Category Archives: Fintech Opinions

The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement

Clyde & Co | Karen Boto | Nov 26, 2019

legal statement crypto and smart contracts - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal StatementEarlier this week the UK Jurisdiction Taskforce (UKJT), part of the LawTech Delivery Panel of senior solicitors and barristers headed by Chancellor of the High Court, Sir Geoffrey Vos, published a landmark "Legal Statement" providing long awaited clarity as to how cryptocurrencies, distributed ledger technology (DLT) and smart contracts might be treated under English law.

The statement follows several rounds of public and private consultation, conducted to address the perceived legal uncertainties of these innovative technologies.

For the first time, the Panel has recognised that cryptoassets, including but not limited to, digital currencies, can be treated as property in principle, and that smart contracts are capable of satisfying the requirements of contracts in English law, making them enforceable by the Courts.

Highlights Below - What is a cryptoasset?

In summary, the Panel explains that a cryptoasset is defined by reference to the rules of the system within which it exists. It is typically represented by a pair of data parameters: one public (disclosed to all participants in the system) and one private. The public parameter contains encoded information about the asset, such as its ownership, value and transaction history. The private parameter (the private key) permits transfers or other dealings in the cryptoasset to be cryptographically authenticated by a digital signature. The private key should be kept secret to the holder.

See:  IIROC Announces Crypto-Asset Working Group Members

Dealings in cryptoassets are broadcast to the entire network and, once they are validated, they are added to the digital ledger. Most commonly the ledger is decentralised meaning no one person or entity has control over it. It is also immutable and cannot be changed. The most common type of ledger being used today is blockchain, although other models do exist. The rules governing the system are established by the informal consensus of the participants.

The novel features of cryptoassets are therefore broadly summarised as follows:

  • intangibility;
  • cryptographic authentication;
  • use of a distributed transaction ledger;
  • decentralisation; and
  • rule by consensus.

Can cryptoassets be characterised as property?

The Panel has considered what property is, as a matter of English law. As no general or comprehensive definition of property exists in statute or case law, the Legal Statement focusses upon the necessary characteristics of property as identified in a number of authorities. The Legal Statement provides that before a right or interest can be admitted into the category of property: "it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability. Certainty, exclusivity, control and assignability have also been identified in case law as characteristic of property rights."

See:  Coinshares Reveals Top 10 Crypto Trends in 2019

Although whether English law would treat a particular cryptoasset as property will be fact sensitive and require a consideration of the nature of the asset concerned, and the rules of the system in which it exists, in general, the Panel concluded that "cryptoassets have all of the indicia of property."

The Panel also concluded that the "novel or distinctive features possessed by some crypto-assets" set out above, did not "disqualify them from being property.....nor are cryptoassets disqualified from being property as pure information, or because they might not be classifiable either as things in possession or as things in action."

Why does it really matter if a cryptoasset is property?

It is important to determine whether a cryptoasset is capable of being property because it means that it can be owned, which gives rise to important proprietary rights that can be recognised against the whole world. The owner of a thing is entitled to control and enjoy it to the exclusion of anyone else.  Proprietary rights are of particular importance when it comes to issues relating to succession on death, the vesting of property in personal bankruptcy, and the rights of liquidators in corporate insolvency, as well as in cases of fraud, theft or breach of trust.

So, what is the asset and who owns it and how is it transferred?

The Legal Statement confirms that whilst cryptoassets can be transferred either via an "on chain" transfer (with the ledger being updated in the usual way) or by way of an "off chain transfer" (another type of transfer outside the ledger which is vulnerable to a superseding on-chain transfer i.e. double spending by the transferee)) these will not constitute transfers in the legal sense. This is because of the way the distributed ledger technology operates: unlike a tangible asset, the same cryptoasset does not pass, unchanged, from one person to another. Instead, the transferor typically creates a new cryptoasset, with a new pair of data parameters: a new or modified public parameter and a new private key. The data representing the "old" cryptoasset persists in the network, but it ceases to have any value or function because the cryptoasset is treated by the consensus as spent or cancelled so that any further dealings in it would be rejected.

See:  Singapore Poised to Allow Crypto Derivatives on Approved Venues

What consequences does this classification have?

The Legal Statement concludes that it is possible to declare a trust over an ownership interest in a cryptoasset.

However, as the Panel found that a cryptoasset is not a physical thing, it cannot be subject to a possessory relationship, such as a bailment, a lien or a pledge. That said, the Panel expressly states that it could see no obstacle to the granting of other types of security such as charge or mortgage.

It is also clear that cryptoassets are not documents of title, documentary intangibles or negotiable instruments (though some form of negotiability may arise in future as a result of market custom), nor are they instruments under the Bills of Exchange Act.

Nevertheless, as the Panel was of the view that cryptoassets can be property at common law they were in no doubt that they may therefore also be property for the purposes of the Insolvency Act 1986 (IA 1986) which contains a very wide definition of property. Indeed, even if a cryptoasset was deemed not to be property at common law, it might still be deemed to be property under the IA 1986.

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

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The 5 Debates That Will Shape Fintech In The 2020s

Forbes | Ron Shevlin | Dec 2, 2019

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OBSERVATIONS FROM THE FINTECH SNARK TANK

It’s that time of the year when banking industry pundits turn their thoughts to the top trends of the upcoming year. I’d like to take a different tact and posit the top debates the industry will wrestle with in the coming decade.

It’s that time of the year when banking industry pundits turn their thoughts to the top trends of the upcoming year. I’d like to take a different tact and posit the top debates the industry will wrestle with in the coming decade.

1) Branches: Dead or alive?

The branch debate is certainly not new. But it’s far from resolved, and will accelerate in the next few years. To date, the debate has centered on arguments from:

  1. Branchophiles who point to statistics that show that some high percentage of consumers still go to branches. For example, a CNN article reported that “banks should think twice before they shut down their next bank branch: Many customers, especially younger ones, still regularly rely on physical banks to make deposits, get paper money and even pay bills.”
  2. Branchophobes (like myself) who argue that while consumers might still want the “human touch,” that touch doesn’t necessarily have to come from someone sitting in a building called a bank branch. Why can’t banks use Facetime to facilitate interactions between people? Or why can’t they improve digital processes so consumers don’t need human intervention?

Over the next few years, this debate will focus less on consumer behaviors and preferences and more on the potentially disparate economic impact of branch closings.

Make no mistake: This debate will continue to be politically-infused with anti-bankers accusing banks of intentionally taking harmful actions against segments of the population.

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The NCRC report, for example, points out that “the loss of branch banking access impedes small business lending, hampering capital availability to the primary engine of US economic growth.”

This ignores two facts: 1) The capital gap was created by banks’ increased aversion to risk, not branch closings, and 2) The gap has been closed by fintech startups—who don’t have branches.

Potential implication: Digital banks (and other types of fintech providers) will be required to have a physical presence in economically disadvantaged areas, which will impede their cost advantages.

Bottom line: This decade-old debate will continue into the 2020s, but will be the first of the big debates to be decided as technology-driven approaches to banking become even more dominant—and operationally better.

2) Data: Will privacy and security concerns curtail the use of data?

Picking up where the AI debate leaves off, the debate over the use of consumer data will rage on throughout the 2020s with no easy answers.

On one side of the debate are Dataphiles who argue that data can be used to personalize products, services, and advice that deliver benefits to consumers.

On the other side are Dataphobes like Karen Yeung, a University of Birmingham professor who writes, in Five Fears About Mass Predictive Personalization in an Age of Surveillance Capitalism, that:

"Personalization fosters the asymmetry of power between profilers and individuals. Because preferences and interests are not explicitly stated, personalization may not be in the interests of the customer. Predictive profiling systems intentionally seek to exploit the systematic tendency of individuals to rely on cognitive heuristics or mental short-cuts in making decisions.”

Giving consumers choices over who gets to use their data and how its used will prove to be fruitless. As a Brookings Institution research study reported:

“Maybe informed consent was practical two decades ago, but it is a fantasy today. In a constant stream of online interactions, it is unrealistic to read through privacy policies. And people simply don’t.”

It’s not just privacy policies that fall short—proposed “dashboards” to give consumers control over their data can’t come anywhere close to the level of complexity involved with the use of consumer data.

See: 

Enabling consumers to sell their data isn’t a panacea. Proponents argue that “if consumers could sell their data, they would have the ability to share the data from any transaction with multiple organizations—to their own benefit and that of society as a whole.”

Unfortunately, this perspective ignores the fact that most consumers can’t foresee the way the data they sell could be used. According to the Brookings Institution, “Consumers are unlikely to strike a good deal for their data since they lack information about its value, and the data collectors will be the market makers.”

Bottom line: The debate over the use of data will become highly complex in the 2020s. Big Tech firms are already in the spotlight for their use of data—that light will spread to the companies who partner with them.

3) China or the West: Which fintech model will prevail?

SWIFT reports:

“China and the West are at different stages of fintech maturity. China’s fintech success derives not just from a technological advantage and unprecedented innovation, but also from integrating finance and real-life needs.”

The integration of “finance and real-life needs” has produced “super apps” like WeChat, which have yet to catch on in the US. The big question is: Will they?

The answer will likely be determined by how the other debates outlined in this article play out. Unknowns in this debate include:

  • Will the US continue to move towards socialistic economic approaches that help favor a super app environment?
  • Will the US develop and adopt a national AI policy to become more competitive (and, in fact, does it even need to)?
  • Will the US regulatory environment (e.g., antitrust laws) change to favor a super app approach?
  • Could a Chinese-like Social Credit System take hold in the US?

See: 

The virtue of a social credit system is a debate unto itself that could dictate the fintech implications. A study titled A Dystopian Future? The Rise of Social Credit Systems presents two sides of the argument:

  • One side argues that “a Social Credit System can’t be rightfully designated as civic virtues because: (1) a score constitutes an aim external to any ‘virtuous action’, and (2) the resulting activity tends to conformity rather than to distinction in the public sphere.”
  • The other side sees it as a “promising way to enhance distributive justice and an alternative for price mechanisms in market economies.”

The stakes of this debate transcends the success or failure of individual companies. As Richard Turrin writes:

“For the first time, fintech is being used by countries to compete with one another on a global stage. Fintech is being deployed as a tool for governments to project their power abroad, and potentially disrupt established systems.”

Bottom line: This is the mother of all debates among the five listed here. This debate goes to the heart of the American economic system and the zeitgeist of the American psyche.

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NCFA Jan 2018 resize - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement 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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How Big Data and Blockchain are enhancing FinTech

Medium | Maria Wachal  | Oct 29, 2019

Data driven ideas - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal StatementThe volume, velocity, and variety of data that financial companies are relying on is overwhelming, but there are game-changing technologies that can tame the data and provide indisputable value.

FinTech companies want to provide personalised and innovative services and products to accelerate customer experience. Customer centricity enabled with data analytics is the number one priority for this sector. Injecting financial sector with advanced tech like Big Data and Blockchain can enable banking and finance go far beyond cashless payments and mobile services toward personalised customer experience that will transform FinTech further.

The revolution number 4

Humankind witnessed so far 3 industrial revolutions that impacted production. During the 1st revolution people started using steam power and machines replaced muscle power. The 2nd revolution changed our lives with the introduction of electricity. Finally, when the computer chip was invented, we witnessed the 3rd revolution which not only automated production, but changed our personal lives for good.

See:  How Small Businesses Can Compete By Leveraging Data Insights

The 4th industrial revolution — the digital transformation — is happening right in front of our eyes. It is fuelled by Big Data powered by Artificial Intelligence and Machine Learning, and technologies like Blockchain, that can significantly impact the way the world is progressing.

Big Data in FinTech

We live in a world of hyper-personalization and financial firms want to deliver the promise of personalized customer experience. Being data-driven and leveraging indirect information about customers to transform them into valuable insights is crucial. The notion that can speed up the evolution in this area is the implementation of the real-time self-learning data models that can provide analytics for every single outreach and interaction.

When we talk about collecting data about customers, we are typically referring to 5V characteristics of Big Data:

  • Data Volume — a huge volume of quotes, market data, and historical trade data.
  • Data Velocity — the speed at which the data is being generated. The faster trade data is processed, the faster it can be applied for trading.
  • Data Variety — the existence of various formats and sources of data that can be be structured or unstructured.
  • Data Veracity and Data Value —the quality and usefulness of the data.

There are various opportunities for applications of Big Data in the finance world that could significantly boost predictiveness and relevancy of data, because data needs to be rigorously analysed and assessed for its veracity and functionality in order to avoid constraints of quantity vs quality.

See:  Data is a 2-way street in a post-GDPR world

Fintechs need personalisation

Traditional banks will slowly go out of business. Innovative FinTech companies want to deliver personalised and cost-effective finance products. In order to do so, they need to utilize enormous numbers of data from various touch-points.

The old approach to customer segmentation, meaning dividing customers into groups based on data related to demographics, geography, economic status as well as behavioural patterns, can be enhanced with Big Data algorithms that introduce relevance-drivers. They play a crucial role in determining the minimal overlap across segments and minimal separation within the segments.

Big Data and ML applications enable businesses to get to know customers on a more granular level by providing better analytics and forecasting. Personalisation is already gaining grounds in insurance services. The more of data insurers have on their customers, the more they can adjust their premiums accordingly. Data-driven insights can also further confirm data analysts’ intuition and reduce human errors when developing a risk profile of customers requesting financing or underwriting and credit-scoring in loan management. The massive growth and availability of real-time data also improves the accuracy of marketing and devise customer retention/loyalty programmes.

See:  Differences Between AI and Machine Learning and Why it Matters

FinTechs need automation

Financial companies need to harness big data to aid in processes like trading, risk or fraud. Computer algorithms are able to learn and adapt to real-time changes and conduct trades autonomously. With machine learning systems can automatically learn and improve to identify risks better and to anticipate and avoid them. Every FinTech company wants the trading algorithms that outperform those of their competitors. Supervised machine learning gives higher accuracy than any other mathematical models and enables trading decision based on more than stock information, way better than those with the human involved.

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NCFA Jan 2018 resize - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement 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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Social equity must be central to urban tech innovations

FastCompany | Alex Ryan | Nov 26, 2019

social equity and urban tech - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal StatementThe lesson to learn from so many tech efforts that have drawn protest: social equity must become central to every project that taps data-hungry tech to deliver citizen services.

Sidewalk Labs, the urban innovation arm of Alphabet, had grand ambitions to create a prototype smart city in Toronto, filled with a smart power grid, underground tunnels for freight, and countless other shiny innovations. But the project was significantly scaled back as concerns about tech’s ethics and use of personal data have become more prominent, and because of how Sidewalk Labs has interacted with the city itself.

The saga shows that companies entering new markets without consulting local communities open themselves up to severe risks. Failure to bring the public into public innovation immediately surfaces the possibility of citizen activism that impacts profits and project timelines, the development of local regulations that aim to curb specific business models in question, and the exposure of practices that vault companies into the public spotlight. If you have any doubts, just look at the turbulent rise of Uber (and ridesharing, in general), the retreat of Amazon from Queens, and the sharp decline of WeWork. Social equity must become central to every project that taps data-hungry tech to deliver citizen services, address critical local issues, rethink infrastructure, and improve the quality of life in a place.

See:  While Canada debates, others are commercializing our most valuable asset: data

Citizens must have a leading role in innovation planning

Innovation can drive inequality. Entire demographics can be left behind—or specifically targeted—when physical technologies, mobile apps, and digital platforms roll out to address urban issues from transit congestion to climate change to criminal justice. Further, governments and private industry stakeholders often introduce innovations to local communities without bringing previously marginalized communities into the fold, by accident or by design. That practice needs to end.

That said, there are some positive examples from cities around the world looking to use tech for good. In Barcelona and Amsterdam, the DECODE project provides tools that put individuals in control of whether they keep their personal data private or share it for the public good. In London, the Open Data Institute and the city have partnered to create solutions to civic challenges, while maintaining the privacy and security of Londoners. Unfortunately, these are more the exception than the norm. More cities that want to embrace innovation must take people into account from the beginning.

Governments need to deepen tech literacy and invest in data governance capacity

Big Tech’s efforts to drive innovation at the local level often masquerade as noble promises to improve the status quo. Companies like Amazon, Uber, and Sidewalk Labs introduce full-scale civic projects that aim to put autonomous vehicles on the streets, overhaul transit options, deliver flexible architecture, and engineer outdoor microclimates. High-speed networks, futuristic algorithms, and a vast array of sensors power their local advances, often without consent from local leaders and communities. Consequently, municipal governments still find themselves rethinking everything from regulatory oversight to public realm data privacy to the complex dynamics of public-private infrastructure projects in response to Big Tech movements, instead of in concert with them.

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

At the same time, public sector leaders around the world still have plenty more work to do to hold tech companies—and themselves—accountable for responsible practices that ensure data transparency and security. Officials in charge of innovation-focused regulation and oversight must embrace diversity of people, cultures, and perspectives in order to make cities welcoming places powered by ethical technology. They must expand the number of voices at the table in order to properly address local issues, like public transportation and economic disparity, that divide people within communities. That process begins with taking steps to educate current leaders and staff about the importance of strong data governance, opening clear lines of communication with local communities, and allocating budget toward hiring top technology talent with both the moral compass and technical knowhow to go toe-to-toe with private sector actors. This is what Toronto has learned from the Sidewalk experiment.

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NCFA Jan 2018 resize - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement 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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Even Facebook’s Libra can’t escape the fintech establishment

FastCompany | Howard Yu and Jialu Shan | Nov 6, 2019

american dollar - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal StatementDespite Facebook’s reach, IMD professor Howard Yu and research fellow Jialu Shan break down how its Libra digital currency is no match for legacy financial institutions.

To understand the impact of Visa’s and Mastercard’s withdrawal to Libra is to understand their enormous influence in fintech innovation in the Western world. At the International Institute for Management Development (IMD), we track how likely a firm is to successfully leap toward a new knowledge frontier in its effort to prepare for the future. We specifically measure how ready the industry incumbents in the financial sectors are for new areas such as robo-advisers, cryptocurrency and blockchain, artificial intelligence, mobile services and mobile payments, and application programming interfaces (APIs).

To achieve a balanced and robust measurement, we take note of the “health” of a company’s ongoing business through its cash flow, operating margins, and rising revenues. But for that healthy cash flow to be effectively deployed into new areas, executives need to see beyond their day-to-day operations and be capable of challenging the long-held assumptions of the industry. This process demands diversity in a company’s workforce, which is represented by gender and nationality as well as the specific backgrounds of the top leadership. We then measure the company’s growth prospects as gauged by investors’ expectations, investment in startups or new ventures, and, perhaps most importantly, its new product announcements.

See:  Sibos London 2019: Banks that fail to embrace APIs ‘face existential threat’

The result is an index, which unsurprisingly includes a few household names among fintech developers. PayPal, a digital payments firm that turns 20 this year, and Square, which processes credit card payments everywhere from street stalls to coffee stands to fancy farmers’ markets, are both sitting at the top of the rankings. And yet, several incumbents have managed to grow just as fast. They are the legacy infrastructure builders: Visa and Mastercard.

Since the dawn of the smartphone era, countless new entrants providing payment methods—Apple Pay, Google Wallet, Square, PayPal, Vimeo, and Revolut, to name just a few—have all proven themselves powerful innovators that can design offerings that consumers crave. They have carved out segments of the market away from the credit cards that traditional retail banks issue.

In the face of these changes, the only proven strategy Visa and Mastercard can rely on in order to maintain the relevance of their legacy infrastructure is to bypass their own plastic, deemphasizing and destroying the very physical embodiment of their products, which was cherished for decades, and allowing these disrupters to connect to their toll road. If you can’t beat them, let them join you.

It should come as no surprise that when the Apple card was announced, commentators noticed that, in addition to promised breakthrough features, its logo shared space with Goldman Sachs—the underwriter—and Mastercard. Not even Apple can shake off the plastic network.

And it’s not just Apple. PayPal, Square, Samsung Pay, Google Pay, Facebook Credits, Stripe, and even cryptocurrency startup Coinbase, all work with Visa and Mastercard. In other words, no fintech company can disrupt anyone unless they pay a toll to the old boys’ network.

The reason is simple. An interface standard has emerged that has made Visa and Mastercard so simple and powerful to work with that their vast networks are irresistible for any fintech: APIs.

See:  Lack of open banking framework forcing Canadian consumers to choose between convenience and security, TD exec says

An API is an official set of rules and guidelines that facilitates the exchange of information between two pieces of software. These software routines, protocols, and tools can allow third parties to tap into Visa and Mastercard’s infrastructure. “While many legacy bank players have been hesitant to see Visa as primarily a technology company,” observed Gilles Ubaghs, senior analyst of financial services technology at Ovum, “the recent launch of Visa’s developer platform, . . . with a host of APIs offering a full mix of payment functionality, all built on Visa’s underlying core network, [shows that] Visa is opening up its full capabilities directly to the broader digital ecosystem.”

The major breakthrough here, then, is the realization that a product’s best feature will never be invented in-house. Visa and Mastercard realize that killer apps will be invented by third parties, who are closer to the customers than the credit card giants. Whenever a third-party application becomes significant enough, the system co-opts it in order to remain flexible, all the while setting new standards for the industry. There may come a day when credit cards themselves disappear, but Visa and Mastercard can still be ubiquitous, still making all the hard parts of sending and receiving money around the world look easy.

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NCFA Jan 2018 resize - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement 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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Where top VCs are investing in fintech?

TechCrunch | Arman Tabatabai | Nov 6, 2019

top VC fintech insights - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal StatementOver the past several years, ‘fintech’ has quietly become the unsung darling of venture.

A rapidly swelling pool of new startups is taking aim at the large incumbent institutions, complex processes and outdated unfriendly interfaces that mar billion dollar financial services verticals, such as insurtech, consumer lending, personal finance, or otherwise.

In just the past summer, the startup community saw a multitude of hundred-million dollar fintech fundraises. In 2018, fintech companies were the source of close to 1,300 venture deals worth over $15 billion in North America and Europe alone according to data from Pitchbook. Over the same period, KPMG estimates that over $52 billion in investment pour into fintech initiatives globally.

See:  How to Value a Fintech Startup

With the non-stop stream of venture capital flowing into the never-ending list of spaces that fall under the ‘fintech’ umbrella, we asked 12 leading fintech VCs who work at firms that span early to growth stages to share where they see the most opportunity and how they see the market evolving over the long-term.

The participants touched on a number of key trends in the space, including rapid innovation in fintech infrastructure, fintech companies embedding themselves in specific verticals and platforms, rebundling and unbundling of financial services offerings, the rise of challenger banks and the state of fintech valuations into 2020.

Charles Birnbaum, Partner, Bessemer Venture Partners

The great ‘rebundling’ of fintech innovation is in full swing. The emerging consumer leaders in fintech — Chime, SoFi, Robinhood, Credit Karma, and Bessemer portfolio company Betterment — are moving quickly to increase their share of wallet with their valuable customers and become a one-stop-shop for people’s financial lives.

In 2020, we anticipate continued entrepreneurial activity and investor enthusiasm around the infrastructure and middleware layers within the fintech ecosystem that are enabling further rebundling and a rapid convergence of product themes and business models across the consumer fintech landscape.

Many players now look like potential challenger bank models more akin to what we have seen unfold in Europe the past few years. Within consumer fintech, we at Bessemer are more focused on demographically-specific product offerings that tap into underserved themes, whether that be the financial problems facing the aging population in the US or new models to serve the underbanked or underserved population of consumers and small businesses.

See: 

Ian Sigalow, Co-founder & Partner, Greycroft

What trends are you most excited in fintech from an investing perspective? 

I suspect that many enterprise software companies become fintech companies over time — collecting payments on behalf of customers and growing revenues as your customers grow. We have seen this trend in many industries over the past few years.

Business owners generally prefer a model that moves IT expenditures from Operating Expenses into Cost of Goods Sold, because they can increase prices and pass their entire budget onto the customer.

On the consumer side, we have already made investments in branchless banking, insurance (auto, home, health, workers comp), cross-border payments, alternative investments, loyalty cards/services, and roboadvisor services. The companies we funded are already a few years old, and I think we will have some interesting follow-on activity there over the next few years. We have been picking spots where we think we have an unfair competitive advantage.

Our fintech portfolio is also more global than other sectors we invest in. This is because there are opportunities to achieve billion dollar outcomes in fintech, even in countries that are much smaller than the United States. That is not true in many other sectors.

We have also seen trends emerge in the US and move abroad. As an example we seeded Flutterwave, which is similar to Stripe, and they have expanded across Africa. We were also the lead investor in Yeahka, which is similar to Square in China. These products are heavily localized —tin for instance Yeahka is the largest processor of QR code payments in the world, but QR code payments are not popular in the US yet.

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NCFA Jan 2018 resize - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement 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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Lack of open banking framework forcing Canadian consumers to choose between convenience and security, TD exec says

Financial Post | Geoff Zochodne | Nov 5, 2019

TD open banking - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal StatementOpen banking is already happening in the market and regulators need to catch up

A lack of action on open banking could be forcing Canadian consumers to choose between convenience and security when it comes to third-party financial service providers, according to the chief digital officer of one of the country’s biggest banks.

“For me, there’s a problem,” Rizwan Khalfan, Toronto-Dominion Bank’s chief digital and payments officer, told the Financial Post at the bank’s technology day last week. “That’s an unfair trade-off.”

So-called open banking is a framework that would allow consumers and businesses to let third-party companies access their financial transaction data via secure online channels known as application programming interfaces (API). This could allow companies to design products and services with the data, as well as possibly enable easier account-switching.

Ottawa has been weighing an open-banking framework since 2018, but has yet to release the results of a consultation process launched in January.

In the meantime, the financial technology industry has been developing quickly, and apps that use “screen scraping” — a process whereby customers hand over their login credentials to a third party which then retrieves their financial information — have grown in popularity. This process can violate the terms and conditions of a bank account and could lead to increased risk of identity theft and cyberattack, according to a Senate of Canada committee report.

Khalfan called this an “emerging problem” in Canada that must be solved.

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

TD is proposing the government pursue an open banking model that is along the lines of the industry-led model in the United States, where TD already has the necessary technology in place.

“We’ve built out our APIs and we’ve actually gone live with them in the U.S. in the last month,” Khalfan told the Post. “Because we are North American, we leverage our investments on both sides of the border, so we are planning to use the same API gateways in Canada.”

Khalfan expects a third-party certification process in Canada, but TD is proposing an independent assessment organization that would be overseen but not run by regulators. Everyone in the open-banking “ecosystem” would have to follow industry standards, which would be encouraged by regulators.

“There’s enough industry data standards available that we can actually leverage one of them and then tailor it to our needs in Canada,” Khalfan said.

He also said they are working with regulators and financial-technology firms, and added sorting out standards could be done “in months.”

“An industry-led solution has the potential to be a lot faster,” Khalfan said.

An alternative to TD’s vision is the model that has been implemented in the United Kingdom, where a regulator found bigger banks did not have to compete all that hard for business, which left consumers paying more for their services.

Open banking was part of the recommended solution, and the U.K.’s biggest banks were mandated to make personal and small business account data available to third parties via APIs. Standards were set by the bank-funded Open Banking Implementation Entity and the Financial Conduct Authority approves third parties.

By contrast, TD’s proposal would see a customer engage with a third party provider or app, which would then — usually via an aggregator — send a request to the bank for the consumer data. The bank would ask the customer if they consent to sharing the data, Khalfan said. If so, the data would be sent through industry-standardized APIs.

See:  Open Banking Era Starts in Australia (Feb 2020)

Khalfan’s concerns appear to echo feedback the government received in meetings with around 200 stakeholders earlier this year, as detailed in documents obtained by the Post following an access-to-information request.

“An area of consensus among stakeholders is that elements of open banking are already happening in the market and there needs to be consideration of how this activity is managed,”

says a memo sent to an associate deputy finance minister ahead of a March meeting with the lead of Australia’s open banking review.

“Stakeholders are not of the view that the status quo (redacted) is tenable or desirable,” it says.

 

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NCFA Jan 2018 resize - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement 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 Newsletter subscribe600 - The UK Provides Legal Certainty For Smart Contracts And Cryptoassets In Its Landmark Legal Statement

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