Small Business Banking

Education is the cost of doing business in invoice finance

Strategic partnerships are booming in this sector globally, as the magical tech-meets-distribution sweet spot sees more banks and fintech vendors cuddling up.

One needn’t look further for proof than news out last week that British based invoice financing platform MarketInvoice had closed a £26 million equity funding round with Barclays and Santander.

Barclays have been involved with MarketInvoice for some time, after acquiring a minority stake in the business in August of 2018. Banks, like Barclays, are slowly realising deploying growth capital to SMEs isn’t something they are equipped to do – from a risk management or digital delivery perspective.

Invoice finance isn’t child’s play. There are plenty of traps for new players, and technology isn’t always a failsafe against rogue business owners and fraudulent activity. Automating the credit-decision process is still a challenge, and imperfect information sets, even in cloud accounting software, still present challenges and risks to lenders.

But the upside, if you can get it right, is huge.

To get a sense of the nuances within this industry in the UK, the UK Finance body reports are a good starting point. The Q2 2018 report sheds some light into the ebbs and flows of the various financing flavours that make up the sector: Here are some highlights.

  • Export and Import factoring grew by 13.1% over the quarter, while Export Invoice Discounting fell by 9.9%.
  • UK invoice finance growth overall trails asset based lending, however its slice of the total lending pie is significantly greater.
  • Construction, followed by retail and transport were the fastest growing industry sectors
  • The two sectors with the biggest concentration of clients, when measured by turnover are £ 0.0-0.5M, at 12,193 and £ 1.0-5.0M, at 13,289

Numbers have been fairly static on many growth fronts for the UK sector over the past year or so – possibly a Brexit or trade uncertainty signal flowing through into growth investment decisions made by SMEs. While there is room for growth given the various statistics on growth capital demands more generally, finding the lever is key. It is probably less a ‘do we have capital available to deploy’ challenge for invoice finance businesses and more a lack of understanding about the product set amongst potential borrowers, something many vendors can tell you about in this space.

Perhaps MarketInvoice will use its new working capital to raise the profile of the sector to the benefit of the many startups in the ecosystem. Someone will need to bite the bullet and make this investment for the sector to grow.

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.

Blockchain, Davos, Fintech, Strategic Viewpoint, tech, WEF

The Self-fulfilling Prophecy; reporting from the WEF in Davos2019

It makes sense to gather high up in the Alps, above the clouds where the sun shines on anyone strolling around while temperatures are -10C or more, to discuss about `Globalization 4.0 `. For those who disagree, just think of it as a tradition.

This year there was no Eureka moment (except if I missed it) but there was a loud and clear support for the Gorilla in the room narrative

A self-fluffing prophecy:

Transhumanism – technology solves our large scale problems!

 So let’s all get to work on experimenting, applying, pivoting technologies, to make the dream come true. It was clear from the themes of talks and panels that we are already spending time and resources on discussing how `Tech` will become reality and what will be the consequences and side effects. Artificial intelligence, Internet of Things, Robots, the future of Work, Blockchain, are the trending tags.

Zoom-in

Given my physical limitations, I attended some events from which I am sharing `color` as we used to say on the trading floor (that is any information that paints a picture of over the counter OTC markets).

20190128_130807.jpg

The Global Business Blockchain Council – GBBC, led by Sandro Ro who was appointed in March 2018 covered diverse topics. I arrived to go directly to the Procivis[1], Vetri[2] event because the issue of self-sovereign identity is a building block towards a more decentralized globalization 4.0. The support from the regulator of the canton of Zurich and the presence of the prime minister of Bermuda were one of the highlights.

Watch this space. Later during the week, Joseph Lubin and Tom Lyons had a fireside chat at the infamous piano bar of Hotel Europe, organized by CryptomountainRocks special event during the WEF, and J. Lubin spoke extensively about uport.

Self-Sovereign Identity is the concept that people, businesses, and entities, can store their own identity data on their own devices, and provide it efficiently to those who need to validate it, without relying on a central repository of identity data and without leaving hackable copies all over the web.

This is really the core of the next generation Web. In a nutshell, it means that Blockchain IDs are the way for individuals and any legal entity. These are universally discoverable through zero-trust datastores.

Self-sovereign identity is the chip for Democracy and Web 4.0

 Having said this, I must point out that the anti-blockchain tribe (N. Roubini and more) continue to highlight that we have actually not seen any real use case of the hundreds of Dapps being developed. I also heard that in the crowd that attentively gathered to hear J. Lubin speak. Consensys has not managed yet to make one of its Dapps a solid business case. The Ethereum protocol on the other hand, in an exemplary decentralized fashion, got used for the next generation of crowdfunding. From a 35,000 feet point of view, this does qualify for the next iteration of a decentralized autonomous initiative, launching a business process that created value but also `polluted` capital markets. I can imagine, reviewing this decentralized autonomous collaboration, to see what worked and what didn’t.

I also attended the Women in Blockchain Switzerland panel, which won my heart as the most diverse panel. I walked away hugely inspired by Viola Llewellyn, the African co-Founder & President of the smallbiz Fintech Ovamba and Diana Grigoras. I am only highlighting these two amazing women, only because I know closely the work that Monique Morrow[3] is involved in, Bill Tai (VC, athlete, educator), and Robin Errico Chief Risk Officer and Diversity & Inclusion Leader at Ernst & Young Ltd, Switzerland (EY), who also participated in the panel.

Viola is another woman that is successfully making an impact in the lives of the small businesses in Africa that don’t have a credit history and won’t be served by banks. She has combined Fintech with her local cultural knowledge to offer short-term capital to micro, small and medium-sized businesses. The capital is provided by international investors from the US, U.K. and Japan. Ovamba covers Africa, emerging markets and the Middle east for trade, inventory purchases and growth. Already a 5yrs old Fintech, mobile only and first launched in Cameroon, it now links capital from overseas to businesses in the aforementioned markets. GLI Finance, the UK based alternative lending provider, and Crowdcredit, a Japanese cross border marketplace lending platform are amongst the international partners.

Viola.png

Communities are still being built with the vision and persistence of a strong leader.

Women excel in building communities, which is excatly what we need for Globalization 4.0.

I visited the Ethereal Lounge and bumped into Don Tapscott who was excited to share more details about the large scale upcoming event in Toronto, Blockchain Revolution Global. A collaboration of the Blockchain Research Institute (BRI) and the MCI world; with a focus on enterprise level applications with a cross-industry selection. I also met for the first time Joe Lubin and chatted about a dear topic to me `liquidity` for digital assets (so many still confuse digitization with liquidity). He mentioned coven.vc, a new Consensys baby, in beta mode which the next generation for designing an open platform for vc investing.

Consensys did layoff people but the venture production continues. Kaleido, a ConsenSys business was launched in collaboration with Amazon Web Services (AWS) this past summer. I heard about it from J. Lubin. It is a marketplace for enterprises to plug-and-play.

Blockchain powered IT services are being built at an accelerated speed. I can’t keep up with innovations.

I spoke at Cryptomountain Rocks, after Daniel Diemers and Barbara Lang, on `A Wall Street take on Crypto`. I shared my strong point of view on how Wall Street will take advantage of the change in the narrative in the blockchain space from a pure `Disruption` rock band style to a `Co-creating sustainable innovation` one.

What parts of the pie from the new digital assets, will Wall Street aim at and what will be left untouched for the cyberpunks[4].

Exclusion is where value is hidden and can be unlocked

 CryptomountainsRock Battles

One of the most effective ways to open up the conversation on topics like decentralization, transparency, rethinking money, unlocking value, digitization of assets and processes, etc, (beyond writing our insights tirelessly here at Daily Finte ch along with others sharing knowledge and expertise on other platforms – text or audio) is the live Cryptomountains Talk Battles that Reto Gradient has designed and is the trademark of the unconference every Spring in Davos. This year was the inaugural event during the WEF of Cryptomountains with lots of talks and panels.

Talk Battle topics during the WEF

  • Forget about Bitcoins
  • Decentralization is an Illusion

The two participants, have 3min each to share their arguments. One has to be pro and the other against. After this the audience votes which speaker needs more support (i.e. arguments are relatively weak). Then, people from the audience line up to support their choice of weakness and have 1min to `help` on stage with their argument. The battles end by….

If you want to participate on stage or from the audience in this kind of battle, come this March to the original annual event in Davos – the unconference with skiing in the morning and talks +.

[1] Procivis and Valid, the early pioneers in Self-Sovereign Digital ID for governments, by Efi Pylarinou

[2] Monique Morrow has been recently appointed President of Vetri. She is the founder of the Humanized Internet and a unique personality that guarantes execution in full alignment with the mission.

[3] Listen to the podcast with Monique Morrow, co hosted with Arun Krishnakumar, on Humanized tech with built-in values.

[4] To book me for a talk – conference event, private event, conference – on this topic or more, click here.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Bitcoin & Blockchain

Blockchain Front Page: New York regulators approved new Crypto ventures

robinhood-bitlicense

Last week our theme was “Anonymous transactions in Bitcoin”

Our theme for this week is “New York regulators approved new Crypto ventures“

Its official, New Yorkers can now use Robinhood to buy Bitcoin. The Department of Financial Services in New York has officially approved a BitLicense for the popular trading app. Residents in the State of New York will be able to buy Bitcoin using Robinhood’s app, with their debit cards.

In a blog post, Robinhood announced they were also granted a money transmission license by the state. Since January last year, Robinhood has expanded the number of cryptocurrencies listed and currently has seven of them available in 30 states across the US.

LibertyX was the second company to be recently granted a BitLicense, becoming the very first regulated company to let New Yorkers buy Bitcoin, using traditional ATMs. Their BitLicense will allow New Yorkers to purchase BTC, at potentially thousands of brick and mortar locations through the state. LibertyX introduced the first Bitcoin machine in 2014. The company makes it easy for anyone to buy virtual currencies in more than 19,000 physical location in the U.S.

When it come to cryptocurrencies, the State of New York has some of the toughest regulations. A BitLicense is required to offer cryptocurrency services in New York. The license was created in 2015 and is considered one of the most important and hardest licenses to get in the US, because of strict regulations relating to anti-money-laundering, anti-fraud and cybersecurity policies. Up to now, the New York regulator has approved 16 companies to offer cryptocurrency services in New York.

Many investors see regulation as the primary reason for crypto’s bear market and the ICO slowdown in 2018. Most crypto enthusiasts are not optimistic about regulations for crypto. For many, the idea of assets like Bitcoin is to get around the regulations of the traditional financial system. An article on Medium, goes as far as saying “The BitLicense Is a Bad Idea That Must Die“.

“All the “BitLicenses” in the world could not stop MTGOX from having a software problem, and no law can bring back the money lost either directly or through the disruption the event caused by the software error. Once again, entrepreneurs powered by the internet make life easier and better, not laws and regulations. Regulation does not make software correct; developers do.”

Recently, the Winklevoss twins publicly ran an advertising campaign encouraging rules for crypto. The ad goes: “Crypto Needs Rules.”

gemini.jpg

I think that regulation is very important for validating crypto. When big organizations like Yale, Goldman and Fidelity make investments in cryptocurrencies, this brings a lot of credibility to the market. But, regulation can validate the market beyond anything else. It brings clarity and protection to both businesses and consumers.

The fact that government regulators are taking note, is very important. Yet, none of this is to say that government regulations are always good. Regulations need to be taken with a grain of salt, because over-regulation can hurt businesses in an early stage of growth and stifle innovation. As we go through this transitional period, its very likely that those who can’t afford to play by the rules, will disappear.

I expect 2019, will be the year of regulation. At the last G20 meeting, the top 20 economies said it clearly: “We will regulate cryptocurrencies.”

We will see more and more government agencies across the globe, defining regulatory frameworks for crypto, to provide adequate consumer protection. More regulatory clarity can speed up the process of major financial institutions getting in the market and open up the possibility of public investment vehicles, like an exchange-traded fund (ETF), Regulation is blessing for crypto entrepreneurs and companies, because it will provide clarity and fuel further market growth.

For more about the Front Page Weekly CXO Briefing, please click here.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday.

Uncategorized

Financial Inclusion Party – Top 7 startups to follow

#ThriveForFintech

Appa, have you finished saying “this is good about you, this is bad about you” is how my 5 year old enquires about my VC job. I am sure there will soon be a time when I explain to her that its not quite as binary as that.

The next generation of entrepreneurs really have it in them to rebuild the world, and they really care about and believe in what I often call Inclusive Capitalism. I love my job because it gives me a sneak peek into the future, and gives me an opportunity to be part of the transition.

The journey of the past three months with Crowdcube, Deloitte and Linklaters through the Thrive for Fintech programme has been a great learning experience. The last couple of months have made me love my job even more!!

To quickly put the programme in numbers – we (Green Shores Capital), set out to invest upto £500k in Financial Inclusion firms, spread over 2-3 firms, in partnership with Crowdcube, Deloitte and Linklaters. The programme was announced in early December.

More than 70 companies wanted to apply for the programme. Just over 50 applications were accepted. Green Shores team then spent time with these firms to choose 7 for the final pitching event. The final pitch happened yesterday. It was amazing to see a diverse mix of Entrepreneurs, from London, Bristol, Edinburgh, Israel and Haiti come together.

It felt more like a celebration of Financial Inclusion, than a pitching event

These were the firms and their themes

Stork Card – A firm focused on young parents, who have just stepped into the expensive yet rewarding journey of parenting. They provide proactive financial services, and other childcare benefits through data analytics. Their go-to-market is interesting, as they partner with corporates to provide Stork card services to their employees. This helps employee retention, especially through the child birth and early years of parenting. I just could relate to their story straight away!!

Tickr – A startup that offers impact investing through a robo advisory angle. Impact investing has been largely an institutional play all these years. Tickr have two asset managers who have come together to bring institutional quality investment opportunities to the retail audience. They also narrate the impact that investors have made through their investments in different parts of the world.

Tumelo – Tumelo are also a robo advisor for retail investors to access impact investing. They take a different approach to their business model, where they call the robo advisory capability as just a means to an end. Through partnerships they have cracked with top NGOs and charities, they also want to allow retail investors to have a voice in the board room of top corporates.

I must stress this, and I don’t intend to give any team special treatment here.

It was so much fun talking to Tom @ Tickr and Georgia @ Tumelo. Both are trying to solve similar problems, but have a whole different approach to it. It is going to be super exciting to follow them through the next few months and years.

Confirmu : Confirmu use psycho analytics and AI to the credit scoring world. They have a proprietary chat system, which is part of their customer onboarding process. When an individual, who doesn’t have a credit file wants to borrow, often the request is rejected because the lender doesn’t have a clue on whether he/she intends to repay. The chat process includes questions, pictures, emojis and voice recognition in 5 languages, and gives a score on the borrower, that will help the lender make a decision. Special thanks to Yatir @ Confirmu for traveling from Israel to meet us and for the event.

ITI Group : ITI Group was founded by a group of bankers who feel there weren’t a good reliable retirement plan. They also feel strongly about onboarding people into the habit of saving very early in their lives. They have a debit card solution, which will yet again be a means to an end, and a clever go-to-market, with some exclusive partnerships to onboard customers. However, the retirements plan they offer is differentiated from the crowd, and when the two capabilities (retail end and retirement fund end) are put together, they are a compelling use case.

Money Dashboard: Money Dashboard to most UK Fintech followers need no introduction. They are the top UK personal finance management app, and they have won awards and accolades for their work in this space many times. So whats so special? Closing in on 100,000 customers onboarded, data richness, and a very decent annual recurring revenue. I am not going to say more here, I will let you do your research.

Agriledger: Last but in no way the least, Agriledger are providing economic identities, and supply chain finance options to Farmers across the world, using Distributed Ledger technology. Through their solution, they bring transparency to the food supply chain, and in the process making sure, the farmer is the owner of the food, and the end consumer buying the product has complete transparency of the journey and quality of the food. They have already got a contract with the World Bank to deploy the product in Haiti.

With so many exciting and varied use cases, we now have the enviable job of getting to the decision of where to invest. Watch this space!!

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email

Grab, insurance marketplace, InsurTech, policygenius, wellthie, zhong an

Insurtech Front Page Weekly CXO Briefing – Online Insurance Marketplace

healthcare_marketplace-1

The Theme last week was about InsurTech accelerators.

The Theme this week, is about online insurance marketplace. This has been a popular sector since InsurTech Day 1. Starting with a marketplace, both incumbents and startups can build an ecosystem out of it.

For more about the Front Page Weekly CXO Briefing, please click here.

Incumbents embracing InsurTech is a common theme in our posts. This time, it’s about customer engagement.

Story 1: ZhongAn, Grab Form JV to create digital insurance marketplace in SEA

Extract, read more on Digital News Asia:

“ZHONGAN Online P&C Insurance Co, Ltd (ZhongAn or ZA Insurance), the first Internet-based insurer in China, announced on Jan 16 that its subsidiary ZhongAn Technologies International Group Limited (ZA International), and Grab Holdings Inc, Southeast Asia’s leading online-to-offline mobile platform, will establish a joint venture company (JV) to enter the digital insurance distribution business in Southeast Asia.

The JV will create a digital insurance marketplace that offers insurance products in a range of categories with fractionalised premiums, directly to users through the Grab mobile app.”

ZhongAn has delivered a great performance in 2018 with a 11.22 billion RMB (1.65 billion USD) premium income and an 88.4% growth. Now Zhong An is trying to build its influence in SEA, and an insurance marketplace built on a popular local platform with huge internet traffic is a perfect choice.

 

Story 2: Policygenius Adds Auto and Home Insurance to Online Marketplace

Extract, read more on Insurance Innovation Reporter:

“Policygenius, a New York-based national direct-to-consumer insurance broker, has announced that it is expanding its online insurance marketplace to offer home insurance and auto insurance with a personalized shopping experience that aims to be unique in the market.

“Our customers have repeatedly told us they love how easy we’ve made comparing and buying life and disability insurance,” comments Jennifer Fitzgerald, CEO and co-founder, Policygenius. “They wanted to know when we’d be expanding to help them with other types of insurance as well. Today, we’re happy to announce that we’ve added home and auto to our marketplace.””

Founded in 2014, Policygenius is a veteran in the online insurance marketplace sector. The offer expansion could bring its customers with a more comprehensive insurance shopping experience.

 

Story 3: Wellthie Launches Health Insurance Marketplace

Extract, read more on Coverager:

“Wellthie, the company that’s “modernizing the insurance shopping experience,” has launched a new health insurance marketplace for small businesses to search and compare health insurance costs and options.”

While most of the online marketplace is designed for individual consumers, Wellthie aims at small business owners. A relatively small market with less competition.

Online insurance marketplace is, in a sense, the alpha version of InsurTech. It could be as simple as e-commercialized insurance store. But behind the curtain, you also need to figure out a way to recommend policies which suit customers’ best interests. That would involve technologies and thinking in customers’ position.

 

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Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

Check out our advisory services(how we pay for this free original research).

To schedule an hour of Zarc’s time for CHF380 please click here to send an email.

Small Business Banking

Flyt acquisition example of opportunities in platform integration space

 

When it comes to user experience, and engaging with the brands we love, we’ve all mostly moved on from downloading individual business apps. Nowhere is this more obvious than in the food ordering world, where aggregation platforms like Uber Eats are fast becoming the Amazon of eateries.

But what powers those systems? What makes your order travel seamlessly between your iPhone and the kitchen, then all the way back to your door?

Platforms like Flyt, who was acquired this week by global food marketplace Just Eat for £22 million.

A middleware service, Flyt allows hospitality retailers to connect orders from services like Uber Eats, directly with their POS, bypassing double keying and extra data entry by staff onsite and updating the kitchen instantly, who can begin prepping the food, shortening the kitchen to door estimated time. And you and I both know that is a big determinant about who we choose to order from.

While a technology like Flyt might not seem like a game changer to you, for small businesses, who live and breathe on efficiency and reduced headcount, these services are basically pre-requisites for survival in the cut throat world of digital food. Mom and Pop processes and clunky systems will now see you out of business in the time it takes to heat a pot of pasta.

Flyt may not be a household name, like Uber Eats, but it powers a good number under the hood, and it’s another example of how integration layers and platform connectors are embracing the huge opportunity that comes with the expansion of the digital food market. It’s an opportunity that can be realised without the added complexity of having to build a consumer facing brand, like Uber Eats.

Services like Flyt haven’t forgotten payments.

The platform has partnered up with global fintech Adyen to enable restaurants to create a customised chatbot for Facebook Messenger, that can take payment within the app. From a user experience perspective, it’s very straight forward. Open the app, select the restaurant location and enter your table number. Hey presto, your order appears, straight from the Point of Sale, and you can pay with your stored and verified payment option then and there. I’d go back to that restaurant, and hospitality venues know it. User experience on steroids.

Plug and play logistics, ordering, payments and infrastructure makes starting a business all the easier these days. Perhaps soon it will be as easy to open a physical store as it is an online one, as the worlds merge closer and closer together.

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.

ASX, Bitcoin & Blockchain, dlt, NASDAQ, stock exchanges

Are Stock exchanges fast and efficient?

financial-markets

The Austrian school of economics view is that

Stock Exchanges are the fastest and most efficient data-processing large scale system that we humans have designed so far.

Stock exchanges need roughly 15minutes of trade to determine the effect of a piece of news – political, scientific, ecological, societal etc – on the prices of shares.

Whether this will change with DLT technology and when is up in the air. For now, we have old and powerful institutions running these data-processing systems and it won’t be easy to take steal their Cheese.

The Frankfurt Stock Exchange is over 400 yrs old with a market cap putting it in the 10th position globally[1]. The London Stock Exchange (LSE) and the New York Stock Exchange (NYSE) are both over 200yrs old and are in the 3rd and 1st respectively by market cap. Just a few blocks away from the front runner, there is NASDAQ only 45yrs old and with a 2nd ranking in market cap.

The 29yr old Australian Securities Xchange (ASX) ranking 14th in size, is actually the bravest in that they were the first to explore DLT technology for their settlement and post-trade activities. Digital Asset has been their partner, with whom they have been designing a replacement of their Clearing system CHESS since 2015, which they actually own (not the case for other stock exchanges). The full launch has been pushed out again from 2020 to 2021.

The architecture of this system maintains the messaging-based interaction with its participants and does not require them to have to run a node on the network in order to participate.

“We are often told by many, including other market infrastructures, ‘You’re so brave that you’re going first, you’re using DLT’ — we actually genuinely consider it brave to embark upon a large transformation program and not adopt this technology,” said Cliff Richards[2] ASX`s executive general manager of Equity Post-Trade Services.

NASDAQ is the most active stock exchange by being involved in several different DLT initiatives that are, however, recent.  In Spring 2016, in a post about Fintech in action on Western stock exchanges, I had mentioned Linq, a private blockchain company focused on private securities issuance. Linq allowed unlisted private companies to represent their share ownership digitally and securely. Later, Linq and Chain[3], a blockchain services provider, used DLT to register digitally ownership of private shares.

In May 2017, Nasdaq partnered with CitiConnect for Blockchain and took Linq to the next level. They went through a seamless end-to-end transactional process for private company securities.  Payment and reconciliation magic via DLT.

In October 2018, NASDAQ also partnered with the Azure blockchain service of Microsoft[4]. The aim is to integrate it in order to improve buyer-seller matching, management of delivery and payment. The key advantage they present is that this deployment will allow for interoperability with customers using various blockchains.

What really caught my attention is the Nasdaq`s use of DLT technology in their newswire services. They are starting to use smart contracts for time-sensitive data like corporate announcements, press releases, regulatory filings, etc and the associated valuable meta-data. Nasdaq seems to have filed for a patent around this  – Nasdaq Gets Patent for Blockchain Newswire to Solve Gaps in Audit Trail Gaps and Errors[5]!

For me, this latest use case can be big. Distributing meta-data through smart contracts and giving access to it on a pay-as-you-go basis, will be a huge business in financial markets and Nasdaq can dominate in this. If this then gets integrated into their market analytics business, then bingo.

[1] Data source from the Visual Capitalist as of April 2017 – Comparing the largest Stock exchanges

[2] ​Here’s what to expect from ASX’s blockchain-based CHESS replacement

[3] Chain was acquired by Stellar in Sep 2018

[4] Microsoft to Integrate Blockchain Offering Into Nasdaq Services Following New Partnership

[5] Nasdaq Wins Patent for Blockchain-Based Newswire Service

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

 

 

Uncategorized

Blockchain Front Page: Anonymous transactions in Bitcoin

anonymous_bitcoin_transactions.png

Last week our theme was “Bitcoin Whales, Bulls & Bears Heading to zero? Or heading to $1 million? Your call”

Our theme for this week is “Anonymous transactions in Bitcoin“

Are transactions made through Bitcoin really anonymous?

When one person sends Bitcoin to another person, their identities are not needed to complete the transaction. They do not need to share with each other, their names, addresses or phone numbers.

It sounds pretty anonymous, right?

A cryptocurrency transaction has three parts: the sender’s address, the receiver’s address, and the amount being sent. For Bitcoin, all three are public. For any transaction, we can see address of the sender, receiver and value of the transaction. Now, since every Bitcoin transaction is recorded on Bitcoin’s public ledger, anyone can view any Bitcoin wallet and transaction.

Bitcoin is neither confidential or anonymous.

Screen Shot 2019-01-21 at 1.57.30 AM.png

Bitcoin is pseudonymous, because each user has a public address that can be traced back to an IP address or exchange account.

There are many ways to link a wallet address, someone’s identity. Some people share their wallet address online. If an address is used on an exchange, that implements KYC (“Know Your Customer”), the address can be linked to a person’s real-world identity. Merchants you pay can make the connection.

As usage grows and more transactions are recorded on blockchain, a massive public map is being stored, which is accessible by anyone. With the right tools, transactions can be placed under a microscope to give us a very clear picture of how Bitcoins are moving. This poses a huge privacy concern.

Companies like Chainalysis and Elliptic have developed software to analyze blockchain transactions. To link transactions to real identities, they use online and public information. Chainalysis’s most famous work was helping the FBI identify two agents, that were stealing Bitcoins from the wallet of Silk Road, an online drug marketplace.

Blockchain analysis software, goes far beyond just catching criminals. As more investors enter the market, blockchain analysis software can help banks and other financial institutions comply with KYC/AML, or monitor market trends. Increased Bitcoin trading in countries around the world, could mean pressure on national fiat currencies. This kind of information could provide insights to investors, long before official statements are public.

While, Bitcoin does not offer anonymous transactions, concerns about privacy have increased and so have the prices for some cryptocurrencies that offer anonymous transactions. Monero started last year at $12, reaching $136 in August. Zcash in  January was at $10, and in June it reached $376.

Currently, there are several efforts (TumbleBit, Chaumian CoinJoin and ZeroLink, Schnorr Signatures for CoinJoin, STONEWALL etc.) underway to increase Bitcoin’s privacy, the most prominent being “Confidential Transactions”.

Confidential Transactions (CT) provide a way to protect transaction values, so they are only visible to the people involved in the transaction. Everyone else only sees that Bitcoins are transacted, but not know how many. While, CT improves privacy by preventing others from viewing your account balance and transaction amounts, it not a silver bullet for privacy. Confidential Transactions masks amounts, but you can still see who is paying who.

Is it possible to be anonymous?

There are number services that let you buy Bitcoin with KYC.

BitQuick acts as an escrow for Bitcoin transactions via cash deposits at thousands of banks across the US. The seller deposits the Bitcoins at BitQuick. Once the buyer deposits the cash into the seller’s account the coins are released. A mobile phone number is needed for this process but no id verification is required. Unlike an photo ID a mobile phone number can be easily purchased with an anonymous email via Skype for example. You could also use Bisq to buy and sell Bitcoin, without AML/KYC. Bisq is a decentralized peer to peer Bitcoin exchange that lets you buy/sell Bitcoin with a variety of payment methods.

There are ways to stay anonymous. Bitcoin used together with the TOR network, allows anyone to pay anonymously for digital goods. In combination with Tor, anyone can get additional protection and encryption, using Tails, Bitcoin tumblers, and mixers. Also, technologies like Dark Wallet go even further. It uses a technique called CoinJoin: Every time a user spends Bitcoins, the transaction is combined with that of another user, chosen at random, who’s making a payment around the same time.

If I had to make some suggestions, here four rules of thumb:

1. Always try to use cash: If you’re want to buy and sell Bitcoins anonymously, the most private way would is in cash and in person. You can use services like LocalBitcoins to find someone who is willing to sell Bitcoins for cash close to your location. Another way to buy Bitcoins anonymously with cash, is to go to your nearest Bitcoin ATM and buy Bitcoins from the ATM using cash.

2. Never reuse Bitcoin addresses: Use a new Bitcoin address for every single payment you receive, and never send money twice to the same exact Bitcoin address. Re-using a Bitcoin address is a massive privacy and security risk. Fortunately, many of the newer wallets can generate an unlimited number of public addresses, from a single seed.

3. Never use SPV and hosted Wallets: Almost all SPV wallets (also known as thin clients) leak which addresses you own to whatever SPV server they connect to. SPV wallets do not store the blockchain locally. Instead, they query a single SPV server for the transactions that involve the addresses in your wallet. While this functionality is far more efficient and fast than parsing the blockchain locally, the trade-off is that every Bitcoin address you own is submitted to the SPV server.

4. Use an anonymity network or VPN like Torguard: Always connect to the internet through a privacy network like those listed above or a VPN and use a privacy optimized version of Firefox, or the Tor browser.

A lack of privacy is a problem. Bitcoin anonymity is an uphill battle. All transactions are permanently etched in a transparent ledger. Being anonymous requires expertise and effort. For most users hiding their financial records from the government, will be impossible, but the vast majority of users might not necessarily want the world to know where they spend their money, what they earn or how much they own. For now its our responsibility to adopt good practices in order to protect our privacy.

For more about the Front Page Weekly CXO Briefing, please click here.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG. He writes the Blockchain Weekly Front Page each Monday.

Bitcoin & Blockchain, Blockchain, Consumer Banking, DX Exchange, security token, wall street

DX Exchange Security token model could democratise Wall street

2019 is the year of the Security tokens. We have had several ebbs and flows in the Blockchain industry over the last few years. Events of the past 18 months especially have shaken the industry into some serious introspection.

Revelations around the lack of controls and regulations around capital raising models have brought the industry into serious disrepute – in such a fashion that the merits of the Blockchain framework have been challenged. Being a passionate student and a commentator of the industry, I still believe, the model is intact, its the controls around it that have failed to stop human greed from causing havoc.

On the brighter side though, security tokens were seen as the bail out for the industry in many ways. Towards the end of 2018, there were a lot of talks that the model has merits, and as soon as the year opened, we have had the news of DX Exchange platform launch.

The DX Exchange platform allows bluechip stocks traded in NASDAQ on Blockchain using security tokens – this would cut out the middlemen, and when rolled out across markets, would save Billions. The disintermediation that the model brings to the table, will also put several business models dependent on Wall street at risk.

Why is this a better model than an ICO? Is this just another hype? Is this a perfect model that will create the new inclusive Capital markets?

I believe, ICO was the wrong start to the right journey. Being an early stage Venture Capital investor, I understand that valuing a startup is more of an art than science. There are very few data points. So when a business that has no way to value itself goes on Blockchain, the intrinsic value behind the tokens will be challenged by the traditional financial services industry.

Blockchain purists will argue that the new capital markets driven by Blockchain wouldn’t need traditional financial services principles AS-IS. However, what we are trying to do with Blockchain is a massive change in the way we exchange value, and that can only happen by collaborating with the incumbents.

If value has to move from traditional markets to the Neo Market, it can’t happen without key stakeholders in the traditional markets understanding the value of the Neo Market and embracing it. Security tokens can make that happen.

DX stressed that its digital stocks are classed as derivatives — with the underlying asset being equity of 10 Nasdaq-listed firms — and that its platform is regulated under the European Union’s Mifid II directive

CNBC News

With Security tokens, the problem of intrinsic value is resolved. When you have a token that’s valued based on an underlying stock – most people who understand derivatives will get it. Of course, the tokenisation process, the exchange, its participants, operational details of managing transactions will have to be regulated and audited regularly to ensure that the security token industry gains credibility.

In doing so, we would have created a disintermediated Neo market on the Blockchain, but still largely within a traditional financial ecosystem. That is the first step, and I believe the right step for Blockchain in Finance.

Will there be scams? There will be – for sure. But I believe the worst of these scams are behind us, and with controlled progress, the Blockchain industry should see the adoption that it was meant to.

I am really hopeful that there will be a day when Mangoes from my farm in India and Buckingham palace will both go on Blockchain, and I will be able to trade some equity in the palace with Mangoes.

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on Inclusion and a podcast host.

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accelerators, Aon, GIA, Hartford, InsurTech, SBC

Insurtech Front Page Weekly CXO Briefing – Accelerators

The Theme last week was about cars and auto insurance.

The Theme this week, is about InsurTech acceleration programs. At the beginning of the year, new InsurTech programs are ready for a robust launch, so are the startups.

For more about the Front Page Weekly CXO Briefing, please click here.

Incumbents embracing InsurTech is a common theme in our posts. This time, it’s about customer engagement.

Story 1: Global Insurance Accelerator kicks off 2019 with 10 insurtechs

Extract, read more on Digital Insurance:

“The Des Moines, Iowa, Global Insurance Accelerator is starting up its next cohort on January 15. The fifth iteration of the insurtech development program features 10 early-stage companies that will participate in the 100-day program. Over the course of that time, startups will work with insurance company mentors from a range of sponsors to move their product to the demonstration stage, which will take place April 24 at the Global Insurance Symposium, also in Des Moines.”

I checked the cohort and found zero familiar names. Looking forward to their performance and what they can deliver to attract incumbents.

Story 2: 10 startups in second Hartford Insurtech Hub cohort

Extract, read more on Digital Insurance:

“The Hartford Insurtech Hub, one of a proliferation of insurtech startup accelerator and incubation programs to launch over the past several years, has announced the 10 startups that will participate in its second iteration. Selected from a pool of more than 200 applications, the companies will relocate to Hartford for the start of the three-month program in February. Corporate partners for the Hub include Aetna, The Hartford, Travelers and USAA.”

To be honest, the fields those 10 startups covering are not new. IoT, item coverage, claim enabler etc. But maybe they can provide a new perspective on existing concepts.

Story 3: SBC InsurTech teams up with Aon

Extract, read more on Finextra:

“Aon joins the SBC community as an industry partner for SBC InsurTech CoLab (CoLab), a themed-based innovation program for mature markets. CoLab aims to align the impact innovation can deliver with an organisation’s strategic imperatives and top priorities. Aon will be focusing on CoLab’s ‘Commercial and Specialty Lines’ sector, which will look at specific problems in key customer segments ranging from SME to large industrial insurance. This will enable the key gaps in the insurance value chain to be better understood and addressed through collaborating with growth stage startups.”

This one is about the other end of the chain – corporate partners. If startups are the source of energy for InsurTech programs, insurers as corporate partners can be appropriate tools to harness that energy.

Accelerators provide opportunities for startups to showcase themselves in front of potential partners or competitors. It’s about communications and idea sharing. Of course, most of the startups in those accelerators might mediocre, but sometimes there might be a gem hidden among them.

 

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Zarc Gin is an analyst for Warp Speed Fintech, a Fintech, especially InsurTech-focused Venture Capital based in China.

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