Schepers, a legal executive, explained to me that foundations are supervised by the Swiss Federal Supervisory Board for Foundations (ESA) and are required to be registered in the commercial registry and provide an annual report. Associations are not subject to any of these requirements.
As the 28 founding members will be discussing governance and much more about LIBRA, I feel that the composition of this association was overlooked (as other more basic items needed tending). It was actually – and rightly so – welcomed and the sentiment was positive because it has a decentralization flavor to it.
Confession No. 3
One of my first emotional reactions while reading the facts reported from Verum Capital – Your guide to Libra – on the day it hit the market, was to ask three questions:
Q1: For how many of the 28 founding members has financial inclusion been their business?
Q2: How many of the founding members have unsuccessfully experimented at scale in financial inclusion?
Q3: Which organizations were invited to consider being a founding member? And who decided this?
I share with you today my initial findings (more research and patience is needed to address them all) from looking closer to the founding members that each `coughed up` $10million
There are 7 members from the financial sector and most of them need no introduction.
Discussing the composition of the founding members with Verum Capital, it became clear that none of the top 5 remittance players were invited. Xoom ranks 6th and was bought out by Paypal in 2015. LIBRA has included the 6th global remittance player as a founding member.
Source: SaveOnSend.com
There are 4 members from the Blockchain space. Coinbase and Xapo, need no introduction. I do confess that I had to check out the others. BisonTails was only setup in Oct 2018 in the US to focus in blockchain interoperability and has only $5.3mil in seed funding[4]. Anchorage is a US start-up launched in 2017 focused on digital asset custody for institutional investors with a Series A funding completed (total funding $17mil).
Where did Bison Trails find the $10million membership fee to participate in the LIBRA association? Why did Anchorage decide to spend 60% of its total funding up to date, on its LIBRA membership?
There are 4 members from the VC world, which a priori seems a sector weight that I cannot rationalize (help is welcome; please comment).
Source: Ribbit, A16Z Lead Fintech Unicorn Hunters, CB insights
Andreessen Horowitz is an investor in Bison Trails (one out of seven) and a lead investor in Anchorage. Thrive is family to the Facebook family. USV is family to Coinbase, and on and on.
Three out of the five top VC are founding members of the LIBRA association. Top VCs can be measured in several ways. What is more relevant here is their Fintech footprint.
There are 3 members from the e-commerce space. Ranging from travel, to luxury fashion.
Two online hailing businesses and one music unicorn
Two telecoms with Iliad being a founding member that is losing clients and revenues but has a founder and still majority shareholder (billionaire Xavier Niel) who loves challenging the corporate establishment and is the founder of the StationF, one of the biggest startup campus.
There are 5 members that are non-profit organizations:
Wrap up
Confession No. 4
I continue to look into the issues raised by the boldness and the potential of the Libra coin (which has huge regulatory risk). LIBRA has actually a huge PR and branding problem, as even the MIT Tech Review article and many more, refer to the LIBRA Stable coin as the `Facebook coin` Facebook’s Libra: Three things we don’t know about the digital currency.
David Marcus, spearheading the Libra project for Facebook, had to denounce rumors that the $10 million buy-in got the validating firms access to transaction data (Decrypt).
There are 28 seats around the LIBRA table for now (similar to the way Stellar started off with 30 nodes). The LIBRA coin is not a Facebook coin. However, governance in an association is legally non-existent. So, for now we need to be clear that it is in good faith and only by giving the benefit of the doubt, that the LIBRA association has a dream and we should be watching their execution closely.
David Siegel through his new endeavor Cutting through the noise shared several facts and insights on LIBRA, as he is excited about the potential of a Stable coin that can scale fast as it will be launched in established markets. LIBRA will be offered to all users on Facebook, Booking, Lyft, Paypal, Farfecth, …..
During his webinar on Saturday (recording on youtube) I learnt that 60% of votes are needed in order to make a change in LIBRA. I like to think of this as the 60% attack nightmare.
Can Facebook pull off a 60% attack?
As Bernand Lunn said to Swissinfo.ch the day after, in What does Facebook’s Libra cryptocurrency aim to achieve?: “Facebook has been hugely successful making money from accumulating people’s data and then selling it. It’s hard to see them completely changing their stripes.”
How will the LIBRA association untaint the LIBRA coin so that it is not thought of as a Facebook coin?
[1] Excerpt from `Money is a claim on an Institution and the reason for change`, Efi Pylarinou
[2] Andreessen Horowitz: How Facebook’s Libra Cryptocurrency Will Be Governed
[4] Source from Crunchbase
Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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2016 was a pivotal year in India’s digital economy. Demonetization was deemed a execution failure by many experts. However, it has triggered a digital payment boom in the country. In the last two years, transaction sizes in India have grown 50 times to $2 Trillion (143 Trillion INR). Some claim demonetization wasn’t the reason for the payment boom. If not causation, there is definite correlation between the two.
When we talk about Asia Fintech/Payments, China’s $40 Trillion market perhaps takes precedence over the other economies. However, if India continues to grow at the current pace, we may see yet another leap frogging Asian Fintech economy. I must confess, I was pretty excited when I first read about the 50X growth of the payments market.
Several global players have set up shop in India. Google, Amazon and Alibaba have all taken part in the payments boom in different ways. While these tech giants keep clashing, the Indian government has led the way in setting up the core infrastructural elements through the Unified Payments Interface (UPI). This is perhaps one of the few instances where a government has pioneered innovation at this scale.
I recently spoke to Elizabeth Chapman, CEO of ZestMoney – a fintech lender in India. As a Westerner, now running a startup based out of India, she is perhaps best suited to assess the developments there, especially in comparison to the west. There were two key developments she was very pleased about.
One, getting a digital identifier for 1.3 Billion people. Getting the Aadhaar programme up and running in under two years, was no mean feat. The data base has been linked to several governance aspects, like tax for example. The other development Liz was impressed about was the UPI, which has catalysed the payments boom.
Now coming back to India payments, Facebook is a key player. Whatsapp payments was tested with a limited audience in India. While the uptake was very good for the functionality, regulatory support was missing. The Reserve Bank of India (RBI) initially came up with a rule that customers’ payments data can’t be stored outside of India.
The Government of India also imposed a rule that any data classified as critical personal data cannot be stored outside of India. Most international technology firms have expressed their dissatisfaction with these data protection rules. One of the key reasons why Whatsapp Payments didn’t take off in India was because of this rule.
In an emerging markets context, consumers care less about data protection and privacy. As long as they get to be part of the banking system and the financial ladder, getting paid is all they care about. Which is why QR codes and PayTM wallets have become so commonplace on Indian roadside shops.
In a recent Linkedin conversation, one of the comments were about decentralised ways of storing assets in a wallet. It is a great concept in the west, and I love to talk about it till the cows come home. However, this was hyped as a great development in an emerging markets context. I don’t believe that is true.
Emerging markets consumers DO NOT care about decentralisation. I am not talking about the college graduate in south east Asia who is writing a Blockchain and has 10 different wallets to store cryptos.
I am talking about the lady who is selling the turmeric in the picture above. All she cares about is an easy way to get paid, so that she can cook dinner for her kids, and pay their school fees. They care about how inflation could take away all their wealth in Latin America and parts of Africa. Therefore, a solution that solves their day to day problems will see massive uptake.
We have already seen the rise of digital payments in India. With the removal of these data localization rules by RBI and the Government of India, there will be more explosive growth. With Facebook’s Libra (Sorry, couldn’t help mentioning it) around the corner, getting rid of the data localization rules, may not necessarily be a bad thing.
For Facebook, India is the biggest market – be it based on population or internet growth, or middle class income or financial inclusion. All the metrics point to India for Facebook.
For me, Financial Inclusion comes ahead of Data Protection. We thought Identity with Aadhaar – we didn’t think decentralisation. Let’s get them all on to the next generation payment network, get an economic identity created for them. Data protection, privacy and decentralisation will soon follow as awareness of the risks of the digital economy becomes more prevalent. For now, let us just help the lady selling the turmeric get paid.
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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The Daily Fintech SmartExpert Service is an easy engagement model for our advisory services. Now you can start working with us by simply choosing your expert, paying for the hour and scheduling your call with the Expert.
In this post we unpick that simple phrase “paying for the hour” and explain why we decided to innovate on that front by partnering with one of the next generation of StableCoins for payments rather than simply using the credit card rails and what we learned from that experience. We like to write about payments innovation. With this partnership we are testing our theories in the laboratory of the real world and making that experience available to our readers.
In this post we will describe:
For our big picture view on why StableCoins are so important (but also so hard to get right), please read this update to The Blockchain Economy digital book that was published on Saturday.
Why we are using a cryptocurrency for payments, rather than relying on the legacy credit card rails.
First, we do offer legacy credit card rails as an option. If you are not comfortable using cryptocurrency, just use Paypal.
Second, we like to test our theories in the laboratory of the real world. Back in April 2017 Daily Fintech articulated the thesis that Bitcoin Will Move From Darknet Early Adopter Niche To Clearnet Mainstream:
“This will happen first among free agent, knowledge workers who offer digital products/services cross border.“
“Free agent, knowledge workers who offer digital products/services cross border“ describes the Daily Fintech SmartExpert service. Now it is time to test that theory in the laboratory of the real world.
Third, it just makes practical sense in a borderless world for DailyFintech’s global subscribers and Experts. Once you really look at how cross border payments work using legacy bank and credit card rails, you see three big practical problems:
Our theory is that change will be driven by Merchants not Consumers, because Merchants have the motivation. We decided to test this theory by offering payment for the Daily Fintech SmartExpert Service using a StableCoin.
Why use a StableCoin rather than Bitcoin or any other Tokenomics funded cryptocurrency.
in a word – volatility. When we first started thinking about how to do this, we planned to use Bitcoin and we created a clever (but, in hindsight, overly complex) way to deal with the volatility problem. When we discovered StableCoins, we saw that we did not need a complex way to deal with the volatility problem. The complexity of explaining how we dealt with Bitcoin volatility would have created friction that would have impeded the chances of success for the Daily Fintech Expert Service.
So much for Bitcoin. What about all the Altcoins that offer quick, low cost payments? They solve the speed and fees problem very well, but they do NOT solve the volatility problem. Any cryptocurrency that is funded through Tokenomics has an inherent volatility problem. The venture and their early investors want the price of the coin to rise and some traders bet against it rising; the push and pull of these bulls and bears creates volatility.
What is needed is something that is a) a cryptocurrency b) non-volatile by design. In short we need a StableCoin. For more on Stablecoins, please see this chapter of The Blockchain Economy Book
The next question was – which StableCoin?
Why we chose the GLX StableCoin
GLX is a StableCoin issued by a company called Globcoin.
We chose the GLX StableCoin for 5 reasons:
In fact, in full disclosure, I like Globcoin so much that I agreed to join their Board and help make things happen for them.
What we learned during this project.
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is the author of The Blockchain Economy and CEO of Daily Fintech.
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$41 Trillion was the size of China’s mobile payments market in 2018. It is perhaps counter-intuitive when the payments market is more than three times the size of China’s GDP ($12 Trillion). That’s because GDP is based on value creation, not on transaction volumes.
Let me explain it with a crude example. A couple of weeks back, two of my friends and I went into a sports shop in Chislehurst, and bought a cricket bat for £240 for the summer. We knew we were going to share the costs at £80 each. I paid the shopkeeper £240, and then my friends paid me £80 each.
While the value created/exchanged in this case was for £240, payments happened for £240+£80+£80 = £400. GDP is calculated based on the £240, and payment volumes would account for £400.
In the initial days of my discussions about China Fintech, I would often praise China’s Fintech businesses as perhaps the largest in the world. China is doing Trillions in mobile payments, and the US is still groping its way towards $200 Billion. Purely from a size perspective China is light years ahead, but the business models there are different.
Fintech is used as a business model by lifestyle firms in China and broadly Asia. Fintech is not their core value proposition, at least it is not until they onboard a few million customers. Their core lifestyle business is then augmented by Fintech services for their customers, and that makes their life style business stickier.
I have touched upon this in detail in one of my previous posts on how lifestyle businesses have evolved into Fintech heavy hitters in Asia. And payments is the lowest common factor between ecommerce/lifestyle businesses and financial services. Therefor, firms like Alibaba, Tencent, Grab and Bykea have integrated payments to their core service offering.
However, the Chinese tech giants have identified that it was time to upgrade from payments into banking. Earlier this month Alibaba, Tencent, ZhongAn and Xioami were granted a virtual banking license in Hong Kong.
Alibaba applied for a banking license for its Ant SME services, which is a subsidiary of Ant Financial. Tencent and Xiaomi did a Joint venture to go for the banking license. Xiaomi is the fourth largest mobile phone manufacturer in the world with over 120 Million smart phones in 2018.
When Amazon began offering lending to its SME base, there were headlines that they would soon go for their banking license. However, the trend these days is that the East would lead and the West and the rest would follow. Now that China tech giants have upped the ante with a banking license, would the US peers respond? Watch this space.
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).
The Monetary Authority of Singapore (MAS) have been piloting several Blockchain use cases over the past few years. Central Bank Digital Currency (CBDC) was one of the key focus areas of Project Ubin – MAS’ Blockchain initiative. In September 2018, I had published my post on Singapore and their efforts around Blockchain.
With the five phased approach to Project Ubin, we may soon see a state issued digital currency. That would not only put Singapore ahead of its Asian peers, it may be a Global first.
We now have a global first. Just over a week ago, MAS and the Central Bank of Canada made an announcement that a transaction between digital currencies of the two central banks was executed successfully. The trial was performed with the help of Accenture and J.P.Morgan.
As the Blockchain narrative developed over the years, one of the key buzzword was decentralisation and disintermediation. However, in the last two years, we have seen permissioned Blockchains gain popularity.
The three dimensions of the Blockchain Trilemma proposed by Vitalik Buterin were, Scalability, Security and Decentralisation. Designers of Blockchain systems have to choose between these three dimensions. The rise of permissioned Blockchain indicates that Decentralisation would be the first to be compromised amongst the three dimensions.
There are several reasons why a central bank would launch a digital currency. In the case of the Petro, the rationale was largely to stay clear of sanctions and raise capital to pay back some of their debt.
Reserve Bank of India on the other hand is exploring CBDC as it would be a low hanging fruit after the mass (forced) adoption of the nation’s identity system – Aadhaar. A good model would be to link a CBDC to Aadhaar verified wallets to create accountability and traceability of cash in the economy.
RBI was also spending 7 Billion Rupees ($100 Million) per year in just creating and managing the Rupee. There would be huge savings if they launched a CBDC.
Getting back to the SGP digital currency. Some key points to note are the following,
The picture above explains the HTLC framework used by this model. A report was published at the back of this initiative, describing several models that cross border settling systems could use.
The next wave of central bank blockchain projects can make further progress by bringing technology exploration together with policy questions about the future of cross-border payments
Sopnendu Mohanty, Chief Fintech Officer, MAS
The report also goes into the depths of the challenges in using HTLC and the potential alternatives being worked on by the Blockchain community. Like in most other Financial Services use cases of Blockchain, this transaction was also executed in a controlled environment.
CBDC are still in their infancy. This pilot could be followed up by collaboration across several central banks at the policy, governance, process and infrastructure levels. This would benefit the global economy at a scale never seen before. Let’s take stocks in a year. Watch this space.
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on “Sustainable Deeptech Investments” and a podcast host.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).
Financial Services has traditionally been a game of numbers, aggressive product (mis)selling, big bonuses and as a result too many “too big to fail”s. The rise of regulations and technology innovation within the industry has resulted in a course correction. The customer is now getting some attention. And more recently customers’ behaviour is.
Applying behavioural sciences to study how customers make their financial decisions has seen some recent traction. It is critical to bring together cognitive biases and behavioural anomalies and understand how these affect financial decisions. Add to that the impact these financial decisions have on an organisation’s PnL. An executive in a bank capable of doing that would be an ideal fit to as the Chief Behavioural Officer.
The rise of Fintech was accompanied and facilitated by the rise of friendly customer journeys. Today I spend so much, not realising how much money has gone out of my bank account with just a touch. The process is so frictionless that, the act of paying someone is invisible. When it is out of sight, it is out of mind. That’s the simplest way to make people spend more.
That is an example of how an existing process has been made less of a touchpoint. Recently, Merill Lynch conducted an experiment where they asked users to upload their photos. They would run a program to show what the users would look like in 30-40 years. That made the users more conscious of their retirement planning, and shifted their financial behaviour.
Another instance is where the Commonwealth bank of Australia launched an app for customers to set goals. The tool prompts customers to set personalised savings goals and breaks them down to smaller milestones. Since February 2019, users have created more than 250,000 savings goals – 27% of the goals being towards a holiday and 19% towards a property.
Human beings are irrational when it comes to financial decisions. An understanding of behavioural sciences is not just important to win over customers. It is critical to understand the biases that affect existing business decisions that are made within a firm. Leading valuations expert Ashwath Damodaran calls for the need to study these biases as much as the valuation principles used within investment banks.
All valuations are contaminated by bias, because we, as human beings, bring in ourpreconceptions and priors into the valuations. When you are paid to do valuations, that bias multiplies and in some cases, drowns out the purpose of valuation
Professor Ashwath Damodaran
We (my firm Green Shores Capital), recently did an event to identify top financial inclusion firms to invest/track for investments. One of the firms Confirmu, based out of Israel, study the psychological responses from a potential borrower to assess if they were trust worthy or not.
It is one thing going through the borrowers bank account, business plan and reasons for the loan. While all that could be genuine, a borrower might still not have a genuine intention to repay. Especially in countries where there are no credit bureaus, a system to predict the future behaviour of a borrower could be very handy.
While there are several tools to assess the ability to repay, there are very few to assess the intention to repay a loan.
Confirmu’s customer journey takes the users through a chat process, where the customers answer a few basic lifestyle questions, then choose their favourite between a bunch of images, and finally leave a voice answer to a question. Their machine learning powered algorithm gives a rating indicating the customer’s intention to repay.
Banks have started to focus on technology much more than they have ever done. However, as Steve Jobs puts it – ” it’s technology married with liberal arts, married with the humanities, that yields us the results that make our heart sing”
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).
The Cross border payments market was at $22 Trillion three years ago as per a research by the Boston Consulting Group. Certainly a market to go after, and Visa and Mastercard do not seem to be shy of throwing punches at each other in the process. So who got their nose ahead?
Earlier this year, Mastercard and Visa were fighting it out for the acquisition of Earthport. In Dec 2018, Visa had made an offer of $250 Million to acquire Earthport, a UK based payments firm. Mastercard came to the table with a $300 Million offer for Earthport. The deal was too important for Visa that they upped their offer to $320 Million and pretty much closed it. Pretty much closed – because the Competitions and Markets Authority (CMA) yesterday said that they were investigating if the acquisition would create a “substantial lessening of competition” in the UK.
No deal is done until it is sold, signed and then signed again. At this point, the deal looks far from signed – however, the acquisition could help Visa’s dwindling fortunes with the cross border payments segment. Visa’s Q1 results showed that the growth of the segment was at 7% and Mastercard’s growth was at 17%. So, clearly desperate times for Visa, and no wonder they are willing to pay a bigger amount.
Earthport were considered leaders in disintermediating the cross border B2B payments space. Historically, this process saw monies taking several hops before it reached the target bank. Through Earthport’s network, the process would be simplified with just one hop, and clearly Visa see the advantage. Having backed out of the deal, Mastercard focused on acquiring Transfast, another cross border payments firm. Transfast boast a network of about 125 countries and integration with over 300 banks.
We believe Transfast gives us the strongest platform to immediately enhance our cross-border capabilities and further deliver on our strategy.
Michael Miebach, Chief Product Office, Mastercard
Mastercard have been more aggressive in driving growth through acquisitions in recent times. In Q1 2019 alone, they were involved in several other payments deals. They committed $300 Million as a cornerstone investor in the IPO of Dubai-based Network International. Network International is the largest payments processor in the Middle East and Africa, and are planning their IPO in London with a target valuation of $3 Billion. The transaction would see them take a 9.99% stake in Network International.
Mastercard are beefing up their Africa presence through their investment into Jumia, an Africa focused payments firm. Jumia and Mastercard have been working together since 2016, and the latest round would take Mastercard’s total investment into Jumia to $56 Million. The ambition is to expand aggressively across the 14 African markets that Jumia are already present in, and also help entry into other African markets.
Having taken care of Africa and the Middle East markets, Mastercard have also set sights on Asia. They have now taken part in the current funding round of Singapore based Bill.com, who handled $60 Billion in payments in the region. Bill.com raised $88 Million from several investors including Fidelity investments, Franklin Templeton, Tamasek and Mastercard.
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).
Jack Ma famously called Alibaba and their tech giant peer group – TechFins, declaring their intention to sneak into financial services. Banks were too focused on their battle with Fintechs then, that they perhaps were blindsided by the rise of TechFins. The first quarter of 2019 has been eventful, with major headlines from big tech firms like Facebook, Apple and Alipay.
Over the past few years, since the Fintech boom has been afoot, talks of Fintechs vs Banks have been rife. But only when China saw leap frog moments in its payments landscape, via, Alipay and WeChat, did the industry (both banks and Fintechs) pay any attention to the big tech giants. I have always said that the Tech giants had two big advantages.
They have what the banks don’t have – agility in innovation, and they have what the Fintechs don’t have – Massive Customer base (and their data).
The challenge in exploding into Financial Services for the tech giants was that, it was non-core to them. However, the evolution of Fintech use cases, and the seamless integration of these applications into consumer’s routine, have made them almost invisible. So, all the tech giants had to do was pick use cases where they could be mostly invisible – payments was a low hanging fruit.
Two weeks ago Barclays and Alipay announced their partnership. Alipay will now be available with several merchants across the UK, and allow for seamless payment experience for half a million Chinese residents, tourists and students in the UK.
“Barclaycard, which processes nearly half of the UK’s credit and debit card transactions, today announced a new agreement with Alipay, the world’s leading payment and lifestyle platform, which will allow retailers to accept Alipay transactions in stores across the UK “
The partnership is for UK retailers to accept Alipay payments without replacing their existing point-of-sale system. Alipay users on the other hand will enjoy the benefits of the seamless journey that they have at home.
The other key event of the last couple of weeks has been THE APPLE CARD. If you haven’t yet heard, good for you and I suggest you google at your peril. But atleast for me, the social media reaction was a bit too overwhelming. My take on the announcement –
THE GOOD
THE BAD
THE UGLY
Irrespective of the disappointing aspects of the card, I believe, Apple has rocked the boat, and banks are feeling the heat. They are cash rich, know how to create digital+physical products, have a brand following, and can disrupt payments in a bigger way, if they chose to.
With IBM entering the remittance market through World Wire, Facebook testing out Whatsapp payments, Alipay entering the UK market in a big way, and Apple’s recent announcement, the Penny should have Dropped for the banks. And the realization should hit them that Fintechs were more of a distraction, the real battle has just begun.
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).
72 countries, 47 currencies, 44 banking endpoints and more than 1081 unique currency trading pairs. IBM Blockchain World Wire is here.
IBM Press release on World Wire
In the last four weeks, we have had JPM Coin announcement by JP Morgan, followed by Facebook’s ambitions to plug crypto payments into Whatsapp, and now IBM have announced the launch of World wire – a cross border payments platform on Stellar protocol. I tried to call them permissioned Blockchain, but couldn’t resist calling them “Centralized”.
When I blogged about JPM Coin a few weeks ago, and how it could affect both Ripple and SWIFT, one unanimous comment I received was that JPM Coin couldn’t be considered a cryptocurrency. I have had several philosophical arguments over the years on why a permissioned Blockchain, preferred by enterprises, do not/do qualify as Blockchain as they are centralized.
For all practical reasons, we have seen the rise and fall of decentralized Blockchain. Most of us would like a utopian decentralized world without these too-big-to-fail firms throwing their weight around, or central regulators calling the shots, or tech giants monopolizing industries with their data might. However, it is hard to make the leap from a highly centralised system (we have today) to a new decentralised way – not just philosophically, but also pracically.
The focus has shifted from ICOs to the more conservative STOs, with stable coins showing up in most use cases. Several startups I have met in the last few months have even stopped using the term ‘ICO’. The resurgence of Blockchain is now being led by big firms like IBM, Facebook and JP Morgan. I wouldn’t be surprised if this becomes the norm in 2019, where we see more Blockchain based production use cases from enterprises.
IBM have been working in partnership with the Stellar Foundation for quite sometime now. When I spoke to Lisa Nestor, the Director of partnerships at Stellar in Q4 2018, she mentioned that they had a strategic partnership with IBM. She stressed the importance of working closely with incumbent organisations across industries to make Blockchain usage mainstream.
We’ve created a new type of payment network designed to accelerate remittances and transform cross-border payments to facilitate the movement of money in countries that need it most
Marie Wieck, General Manager, IBM Blockchain
As a result the IBM World wire, focused on the cross-border payments market has already enabled payment locations in 72 countries, with 48 currencies and 44 banking endpoints. It supports Stellar Lumens and a USD based stablecoin – thanks to their work with Stronghold. The network will also support stablecoins issued by several of its consortium banks. The list includes stablecoins based on Euro, Indonesian Rupiah, Philippine Peso, Korean Won and Brazilian Real. How will this affect Ripple?
Credit Ripple for the vision of using a digital asset in order to enact immediate settlement with finality. I think their implementation followed one path. Our implementation is a little bit different. We are not the issuer of an asset. In fact, what we believe is that there should be an ecosystem of a variety of digital assets that provide the settlement instruments that enable these cross-border payments.
Jesse Lund, IBM’s VP of Blockchain and Digital currencies
IBM’s strategy of keeping the platform agnostic to any kind of digital asset is a master stroke. The platform will work through the following steps,
The new world of international payments look pretty disintermediated, near real time and efficient. Bringing on-board new markets is cheaper; micro payments support and end to end transparency are all benefits too. Are we still going to be hung up on “It is not really decentralized”? Do we care?
Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.
I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.
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