Category Archives: Fintech International

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”

Crowdfund Insider | | June 20, 2019

RegCF SEC report - 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”The Securities and Exchange Commission (SEC) has published a statutory report on Regulation Crowdfunding commonly referenced as Reg CF. The mandated report must be forwarded to Congress three years after Reg CF rules became effective (May 2016).

Reg CF is the smallest of three federal “crowdfunding” exemptions allowing issuers to raise just $1.07 million from both accredited and non-accredited investors.

According to the report authors:

“the number of crowdfunding offerings, as well as the total amount of funding during the considered period, was relatively modest.”

The report tallies activity under Reg CF from May 2016 to December 31, 2018. At the end of the period, there were 45 active Portals and 9 Broker-Dealers which had participated in at least one Reg CF offering.

See:

Three platforms accounted for two-thirds of all initiated offerings and proceeds raised.

SEC: the number of #RegCF #crowdfunding offerings, as well as the total amount of funding during the considered period, was relatively modest Click to Tweet

According to the SEC:

  • Between May 16, 2016, and December 31, 2018, there were 1,351 offerings, excluding withdrawn filings, seeking in the aggregate a target, or minimum, amount of $94.3 million and a maximum amount of $775.9 million.
  • Of the completed offerings, approximately $107.9 million has been raised during the period.
  • 29 offerings reported raising at least $1.07 million from May 16, 2016, through December 31, 2018
  • The typical offering was small and raised less than the 12-month offering limit. The median target amount sought was $25,000 and the median maximum amount sought was $500,000.
  • Pointing to an external report, the SEC notes that the total number of investors in successful offerings increased from 77,558 in 2017 to 147,448 in 2018

Regarding the cost of launching a Reg CF campaign, the SEC states:

“According to the survey, the average issuer employed three people who collectively spent 241 hours to launch a crowdfunding campaign. Based on the survey estimates, the total cost of creating a campaign page, issuer disclosures, film, and video, and hiring a marketing firm, a lawyer, and an accountant amounts to approximately 5.3% of the amount raised.”

The most costly portion of the campaign preparation has to do with disclosure. This cost, on average, $6218 or a time allocation of 86 hours, according to the SEC.

See:  Architecting a New World: Investment Crowdfunding and Digital Assets

The report mentions that cost and complexity have impacted this sector of online capital formation. The authors point to previous SEC Small Business Forums where participants have made recommendations to improve Reg CF for the past few years but to date, no action has been taken on these recommendations.

The document includes some anecdotal feedback from crowdfunding platforms. For example, one platform states that “while few offerings reach the current limit, many issuers choose not to rely on the crowdfunding exemption because the limit is too low.”

Another intermediary thought the current cap was ok.

But several respondents stated that the offering limit should be higher, recommending limits from $5 million to $20 million.

Negative Selection Bias?

Importantly, the SEC report states:

“Some of these market participants stated that the existing offering limit may deter some high-quality, high-growth issuers with substantial financing needs from relying on Regulation Crowdfunding, thereby lowering the average quality of issuers in the Regulation Crowdfunding market. One intermediary respondent stated that raising the offering limit could attract more issuers and expand opportunities for non-accredited investors.”

Many platforms have crafted a workaround to bypass constricted Reg CF rules regarding investment caps and investors limitations.

It is now commonplace to run two concurrent offerings: a Reg CF and Reg D side-by-side for accredited investors. But some intermediaries told the SEC this was “unnecessarily confusing to investors and more costly to issuers.”

The report says that no enforcement actions have been taken against Reg CF issuers by the SEC but FINRA has taken 4 separate actions against a funding portal and NASAA says a small number of actions have been taken by state regulators.

See:  OurCrowd Double IPO Success Provides Crowdfunding Validation

A fair amount of review is given to the development of (or lack of) a secondary market for Reg CF issued securities. To date, no platform has been able to successfully maintain a marketplace for securities as the size of the market is simply too small and affiliated costs too high.

The important concept of a Special Purpose Vehicle (SPV) for aggregating investors into a single entity is addressed. The report cites the potential investor protections an SPV structure could provide. An SPV could facilitate a vehicle where “small investors [could] invest alongside a sophisticated lead investor who may negotiate better terms, protect against dilution by negotiating during subsequent financings, mentor the company, and represent smaller investors on the board.”

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NCFA Jan 2018 resize - 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” 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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Creative Destruction Lab joins the Libra Association as first named academic Founding Partner

CDL Team | June 18, 2019

CDL libra - 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”The Libra Association announces a new initiative with the goal of increasing access to financial services and fostering financial inclusion around the world

TORONTO, CANADA – Today, Creative Destruction Lab (CDL) – a not-for-profit seed-stage startup program – announces that it will be a Founding Partner of the Libra Association. CDL is keen to contribute to the success of the Libra initiative as the sole Canadian organization and academic institution in the Libra Association at present.

The Libra Association will create Libra, a simple global currency and financial infrastructure that can empower billions of people. Libra will be built on a secure, scalable, and reliable blockchain; and it will be backed by a reserve of assets designed to give it intrinsic value. The Libra Association will govern the infrastructure and manage and evolve this new ecosystem. Libra will enable developers and businesses to build inclusive new financial service products for people around the world.

See:  Facebook’s Libra Cryptocurrency: Everything We Know

At this time, CDL is the sole academic Founding Partner of the Libra Association. The initial group of organizations that will work together on finalizing the association’s charter include:

  • Payments: Mastercard, PayPal, PayU (Naspers’ fintech arm), Stripe, Visa
  • Technology and marketplaces: Booking Holdings, eBay, Facebook/Calibra, Farfetch, Lyft, Mercado Pago, Spotify Technology S.A., Uber Technologies, Inc.
  • Telecommunications: Iliad, Vodafone Group
  • Blockchain: Anchorage, Bison Trails, Coinbase, Inc., Xapo Holdings Limited
  • Venture Capital: Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures
  • Nonprofit and multilateral organizations, and academic institutions: Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking

Libra will extend CDL’s Blockchain Stream – a program developed to create startups that exploit blockchain technologies that enable novel contract design and innovative market design.

As a Founding Partner, CDL will contribute to the creation of the Libra Association, promoting activities that enhance startup innovation worldwide.

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NCFA Jan 2018 resize - 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” 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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Facebook’s Libra Cryptocurrency: Everything We Know

PC Mag | Rob Marvin | June 18, 2019

facebook launches libra - 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”Facebook's Libra Cryptocurrency: Everything We Know

Facebook's big blockchain play, consisting of the Libra coin, the nonprofit Libra Foundation, and Facebook's Calibra wallet, will create a crypto-based payments ecosystem across Facebook, Messenger, WhatsApp, and beyond.
Facebook's long-rumored cryptocurrency finally got its big debut, and it's called Libra after all.

Facebook today released a lengthy white paper, along with a post from Mark Zuckerberg and another from VP of blockchain David Marcus, announcing the ambitious crypto initiative and all that comes with it.

The open-source Libra cryptocurrency and blockchain will be governed by the nonprofit Libra Association, while a new Facebook-owned subsidiary called Calibra will release a wallet for Libra tokens and ultimately other banking and finance products—a move that could turn Facebook into a financial services giant in addition to a social and advertising one.

See:  Facebook’s Cryptocurrency: Great Idea, Wrong Company

While the public launch of Libra won't happen until the first half of 2020, the developer testnet of the Libra blockchain is live today. There will also be a new programming language called Move for developers to build distributed applications atop the Libra blockchain, though Facebook said neither itself nor the Libra Foundation will be in charge of vetting and approving apps, meaning there could be the potential for fraudulent or scam apps.

We've heard rumblings about a secret blockchain project since last May, when Cheddar's Alex Heath reported that Facebook had been exploring blockchain and the creation of its own cryptocurrency for use within its apps since 2017. Facebook's goal is to launch a virtual token allowing anyone in the world—and particularly billions of unbanked individuals who don't have bank accounts but do have smartphones—the ability to make seamless digital payments and transfers both inside and out of Facebook's apps.

There's a staggering amount of technical detail to how the permissioned Libra blockchain works (read: not completely open like Bitcoin and Ethereum) and how the Libra Association will keep the price stable using a reserve asset pool tied to multiple currencies including the dollar, pound, euro, Swiss franc, and yen.

But for consumers wary of trusting their money and financial data to a company known for privacy problems, there are a few important points Facebook is hammering home with Libra. Not only is it ceding control of the blockchain, but Facebook's social data and Libra's financial data will be kept entirely separate. You don't need a Facebook or WhatsApp account to use Libra or sign up for Calibra.

While users will be vetted for anti-fraud protection when setting up an account, like other blockchains there will be no personal information associated with Libra and all transactions will be encrypted. Facebook can't take the data from your transaction history and use it to target ads or sell you products.

See:  Stablecoins: Experience the Stability

What We Know About Libra

Cheddar reported in December that Facebook was on a hiring spree led by Marcus, the ex-PayPal president who formerly served as VP of Facebook's Messaging products. Marcus, an early Bitcoin investor who serves on the Coinbase board, confirmed he was leaving Messenger to focus on heading "a small group to explore how to best leverage Blockchain across Facebook, starting from scratch."

The team has grown from a dozen members to more than 50 employees, including the former team behind blockchain startup Chainspace, which Facebook acquired in February.

Facebook explored a number of different avenues while figuring out exactly how the financial side of its cryptocurrency will work. After meeting with dozens of financial institutions and tech companeis about backing its token (including Zuckerberg's old friends the Winklevoss twins), Facebook decided to give up absolute control by setting up an independent governance body called the Libra Association, based out of Geneva, Switzerland, to oversee the token.

The 27 founding members of the Libra Assocation paid a minimum of $10 million to operate a node on Facebook's blockchain underlying the token, which will be a stablecoin—meaning Facebook's cryptocurrency will have a stable price during payments and transactions backed by a number of different global currencies beyond just the US dollar. Facebook employees will reportedly have the option of taking the cryptocurrency as part of their salaries.

At launch and for the foreseeable future, Libra will not be a permissionless blockchain other cryptocurrencies, meaning that it's not truly decentralized: not just anyone can set up a node and join the blockchain. Facebook said it couldn't figure out how to make a permissionless blockchain scalable to the number of transactions Libra is expected to see; upwards of 1,000 per second. Libra has a vague plan to transition to a permissionless system "within five years," but for now the association will focus on adding new, vetted members.

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

What Libra Mean for the Crypto Market

Facebook's token is poised to achieve two very important firsts for cryptocurrency: the first crypto asset launched by a major tech company with a wide global rollout across both the financial world and consumer web services, and the launch of the most high-profile stablecoin ever created.

Stablecoins are enticing but risky endeavors, and in some cases fraught with controversy. The idea behind a stablecoin is to reduce the volatility and uncertainty of crypto prices to ensure that conversions, remittances, and other transactions remain, well, stable for consumers.

There are a few ways to do this. One is to peg a cryptocurrency either as a fiat currency (or in Facebook's case, a basket of currencies) such as in the case of Tether, the most high-profile stablecoin until now, which is in theory pegged 1:1 to the US dollar. This turned out not to be entirely true, and Tether has dealt with a myriad of issues, from allegations of price manipulation to a loss of trust and investigations into in whether the coin was fully backed and was used to cover popular exchange Bitfinex's losses.

Stablecoins can also be peggged to a reserve resource like gold or silver, or in some cases it can be a coin where the supply, demand, and exchange rates are monitored and controlled to keep prices consistent. Stablecoins have gained popularity in countries like Venezuela where citizens need an alternative to the hyperinflated bolivar, but they can come in many different forms. JPMorgan's JPM Coin is a stablecoin in a fashion (albeit only for use within the bank's own private blockchain network), and IBM has partnered with blockchain payment network Stellar to let international banks launch their own stablecoins on the Stellar public blockchain.

The way Facebook has structured Libra gives the cryptocurrency instant global legitimacy, both it the high-profile members behind the effort and in tying the tokens to a number of government-backed fiat currencies. Particularly through apps like WhatsApp, Libra could also realize the promise of frictionless remittances and cross-border payments in the developing world that gives unbanked users simple, low-fee ways to send and receive money.

See:  Fidelity Will Offer Cryptocurrency Trading Within a Few Weeks

Libra is a huge market validation for crypto's long-held promise of digital payments, but the trade-off is that the permissioned, more centralized blockchain creates the transaction scalability needed while somewhat compromising the truly decentralized and distributed nature of the technology.

A Lightning Rod for Regulation

The moral is, Facebook's coin will work quite differently from Bitcoin, Ethereum, or any of the mainstream cryptocurrencies built on public blockchains. Libra won't be transacted over a public blockchain like Bitcoin where it would be difficult for Facebook to ensure the coin wasn't being used for illegal activities; the private, permissioned network set up through the Libra Association (where only verified companies control nodes) creates a network that's still decentralized to a degree, but governed and monitored by a foundation that Facebook and its partners control.

Bloomberg reports that Facebook will test its stablecoin first in India for WhatsApp transfers, with the goal of realizing one of cryptocurrency's ultimate goals: seamless cross-border payments and remittances anywhere in the world.

Facebucks will shine a bright light on the cryptocurrency market as a whole, and it'll also come with increased regulatory scrutiny from US agencies, including the SEC and CTFC, as well as countries worldwide. Rolling out a global stablecoin of this kind that's pegged to multiple currencies and backed by giants of the tech and financial worlds will force the kind of accelerated regulatory action that the cryptocurrency market has been waiting for.

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NCFA Jan 2018 resize - 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” The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Uber is making a fintech push with a New York hiring spree

CNBC | Kate Rooney and Hugh Son | June 10, 2019

MoDara Khosrowshahi CEO uber tech - 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”bility giant Uber is looking to accelerate the creation of financial products with a new fintech outpost in New York, according to people with knowledge of the plan.

The ride-hailing company is aiming to hire several dozen engineers and product managers this year, and the New York team could eventually exceed 100 workers, said the people, who declined to be identified speaking about Uber’s plans.

Uber, fresh from its IPO last month, is looking to tap New York’s talent pool, which is deeper when it comes to fintech and bank workers than its hometown of San Francisco. By building out its financial ecosystem, the company can increase its lead over rivals like Lyft. The efforts are likely to be focused on ways to increase engagement and loyalty to the Uber platform, according to people who attended a recruitment event earlier this year.

Payments chief Peter Hazlehurst and top engineer Johnie Lee spoke at the event, held at Uber’s New York offices, the people said.

There are many possible payment and lending innovations Uber could come up with: It has 93 million active users globally, most of whom use linked credit cards or fund a wallet called Uber Cash to pay for rides and food delivery.

The two major areas being looked at by its financial products team involve building “payment experiences” that encourage riders and eaters to use Uber or remove costs from the system, and helping contractors manage the funds they earn, according to a job posting.

See:  What bankers need to know about the mobile generation

That’s in line with products Uber has already released, like Uber Cash, which includes discounts when a user funds the wallet, its loyalty program Uber Rewards, and its co-branded credit card. On the other side of the service, Uber allows drivers to get paid as often as five times a day instead of waiting for weekly paychecks.

A more radical possibility is an Uber bank account, according to a person with knowledge of the matter.

Creating a bank account has been discussed at a high level at Uber but may be years away, or the company could decide against it, this person said. Uber relies heavily on the banking system to get paid and pay drivers, and it could potentially cut out middlemen with its own bank.

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NCFA Jan 2018 resize - 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” 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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Hong Kong being pulled into the 21st Century — digital banking licenses finally arrive

Schulte Research | Paul Schulte | June 17, 2019

global network and points of presence maps - 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”Digital banking finally arrives in HK --all in one go!

Be careful what you wish for — you might get it.  Hong Kong People have been kvetching for years about the poor quality of banking services. Now, they will have a deluge of ultra-efficient and essentially free new services. These services will offer strictly online banking services without branches and ALL of them have very deep pockets. The first batch below, which I will enumerate in a moment, have capital to burn of about USD 250 million.

This can go a long way in eroding the highly profitable cartel of HSBC and Hang Seng Bank.  Hang Seng Bank has consistently had among the highest ROE globally north of 20-21%. And its revenue per customer has been among the world’s highest as well. HSBC owns more than 40% of HSB, so it has been a cash cow for the bank. Hong Kong is really the center of profitability for HSBC, since its ROE for commonwealth countries is the single digits and it has basically given up on the US financial market.  It’s European business, like all Euro banking franchises, is in the doldrums.

See:  FINTECH FRIDAY$ (EP.11-Sep 28): How Amazon Bank is Dominating and Risks of a Digital Bifurcated World with Paul Schulte, Founder of Schulte Research

Before we delve into the new guys on the block, lets focus on two issues.  Hong Kong is desperately behind on all of this digital banking.  Let’s just say that the HKMA has been ultra-cautious to not rock the boat for incumbent banks. Hong Kong has been an example where the regulator has caused some degree of asphyxiation of the environment due to its cozy relationship with the status quo players. Banks like Goldman Sachs have had digital bank Marcus for many years. JP Morgan has had Finn for some time.  Others like BNP, ING, Santander all have had digital banks for many years.  And of course, China is a banking system which no longer has cash, credit cards or checks. Hong Kong still runs on checks and taxis only accept cash.  This Big Bang we saw in April and May will be very painful for the incumbents.

HK digital bank licenses April 2019 - 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”

The second issue is traditional telecom services have traditionally gone through telecom trunks. Hong Kong’s vital importance to the region has been little appreciated.  It is the nerve center for much of the undersea telecom services for Asia Pacific — as much as 90%. HSBC, for instance, has relied on this for many decades to connect its vast commonwealth system.  As China decides to go its own way and disconnect from the Western systems (like Google and WhatsApp) and create a self-sustaining systems based on Alibaba and Tencent. As Hong Kong slowly morphs into a Chinese city, it is quite certain that China will not wish to remain vulnerable to a cable system open to hacking by western intel services. In this way, HSBC is very much tied to the fate of the “Five Eyes” and can no longer say its future lies in being an Asian bank. The same goes for Standard Chartered.

Given that all eight of the new digital bank entrants are either pure Chinese or have important PRC anchor tenants, this sudden burst of highly adept and highly competitive entities will surely drive down margins for all banking services within 2–3 years. This reminds me of when the PRC investment banks came into Hong Kong. Many people said they could not compete outside of China.  They said they could not go up against polished investment banks with long histories.  (I worked inside CCB Intl and from the time I got there to time I left two years later, they had gained massive experience and it was lead manager on the highly successful CITIC Securities IPO.  Within a few years of the investment banks arriving, commissions fell 50% and banking fees fell more than 50%. I predict the same will happen for traditional banking services, but it is likely to happen faster.

See:  Singapore topples United States as world’s most competitive economy

Why will traditional banking fees fall faster with the NEW PRC digital banks than when PRC investment banks caused commissions and fees to collapse in 2010-2014? Because Alibaba and Tencent, among others, invented digital banking many years ago. They have mastered online asset gathering, online SME lending, online robo-advisory, online FX transfers, online everything. And it is glued onto a cell phone that is fully integrated into the lifestyle of 1.4 billion people in ways that Hong Kong people could hardly dream of.  Banks are essentially nowhere in understanding how financial choices are a mere subset of a person’s lifestyle choices.

HK digital bank licenses May 2019 - 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”

The first batch of online banking services below are a smattering of Hong Kong and western entities, but they are all basically Chinese entities.  The second group announced last week are all of the major players in Asia pacific lifestyle and financial services. Let’s not forget, for instance, that Alibaba is now connected to Pay TM, Lazada, Tokopedia. And Tencent can leverage WeChat in HK online activity. This can render much of the local banking services irrelevant. I was doing some consulting three years ago with some of these incumbents and was begging them to split off online banking services with a separate entity. I also wore out my welcome with the HKMA and told them to force a big bank in digital services for the good of the local incumbents. Nothing happened for years. Now, ALL of the most adept online banking powerhouses — hungry, entrepreneurial, savvy and well funded — have come into Hong Kong virtually on the same day. God help the incumbents.  They have no one but themselves to blame for not being prepared.

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paul schulte2 - 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”Paul Schulte, Schulte Research
Founder and Managing Editor
Hong Kong

https://linkedin.com/in/paul-schulte/

Paul Schulte's roles in banking & financial services in the past 30 years include equity & fixed income research (buy & sell sides) in emerging markets. In recent years, technology has evolved rapidly to challenge all facets of financial services his core belief is: Liquidity & credit are everything; get bank liquidity & solvency right and the rest follows. Aside from being the founder & editor of Schulte Research, he has taught for 18 years IN MBA programs: Tufts, HK UST, HKU, LMU Hilton School in LA & SUSS in Singapore. He has also worked for the Number 1 investment bank from Switzerland, US, UK, Japan, PRC & Holland starting in 1990. Paul has been a source for the WSJ, NYT, Bloomberg, Nikkei, FT, Economist, Barron’s & Forbes. His clients include some of the largest sovereign, pension, mutual and hedge funds globally. He served as an advisor to IOSCO, ASIC, HKMA, Malaysian SFC, PRC PBOC & CBRC, Thai SEC & Indonesian OJK and Bank Indonesia.


NCFA Jan 2018 resize - 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” 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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Facebook’s Cryptocurrency: Great Idea, Wrong Company

Forbes | | June 17, 2019

mark Z. facebook - 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”All the signs are that Facebook is about to launch its cryptocurrency on June 18, a project known internally as Libra, and that soon, apparently, we will all be using. So what are the implications of a company with 2.4 billion users launching its own currency?

Strategically, the movement makes sense for Facebook: at a time when many question the its dominance of social networks and when a majority of its own shareholders say they want to see the back of Mark Zuckerberg, the company announces a very ambitious project of universal appeal giving it a central role in the world economy, in the wake of innumerable cryptocurrency projects of dubious legality, irresponsibly speculative and wasteful in terms of energy, aimed among others at people in countries with unstable currencies or limited banking penetration. As Jack Dorsey has said, this maybe the perfect moment to create a universal currency for the Internet era, reflecting the trend toward a universalization of the world. However, what is less clear is whether this currency should be in the hands of Facebook.

See:  FaceCoin: Here’s What Facebook Could Build In Blockchain And Cryptocurrency

Technically, the project is not terribly interesting: although the company has hired a lot of talent with experience in the world of cryptocurrencies, what it has built is a stablecoin anchored to a basket of currencies, securities and organizations to avoid excessive control by a single player (including Facebook), and thus any potential speculation: the company has spoken with financial institutions to provide capital in the form of billions of dollars of international fiduciary coins and low risk securities as collateral to stabilize the price of the currency. Companies interested in operating a node have to contribute $10 million to validate transactions with the currency, to vote in future operations and above all to avoid argument about Facebook’s excessive power. The company plans to cede control of its cryptocurrency to an external independent foundation based in Switzerland.

Facebook’s currency can be transferred at no cost through Facebook products, including Messenger and WhatsApp, and the company is working with retailers to accept it as payment, which may involve commissions and possibly some agreement with ATM network managers to allow exchange with other currencies. There may even be incentives for users ranging from payment for advertising to promotions of schemes similar to loyalty programs. The company may even pay interest to users for deposits in its currency, a move designed to avoid suspicion of the company holding onto interest.

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In addition to the attention the project will attract, including from the regulators, it will raise awareness of cryptocurrencies, dynamizing the environment and possibly helping it evolve. Facebook’s currency is designed to be user friendly and as easy as any other conventional currency, allowing everybody, not just the experts, to join it.

The currency will also allow us to know once and for all how many real users Facebook has: they will all need to be identified in order to prevent money laundering or other criminal uses. This will be particularly important in failed states or where few people have bank accounts.

In many ways, a universal currency, drawing on the experience of other cryptocurrencies and aimed at populations who for many reasons are outside the traditional economy sounds like a good idea. However, the problem is that the company behind has the worst reputation for privacy, along with ethical standards that have seen it involved in accusations of electoral manipulation and even genocide. As far as Facebook is concerned, its users are raw material, and the idea it would have access to my financial records terrifies me.

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NCFA Jan 2018 resize - 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” 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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Why Did Chase Shut Down Finn?

Forbes | | June 6, 2019

chase closes finn - 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”JPMorgan Chase announced that it is shutting down Finn, its digital banking service.

According to the Wall Street Journal:

Finn was a bit of a hybrid, offering customers a digital app loaded with features as well as some branch access. The bank ultimately determined that Chase was best positioned to provide that combination of services to its customers, according to people familiar with the matter, rendering Finn unnecessary."

Finn, named after one of Meadow Soprano's boyfriends in the hit TV show The Sopranos (just kidding), was launched in July 2018 after a nine-month test in the St. Louis market. At that time, Tearsheet wrote:

Finn’s wider rollout is evidence of the opportunity banks see in serving younger, digitally native users, and a sign that the agile, iterative approach to products typical of startups is making its way to the big banks."

Well, that didn't turn out as planned. According to estimates from Cornerstone Advisors, Finn managed to sign up just 47,000 customers since its inception.

Why Did Finn Fail?

Finn's failure can be attributed to the combination of three factors:

  • Lack of demand. Who wants to bank with a digital bank like Finn? According to Cornerstone Advisors' research, not a lot of people. When asked who they would consider if they were in the market for a new checking account, only 7% of respondents said they would consider a digital bank.
  • Wrong audience. If Finn's target market was "younger, digitally native users," it was barking up the wrong tree. Just 7% of 20-something Millennials and 6% of 30-something Millennials said a digital bank would be in their consideration set. In contrast, 9% of Gen Xers and 7% of Boomers said they would consider a digital bank.
  • Better choices in the market. This is the clincher. The bottom line is that Finn didn't offer consumers (and in particular, existing Chase customers) anything they couldn't get elsewhere. Chase was already leading the pack (or right up there) in mobile banking capabilities.

Megabanks Lead the Pack in Mobile Banking Functionality

A study by S&P Global Market Intelligence looked at 15 "advanced" mobile banking capabilities, i.e., features beyond the standard ones like branch/ATM locator and check balance. They reviewed the mobile banking capabilities of 70 banks--26 with assets greater than $50 billion, and 44 with assets between $10 billion and $50 billion.

Percentage of Banks Offering Mobile Banking Feature by Asset Size
Greater than
$1 trillion
$50 billion
to $1 trillion
$10 billion
to $50 billion
Manage balance or fraud alerts  100% 95% 75%
P2P payments 100% 91% 66%
Other biometric login options 100% 86% 68%
Turn card on/off or report lost 100% 77% 39%
View balance without logging in 100% 68% 52%
Card rewards information 100% 64% 27%
Other language options 100% 59% 7%
Travel notification  100% 36% 16%
Credit score information 100% 32% 7%
Access account statements 75% 68% 45%
Budgeting tools 75% 45% 36%
Apple Watch app 75% 27% 16%
Cardless ATM 75% 18% 5%
Schedule branch appointment  50% 23% 2%
Picture bill pay 25% 9% 7%
Source: S&P Global Market Intelligence

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NCFA Jan 2018 resize - 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” 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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