Category Archives: Research

FCA publishes update on wide-ranging review of retail banking sector

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WiredGov UK | FCA | Jun 28, 2018

The Financial Conduct Authority (FCA) yesterday published an update on its Strategic Review of Retail Banking Business Models.

The Review is an in-depth and wide-ranging piece of work to give the FCA a greater understanding of retail banks’ business models, and how these may change in the future. This includes looking at how personal current accounts (PCAs) are paid for, the possible impact of technological and regulatory developments such as Open Banking and changes to payment services due to the revised Payment Services Directive (PSD2). It sets out the progress made on the analysis of the issues and planned next steps.

See:  New matchmaking service for small businesses looking for finance

The review is also critical to the FCA’s work on overdrafts. The FCA has already expressed concerns that some potentially vulnerable people are paying significantly more for their current accounts through unarranged overdraft charges and fees. In May this year, the FCA proposed a set of potential changes on overdrafts for discussion as part of its high cost credit work and will consult on any changes later this year.

The review shows that most current account customers contribute to their bank’s profits, but a small proportion pay significantly more than others – around 10% of customers generate between a third and a half of all contributions to profits from current accounts. The data also show that many consumers go to their current bank rather than shopping around when looking for other financial products.

For example:

  • 52% of PCA customers with credit cards have one with their PCA provider;
  • 48% of PCA customers with personal loans have one with their PCA provider; and
  • 32% of PCA customers with mortgages have one with their PCA provider.

Andrew Bailey, FCA Chief Executive, said: “This is an important piece of work to help us understand the complexities of the retail banking market and how this may develop in the future.

“It provides more evidence that there is no such thing as free banking. In particular, this evidence will inform the work we are doing on overdrafts, so we can fully understand the potential effects of the significant action we are considering taking in this market.”

The FCA’s analysis shows some of the reasons why retail banking markets remain highly concentrated.  Major banks have a captive audience of customers who do not switch and can be cross-sold other products.  Together they have a large share of the PCA market, currently over 80%, giving them considerable competitive advantages.

Yesterday’s update also sets out a number of factors that could lead to significant changes in this overall picture of the market. In the next stage of the Review, we will look at a number of scenarios to assess when and how these changes may have an effect – including changing customer behaviour, regulatory initiatives, technological developments like Open Banking, and changes to banks’ business models such as branch closure programmes.

The FCA has collected information from 45 firms across the range of the market to inform the Review including major banks, small retail banks, building societies, specialist lenders and new digital banks.

See:  Europe’s banks brace for a huge overhaul that throws open the doors to their data

The FCA is asking for responses to this update, including evidence or views, by 7 September 2018. The next stage of the Review will look at a range of possible future scenarios, including what branch closure programmes mean for consumers and banks’ business models, and how technological and regulatory changes may affect the market.

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Bloomberg | By Michael Patterson and Andrea Tan | Jul 16, 2018 It might be the definitive sign that cryptocurrencies have arrived on Wall Street. CFA Institute, whose grueling three-level program has helped train more than 150,000 financial professionals, is adding topics on cryptocurrencies and blockchain to its Level I and II curriculums for the first time next year. Material for the 2019 exams will be released in August, giving candidates their first opportunity to start logging a recommended 300 hours of study time. CFA added the topics, part of a new reading called Fintech in Investment Management, after industry participants showed surging interest in surveys and focus groups. The worlds of finance and crypto have become increasingly intertwined after last year’s Bitcoin boom, with regulated futures now trading in Chicago, blue-chip firms like Goldman Sachs Group Inc. dabbling in digital assets, and scores of Wall Streeters joining crypto-related startups. More:  Traders With Pockets Full of Crypto Quit Wall Street While digital coins have tumbled in 2018 and the real-world impact of blockchain ventures has thus far been limited, some observers say the technology could ultimately transform swathes of the global financial system. “We saw the field advancing more quickly ...
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‘This Is Not a Passing Fad’: CFA Exam Adds Crypto, Blockchain Topics
Oracle Times | Andreas Townsend | Jul 9, 2018 The crypto world and the technology behind it are still intriguing for traders and investors as well from all over the world. A token burn is a common occurrence, and some crypto companies may decide to burn some of their tokens from the circulating supply for more reasons. This is known as coin burning, and it has been conducted by various token developers as a tool to increase demand. Binance coin burning is approaching Binance is on the verge of its quarterly coin buyback and burn of its Ethereum-based token Binance Coin (BNB). The company’s whitepaper explained how the coin burn works and states that “every quarter, we will use 20% of our profits to buy back BNB and destroy them until we buy 50% of all the BNB (100MM) back. All buy-back transactions will be announced on the blockchain. We eventually will destroy 100MM BNB, leaving 100MM BNB remaining.” The structure will make the coin more attractive to investors Binance has initially created 200 million BNB, and they promised that no more coins will be generated ever again. This structure is designed to make the coin more attractive to investors ...
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Binance Coin Burn Is Around The Corner – How The Coin Burn Works
North American Clean Energy | Jul 15, 2018 Blockchain is coming to the energy world and its impact will be massive. It will accelerate the transition to renewables and give us real and immediate ways to combat global warming, incentivize the production of renewable energy, and replace fossil fuels. What is blockchain? If you’ve heard of Bitcoin, blockchain is the technology that powers it. Blockchain allows data to be recorded on a distributed ledger in a way that cannot be changed. Why does it matter? The key benefit of blockchain as a technology is that it enables parties that do not know each other or trust each other to do business together and still feel secure.  Applications running on the blockchain can take advantage of smart contracts that trigger certain events (for example, payment) when particular milestones are met – so long as some form of proof is presented that a particular milestone has been met. More:  Blockchain has the potential to do amazing things, but it needs a reboot Together, blockchain as a technology, and the advent of smart contracts running on it, have the potential to change everything, much the same way that internet technology changed everything in the ...
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Blockchain and the Future of Energy
BNN Bloomberg | Nisha Gopalan and Andy Mukherjee | Jul 14, 2018 (Bloomberg Opinion) -- Can’t code, or speak Bahasa? Didn’t go to school with a CEO’s son or daughter? A robot will take your trading seat. Read on if you want to save your job. The threat from automation is in the flows part of banks’ global markets business, the most important chunk of the biggest division of investment banking. Investment banks garner 70 percent of their revenue from global markets, made up of trading stocks and bonds, as well as structuring derivatives products and financing; the remaining 30 percent comes from advisory services like shepherding M&As or helping companies raise equity and debt. The higher-margin areas within markets — from structuring to swaps — is relationship-oriented, and therefore (relatively) safe from robot overlords. And it happens to be a big contributor to the 70 percent pie, especially in Asia, where commissions on equities and fixed-income trades are sinking fast, and language and client connections play a big role. Good news? Read on. With the flows business comprising 51 percent of banks’ global markets revenue of $109.8 billion last year, according to Coalition data, automation of even vanilla trades is no small threat. Besides, the 30 percent ...
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Lifehacks for When a Robot Wants Your Job
Crowdfund Insider | Cali Haan | Jul 9, 2018 The Ontario Securities Commission (OSC) published its 2018-2019 “Statement of Priorities” June 5th, but the document provides zero helpful guidance to Ontario companies trying to engage with cutting-edge blockchain-based financial technologies, says Toronto-based blockchain lawyer Amy ter Haar. The “OSC…Statement of Priorities for the Financial Year to End March 31, 2019” restates the commission’s ongoing commitment to investor protection, reduction of regulatory burden and the enhancement of staffing diversity. But according to ter Haar, when it comes to areas like ICOs (Initial Coin Offerings), “tokenized securities” and blockchain for fintech, the agency is painfully vague. “The entire investment community is looking to the OSC and CSA for guidance around blockchain and cryptocurrencies and it is disappointing that this hasn’t been highlighted as a priority,” wrote a frustrated Ter Haar via LinkedIN. While it is clear from the “Statement of Priorities” that the OSC has many concerns in its purview, the document’s reliance on fuzzy platitudes regarding Fintech suggests sluggishness at commission and the downright neglect of a growth industry supercharging across the globe: “There are two sides to industry health. Investor protection is just one side of it…However we categorize cryptocurrencies ...
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Ontario Securities Commission “Doesn’t Really Know What’s Going On” in Blockchain Fintech, Says Lawyer
About NCFA Canada | C. Asano | July 9, 2018 TORONTO, JUL 9, 2018 – The National Crowdfunding & Fintech Association of Canada (NCFA) today announced that Charlene Cieslik, Chief Anti-Money Laundering Officer (CAMLO) of Coinsquare, has joined the Association`s growing Advisory Group to advise on the areas Compliance and Anti-Money Laundering (view). Charlene Cieslik is the Chief Anti Money Laundering Officer of Coinsquare, Canada's most secure digital asset exchange for buying bitcoin, ethereum, and other digital currencies.  During her 20-year career, Charlene has held roles as the Chief Compliance Officer, Chief Anti-Money Laundering Officer, Chief Anti-Bribery Officer, and Chief Privacy Officer at several Canadian and Foreign scheduled banks, where she was responsible for the development, remediation, and execution of AML/ATF, anti-bribery, regulatory, and privacy programs. Charlene has worked with several “Big 4” accounting firms and a Canadian fintech company, where she has assisted global financial institutions with AML/ATF program development, particularly with post-regulatory exam remediation and AML/ATF investigations. Charlene holds a Master’s degree in Criminology from the University of Toronto, is a Certified Anti-Money Laundering Specialist, and was an original founder of the Toronto ACAMS Chapter.  She has lectured as a Professor at Seneca College and currently teaches in ...
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Charlene Cieslik, Chief Anti-Money Laundering Officer of Coinsquare, Joins the National Crowdfunding & Fintech Association of Canada’s Advisory Group
Crowdfund Insider | JD Alois | Jul 2, 2018 In a significant policy move by the UK government, the threshold for investment crowdfunding has been upped to €8 million thus matching the recent change by Germany which announced the same funding limit. This increase is due to a change in the Prospectus Directive. In the UK, there is no limit on how much a crowdfunding platform may raise online. But a rule requiring a full blown prospectus at €5 million has, in effect, created a significant speed bump for investment crowdfunding platforms – one that has rarely been breached due to the cost of creating and complying with a prospectus requirement. The change announced today, should have an important impact on UK crowdfunding platforms as it will help make the online capital formation industry far more viable as issuers seek larger funding amounts raised via the issuance of securities online. In the early days of UK crowdfunding most issuers raised smaller seed round amounts. Today, issuers span a far wider range of funding requirements from seed stage to scale up. Frequently, these offerings are done in partnership with professional investors such as VCs or experienced angels. See:  Competition Bureau weighs in on ...
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UK Government Ups Crowdfunding without Prospectus to €8 Million – Matching Germany
Betakit | By Amira Zubairi | Jul 4, 2018 Several Canadian FinTechs have made announcements on the growth of their companies, launching new features and partnerships. Here’s the latest on these company updates. Skrumble Network raises $19.96 million Toronto-based Skrumble Network, which aims to create secure connections for communication, raised $19.96 million ($15 million USD) through its token crowd-sale. Skrumble Network said it raised the funding for its communication-centric blockchain network that will provide developers the infrastructure to build messaging apps. The company wants to help developers build messaging apps that feature secure connections, real-time voice and video calling, wallet integrations for in-context money transfers, and the ability to edit, save, and unsend messages. Skrumble Network said its broader goal is to address data privacy concerns and allow users to take back ownership of their personal data. The company uses a consensus-based algorithm derived from unique session IDs, which enable private peer-to-peer connections. “Social media has completely changed the face of communication, and now, data privacy and ownership is one of the biggest concerns of this time. 2.2 billion users around the world have trusted Facebook with their information; 87 million of those users received a wake-up call…when they got ...
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Today in FinTech: Skrumble Network raises $19 million CAD in ICO, Goldmoney partners with Malbex Resources
SmartCompany | Dominic Powell | Jul 2, 2018 A raft of Australian fintechs have signed a newly minted code of practice to improve transparency and bolster confidence in the small business lending space. Released on Friday, the code was formulated and backed by Australia’s Small Business Ombudsman Kate Carnell, the Australian Finance Industry Association (AFIA), FinTech Australia, and lending advisory and SME advocate thebankdoctor.org, operated by Neil Slonim. Leading small business lending fintechs Capify, GetCapital, Moula, OnDeck, Prospa and Spotcap were all signatories to the code, which will require them to comply with a series of best practice principles when dealing with SME customers. Alongside pledging to meet all current legal and regulatory requirements for small business lending, the signatories have also agreed to introduce an easy to understand loan summary and contribute to a price comparison document being produced by the code’s organisers. See:  Peer-to-peer lending will help small businesses stay afloat This document will simply lay out all costs and fees associated with the fintech’s loans, including the total repayment amount, annual percentage rate, and the simple annual interest rate. Failure to comply with the code will see the offending fintech lender subject to an independent Code Compliance ...
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Six Aussie fintech lenders sign on to code of practice to help SMEs get better loans
WiredGov UK | FCA | Jun 28, 2018 The Financial Conduct Authority (FCA) yesterday published an update on its Strategic Review of Retail Banking Business Models. The Review is an in-depth and wide-ranging piece of work to give the FCA a greater understanding of retail banks’ business models, and how these may change in the future. This includes looking at how personal current accounts (PCAs) are paid for, the possible impact of technological and regulatory developments such as Open Banking and changes to payment services due to the revised Payment Services Directive (PSD2). It sets out the progress made on the analysis of the issues and planned next steps. See:  New matchmaking service for small businesses looking for finance The review is also critical to the FCA’s work on overdrafts. The FCA has already expressed concerns that some potentially vulnerable people are paying significantly more for their current accounts through unarranged overdraft charges and fees. In May this year, the FCA proposed a set of potential changes on overdrafts for discussion as part of its high cost credit work and will consult on any changes later this year. The review shows that most current account customers contribute to their bank’s profits, but ...
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FCA publishes update on wide-ranging review of retail banking sector

 


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, STO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Cambridge Centre for Alternative Finance Launches Global Research to Provide the Most Comprehensive Research on Fintech Available Today

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Crowdfund Insider | | Jun 5, 2018

The Cambridge Centre for Alternative Finance (CCAF), at the Judge School of Business at Cambridge University, has launched their annual research initiative pertaining to the global alternative finance industry. While in years past CCAF has staggered the research, this year they are commencing all at once, targeting the various regions around the world simultaneously including: the United Kingdom, Europe, the Americas, Asia and Africa.

The CCAF reports have emerged as the leading source for accurate data on innovations in finance such as crowdfunding, peer to peer lending (online lending), blockchain development and cryptocurrency. Regulators and policymakers from around the world have benefitted from the unparreleled insight into Fintech provided by the CCAF benchmarking reports.

Rotem Shneor, Associate Professor School of Business and Law University of Agder, Norway,  who is co-leading the EU portion of the study, commented on this year’s research project;

“It is a pleasure and honor to once again join the excellent research team working on this important report. Previous reports have been the most comprehensive and reliable source for industry facts and figures. The European report provides quality well-researched information for anyone seeking to understand market dynamics, developments, challenges and opportunities in the alternative finance industry. As such, it is widely used by industry players for strategic decision making, by government officials for policy formulations, by educators in crowdfunding teaching and training, as well as by researchers who are inspired by the identified facts and gaps driving further research in a new emerging field.”

Michael King, an Associate Professor at Ivey Business School in Canada, is helping CCAF compile data in his country. He says that collecting accurate data on the state of alternative finance in Canada is crucial for establishing the credibility of this funding source with regulators, politicians, investors, and borrowers.

“Without reliable data showing its importance, marketplaces and online platforms cannot hope to be viewed as legitimate partners. The 2018 survey is well-timed to contribute to the review of Canada’s Financial Sector Framework, which will wrap up in 2019, particularly the debate over open banking”.

Diego Herrera, Financial Markets Specialist at the Inter-American Development Bank, described the CCAF research as vital;

“This research is very important for Latin America and the Caribbean for mainly two reasons: First, as of 2015 the region knew that the Fintech ecosystem, in particular Alternative Finance, was growing up, but nobody knew to what extent or its size. The first version of the study delivered clear data on the segments for the alternative finance ecosystem on volume, type of clients, size per country, among other relevant numbers. The following study and its depp dive in Mexico and Chile delivered trends on data and also details such as price, reasons to use platforms against the traditional financial sector, among others. Second, as a continued effort, this study is the only source in the region to determine what researchers and the industry would like to know on the AF industry, creating a large value added for everyone. It is not just an accounting on the number of platforms but rather a collection of useful data on what the vertical is offering for the region in terms of inclusion and supply of financial instruments.”

Dr. Naoyuki Yoshino, Dean at Asian Development Bank Institute, said that expanding access to finance is an important development objective in many Asia-Pacific countries;

“Fintech holds great promise to accelerate and facilitate the achievement of such access. This survey will provide an important database from which to develop policy recommendations to promote financial inclusion while safeguarding financial stability and maintaining consumer protection.”

Professor Shenglin Ben, Dean of Academy of Internet Finance at Zhejiang University added that alternative finance has experienced vigorous growth in recent years around the globe. Various business models are flourishing in different regions and markets. In particular, marketplace lending and crowdfunding are key parts of alternative finance that have gone through rapid and dynamic development creating highly diversified business models – especially in the Asia Pacific region.

See:  Fintech As a Pathway to Financial Inclusion? The Case of China

“I am very glad that the Cambridge Center for Alternative Finance (CCAF), the Academy of Internet finance, Zhejiang University (AIF) and the Asian Development Bank Institute (ADBI) are working jointly to conduct the 2018 Asia Pacific alternative finance survey, aiming to provide useful insights for both policy makers and practitioners in the area of alternative finance. We are very grateful to your kind support and participation.”

CI had a chance to speak with Bryan Zhang, Executive Director of CCAF, and Tania Ziegler, Senior Research Manager at CCAF, on the forthcoming research project. I asked them why they decided to complete their annual research in one fell swoop this year.

Zhang and Ziegler explained that in previous years they would launch 5 or 6 different surveys that were region blocked. But with so many platforms operating in multiple jurisdictions and operating more than one model, they realized that they weren’t capturing what was really happening globally. The emergence of cross regional activity is a critical finding they haven’t quite teased out in our previous reports, changing the survey format should help rectify this.

So other than the timing of the research, what has changed in the Fintech world?

“For five years, we have recorded impressive growth and documented how alternative finance models have developed and become more sophisticated,” shared Zhang. “In that time, we have seen alternative finance become a global phenomenon [they are now tracking platform activity in over 170 countries], with greater interconnectivity at a cross regional level. As platforms (and the models they operate in) become more sophisticated, they are increasingly becoming borderless as well.”

Having now tracked alternative finance for five years, and from this relatively short perspective, the Centre has noted an emerging industry that has progressed quickly. Where once there were only handful of early adopters and innovators in a given country, they now see an “altfin” landscape that is growing rapidly, with an exponential number of new platforms driving competition and introducing new products.

In many regions (the EU, UK, USA) the Centre is also seeing their first cases of consolidation, but with continued diversification of products and services to customers.

More:  Federal budget keeps Canada’s fintech sector in the ‘valley of death’

In recent years, they have documented a concerted effort to streamline and innovate investment processes, and to introduce new technologies (blockchain, gamification, etc) for the products on offer.

Yet, despite displaying continuous growth, the altfin landscape has not reached its potential.

“Key challenges persist relating to market education (both for incumbent finance providers and the consumers who might use an altfin platform) and integration of Fintech-friendly regulation into long-established regulatory systems (the caveat here is that this varies significantly across countries),” stated Ziegler. In recent years, we have seen a much greater emphasis on regulatory innovation (in certain countries), with an emphasis on activity-appropriate approaches towards alternative finance models. This has gone hand-in-hand with policy directives for increased SME access to finance, financial inclusion, etc. Five years ago, there was a heavy-dose of skepticism when discussing alternative finance. From what we have observed, the tides have changed, with greater willingness to enable policies or regulatory frameworks that include fintech operators.”

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

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12 Graphs That Show Just How Early The Cryptocurrency Market Is

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Medium | Chris McCann at Graylock Partners | May 6, 2018

From the time the first website was published in 1991 until today, the internet has profoundly reshaped humanity.

Comparisons between cryptocurrencies and the growth of the internet are invariably drawn (including cryptocurrencies’ netscape moment); however, I wanted to test this comparison and see exactly how far along we are.

In this post, I’ll also be exploring the growth of the cryptocurrency market & the early growth of the internet, to see what takeaways we can uncover.

What makes this comparison tough

It’s impossible to know exactly how many people use cryptocurrency and how often because:

  • For people who self custodial their cryptocurrencies — people can have multiple wallets for different cryptocurrencies.
  • For people who store their cryptocurrencies on exchanges — 1 wallet address does not equate to 1 user on the exchange. It’s also typical for exchanges to create a wallet address for each transaction.

Thus, the only way to get an understanding of the number of users for cryptocurrencies is through approximations.

Measuring cryptocurrency user growth

I tried to approximate cryptocurrency user growth in a few ways:

  • Bitcoin & Ethereum wallet growth
  • Bitcoin & Ethereum active addresses growth (proxy for DAU)
  • User growth of crypto-fiat and crypto-crypto exchanges
  • Total cryptocurrency trading volume over time

See: 

Takeaways:

  • Even though we’ve seen a huge increase for number of users of cryptocurrencies, tokens, and DApps — we are still in year 1994 if we compare the trajectory to the growth of the internet.
  • However, depending on your long-term view of the core-use cases of blockchains & cryptocurrencies, the analogy is either an apt analogy or a pointless endeavor:
  • If you view the core use-cases of cryptocurrencies as a new asset class then I wouldn’t necessarily expect cryptocurrencies to follow the same trajectory as the internet — both in terms of user growth & growth of assets (equivalent to websites on the internet).
  • If you view the core use-cases of cryptocurrencies as an application platform for decentralized applications (DApps) — or better known as the decentralized internet — then the growth of users & DApps would be comparable to the growth of internet users & website growth.

My biggest criticism towards the DApp future is we haven’t seen DApp usage keep pace with the number of DApps being created. The current core use cases of cryptocurrencies are speculation, store of value, assets, payments, etc.

Looking at the data we can see the use case of cryptocurrencies as an asset class has considerably more proof points and measurable user adoption. However, the future of decentralized applications, while interesting to track, is still too early to measure.

Continue to the full article --> here

 


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to thousands of members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

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The forces of change are trumping banks and regulators

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The Globe and Mail | and | May 15, 2018

Patricia Meredith and James L. Darroch are the authors of Stumbling Giants: Transforming Canada’s Banks for the Information Age, the winner of the 2017/18 Donner Prize.

Most businesses fail to respond to the challenge of disruptive technology. But disruptive technologies, including mobile devices, cloud computing, artificial intelligence, blockchain and social networking, are transforming financial services.

So it is perhaps not surprising that, far from embracing creative destruction, the protected oligopoly of Canadian banks and their counterparts in many other parts of the world have chosen to lobby in favour of the status quo. The response of global financial regulators, in the form of Basel II and III, has reinforced the old business model, making it more difficult for banks to adapt. Unfortunately, as we describe in our book, Stumbling Giants: Transforming Canada’s Banks for the Information Age, the forces of change are far more powerful than the bankers and regulators are.

As Bill Gates said more than 20 years ago: “We will always need banking, we won’t always need banks.”

The functions of banking – lending, investing and paying – are necessary in the information age. But how these functions are performed looks very different. Financial-technology companies (fintechs) – such as Amazon, PayPal, Alibaba, Apple, Google and myriad small players including robo-advisers, lenders and payments providers – are using technology to create new and better financial services for both consumers and businesses. They operate in all parts of financial management, whether that is tracking overall spending, applying for a loan or optimizing investment strategies. These technology companies compete directly with traditional banks and, in many respects, have taken them by surprise.

Ant Financial Services (part of the Alibaba Group) uses information from its payment-processing platform to develop cash flow forecasts and assess the riskiness of micro, small and medium-sized businesses. It tracks performance in real time and increases credit lines if the business is increasing faster than expected and accelerates collections if it is not. Ant’s loan losses are significantly lower than those of traditional banks. It’s “Just Spend” securitized consumer loan product helps consumers take that vacation they have been dreaming about. Amazon One Click let’s me buy that item I have been eyeing up online without having to perform a payment transaction. PayPal for Business offers web payments, online invoicing and other services to help me run my online business better.

To support the growth of fintech companies in Canada, the federal government must encourage innovation and increase competition. As Payments Canada rolls out our new real-time payments system, the government should accept the Competition Bureau’s recommendation and enact legislation to open access to qualified non-bank participants. It must implement legislation similar to laws already in place in Britain, the European Union and Australia, making it clear who owns the data stored in warehouses (the customer) and who has access to it (all competitors with the owners’ permission). This would make information – the raw materials for modern financial services – available to all competitors.

Check out:  NCFA: Canada Needs a Harmonized Securities Environment as Current Provincial Approach is a Fintech Innovation Killer

To support the growth of micro, small and medium-sized enterprises (SMEs) the government should consider giving the Business Development Bank of Canada the mandate to develop securitized lending. Using artificial intelligence and sophisticated risk-pricing algorithms to adjudicate loans based on real-time transaction data and future cash flow forecasting has proven much more reliable than traditional bank lending, based on historical returns and secured assets.

Innovation in financial services is urgent. Canada is falling further and further behind. Countries such as China, India and the United States are moving rapidly to establish e-commerce platforms with integrated financial technology companies. Fintechs are key drivers of the financial ecosystem of the future. Instead of wasting time revising the Bank Act to preserve the status quo, our policy makers should focus on legislation to ensure access to infrastructure and data for innovative new entrants and access to financing for the SMEs that represent Canada’s entry into the 21st century information economy.

Continue to the full article --> here


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to over 1700+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

 

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An investor’s guide to robo-advisors 2018

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MoneySense | David Aston | Apr 29, 2018

Find out which robo-advisor is right for you —and how to pair your robo with a real human

When robo-advisors first burst on the scene a few years ago, they threatened to replace human advisors in situations where not much human help was needed. If you wanted more extensive human advice, you still had to pay up to go with a conventional advisor.

Now there’s a formidable new trend emerging.  Increasingly, robo-advisors are teaming up with human advisors in new and creative ways to provide “hybrid” combinations that achieve the best of both worlds.  You get easy digital access and efficiency combined with whatever level of human expertise you need.  You can expect to pay less in fees compared to amounts charged by conventional advisors. But often you also get more value from the advice because it can be concentrated where you need it most.

“Hybrid is where the future is going and everyone is converging into it,” says Kendra Thompson, global lead for wealth management at consultancy firm Accenture.  Of course, the trend is still in its early stages and you will only see hints of it in today’s robo-advisor offerings. (See the accompanying comparison tool below Which Robo-Advisor is Right for You Now for a guide to current offerings from seven leading robo-advisors.)

See:  Introducing the Convergence Ecosystem

It’s easy to get the misleading impression that robo-advisors are antagonistic rivals to human advisors.  Fueling that impression are hard-hitting ads by robo-advisor Questrade Portfolio IQ, where everyday Canadian investors grill their sleazy-looking conventional advisors about why their fees are so high and their returns are so low.  But it’s clear that algorithms won’t replace quality human advice in more complex or nuanced situations, at least any time soon.

If you need a comprehensive financial plan or want help coping with a market meltdown,  you’re likely to want to turn to a trusted human advisor with high levels of financial expertise but also human qualities like communication skills and empathy.

Key to the hybrid partnership is freeing up good advisors to provide value-added advice while using technology to: provide transparent online account access across multiple devices, streamline administration, and take care of routine transactions like rebalancing.  Most robo-advisors recognize their own limitations and see good human advisors as potential partners. “We think advisors who are delivering value will continue to thrive,” says Wealthsimple CEO Michael Katchen.

Humanizing the robos

The hybrid trend has several aspects.  Firstly, some robo-advisors themselves are adding more human services like basic financial planning and dedicated human advisors. But the larger, long-term trend is robo-advisors and other fintech companies teaming up with outside financial planners and conventional advisory firms in just about every segment of the investment advice business.

Of course, the trend is still in its early days and much of the activity is behind the scenes. Nonetheless, Thompson points to a flurry of deals and huge sums of money that the major financial institutions are pouring into this area to show that the trend is unmistakable.

“The type of transformation that is going on is unprecedented,” says Thompson.

“The dialogue of robos vs. humans or old vs. new really misses the richness of what’s going on, which is an entire industry re-inventing itself to be more modern, more in line with what investors want to pay for, and to be more in line with the consumer experiences of today.”

In one of the simpler forms of hybrid collaborations, independent financial planners are referring investments to a robo-advisor while providing over-all financial planning services.  Typically the financial planner has online digital “dashboard” access to the account and incorporates portfolio information into their financial plans.

Also:  This man has made more money trading cryptokitties than investing in his IRA

While the robo-advisor retains full responsibility for managing the investments and matching the client to the appropriate portfolio, the financial planner might fill the role of trusted human advisor who can prepare an in-depth financial plan but also counsel clients about all aspects of their finances.  That might include, for example, talking clients through their jitters during a market correction.   The robo-advisor typically discounts their rates compared to what they charge regular clients because of reduced need for the robo-advisor’s services.

With client permission, the robo-advisor may draw the planner’s fees from the robo-advisor investment account and remit them to the planner.  Already hundreds of financial planners are working with robo-advisors in this way or something similar.  (We’ll describe an example in a minute.)

But there is much more to the hybrid trend than that.  At a more complex but profound level, robo-advisors and other fintech companies are providing much of the technology to help major financial institutions transform their conventional advice businesses.  These partnerships range from situations where robo-advisors provide their complete investment platform, process, portfolio design, and brand to other “white label” situations where the robo-advisor only provides the underlying technology and platform and the conventional financial institution partner does the rest.   Because these transformations are so large and complex, they will take time and often start small with pilot programs in niche areas of the business, but no one doubts their potential.

“Our vision is to become the platform of choice,” says Randy Cass, CEO of Nest Wealth, a robo-advisor in which National Bank Financial has a major investment.  Nest Wealth is partnering with National Bank Financial to introduce hybrid capabilities at the bank and has also cut hybrid-type deals with three other conventional advisory firms.

Meanwhile, the Bank of Montreal’s BMO SmartFolio robo-advisor offering is available alongside full-service brokerage accounts in its BMO Nesbitt Burns division.  In the right client situation, BMO SmartFolio allows brokers to spend less time on administration and reviewing client accounts, and more time on value-added activities like financial planning and estate planning, says Silvio Stroescu, head of digital investing at BMO Financial Group.

And while Wealthsimple hasn’t publicly specified how it might help transform Power Financial Corp.’s diversified financial services empire, the fact that Power Financial has acquired a controlling stake in Wealthsimple at least indicates interest if not intent.  Other robo-advisors such as Invisor, Justwealth and WealthBar have also announced hybrid deals of varying size and significance.

Not just for millennials

Meanwhile the robo-advisor’s traditional direct-to-consumer offering continues to evolve.  Many of the features that were novel a few years ago are more commonplace today.  That includes:

  • digital access and communication through multiple devices;

  • construction of largely passive portfolios using low-cost ETFs;

  • online questionnaires that match new clients to the most appropriate portfolios for their circumstances;

  • paperless account initiation or “onboarding” process;

  • automated rebalancing of portfolios; and

  • availability (in most cases) of highly qualified portfolio managers working to a fiduciary standard to step in and provide limited human advice when needed.

Robo-advisors were originally thought to appeal particularly to millennials because of the demographic’s early embrace of digital technology, but the focus has shifted more towards older investors with larger balances.  While some robo-advisors have gone after an older clientel from the get-go, others have more recently added features that are likely to have particular appeal to this group, like basic financial planning, tax-loss selling and portfolio managers dedicated to specific clients.

Check out:

Wealthsimple

Wealthsimple is the industry market share leader and millennial robo-advisor of choice with its cool marketing vibe, youthful executives, and socially responsible investing (SRI) options.  But it introduced Wealthsimple Black for clients with balances over $100,000, providing lower fees, tax-loss harvesting and basic financial planning.  CEO Katchen says that Wealthsimple Black is the fastest growing segment of its business and that the firm has seen its average over-all client age shift to 34 from 29 a few years ago.  The company has more than 80 per cent of Canadian robo-advisor users as clients, according to Strategic Insights data cited by the company.  It has also expanded to the U.S. and Britain. Wealthsimple announced in March that it had reached $2 billion in client assets and 65,000 clients, with the “majority” in Canada.  It is the only Canadian robo-advisor to release client figures.

WealthBar

WealthBar has always designed portfolios to generate cash flow and reduce volatily, features of particular appeal to older investors.  But it has added services like dedicated advisors and basic financial planning reviews by certified financial planners. Its average client age now is about 48, says WealthBar CEO Tea Nicola.  In addition to ETF-based portfolios, WealthBar also offers pooled funds in specialized asset classes like real estate, a product usually only available to large account clients at conventional advisors.  “We democratize a high net wealth way of investing,” says Nicola.

Justwealth

Justwealth strives to appeal to older investors with larger balances by taking a relatively sophisticated approach to managing portfolios.  Instead of providing six to 10 set portfolio options, which is typical, it provides 65.  That allows it, for example, to offer distinct non-registered portfolios which use tax-advantaged ETFs and emphasize asset classes with relatively favorable tax treatment.  Furthermore, it provides personalized (rather than robotic) tax loss harvesting.  Justwealth also offers RESP target date portfolios that become more conservative as the beneficiary gets closer to needing the funds in university.  Justwealth’s average client age is the mid-40s, says President Andrew Kirkland.

 

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry in Canada.  For more information, please visit:  www.ncfacanada.org

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Guide to Canadian cryptocurrency taxation

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Koi Research Group | Last updated March 26, 2018

For most Canadians who do not trade for a living, you are expected to pay tax as a capital gain. If you spend a significant amount of time trading and analyzing the markets without holding long-term, you may be required to file your gains as income.

Currently, there are no distinctions and all cryptoassets are treated equally in regard to profits made from the activity. In the future we may see distinctions between cryptocurrencies, crypto-commodities, cryptosecurities and other digital tokens when it comes to tax.

The Swiss regulatory authorities released differentiations on types of tokens, defining “payment” “asset” and “utility” tokens. We can likely expect a similar classification from the CRA in 2018.  Since cryptocurrencies are not considered a legal currency in Canada, all payments made using bitcoin or other cryptocurrencies are considered barter transactions and the tax implications are derived from the fair market value of the barter.

Although mining may be viewed as a hobby, the CRA considers any profit-making activity a business and as such, the hobbyist miner should claim the miner and all associated costs as an expense and claim the net income as personal income.

Income vs Capital Gains

The central issue up for debate is whether to consider cryptocurrency profit/loss as income, or as capital gains. There is no black and white answer to this; it depends if you consider yourself a short-term trader, or a long-term investor. If you fall under the category of trader, you will likely be taxing your cryptocurrency gains as income, whereas a long run investor will be claiming their tax as capital gains.

To evaluate if you are a short-term trader who would pay taxes as income, it is best to ask yourself if you fall under the factors below from TaxTips.ca:

  • frequent transactions, extensive buying and selling of securities
  • short periods of ownership
  • some knowledge of or experience in the securities markets
  • security transactions form a part of the taxpayer’s ordinary business
  • a substantial portion of the taxpayer’s time is spent studying markets and investigating potential securities purchases
  • security purchases are financed primarily with margin or debt
  • the taxpayer has advertised or otherwise made it known that he is willing to purchase securities
  • securities purchased are speculative in nature or do not pay dividends

See:  THE CRA’S Position On Cryptocurrency: Income Tax Implications

Based off these factors that would classify a trader, many of us likely do not fall into this category, and can instead file our taxes as capital gains. With this in mind, lets run over a quick example of how the CRA treats capital gains tax.

Capital Gains Tax

In short, 50% of your capital gains are taxed, and are taxed at your marginal income tax rate.

For example, let’s say you bought for $500, sold at $600, and now you have $100 of capital gains to declare. For 2018, your first $46,605 in income is taxed at 15%, so for this example, you would pay:

($100*50%)*15% = $50 * 15% = $7.5

In this scenario you would keep $92.5 of that $100 gain and report $7.5 in capital gains.

Unrealized Gains

What if your gains are held in cryptocurrency and you know the dollar value because an app like Blockfolio or Delta calculates it for you?

In general, any gains you have made but have not withdrawn only exist as “paper gains.” You do not have to report unrealized gains. Whether it is foreign currency, stocks, or cryptocurrency gains that you have not yet cashed, you do not have to report these gains because you have no profit – a form of taxable income – to report. Further reading can be found starting on page 5 this Canadian Tax Foundation report.

What do I tax?

You should organize and track all of your withdrawals from cryptocurrency/bitcoin back into fiat. You should be able to find this information in your trade history on the cryptocurrency exchange you use. Based on what is written above, these are the amounts you will be paying capital gains tax on.

What about claiming it as foreign currency?

What if your cryptocurrency gains have exceeded $100,000? There have been some mentions online that it is possible to consider cryptocurrency as a foreign currency, which you would have to declare as foreign currency/property if it exceeded $100,000. This approach does not need to be pursued by investors for two reasons. Firstly, your tax return will actually ask if the cost of that foreign property was over $100,000 or not. Many investors have invested less than $100,000 in the cryptocurrency space, which immediately makes this irrelevant for them. Secondly, since cryptocurrency is not tied to any government whatsoever, it does not meet the criteria of “foreign property” and we feel that making an argument for it holds less credibility and backing than filing your taxes as capital gains.

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Download PDF guide: Canadian crypto tax document Koi_Metrics 03.26


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry in Canada.  For more information, please visit:  www.ncfacanada.org

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Fintech As a Pathway to Financial Inclusion? The Case of China

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Microfinance Gateway | Douglas Randall & Jennifer Chien| Apr 2018

Two Chinese fintech models illustrate the opportunities and risks involved

Douglas Randall is a Financial Sector Specialist and Jennifer Chien is a Senior Financial Sector Specialist in the Finance, Competitiveness, and Innovation Global Practice, World Bank Group. 

The opportunities and risks of fintech are front of mind for financial sector policymakers these days, and many are looking to China for inspiration and guidance. The Chinese experience has undoubtedly demonstrated that fintech – i.e. new, technology-driven financial sector players - can transform how consumers make payments, save, borrow, invest, and insure themselves against risk. But this experience also comes with caveats and cautionary tales. These topics, along with many others, are discussed at length in a new report on China’s financial inclusion experience co-authored by the World Bank and the People’s Bank of China.

The report explores two fintech models in China that serve to illustrate both the opportunities and risks of fintech: (1) nonbank digital payment providers, and (2) peer-to-peer (P2P) lending platforms.

Nonbank Digital Payment Providers

Alibaba and Tencent were originally established as an e-commerce and social network company, respectively. But both are now major players in the retail financial services market. This transformation began with the integration of payments functionalities into their existing online networks. Alibaba’s first foray into financial products was Alipay, launched in 2004 to facilitate transactions and build trust between buyers and sellers on Taobao, Alibaba’s online marketplace. Similarly, the integration of a payments product into Tencent’s social media platforms WeChat and QQ has proven to be a massively successful model that allows users to blend social and financial interactions, including sending gifts or remittances.

Fast forward a decade, and hundreds of millions of customers now use payment services offered by nonbank digital providers like Alipay and Tenpay, as well as a broader range of financial products offered by Ant Financial, a group of companies of which Alipay is a member. Alibaba and Tencent were leaders in opening up digital payments to nonbank players. The result is a dramatic evolution towards a cashless society in many major urban areas in China. The Chinese experience has shown that online, network-based business models can facilitate the design and delivery of innovative financial products by leveraging technology, network effects, big data, and cross-subsidization opportunities.

See: China’s Alibaba bringing online payment platform AliPay to Canada

But while fintech has certainly improved the availability, convenience, and affordability of financial products for consumers within these large online ecosystems, there is less consensus on the degree to which nonbank digital payment providers have reached unbanked, "last mile" consumers in China. Consumers who do not use social media or e-commerce platforms - disproportionately the poor, rural, and elderly - may receive limited financial inclusion benefits from such models. The scarcity of robust data and analysis poses a further challenge in determining the degree to which fintech providers reach "last mile" consumers.

In fact, much of the progress achieved in reaching the “last mile” with basic transactional products has been accomplished by traditional financial service providers. For example, China has nearly one million third-party retail agents operating on behalf of a financial service provider, with many agents operating in villages not otherwise covered by bank branches. Less than 5% of these agents have been established by nonbank digital payment providers. The channeling of social transfers through bank cards and via agents has also been a significant contributor in reaching previously excluded adults.

P2P Platforms

In the credit space, fintech providers have similarly disrupted the status quo. New digital credit providers have emerged, including internet banks, online microcredit companies (MCCs), and P2P platforms. In particular, P2P platforms seized on the significant market opportunity to reach creditworthy retail customers neglected by traditional financial service providers focused on serving larger enterprises. P2P lending platforms began gaining steam in the Chinese market about ten years ago, and there are now over 2,000 such platforms serving over eight million borrowers in China.

See:  Central banks should consider using digital currencies: China think tank

Unfortunately, there have been numerous instances of consumer abuses in the P2P industry. Many lenders/investors were led to believe that their funds were channeled to a specific borrower or that their loan was guaranteed by the P2P platform – beliefs that often turned out to be false. There were also cases of outright fraud. In one high-profile case, the company Ezubao was shut down in 2015 after authorities discovered it had been operating a Ponzi scheme in which fraudulent investment products were sold to nearly one million investors.

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Download the 98 page PDF report --> here


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders across the country. NCFA Canada provides education, research, industry stewardship, and networking opportunities to over 1600+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry in Canada.  For more information, please visit:  www.ncfacanada.org

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