We have to fly high to see what is happening in the world. We are all trapped in the convenience trap. And as David Siegel says in his recent video
We are pawns
Flying high and using the revenue lens for public companies like Amazon, is where I want to take you today. I took a glance at the 2018 revenues of Amazon. The three main businesses lines are e-commerce, cloud computing, and ad revenues. What struck me was that growth came from ad revenues which are `lumped` into a generic category labeled `Other`.
Remember 2015 was the first year that Amazon reported cloud revenues separately, revealing specifics about its AWS business. Today, four years later, Amazon reports advertising revenues in a category that is named `Other`. According to the GeekWire for 2018, Amazon reported $10.1 billion for the “Other” category. According to Amazon`s financial statements this category “primarily includes sales of advertising services, as well as sales related to our other service offerings”. Fortune reported that in Q1 2019,
Sales in Amazon’s “other” segment, which is mostly advertising, increased 34%, to 2.72 billion. The company’s digital advertising franchise has grown into the third largest in the U.S., trailing only Alphabet’s Google and Facebook, researcher EMarketer estimates.
Let me spell this out loud: Amazon`s advertising business is getting ready to be publicly disclosed as one of the main businesses competing openly with Facebook and Google`s Alphabet. This is important because the top marketplaces are Ad driven and don’t seem to intend to switch from that business model. Actually, it isn’t easy for them to switch to another marketplace business model.
Are you aware that merchants that want to sell on the Amazon marketplace have to compete amongst themselves to reach end customers? That means, paying to advertise on Amazon in order to move algorithmically up the ranking on the Amazon marketplace. This is the game that each and every Western Bigtech uses in its closed ecosystem. You have to understand the algorithm and pay to play based on the rules of the algorithm; be it Amazon marketplace, Facebook, Alphabet.
This realization makes me think that maybe, I only say maybe, merchants borrow from the SME lending arm of Amazon, to finance their advertising campaigns on Amazon. So, Amazon wins twice. I don’t have data on this, so it is only a conjecture.
We know that the technology is there to launch an e-commerce marketplace that vendors can reach end customers (B2C or B2B) without having to pay high advertising fees and incur costs to play on the platform whether they sell or not. Who can execute on this? We just need one success story of such disintermediation. Will it be in selling books or music or baby formula or online education? Will it happen in the West or the East? Will Amazon dare to cannibalize its e-commerce business at least in one area?
What we do know, is that it won’t happen from Facebook whose business is 98.5% based on advertising and their plans for a Facecoin won’t change that business model. It won’t come from Alphabet either, who earns 15% of revenues from non-google ads but 70% from advertising of the Google family (Youtube, Gmail, etc). Both are Titanics in advertising and can`t disrupt themselves.
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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Last week our theme was “Top 7 Crypto Exchanges for IEOs“. Our theme for this week is “”
TLDR. Search data is a great way to track the growth of active Bitcoin and cryptocurrency users. Search is a great indicator of what people are interested in. Engagement levels are red hot, with crypto investors checking the daily price of of their precious coin. Data from Google Trends shows search interest for Bitcoin hit a 14-month high. This data confirms studies that suggest there’s a correlation between Bitcoin’s price movements and search interest for it. For Bitcoin, cryptocurrencies and blockchain looking at the search data for different geographies, we can examine the entire ecosystem in new and interesting ways.
Bitcoin has been hovering around $8,000. The CBS 60 Minutes segment, “Bitcoin’s Wild Ride,” which aired last week was very positive for Bitcoin.
Bitcoin’s price movement has been getting more and more people to search for it. There seems to be a real connection between people searching Bitcoin on Google and actual investment in the cryptocurrency. Bitcoin’s price can be predicted based on the number of Google searches for it, because the latter precedes the former, making Google search a key indicator for Bitcoin trading.
Google trends also shows us the geographic origin of Bitcoin searches, with countries in Africa and Europe ranking in the top 10:
Nigeria
South Africa
Ghana
St. Helena
Netherlands
Austria
Switzerland
Singapore
Slovenia
Australia
Germany
Venezuela
Canada
Malaysia
Ireland
United Arab Emirates
Pakistan
United States
United Kingdom
New Zealand
Beyond prices, Google searches also indicate the pulse of an entire geographic region for crypto. Using Google Trends we have tried to uncover the interest for the top two cryptocurrencies, Bitcoin and Ethereum, overall for Cryptocurrencies and for Blockchain technology, performing searches for “Bitcoin”, “Ethereum”, “Blockchain” and “Cryptocurrency”.
Its no surprise that countries like Japan, South Korea, China and Russia lead the world in interest for “Blockchain”. They are building solutions to harness the power of decentralization and stand at the forefront of developing blockchain technologies.
In most western countries like the United States, the European Union, Canada, the United Kingdom and Australia, Bitcoin dominates user searches.
In South America, Venezuela presents an interesting case. With its unstable political situation and economy, “Bitcoin” is the top query with 75% of the results.
There is an incredible amount of information one can obtain from Google’s Trends. But Google search data is not the only source. There have been studies showing the correlation between Twitter posts and Wikipedia article views to Bitcoin’s price.
No matter how you look at it, the relationship between public interest and price is undeniable. It indicates that people are interested in buying Bitcoin. It is FOMO materialized in numbers and coincides with Bitcoin’s famous, or perhaps infamously wild market cycles.
He writes the Blockchain Weekly Front Page each Monday.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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TLDR. When Vitalik Buterin and Balaji Srinavasan were asked whether certain trends were either underrated or overrated, they both said that StableCoins were underrated. This post is my explanation of why I think they are right. Yet we have already seen some high profile StableCoins fail, which is why the headline also refers to why StableCoins are also so hard to get right.
In the image above you see the usual path to a currency – from Store of Value to Medium Of Exchange to Unit Of Account. Bitcoin could be all three but today faces a volatility chasm, with wild bull and bear markets. A StableCoin is designed from the start to be all three.
Today Bitcoin is a speculative Store of Value (the digital gold thesis). I am on the record saying that Bitcoin has more upside than downside and have been a buyer, but it is certainly a speculative bet. Even though it is speculative, Bitcoin has some credibility as a Store of Value.However Bitcoin is weak as a Medium Of Exchange (there is not much you can buy directly in Bitcoin) and Bitcoin is not credible at all as a Unit Of Account. You will know when Bitcoin becomes a Unit Of Account – we stop referring to how much something costs in Fiat currency and only refer to the cost in Bitcoin or Satoshi units.
Watch Vitalik Buterin (Ethereum) and Balaji Srinavasan (Coinbase and A16V) talk about StableCoins around minute 38
Mixing SpeculativeCoin and StableCoin in one venture does not work
StableCoin for JP Morgan, Facebook & Samsung is just the tip of the iceberg
Why a StableCoin has to be multi-currency basket
Don’t bet against Government backed CBDC.
Low volatility is essential for Cross Border payment rails
Bitcoin as a Medium Of Exchange faces hurdles that will take a long time to overcome
You cannot manufacture a stable result out of unstable/volatile base
Audit heavy/ tech lite is simple key to trust in redemption
StableCoin can be a currency for passionate global communities
StableCoin can be bridge into crypto for conservative adopters
Context & References
Mixing SpeculativeCoin and StableCoin in one venture does not work
We call them StableCoin to differentiate from coins/cryptocurrencies that are speculative. So I coined (sic) the word SpeculativeCoin.
SpeculativeCoins have benefited from a great business model, defined as Tokenomics (funding via coins that you sell into a rising price). The idea got discredited in the ICO hype and got nailed by the SEC (details here).
Ripple has been masterful at using Tokenomics to boost XRP. Whether that means XRP has value is more debatable, but there is no question that Ripple has done well with this model. It is debatable how many Altcoins will do well, but what is absolutely certain is that you cannot mix SpeculativeCoin and StableCoin in one venture.
Speculative Coin/Tokenomics might work. StableCoin might work. An investor might mix SpeculativeCoins and StableCoins into a portfolio just like you might have Facebook and Exxon Mobil in the same portfolio. However, the two models are totally different. It would be like combining Facebook and Exxon Mobil in the same operating business.
StableCoin for JP Morgan, Facebook & Samsung is just the tip of the iceberg
It is hard to keep up with the flurry of PR from big companies offering their own branded StableCoins. Without trying too hard to stretch the memory banks, we have seen StableCoins launched by JP Morgan, Facebook & Samsung. Other big banks, social media networks and consumer electronics companies will soon have to issue one to compete. Soon we will have a StableCoin for each Global 2000 corporate and then it may move to SME.
When every company has their own StableCoin, it will add about as much competitive advantage as having your own .com address.
Why a StableCoin has to be multi-currency basket
A single Fiat currency StableCoin, whether USD or EUR or CHF or any other reasonably stable Fiat currency is not good enough for two reasons, one of which is critical:
– a multi-currency basket is more stable than any single Fiat currency. Even if a Fiat currency has been stable for a long time, smart investors don’t like betting that politicians won’t do something stupid in future. Printing money is a pretty big temptation!
– a single Fiat currency could be seen as a threat by the nation state that issued that currency. Although governments cannot shut down Bitcoin or Ethereum (for more, read this chapter in The Blockchain Economy), they have morecontrol when it comes to a single Fiat currency StableCoin. This is an existential threat to a StableCoin venture pegged to a single Fiat currency. As the news of Basis shutting down shows, this is not just a theoretical risk. Basis shut down, despite raising over $100m from top tier investors, because of regulatory pressure.
Don’t bet against Government backed CBDC.
CBDC = Central Bank Digital Currency. A CBDC cuts out the FX Interbank market but not the Central Bank. It is a more efficient Fiat currency; still Fiat but faster and more efficient. Governments that are frustrated by their ability to shut down Bitcoin (because it is decentralised and there is no Bitcoin company) will not hesitate to shut down any threats that are easy to shut down.
That is why a single Fiat currency, which could be seen as a threat by the nation state that issued that currency,faces existential risk fromGovernments.
Low volatility is essential for Cross Border payment rails
“Use case # 3 is using Bitcoin as an invisible interim store of value. Neither sender nor receiver cares about Bitcoin. If you wanted an interim store of value for this purpose, the last thing you would invent is Bitcoin. You would create something that was almost a mirror image of Bitcoin:
Had the lowest possible volatility against the major Fiat Currencies.
Was not perceived as a threat by the Governments that issue those Fiat Currencies.”
Look at the 10×3 problem. Imagine getting paid for a product with a 10% margin and in the 10 minutes to settle on-chain, the price declines by 10%. You just lost money on that sale, even if fees are zero.
Bitcoin as a global Medium Of Exchange faces hurdles that will take a long time to overcome
We may pay for most our purchases with Bitcoin at some point in the future. The problem is that may be so far in the future that we a get our space flight to Mars before Bitcoin becomes a global Medium Of Exchange.
Our theory is that it will happen first via the excluded in countries suffering a currency crisis (for more, read this chapter in The Blockchain Economy). So we may see local networks where Bitcoin crosses the chasm to become a Medium Of Exchange (for example in Venezuela). Then it may replicate in other failed states who lost control of their currency.
For Bitcoin as a Medium Of Exchange to cross the chasm in the developed world, we will need a wave of startups to create services to meet needs that consumers are not even aware of yet.
Both will take time.
You cannot manufacture a stable result out of unstable/volatile base
The idea that clever math/code means you can create a StableCoin automagically from unstable/volatile cryptocurrencies sounds like creating Triple A mortgage bonds out of junk loans – and we know how well that ended in 2008!
Audit heavy/ tech lite is simple key to trust in redemption
“Fiat collateralised (Fiat deposits held in custody). This is the most popular and easy to understand and used by most StableCoins. For example, Tether/USDT pegs to the US Dollar via reserves held in custody. So if you buy $1 of USDT, you are told that it is backed by $1 of US Dollar held in a bank. This obviously requires some confidence that the StableCoin operator really does have the assets properly custodized; there has been serious concern whether Tether/USDT was doing this. Confidence measures include an audit by a reputable firm. StableCoins will increasingly fall under regulatory scrutiny as they are deposit taking and need at least AML/KYC processes. This model has been described as “audit heavy/tech light”. It is operationally complex, because you need all the Legacy Finance relationships; bridging the worlds of Crypto and Regulated Banks is not easy.”
StableCoin can be a currency for passionate global communities
We live in a world where more people are members of Facebook than are citizens of even huge population countries and where we often have as much in common with “tribes” across the globe than we do with our physically close neighbours. People who are passionate about something (diet, fashion, religion, whatever) want to find others like them when they travel and when they want to give cash to that person, a multi fiat StableCoin can be trusted by both parties.
StableCoin can be bridge into crypto for conservative adopters
On a panel at a conference, I told the panelist next to me (a senior banker) that I was a Blockchain and Bitcoin bull. The banker asked me if that meant that I was an anarchist. I laughed and said “look at me, I have grey hair and wear a suit, how can I possibly be an anarchist?” The point is that when you leave the cryptosphere and talk to mainstream business people and investors, they look for something that feels more normal and less mind bending than Bitcoin – like StableCoins.
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO of Daily Fintech and author of The Blockchain Economy.
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).
$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.
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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TLDR As discussed in the prior post Lemonade is many things, per CEO and co-founder, Daniel Schreiber– revolutionary tech platform, charitable giver, P2P service provider (no, strike that), but at its core it is a property insurance company. The hows and whys matter not when the application for license goes before the respective jurisdiction’s regulators. The company must be organized and operated in a manner that is recognized as secure for its policyholders and adequately financed as such, must comply with the same accounting standards as other insurance carriers, and must be ready and able to comply with the agreements, provisions, and conditions its policies include.
Why belabor these points? Because the company leads with its innovation chin, its behavioral economics, and its promises to act as a totally different insurance company than what those crabby octogenarians (who) think we are making too much noise companies do.
One of the foundational points the firm makes at its outset is that there is a recognition by Lemonade’s founders that, “There’s an inherent conflict of interest in the very structure of the insurance industry.” (Chief Behavioral Officer, Prof. Dan Ariely, see around 0:54 of the video). He continues, “Every dollar your insurer pays you is a dollar less for their profits. So when something bad happens to you, their interests are directly conflicted with yours.”
Of course there is conflict between payment of premiums and indemnification- absent the ‘tension’ insurance would not exist, or perhaps would be free! It might be said that Professor Ariely’s perspective has an inherent flaw in not acknowledging that an insurance policy is a contract for risk sharing between an insured and carrier, that a respective policy premium and deductible are the insured’s agreed cost of sharing the risk covered by the policy, and that the carrier promises to indemnify the insured for damages due to causes of loss the policy covers. It’s not a pure quid pro quo financial agreement because the cost of underwriting, selling and administering the policy falls upon the carrier, and the deductible and premium cost falls upon the insured. The use or equality of the costs are only considered upon inception of a claim. In addition, the insured is not involved in devising the terms of the policy, as a contract of adhesion a prospective insured’s sole power is accepting the contract in its entirety or not. Absent optional inclusion of additional contract scope or details (endorsements and/or coverage limits), the insured is powerless in respect to a contract that ostensibly is in equilibrium between the parties- premium on one side, equivalent policy benefits afforded by the other side.
The price of the risk is determined by the carrier and approved by regulators based on volumes of data, actuarial smarts and with an eye to profitability balanced with service. The frequency of CWPs (closed without payment) and paid claims is part of the actuarial machinations (regulators are comforted by carriers whose data are in concert with the industry at large), as such denials of coverage are, if absent, a concern for regulators. Is there an undue conflict of interest for incumbent carriers where policy provisions apply, or is Lemonade leveraging a message based on clever marketing?
Consider the typical property insurance claim pool:
Not every policyholder has a claim each premium period; in fact less than 20% of a typical insurance carrier’s homeowner’s customers experience a claim during a policy year. Of that pool of claims the frequency of denial is on average less than 30% of the total claims closed. Extending the thought process, a carrier with 500,000 policyholders experiences on average 100,000 claims during a year, and of those 100K customers 30,000 may be denied coverage, so one can say approximately 6% of the subject carrier’s customers’ insurance services end in coverage disappointment. Compare that with the carrier’s YOY customer retention rate and it may be clear that denials of coverage are not the only factor in customers’ renewal algorithms. Is that the basis upon which differentiation can reside?
There may be a stronger position for the firm to take that the inherent issue may be in pricing losses, confirming losses at FNOL, or sorting out the spurious (read as fraudulent) claims. Per the firm 90% of FNOL reports are through Maya or similar service bots, and since that service entry is tied to the entire suite of AI it can be said that FNOL may be the best vehicle to mitigate the effect of any ‘inherent conflict.’
Why that? The firm (through marketing and per discussion) relies on the position that a ‘Ulysses Contract’ is in place for the firm- a figurative ‘tying of hands’ for Lemonade in focusing on denials of claims since any excess of earned premium over the firm’s flat fee is donated to the policyholders’ charities of choice. No path to the bottom line, no incentive for capricious denials. Is there legitimacy to this position? Insurance is a contract, 90% of Lemonade’s claims are being handled by bots, pricing is established by regulated filings, and claim denial ‘touches’ affect only a small percentage of customers. It’s probable that most denials of coverage are due to contractual reasons, i.e., policy provision reasons including the cause of loss not being a named peril. At this juncture the carrier has primarily renters’ policies as its portfolio, and claims are comprised of unscheduled personal property that has relatively concrete pricing. In addition, claim customers have limited knowledge of what comprises effective claim handling- other than prompt receipt of proceeds into one’s account. If there’s a Nash Equilibrium in place, customers seem to be unaware, and can a bot be adversely subject to the vagaries of Game Theory?
Lemonade must be respected for its InsurTech effect on the property insurance industry- everyone knows of the Lemonade entry and journey. The growth of the firm (while overall PIF is small) continues to engage the attention of all. As Daniel Schreiber said in our discussion and in his recent blog entry Two Years of Lemonade: A Super Transparency Chronicle, “ the fact that our reinsurance agreements protect us from too many claims can’t hide the fact that, since launch, we’ve paid out more in claims than we’ve collected in premiums. Clearly, that can’t continue indefinitely.”
As the carrier evolves into a multi line policy organization (renters’, condos, homeowners) the bot approach to claim handling will be tested. Renters’ claims are personal property tasks- named peril, concrete loss description, concrete valuations. A house claim may involve multiple parties- the insured, emergency services vendors, public adjusters, field adjusters, third party administers, and so on. The Nash Equilibrium will be complicated to affect in that multi-player game, and a Ulysses Contract will be toothless to address the covered damage, partial denials, additional living expense wranglings, and other unknown factors.
Regardless of the company’s cover portfolio, the need to become viable within the framework of insurance accounting looms over the discussion of social good. To quote from a October, 2018, article posted by Coverager, “Lemonade’s Cards“,
“And while Lemonade ‘solved’ this conflict by only taking a flat fee and giving unclaimed money to charity, are they really a conflict-free company? Do they not have a strong desire to improve their loss ratio? Isn’t the loss ratio an important part of their business? Will they be able to attract investors or potential buyers with a high loss ratio?”
The firm will find its data aggregation, analysis, and predictive capabilities invaluable from underwriting to claim settlement, and may find the expected diversity of its claim portfolio meaningful in building its flow of ‘excess’ to charitable organizations. There’s a cadre of claim staff developing their service skills- in other words they are learning to be insurance pros. And at a minimum Lemonade has been patient with the industry placing them under a magnifying glass, watching every step being made- that’s not a bad thing and has added to the collective knowledge of insurance innovation. However, at this juncture having a Ulysses Contract as a mainstay of its business model appears to serve Lemonade’s marketing more than it does its loss ratio.
Patrick Kelahan is
a CX, engineering & insurance professional, working with Insurers,
Attorneys & Owners. He also serves the insurance and Fintech world as the
‘Insurance Elephant’.
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).
Australia
is sometimes colloquially labelled as the world’s biggest island. While some
might view this from a geographical stand point, it can often be meant more in
the intellectual sense. It’s no secret Australia is generally more interested
in what’s going on in Australia, than what’s happening in the rest of the
world.
The big
news out of Australia, if you haven’t already heard, is that voters went to the
polls last weekend. In true Trumpian and Brexit fashion, Australia was
delivered its own ‘surprise’ political upset. The right leaning conservative
government, led by Scott Morrison, was re-elected, much to the surprise of the
pollsters and betting agencies.
I wasn’t
terribly surprised, having had enough nous to place a bet on the coalition
government as returning to power. The odds of 5 to 1 coalition to labour seemed
out of whack with the actual closeness of the polling in marginal seats, and
the impact of potential preference votes. They weren’t out of whack with the
media commentary however, which from left to right leaning publications, was
more or less backing, or accepting a labour win. Seems like the media these
days, gets it wrong with alarming consistency.
You’re
probably wondering what any of this has to do with fintech.
Well,
governments can play a crucial role in driving the fintech ecosystem forward.
Labour had already made murmurs it would deprioritise open banking, which is
already overdue in Australia.
On the flipside,
the coalition government hardly painted an exciting picture for fintech, with
innovation absolutely not on the agenda. It’s anyone’s guess what will fill the
policy void now, but for those interested in where it may land, Business
Insider spoke to several leading voices on what they think will happen
next. A good read for those of you who have investments downunder, or who are
looking to invest.
As a Kiwi – who can’t vote in Australia, but who’s taxes are certainly welcomed by the powers that be – what I find is interesting, is how the voices of people like me, Australia’s immigrant community, can be impacted by government policy around money. While I am afforded many more protections and rights given the close nature of New Zealand and Australia countries, many others from the immigrant community are not. And this can result in a serious financial impact.
Working Holiday Super Tax
Australia
has long been a number 1 destination for working holiday makers. It’s estimated
that during their approximate 2 year stay, they contribute $1.3 billion to the
economy, with $770M being spent in rural communities alone.
While these
visa holders come from all over the world, one of the main working corridors is
the UK, which only looks set to grow post Brexit, should the trade
representatives get their way. Around 40K land each year as part of the working
holiday visa program, with many going on to sponsored employment.
Working
holiday makers are expected to abide by Australia’s laws, including
contributing 9.5% of their earnings into Australia’s compulsory pension system,
superannuation.
When they
leave Australia, while they can freely take their take-home pay earnings, they cannot transfer the thousands of dollars
of super they are likely to have accumulated to an equivalent pension plan in
their country.
Instead a shocking 65% of their wealth is taken off them, with the
remainder cashed out. Their Kiwi counterparts can take the full balance home,
thanks to a Trans-Tasman portability scheme.
This is a tax rort, front left and centre. It also disproportionately
affects young people, who need all the help they can get these days, building wealth.
But it is also an opportunity to reinvent what pensions mean, how we distribute
and manage them, and how a fintech that thinks globally but locally can make
all of this easier, simpler, and hassle free.
Look at Transferwise, which is now the most valuable European fintech. It
is part of a growing group of global first fintechs that are willing to tackle
cross border money frictions that have no reason to exist other than through
archaic government policy.
Fintech’s that tackle these problems have a unique opportunity to represent the new global citizen. Despite the noise around protectionism, I believe it is fairly inevitable that the movement of workers and migration will continue, if not escalate. Which is why we need more companies willing to tackle some of these policy inequities head on.
We are doing this at my pension startup fintech, Zuper. After all, why does
it matter where your pension is managed from, so long as you can easily
contribute into it? If you have multiple pots here and elsewhere, there is no
reason why this should be hard to manage.
Whether we get somewhere or we don’t, the challenge and opportunity is clear. Solve the problems that matter, and be a champion for your customers. Fintech, when done right, should address inequities, not further them. If you can prosecute that case well, then you’ve earned the right to build a billion dollar business.
Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.
I have a commercial relationship with the companies or people mentioned as CEO and co-founder of Zuper. 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)
As usual, there is no clear definition of what CivicTech is and there is a lot of debate which actually gets very political. We can start thinking of CivicTech as any technology that upgrades governments and community governance. So, you are allowed to think of it also as including technologies that reshape democracy. People even include any technology use case that is for common good.
I am only here to share a primer on CivicTech. It became very clear to me (through this first dive into CivitTech) that Social media, Smart Cities in platform economies with ever increasing Digital participation is the era that we live in.
In such a world, CivicTech will increasingly become important. Like it or not, Social media, Smart Cities in platform economies are shaping our identities and values whether we realize it or not. We – the end customers sort of speak – the individuals are demanding more and more rights and the lines of who does what and who is responsible for what, are blurring.
Excerpt from the presentation of Prof. Sofia H. Ranchordás, Chair of European and Comparative Public Law & Rosalind Franklin Fellow, University of Groning
“This is Water” is a metaphor for the conscious awareness of others by David Foster Wallace’s commencement speech at Kenyon College.
`This is Digital` and we better become conscious of the ocean that we are swimming in:
Social media, Smart Cities in platform economies with ever increasing Digital participation.
I focus mostly on Fintech, WealthTech, Regtech,….
CivicTech ties into all of these and much more. Chris Skinner presents to us the `Digital Human` in his recent book with the homonymous title. His subtitle `The fourth revolution of humanity includes everyone` ties into CivicTech that has clearly a role to bringing us all together.
Just a few specifics on how CivicTech is being piloted and used globally right now. Digital humans in participatory budgeting are being included in 3,000 municipalities around the world, according to Dr. Tiago Carneiro Peixoto, Senior Public Sector Specialist, World Bank’s Governance Global Practice.
Examples are live all around the globe. The father of Civictech is the UK project FixMyStreet and in the US, Change.org. These are using crowdsourcing community feedback, ideas and project requests to improve budgeting decisions.
Various technologies are being used in CivicTech, from text messages, to app like dashboards and online voting systems of all sorts. These are powered by chatbots, AI and even blockchain technology.
In Brazil in Porto Alegre, one of the most populated cities in South Brazil, the World Bank introduced participatory budgeting as early as 1989. Citizens present their demands and priorities for civic improvement. This use case is one of the longest standing CivicTech implementations. Because of the increased investment in sanitation and health, the processes have reduced infant mortality. In addition, the tax collection rate has improved by more than 30%. One of the learnings of CivicTech implementation in underdeveloped areas (where it is most needed) is that quantifiable results become evident typically after a 5yr period. So, these are not quick wins.
In Argentina the city of Rosario, has been the test ground for a gender-mixed participatory budgeting approach, aiming to involve more women in the participatory budgeting process, and to raise awareness around gender issues and the positive impact of female participation.
New York City has an interactive map – the Idea Collection Map – that any community member can submit an idea. Community volunteers, called Budget Delegates review the ideas and turn them into real proposals for a ballot, with input from city agencies. These proposals will be up for a community-wide vote. This Participatory Budgeting process is being used to directly decide how to spend at least $1,000,000 of the public budget in participating Council Districts.
In Belgium mini-publics are already being used to improve democratic processes and make them more transparent. Mini-publics are an assembly of citizens who are demographically representative of the community. The topics handled by mini-publics range from controversial science and technology issues to social issues like health and justice. Mini publics are now institutionalized in Madrid and in the German-speaking part of Belgium.
Paris has decided to allocate 5% of its investment budget to be handled through participatory budgeting. This started in 2014 and is planned for a 6yr period (until 2020) and encompasses a total of 0.5billion euros. The issues that have brought up by the community are urban agriculture, greening the city, and caring for refugees and homeless people.
In China, a unique participatory budgeting project started in Chengdu in 2011. This is a city of close to 15million people. Since the start of this process, there have been 50,000 small projects approved. Most them are for basic local services in infrastructure, such as village roads and water supply. The unique design of the implementation is that the citizens have the choice to either spend the participatory budgeting resources on immediate actions, or to use them as a down payment on a collective loan for much larger projects. If the latter is chosen, then the loan is repaid by a part of the participatory budget in the following years.
In the US, Vallejo a city in California’s San Francisco Bay Area, has been using technology for participatory budgeting courtesy of the Stanford Crowdsourced Democracy Team since 2012. There have been 5 voting cycles to allocate over $8million to fund 27 projects. Vallejo reports that 20,000 residents of Vallejo have participated. Unfortunately, during a recent vote (Cycle 6) there was a loss of all votes due to human errors and people are asked to revote.
Conclusion
`This is Digital` and we better become conscious of the ocean that we are swimming in: Social media, Smart Cities in platform economies with ever increasing Digital participation.
This is a #TwitterDemocracy[1] kind of world. Social media alone, are a digital participation form 24/7. We are shifting from one-off events like voting to a very interconnected world. With smart cities, we will provide real-time feedback which swiftly makes the loop into all platforms and into our life. Technology can help us become more efficient and arrive at a consensus at local levels much faster and better than we are able today.
For this however to happen, we need to improve literacy at all levels. Digital literacy is paramount to include everyone in this new future world.
[1] I am using #TwitterDemocracy as a generic term.
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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Last week our theme was “Bitcoin going parabolic. ALT Season is Almost Here!“ Our theme for this week is “Top 10 Crypto Exchanges for IEOs”
TLDR. Initial Exchange Offerings (IEOs) are picking up steam, capturing the interest of investors, project teams, and exchanges. IEOs have been breathing new life into the dying ICO model. While the first IEOs took place back in 2017 (Bread, Gifto), the trend didn’t really take off until early 2019. The demand for IEOs has been considerable, and can be attributed to several factors. IEOs represent a radical shift in the ICO model, in terms of trust. Top cryptocurrency exchanges around the world are launching their IEO launchpads and are scrambling to attract interesting new projects that want to raise funds, by selling tokens directly to exchange’s user base. This article will walk you through the rise of IEOs, their unique nature, advantages and limitations and evaluate the IEO offering by some of the top Exchanges.
Since the Coinmaster token sale in 2013, ICOs have been the most popular way to fundraise. The ICO idea is simple. The project creates a digital token, based on the ERC20 protocol, and then offers it for sale in an initial offering. While ICOs have raised billions and the ICO model became the most popular way to raise money, there have been plenty of problems and the model has been slowly dying.
One of the issues most investors face, is how to predict if the project will work after launch and if it will be successful. But the biggest problem has been scam.
The total funding of coins and tokens in 2017 reached o $11.9 billion, with 11% ($1.34 billion) going to scams. A research study by Statis Group, revealed that more than 80% of ICOs in 2017 were scams. I am sure you all remember Bitconnect and their $2.6 billion Ponzi scheme (BTW, I just heard that Bitconnect is coming back and will go live in 42 days).
The trend has been changing and IEOs represent a safer way to invest in tokens. The most important advantage of IEOs is trust.
An IEO is just like an ICO, with the difference the tokens are sold only to the users of the exchange, that is conducting the token sale. IEOs offer plenty of advantages, over ICOs. An exchange can tap into its user base. The standards for due diligence are higher. The project gets an immediate listing on an exchange.
While, IEOs look very similar to ICOs, they offer more security and trust.
The exchange screens every project that wants to launch an IEO on its website. It analyzes the project’s whitepaper and tokenomics, marketing, product status and a few other things, to determine if the project is promising enough. If the project has legs, then a date is set for the IEO and exchange’s users can purchase the token. After the IEO completes, the token is listed on the exchange and is available for trading.
Binance kicked off IEOs early this year. In January, Binance’s Launchpad hosted a public sale of BitTorrent tokens, raising $7.4 million for the file-sharing service owned by Tron.
But major trading platforms like OKEx, Huobi, Bitrrex, Bitmax, Coineal, Exmarkets, KuCoin and others are joining the IEO bandwagon. The majority of the IEO platforms are currently held by Asian exchanges, however, European platforms are also getting ready to join the party.
Choosing the right platform to host an IEO is very important. Its give a project the best chance to achieve its fundraising goal. Some of the things to consider when selecting an IEO platform are: easy of use, safety and security, high liquidity, multi-coin support and strong technology.
Binance Launchpad: Superior technology, partnerships and a seamless user experience, are the reasons for its high liquidity. Currently the exchange has the highest number of users in the world giving it a broader reach, supporting all devices and multiple languages.
OKEx Jumpstart: The Malta based exchange, is one of the leading exchanges by tradING volume. To provide uniqueness to its platform, OKEx Jumpstart uses a subscription, plus allotment approach. The subscription opens for 30 minutes and it will close early if the oversubscription limit is reached. Once the subscription is over, allotment then follows.
Huobi Prime: Huobi positions its launchpad as a Direct Premium Offering (DPO) platform. All coins purchased through Huobi Prime are immediately deposited into user’s accounts and are tradable on Huobi Global against Huobi Token (HT).
Bittrex: Bittrex’s first attempt at an IEO didn’t go as planned. RAID, its first IEO had stop, due to some controversy with the project being funded.Unlike most other exchanges, Bittrex does not have its own token.
Kucoin Spotlight: At start the only requirement to participate, was to have a verified account and the principle was “first-come, first-served”. Now the exchange plans to use a lottery model. The exchange’s native coins are used as an instrument in the IEO model.
Coineal: A big exchange with almost $700M daily trading volume and a stronghold in the southeast Asian markets with investors in China, Japan, Korea, Vietnam.
Exmarkets Launchpad: One of the newer aggressive exchanges in the race. The platform lists 9 completed IEO’s 4 ongoing and 3 upcoming.
To launch an IEO, most exchanges ask for an upfront flat fee and a percentage of tokens or the funds raised. In most cases, terms are determined through private discussions rather than standardized procedures. Several exchanges are making IEOs a priority and are no longer considering new or niche assets for general listings. When I was speaking with a new exchange a couple of days ago, they told me their strategy is for IEOs to be their main source of revenue.
With 260 exchanges listed on Coinmarketcap, the exchange business is profitable, however the market has become vert saturated and competitive. Exchanges are looking for new ways to earn and IEOs can boost their revenues and through listing fees.
During the ICO boom in 2017, many projects hit the market and a lot of money was invested. But because of high scam rates, several countries in order to protect investors, banned ICOs or placed strict rules to reduce potential fraud. IEOs solve many problems that existed in the ICO model. High levels of trust make the IEO crowdfunding process much more efficient. However the possibility of the project failing after raising funds from an IEO still exists.
Initial Exchange Offerings mark the end of a long crypto winter, bring more security to the blockchain fundraising, change the fortunes for most of these exchanges and ultimately protect investors from scammers and fake projects.
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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TLDR. Centralized media (Facebook, Twitter, Google/You Tube etc) is in a perfect storm of privacy concerns/regulation, censorship/deplatforming and the resistance to advertising due to adblockers and runaway bots. The idea of decentralized media via immutable permissionless Blockchain networks is appealing as a solution. Yet the status quo seems to prevail and radical decentralzsed alternatives such as Diaspora have failed dismally in the past. It is possible that a hugely popular gamer, PewDiePie, and his deal with Dlive could be an imperfect bridge to that decentralized world.
The PewDiePie deals shows that DLive understands the real world
When will Fortnite use BTC for in-game purchases?
Context & References
What is DLive?
DLive calls itself a “disruptive live streaming platform”. It was built using Lino, a decentralized blockchain that was founded in 2017, funded with $20 million and launched in September 2018. It has about 30 employees.
DLive reports 3 million monthly active users and 35,000 active streamers. This is not a science experiment.
Dlive uses Lino Points to pay content creators. Each Lino Point is worth $0.012, and can be acquired through using PayPal, Xsolla, or cryptocurrencies. Content creators receive up to 90% of the Lino Points they earn (ie Dlive takes 10%, which is a lot more transparent than YouTube).
My censorship is good, your censorship is bad
What speech should the media owners censor in a polarised world?
Social media is now so mainstream that media owners have to face the awful choice of which extreme views they should censor in our totally polarized world. It is a lose/lose proposition; they will alienate one side and then to compensate for bias will alienate the other side.
Your vile content is my free expression and vice versa.
But who cannot love PewDiePie?Not being of the gaming generation I sought an opinion on PewDiePie from that generation and got two thumbs up.
Payment in BTC not BAT or Steem Or LINO
An early attempt at decentralized media via immutable permissionless Blockchain networks is Steem. While I love the mission, I am a sceptic/bear on Steem for reasons I outlined in this post. The TLDR summary, the flaw is funding via a SpeculationCoin (aka Tokenomics). Another Tokenomics approach is Brave (with their BAT token) and they are hitting issues as Gab is forking Brave.
Dlive may suffer from the same problem. Creators get paid in LINO points. If this is an ERC 20 Token that is easily convertible to BTC or whatever cryptocurrency you think has value, then cool. In short, fungibility matters.
The PewDiePie deals shows that DLive understands the real world
PewDiePie, the Swedish gamerwhose real name is Felix Kjellberg, has nearly 94 million YouTube subscribers. He is a star, perched atop the digital power law. PewDiePie has been critical of YouTube. So it was a smart move for DLive to do a deal to bring PewDiePie to this decentralized Blockchain based competitor to YouTube.
This is not the sort of move that Diaspora made and that is one reason why Diaspora never made it outside the techie visionaries/early adopters.
When will Fortnite use BTC for in-game purchases?
Fortnite is getting massive traction in the gaming world. If you love PewDiePie you probably love Fortnite.
If Fortnite use BTC for in-game purchases (rather than a proprietary token), then decentralizedmedia will go mainstream. Dlive could be an imperfect bridge to that world.
Bernard Lunn is a Fintech deal-maker, investor, entrepreneur and advisor. He is CEO of Daily Fintech and author of The Blockchain Economy.
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A week ago, the news of the Long Term Stock Exchange (LTSE) backed by some of the biggest names in Silicon Valley emerged. The Elites in the valley, including Marc Andreessen, Reid Hoffman and Peter Thiel have joined hands to set up a stock exchange where firms do not have to worry about “Short Termism”. It is seen as the tech world’s open war against Wall Street’s modus operandi.
Some hail the move as a masterstroke. The features of the LTSE make it more attractive for investors who stick around longer with a firm. Voting rights are directly proportional to how long an investor held a firm’s stocks. But this is also a double edged sword as it makes founding teams too powerful. It could make bubbles bigger, and wave riders could get a smoother ride to exit.
Many questions come to mind when I think about where this could take us. Let us explore each one of them.
Recent disasters of Uber and Lyfts – is Wall street better at identifying good business models?
How long can patient capital be, errrr, patient?
Does Wall Street need to be more tolerant of Visionary Founders?
Growth vs Profitability conundrum – Won’t LTSE make profitability and a good business model rarer?
Creation of monopoly – Good way to make money for businesses and investors? But what about the consumer?
Uber’s IPO earlier this month is arguably the worst opening ever as investors lost $650 Million on the first day. This also happened with Lyft and the stock hasn’t recovered yet. Analysts claim that the ride hailing business model is broken. Softbank’s stocks has taken a beating since then. Would LTSE have minimised the losses that Softbank made since the Uber IPO?
However, with investments (of ~25 Billion) in Ola in India, and Grab in South East Asia, SoftBank’s fund controls 90% of the ride hailing market in the world. One of them (Wall street or Softbank) is definitely wrong about the market and the business models in this space. Is LTSE needed to bridge this gap in perception of business models?
The question that immediately followed was, how long can Patient capital be patient? Early stage investors go largely with gut instincts, where as later stage and public market investors are generally more data driven. If all data points to continued losses (Uber’s Q4 2018 EBITDA loss was at $842 Million), should analysts still give the firm a thumbs up based on the market potential of the firm?
LTSE in this scenario could make Wall Street look good, if the intention was to stay long despite continued losses.
The other side of the argument is also valid. Markets have misjudged visionary founders. Michael Dell took his firm private at ~$25 Billion in 2013 and led the transformation of his firm. The firm has re-positioned itself, and it’s estimated valuation today is ~$70 Billion. When Tesla had pressure from the markets, Elon Musk, took to twitter and spoke about taking the firm private – and of course got into trouble with the regulators for doing so.
If LTSE went live, founders like Dell and Musk could operate in the public market more comfortably.
If LTSE went live, firms like UBER could keep growing and take more of the market, without having to demonstrate a sound business model underneath.
One of the approaches that private investors like to see is “Going for Growth”
“If your growth plan doesn’t scare me, I do not want to invest in you” – That’s another famous VC one liner.
This approach has given rise to centralised tech monopoly over the years. Google, Facebook, Amazon, Uber are all leaders in their market segment. If LTSE backed them with public money, they have to worry less about profitability, if at all. They can continue with growth and their market conquest.
As an investor who is just looking for an exit, I would love this approach. But as a consumer, who cares about accountability and healthy competition, this is definitely not the way forward. The “Winner takes all” approach has made tech look like the new banking.
LTSE can be a boon to some visionary founders. If it had been announced during times of low liquidity in the market, it would have come across as a genuine attempt by proven Silicon Valley elites. It is coming at a time when market is rich with cash, and it feels like LTSE will make the bubble bigger, and the fall harder.
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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