Category Archives: Fintech AI/ML, Data-driven

Blockchain Startup Backed By Big Banks Ushers In New Era Of Banking

Forbes | Andrea Tinianow | Oct 18, 2019

UK digital payment rails - Blockchain Startup Backed By Big Banks Ushers In New Era Of BankingFnality, a London-based company is banking on blockchain technology to usher in an era of digital financial markets. They are betting that the financial markets are going to tokenize. Fnality intends to be there when that happens. In fact, they intend to spur the transformation.

According to Fnality’s chief executive officer, Rhomaios Ram, “if the markets are moving to a new model, they will need a secure infrastructure for digitizing payment and settlement on a global basis. We are creating a new financial market infrastructure, a new payments system [for wholesale banking].” Wholesale banking refers to lending and borrowing between banks, or with large customers such as the government, pension funds, and big corporations.

Ram continues, “our two areas of focus right now are establishing a digital currency capability in each currency, and coordinating and orchestrating with business applications, such as tokenized exchanges, issuance platforms, collateral and trade finance, that want to use this new payment functionality.”

Backed by a consortium of financial institutions, including some of the world’s most important banks: Banco Santander, BNY Mellon, Barclays, CIBC, Commerzbank, Credit Suisse, ING, KBC Group, Lloyds Banking Group, Mitsubishi UFJ Financial Group Inc., Mizuho Bank, Ltd, Nasdaq, Sumitomo Mitsui Banking Corporation, State Street Corporation, and UBS, Fnality will offer the Utility Settlement Coin (USC). Notably, the USC will be fully backed by cash collateral held in accounts at central banks around the world. To start, the USC will represent five different currencies: U.S. dollar, euro, UK pound sterling, Japanese yen and Canadian dollar. The cash collateral ensures that the value of the USC remains stable, while the Fnality platform enables interoperability through its connection to any blockchain network or legacy system.

See: Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT

Ram notes that the Fnality platform will not supplant systems that are currently in place for traditional banking. Their plan is to create a financial infrastructure to serve the digital marketplace that is to come. The USC will allow banking participants to engage in exchange for value transactions, to include cross-currency transactions, without many of the traditional intermediaries and their associated costs. Banks will be able to clear and settle transactions virtually instantaneously, improving efficiency, and reducing cost and risk.

Michele Curtoni, VP Digital Product Development & DLT at State Street says, “increased interest in digital assets [is] underpinning the evolution of wholesale financial services, [which] creates a need for digital cash in the form of cash on ledger. We believe Fnality is proposing a solution to [meet] this need. Fnality stands out as it is focused to provide a wholesale, multi-currency and instant payment solution leveraging a counterparty risk-free payment model. These properties meet our requirements for a successful model. Digital assets such as the ones proposed by Fnality have potential to deliver improved settlement efficiency, reduced risk and better client experience.”

Participating banks will deposit cash collateral with Fnality’s account at the central bank, providing the backing for the USC on the Fnality platform. They may leave a specified amount in the account, or add currency to the account on an as needed basis. Ram suspects that banks will measure their liquidity needs each day. And, since USC can be held and used 24/7, it will likely impact the way banks manage their liquidity and change the way they settle foreign exchange.

The idea for Fnality started at the end of 2015. At the time, Clearmatics, which provides the design of the blockchain system, and UBS considered how to enable efficiencies in the financial markets. They created a consortium to explore the idea, and Ram joined as its chair.

See:

The Linklaters law firm has been advising on the project since its inception, first as legal counsel to the consortium of banks and now with respect to the legal/regulatory implications of the USC and the Fnality platform. Harry Eddis, Global Fintech Partner, Linklaters, offers that

“the march towards digitalizing assets can only succeed with equivalent digital payment rails. USC is the payment rail solution at scale, utilizing blockchain technology to vastly improve settlement discipline.”

Ram explains, that “if you are going to tokenize finance and trade settlement, you will also need to tokenize the payment system. Tokenized markets have three essential ingredients: tokenized assets, tokenized new exchanges or price discovery mechanisms, and a tokenized means of payment. To do this, the cash leg of the payment must have the same credit quality of a central bank, and it must allow for settlement finality.” Those became the two fundamental design goals in the creation of the USC.

There are many in the crypto sector who thought that payment systems would be transformed by cryptocurrencies such as ether and bitcoin, but that doesn’t seem to have occurred for numerous reasons, chief among them their volatility. Stable coins, such as Tether or Maker’s Dai, have also proliferated as a potential solution for digital payments. But they too have not been widely adopted on an enterprise basis.

Fnality’s strategy of engaging directly with central banks is promising. The Bank of England’s governor, Mark Carney famously expressed that “consortia, such as [Utility Settlement Coin] . . . can drive efficiency and resilience in operational processes and reduce counterparty risks in the system, unlocking billions of pounds in capital and liquidity that can be put to more productive uses.”

That’s what Fnality is counting on.

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NCFA Jan 2018 resize - Blockchain Startup Backed By Big Banks Ushers In New Era Of Banking 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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Bank/Fintech Partnerships: The Fad Is Over

Forbes | Ron Shevlin | Oct 14, 2019

business and tech - Blockchain Startup Backed By Big Banks Ushers In New Era Of BankingPartnerships are Not the Future of Fintech

Bank/fintech partnerships are crucial to the future of banking” has become a widely accepted meme in the industry.

In a recent study from Finextra, 81% of bank executives surveyed said that collaborating with partners was the best strategy to achieve digital transformation. They’re going to be disappointed.

The vast majority of banks are not well suited to partnerships:

  • Larger institutions may have the resources to identify, vet, and enter into partnerships, but their size and organizational complexity makes operationalizing and scaling partnerships difficult.
  • Smaller institutions typically don’t have the resources or skills needed to identify, vet, and enter into any meaningful number of relationships. Operationalizing partnerships often requires integration into core apps which can be a challenge for smaller institutions.

Then there’s the issue of corporate culture which, in many banks, is not conducive to partnering with outside entities. The Competing Values Framework developed by Cameron and Quinn helps explain why–some cultures are more control-oriented than collaborative.

Partnerships Are No Piece of Cake from the Fintech Perspective

Brett King, founder of fintech Moven told me, “The biggest barrier to bank/fintech partnerships is banks’ procurement departments. They treat us like small IBMs and hammer us with performance and risk clauses that would kill us if we let them.”

See: 10 Key Issues For Fintech Startup Companies

Echoing that sentiment was Philippe Gelis, CEO of fintech Kantox, who wrote, “Inside banks, there is also no single decision maker. You need to convince multiple stakeholders that the partnership makes sense, that it will create significant extra value for both parties, and that the risk of cannibalization is low. Once that’s done, you then need to convince their compliance department, IT team and legal.”

What does this all add up to? According to Dr. Louise Beaumont from Publicis.Sapient:

“For banks, partnerships won’t generate the quantum leap they need to move beyond a decades-old, product-centric mentality to deliver next-generation financial services that consumers deserve. At best, they may gain a workable solution that squats awkwardly in the existing infrastructure and brand. At worst, banks will fail to deliver any noticeable difference to customers beyond a flurry of press releases.”

Industry Participants Will Be Connected, But Not in the Form of Partnerships

This isn’t to say that banking industry participants (e.g., institutions, fintechs, and vendors) won’t be highly interconnected–they will be. But one-to-one partnerships won’t be the predominant form of connection. The most prevalent ways to connect will be:

Platforms. Amazon is a platform. There are over five million marketplace sellers across all Amazon marketplaces (more than one million new to Amazon in 2019 alone). They’re hardly “partners” with Amazon. According to a Forbes article titled Digital Platforms Are Eating Banking, there five types of digital platforms taking over the banking world: 1) Megabank API toolkits; 2) Marketplace platforms; 3) Analytics platforms; 4) Business banking platforms; and 5) Core integration platforms. Platforms provide a plug-and-play capability that enables participants to interact, transact, and integrate without partnership or one-to-one contractual arrangements.

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Open banking. Consulting firm EY defined open banking as: "Online banking and financial services enabled through consumers' ability to offer third-party providers access to their personal bank account data and payment initiation." This type of connection enables the sharing of data between parties without a contractual agreement (i.e., partnership) or transactional capability (like a platform provides).

[Banking]-as-a-service. The term BaaS is often used interchangeably with open banking, but I’m using the term here to describe what fintechs like Harvest (wealth management-as-a-service) or StreetShares (lending-as-a-service) provide to banks. These arrangements are somewhere between a partnership and a traditional vendor relationship. The BaaS fintech provides a “service” to the financial institution–in these examples by offering a product or service to the market–but with non-traditional service level agreements and support requirements.

Alliances and consortia. Partnering with each other may be a better starting path to partnering with fintechs. Examples include Alloy Labs Alliance, a shared innovation lab and accelerator, and CU Ledger, a credit union service organization focused on distributed ledger technology.

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NCFA Jan 2018 resize - Blockchain Startup Backed By Big Banks Ushers In New Era Of Banking 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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Accelerate—it’s time for insurers to move swiftly and decisively

McKinsey & Company | Johannes-Tobias Lorenz | Sep 30, 2019

running digital fast - Blockchain Startup Backed By Big Banks Ushers In New Era Of BankingIn the past, speed was not critical for an insurer's success. The reality today is totally different. To flourish in the digital age, insurers must move swiftly—and decisively.

For a long time, the traditional insurance business model proved remarkably resilient. A robust regulatory environment, limited consumer interest, and large balance sheets safeguarded the competitive advantage against early digital attackers. But the picture today is different. Digital technologies are putting pressure on profit pools, and competition is intensifying as traditional industry borders blur and players from adjacent markets shake up the traditional insurance value chain to claim their stake. On top, the negative-interest-rate environment threatens the economic foundations of the industry.

See:  Tesla Promises up to 30% Lower Insurance Rates with New Car Insurance Play

The good news: Traditional insurers remain in a strong position to flourish in the digital age. Most have customer access through their proprietary channels, strong and trusted brands, and actuarial expertise. These features make traditional insurers valuable partners in budding digital ecosystems that are evolving to offer both risk prevention and risk mitigation services. In addition, they also have large balance sheets that enable them to underwrite large risk pools. Today, most insurance companies have started applying new technologies within their organizations and are making strides in implementing digital solutions. However, the metabolic rate needs to increase to stay competitive in a polarizing “winners take all” environment.

How to move swiftly—and decisively

The strength of an insurer’s in-force book will not protect it indefinitely. Incumbents need to move quickly to compete with digital competitors that have the agility to keep pace with evolving technology and customer needs. Five key observations on speed can help guide insurers on the right track.

1. Know your strategy

Big moves that drive digital effectiveness need a strategy that is clear and adaptable. Indeed, these characteristics go hand in hand, as a clear vision of the future is more powerful when combined with learning through experimentation and realignment. Agile ways of working can lower risks at each step and create opportunities to mold strategic aims to new realities. Companies that achieve this flexibility while maintaining a clear vision can be quicker and more decisive in implementing their digital agenda.

See: 

 

2. Make speed manageable

Frequency matters. A powerful strategy to digitally transform an existing business model must be met by a manageable set of practices that support change week to week and quarter to quarter. Our research finds that top performers perform crucial tasks—such as learning about digital technologies, assessing the business model for digital-productivity opportunities, or sharing lessons learned from failed or successful tests—more frequently than other companies.

3. Do your homework (often)

What’s the fun in all the data if you’re not using it to make your organization better? A recent McKinsey study found that that 44 percent of top-performing companies collect and analyze customer data weekly or more frequently to identify new opportunities, compared with 16 percent of laggards, which tend to analyze customer data only monthly. Frequent analysis will allow companies to make bigger, better acquisitions and capital-expenditure decisions, scaling up what is working more rapidly and effectively.

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NCFA Jan 2018 resize - Blockchain Startup Backed By Big Banks Ushers In New Era Of Banking 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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Sibos London 2019: Banks that fail to embrace APIs ‘face existential threat’

FSTech | David Adams | Sep 24, 2019

Sibos London 2019 - Blockchain Startup Backed By Big Banks Ushers In New Era Of BankingFinTechs could usurp banks to become the primary providers of consumer and business services if the incumbents fail to embrace Application Programming Interfaces (APIs) as a means of reforming and reinvigorating business processes.

This was according to Citi’s Tony McLaughlin, who has responsibility for emerging payments business development and treasury and trade solutions at the bank.

He told delegates at Sibos in London that

Open Banking is not a regulation or compliance project, but “a test case as to whether our industry will move into the 21st century”, inviting delegates to “acknowledge the gap between the digital expectations that businesses and consumers have for banking and the reality of banking” and to face up to the fact that financial services will be embedded into digital platforms in future.  -- Citibank, Tony McLauglin

He urged banks to embrace Open Banking in full, by creating the APIs that will be used on those technology platforms and collaborating on the development of global standards for API use and security.

McLaughlin’s message was echoed elsewhere at the conference, including during an interesting panel discussion featuring experts at Bank of America Merrill Lynch, Lloyds Banking Group, BNP Paribas Securities Services and ClearBank, talking about how and why each was using APIs.

BNP Paribas Securities Services global head of digital client experience Paud O’Keefe described the challenges that a long established bank faces in trying to make full use of APIs -

“We’ve got legacy systems, we’ve got siloed data” - and stressed the need for banks that have poured money into enhancing data management capabilities in recent years to get the most out of those investments. -- BNP Paribas Securities Services, Global Head

But he also insisted on the importance of making the most of APIs.

“If you don’t have that real-time access to your data, that ability to communicate with your peers and FinTechs, you’re not going to be at the table,” O’Keefe said. “You’ve got to have API-enabled systems.”

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NCFA Jan 2018 resize - Blockchain Startup Backed By Big Banks Ushers In New Era Of Banking 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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No banking charter? No problem. Fintech companies team up with small-town banks

Los Angeles Times | Julie Verhage | Sep 27, 2019

square retail payment device - Blockchain Startup Backed By Big Banks Ushers In New Era Of BankingCustomers of Square Inc., the Silicon Valley payments behemoth, might assume that the cash they send to friends on the platform is housed in a glassy building in Silicon Valley, tended to by hoodie-clad tech workers. Actually, that money is more likely to be sitting in a 117-year-old community bank in Iowa.

Partnerships between high-flying tech companies and traditional banks, many of them tiny by comparison, are a key force behind the financial technology boom. Because virtually no tech companies have the license required to perform banking services, many of them partner with existing banks to offer a suite of services including checking accounts, credit cards and the back-end and regulatory work the tech companies aren’t equipped—or allowed—to handle.

Now, driven by the tech industry’s thirst to jump into finance, a new crop of businesses are looking to broker the connections between tech and banks. One such business is Cambr, a little-known division of an investment company called StoneCastle, which counts Square and other fintechs as customers. StoneCastle works with more than 800 small banks, spread across the country, ready to take and hold deposits from Silicon Valley start-ups such as Square.

See:  What does the future of banking look like, according to the experts?

“Airbnb, one would argue they are one of the largest hotel chains that doesn’t own a room,” said Josh Siegel, chief executive of StoneCastle Partners LLC. “Our network works in a similar way. We have an account at the bank, it’s the room we rent, and we can rent it out to whoever we want.”

Cambr’s service launched last year as a partnership between StoneCastle, which provides the bank connections, and digital banking platform Q2 Holdings Inc., which works on the software and programming. Square’s Cash App was one of Cambr’s first customers, Siegel said, and it has since added start-ups such as Acorns Grow Inc., MoneyLion Inc., Qapital Inc. and robo-advisor Betterment LLC, in a recently announced deal.

What Cambr aims to offer tech companies is a ready-made strategy to accept deposits that they wouldn’t otherwise have the license to handle.

Here’s how it works: A tech company or start-up might give Cambr as much as $100 billion of customers’ cash, and could then ask the service to spread the money around to potentially hundreds of different financial institutions. A result of spreading out the deposits is that more of the fintech’s cash is insured under the Federal Deposit Insurance Corp.’s $250,000-per-account guarantee, offering more coverage than if the money were deposited at a single institution.

The partnership model, which has rapidly become the go-to for financial technology companies, does pose some risks for banks, particularly if fast-moving start-ups draw the ire of regulators, as has happened before.

“The banks are the supervised entities so the buck stops with them,” said Brian Korn, partner and head of fintech practice at Manatt, Phelps & Phillips. “The regulators are waiting for situations where there’s a breakdown.”

But many community banks have embraced such partnerships, seeing them as a salve in times of digital disruption. More deposits can allow small banks to grow and make more local loans. In Cedar Falls, Iowa, the 117-year-old Lincoln Savings Bank, which works with Cambr, has boosted its revenue by partnering with fintechs, said Mike McCrary, who runs e-commerce and emerging technology for the bank. McCrary said that when Lincoln Savings Bank considered how it could best position itself for the next 10 years, fintech partnerships were an obvious answer.

See:  One size doesn’t fit all: Strict regulations meant for big banks holding back fintech in Canada

“In order for us to be relevant years from now, there had to be something digital,” he said. “Now we’re putting a lot of resources into this area of our business,” including, he said, building out a new team dedicated to working with tech companies.

One option for tech companies has been to apply for an Industrial Loan Charter, which would effectively grant them license to provide financial services. Square first applied for the charter in the fall of 2017, but its request shows no signs of being approved. Social Finance Inc. also applied for an ILC, but withdrew its application altogether.

“It’s not easy to become a bank here, and we haven’t seen much traction in general with the ILC,” Matt Burton, partner at venture capital firm QED Investors, said. “What we have seen is continued demand for non-banks to offer banking solutions.”

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NCFA Jan 2018 resize - Blockchain Startup Backed By Big Banks Ushers In New Era Of Banking 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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What does the future of banking look like, according to the experts?

Raconteur | Francesca Cassidy | May 1, 2019

future of finance and banking - Blockchain Startup Backed By Big Banks Ushers In New Era Of BankingNew trends in finance, from open banking to the rise of fintech startups, are shaking the industry and putting customers at the heart of the future of banking, 

What can traditional banks learn from fintechs?

What Bank Leumi and Pepper teach us is that both traditional banks and fintech companies have their strong suits, although

Mr Paris believes the relationship has gone through three phases:

  1. The first saw traditional banks detect fintech as a threat and attempt to squash them through regulation.
  2. The second came as the banking industry recognised the true value of fintech and set out to partner with or acquire them.
  3. We are now in the third phase. “Banks realise that simply acquiring a fintech company does not solve the problem, as the relationship is still one-to-one. What is needed is for a fintech to have access to thousands of banks and vice versa.”

See:  Where Top US Banks Are Betting On Fintech

The question is, will traditional banks consent to?

Matthias Kröner, founder and former chief executive officer of the Fidor Group, one of Europe’s first digital banks, thinks not. “I don’t think a big bank corporation is culturally able to deal with innovation”, he says. “It’s a question of compliance. In order to embrace the innovation of fintechs, you need a special governance structure that allows for a fail-fast, laboratory approach. Traditional banks are too afraid of risk.”

One challenge for fintechs is keeping the innovation level high. The bigger an organisation gets, the more you have the tendency for everyone to lean back - Matthias Kröner, the Fidor Group

So what is the future of banking? It is certainly digital and, as a result, more open, more transparent, more ambitious. Most importantly, it lies in the hands of the customer. Any financial services provider looking to make it to 2030 must embrace this truth, and use all the digital and technological tools at their disposal to make their offering as customer-centric as possible.

What does the future of banking look like, according to the experts?

Ian Bradbury, chief technology officer for financial services, Fujitsu

“The next wave of digital banking solutions, enabled by advanced data analytics, APIs and Open Banking legislation, will go much further. We will see a seamless incorporation of financial and pseudo-financial services into daily activities, both digitally and in the physical world.”

See:  Open banking has a big branding problem, government’s public opinion research suggests

Simon Paris, chief executive officer, Finastra

“My vision is that banking will go back to what it was born for. To provide a financial service. To help people and businesses unlock their potential. Instead of being about how many products per customer you have, it will be about customer’s exchanging their personal data for better service. You tell me how much you drive, and I’ll decrease your car insurance. You share your smart watch data and I’ll decrease your life insurance.”

Matthias Kröner, founder and former chief executive officer, the Fidor Group

“Customer demands for innovation never changed a market as much as changes in regulation, like we’ve had with open banking. PSD2 is finally forcing the banks to be customer-centric. It will mean an easier and better life for customers. I'm absolutely convinced of this. If we combine the success of data with AI and machine-learning - the sky is the limit.”

Flavia Alzetta, chief executive officer, Contis

“In terms of payments, I think the shift from physical assets to virtual or no assets will be very visible over the coming years. I spent 14 years at Amex, and I think the physical card will disappear. The more innovative payment options coming up - such as

biometrics - will simplify payments immeasurably.”

Rakefet Russak Aminoach, chief executive officer, Bank Leumi

“10 years from now the retail banks which take the right steps will be much more significant than they are today, and some will have ceased to exist. I don't think we will have one bank like one Amazon or one Google, I believe that we will have local winners. Regulators are a local thing, as are currencies, so I don't think we'll have one bank for the whole world, but I believe that, in each market, we will have a huge winner who will do the right thing and take a large part of the market.”

See:  One size doesn’t fit all: Strict regulations meant for big banks holding back fintech in Canada

Michal Kissos Hertzog, chief executive officer, Pepper

“The CEO of AirBnB was asked a similar question. He said it doesn't really matter what AirBnb offers in 100 years - whether it is still a question of booking rooms online or not - if their DNA and culture stays the same, then AirBnb will stay relevant. Banking changes all the time, the value proposition and user experience will change.

Banks which will can change and stay relevant will survive, and the others will not.”

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NCFA Jan 2018 resize - Blockchain Startup Backed By Big Banks Ushers In New Era Of Banking 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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Max Levchin’s Affirm seeks capital amid surge in fintech funding

TechCrunch | Kate Clark | Sep 12, 2019

Affirmmax levchin - Blockchain Startup Backed By Big Banks Ushers In New Era Of Banking, founded by PayPal’s Max Levchin, is said to be raising as much as $1.5 billion in a combination of debt and equity, according to people with knowledge of the company’s fundraising activities. Josh Kushner’s New York venture capital firm Thrive Capital is said to be leading the financing, with participation from the San Francisco outfit Spark Capital.

Affirm declined to comment. Representatives of Thrive and Spark, existing Affirm investors, have not responded to a request for comment.

Sources familiar with Affirm, which gives consumers an alternative to personal loans and credit by financing online purchases at point-of-sale, presume the round will be made up largely of a line of credit from a large financial institution, known as a warehouse facility.

Affirm recently raised a $300 million Thrive-led Series F round in April at a valuation of $3 billion. Fintech companies focused on payments and lending, however, require a vast amount of capital to sustain operations. Those capital requirements coupled with the frothiness of the venture capital market justify this additional cash infusion.

To date, Affirm has raised $1.03 billion in funding from Ribbit Capital, Founders Fund, Andreessen Horowitz, Khosla Ventures, Lightspeed Venture Partners and more, according to PitchBook. Fellow fintech ‘unicorns’ Brex, Stripe, SoFi and Kabbage, for context, have collectively raised roughly $5 billion in debt and equity to date.

See:  Regular investors are cut out of a major financial market and the SEC chief wants to change that

Affirm offers installment plans to online shoppers, a method of delayed payment historically reserved for large purchase like vehicles or luxury electronics. Using Affirm, consumers can create personalized installment plans for purchases as small as a pair of sneakers sold by StockX or as large as a diamond engagement ring from Diamond Nexus, for example.

Affirm, serving as an alternative to a credit card charge, requires no paperwork, minimum credit score or income. The company, however, makes money the same way as a credit card provider, with interest rates for Affirm’s loans falling between 10% and 30%.

Affirm’s fundraising efforts come as more and more companies are devoting ample resources to consumer and B2B lending. Affirm, doubling down on the opportunity in B2B, spun out a new financial services business focused entirely on business lending earlier this year. The company, Resolve, provides a “buy now, pay later” option tailored to B2B sales flow.

“Traditional B2B financing is slow, inaccurate and limits a business’s potential for growth because of an over reliance on email, call centers, faxes and manual invoicing processes,” Resolve wrote in an April press release. “Today, many companies offer a standard net 30-day payment plan only to their best and longest tenured customers, leaving others in need of financing to rely on credit cards or installment loans.”

Meanwhile, companies like Stripe and Square are making a concerted effort to explore other financial frontiers, with the former launching a lending tool as well as a corporate credit card this month. Square, for its part, recently introduced a new debit card, called the Square Card, allowing businesses to withdraw and spend money they’ve collected through Square payments.

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