Category Archives: Entrepreneurs and Start-ups

The Solution To The Fintech IPO Shortage

Forbes | Ron Shevlin | July 1, 2019

fintech IPO shortage - The Solution To The Fintech IPO ShortageOBSERVATIONS FROM THE FINTECH SNARK TANK

A Seeking Alpha article titled Why Fintech May Not Be Fit For Public Consumption states:

The year 2019 seems set to be a record-setting one for venture capitalist exit value capture by means of tech IPOs. But fintech doesn't seem to be a part of this picture. VCs are certainly putting money into fintech startups. There were 170 financings in the US in the first quarter of 2019. But, as Pitchbook says, 'not one of the most valuable fintech companies in the world seems particularly close to an offering.' "

The article chalks this up to three primary causes:

1. Poor IPO performance in 2018. According to the article, "One reason nobody is in a hurry to go public is that the results of the last crop of fintech concerns that did go public have been unimpressive. Adyen and IntegraFin are prospering, but neither GreenSky nor EverQuote is "lighting up the heavens" according to Seeking Alpha.

See:  OurCrowd Double IPO Success Provides Crowdfunding Validation

2. Mega-round financing. Seeking Alpha postulates that investor interest in mega-rounds--e.g., Qatar Investment Authority's investment of $500 million in SoFi and Tiger Capital leading a round that raised $300 million for Coinbase--is another factor dampening interest in IPOs. According to Jim Marous, publisher of the Digital Banking Report:

With all of the mega-round investment in fintech firms, you would think more fintech players would cash out and go the IPO route. But why would successful fintechs, who appear to have a bottomless pit of funding at their disposal, subject themselves to the massive scrutiny that comes from going public? Fintech firms don't see a slowdown of the funding fire hose and have no desire to lose control of their vision."

3. Lack of scale. Seeking Alpha asserts that fintech "doesn't scale as easily as other sorts of tech," making fintech startups less likely to be IPO candidates. According to one veteran of the fintech startup scene (a founder and angel investor who now heads up technology innovation at a large bank, which is why he prefers to remain anonymous):

People underestimate the scale dynamics of financial services. You need a lot more maturity across all measurable KPIs before you can be successful in the long-term. In an ecosystem with these scale dynamics, if a fintech startup can use private capital at favorable costs to grow operations and monetize employee equity, and avoid the distracting microscope of quarterly filings, it's going to do so."

Pascal Bouvier, Managing Partner of Middlegame Ventures echoes this sentiment, but points out that there are startups who have achieved scale and still not gone public:

Stripe is an example of a fintech that should already be public--they've achieved scale. But for others, operational readiness at massive scale is key in order to go public. If you do not achieve repeatability in your core business you end up suffering post-IPO.”

 

The Business Model Factor

Scale is certainly a big part of the equation--but why aren't many fintech startups able to achieve scale? The answer may be their lack of a sustainable, viable business model. According to Brad Leimer, co-founder of Unconventional Ventures:

It's much easier for companies like Ayden and Klarna to go public because they have a profitable model out of the gate--they only need to achieve market share to achieve escape velocity. Fintechs have to figure out that there are alternative business models to the ones banks leverage today. The path toward more IPOs in fintech is to think differently about where the industry derives value in exchange for what they create for the consumer of business."

Interestingly, Leimer's two examples are B2B--not B2C--companies, and that might hold a clue to the dearth of fintech IPOs.

See: 

Many Fintech Startups Aren't Meeting The Criteria For Sustainable Growth

What must a fintech (or any) startup do to succeed for the long-term? To oversimplify matters, it must first either offer a new product or service to fulfill unmet needs or provide an existing product or service with innovations to marketing, distribution, service, and/or product and service features that enable it to compete with incumbents. And then second, it must either expand the market size and/or its set of offerings to sustain growth.

Too many B2C-focused fintech startups have come to market with existing products or services whose "innovation" is digital distribution and service. That's not enough of an innovation to thrive. The world of B2C fintech in the US is characterized by:

  • Digital tunnel vision. Too many fintech startups suffer from Bank Displacement Syndrome--the belief that traditional banks can be displaced with nothing more than a digital product offering. Consumers who opened accounts with digital banks have done so because they want rewards, better interest rates, and/or better PFM tools--not because they want a "branchless" bank.
  • Featurization. A number of fintech startups have hung their point of differentiation on capabilities like providing a "safe to spend" feature or getting one's paycheck a day early. Savings tools like Digit and Qapital do a great job of helping people save, but the service is tied to some larger solution (i.e., checking account) that they don't provide. This "featurization" of fintech is creating firms with business models that won't provide sustainable growth--and the market is not ready to believe that these firms can expand product-wise.
  • High-risk lending strategies. After hitting a high of $25 per share in December 2014, Lending Club's stock price has been trading for less than $10 since the beginning of 2016. It shouldn't be a surprise. According to Pascal Bouvier, "Lending Club is an example of a fintech that should not have gone public--its credit portfolio wasn't mature enough." That's being generous. The firm's portfolio has been heavily weighted to credit card consolidation from sub-prime borrowers, and it hasn't successfully expanded market size or its offerings to create and sustain growth. The same can be said for some digital-only small business lenders.

Is there hope for the fintech IPO shortage?

Continue to the full article --> here


NCFA Jan 2018 resize - The Solution To The Fintech IPO Shortage 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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Crowdfunding for a Startup: How it Builds a Business’ Credibility

Guest Post | Aug 14, 2019

Funding meeting - The Solution To The Fintech IPO ShortageYou see a need. You know that your new business can fill that need.

The problem is that it takes an incredible amount of capital to start a business. Besides purchasing equipment, raw materials, and computer systems, you also have the expenses that no one ever thinks about when opening a shop. Did you figure in the cost of hiring an accountant, a lawyer, and paying for workers compensation insurance?

Instead of heading to the bank with your business plan in hand, you may consider whether working with a crowdfunding site might be another feasible way to raise cash for your business expenses.

Here’s how crowdfunding sites work.

Cash in Exchange for Equity

Have you seen Shark Tank? On this TV show, investors decide whether or not they would like to provide capital for startups in exchange for a piece of the company. Sometimes the hosts compete against each other for the opportunity to invest. Sometimes they pool resources and form investment partnerships for a portion of ownership in the company. Occasionally budding entrepreneurs are sent away empty-handed.

See:  Regulation Crowdfunding Surpasses $250,000,000 in Commitments The Model is Working but its Potential is Much Greater

Equity crowdfunding works in the same way. Using a crowdfunding website such as FrontFundr, your investors provide you with funding to move your business forward for a portion of the future profits.

Donations

Perhaps your business may provide a needed service or product for a blighted area. Maybe you are interested in starting a nonprofit group to serve the greater good. If this describes your scenario, you could seek donations from crowdfunding sites. The gifts can be used to get your idea up and running, and of course, there is nothing to repay.  Interested?  Check out FundRazr, Canada's leading donation-based platform, that has helped raise north of $130 million dollars for individuals and organizations.

Donations - The Solution To The Fintech IPO Shortage

Borrowing from Individuals

Instead of borrowing money from a traditional bank, you could borrow money from individuals leveraging the compliance and match making services of a platform like Lending Loop. You will still pay a set annual percentage rate like you would when taking out a conventional loan.

Rewards

Some investors are inspired to fund new businesses by an offer of a product, service, or gift they will receive in exchange for the cash donation. For example, if you are opening a car wash, perhaps investors will give you a set amount of money for you to purchase equipment with the idea that they will receive free car washes for six months after the business is up and running.

See:  OurCrowd Double IPO Success Provides Crowdfunding Validation

If you had told someone twenty years ago that they would be able to collect cash from strangers over the internet to open a business or pursue a creative endeavor, they would have thought you were crazy. You could have found investors for your business, but only among your friends or family. Otherwise, entrepreneurs were forced to work with traditional banks who may not have been open to offering cash for products they couldn’t understand.

Rewards - The Solution To The Fintech IPO Shortage

But when you receive money for your idea through crowdfunding, that means that you not only won the backing of a single loan officer at a lending institution. It means that dozens, hundreds, or even thousands of people think that your idea is good enough to support.

Crowdfunding sites have different specialties. Kickstarter connects creative people with resources they can use to bring their ideas to life. Kickstarter has helped artists, musicians, filmmakers, and designers. You no longer have to be a millionaire to be considered a patron of the arts.

Inventors often use Indiegogo, a crowdfunding website that has allowed entrepreneurs to raise over 1 billion dollars. Investors can receive equity in the company or receive a share in the revenue.

All you techies out there will appreciate Crowdsupply, a crowdfunding website for hardware designers and innovators. The hardware must be original, useful, and respectful.

Perhaps you already have a following, and you know you could increase your cash flow by offering exclusive content or behind-the-scenes experiences for your fan base. You may want to check out Patreon.

See:  What You Should Know About Crowdfunding Your Start-up

Designing a campaign - The Solution To The Fintech IPO Shortage

There are several websites you can visit to help raise money for a nonprofit entity. Go Fund Me was started by Indiegogo. You could also visit StartSomeGood, which allows you to submit your project for free as long as you agree to pay a service fee of 5% of your project is fully funded.

If you are seeking funds to open a business, take a look at WeFunder. This website has more than 150,000 who are interested in keeping the American Dream alive. The site is quick to tell investors that they may undoubtedly lose their money on the investments since so many small businesses fail.

Do you have a dream, but you need to raise some capital to see it to fruition? Consider seeking the help of family, friends, and strangers through a crowdfunding website.

 


NCFA Jan 2018 resize - The Solution To The Fintech IPO Shortage 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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Fully automated decision making AI systems: the right to human intervention and other safeguards

Wired UK Gov | Information Commissioner's Office | Aug 12, 2019

Automated AI decisions - The Solution To The Fintech IPO ShortageReuben Binns, our Research Fellow in Artificial Intelligence (AI), and Valeria Gallo, Technology Policy Adviser, discuss some of the key safeguards organisations should implement when using solely automated AI systems to make decisions with significant impacts on data subjects.

This post is part of our ongoing Call for Input on developing the ICO framework for auditing AI. We encourage you to share your views by leaving a comment below or by emailing us at AIAuditingFramework@ico.org.uk.

The General Data Protection Regulation (GDPR) requires organisations to implement suitable safeguards when processing personal data to make solely automated decisions that have a legal or similarly significant impact on individuals. These safeguards include the right for data subjects:

  • to obtain human intervention;
  • to express their point of view; and
  • to contest the decision made about them.

See:  How Data-driven Strategies Can Improve Impact Investing Outcomes

These safeguards cannot be token gestures. Guidance published by the European Data Protection Board (EDPB) states that human intervention involve

a review of the decision, which “must be carried out by someone who has the appropriate authority and capability to change the decision”.  The review should include a “thorough assessment of all the relevant data, including any additional information provided by the data subject.”

In this respect, the conditions under which human intervention will qualify as meaningful are similar to those that apply to human oversight in ‘non-solely automated’ systems. However, a key difference is that in solely automated contexts, human intervention is only required on a case-by-case basis to safeguard the data subject’s rights.

Why is this a particular issue for AI systems?

The type and complexity of the systems involved in making solely automated decisions will affect the nature and severity of the risk to people’s data protection rights and will raise different considerations, as well as compliance and risk management challenges.

Basic systems, which automate a relatively small number of explicitly written rules (eg a set of clearly expressed ‘if-then’ rules to determine a customer’s eligibility for a product) are unlikely to be considered AI. It should also be relatively easy for a human reviewer to identify and rectify any mistake, if a decision is challenged by a data subject because of system’s high interpretability.

However other systems, such as those based on machine learning (ML), may be more complex and present more challenges for meaningful human review. ML systems make predictions or classifications about people based on data patterns. Even when they are highly accurate, they will occasionally reach the wrong decision in an individual case. Errors may not be easy for a human reviewer to identify, understand or fix.

While not every challenge on the part of data subject will be valid, organisations should expect that many could be. There are two particular reasons why this may be the case in ML systems:

  • The individual is an ‘outlier’, ie their circumstances are substantially different from those considered in the training data used to build the AI system. Because the ML model has not been trained on enough data about similar individuals, it can make incorrect predictions or classifications.
  • Assumptions in the AI design can be challenged, for example a continuous variable such as age, might have been broken up (‘binned’) into discrete age ranges, eg 20-39, as part of the modelling process. Finer-grained ‘bins’ may result in a different model with substantially different predictions for people of different ages. The validity of this data pre-processing and other design choices may only come into question as a result of an individual’s challenge.

See:  Innovative new law opens Guernsey up to Artificial Intelligence

What should organisations do?

Many of the controls required to ensure compliance with the GDPR’s provisions on solely automated systems are very similar to those necessary to ensure the meaningfulness of human reviews in non-solely automated AI systems.

Organisations should:

  • consider the system requirements necessary to support a meaningful human review from the design phase. Particularly, the interpretability requirements and effective user-interface design to support human reviews and interventions;
  • design and deliver appropriate training and support for human reviewers; and
  • give staff the appropriate authority, incentives and support to address or escalate data subjects’ concerns and, if necessary, override the AI system’s decision.

Continue to the full article --> here


NCFA Jan 2018 resize - The Solution To The Fintech IPO Shortage 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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New Regulatory Framework for Canadian Retail Payments Coming in 2019

Gowling WLG | Jeffrey Roode, Partner | Aug 12, 2019

new retail payment regs coming to canada  - The Solution To The Fintech IPO ShortageIn its budget released in March, the Canadian federal government confirmed that it plans to introduce legislation in 2019 to implement a new retail payments oversight framework.  It is proposed that the Bank of Canada will would oversee this regulatory framework. This is a significant development as it will mean that a number of payments industry participants that are currently unregulated, including many fintech companies, will now be regulated.

Background

While the recent federal budget provided few details about the proposed regulatory framework, we expect that it will be based on a 2017 discussion paper released by the Department of Finance.  The discussion paper noted a number of problems in the way retail payments are regulated, most notably that regulated financial institutions, such as banks, are subject to detailed regulation with respect to their retail payments businesses, while other payment service providers (referred to as PSPs) are not subject to a comprehensive regulatory oversight framework.

See:  JP Morgan is rolling out the first US bank-backed cryptocurrency to transform payments business

The Department of Finance is concerned that this will create risks and confusion for consumers who might expect similar levels of protection, regardless of who their PSP is. The new legislation (which has yet to be developed) will presumably attempt to shift the regulatory framework away from an “institution-based” approach, where an entity is regulated based on the type of institution it is, towards a “functional” approach, where entities are regulated based on the types of activities they engage in — regardless of what kind of institution they are.

According to the discussion paper, the goal of the new oversight framework is “to ensure the retail payments ecosystem evolves in such a way that payment services remain reliable and safe for end-users and the ecosystem is conducive to the development of faster, cheaper and more convenient methods of payment.”

Who will be Regulated?

The discussion paper suggests that PSPs that engage in one or more of the following activities in the context of an electronic fund transfer for an end-user will be subject to the new regulatory framework:

  • Providing and maintaining a payment account for the purpose of making electronic fund transfers
  • Enabling the initiation of a payment on behalf of an end-user
  • Providing services to approve a transaction and/or enabling the transmission of payment messages
  • Enabling an end-user to hold funds in an account with the PSP until the funds are withdrawn or transferred to a third party through an electronic fund transfer
  • Enabling the process of exchanging and reconciling the payments items (referred to as “clearing”) that result in the transfer of funds and/or adjustment of financial positions (referred to as “settlement”)

As a result, the discussion paper envisions that the new regulatory oversight framework would apply to a wide array of transactions, including credit and debit card transactions, online payments, pay deposits, pre-authorized payments and peer to peer money transfers. Certain exceptions would apply, including cash transactions and gift cards or shopping mall cards that allow the consumer to make purchases at only one merchant or a limited group or merchants.

See:  Capital One data breach shows why it shouldn’t be a tech company that does banking

Interestingly, the discussion paper proposes that the new regulatory framework would only apply to transactions in fiat currencies like the Canadian dollar, so bitcoin and other virtual currency transactions would be exempt. However, the government does plan to monitor the use of virtual currencies in retail payments, leaving open the possibility that the regulations could apply to virtual currencies in the future.

The New Regulatory Requirements

The discussion paper proposes the following measures:

  • Safeguarding requirements regarding the holding of end-user funds by PSPs
  • Operational standards for PSPs
  • Requirements for PSPs to disclose key characteristics of their products to end-users
  • Requirements for PSPs to maintain dispute resolution mechanisms
  • Liability rules shielding end-users for losses as result of unauthorized transactions
  • Requirements that PSPs register with the regulator

 

Conclusion

As with any new legislation, the devil will be in the details. However, assuming the new legislation adopts the principles set out in the discussion paper, we would expect that a large number of fintech companies and other previously unregulated PSPs will fall under the new regulatory regime and will, for the first time, need to develop a compliance strategy.

 

Jeffrey Roode - The Solution To The Fintech IPO ShortageAbout the Author

Jeffrey Roode is a partner at Gowling WLG, an international law firm. Gowling WLG’s dedicated tech group works with clients to navigate complex regulatory and operational challenges, enabling them to take advantage of the innumerable opportunities available in the burgeoning tech sector.

 


NCFA Jan 2018 resize - The Solution To The Fintech IPO Shortage 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 Fridays EP35: Autonomous Alternative Lending with Vit Arnautov of Turnkey Lender

NCFA Canada | Aug 9, 2019

JOIN US ON A STORYTELLING JOURNEY EVERY FRIDAY.

FF EP35 Vit Arnautov Turnkey Lender - The Solution To The Fintech IPO Shortage

Aug 9: Autonomous Alternative Lending with Vit Arnautov of Turnkey Lender EP35

HOST: Manseeb Khan, Fintech Friday's show host

GUEST: VIT ARNAUTOV, Chief Product Officer of Turnkey Lender, (Linkedin)

BIO: Vit is a skilled business executive with more than 10 years of experience in managing and delivering innovative fintech solutions. Since its foundation, Vit has been a part of the TurnKey Lender, a company creating intelligent AI-driven solutions for alternative lenders. Over the years he’s become its Chief Product Officer which gives him an incredibly deep insight into fintech in general and lending industry in particular. His areas of expertise include FinTech, digital lending, AI, and big data. Vit is happy to share his expertise with striving entrepreneurs and anyone else it can be helpful for.

About this episode: On this episode of NCFA's Fintech Fridays Podcast, our host Manseeb Khan sits down with Vit Arnautov from Turnkey Lender. They chat about how AI will help the lending space, underbanked countries and why cloud lending is a trillion dollar industry. Enjoy!

turnkey lender logo - The Solution To The Fintech IPO Shortage

Subscribe and tune in each Friday to check out the latest movers and shakers in fintech.

Listen to more podcasts here: Season 1 | Season 2

 


Transcription of Interview

Intro: Welcome fintech Friday's a weekly podcast brought to you by the National Crowdfunding and Fintech Association of Canada and partners.Covering all things fintech block chain be AI and alternative finance.

Manseeb Khan : Hi, everybody Manseeb Khan here and thank you for tuning in to another fantastical episode of the FinTech Friday podcast. This week I'm super excited to have Vit from Turkey lender. Vit Thank you so much for sitting down with me today.

Vit Arnautov: Hello. Happy to be here. Thanks for having me.

Manseeb Khan : Yeah, for sure. So, could you. For the I guess five or six audience members may not know who you are and what your company does. Could you just give us a rundown of a little bit of your background and what turnkey lender is?

Vit Arnautov: Okay, sure. So, I am a chief product officer, at Turnkey Lender. I mean, this business for about 10 years now, I've been in this company since the very beginning. So, this gives me a good understanding of all the processes in fintech and digital lending. Turnkey lender is the provider of intelligent lending automation. We were the first company to offer great software for the businesses of any kind. And we're focusing on digitalization processes automation and a loan decision making. But we're pretty much covering all the long lifecycle from the origination of the collection and through, of course, the decision. So, we have a line of products. The books version that can be delivered within a day. And with all the required functionalities to start lending and the enterprise solution for more sophisticated clients, this is a tool that allows you to build business processes, solve any complexity without coding. So, you can put it as a kind of Lego construct, a way you can build and automate your processes with blocks. We're Singapore based company we have offices in the U.S., in Ukraine, Indonesia, Malaysia.

Manseeb Khan : That's incredible. I like the Lego analogy you use. I think that's going to make it a lot easier for the audience members , especially to really understand the really amazing work that you guys are doing. So, could you just talk a little bit more of the approval process, right, and how kind of differs from the other alternative lenders?

Vit Arnautov: Yes, sure. So, the decision making, and approval process is still the biggest challenge for the lenders. We understand that this is also the main brisk source in their business. So, we provide several layers of the decision-making process using both traditional and alternative approaches. So, it goes like this first you have the fraud prevention to where you analyze information from internal and external sources like terrorists and other fraud lists. Then you have alternative scoring with more information from client’s house to fill in the application for how fast he's typing, how the application details. If there were copy paste that if there are too many replacements of attachments and understanding if this is a bot filling the application of these real plan. Now that we analyze also the mobile data, which is like mobile usage, number of contacts and so on, because for the entire statistics, about 80 percent of applications can come in from mobile platforms. Right? After that, we have the bank account statements, analysis, and after that goes the internal scorecard, which is the decision engine that we provide out of the box. It's powered by artificial intelligence. It learns about the borrowers and during the lifecycle of the loans. Right. And adjust in time by having more accurate and precise decisions later on. We don't have enough data to analyze. So, with more like advanced package, you can also have the champion challenge scorecards where, for example, if you want to have 10 or 15 percent of more riskier applicants and this is how you apply this on. And also, we provide, of course, the scoring reports for us or our class to analyze and track the performance and to fine tune in future the score.

Manseeb Khan : That's incredible, I'm glad that you have multiple like contingency plans when it comes time, actually like vetting and approving the process. Right. Like even under you, even though the process, I mean, as you know, has turned 200 does claim that it is. It is very fast. It is incredible that like even though it is fast, you still have multiple layers of channels you have to kind of go through.

Vit Arnautov: Yeah. Yeah. Absolutely. And this is like it has all those layers. And actually, can combine several of those. So, we also have like artificial intelligence with image forgery detector, for example, to analyze it attachments that are being in placed this is like an additional module that can be included. And all of this is combined all together. Or you can just use partially to use one block or use another one cause for different markets. It's different. And for different auditors, it's also different. Right. And so, you just can choose which of those you want to use.

Manseeb Khan : So, you do have the option to pick and choose the blocks that are appropriate for you and your business and your auditors. Could you talk about like the biggest technological challenges that alternative lenders face and how does Turnkey lenders solve them?

Vit Arnautov: Sure. So, from my point of view, the biggest ones are, first of all, of course, the regulations that we're having from our governments. There are literally a lot of them right now. And it's getting even worse because governments very strict in those regulations. And we, of course, understand that someone a good purpose. But so, we need to comply with that. And so, in case of Turnkey Lender, it's for example, we have signed an agreement with Thompson Reuters to streamline those military compliance for the clients in different countries because each country has their own compliance. And also, you want to buy a solution that is flexible enough to fit the regulations that are not there yet, but yet to come the fall of the governments. So, the second thing is you the need of one day fund transfer for the organizations and for borrowers. So, solution for that is in turnkey lender. That is fast decision making where you can provide a decision within seconds and you can transfer funds with some kind of automation of payment provider, comparing it to taking days or even weeks. In the past. So, this is a huge change right now. I say that is the growing competition among lenders due to a significant lowering of the entry barrier to the market. And this is also we provide the faster decision making which allows your business to grow faster and provide better decision and lowering risk, of course. And it's the intuitive user interface for the borrowers scores. Each of those question or another step in the application process and know your customer process. It lowers your sales funnel.

Manseeb Khan : Right that makes total sense. How do you see the role of A.I. in digital lending now and in the near future? Because you have mentioned a couple times, you know. How what differentiates you guys from other lenders? And what kind of makes you guys a little bit more pulling ahead is the fact that you guys actually use AI the most the fullest advantage currently to make sure your loaning process, your vetting process and security. And just to make sure the whole like you can optimize every single block to the fullest potential.

Vit Arnautov: Yes, absolutely. So, the first usage of the A.I. is obviously for chat bots that we can see this support that automates their first level and second level usually. And like using bots to kind of answer the questions faster. But what's the biggest application for me, as I see, is the risk evaluation and of course, the decision and process. So, the AI usage helps us to provide more accurate analysis in predicting the expected future behavior for a client and therefore to provide more precise decision making. So, the learning curve for the AI is exponential and in the nearest couple of years we are going to get a huge leap in this.

Manseeb Khan : Because you can totally mitigate a lot more risk. Right being able to map out certain behaviors of who you're lending out to, you get to know, you know, aside from who they are, from the financial statements and from the history and aside from all the documents that they already require having an additional layer of A.I. to learn their behavior patterns and to send it to kind of trend to see what they're going to do in the next five years. I believe that's very important for sure.

Vit Arnautov: Yes, absolutely. If I may add. So please, you've got the operational costs because you don't need to have like 20, 30 people in the office for decision making. You can automate it at all and provide the system within seconds. So, this also eliminates today human error and it helps you to cut costs. Right.

Manseeb Khan : Yeah, for sure. Absolutely. And like you can even start again adding more. And actually, this opens up the door to add more blocks in the future of having even more criteria as of getting approved for loans or what it or the case may be. You guys do something really interesting called Cloud lending. Could you explain a little bit more of what cloud lending is and why it's going to become a trillion-dollar year over year industry?

Vit Arnautov: Yeah, sure. So, cloud lending is really exploding and so we host all our solutions in the cloud, of course. And for each like if it’s a retailer or even a dentist wanted to stand their business and to go online. Or is it a fintech startups. A lot of new players coming into the market. And of course, they have our own challenges and many businesses struggle with the entry barrier. But with a bot platform that we provide, it can be deployed within a day. So, it's ready to use and compare it to the like millions of dollars that banks were investing in R&D to have the same functionality in the past. So, the way we see it is launching now a web platform. A cloud platform for lending is as easy as a WordPress site, which was a really heavy 10 years ago. And now it's a matter of hours. And so, we're even hosting it for you. So, you don't need to pay for hosting separately on your domain name. So, we have a goal in one place. You just buy a subscription and you go with your lending platform.

Manseeb Khan : That's incredible. That makes it a lot more easier to use. I like the WordPress analogy. How do you how do you see technology changing in the lending space in the next five years?

Vit Arnautov: Yeah. First of all, the one that we just discussed, the way AI use each, of course. Now, the second thing I would mention is the whole lifecycle of the loan automation. And it's not only the A.I. usage, but all these flaws that are being now automated with lending solutions. So, it's also eliminating the human error and speeding up the process. It's all about processes. Automation is all things like servicing and collection, reporting, underwriting, and even notifications are all automated now. And you don't need once again 20 people to manage the software and be one engineer who's sitting in the office and fine tuning the software. And it works just as it is. No additional features required. Everything's in place already. Now, the one more thing worth mentioning is an expansion to under banked or unbanked regions and new demographics. Cause as far as I remember, it is two and a half billion people who cannot get access to banks right now in the world. Right. So, it's half of the entire population of the planet. And in really developed countries, the customer acquisition cost is already high. And it continues to grow. This why is many financial institutions having branches of them of their software to go with under banked regions and demographics. This is what's going to change in the near years, of course, because, for example, we're providing an international version of our solution that also you can just choose the country you're operating with and change it automatically change the unique identifier system, for example, and the date format, the currency, the language and stage, and it's ready to go and you can work with it. So, in an example within Asia, they have a lot of rural banks and fintech’s trying to reach out offline lenders outside of the big cities and provide loans to them. So, we can see that interest industry is growing faster.

Manseeb Khan : Yeah. I mean, you did bring up a good point of the fact that there are two billion people that are getting under serviced. And I think the future of that is very bright. I think there's a ton of opportunity there for helping, you know, very under underdeveloped countries. And just like infrastructure in and of itself and being able to service these kinds of people and help them develop, help them, you know, like foster new growing economies. That in and of itself is very exciting because like so many like so many new innovations and just ideas and just like so amazing things are to come out of that. And that to me is. That's can be very, very exciting.

Vit Arnautov: Yes, absolutely. I totally agree with you. And hopefully Elon Musk will cover the earth with the Internet connection very soon and all those people will be able to reach the Internet with loans to be able to grow their businesses. Because right now they just cannot access their banks, right? Yeah. Yeah. In the next few years, they will be able to get loans or their business and start to get in profit.

Manseeb Khan : Right? For sure. And this and this now start to become like an actual player. Right. In whatever space they may be in. Right. That's very, very exciting.

Vit Arnautov: Yeah, absolutely right. Yeah.

Manseeb Khan : So, I guess, how does alternative lending impact industries, I guess, such as telecom and like medicine then?

Vit Arnautov: Ok, let's start with medicine first, right? Cause medical is they say that 21st century is going to be a century of medicine and biotech and the industry's going to be bigger every year. I believe that in 10 or 15 years you will be able to replace your arm with a bionic we are if you want. But the costs for these such kind of surgeries are really high. And so that's where the lending comes in. And you have to get sometimes the service is very fast and you get money and not get a loan from this organization. And so, the second one is telecom and the previous logic goes there. When a user doesn't have money on their balance, they should be instantly offered with the with a credit line to continue communicating so they could repay it later on. And the second use case for telecoms is that they should be able to get a new tablet or new phone right from the office of the telecom. So, they are starting to finance their retails. And you don't have to go to bank anymore. You can get it right in place. So that's why I think it's going to be big in next couple of years.

Manseeb Khan : Mm hmm. The medicine that I never thought of it in the medicine field of like, hey, you know, you want a new bionic arm. Awesome well there is costs for that. I was like, oh, that now. I mean, it's a lot more sense, especially now with the new I guess now like we have robotics and medicine and like, you know, we can actually like sooner or later we able to replace any single body part we can.

Vit Arnautov: Absolutely agree with you Looking forward into this into that future.

Manseeb Khan : Yeah. One hundred percent. So, my I can't wait for that too. Um, are there any other spaces that turnkey lender or are looking into?

Vit Arnautov: Yes, sure. So, we think that retail will be big also. For example, the in-house retail, if you're producing anything you can just provide also services like lending services for that and you will be able to get to competitors with that. You just provide an installment program. Increase in your sales. And then it's very simple, but it's very effective because the sales rises.

Manseeb Khan : Yeah, for sure. because now you have one advantage compared to competitors of, hey, you know what? Sure. We sell. I don't know. Artisanal couches, whatever, whatever, whatever. I don't know whatever you might be selling if you know how to feel, if you do have the full amount. That's OK. We actually offer financing terms, and these are the actual financing terms. So, yeah, no, I agree.

Vit Arnautov: And the business gets their interest and the customer gets the reality. And then there are more clients and there is no downside in this in this approach for sure.

Manseeb Khan : Absolutely. So aside from, I guess, a telecom retail. Are there any other industries that you think alternative lending is going to impact next? And why?

Vit Arnautov: Actually, I think lending will be huge in years future That's to what you mentioned. Like 1 trillion dollars. And it can be anything. It can be e-commerce. It can be a medicine, retail, anything. It can be just installment loans, consumer loans, just anything. And the under banked regions, so that you are discussing. Right. So how about what the population will be getting loans?

Manseeb Khan : So, a little insight into the trends of the lending industry. I mean, such as P2P lending and house financing, which we talked about, debt financing, you know, factoring, invoicing. Could you discuss the areas a little bit more in detail and how do you see them developing more in recent years?

Vit Arnautov: Yeah, sure. So once again, the other bank regions, for example, are not just crowd lending and like crowd funding, it can be peer to peer for businesses in Africa, for example. They want to extend their business. They, for example, produce some great goods, but they don't have this capital to yet grow in. So, with the peer to peer, they can access funds from UK and US for from developed countries. Right. And they're just getting those money to expand their business. And this is very efficient loans with low risks, actually, because they have collateral on their businesses. I'm pretty sure that they will be able to give it back the loan within like short terms for business. It's two years, three years. And this is very effective. And for those lenders, for those businesses in Africa, that they just cannot get funding without it. So, this is the only source and the fastest source of funds that they can access. So, the effort to bear is great also.

Manseeb Khan : Right. And this kind of goes in the conversation of like open banking right now. You're going to have let's stick with the Africa example. Right. I'll let you have a business in Africa. They need money to actually start the business up or pay off whatever they need to pay off. And, you know, they could they can actually start getting more competitive rates. You know, hey, let's look at the banks and UK and let's look at the banks and like Germany or like the bank or the banks like Sri Lanka. Let's see. Look what all the rates are. What do we get? And it's kind of creating a more of a of a really creative, not creative, creative, and competitive marketplace for businesses to kind of have a lot more options and not be as and not have such a high bar of entry.

Vit Arnautov: Yeah, Exactly. And also, worth mentioning that for developed countries, the percentage for loans will get 3 percent. Right. And for Africa, the usual percentage might be like 12 percent or 14 percent. And it's OK for them because they just don't have access to money. So, for developed countries, they have the high interest for not developed or developing countries. It's to get money faster. So, the economy of the world is growing because of that, because money is distribution from one region to another. And are like the money is in the place in Africa producing goods and selling goods. So, the economy rises all over the world because of it.

Manseeb Khan : Right. No, absolutely not. You know, it's really helping fuel the flame of having of more of a globalized economy. Right. Exactly. Yeah. So Vit is there. Before we wrap up, is there anything else you want to add on? I guess a couple of things that you definitely want to keep. You want to make sure the audience kind of keeps in mind.

Vit Arnautov: If you're starting a business, just consider having a platform that is really user friendly and to its flexible enough to fit your business needs and flexible enough to fit your future business needs. So, there are platforms right now that allow you to start business with one day and start operations. So, yeah, it's good. It's great. It's like good for your business.

Manseeb Khan : Awesome. Yeah. So, make sure you make sure everyone or all the entrepreneurs that we have in the audience, make sure that you stay flexible as much as you can. So. Exactly. Yeah, that's awesome. So Vit Thank you so much for sitting down with me today.

Vit Arnautov: Thank you very much for having me Manseeb. Once again. Yeah.

Manseeb Khan : For sure. So, I guess we'll I guess we'll be the best way for audience members to either reach out to you personally and or to Turnkey Lender or if they have any more questions about anything.

Vit Arnautov: Absolutely. You have my contacts. If anything, you can contact me directly or with from our site on Turnkey Lender dot com where we'll be happy to help you. And we'll be happy to answer all of your questions.

Manseeb Khan : Ok. Awesome. Thank you very much. Yeah, for sure.

Outro : you've been listening to fintech Fridays brought to you by NCFA and partners. Tune in weekly for the latest fintech Friday podcast by subscribing to this channel. The National crowdfunding and FinTech Association of Canada is a non-profit actively engaged with social and investment fintech sectors around the globe and provide education research industry stewardship services and networking opportunities to thousands of members and subscribers. For more information please visit and see if a Canada dot org. Oh yea.

 

End of Podcast

 

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NCFA Jan 2018 resize - The Solution To The Fintech IPO Shortage 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

Latest news - The Solution To The Fintech IPO ShortageFF Logo 400 v3 - The Solution To The Fintech IPO Shortagecommunity social impact - The Solution To The Fintech IPO Shortage
NCFA Fintech Confidential Issue 2 FINAL COVER - The Solution To The Fintech IPO Shortage

Forbes | Ron Shevlin | July 1, 2019 OBSERVATIONS FROM THE FINTECH SNARK TANK A Seeking Alpha article titled Why Fintech May Not Be Fit For Public Consumption states: The year 2019 seems set to be a record-setting one for venture capitalist exit value capture by means of tech IPOs. But fintech doesn't seem to be a part of this picture. VCs are certainly putting money into fintech startups. There were 170 financings in the US in the first quarter of 2019. But, as Pitchbook says, 'not one of the most valuable fintech companies in the world seems particularly close to an offering.' " The article chalks this up to three primary causes: 1. Poor IPO performance in 2018. According to the article, "One reason nobody is in a hurry to go public is that the results of the last crop of fintech concerns that did go public have been unimpressive. Adyen and IntegraFin are prospering, but neither GreenSky nor EverQuote is "lighting up the heavens" according to Seeking Alpha. See:  OurCrowd Double IPO Success Provides Crowdfunding Validation 2. Mega-round financing. Seeking Alpha postulates that investor interest in mega-rounds--e.g., Qatar Investment Authority's investment of $500 million in SoFi and Tiger Capital leading a round that raised $300 ...
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CNBC | Kate Rooney | Aug 12, 2019 Money spent in venture capital and other alternative investments is surging as investors look for riskier, but higher-yielding investments. The trend coincides with relatively low returns from more conventional Wall Street investments such as stocks and bonds, and a drop in the number of publicly traded companies. “In a world where big institutional investors find themselves starved for returns, it’s not surprising that they have steadily increased allocations to private markets and you’ve seen capital continuing to flow into the asset class,” says McKinsey Partner Bryce Klempner. Many global investors are turning toward Silicon Valley instead of Wall Street in search of returns. The total invested in private markets hit all-time highs last year and continues to break multi-decade records this year. In the first half of the year, total investments in venture capital hit a 19-year high of $53.3 billion, according to data from Refinitiv published last week. That marked a 21% increase by total dollar amount compared to the first half of 2018. See:  $5 million Equity crowdfunding extended to private companies The steady stream of funding comes alongside a drop in the number of publicly listed companies, rock-bottom global ...
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TechRepublic | Mary Shacklett | July 23, 2019 Learn how artificial intelligence and analytics can be used to improve customer service in banking. When I was a CIO for a financial institution, I worked with executives on the operations side to see how we could improve relationships with customers at our branches. Our front-line tellers at these branches were more like order takers—they did what customers asked, but no more. These employees were in low-wage positions, and they often had limited skills. One of the skills we wanted was interpersonal engagement with customers that you would typically find in a salesperson. We decided to hire people with retail and/or people-facing experience, figuring that we could train them to be tellers. We implemented systems that would prompt a teller to ask a customer about new products the customer might be interested in, and we offered financial incentives for enrolling customers in new products. The experiment yielded mixed results and likely would have gone better if we'd had some of the analytics and artificial intelligence (AI) automation tools that are available today. See:  How Jack Ma’s $290b SME credit engine is changing Chinese banking "Most customers tend to keep their accounts with ...
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Guest Post | Aug 14, 2019 You see a need. You know that your new business can fill that need. The problem is that it takes an incredible amount of capital to start a business. Besides purchasing equipment, raw materials, and computer systems, you also have the expenses that no one ever thinks about when opening a shop. Did you figure in the cost of hiring an accountant, a lawyer, and paying for workers compensation insurance? Instead of heading to the bank with your business plan in hand, you may consider whether working with a crowdfunding site might be another feasible way to raise cash for your business expenses. Here’s how crowdfunding sites work. Cash in Exchange for Equity Have you seen Shark Tank? On this TV show, investors decide whether or not they would like to provide capital for startups in exchange for a piece of the company. Sometimes the hosts compete against each other for the opportunity to invest. Sometimes they pool resources and form investment partnerships for a portion of ownership in the company. Occasionally budding entrepreneurs are sent away empty-handed. See:  Regulation Crowdfunding Surpasses $250,000,000 in Commitments The Model is Working but its Potential is Much ...
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Forbes | Biser Dimitrov | Aug 13, 2019 2019 is the year when the blockchain ecosystem and the crypto industry as a whole had to get sober. After a wild 2017 and a bear 2018, the blockchain space is back on an upwards trajectory with new developments. There are no more Initial Coin Offerings (ICOs) to distract the crypto ecosystem and the building mentality is back on. This post-ICO and post-useless-PR-partnerships age urges the blockchain community to be less focused on the current price of bitcoin and more focused on producing meaningful services and advancements. Big projects from established enterprises like Facebook Libra are taking all the media space now and this is net positive for the enterprise blockchain space as well. The first half of this year was full of blockchain developments led by large enterprises in almost all important sectors, including insurance, financial services, supply chain, healthcare and trade finance. There is a huge benefit in joining a specialized industry-focused blockchain consortium because you sit at the same table with your main competitors but at the same time you work toward the same goal. You are not alone in figuring out the benefits, implementations and roll-out of distributed ...
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Wired UK Gov | Information Commissioner's Office | Aug 12, 2019 Reuben Binns, our Research Fellow in Artificial Intelligence (AI), and Valeria Gallo, Technology Policy Adviser, discuss some of the key safeguards organisations should implement when using solely automated AI systems to make decisions with significant impacts on data subjects. This post is part of our ongoing Call for Input on developing the ICO framework for auditing AI. We encourage you to share your views by leaving a comment below or by emailing us at AIAuditingFramework@ico.org.uk. The General Data Protection Regulation (GDPR) requires organisations to implement suitable safeguards when processing personal data to make solely automated decisions that have a legal or similarly significant impact on individuals. These safeguards include the right for data subjects: to obtain human intervention; to express their point of view; and to contest the decision made about them. See:  How Data-driven Strategies Can Improve Impact Investing Outcomes These safeguards cannot be token gestures. Guidance published by the European Data Protection Board (EDPB) states that human intervention involve a review of the decision, which “must be carried out by someone who has the appropriate authority and capability to change the decision”.  The review should include a “thorough assessment of all the relevant ...
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TechNode | Nicole Jao | Aug 12, 2019 China’s planned digital fiat currency is nearly ready for release after five years of research and development, a senior official at the central bank said (in Chinese) at a forum on Saturday in Beijing without confirming a timeframe. Why it matters: The People‘s Bank of China (PBOC) aims to steal a march on global counterparts by accelerating the development of its national digital currency. The central bank has been researching and developing a digital currency since 2014, though specific details remain scant. The government’s fast-tracking of the national digital currency was reportedly prompted by fears that the emergence of cryptocurrency projects like Facebook’s Libra will bring disruption to its economy. “As one can imagine, to issue digital fiat currency in a country as big as China, the employment of pure blockchain architecture cannot fulfill the throughput required for retail usage. Eventually, we decided that, at the level of the central bank, we should remain technology-neutral and not preset a technology roadmap, meaning not relying on a specific technology.” —Mu Changchun, the deputy chief of central bank’s payment and settlement See:  Central banks should consider using digital currencies: China think tank Details: Mu ...
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Gowling WLG | Jeffrey Roode, Partner | Aug 12, 2019 In its budget released in March, the Canadian federal government confirmed that it plans to introduce legislation in 2019 to implement a new retail payments oversight framework.  It is proposed that the Bank of Canada will would oversee this regulatory framework. This is a significant development as it will mean that a number of payments industry participants that are currently unregulated, including many fintech companies, will now be regulated. Background While the recent federal budget provided few details about the proposed regulatory framework, we expect that it will be based on a 2017 discussion paper released by the Department of Finance.  The discussion paper noted a number of problems in the way retail payments are regulated, most notably that regulated financial institutions, such as banks, are subject to detailed regulation with respect to their retail payments businesses, while other payment service providers (referred to as PSPs) are not subject to a comprehensive regulatory oversight framework. See:  JP Morgan is rolling out the first US bank-backed cryptocurrency to transform payments business The Department of Finance is concerned that this will create risks and confusion for consumers who might expect similar levels ...
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Guest Post | Aug 12, 2019 Blockchain is the hype today. The talent is in high demand and the technology takes over many of the headlines in publications and news. Investors keep piling their money into it. Blockchain is known to be the best thing that happens to public services. As a result, we are witnessing an increase in blockchain education. In the past few years, universities slowly began introducing blockchain technology courses and designing special programs that teach you the skill. However, as we mentioned, this usually goes really slow. By the time the education designs great programs and lists new courses, the technology will have switched and advanced. This is why your choices in terms of blockchain courses and education are still rather limited. However, the number of universities that offer them is growing by the minute. Blockchain Today In our list, you’ll find about the most prepared universities that offer a blockchain degree. Finding a university that has this course can be truly beneficial for your career and future, which makes this a serious decision to make. If you enroll onto a program that excludes blockchain from its curriculum, you’ll be left out in the modern job ...
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NCFA Canada | Aug 9, 2019 JOIN US ON A STORYTELLING JOURNEY EVERY FRIDAY. Aug 9: Autonomous Alternative Lending with Vit Arnautov of Turnkey Lender EP35 HOST: Manseeb Khan, Fintech Friday's show host GUEST: VIT ARNAUTOV, Chief Product Officer of Turnkey Lender, (Linkedin) BIO: Vit is a skilled business executive with more than 10 years of experience in managing and delivering innovative fintech solutions. Since its foundation, Vit has been a part of the TurnKey Lender, a company creating intelligent AI-driven solutions for alternative lenders. Over the years he’s become its Chief Product Officer which gives him an incredibly deep insight into fintech in general and lending industry in particular. His areas of expertise include FinTech, digital lending, AI, and big data. Vit is happy to share his expertise with striving entrepreneurs and anyone else it can be helpful for. About this episode: On this episode of NCFA's Fintech Fridays Podcast, our host Manseeb Khan sits down with Vit Arnautov from Turnkey Lender. They chat about how AI will help the lending space, underbanked countries and why cloud lending is a trillion dollar industry. Enjoy! Subscribe and tune in each Friday to check out the latest movers and shakers in ...
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FF EP35 Vit Arnautov Turnkey Lender - The Solution To The Fintech IPO Shortage

Creating Trust in Cannabis

CannaProve | Paul Brousseau | Aug 9, 2019

Creating trust in Cannabis - The Solution To The Fintech IPO Shortage

Globally, cannabis is only legal for consumption in Canada, Uruguay and some states in the USA.  However, after the legalization of both recreational and medical marijuana with edibles, cosmetics and beverages on the near-term horizon in Canada, it is expected that many other countries will follow to increase their tax base while attempting to reduce the impact of cannabis as a gateway drug. For example, countries, like Jamaica, have reduced the penalties on possession to minimal levels with the expectation it could be legalized at some future point. The global cannabis market is estimated to approach $250B by 2025.

While the legal changes to cannabis in Canada and parts of the US has created a vibrant legal market, there is still a substantial black market which can provide very good product at 33–50% cheaper. Much of this is attributed to the black market ignoring the ban of the use of pesticides during cultivation. As their product is not inspected nor under the same rules for accurate packaging, the cultivators use this advantage at the expense of consumers health. It is for this reason that there is a trust issue with cannabis — both for recreational and medical purposes.

See:  Cannabis & blockchain: Bad romance or a perfect match?

A critical turning point in this market will take place when a regulator finds a serious flaw in a supply chain. As we have seen with foods like lettuce and alfalfa sprouts, a single recall or non-compliance issue has huge impacts on the entire market as the perception of users is the entire supply chain system for all users is compromised.

An insurance policy for participants in the market is severely needed.

 

How do we solve the trust problem?

The first building block is having shared data between the stakeholders in a supply chain. Blockchain is the logical technology as it enables a single source of truth between all the stakeholders. We don’t believe that it is necessary or really possible to replace all the existing systems already in place in the supply chain. Rather, we suggest integrating existing systems through standardized APIs including seed-to-sale tracking and ERP software, logistics systems, lab testing applications, pharmaceutical systems and retail.

See:  Walmart China Takes on Food Safety with VeChainThor Blockchain Technology

Data quality needs to be ensured. For example, data from ERP systems may each be okay, but they might not match between two stakeholders. This is especially true with demand/forecasts. But what if the source data entered is bad? One can overcome this data reliance in a couple of ways:

  • The first is to get data from trusted machines — IoT sensor data — instead of relying on humans entering data. This assumes that one can authenticate the devices — a feature of smart contracts on blockchains. An alternative approach is to closely link people to transactions, in which stakeholders in the supply chain will be required to sign-in with a Digital ID — this could be augmented with biometric data — and this data can be stored with each transaction. In this way, if there is any fraud, there is a person responsible for oversight.
  • Another method is to validate the data versus prior data sets. For example, we could know how much longer/shorter this shipment took than history average. Although this helps, unless there is data about the fraud or data that points to the fraud, the systems cannot detect fraud. So what has to happen is that when a fraudulent activity is uncovered, the supply chain oversight group needs to uncover data that can identify this type of action. This new data, if historically available, should be used to identify past fraudulent activities.

 

Business opportunities made possible by a trusted network

  1. Decreasing Compliance Risks and Costs

Using the provenance data, compliance solutions can be delivered in four steps of incremental value: data completeness, regulatory oversight, electronic codification of the compliance rules and automated compliance reporting.

By gathering the chain of custody validation in one source, it helps compliance officers and regulators alike prove in a timely and cost-effective manner that product batches/lots were managed appropriately with full traceability.

CannaProve - The Solution To The Fintech IPO Shortage

See:  A Digitized Staff Compliance Platform is a Must-Have

By working with leading legal and compliance firms, knowledge and operating guidelines can be streamlined and automated through code in smart contracts. Once in place and validated by regulators, automated reporting for each participant in the supply chain can be created for regulators.

 

  1. Leveraging Accurate, Shared Data for Revenue Increase

In a blockchain enabled environment actual demand orders is possible with the demand signal shared with all participants in real time. Also, with better and more timely demand signals, product mixes can be better optimized for greater profits, especially as user tastes become better understood and new products, branding and sales strategies and the like need to be introduced.

As demand is better fulfilled through more consistent and effective cultivation processes, brand management will be the next key battle ground for cultivators. With the full provenance data about their products, cultivators can utilize this same data augmented with social media data to provide metrics around competitive pricing and customer sentiment. In a market where the current range of prices from Good to Best is approximately 2x, there should be a potential increase of 70–80% in margins, if we compare cannabis to other consumable goods such as wine and cosmetics, which have a range of 10x.

For retailers, there is currently only relatively sparse provenance data on product packaging. Providing multiple views of the provenance will be a key element to drive up brand value through detailed information about the chain of custody. This is especially true for pharmaceutical companies and medical users, as well as recreational consumers looking to get organic or at least non-hazardous products.

See:  5 Missing Necessities to Move Blockchain from 0.2% Global Penetration to the Remaining 99.8%

 

  1. Fine Tuning Supply Chains for Profit Optimization

We are at the infancy of the global legal cannabis market with barely 1–2% adoption. We believe that, even as a highly restricted/controlled product, the market will mature into a global market whereby supply is no longer locally produced, as is the case with food and pharmaceuticals. On the face of it this is cost driven.

As a result of this coming globalization, there will be a great need to provide detailed, verifiable and immutable chain of custody information to regulators. However, once proven, we believe that the market will move towards a global supply chain. What this means is that supply chains will have more and longer planning cycles and complexity. It also means that they will have more options to optimize their profits if they can utilize data. We believe that organizations will be able to shift production from one facility to others to optimize profits affecting time to market, price and cultivation risks.

 

Paul Brousseau President CEO CannaProve - The Solution To The Fintech IPO ShortagePaul Brousseau, President & CEO of CannaProve (www.cannaprove.com)

CannaProve is the recognized leader in solutions that empowers trust and knowledge across the global cannabis industry. CannaProve was founded on principles of improving life quality through the adoption of cannabis and all its derived health and wellness benefits. CannaProve proprietary software platforms offer a user-rich, simple to implement experience that enables cannabis supply chain participants to be agile and responsive to turbulent markets, while capturing maximum value.


NCFA Jan 2018 resize - The Solution To The Fintech IPO Shortage 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

Latest news - The Solution To The Fintech IPO ShortageFF Logo 400 v3 - The Solution To The Fintech IPO Shortagecommunity social impact - The Solution To The Fintech IPO Shortage
NCFA Fintech Confidential Issue 2 FINAL COVER - The Solution To The Fintech IPO Shortage

 

Regulation Crowdfunding Surpasses $250,000,000 in Commitments The Model is Working but its Potential is Much Greater

Crowdfund Capital Advisors | Sherwood 'Woodie' Neiss | Aug 7 ,2019

RegCF - The Solution To The Fintech IPO ShortageIt has been just over 3 years since Regulation Crowdfunding (Reg CF) went into effect and most recently the industry surpassed a quarter of a billion dollars in commitments. Since inception over 1,800 companies in cities all across the United States have filed to raise money under Regulation Crowdfunding. Over 271,000 investors, most of which are friends, followers or customers of these businesses have made commitments to start, scale or expand operations.

The average raise stands around $237,000 which firmly addresses the Valley of Death[1] issue. Most of the successful companies are raising funds in less than 90 days which is far faster than other forms of financing like Venture Capital or Bank Loans. There’s been no fraud or Wild West as opponents had claimed.

“Essentially we built a financing mechanism which is doing exactly what we said it would,” said Sherwood Neiss Principal at Crowdfund Capital Advisors (CCA) “We’re funding local businesses with a vested group of local investors that is creating local jobs and powering local economies.”

Regulation Crowdfunding began on May 16, 2016. It allows any startup or small business to raise up to $1,070,000 online from family, friends and followers (accredited or not) provided issuers use an online investment platform that is registered with the Securities and Exchange Commission (SEC) and disclose information about their company and financial wellbeing.

See:  The SEC Publishes Report on Reg CF: “The number of crowdfunding offerings as well as the total amount of funding during the considered period was relatively modest”

Since the industry began, Crowdfund Capital Advisors has been collecting information on every offering in its CCLEAR Database. CCLEAR is the leading Regulation Crowdfunding database that collects, cleans, aggregates and reports on all companies seeking funds via Regulation Crowdfunding as well as those doing parallel 506(c) offerings[2]. This information includes financial performance, security offering, valuation, industry, daily commitments and number of investors. The information is summarized and published on a daily basis on the CCLEAR Regulation Crowdfunding dashboard.

Here are some key data trends:

  • Capital commitments – From FY17[3] to FY18 capital commitments increased 178% from $45.7M to $81.1M. The second full FY of Reg CF saw capital commitments increase 139% to $113M. Total capital commitments to date is over $250M.
  • Issuers – During the same period the number of companies seeking to raise funds increased 187% from 317 to 592 and 137% to 810 in FY19. Total issuers to date is over 1,800.
  • Investors – The number of individual investors grew from 44.5k in FY17 to 92.6K in FY18 to 117.8K in FY19. Total investors to date is over 270,000.

“No matter how you look at it, there’s been an impressive growth of at least 250% in 2 years,” says Neiss. “If we extrapolate out over the next 2 years, we estimate that over 3,400 companies across the United States will receive half a billion dollars by over half a million investors.”

CCLEAR captures a maximum of 56 different industries from Advertising and Marketing, to Healthcare and Utilities. During the first fiscal year there were 44 industries represented. That number increased to 47 last fiscal year. While application software, alcoholic beverages, business services, consumer packaged goods, entertainment, personal services and restaurants were the most common industries seeking funds, financial services, business services, employment services and retail saw the greatest increase in offerings between the first and third fiscal years.

“The wide representation of so many industries speaks to the broad appeal of regulation crowdfunding to both companies seeking and investors looking to deploy capital,” says Neiss. “No matter what industry you are in, if you have an engaged group of customers that could be investors, Regulation Crowdfunding is something you should explore.”

Companies in 48 of the 50 States have registered to raise funds via Reg CF.

See:  OurCrowd Double IPO Success Provides Crowdfunding Validation

From an employment perspective, the data shows that Reg CF continues to sustain and support local jobs. In the first fiscal year over 1,482 jobs were supported. This grew by another 3,150 in the second fiscal year and another 4,448 in the third.

“Collectively almost 10,000 jobs have been supported around the United States since the launch of Regulation Crowdfunding,” says Neiss.

“We expect this number to grow by another 10,000 in the next 2 years. 20,000 jobs means 20,000 people employed by local businesses and reinvesting their income back into these communities through mortgage payments, groceries, dining out, education and more. This is how we support local economies. And we are doing it despite the current $1M cap on company raises. Imagine what we could do if we increased these caps from $1M to $5M, $10M or $20M? It is easy to see how we could increase this from 20,000 to 200,000 jobs.”

While not all Regulation Crowdfunding companies are revenue generating those that are had over $400M of Revenue in their most recent fiscal year.

“Given that the majority of these firms are growing and reinvesting their earnings, you can only imagine the multiplier effect that this has on local economies,” says Neiss. “Businesses are reinvesting into their local economies by purchasing goods and services to support them and hiring employees. And employees are using their paychecks to support themselves. Together we estimate they are pouring close to a billion dollars into local economies.”

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NCFA Jan 2018 resize - The Solution To The Fintech IPO Shortage 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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NCFA Fintech Confidential Issue 2 FINAL COVER - The Solution To The Fintech IPO Shortage