Open banking is already happening in the market and regulators need to catch up
Key Points
The e-commerce giant will start letting consumers use Amazon Pay for bill payments by voice and online
The independent dispute resolution service has been abandoned by most of the big Canadian banks
Key Points
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Digital, NEO, Open Banking, Open Finance
Lack of open banking framework forcing Canadian consumers to choose between convenience and security, TD exec says
Financial Post | Geoff Zochodne | Nov 5, 2019
Open banking is already happening in the market and regulators need to catch up
A lack of action on open banking could be forcing Canadian consumers to choose between convenience and security when it comes to third-party financial service providers, according to the chief digital officer of one of the country’s biggest banks.
“For me, there’s a problem,” Rizwan Khalfan, Toronto-Dominion Bank’s chief digital and payments officer, told the Financial Post at the bank’s technology day last week. “That’s an unfair trade-off.”
So-called open banking is a framework that would allow consumers and businesses to let third-party companies access their financial transaction data via secure online channels known as application programming interfaces (API). This could allow companies to design products and services with the data, as well as possibly enable easier account-switching.
Ottawa has been weighing an open-banking framework since 2018, but has yet to release the results of a consultation process launched in January.
In the meantime, the financial technology industry has been developing quickly, and apps that use “screen scraping” — a process whereby customers hand over their login credentials to a third party which then retrieves their financial information — have grown in popularity. This process can violate the terms and conditions of a bank account and could lead to increased risk of identity theft and cyberattack, according to a Senate of Canada committee report.
Khalfan called this an “emerging problem” in Canada that must be solved.
See: Open banking has a big branding problem, government’s public opinion research suggests
TD is proposing the government pursue an open banking model that is along the lines of the industry-led model in the United States, where TD already has the necessary technology in place.
“We’ve built out our APIs and we’ve actually gone live with them in the U.S. in the last month,” Khalfan told the Post. “Because we are North American, we leverage our investments on both sides of the border, so we are planning to use the same API gateways in Canada.”
Khalfan expects a third-party certification process in Canada, but TD is proposing an independent assessment organization that would be overseen but not run by regulators. Everyone in the open-banking “ecosystem” would have to follow industry standards, which would be encouraged by regulators.
“There’s enough industry data standards available that we can actually leverage one of them and then tailor it to our needs in Canada,” Khalfan said.
He also said they are working with regulators and financial-technology firms, and added sorting out standards could be done “in months.”
“An industry-led solution has the potential to be a lot faster,” Khalfan said.
An alternative to TD’s vision is the model that has been implemented in the United Kingdom, where a regulator found bigger banks did not have to compete all that hard for business, which left consumers paying more for their services.
Open banking was part of the recommended solution, and the U.K.’s biggest banks were mandated to make personal and small business account data available to third parties via APIs. Standards were set by the bank-funded Open Banking Implementation Entity and the Financial Conduct Authority approves third parties.
By contrast, TD’s proposal would see a customer engage with a third party provider or app, which would then — usually via an aggregator — send a request to the bank for the consumer data. The bank would ask the customer if they consent to sharing the data, Khalfan said. If so, the data would be sent through industry-standardized APIs.
See: Open Banking Era Starts in Australia (Feb 2020)
Khalfan’s concerns appear to echo feedback the government received in meetings with around 200 stakeholders earlier this year, as detailed in documents obtained by the Post following an access-to-information request.
“An area of consensus among stakeholders is that elements of open banking are already happening in the market and there needs to be consideration of how this activity is managed,”
says a memo sent to an associate deputy finance minister ahead of a March meeting with the lead of Australia’s open banking review.
“Stakeholders are not of the view that the status quo (redacted) is tenable or desirable,” it says.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. 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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Uber announces deeper push into financial services with Uber Money and Understanding its threat to the financial industry
CNBC | Hugh Son | Oct 28, 2019
Key Points
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The ride company announces a new division called Uber Money, which includes a digital wallet and upgraded debit and credit cards.
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The emphasis, at first, will be expanding Uber’s efforts to give its 4 million-plus drivers and couriers around the world access to a mobile bank account so they can get paid after each ride.
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Uber could one day offer a bank account to consumers on its platform, according to Uber Money head Peter Hazlehurst.
Ride-hailing giant Uber is making a deeper push into financial services.
The company announced on Monday the formation of a new division called Uber Money to house its efforts, which include a digital wallet and upgraded debit and credit cards. The emphasis, at first, will be expanding Uber’s efforts to give its 4 million-plus drivers and couriers around the world access to a mobile bank account so they can get paid after each ride, according to Peter Hazlehurst, who will head the new division.
“We wanted to help everybody understand that there’s a new part of Uber that’s focused on financial services and that has a mission of giving people access to the type of financial services they were excluded from,” Hazlehurst said in a phone interview.
Under pressure to turn a profit amid competition from new ride-sharing entrants around the world, Uber is betting that by building out its financial ecosystem, it can keep drivers and riders loyal to its platform. The company topped 100 million monthly active users this year. Many of them use credit cards to pay for rides and food orders. Future products could remove costs related to financial middlemen or generate new revenue streams.
See: Uber is making a fintech push with a New York hiring spree
In June, CNBC was first to report that Uber was ramping up the creation of financial products by hiring engineers for a fintech outpost in New York.
Uber is rolling out globally a debit card with an enhanced “instant pay” service it has been testing in the U.S. and a few other markets. The feature has taken off in the U.S, with more than 70% of driver payments made using instant pay, according to Hazlehurst. It is essentially a no-fee banking account, with the debit card in the U.S. linked to an account provided by Green Dot.
“Not only do you get access to your earnings in real time, it doesn’t cost you anything to keep the money there and you can spend it whenever you want to,” Hazlehurst said.
Cash-strapped drivers
These payment innovations highlight the reality that many in the gig economy are struggling to make ends meet. Another popular feature, no-cost $100 overdrafts, helps cash-strapped drivers pay for gas to kick off a working day. It is, however, a better alternative than high-interest payday loans.
Uber’s ambitions could bring drivers into the realm of digital finance in parts of the world where cash is still king, like Pakistan and Bangladesh. About 40% of all Uber trips globally are paid using paper currency, Hazlehurst said, and Uber is eager to bring that figure down.
See: Uber Banking: Fintech Aims to Revolutionize Financial Services in Canada
After equipping drivers with electronic bank accounts — echoing the model of so-called challenger banks like Chime and Varo — would Uber one day look to provide its many millions of riders with an account, too?
“I think so,” Hazlehurst said. “The reality is that the needs of our partners in the U.S. and in Brazil and in Australia and in India mirror in many ways the needs of consumers as well, particularly in the cash-heavy economies. And the opportunity that we have is to expand to help all of those people have access to financial services.”
One advantage Uber has over other new entrants into banking is its massive scale, which allows the company to negotiate better deals with vendors, he said. “We don’t have to take the traditional fee income model to operate these services,” Hazlehurst said.
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Understanding Uber Money its threat to the financial industry
Future of Finance | Lex Sakolin | Nov 4, 2019
Uber has entered finance! The end is nigh! The boogeyman is here!
Oh. So what's involved? There's a debit card and a "debit account" powered by Green Dot, the same bank that's behind Apple Pay's person to person service. That means that Uber isn't a bank, but is renting shelf space on one. There's a wallet that will be integrated into the Uber app, within the driver's experience. So tracking your earnings and spending will be a feature that is part of the app -- not unlike what Amazon has had for years for merchants. There is a credit component, letting drivers withdraw money against their payckeck. And there's a Barclays credit card, private labeled for Uber, riding on the VISA rails.
Hear ye, hear ye, beware the disruption and tremble under its glory!
So maybe you can tell I am not terrified of this offering, as it relates to the position of banks in the world. But it would be a mistake to underestimate it, and in particular, to miss the various trends that are pulling this together. One lens to understand these developments is the Gig Economy theme. The 2008 Great Recession created high levels of unemployment across the world, and the technology sector was ready with solutions. It is expensive to have employees – they have all sorts or rights, like the ability to organize and the expectation of health and pension benefits. On the other hand, contractors have no such expectations and can be hired and fired at will. To that end, contracting gig websites – from home repairs, to deliveries, to driving pseudo taxis – sprouted like flowers after a fresh rain.
See: Omer Ismail — Head of Marcus U.S. (Goldman Sachs’ Consumer Business)
The issue with lots of part-time work, other than being a psychological nightmare for people that want full-time work, is that you lack the benefits and stability employers provide. In the nonsense world of the United States, employers are responsible for worker healthcare and retirement, and compete to provide such benefits. One could reasonably expect that such social benefits should come from society, but that’s a topic for another day. So when you take away employers, and replace them with venture blitz-scaling start-ups like Uber, the end result is a lot of people who have earnings volatility, a lack of access to traditional financial services, an inability to buy a home under a mortgage, a lack of affordable health care, and a variety of other monsters.
No good pain point is left unserved, however. A number of neobanks have been formed to help with exactly these problems, across categories. The examples below, including Oxygen and Joust, offer a full financial solution for contractors. This includes accounts and consumption smoothing through credit, but it also includes things like merchant gateways and other enabling small business and freelancer technology. Uber's entry point into finance is first and foremost competing with companies like this -- the teams trying to build good financial offerings for those with a contractor's set of problems. And these are more fully featured apps, though they are less tightly coupled and not integrated directly into Uber's experience.
If these targeted gig-banks are too niche from your point of view, we can then just highlight the US neobanks that focus on the same income/wealth demographic. The killer feature for those is credit, not information or aggregation. See Chime or MoneyLion below, with millions of customers each. Who doesn't want to get free money every week? The pro-Uber argument you could make is that Uber has advanced data on its drivers, like Amazon for its merchants. Amazon can better underwrite merchants, because it knows the web traffic to their pages on its own marketplace, and the conversion rates into purchasing a product. Similarly, Uber can project out the trips an individual driver will likely experience in their location based on the massive data set, and use that to adjust the underwriting model. But still, there is real competition.
See:
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Incumbents, consumer complacency barriers to innovation in Canadian banking
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Unlocking the Potential of Frontier Finance
Another lens you can take to analyze the offering is by looking at personal financial management companies that focus on the employer. Two examples come to mind, though there are countless available. Hello Wallet was a fintech start-up focused on helping employers provide a Mint.com-like benefit to employees, with the concept that financially healthy employees are better at their work. You can see the screenshots below. The company was sold to Morningstar for about $50 million, and then sold off again to KeyBank. The largest analytics company was not able to sufficiently commercialize the data/analytics play, and divested to a bank, for whom PFMs are more core and strategic. Times change certainly (e.g., Plaid vs. Envestnet), but this commercialization challenge remains real. Further, Uber is just a single employer, albeit with 3 million drivers, while these PFMs had targeted a broader market.
Think also about Financial Engines. One of the original digital wealth management companies, FNGN was started in the early 2000s (way before you, Wealthfront) to target corporate workplace programs and sit on top of 401(k) retirement providers. It helped employees make better investment decisions, and focused on the place most of us actually make that investment decision. FNGN was eventually combined with the Mutual Fund Store (a store! of mutual funds!) and Edelman Financial to create a $200B+ assets under management player. Could Uber roll out a meaningful competitor? Can it offer a digital financial advisor that moderates between investments, banking, and credit to Uber drivers? Yes, but remember that for most of the drivers, the key issue is to have enough money for rent during the middle of the week.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. 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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Amazon to support utility-bill payments with Alexa
MarketWatch | Emily Bary | Oct 27, 2019
The e-commerce giant will start letting consumers use Amazon Pay for bill payments by voice and online
Amazon.com Inc. is tapping into bill payments by letting customers use its Amazon Pay feature for their utility bills.
The e-commerce giant said during a Sunday keynote at the Money 20/20 financial technology conference that it would be partnering with fintech company Paymentus to add the feature, which will allow customers to pay online or else by voice using Amazon’s AMZN, +1.03% Alexa voice assistant.
See: Bank Customers Are Primed And Ready For Amazon
Prior to the announcement, Amazon Pay Vice President Patrick Gauthier told MarketWatch that the company saw an opportunity in bill payments as about 70% of consumers don’t enroll in automatic payments. The new feature will allow users to get notifications through Alexa when their bills are due and to ask questions about the bill amount or how it compares with prior ones.
PayPal Holdings Inc. PYPL, -0.30% , a rival to Amazon in payments, announced its own bill-pay partnership with Paymentus earlier this year.
Amazon expects to be able to reach 95% of ZIP codes with its feature by the end of the year. Consumers may learn about bill-pay availability through Amazon or through a supported utility company, Gauthier said, and they then will be able to connect their accounts. He argued that the function could be valuable for utility companies that often receive calls from customers asking basic information about bill amounts.
Amazon.com Inc. is tapping into bill payments by letting customers use its Amazon Pay feature for their utility bills.
The e-commerce giant said during a Sunday keynote at the Money 20/20 financial technology conference that it would be partnering with fintech company Paymentus to add the feature, which will allow customers to pay online or else by voice using Amazon’s AMZN, +1.03% Alexa voice assistant.
Prior to the announcement, Amazon Pay Vice President Patrick Gauthier told MarketWatch that the company saw an opportunity in bill payments as about 70% of consumers don’t enroll in automatic payments. The new feature will allow users to get notifications through Alexa when their bills are due and to ask questions about the bill amount or how it compares with prior ones.
PayPal Holdings Inc. PYPL, -0.30% , a rival to Amazon in payments, announced its own bill-pay partnership with Paymentus earlier this year.
Amazon expects to be able to reach 95% of ZIP codes with its feature by the end of the year. Consumers may learn about bill-pay availability through Amazon or through a supported utility company, Gauthier said, and they then will be able to connect their accounts. He argued that the function could be valuable for utility companies that often receive calls from customers asking basic information about bill amounts.
See: Cities and states around the country are banning stores from refusing to accept cash, and it’s a troubling trend for Amazon
Amazon has been building out the capabilities of its payments button, which lets users pay not only on the e-commerce giant’s own site, but also on those of other retailers that have added the button. The company first embedded the payment function within Alexa in 2017, and added ability to make charitable donations through Amazon Pay and Alexa in 2018.
Consumers are still warming to the idea of payments through a voice command, but Gauthier sees room for Amazon to ultimately expand into other types of bill pay, including phone bills, cable bills and insurance.
Amazon has been building out the capabilities of its payments button, which lets users pay not only on the e-commerce giant’s own site, but also on those of other retailers that have added the button. The company first embedded the payment function within Alexa in 2017, and added ability to make charitable donations through Amazon Pay and Alexa in 2018.
Consumers are still warming to the idea of payments through a voice command, but Gauthier sees room for Amazon to ultimately expand into other types of bill pay, including phone bills, cable bills and insurance.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. 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 slow death of Canada’s banking ombudsman
Investment Executive | Ermanno Pascutto | Oct 17, 2019
The independent dispute resolution service has been abandoned by most of the big Canadian banks
For several years, the federal government has failed Canadian retail consumers and small business in providing access to justice in banking, including for seniors, who have comprised 38% of ombudsman banking complaints.
The Ombudsman to Banking Services and Investments (OBSI) was created more than two decades ago by Canada’s largest banks as a national, independent and not-for-profit organization to resolve consumer disputes, in order to get ahead of the federal government before it went ahead with enacting a statutory ombudsman. OBSI was created initially for the resolution of banking complaints and its mandate was expanded to include investments.
See: Cambridge: Global Regulator Survey Results – Regulation of Alternative Finance is Key to Make Sector Safe to Scale for the Masses
OBSI, the only independent referee and dispute resolution service for consumer and small business complaints with banks, has slowly been abandoned by most of the big Canadian banks. Consumers are forced to hope that they will be dealt with fairly and impartially by a for-profit dispute resolution service provider paid for by the banks. The Montreal Canadiens would never be happy about the Toronto Maple Leafs choosing and paying the ref for any game, but this is effectively what the banks are doing to consumers, except that banking consumers are worse off than hockey players. They are amateurs with no home game, always playing in the bank’s arena, against the bank’s staff, and in front of the bank’s referee.
Since OBSI’s inception, something went wrong and the largest Canadian banks abandoned OBSI, replacing it with their own for-profit dispute resolution service, hired and paid for by each bank. OBSI’s relevance has been dying at the hands of most of the same big banks that first established OBSI two decades ago.
The federal government sees this happening, and hasn’t done anything about it. To the credit of the securities regulators, the Canadian Securities Administrators, led by the Ontario Securities Commission, refused to permit the same thing to happen in investments: the regulator prevented banks, insurance companies and other dealers from abandoning OBSI for dispute resolution in investments.
See: Banks Must Act Now or Risk Becoming a ‘Footnote’: McKinsey
It certainly was not that OBSI was awarding too much compensation to consumers that caused the big bank mass exodus.
The banks have never paid $1 million in aggregate for an entire calendar year, which is less than a “rounding error” or one month’s compensation of a big bank CEO.
So the only logical inference to be drawn is that OBSI was a little too independent for the big banks’ liking. Some of its “too independent” behaviour may have included such OBSI practices as investigating problems discovered in complaint accounts that the customer didn’t themselves identify. Financial services industry members did not like this practice, but OBSI has said it is consistent with the practices of other financial services ombudsmen around the world.
An external bank ombudsman’s role is to investigate unresolved consumer complaints independently and recommend appropriate settlements. Banking complaints from retail consumers and small business (everyday Canadians) that require dispute resolution include excessive fees for prepayment of mortgages, fraud and missing and stolen funds. Investment-side complaints include high-risk investments that the consumer didn’t understand, unexpected fees, predatory practices, unsuitable investments that consumers can’t sell in times of crisis, fraud and problems with joint accounts and powers of attorney.
Seniors are particularly vulnerable, because of challenges such as physical or cognitive impairments, insufficient time horizon to replenish capital losses or death of partners who traditionally managed the finances. More than 38% of OBSI banking complainants are over age 65, and many are low income. They often need extra assistance and focused attention, which is more likely to be available from an independent non-profit ombudsman than a dispute resolution service provider that is focused on its bottom line.
See: Fintech’s fast pass to traditional banking is now cut off
Canadians, including the especially vulnerable seniors who need extra support and protection, need a statutory ombudsman that is independent from the banks. They need a statutory ombudsman to recommend solutions in cases that are big enough to warrant concern, but too small to be dealt with through the courts or too expensive to be dealt with through the courts for the average Canadian.
Increasingly irrelevant in banking, OBSI should recognize its inevitable and slow death at the hands of the big banks, announce that it will cease to act for any bank at a chosen date in the near future and inform Canadians that the big banks have killed the only independent ombudsman for consumer banking complaints.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. 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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Fintech’s fast pass to traditional banking is now cut off
CNBC | Kate Rooney | Oct 24, 2019
Key Points
- A ruling by a federal judge this week pours cold water on some tech companies’ plans to quickly become a bank.
- The New York judge ruled that the Office of the Comptroller of the Currency, the regulator issuing the charters, didn’t have the authority to do so.
- “A ruling like this slams on the brakes,” says Ryan Gilbert, partner at Propel Venture Partners.
Tech start-ups trying to become banks will now have to take a slower, more traditional route.
Fintech companies had welcomed a special bank charter that cleared a quicker path for them to become a bank. But that was dealt a blow this week as a federal district court in New York decided that the Office of the Comptroller of the Currency, the regulator issuing the charters, didn’t have the authority to do so.
See: FinTech Charter Hits Speed Bump
The ruling highlights the sometimes murky nature of tech companies getting into banking. It also means that finance start-ups will have to go through the same drawn out process as everyone else.
“It’s a step back for fintechs that are looking long term to become banks,” said Lindsay Davis, fintech analyst at CB Insights. “A fintech charter helped streamline that regulatory process for a company getting into the market.”
The “fintech charter” looked to expedite the process by allowing a start-up to offer lending or payments products without having to accept FDIC insurance, or comply with banking regulations state-by-state. A spokesman for the agency said it “disagrees with the decision and the court’s interpretation of the authority the National Bank Act grants the OCC” and plans to appeal the ruling.
Without the special exception, getting a national bank charter tends to take around 18-24 months, according to Deloitte.
“This might be a longer process than fintechs would have anticipated — the other options are lengthy and cumbersome,” said Alaina Sparks, head of Deloitte’s fintech team. “The OCC charter sparked tremendous interest and got people thinking about new options.”
Advocates of the fintech charter said it would have increased competition by allowing new entrants to the financial system. But the ruling was a win for state regulators, many of whom wanted to block the pathway for fintech. They pushed back on non-banks’ potential to operate across the U.S. without needing to comply with state-by-state laws, which included caps on loan interest rates.
″The decision stops OCC’s attempt to usurp state authority by establishing a federal fintech regulatory framework at the expense of consumers,” New York’s superintendent of financial services, Linda A. Lacewell, said about the court ruling. “This decision makes the financial well-being of consumers from New York and around the country a priority.”
See: No banking charter? No problem. Fintech companies team up with small-town banks
Still, there are other avenues. Square has applied with the Federal Deposit Insurance Corp. for a special industrial loan company license that allows less traditional financial firms to accept government-insured deposits. Stock-trading start-up Robinhood submitted an application to the Office of the Comptroller of the Currency, or OCC, for a national bank charter. Deloitte’s Sparks said those that were looking into the fintech charter will likely still consider similar options.
Fintech firms have managed to tap into the financial system without being a bank. They often partner with traditional community banks to handle the federally insured side of things, while the start-up handles the app and consumer interface. Apple and Goldman Sachs are the most recent example with the launch of the Apple Card.
Continue to the full article --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. 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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Globalizing Fintech In Action: A Discussion With Harinder Takhar of Paytm
Forbes | Alex Lazarow | Oct 27, 2019
Fintech used to be a local game. Increasingly, fintechs are taking a global stance. In my recent op-ed, I covered some of the drivers of this phenomenon, including an evolution towards regulatory openness, the rise of fintech enablers and a shift towards a more global outlook.
To dig deeper into this growing trend, I sat down with founders of leading fintechs who have successfully navigated multi-market expansions. The first in the series was with David Vélez, Founder and CEO of Nubank, an emerging markets financial services provider. Today, I sat down with Harinder Takhar, the CEO of Paytm Labs Inc., and former CEO of Paytm India.
Below we discuss Paytm’s multi-market lens, from starting out in India, to expanding across Canada, Australia, Japan and beyond.
Alex Lazarow: Could you tell us about your business?
Harinder Takhar: Paytm was founded in 2010 and is one of the first digital payment platforms in India. Not only does the company offer individual transactions, merchant payments and point-of-sale systems. It now also offers financial products such as credit cards and the first mobile-first bank with zero online transaction charges and no minimum balance requirement. Paytm has also invaded the ecommerce space with Paytm Mall, event ticketing services, wealth management, insurance and digital gold services.
See: India Challenges China in Global Fintech Fundraising
In 2014 we expanded to Toronto, Canada and started Paytm Labs Inc. We began as a research and development division of Paytm where we’ve applied big data, artificial intelligence and machine learning to Paytm’s data assets to provide optimal financial products to over 420 million consumers and over 12 million merchants in India.
In 2017, the Paytm Canada application launched and offers a consumer-facing mobile app allowing Canadians to pay their bills using multiple payment options and the ability to earn rewards via their smartphone. We are a registered Money Services Business (MSB), which is regulated by FINTRAC. As we continue to grow our operations in Canada, we opened an office in Montreal in the summer of 2019.
In 2018, we embarked in a joint venture between Paytm, Softbank and Yahoo! Japan; known as PayPay. Teams from three different countries came together to launch a QR-based smartphone payment settlement service in Japan offered to both merchants and customers.
Lazarow: How did you choose your first market?
Takhar: It was a tough personal decision to relocate to Canada. However, once I officially received an invitation to immigrate to Canada, I could not pass on the opportunity for myself and my family.
Upon settling into Canada, both myself and Vijay Shekhar Sharma (Paytm Founder) agreed that opening a research and development division in Toronto, Canada would be in the company’s best interest. With the some of the world’s best educational institutions located within the province of Ontario, offering the best computer science engineering programs, it was a quick and easy decision for both of us.
See: India Challenges China in Global Fintech Fundraising
Lazarow: What factors went into the decision to expand? How did you know it was the right time?
Takhar: Back in 2014, big data, machine learning and AI were still gaining traction. At that time, the Paytm app had ~22 million registered customers. While we were able to identify the problem, in our case fraudulent transactions, finding a solution was trickier. This is when we knew that we must develop a system internally.
And, we did just that! We built an in-house anti-fraud platform that uses machine learning to identify fraudulent transactions. It provides real-time streaming data processing engine that allows small business owners and larger retail merchants with the ability to build customer risk profiles. The profiles can be used to create rules and render a fraud action recommendation.
Today, this platform makes up to 50 million decision points per day, and over 130 billion in transaction volume per year.
Lazarow: How did you prioritize your next couple markets?
Takhar: We prioritized by the individual opportunity in the market, and the readily resources that are available to us.
Lazarow: What was required to expand in the new market?
Takhar: Whenever we enter into a new market, we start with looking at the infrastructure. We focus on getting to the core of the problem, building a solution that works for that market, and then using technology to solve that problem.
Team perspective is also very important to us. We look for and hire individuals that have passion and ambition. So, whether we are looking for buy-in internally, or building a new team in a that market, it’s important for the team to emotionally connect with the cause, so that they can help build the best solution.
See: Fintech Investor Interview: Karim Gillani, General Partner, Luge Capital
Lazarow: What were some of the biggest challenges in expanding to new markets?
Takhar: Naturally, each market has faced its own challenges. The key is to not get discouraged, but to look to the end-user and solve the problem that you know will help to simplify their lives.
Lazarow: How do you work with regulators in your new markets?
Takhar: It is important to work with the regulators in any new market. We make a point to get to know the key stakeholders, build a trusting relationship with them, finding out what it is that they require from us, and showing them what it is that we are trying to build.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. 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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Banks Must Act Now or Risk Becoming a ‘Footnote’: McKinsey
Bloomberg | Hannah Levitt | Oct 22, 2019
More than half of the world’s banks are already in a weak position before any downturn that may be coming, according to a report from consultancy McKinsey & Co.
A majority of banks globally may not be economically viable because their returns on equity aren’t keeping pace with costs, McKinsey said in its annual review of the industry released Monday. It urged firms to take steps such as developing technology, farming out operations and bulking up through mergers ahead of a potential economic slowdown.
“We believe we’re in the late economic cycle and banks need to make bold moves now because they are not in great shape,” Kausik Rajgopal, a senior partner at McKinsey, said in an interview. “In the late cycle, nobody can afford to rest on their laurels.”
The decade since the global financial crisis has seen a wave of innovation in financial services, bringing new competitors from fintech startups to giants like Apple Inc. and Alphabet Inc.’s Google. Banks have pondered whether to compete with, partner with or acquire some of these newcomers. Some established firms have sought to rebrand as technology companies, in part to attract hard-to-get talent.
McKinsey, whose clients are some of the biggest corporations in the world, consults on topics ranging from strategy and technology to mergers and acquisitions, outsourcing and stock offerings. In its report, the firm said banks risk “becoming footnotes to history” as new entrants change consumer behavior. Most recent attempts by banks to boost efficiency have been “business-as-usual,” it said.
Banks allocate just 35% of their information-technology budgets to innovation, while fintechs spend more than 70%, McKinsey said. Combined with regulatory factors lowering the barrier to entry -- like open banking and looser requirements for startups -- the environment is increasingly conducive for newer firms to take share from banks.
See:
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Inflection point:Seven transformative shifts in US retail banking
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What does the future of banking look like, according to the experts?
The report points to Amazon.com Inc. in the U.S. and Ping An in China as examples of technology firms that are capturing financial-services customers. To make matters worse for the old guard, the new players tend to go after the business areas that create the highest returns at banks -- credit cards, for example.
Investors have taken notice. Globally, banks’ valuations have fallen 15% to 20% since the start of last year, McKinsey said, adding that “the drop in valuation suggests that investors anticipate a sharp deceleration in earnings growth.”
Lenders can cut costs and find funds for technology by outsourcing what McKinsey calls “non-differentiating activities,” including some trading and compliance functions. Banks “need to get much more comfortable with external partnerships and being able to leverage talent externally,” Rajgopal said.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. 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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