Small Business Banking

Tide and ClearBank potentially poised to grow with RBS bid

It’s the second week in a row I’ve been led, by my research, towards the Royal Bank of Scotland. This must say something about how heavily they are involved in the fintech scene. It increasingly seems like they are at the centre of a growing fintech galaxy, within the wider global universe.

Last week I was led to RBS when I took a deep dive into their multi-brand strategy, which had all the hallmarks of FMCG.

Going back as far as November, RBS also crossed my path when I wrote about their investment in Mettle. This was clearly something that coalesced in my brain, percolating in the background, and somewhat unconsciously drove last week’s insights.

This week I find myself back at RBS again, via news that Tide, a UK SME bank has partnered with ClearBank, the latter of whom is in the process of applying for a grant from the RBS Alternative Remedies Package. All roads, it would seem, lead to RBS, who’s money is poised to cycle through the fintech system through multiple routes!

What will they do if they get the money?

According to Finextra, the bid involves the two upstarts coming together to take on the big challenges SMEs face in the UK, including opening of accounts (only 4% of businesses switched banks in the past year). Switching services are available to make the process less painful, but fewer than 0.5% of those that switch use them.

Market differentiation is another pain point the two companies will look to address through the partnership. In a world of vanilla business banking products, why go through the pain of upping and moving for no real upside in the form of easier or smoother access to credit, or less time on business admin?

Today it’s believed Tide has 1% of the 5.6 million SME market. With a little money from the RBS remediation fund and some clever strategic partnerships, like the one with ClearBank, there’s good odds they could steal a lot more.

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.

AI, health, wealth management, WealthTech

Food and Finance blurring through technology

As technology blurs business lines and `forces` incumbents to get rid of silos, Wealth Management & Capital Markets become broader.

Wealth Management & Capital Markets are being re-imagined as we speak.

Stay with me in this transformation.

My vision of Wealth Management is a holistic service that surely includes the future of Food and how we eat.  We didn`t touch on this topic with Paolo Sironi, when we discussed the principles of the Theory of Financial Market Transparency (FMT) in `Sustainable Banking Innovation`. Limited (and irreversible) time constraints were the reason that I didn`t raise the issue, which otherwise would be a very suitable topic to discuss with the Italian thought leader @thespironi.

My belief is that Food, Finance, and Fun are essential domains to our health and wealth. So, we will soon add to budgeting, borrowing, insurance, investing, trading, all sorts of others non-conventional `assets` and services.

Vivek Gopalakrishnan, head of brand & communications Wealth Mgt at BNP Paribas in South East Asia,  shared a Reimagine food infographic about What and How we will be eating.

reimagine food

Source: DECODING THE FUTURE OF FOOD

The way I see the broadening of wealth management with Food is through AI algorithms that we will eventually trust, as we become convinced that they know us better than we know ourselves. Once this cultural shift happens, then food AI advisory will become ubiquitous. We will entrust the mathematics, the algorithms to advise us on Diversification, risk management, and investing around food.

All this will be 100% linked to our customized insurance policies naturally. It will also affect our risk appetite in financial investing as science will put us in more control of our life expectancy and Immortality will become in. Audrey de Grey, the renowned biomedical gerontologist, wants to increase human longevity to the point that death could become a thing of the past. Medical technology could soon be able to prevent us from falling sick. Yuval Noah Harari, also talks about the `Last Days of Death` in Homo Deus.

Even if this doesn’t happen in the next 50yrs, food AI advisory will happen and the best way will be to integrate these services with the advisory of today`s conventional assets in wealth management. My US dollars, my Canadian dollars, my euros, my Swiss francs[1], and my food consumption, risk management, diversification; all in one place.

In the US, the USDA issues a monthly report on what food should cost families nationwide, presented in four different priced plans: thrifty, low cost, moderate cost, and liberal. Food costs, as a % of income, have been declining dramatically in the US (not the case in emerging markets). Whether food costs are 10% or 40% of household incomes, the point is there is a huge opportunity to manage `what and how I eat`, and just looking at the food budget which misses the entire opportunity.

My vision is that there is no distinction between PFM, robo advisors, private banking for HNW and health. Our wealth and health have to be managed in one place. Ideally, lets deploy blockchain technology to manage our data in a `personal locker` fashion and then let’s outsource the processing and the insights from this data to the best algorithms that act in our interest and advise us on what to eat, what to buy, how to diversify, how to rebalance, what risks match our goals etc. Whether it is food or money.

Tokenization can also unlock value in this context by creating communities linked by incentives built-in the tokens, that share similar food habits and or financial goals.

Blockchain can protect us from the data monopoly slavery and enable us to unlock value.

Fintech can empower us as asset owners of these new values.

[1] These are my personal actual holdings since I have lived in each of these currency places and still hold accounts. Still looking for an aggregator to view and manage all these on a single dashboard. Fintech is not done.

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 this week: Bitcoin Whales, Bulls & Bears Heading to zero? Or heading to $1 million? Your call

whales_bulls_bears_bitcoin.png

Last week our theme was “Governments Love Blockchain“

Our theme for this week is “Bitcoin Whales, Bulls & Bears Heading to zero? Or heading to $1 million? Your call“

Over the last year, we have seen all kinds of predictions regarding Bitcoin and its future. Some claim that its doomed, heading to zero, while others believe that it will eventually reach breakaway speed and jump out of the stratosphere.

To the inexperienced users who’ve heard of Bitcoin, but don’t really know about it, price drops over the last year are only an indication of Bitcoin’s failure. However, for those that have been in the market for a while, they are aware that Bitcoin has had its fair share of bear markets in the past and has come back stronger.

Cryptocurrencies have followed an interesting path, since their boom in late 2017. There has been growth, regulation, and changing sentiment.

Despite the dropping prices, the crypto user base has been growing. According to a report by the Cambridge Center for Alternative Finance, crypto users doubled in 2018 rising from 85 million in 2017 to more than 139 million in the first three quarters of 2018.

crypto2018.jpg

Governments are developing regulatory frameworks to foster cryptocurrency innovation, and large financial institutions are getting involved.

In July 2018, Malta became the first country in the world to establish a clear regulatory framework for cryptocurrencies and ICOs. Japan again has been ahead of the curve, by officially allowing the crypto industry to self regulate. It has turned over this responsibility to the Virtual Currency Exchange Association (JVCEA), rather than authorizing traditional financial regulators, to oversee crypto exchanges.

Despite attempts at regulation, it still remains a challenge. The U.S. approach to regulating the crypto industry has been to work within its current laws, rather than introduce new ones. Other countries like Russia and India are preparing specific legislation for cryptocurrencies. We can expect governments to focus on taxation and regulation for ICOs/tokens offered  to the public, as the top nations agreed in the last G20 Summit.

The crypto market tends to be very emotional and volatile. People tend to get greedy, when the market rises, developing FOMO or become erratic, selling their coins when they see red numbers. The Crypto Fear & Greed Index, shows us how people’s emotions and sentiments change over time.Screen Shot 2019-01-14 at 12.37.40 AM.png

When it comes to ICOs last year, we saw even more growth, significantly higher than 2017. In 2018, ICOs raised  $21 billion in capital , 3.5 times more than 2017.

Screen Shot 2019-01-13 at 11.01.06 PM.png

Yet, investors no longer needed to buy BTC or ETH to buy the tokens of blockchain projects. 2018, was the age of private sales. With private sales, investors can purchase tokens directly, using US dollars or other fiat currencies. The 2017 bull run, in many wats was driven by investors buying ICO tokens with BTC and ETH.

On the tech side, despite the bearish market trends, Lightning Network has been making significant strides. We’ve seen a sudden influx of nodes on LN, growing by 300%. Data analyzed by 1ML.com showed that its 11,000 nodes surpassed $2 million and 574 BTC. LN can potentially, push the Bitcoin to a larger audience, which may include large centralized banks. Once Bitcoin gets past the scalability issue, its adaptation in the main financial ecosystem will boom to new heights.

One of the most anticipated developments coming soon to the crypto industry is the launch of Bakkt. Intercontinental Exchange, the operator of the New York Stock Exchange is planning to launch Bakkt, a federally regulated market which will seamlessly and safely enable institutions and consumers to buy, store and sell crypto assets.

It remains to be seen if we will see a significant increase in value, if prices remain around these levels or drop even more. As Bitcoin, cryptocurrency and blockchain adoption continues to grow, it simply becomes harder for them to disappear in thin air or for prices to go to zero. The fact is that cryptocurrencies aren’t going away and will remain an important element of the landscape in the future. Peer-to-peer, decentralized cryptocurrencies hold tremendous potential. The crypto market and blockchain technology are still in their infancy and more innovations are yet to come.

The crash we saw in 2018, is by no means an indication of long term value. At this point, the market will continue to be affected by speculation. Even small developments by governments and regulators will likely affect prices. Also, a big numbers of Bitcoins have been moved by whales out of cold storage. On any given day, this could mean market changes, larger than 10%, in either direction,.

It’s difficult to put a finger on price, but I believe that prices will rise over time and Bitcoin will regain its footing. As institutional investors join the market, they will jumpstart the next bull run. Whether it happens through direct investment or because of new developments like Bakkt or Bitcoin ETFs, one thing is for sure, its coming.

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.

Challenger Banks, Consumer Banking, crowdcube, Crowdfunding, monzo, neobanks, unicorn

Monzo – London’s latest Unicorn sets sight on Global expansion

It doesn’t get bigger than Monzo and its CEO Tom Blomfield for London/UK Fintech. After grabbing headlines over the past 12 months, the end of 2018, saw Monzo achieve the status of a Fintech Unicorn.

Monzo went on Crowdcube (UK’s largest crowdfunding platform) for the funding round in 2018, when the raise of £10 Million closed in under 10 Minutes. As crazy as it sounds, and despite being sceptical about the valuation, part of me still likes to think that it was a well deserved milestone for Monzo.

The end of 2018 brought more luck to Monzo, especially to Tom Blomfield. He was awarded the prestigious OBE for his services to improving competition and driving inclusion in Financial Services. I don’t entirely agree with the financial inclusion angle, but hey, the leadership he has shown at Monzo makes him the poster child of Fintech in the UK.

“An OBE is a Queen’s honour given to an individual for a major local role in any activity such as business, charity or the public sector. OBE stands for Officer of the Most Excellent Order of the British Empire”

Monzo was founded in 2015 initially offering prepaid cards and moved on to a current account when they got a banking license in 2018. The Banking license meant that upto £85,000 of depositors money is insured by the UK’s Financial Services Compensation Scheme.

They saw tremendous growth in 2018, when they acquired ~1 Million users, but only 20% of them used Monzo as their Salaried account. The strategic direction that Monzo wants to take (to make money) would be in saving money for its customers (charge commissions), and creating financial dashboards for customers.

As they set sight on accelerating their growth at the back of their funding round in 2018, Tech Cruch recently reported that, they may be going for the US market next. Gone are the days when UK firms took a conservative approach of capturing Europe before going after the US market – which is generally considered a higher risk proposition, atleast by investors.

They have also ensured that corporate governance is taken care of as growth continues. On that note, they have managed to get Gary Hoffman as chairman. Gary is the former Barclays vice-chairman who steered Northern Rock through its emergency bailout during the financial crisis.

Amongst Neobanks in the UK, Revolut have certainly got the throne for the time being. But Monzo are in striking distance. So its onwards and upwards for Monzo and Tom. Well done and Happy New Year!!

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

auto cars, auto insurance, car insurance, connected cars, InsurTech, vintage cars

Insurtech Front Page Weekly CXO Briefing – Cars and Auto Insurance

1.10 connected cars

The Theme last week was a preview for InsurTech in 2019.

The Theme this week, is about cars and auto insurance. The auto industry is in the process of revolution with the emergence of connected cars and sharing economy. Sometime it concerns insurance, sometime it doesn’t. But I think insurers should always pay attention.

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: Data Derived From Connected Cars Raise Concerns

Extract, read more on Claims Journal:

“Automakers are collecting valuable pieces of information thanks to the internet connections, cameras and sensors built into most vehicles in recent years. The online access makes it possible for cars to be unlocked remotely if the keys are lost. It’s how safety features can be upgraded wirelessly and maintenance schedules adjusted based on performance.”

The article mentioned that government in China has been collecting data from connected car. There have been reports in Chinese media as well, but it did not cause much stir. I have to say in China, people are blunt for privacy, sometimes they are even willing to trade privacy for conveniency.

Story 2: Insurers see value in digital vintage car-sharing

Extract, read more on Digital Insurance:

“Vintage cars are alluring. They represent the simplicity, or craftsmanship, or louche sleaziness of a bygone era. They are also—and I say this as the proud owner of four old vehicles—fussy, dangerous, and excruciatingly unreliable. Not everyone enjoys this kind of constant crapshoot in their daily drive.

Fortunately, a trio of “sharing economy” apps allow occasional access to well-maintained classics. DriveShare, Turo Inc., and Vinty Inc. all function like Airbnb, but each has a unique position. Owners list their vehicles, upload information and images, set a rental price, and provide guidelines on things such as mileage, security deposit, and delivery instructions.”

Out of three of them, DriveShare and Turo Inc. are both backed by national insurance company, Hagerty for DriveShare and Liberty Mutual for Turo. Vintage car sharing is a small market, but insurance can be vital for its healthy growth.

Story 3: Auto marketplace CarDekho grabs $110M to double down on insurance and financial services

Extract, read more on TechCrunch:

“CarDekho, an online marketplace for car sales in India, has pulled in a new $110 million Series C funding round from a clutch of existing investors to push deeper into financial services and insurance.

Sequoia India, Hillhouse and Alphabet’s CapitalG led the round, which also saw participation from Axis Bank, one of CarDekho’s financing partners.”

Service platform is a good place to nurture insurance habits. Since the platform can save the trouble of seeking potential customers, what insurer should do is to attract users with good policies.

Today’s post brought three different stories around cars and insurance. These intersections between insurance and another industry can breed a fair number of opportunities, and along with some problems as well.

Image Source

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, Strategic Viewpoint

Is RBS being influenced by the FMCG greats in its fintech strategy?

Yesterday RBS announced it had upped its investment into one of its portfolio fintech companies, adding an additional  £2m pounds into financial management app Loot, to take its stake to 25%.

The investment adds weight to a burgeoning collection of fintech ventures invested in or scheduled to be launched by the bank. This includes digital SME bank Mettle (which we covered back in November), digital retail bank Bo, rumoured to be launching in 2019, SME lending platform Esme and the acquisition of SME cloud accounting software FreeAgent for £53 million last year.

Unless you were a fintech insider, you’d be hard pressed to connect RBS to any of these new brands. To date, each brand seems to operate in a stand-alone manner, at least from a web domain, visual and content perspective.

The bones of this unbundling strategy at RBS feels reminiscent of the big FMCG ‘house of brands’ strategy global giants like Johnson & Johnson and Nestle have pursued for decades. Eager for shelf space, each of these companies puts multiple brands into the market that consumers can love or hate on an individual basis, without affecting the parent, which maintains a healthy, non helicopter hovering distance.

Could this be RBS’s strategy here? It’s hard to tell for sure, but it certainly seems to have hallmarks of it. One thing is obvious – there is less sure footing today in maintaining a ‘sole brand’ approach, which is the current status quo. This territory is being cleaned up by newcomers Starling, Monzo and Tandem.

Why compete with fresh branding blood like this on their terms? Instead, as RBS is potentially realising, it makes far greater tactical sense to reinvent themselves through a multi-brand strategy. The new shelf space after all is the internet and the mobile home screen. If I have an Esme, Mettle, Loot and Bo app, that’s far more real estate than one Starling app. Food for branding thought indeed.

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.

capital markets, Strategic Viewpoint, Wealth, WealthTech

Zooming out on Capital Markets and Wealth management

insights

A New Year doesn’t always necessarily mean a new mindset but it does allow us to reflect and zoom out.

Capital markets and wealth management, are being disrupted but we are still early in the journey.

In financial products, Price wars continue and zero-fee products keep growing.

In business models, ‘Go Big’ through volume and marketplace offerings continues to dominate; but beware.

The dream of decentralized Community building through blockchain Tech, has failed miserably for now.

The dream of unlocking value through accounting on DLT and automating liquidity through P2P networks, is gaining traction at the country level too.

Robo-advisors and neobanks, have been pushing prices down. Whether it is ETFs themselves, single stock trading, constructing or rebalancing portfolios, buying insurance, Currency exchange, remittances. Customer is king not only getting better UX but also pushing the Fidelities and the Blackrocks of the world to increase their zero-fee offerings. From zero-fee index funds, to zero-fee trading of single stocks. Robinhood and Vanguard have a huge effect on keeping the pricing war very much alive.

The oxymoron is that the dominant business model remains platforms and marketplaces that cross-sell and aim to keep the customer hoping to sell more and more. But as long as the focus is on the product, as the margins will keep diminishing, it will be a Catch22 game. Margins are not uniform but the tech-enabled price war will eventually squeeze them all down to zero.

Think of Robinhood who started off from freemium stock trading. Their growth has been hugely ‘subsidised’ by VCs – $539million over 5yrs – and now they went out offering checking and savings accounts (albeit screwing up on the pricing)[1].  Sofi who started in student loan refinancing, and went into mortgages, thereafter moved into wealth Management. Goldman Sachs, an incumbent investment bank, who went in and out of banking, then targeted retail customers through Marcus, a consumer loan fixed fee service; and is now moving Marcus to their investment unit.

Will a new business model emerge in 2019 that circumvents this investable Catch22 of going after ‘Growth’ only to sell financial products whose margins are going to zero, one after another? This is what will be on my radar screen for this year.

The other oxymoron that is evident both from 2017 and 2018, is that the current designs and implementations of blockchain technology (predominantly, cryptocurrencies) have failed in building communities natively. During the bull phase, this was masked as “the crypto community” had a growing number of cross-over[2] members. But the common thread was only FOMO and herding. During the bear phase, the “carrots” put out to design communities were IMHO “a disgrace”. Incentives like retail bounties, airdrops of all sorts, are no innovation. Using Telegram and 24/7 digital community managers, has been ineffective in building trust with the potential retail investors and being transparent post ICO with governance and financial reporting.

The good news is that DLT experimentation grew substantially during the crypto winter and even countries are stepping in. The motives are either to boost the local economy by creating a tech ecosystem – in a decentralized design there can be several players included instead of “a winner takes all” operation – or to transform the government in several areas like land registries, self-sovereign IDs, voting, health, education, capital markets ect.

Happy New Year for those that were still on vacation last week. Lots of exciting insights to share this year too.

[1] I’ll ignore their failure in executing. What fintech can learn from Robinhood’s ‘epic fail’ of launching checking accounts

[2] Cross-Over Buyers is a Wall Street term that refers to investors that buy into an asset class only to capture high returns in the short term; whereas typically they invest in another asset class in the long term.

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 Weekly Front Page: Governments Love Blockchain

gov_love_blockchain.png

Last week our theme was “Coinbase IPO…waiting for the bull“

Our theme for this week is “Governments Love Blockchain“

In September, Nikos Kostopoulos, Secretary for Scientific Organizations at New Democracy, the main opposition party in Greece, invited me to speak during the Thessaloniki International Fair about how governments around the world are using blockchain to improve the lives of their citizens.

As the new year starts, I thought it would be good to touch up on this topic again. Blockchain’s incredible potential has become increasingly evident to governments worldwide.

We live in a world where centralization powers society. This includes banks, schools, health and so on. Blockchain has hit the world with force, bringing changes in almost everything out there. However, Bitcoin has been the catalyst for the growth of blockchain. Bitcoin’s price has skyrocketed from just $1000 in early 2017 to $19,000 in December of the same year. While prices in 2018 have dropped more than 80%, with Bitcoin hovering today around $3,800, over the last year the number of crypto users has almost doubled reaching 35 million people and on the commercial side we have things in the pipeline like Bakkt, the SEC decision on a crypto ETF, Facebook getting in the crypto game and so many other developments.

PricewaterhouseCoopers (PwC) reported that many of its customers are spending “big money” on blockchain, and that spending will keep growing, as it is expected to reach $1.7 billion this year. WCA100818-1.jpg

Many governments around the world have a love and hate relationship with cryptocurrency and blockchain. On one hand they show their love for blockchain and how they can use it, and on the other they take actions to prohibit or even ban the use of cryptocurrencies.

The best way to describe blockchain: A shared, decentralized, secure, immutable digital ledger. Blockchain lets a group of people, that are complete strangers, agree on the state of transactions and build trust.

A map published on March 2018 by the Observatory of Public Sector Innovation (OPSI), shows there are currently at least 202 government blockchain initiatives in 45 countries around the world.

Screen Shot 2019-01-06 at 4.28.16 PM.png

The blockchain supporters, love it because it cannot be tampered with or changed because of its decentralized nature. The practical applications are limitless.

Earlier this December, Swisscom and Swiss Post, the Swiss national telecom and postal service, announced the launch of a 100% Swiss infrastructure on blockchain technology. The aim of the initiative is to provide end-to-end blockchain related services to Swiss citizens and companies.

The Dubai Blockchain Strategy initiative, a collaboration between the Smart Dubai Office and the Dubai Future Foundation, is almost ready to implement 20 different blockchain based services. The aim is to create a paperless government, where 100 million documents currently processed each year, including visa applications, land deeds, receipts, license renewals, and voting ballots, all become electronic. Smart Dubai estimates, that almost $1.5 billion, will be saved just from document processing alone.

Blockchain has the power to disrupt and strongly reorganize accounting and the way tax collections are processed. With smart contracts, escrow conditions can be built to divert payments automatically and in real-time, without back office costs. In June 2018, Georgia, announced the government was going to explore how to use blockchain to administer all taxes. The new the tax system could reduce double payments, map payments and refunds to individual and businesses, ensure accurate tracking mechanisms, and ease the administrative burden. Last month in the United States, Ohio became the first state to accept Bitcoin for tax payments.

Over the years, the legitimacy of the voting process has been under scrutiny with reports about tampering and manipulation of election results. Countries like the United States, Germany, Russia, and China have had incidents. For this year’s upcoming elections in Greece, think of voters casting theirs votes directly from their smartphone and because of blockchain the process and results becoming transparent and immediately verifiable.

Estonia the small Baltic nation of 1.3 million people, is the first country in the world to adopt blockchain technology in 2008, with their e-residency program. Estonia utilized the distributed ledger technology to create their own identity system, improving citizen satisfaction and substantially reducing bureaucracy. In the last three years, with its e-residency program, Estonia has offered foreign entrepreneurs the freedom to easily start and run a global business in the country, opening its doors to 23,000 people from 138 countries that signed up to the program.

Ghana is building a blockchain-based land administration platform. With its current inadequate centralized system, based on paper records, its impossible for property to be used as a collateral on transactions made by banks. Using blockchain will allow Ghana to modernize its technology and organization, creating immutable land records that are easily verifiable.

Blockchain’s potential to build trust and transparency, support data protection and privacy has been well established. In countries where corruption and inefficiencies rule, blockchain has the potential to restore faith in government. Blockchain technology can make management and regulation immutable and instantaneous. We can move from a paper-based, delayed-reporting reality, to one that is dynamic and real-time.

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

The Taxman and Innovation – How UK and India compare

UK and India have consistently managed a top 5 ranking when startup ecosystems are compared. India VC investments were at $7.3 Billion in 2017, and UK received $8 Billion investments with $40 Billion worth of exits in 2018. However, their approach to tax policies supporting startup funding have been very different.

Image Source

The startup ecosystem in India received a new shock wave in the form of Tax policies. The taxman sent a bunch of notices to several startups to pay up what is called “Angel Tax” on funds received from Angel investors. The tax would be on the premium in valuation that the firm received from its investors.

This has caused a lot of noise in the local press, with big names like Anand Mahindra (who is also an Angel investor) asking the government to intervene. However, several factors come to mind around this issue.

  • The valuations of startups in India have been generally on the higher side. Startups who receive premium valuations in their early stages of funding, often find it hard to justify the valuations at a later stage. This is one of the factors that creates the funding gap.
  • Startup valuations aside, if the tax man decides to calculate a tax on the premium valuation – there should be a clear valuation methodology published for startups to understand their tax liability when they go for funding.
  • In a fast paced innovation ecosystem where at times abstracts such as quality of team, potential market, intellectual property (not so abstract), first mover advantage etc., decide valuation premiums – the government cannot come up with a comprehensive baseline valuation framework.

 “It needs immediate attention or else all chances of building a rival to Silicon Valley in India will be lost,”

– Anand Mahindra

Without the level of clarity described in the above points, it will be hard for startups to know where they stand. Any tax slapped on them without a comprehensive framework will see an uproar from both startups and investors.

At the Singapore Fintech Festival, when Narendra Modi gave a keynote speech, he referred to the Fintech ecosystem in India and its achievements. However, there seems to be a disconnect between his vision and policy execution.

On the other hand, UK have implemented the Enterprise Investment Scheme and the Seed Enterprise Investment Scheme as tax benefits for investors investing into early stage firms. The HMRC website should give details. But these are the key aspects of the schemes.

  • Investors get a refund (from previously paid tax) of upto 50% of their investment into startups.
  • If the investment is held for more than 3 years, there is no capital gains tax when profits are realised
  • If the investment goes bad, investors can claim refunds (from previously paid taxes) for upto 70% of their investment.

Thanks to these schemes, the early stage investment space in the UK is in pretty good shape. Often times these schemes are carried into Series A rounds by investors. Many funds use special structures to operate in compliance with these schemes.

Tax schemes supporting the innovation ecosystem often provide the much needed traction for startups looking for finance. But they have to be executed through well thought through operational steps to be effective. UK has certainly got it right for early stage backers. India has some work to do.

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

2019, InsurTech, Predictions, startups, Uncategorized

Insurtech Front Page Weekly CXO Briefing – Prospect, a preview for 2019

Prospect

The Theme last week was a review for InsurTech in 2018.

The Theme this week, at the beginning of 2019 is Prospect, a preview for 2019. What trends have the potential to impact future market? Which startups should you pay attention to? Let’s find out.

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: 10 insurtech predictions for 2019: XL Innovate

Extract, read more on Digital Insurance:

“XL Innovate are watching all of the InsurTech developments and trends closely and expect to see a number of exciting changes occur in 2019. Here are 10 predictions for the coming year.”

Predictions include tech giants’ potential expansion in InsurTech, technologies like AI and blockchain going different directions, influences InsurTech gradually imposing on insurance etc.

Story 2: 10 insurtech start-ups to watch out for in 2019

Extract, read more on Bobs Guide:

“The global insurance market has remained more or less untouched by philosophical shifts for decades. Yet thanks to a flurry of recent tech innovations, an influx of investment from venture capitalists and sky-high demand for bigger, better and faster insurance products, the sector is now engulfed in a proverbial evolution.

That evolution has been driven largely by a fresh crop of insurtech start-ups racing to leverage a variety of blockchain technologies, machine learning techniques and revolutionary product lines in order to squeeze out savings that can be subsequently passed on to customers and create an ecosystem of more efficient insurers.”

Well-known names like Lemonade and Metromile are included in the list as well as relatively new ones such as CyStellar and Ins For Renascence.

Story 3: 5 Insurtech Questions for 2019

Extract, read more on Medium blog:

“The return of investment market volatility could make 2019 a year when what life and annuity issuers really want out of information technology is stability.

When the environment is calm, insurers may dream of fancy tech worlds of tomorrow.

When the ground is rolling like waves on the ocean, insurers may cling to any tech systems that can help them stay upright as banks, securities brokers, asset managers, and poorly anchored insurers blow past.”

The questions have been repeatedly asked since the emergence of InsurTech. Answers varied from different insurers and startups. You didn’t thrive because you made the right answer, you know the answer is right because you thrived.

Once again, it’s time to set yearly goals. Do you still remember your goal one year ago? Set your goals, share with us, consult us, let DailyFintech help you see the future more clearly and achieve your goals!

 

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

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