Consumer Banking

Petal a flowering example of brand led fintech

Petal is a fintech startup to follow if you are hungry for brands using sophisticated design and unconventional approaches to positioning their product.

The brave startup has taken on an industry with a bad reputation – credit. Which means dislocating the visual experience is key, from the brand experience, right the way through to the product itself. This can’t feel like credit. It has to be credit, but feel like something else.

Like Starling Bank, Petal’s vertical credit card is a deceptively simple differentiator that shows the power of looking at something afresh, through a design first lens. In addition, the clever positioning of the card-holders name echoes the move towards personalised and monogrammed accessories amongst the insta-first generation.

The fintech startup, which uses ‘cashflow underwriting’ to score and set its customers credit limits, announced it had secured a $34M credit facility this week. American Banker’s catchy headline about the launch of the card to the masses – Startup lender Petal launches its subprime credit card – certainly made us chuckle. Not exactly the headline you’d like to see about your business, and somewhat of a slight on companies like Petal’s mission.

The reality is tens of millions of Americans don’t have credit scores, because they’ve either eschewed credit altogether (this is prevalent in younger demographics) or the systems designed to capture and record their ‘scores’ are hugely deficient. Many old bureaus have woefully inadequate technology and scoring algorithms, especially in the age of big data. That is a goldmine of opportunity for the right risk adjusted system.

So who else is in this space worth watching?

Keep your eyes on Deserve, another competitor in the space. Not quite up there in the branding stakes like Petal, but building a similar proposition.

Petal is smart. You don’t need to invent something new to be successful. Sometimes rearranging the furniture works just as well.

The key is obviously making sure the business growth incentives are aligned with the customer. Currently Petal makes money from interest charges, a typical approach – although it is fee free in every other regard. However in our debt fuelled economy, let’s just hope this isn’t a case of rearranging the deckchairs on the Titanic.

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, Fintech, Uncategorized

AI algorithms – takeaways from Fintech+

The Fintech+ conference with its AI thread was unique. The morning sessions included presentations from Nvidia and Google, and use cases and learnings from Zurich Insurance. Leading into the sustainability & Fintech panel that I moderated just before lunch.

Marc Stampfli, Swiss country manager at Nvidia took us on a journey of AI Fall, Winter and into Spring. He explained neural network concepts borrowed from biology and the initial difficulties of neural network computations outperforming statistical approaches. The 1st tipping point came with increased data availability through the internet, and only then we had evidence that neural networks could outperform statistical models.

After that point, we ran into the next problem which was the lack of computing power to process all this data and multi-layer neural networks. And this is where GPU – a kind of parallel computer –  was created and first used in vector mathematics. This is the technology of Nvidia’s processor.

For me, this historical thread is another example of a solution designed for theoretical mathematics that finds a real-world application that takes us to the next level of the 4th industrial revolution. I associate it to the zero-knowledge proof in cryptography, now used in some blockchain protocols, that allows to verify & validate data without having to trade-off privacy[1].

We are living in a world in which, more or less unconsciously, we increasingly “Trust in Math”. After the GPU adoption in business, we moved to new hardware that is not only faster but also smaller in size. We basically reinventing how data rooms looked.  And this the world from Nvidia’s angle. They have facilitated the growth and new value creation, all powered by #AI tools.  The use cases in Finance are immense. Fintech solutions for:

  • Operations: automating claims processing and underwriting in insurance
  • Customer service & engagement: alerting customer for fraud, chatbots, recommendations
  • Investing/Trading: automating research, trading signals, trading recommendations
  • Risk & Security: fraud detection, credit scoring, authentication, surveillance
  • Regulatory & Compliance: AML, KYC, automating compliance monitoring and auditing.

Evidently, the biggest but fundamental problem that incumbents face in adopting any of these potential use cases, is that they first need to find ways to integrate their data and then to upgrade their data rooms to be able to handle the required computing power.

Having said that, Zurich insurance, one of the large Swiss insurers, shared with us their AI projects and research which started as early as 2015. Gero Gunkel spoke about their very successful AI applications in automating the review of medical records with the aim to arrive at a valuation. A process that entails reviewing reports ranging from 10-40 pages and that may take on average 1hour. They used AI algorithms that reduced this to 5 seconds! That is nearly real time for a business process that is Not low hanging fruit.

Zurich Insurance has also been using AI to automate the time-consuming process of collecting publicly available information towards opening accounts for large corporates. This automated web search can not only offer efficiencies but also become a new service provided to the underwriters of these types of insurances.

“Don’t look for the Swiss army knife”, said Gero Gunkel as AI may seem so promising that one can think it can take care of everything.

Dr. Christian Spindler,  IoT Lead and Data Scientist at PwC Digital Services, raised the important question on how to develop Trust in AI. This is a tricky topic as it beckons for answers around the limits of technology. For now, it is recommended to develop AI algorithms that can also provide explanations for their “Answers”.

I would say that “In Math we Trust” to develop algorithms that Answer “What & Why”.

“Improving lives through AI” is Nvidia’s motto for their Corporate Social Responsibility. See their initiatives here.

[1] Zero-knowledge proof allows a someone to re-assure a validator that they have knowledge of a certain “secret” (data) without having to reveal the secret itself. Zcash is an example of such a blockchain protocol.

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

 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 Weekly Front Page: Bridge to Blockchain mainstream adoption via the next bull market

BLOCKCHAIN-GOING-MAINSTREAM

The Blockchain Weekly Front Page is a CXO level briefing. Our mission is to serve the mainstream business community by selecting one major theme in the Blockchain Economy each week and three news stories to illustrate that theme. This is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world, in your email inbox each Monday at 7am CET. 

For more on the format please click here.

Last week our theme was Gaming on Blockchain.

Cryptocurrency prices have been tumbling since the beginning of the year and many are debating if they will recover. In the last nine months, even after an 80% correction for cryptocurrencies and a 69% drop in the price of Bitcoin, the cryptocurrency industry has continued to grow stronger, with the stakes remaining very high.

The sentiment about long-term potential for cryptocurrencies and blockchain, still remains bullish. At least 59% of accredited and 72% of retail investors confirm they are planning to buy more coins in the next 12 months, according to a survey published  this summer by investment platform SharesPost.

This is driving many companies to double down. The big bet is on how to bring in the next wave of retail crypto traders and investors.

Let’s face it, despite the allure of owning digital assets, most people don’t want to, or don’t know how to safely manage their private keys. Most people need something fast, reliable, mobile and intuitive, that will make it easy to get into the crypto market. And what we’ve been seeing is exactly that. Crypto companies creating mobile-friendly fiat on-ramps.

Coinbase is one of of the companies, and it recently announced the Coinbase Bundle, a market-weighted selection of the five cryptocurrencies. Users can buy a bundle of five cryptocurrencies (Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and Ethereum Classic) for as little as $25.

On Twitter the Coinbase posted: “Bundles are a new way to buy crypto on Coinbase. You decide how much to spend. We deliver a market-weighted distribution of assets in your wallets.”

The Coinbase Bundle will launch in the United States and Europe over the next few weeks. Functionally it’s almost just like the Coinbase Index Fund. The main difference is that the Coinbase Index Fund is designed for accredited and more sophisticated investors, that want to spend a lot of money on crypto, while Coinbase Bundle is for unaccredited and unsophisticated investors. The name alone denotes its a cheaper investment vehicle. Investing in a Coinbase Bundle might be a quick and easy way to buy crypto, but it doesn’t necessarily minimize the risk, if for example the coins in the bundle take same downward direction.

We have also seen other companies, Revolute, Robinhood, Square and eToro, integrate crypto in their retail offerings, resulting in huge growth to their customer bases.

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The Coinbase announcement is strategic for their position in the retail market, especially when you couple it with the announcement of Coinbase Learn,  which tries to give basic knowledge to cryptocurrency newcomers, and Coinbase Asset Pages, a service similar to Coinmarketcap, that has detail information about the top 50 coins in the market.

This launch comes in the middle of fierce competition, which is going to get even more fierce. I think we can expect for the rest of 2018 to see more and more crypto custodians, with unique service offerings that cater to the retail crypto investor.

We are also seeing a lot of mobility from crypto companies, with plans to IPO. This week, Bitmain, the largest mining company in the world, filled for an IPO. Some are claiming that Bitmain is trying to untangle itself from the mess they’ve created and they see the IPO as a means to an end.

But, we’ve also been reading about Binance, Robinhood, Huobi, Canaan, Ebang. Lets not forget all the speculation and rumors about the Coinbase’s IPO in 2018. Also, in August, we had Argo, a mining operation, that listed on the London Stock Exchange, raising £25 million (USD $32.5 million) in investor capital.

If blockchain is the “internet of money”, then an IPO by unicorn crypto company, overseen by very serious regulators on an exchange like Nasdaq, would be a Netscape moment for the entire market. It would add another level of legitimacy to cryptocurrencies and blockchain, bring in serious money from both institutional investors and average consumers and potentially drive mainstream adoption by millions worldwide.

Yet, the single hardest problem in all of crypto is the on-ramp. Taking people’s money and handing them crypto for it. A couple of ex-USB bankers are trying to make it easier and bridge the crypto and fiat worlds.

They launched Seba Crypto AG, a Zug-headquartered company and secured 100 million Swiss francs ($104 million) from private and institutional investors. Their goal is to launch the world’s first regulated bank, that lets consumers easily swap dollars and euros into cryptocurrency.

Seba wants to be just like a normal bank, offering clients asset management products and investment banking services, but also allowing them to have both their crypto and fiat accounts under one roof. Investors will be able to securely use fiat cash from their accounts to invest directly into cryptocurrencies, while receiving full protection.

Banks have been hesitant to work with an industry, in which due diligence checks were rarely performed during ICOs a year ago. This has caused an enormous strain to crypto startups, that have faced problems with banks that refuse to open bank accounts for them, primarily because of concerns related to anti-money laundering rules.

The challenges of integrating into the traditional financial system, has driven many startup to seek out alternatives in countries such as Liechtenstein, Gibraltar and Malta. While there are some banks in these jurisdictions that allow cryptocurrency companies to open a bank account, the process can be grueling and the fees much higher than for normal accounts.

In an effort to ease the pain of cryptocurrency startups, the Swiss Bankers Association (SBA) published new guidelines for opening corporate accounts for blockchain startups. The aim is to make it easier for banks to deal with cryptocurrency startups, while lowering the risks involved in offering services to the crypto industry.

In the crypto world, SEBA is not the only company that is trying to build a crypto bank.  Bank of America has filed a patent related to cryptocurrency custodian system. BoA is proposing a computing system that will act as digital vault storage for the crypto assets of large-scale enterprises. Also, Circle is attempting to secure a banking license in the United States.

Image Source

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

AI, CFTC, Consumer Banking, FCA, IBM Watson, MAS, microfinance, p2p lending, Regtech, regulation

The £50 Billion opportunity and how the global stage is set for Regtech

Regtech is a £50 Billion per year opportunity, and that is just in the UK. That is due to the hundreds of millions of pages in regulatory texts that firms have to deal with, to be compliant. It is critical that firms equip themselves with technology solutions that will help them navigate through the complex world of regulation.

Please note that while Regtech covers regulations across industries, I am taking the liberty of using this term loosely to refer to FS based Regtech use cases.

During my time at PwC, I was involved in evaluating AI products for their Legal and Regulatory offerings. We were looking into IBM Watson, and had some interesting conversations on sending Watson to school to learn Legal and Regulatory language (in English). The AI engine (deep learning, NLP) would then be able to provide guidelines to firms in plain English on what was needed for regulatory compliance.

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It has been almost five years since then and we have seen various developments across the globe. Regtech has never been more relevant. US and Europe have more than 200 Regtech firms, as these two regions are clearly seen as the pioneers of financial services regulation.

‘The FCA is the most innovative regulator in the world in terms of using new technologies and the other regulators look up to them”

– Philip Treleaven

In my opinion, Europe and in particularly the UK’s FCA are world leaders in working with innovative ways of achieving regulatory compliance. Be it payments, open banking or crypto currencies, they have taken a collaborative approach in nurturing the right firms. 37% of Regtech investments across the globe happen in the UK.

But its the happenings in Asia that I find more interesting from a Regtech stand point.

Fintech India has seen massive growth with digital payments being well backed by policies and technology infrastructure. The rise of PayTM, UPI and more recently Google Tez have all helped in bringing the total transaction volume of digital payments to $50 Billion. But with growth comes greed, and regulations have to kick in. There were tens of P2P lending firms in India until the Reserve Bank of India (RBI) launched their regulatory framework for P2P lending in Q4 2017. There are now only a handful of well capitalised P2P lending platforms.

There is a lot of work to be done around automation of transaction reporting. For example, the Microfinance market in India is still largely cash based and reporting is manual. There are startups trying to disrupt this space with cloud enabled smart phone apps, that allow for real time reporting of transactions, when an agent is on the ground collecting money from a farmer. This allows for massive gains in operational efficiency, curbs corruption, but more importantly helps transaction reporting so much easier.

I see India as a market, where Regtechs can help the RBI develop a regulatory framework across Financial Services.

China’s P2P lending market is worth about $200 Billion. Recent frauds like Ezubao, where about a million investors lost $9 Billion, indicate that the market needs to have strong regulatory controls. The scam led to a collapse of the P2P lending market in China. A regulatory framework that helps bring credible players to this space, well supported by a bunch of top Regtechs will help the status quo.

Singapore is the destination for Regtechs in Asia – without a doubt. After the US and the UK, Singapore attracts the most investments into Regtech firms. The support that Monetary Authority of Singapore (MAS) provides to budding startups is the real differentiation that Singapore has over Hongkong as a Fintech hub.

MAS have recently tied up with CFTC (Commodity Futures Trading Commission) in the US to share the findings of their Sandbox initiative. Such relationships between regulators help keep regulatory frameworks aligned across jurisdictions . So, when a Fintech is looking to expand beyond borders, they don’t have to rethink operational, strategic or technology aspects for the new jurisdiction and they can focus on what matters – the consumers.

As Fintech evolves over the next few years, there are several ways in which Banks, Insurance providers, asset managers and regulators can work in partnership with Regtech firms. In some areas, these firms will piggyback off what the incumbents have or haven’t done.

There is often a rule of thumb in the top consulting firms – build propositions in an area where there is fire. In other words, if a client has a major issue that could cost them money and/or reputation, come up with a solution for that. This is particularly true with Regtech firms, where they focus on an area that has a serious lack of control and governance.

However, in many parts of the world, there is a genuine opportunity for Regtechs to go a step further and define the controls in collaboration with the regulators, and perhaps ahead of the regulators.

Arunkumar Krishnakumar is a VC investor focusing on Inclusion, a writer and a speaker.

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, Consumer Banking

Banking on the blockchain with Bitwala and Celsius

It may have its naysayers, but there’s no doubt bitcoin has captured the imaginations of thousands of investors. But making bitcoin legitimate is still a challenge, which is why we read with interest that German blockchain banking service Bitwala will be launching what it claims will be the first ever bank account to concurrently hold euros and bitcoin funds.

The funds will be instantly accessible via the Bitwala debit card and, according to the company’s website, deposits up to €100,000 will be protected by the deposit guarantee scheme of German banks.

Bridging the legacy banking world and crypto space is necessary for the popular digital assets to gain respect as a viable currency. Static bitcoin holders who aren’t day traders are potential gold mines (I really feel like we need a new analogy here!) for transaction fee revenue, something Bitwala is no doubt attuned to.

But there are other ‘deposit’ opportunities for bitcoin ‘hodlers’, especially if they don’t feel super inclined to start spending their crypto on coffees.

Celsius provides passive income of up to 5% interest while you HODL and allows customer to access fiat loans of 9%, while your crypto ‘chills’ in your wallet. You can even short the crypto market from within the app.

Bitwala and Celsius are interesting examples of hybrid models coming to market in the crypto space. It bridges that awkward gap for the normal people, those of us that would much prefer to find a practical application for crypto.

In many ways, these hybrids remind me of the contactless cards that the western world adopted after mobile wallets stalled. Just like mobile wallets, which were used by super early adopters but basically no one else, very few people any of us know in the real world, outside of fintech actually use bitcoin day to day. But that is where the market opportunity is.

Hybrids like Bitwala and Celsius are the models to watch.

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.

sustainable finance, WealthTech

Is Sustainability your driver? Stop Borrowing from the Future.

Sustainable_economy_diagram

Sustainable Finance and Investing, remains misunderstood. Language remains tricky, inaccurate, and subject to interpretation; which inevitably makes Mathematics the only Language that can be trusted (100% internally consistent)[1].

Looking at Sustainable investing, there are different approaches to qualifying.

  • The first sustainable investors, negated sectors like tobacco. This is the exclusion approach.
  • Then came a portfolio management approach, based on which ESG factors are used in traditional investment process always with the aim to optimize risk/return.
  • Lately, impact investing is more direct and explicit, by choosing companies that aim to generate measurable environmental and social benefits (alongside the financial return).

As I review a UBS Global Insights report (What’s on Investor’s minds, Vol.2, 2018) it struck me that Investing is lagging big time in the Shift in Values that is affecting other areas of our life. UBS looks at how our personal values (I would say, the shift in the hierarchy of our personal values) is driving major decisions in our lives. Their statistics show clearly that the Sustainability theme is driving our spending decisions, our willingness to pay a premium, our donations to charity, and even our choice of employment.

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Source: UBS Global Insights report

Sustainability, however, factors considerably less (below 40%) in our investment decisions.

Sustainability investing varies considerably by market. The number of investors with more than 1% allocation to sustainable investments in Singapore and Switzerland are only 35% and China, Brazil, and the UAE + Italy, are in the 50s% and 60s% (probably more investors with smaller amounts).

Screen Shot 2018-09-19 at 11.59.16 AM

Source: UBS Global Insights report

The expectation for growth is also very different. In the US and the UK, there are weak signs of a sustainable investment momentum. Whereas investors in the UAE and China, are largely convinced that this is the way to invest.

In Brazil, which has also a high sustainable investing adoption, there is a strong expectation that returns will outperform traditional investments.

Looking into the UBS report, it is clear that there is a lot of interest that is sitting on the sidelines and that advisors and influencers can play a major role in tipping these non-adopters over. We need to invest in converting these non-adopters because we cannot afford to continue borrowing from the future.

Join me, as I will be moderating a panel on Sustainable Finance at the Fintech+ event on October 1, in Zurich. I will be discussing with Sabine Döbeli, CEO of Swiss Sustainable Finance, Oliver Marchand, founder and CEO of CARBON DELTA, Anna Stünzi, researcher and co-lead of the foraus programme „Environment, Energy and Transportation“, and Rochus Mommartz head of Responsibility Investments. Come to participate in this exciting discussion[2], as I will be asking some tough questions around this topic that touches on a much broader issue:

Shift in values and technology

[1] A major topic that is worthy of a longer interactive discussion.

[2] Register here and use the discount code fpluslimited500.

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

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 Weekly Front Page: Blockchain is changing the Gaming Industry

1_yg9ybc7LMCJab452WlPALg.jpg

The Blockchain Weekly Front Page is a CXO level briefing. Our mission is to serve the mainstream business community by selecting one major theme in the Blockchain Economy each week and three news stories to illustrate that theme. This is all you need to know, each week, jargon free for CXO level business leaders and investors who will use this technology to change the world, in your email inbox each Monday at 7am CET. 

For more on the format please click here.

Last week our theme was Regulations on Blockchain.

Blockchain is a real game-changer and is already disrupting a number of industries. Finance, healthcare, real estate, government, energy, art are a few that are already integrating blockchain into their operations. The real disruption that blockchain brings, is the way it establishes trust, through collaboration and code, rather than a central authority.

Gaming is another industry that is joining the blockchain express, with several projects that are already picking up steam. The union of gaming and blockchain is inevitable and the impact of this evolution is set to be just as significant as the emergence of online gaming a decade ago. Blockchain and tokenization are enabling video games to offer users more value and rights to their in-game digital assets.

On DappRadar.com, a platform that lists decentralized applications, we see that gaming is in the top 3 most popular categories, right up there with exchanges and gambling. More than 350 games have been developed, and while only 100 are currently active, new ones are released every week.

The problem that plagues gaming is the inability to prove the provenance of specific virtual items, leading to fraud. Smart contracts allow users to be confident that they are receiving authentic items since they are tethered to the blockchain. Exchanging such in-game items has become a lucrative industry, estimated to be worth $50 billion, that is expected to increase in size rapidly.

Most blockchain games store your items on blockchain, tying them to your Ethereum wallet and making them permanently your own. The first generation of blockchain games was solely based on this principle and they were focused on collecting unique assets and trading them, for fun, profit, or both. The authenticity of individual virtual items is guaranteed using smart contract standards such as the ERC-721 non-fungible token standard and the newer ERC-1155 implementation.

CryptoKitties, one of the most popular blockchain-based games, raised 12 million in a round led by Union Square Ventures and Andreessen Horowitz and was the first game that started this trend.

Game developers are designing new methods to run online games securely, privately, and efficiently using blockchain technology. Players can form teams in new and existing MMORPGs, record their accomplishments securely and permanently, pay and exchange in-game resources or share rewards, like tokens or in-game currency.

One of the projects moving in this direction is the team behind the Angry Birds development platform. Earlier this month, Cocos-BCX raised $40 Million for a blockchain Gaming Network, to help take gaming to the next level with crypto. Their vision is to become an end-to-end platform, where more than one million currently active game developers can build, deploy, operate, and manage games across multiple blockchains. In a blog post, the company suggested that blockchain technology will help in widening the relationship between developers and gamers, as the technology creates a more transparent community around game mechanics.

Today, the gaming industry is thriving, with two billion people and projected revenue growing from $116 billion in 2017 to $143 billion by 2020 and big players are shifting gears to embrace blockchain.

Ubisoft, a gaming manufacturer, is exploring how blockchain games can help players, as it looks beyond gaming for future possibilities. For gaming industry, blockchain is a logical next step in this evolution, since players have long been familiar with virtual currency and fungible items in the gaming world.

The growth of blockchain gaming apps is primarily driven by the industry’s progressive attitude towards new technologies. But that is not the only reason.

For many small startups in the gaming industry, blockchain is allowing them to sell items and raise money fairly quickly. It’s bringing the player community into the development because they’ve put skin in the game essentially. If the game is successful, they’re able to take those items they purchase and turn around and sell them to other players who missed out on the initial game offering.

But blockchain games, still have some important issues to resolve, specifically transaction time and fees.

On Ethereum, the most common platform used for gaming apps, to buy a $1 item could cost you $2 in gas fees, and 10 to 15 minutes in waiting to get that actual item. Developers are already exploring other blockchains that can help address these issues. Currently, nChain, a global leader in research and development of blockchain technologies, is already looking at ways to allow for the migration of Ethereum-based tokens to BCH.

While EOSBet Dice was hacked for roughly $220,000, the online gambling industry was estimated to be worth $40 billion in 2015 and is projected to keep growing.

This has attracted a lot of cryptocurrency and blockchain startups to the space, that are trying to disrupt it. It turns out that gambling, not buying crypto kittens, is one of the most popular applications on the blockchain. According to Bloomberg, over a 24-hour period the Fomo3D app attracted more than five times the number of users than CryptoKitties.

Casinos are all about the trust between players and the house, and that trust is very often abused to the fullest extent. The integration of blockchain technology in the gambling industry will resolve concerns and problems that the online gambling community has been facing, that have to do with gaming results and intentionally hidden winnings and payouts to avoid public scrutiny.

We’re still in the very early days of the technology, but blockchain will have a massive impact on all aspects of the gaming and gambling worlds. Tokenization of virtual goods, improving betting as well as payments, are just but a tip of the iceberg.

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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 blockchain landscape of Ant Financial

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The 2018 Yunqi Conference is being hosted by Alibaba during 19th to 22nd in September. The conference is one of the biggest digital meetup in China’s Internet community. And Ant Financial is also hosting its ATEC (Ant Technology Exploration Conference) in the same venue.

In the ATEC, both the CEO and VP of Ant Financial have explained their visions into Blockchain application.

Jing Xiandong, CEO and chairman of Ant Financial has announced a Blockchain Partnership Plan in the Yunqi Conference on September 20th. According to the plan, Ant Financial will open its Blockchain-as-a-Service platform in an attempt to create more values for the underlying financial systems and to lower trade costs.

The first batch of partners includes PwC, Tsinghua Smart Cloud, Accenture, Standard Chartered Bank etc. And their cooperation will be implemented in various verticals including auditing, consultancy, banking, tax etc.

Jiang Guofei, vice president of Ant Financial also shared his perspective on blockchain in the ATEC speech. He explained that the blockchain team inside Ant Financial was established in 2016 and has been working very hard since the inception. They have built a blockchain platform for financial industry and also been speeding up the application in every industry.

Jiang also stressed the values Ant Financial blockchain is holding – create values for the actual world. He thought that the blockchain market is in a chaotic state during the past 12 months, but they have been committed to addressing actual problems in our world. Creating value for users is the only goal they are pursuing through blockchain.

Jiang believes blockchain technology can promote the credible transfer of data on the chain, making the society more efficient and lives easier. For example, in a consortium, the companies of one single industry chain can jointly provide integrated services customers. Blockchain as an infrastructure can connect service providers with end users.

As a matter of fact, Ant Financial has already implemented various blockchain applications in different industries. Here is a list of these applications.

Ant Financial

Image Source

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

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

Clash of Asian Giants – Singapore’s Blockchain Sandbox advantage

Since the Fintech boom started across the world, two Asian giants Singapore and Hongkong have always fought hard for the lead in the region. Singapore had better access to the ASEAN community to help Fintechs expand seamlessly, while Hong Kong has been historically seen as the gateway to China.

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However, in my opinion, what gave Singapore a clear edge is the proactive and collaborative regulatory regime. The Monetary Authority of Singapore (MAS) along with the Financial Conduct Authority (FCA) have perhaps been the two most forward thinking regulators, who have helped Fintech boom in their markets.

The regulatory regime and its effectiveness (or the lack of it) on the innovation ecosystem has been a real case study with Blockchain. This is a detailed break down of what regulatory stance countries took on Blockchain. MAS have been quite collaborative when it came to both Blockchain and Cryptos.

ICO By Country

China have shocked the world (as they do every other day), with their focus on AI and Blockchain. According to a study by Reuters, they have the highest number of Blockchain patents in the world in 2017 (225 of 406). In AI they are only second to the US with 23% of Global patents granted in 2017 in the field. However, China have taken a binary stand with Cryptos.

In contrast, MAS had published a set of guidelines for token offerings in 2017.

This may not be the most popular stance today: I believe, every country that has banned Cryptos and ICOs have pushed themselves behind in both technology innovation, and in the evolution of new capital markets, at least by half a decade.

China, perhaps may be an exception to that, as the innovation in Blockchain coming out of the country is mind boggling. But in general, it shows ignorance in the potential of the technology or even laziness to work with this ecosystem. The MAS on the other hand, haven’t banned cryptos. They have worked closely with the innovators to understand the potential and help them get it right.

While Blockchain is meant to be trustless, its hard for counterparties in a value network to trust each other primarily because of the technology involved. Its like asking someone to allow a self driving car to do the job on a busy motorway on day 1 (with eyes closed).

To jump through the trust barrier, MAS are setting up a secure platform to sell tokenised securities. MAS, SGX (Singapore Exchange), Deloitte and Nasdaq are working on this Delivery Versus Payments (DvP) platform to add trust to this ecosystem. This is a continuation of Project Ubin – whose first phase tested Digital currency (for SGD) and the second phase focused on RTGS.

With the five phased approach to Project Ubin, we may soon see a state issued digital currency. That would not only put Singapore ahead of its Asian peers, it may be a Global first.

Arunkumar Krishnakumar is a VC investor focusing on Inclusion, a writer and a speaker.

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Life & Health Insurance is critical to our lives. Here is why.

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I’ve always been a Life guy when it comes to Insurance.  While there is a lot of interesting stuff on the Property and Casualty space (P&C), there is always interest (and a special place in my heart) for Life. It’s where I started and grew up in this industry and where I plan to focus for years to come.

A few weeks ago, I was speaking with my friend Andrew Johnston, (Global head of InsurTech Research for Willis Re).  He informed me that the Q2 2018 Quarterly Briefing (which is put together by Willis Re and Willis Towers Watson Securities, with data and graphs from CB Insights) would be focused on Life and Health. This got me very excited and I asked if I could review the report earlier this week before it was publicly released (under embargo of course), so I could be the first one to write about it.

Of the many research publications on Insurtech (not the daily/weekly ones I previously shared), the Insurtech Quarterly Briefing is one that I look forward to the most.

I look forward to it because it is a great combination of 1) numbers/investments 2) thought leadership, and 3) quality company profiles (aka – if a company is in this report, I know they are a quality company).  

This week, I summarize some key findings from the report along the lines of these three areas.  I do encourage you to read the full report here.  I’ve also included a link to all the previous Quarterly Briefings at the end of this article for reference.

Q2 Investment in Insurtech

Funding throughout the quarters

Investments by country

The quantitative analysis can be found toward the end of the report.  Some highlights from these numbers can be found below (taken from the report):

  • There were 71 InsurTech deals with a total value of $579 million
  • The deal count was 8% higher than in Q1 2018, with total funding amount down 20%
    • While deal volume is up from Q1, total funding is down 20% due to a lack of high-dollar transactions, like the seven $30+ million transactions we saw in Q1 (vs. the two $30+ million transactions in Q2 2018)
  • 71 transactions in Q2 2018 represents the highest transaction volume of any quarter to date
  • For Life and Health (L&H), the 27 transactions announced in the quarter were the highest amount since Q2 of 2017 and the second highest on record
  • 43% percent of P&C and 56% of L&H transactions in Q2 2018 involved B2B companies, compared with 35% and 47%, respectively, of all transactions since 2013
  • With a total of 34 investments, Q2 2018 set a new record for the volume of technology investments by (re)insurers and represents an increase of 26% and 6% from Q1 2018 and Q2 2017, respectively
  • Investment from international markets remains strong; transactions outside of the U.S. account for 58% of total transactions since 2013 and 62% in the quarter
  • There were 22 strategic partnerships between (re) insurers and technology companies in the quarter, which equaled the same amount seen in Q1 2018

Further, as noted in Willis Towers Watson Securities’ CEO, Rafal Walkiewicz’s forward, ‘Life & Health InsurTech has attracted more than $5 billion in funding over the last five years, 20% more than P&C over the same time period’.  Further, L&H ‘funding rounds leading to an average funding round size that is 45% larger than the average for P&C.’

What can be derived from these stats?

Firstly, seeing more investment in Insurtech outside of the U.S. should come as no surprise, especially from countries like China, India and the UK.  China has actually leapfrogged a few other countries to go second after the US last quarter – perhaps a sign of things to come?

Secondly, a record number of investments from (re)insurers should also come as no surprise.  After all, just take a look at the number that have VC arms now.

Lastly, I was pleasantly surprised to see that there has been more investment into L&H vs. P&C since 2013.

At the many conferences and events I have attended, as well as the daily articles I read, there seems to be a slightly higher focus on what’s happening in the P&C space vs. the L&H.  I’ve even had some people from the P&C side tell me they think the L&H side is boring as compared to P&C.  

I would agree there are more products in P&C to enhance and innovate  (travel, home, renters, auto, business, gig economy, etc etc).

However, with L&H, we have the opportunity to help people live longer and healthier lives.  

How boring can that be? (italics inserted in place for cynicism I can’t express through just writing…)

Data, Customer Centricity and Advisory Services

3 pillars

Regardless of the line of business of focus for Insurtech initiatives, how to harness new sources of data, build more customer centric products and provide services above and beyond just paying claims are on the agenda of all (re)insurers and entrepreneurs.  

For L&H, as Mr. Walkiewicz points out, ‘the complexity of change occurring within the Life & Health insurance value chain is much greater than in other insurance subsectors and the potentially positive impact on the quality of life for the consumer is much more profound.’  

All three of these pillars can help to enhance the L&H value chain to help individuals live longer and healthier lives.  

ecosystem

Use of Data

Data areas of interest

As with other lines of business, there is a lot of data already existent within the L&H processes and more and more data becoming available.

The need and amount for medical information in order to provide preventative advice as well as to pay claims is very high and very messy.  How can this information be shared between doctors and patients to provide better care? How can this information be shared between hospitals and (re)insurers to pay faster claims?

There are new data sets being brought to the foray from use of wearables and genomic reports.  How will this data be used for underwriting (taking into account legal and ethical considerations)?  How will this data be used to provide better advice and engagement to customers?

And how will all of this data be incorporated into existing (legacy) systems, processes and analytics that the company undergoes?

dacadoo is one company helping with this, by creating a Health Score, similar to a Financial Credit Score.  Their solution helps with engagement of customers by providing personalized feedback on their lifestyle.  The Health Score also provides Insurers with a different data set to help them with underwriting and ongoing monitoring of premium rates based on the individual’s health choices.  

Atidot is a company helping on the data and predictive analytics side.  They are one of the only providers I have seen specifically focused on Life products.  Their solution targets three groups of individuals – CFOs and Actuaries, Sales/Distribution teams and Retention/Customer Care teams.  They help all of these teams with providing better insights on their in-force book of business as well as information to reach out to their policyholders (in the case of a cross-sell/up-sell or potential lapsation).  For full disclosure, Atidot has been a client of mine this year.

Customer Centric Products

products area of interest

For all Insurance products, the way in which consumers determine their needs (especially when purchasing digitally) can definitely be improved.  Further, the products that they buy can be more flexible in nature.

In P&C, we have seen UBI products, especially for Auto, which offer policyholders the opportunity to pay for the exact amount of miles that they drive.  The use of telematics will also help in providing policyholders discounts for driving better (and potentially premium hikes for driving poorly!).

For L&H, these types of products (UBI based) are a bit more difficult to imagine.  However, using the advanced data and analytics as described above can help with providing policyholders and Insurers with more information as individuals progress through their lives.  

As such, the process for determining the amount of coverage an individual needs at the purchase of their policy as well as throughout the term of their policy are of utmost importance.  Further, products should be built in such a way that are more flexible for policyholders and less onerous if they have a change in needs (i.e. limited additional invasive underwriting).

Anorak is a fully automated, fully digital Life insurance advisory platform looking to tackle the meaningful protection gap of nearly 8.5 million individuals in the UK who are currently uncovered or under-covered by Life insurance.  The process starts with a ‘check-up’, which is like a needs analysis for the individual on their current situation.  Once this is done, ‘impartial advice’ is provided on what type of cover the individual may need. Then, three policy options are provided to the individual.  Their product offers an API which can be integrated into price comparison sites, agencies, online retailers and more.

As a person that likes to focus on the needs of and suitability of products being recommended to an individual, I love what Anorak is offering.  

Ladder Life is a digital MGA that offers online Term Life Insurance.  Their tagline of ‘Life Insurance Just Got Easier’ can be seen through their quote and application process:

  • Consumer answers a brief set of questions (many responses are avoided through supplemental data).
  • Consumer receives an instant insurance quote with no obligation to purchase.
  • If supplemental information is needed, Ladder sends a medical professional to complete an exam (free of charge to the customer).

In most cases, the need for blood and urine samples for underwriting has been eliminated.  

Further, they offer a solution to allow policyholders to adjust their coverage as needs change (called ‘laddering’), without paperwork, meetings, phone calls, cancellation or penalty fees.

For those of you who have ever sold or bought Life Insurance, I hope you would agree that the process and flexibility outlined above are better than some of the ‘traditional’ methods.

Lastly, they have just launched the Ladder API and a partnership with Sofi, helping to provide a more extensive offering to the individuals in Sofi’s ecosystem.

Regard has designed products to address coverage gaps and rising out-of-pocket expenses that many customers in the U.S. face as more employers shift to high deductible Health plans.

This is a huge and increasingly larger problem for the U.S. health market.  

According to the report, Regard differs from many other InsurTech agencies in three important ways: (1) emphasis on institutional distribution needs as the starting point for product and technology vs. a direct to consumer strategy; (2) its position at the nexus of new specialty insurance products and proprietary technology vs. traditional products with off the shelf IT; (3) its ability to participate in premium income through risk retention in addition to MGA commissions compared to a commission-only revenue model.

Digital Advisory Services

advisory services area of interest

Insurance is in an age where we are transforming from a collector of premiums and payor of claims, to a service provider that helps individuals manage and prevent risk in their day-to-day lives.  

The solutions that are becoming available in the L&H space are helping with this to enable policyholders to connect with their doctors and hospitals as well as have 24/7 services through the use of AI and machine learning.  This will help to make L&H products more interactive for their policyholders with an ultimate aim of living longer and healthier lives.

Boundlss provides a AI-powered health assistant for L&H insurers.  Their platform helps to support individuals with their wellness goals and acts as a ‘personal trainer/health coach’ for users.  

The Boundlss platform collects, analyzes and aggregates data from over 400 wearables and mobile apps, allowing insurers to gain new insights into their member populations and their behaviors.

Further, if the AI engine does not provide a response that is sufficient for the individual, a human coach can be brought seamlessly into the conversation.  

Oscar is a fully licensed Health Insurer operating in New York, New Jersey, California, Texas, Ohio and Tennessee.  I’ve covered Oscar before when writing about my own Health Insurance purchase and I believe they are a company to watch for the years to come.  With their recent rise from Alphabet, you can ensure that building a digital ecosystem will continue to be at the forefront for this company.  I liken the ecosystem they are building to that of Ping An and believe they have begun to build a company that is focused equally on advisory services as it is on delivering a quality product.    

‘The Insurtech Grand Prix’

It would be remiss of me if I did not mention the thought leadership piece in the Briefing by Greg Solomon, Head of Life & Health Reinsurance at Willis Re International.  Greg is based in Hong Kong.   

In this, he uses the analogy of the Grand Prix to identify initiatives that are:

  • ‘In the Driver’s Seat’ – Insurers taking a lead in initiatives to better distribute and interact with their policyholders with examples coming out of South Africa and Asia.
  • ‘Rear-wheel drive’ – developments outside of the L&H sector that are changing the dynamic of how products are distributed and built for customers.  Examples here include the joint healthcare venture with JPMorgan & Chase, Berkshire and Amazon, online search and aggregator sites
  • ‘Emerging Tech: Towing Them Along’ – different technologies such as Machine Learning, AI, Blockchain, cryptocurrency and genetic testing, that could change/enhance many elements of the L&H value chain.  
  • ‘Along for the ride’ – tools like wellness platforms that help Insurers be alongside of their policyholders throughout the life of their policy.  

Summary

From this summary, I hope for two things:

  1. That you are inclined to read the whole report!  You can find the link here. There is a lot more information in there, especially deep-dives on the companies mentioned including interviews from their management team.
  2. That I was able to change some of the P&C folks’ opinions of L&H from boring to at least interesting!

I am pleased to see the amount of investment and transformation in the L&H space.  As with all other lines, it is long overdue.

The opportunity for our industry to be part of helping individuals live longer and healthier lives is extremely exciting for me (and should be for you, too).   

Previous Quarterly Briefings

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Stephen Goldstein is an experienced Insurance executive and Insurtech dealmaker with a core focus on growing revenue, launching go to market initiatives and advising industry leaders.

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.