Category Archives: Fintech Opinions

News on China cryptocurrency and more reforms

Schulte Research | Paul Shulte | Aug 21, 2019

China coin crypto - News on China cryptocurrency and more reformsChina is barreling forward on reforms and rolling out the crypto currency. It will be the first central bank to do so.  This will give added momentum to Libra.

Libra could become a new anchor market for global IPOs. Take this seriously. Join if you can.  I’m pretty sure I’m right that it has backing from the very top of the US govt.

1. Cryptocurrency — The China coin is due to be rolled out in November. I hear that the distribution of the coin will be limited to 7 players:

  • The big banks: CCB, ICBC, BOC, ABC.
  • Alibaba and Tencent.   Positive momentum,,,
  • Union Pay.   Interesting — to keep this alive.

All others will be secondary.  The PBOC head did on SUnday make an explicit reference to Libra. As I suspected, China rightly sees Libra as a challenge to China’s early commanding lead in e commerce and payments in all of Asia and through the Silk Road. It clearly is.   Interestingly, HSBC and Stan Chart are cut out. No foreign banks in the consortium.    No foreign firms in Libra (except, weirdly,  Mercato Libra from Arge).

2. China yesterday doubled the size of the free trade zone in Shanghai and has allowed partial capital account convertibility in Shanghai.  This is big and a challenge to HK.  It will also drop duties in Shanghai.

3. ALibaba has cancelled the secondary listing in HK until further notice due to the instability. Big negative for HK.

4. Singapore has suspended all university exchange programs between Singapore and Hong Kong for this year due to the instability.  SO, people are stuck in Singapore to finish programs.

Check out Paul Schulte's new book: AI & Quantum Computing for Finance & Insurance: PRC VS US. https://www.worldscientific.com/worldscibooks/10.1142/11371

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NCFA Jan 2018 resize - News on China cryptocurrency and more reforms 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 Global Currency War Has Begun. China’s Yuan Breaks the 7 to $1 Band. Why is The Dollar Rising?

Global Research | Dr. Jack Rasmus | Aug 5, 2019

US vs China currency war - News on China cryptocurrency and more reformsOver this weekend, China’s Yuan currency broke out of its band and devalued to more than 7 to $1. At the same time China announced it would not purchase more US agricultural goods. The Trump-US Neocon trade strategy has just imploded. As this writer has been predicting, the threshold has now been passed, from a tariff-trade war to a broader economic war between the US and China where other tactics and measures are now being implemented.

Trump will no doubt declare that China is manipulating its currency. A devaluation of the Yuan has the effect of negating Trump tariffs imposed on China. But China isn’t manipulating its currency. Manipulation is defined as entering global money markets to buy and/or sell one’s currency in exchange for dollars (the global trading currency) in order to influence the price (exchange rate) of one’s currency in relation to the dollar. But China is not doing that, so it’s not manipulating. What’s happening is the US dollar is rising in value (or expected to) and that rise in effect lowers the value of the Yuan. The same is happening to other currencies as well,as the dollar rises. Why is the dollar then rising? There’s a global stampede to safety and that means buying US Treasuries–which are now in freefall in terms of interest rates (and escalating in terms of price). Prices from one year or even less, to 10 and 30 year Treasuries are accelerating. But to buy Treasuries, foreign investors must sell their currencies and buy dollars before buying Treasuries. That escalating demand for dollars is what drives up the value of the dollar, which in turn drives down the value–i.e. devalues-the Yuan in relation to the dollar.

See:  Bitcoin price surge may not be trade war but whales

In other words, the slowing global economy which is being driven by the Trump trade wars is what is causing the flight to the dollar and to the safe haven of US Treasuries. Trump’s policies are at the heart of the global slowdown (already in progress due to fundamental forces stalling investment and growth). That slowdown is what’s driving the dollar and in turn lowering the Yuan. Trump policies are ‘manipulating’ the Yuan.

China is of course allowing the devaluation to occur. Previously, it was entering money markets to buy Yuan in order to keep it from devaluing. Now it’s just allowing the process to occur. This is China’s response to Trump’s imposing an additional 10% tariffs on $300 billion of China imports last week. It signals that the ‘trade’ war (now becoming an economic war) has moved beyond tariffs.

With Trump’s recent actions, and China’s now response, the potential for a trade agreement in 2019 looks even more unlikely than before.

What will Trump now do? If he remains true to his past behavior when bargaining partners stand up to him, he’ll try to find a way to ‘up the ante’ as they say, and take additional action. He could step up his attack on Huawei and on other China corporations’ partnerships and investments in the US. China will in turn impose restrictions on US corporations doing business in China (i.e. more licensing, more customs inspections, and imposing more non-tariff barriers). It could unleash an anti-American goods boycott in China. It could reduce the export supply of critical ‘rare earths’ it has. It could suspend its previous decision to allow US corporations doing business in China to have a 51% ownership of those operations. And then it has its ‘nuclear options’, as they say: to cut back sharply or cease purchasing US Treasuries and thus recycling US dollars back to the US. Should that happen, the US government would have to borrow more from other sources to offset its annual budget deficit. That would raise the national debt annually even faster than it has been growing–now more than $22 trillion and projected now to rise more than $1 trillion this year. Should recession occur, the deficits and debt could rise as much as $1.7 trillion, according to the US Congressional Budget Office, CBO, research arm.

See:  Central banks should consider using digital currencies: China think tank

But with demand for dollars to buy Treasuries surging, the US Treasury and Fed would have more difficulty selling Treasuries, equal to China’s decline of purchases, given that Treasury prices are escalating and interest rates falling.

In short, the US-China trade war, the slowing global economy (now about to spill over to the US economy), the US budget deficit, and Fed interest rates are all inter-related. Trump policies are creating economic havoc on all these fronts.

What are some of the likely responses therefore to the China responses to Trump’s hardball strategy-driven by US neocons since May?

The neocons will have attained their goal, which has always been to scuttle negotiations with China unless the latter capitulated on the technology issue. Behind the tariffs, behind the trade war, has always been the war over next generation technologies (cybersecurity, 5G, and AI). It’s now clear that China will not capitulate, so no trade deal is possible so long as the US neocons remain in control of the trade negotiations which, at this point, they still do. The neocons will now use China’s strong response to Trump’s latest tariffs to convince Trump to take an even harder line against China corporations in the US and abroad with obsequious US allies like the UK and Canada.

Trump’s campaign re-election staff will see this as an opportunity to start blaming China for the slowing US economy. Themes of ‘China the currency manipulator’ and ‘China the source of US opioids’ may become the mantra from the White House.

US big business and multinational corporations will be further motivated to put pressure on Trump to go back to the negotiating table and settle. To date, however, they’ve been largely unsuccessful with influencing Trump and the trade negotiations. The Pentagon, military industrial complex, and US war industries have Trump’s ear and they’re shouting ‘technology capitulation’ or no deal’.

The US Farm sector will be in dire straits now. It’s almost certain that within the next six months Trump will have to provide them a third bailout, costing $20 billion or more. That will mean a total of $50 billion cost in farm subsidies due to the China-US trade war.

See:  Know the Difference between A Day Trade & Swing Trade Here

Globally, emerging market economies are likely to be big losers from the worsening trade relations between Trump and China. Their currencies will decline like the Yuan. But they have far fewer resources than China has to weather the crisis. Declining currency values in emerging market economies (EMEs) will mean more capital flight from their economies, seeking ‘safe haven’ in US Treasuries, in other currencies (Japan’s Yen as ‘carrying trade’), or in gold. That capital flight will slow their domestic investment. Their central banks will then raise interest rates to slow the flight, but that will slow their domestic economies further. The declining currencies will also mean rising import goods inflation and drive their domestic inflation levels higher, as their economies simultaneously slow. EMEs will face both more recession amidst rising inflation.

The China-US trade deterioration will also likely exacerbate inter-capitalist conflicts, as is already beginning to appear in the current South Korea-Japan trade dispute.

The worsening US-China situation will also have a negative effect on Europe’s economy, already about to slip into recession soon. More dependent on exports, especially Germany, the deterioration of global trade will accelerate Europe’s slowdown. The growing likelihood of a ‘hard’ Brexit coming at the same time in October, will almost certainly plunge Europe into another major recession as well, even before the US.

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NCFA Jan 2018 resize - News on China cryptocurrency and more reforms 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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Capital One data breach shows why it shouldn’t be a tech company that does banking

ComplianceX | The Compliance Exchange | Aug 8, 2019

digital rainfall - News on China cryptocurrency and more reformsOnce upon a time, any financial institution entrusted with your money and sensitive information would be housed in an imposing building made of granite. Its vault, often visible from the lobby, was formidable. And its managers would always be prudent, conservative types. Think Fidelity Fiduciary Bank, the fictional institution in the Mary Poppins movies, whose chairman in the original film sang: “Invest your tuppence wisely in the bank, safe and sound, soon that tuppence, safely invested in the bank, will compound.”

The idea was to convey a sense of security so that people would feel good about depositing their hard-earned cash and storing their prized possessions in safe deposit boxes. It spilled over to investors who saw bank stocks as prudent, though hardly spectacular, investments.

Nowadays, though, banks can’t do enough to shed the dowdy images, perhaps none more so than Virginia-based Capital One Financial Corp. During an earnings report this year, CEO Richard Fairbank all but said that he did not view his bank as, well, a bank:

“What we’re doing at Capital One is building a technology company that does banking, instead of a bank that just uses technology.”

Which brings us to the company’s announcement that a lone hacker — allegedly a troubled 33-year-old woman in Seattle — had managed to penetrate its firewall to acquire sensitive data on more than 100 million card customers and applicants.

The sad truth is that many modern banks don’t much care about people’s private information. The same apparently goes for companies that work with banks. On the same day the Capital One breach was reported, credit rating agency Equifax agreed to pay $700 million to settle a 2017 data breach.

Institutions might say they do care, but what really matters is how fast they can digitize everything about their company and migrate it to the cloud. By doing this they increase their profit margins and rates of growth, and become Wall Street darlings.

It’s not hard to see the financial pressure on banks. Since the Great Recession, their stock performance has been so-so, while tech companies have done extremely well. Anything that they could do to function more like tech companies that do finance, rather than vise versa, could make them hot properties.

See: 

Tech companies, however, are bad examples to follow. They collect data on people’s habits that allow advertisers, political operatives, hostile foreign powers and others to glean valuable insights. And banks hold even more sensitive information than do most tech outfits.

It’s one thing to be lax and self-interested with people’s web surfing histories or social media contacts. It’s quite another to be cavalier with account information, Social Security numbers and credit scores. These can be sold to people interested in taking out fraudulent loans, making fraudulent purchases and engaging in other forms of identity theft.

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NCFA Jan 2018 resize - News on China cryptocurrency and more reforms 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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Bitcoin is an Unstoppable Force

Daily Fintech  | | July 29, 2019

BTC quarterly price change - News on China cryptocurrency and more reforms

TLDR. During the recent House Committee on Financial Services’ hearing about Facebook’s, Libra, Rep. Patrick McHenry described Bitcoin as an unstoppable force:

“The world that Satoshi Nakamoto — author of the Bitcoin white paper — envisioned, and others are building, is an unstoppable force. We should not attempt to deter this innovation, and governments cannot stop this innovation, and those who have tried have already failed. So the question then becomes, what are American policymakers going to do to meet the challenges and the opportunities of this new world of innovation?”

Today, the entire market cap of digital assets was around $263 billion. Digital currency market caps, coin prices, and overall trade volumes have dropped since June. Looking at what’s been happening over the last few months, the question on everyone’s mind is how is this time different from the past, when Bitcoin reached highs and then came down crumbling.

Well, many things are different.

One of the things is that most of investing is not happening by retail investors, as it did in 2017. Google searches for “Bitcoin” are only 10% of what they were in 2017. FOMO by retail investors has not really kicked in yet. I can only imagine what will happen with the price of BTC when it does.  Source: google trends

Another thing that’s different is institutional demand for Bitcoin. Its soaring. Institutional interest is high, as booming derivatives trading on CME can attest. On June 17, open interest at CME Group saw 5,311 contracts totaling 26,555 BTC, approximately $246 million, dwarfing the volumes during the 2017 price peak. Fidelity, Bakkt, and TD Ameritrade all have plans to launch institutional trading products for BTC.

See:  Visa Makes Its Second Investment Into a Crypto Startup

More importantly, network fundamentals better than ever. Hash rate has increased, driving up security. Security is measured by how much it costs to mount a 51% attack on Bitcoin. The more hash rate, the more security. Over the past five years, Bitcoin’s hash power has increase 1000x, growing to 70 million trillion hashes per second.  Source: blockchain.com

The increase  of daily on-chain transactions and block size, indicate that more people are transacting. Both the on-chain transactions per day (line below) and average transaction value in USD (fill below) have risen significantly since last year.  Source: coinmetrics

The average BTC block size (fill below) has increased substantially, when you compare it to last year’s.

Best of all, average transaction fees have been relatively low, compared to those in 2017. Currently its around $1.92, despite increased block size and on-chain use. Scalability have kept fees substantially lower than late in 2017.

historical daily average bitcoin transaction fee - News on China cryptocurrency and more reforms

Source: bitcoinfees.info

All this is happening almost a year before Bitcoin’s block reward halving, which set for May 2020. Next May, mining rewards will be reduced from 12.5 to 6.25 BTC, which will reduce the number of Bitcoins minted when a block is verified, and the number of Bitcoins potentially sold to the market.

See:  A Global Review Of The Regulatory Considerations Relating To Crypto-Asset Trading Platforms

As Bitcoin’s supply gets tighter and tighter, its inflation rate drops. Unlike governments that can print fiat currencies and risk inflation, Bitcoin’s inflation rate by 2024, the will drop under to 1% and over time it will decrease toward zero.

Today, the number of Bitcoins in circulation is  17.8 million Bitcoins. There will only be 21 million Bitcoins ever issued and we will not reach that number for another 120 years. While we only have another 3.2 million Bitcoins that will ever be created, this limited supply does not restrict Bitcoin’s use as a medium of exchange. Each Bitcoin is equal to 100 million Satoshis. So, if Bitcoin’s price ever reached $1 million, one Satoshi would be worth just a penny.

And it not the only thing that’s happening.

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

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Fintech Investor Interview: Rob Antoniades, General Partner of Information Venture Partners

Information Venture Partners | Rob Antoniades | August 1, 2019

Information Venture Partners - News on China cryptocurrency and more reformsIntro: NCFA Fintech Confidential spoke with some of Canada’s experienced fintech investors, on their background, how Canada has evolved, what we should be doing, advice to fintech founders and what keeps them awake at night. This is part 4 of a 4 part series.

 

What is your background, and why did you start Information Venture Partners?

I have operated VC groups or offices for several banks including CIBC, BMO and then RBC.  My finance experience prior to running these VC operations, was heavily influenced by my time in equity capital markets and included equity research, sales and trading, investment and merchant banking.  These experiences have helped me tremendously as a Fintech investor.  I have lived some of the challenges that we are trying to solve. I co-founded (with David Unsworth) Information Venture Partners to fill a void in the market to fund companies developing technologies relevant for financial services.

 

How have you seen the Canadian fintech ecosystem change in the past 5 years? How has the Canadian fintech ecosystem evolved?

The Canadian Fintech ecosystem has changed tremendously over the past 5 years, for the better.  We are still transitioning as an industry, from very early stage, mostly first-time entrepreneurs 5 years ago or prior, to a more mature ecosystem with companies now generating 8 figures of revenue, some repeat entrepreneurs, and yet still a vibrant start-up ecosystem.

 

See:  Peer to Peer Lending: The Future of Fintech is Now

 

How can we strengthen and grow the Canadian fintech ecosystem?

The easiest way to build the ecosystem is to concentrate our efforts, of the industry (broadly defined), to supporting domestic Fintechs.  For example, our financial institutions spend billions on information technology and if concentrated on Canadian companies, would accelerate the development of the Canadian Fintech community.  Clearly, there would be no expectation that these institutions support disruptive and disintermediating Fintechs.

 

What advise would you give to Canadian fintechs competing globally?

Canadian Fintech companies need to understand that they can start in Canada, and if they have traction here, this momentum can be leveraged with FIs globally.  Our financial system and institutions are highly regarded globally. We can leverage that advantage.

However, in the absence of such a beachhead, there are thousands of customer opportunities around the world.  If your solution addresses a common pain point, you can just as easily build a company with lead customers from virtually any part of the world.  The entrepreneurs need to have that global mindset.

 

What keeps you awake at night?

Insomnia, joint pains and the recurring thought that we, as a nation, have not developed a unified strategy to develop our nation as a leading fintech hub, in the global context.

We as cities or regions, have generally not rallied around local champions, and we as a nation have not developed a coherent strategy.  Can it be done without a strategy? Absolutely, but it would be exponentially more powerful, quicker, and likely successful, if we had the financial and moral support of the ecosystem including all levels of government, industry, capital providers, advisors and entrepreneurs.

See:  Form Fintech & Holt Accelerator Create Map of Canadian FinTech Ecosystem

This strategy would build on local strengths, be minimally competitive between the centres, and not too difficult to execute if we had a champion, with capital and a willingness to make a few mistakes in order to accelerate the advancement of the cause.

Is there anything else you’d like to add?

There has never been a better time to be a Fintech entrepreneur in Canada, at least not in the 20+ years that I have been involved in the sector.

 

Rob Antoniades - News on China cryptocurrency and more reformsRobert Antoniades, General Partner and Co-Founder, Information Venture Partners

Robert Antoniades co-founded Information Venture Partners in 2014 with Dave Unsworth to work with startups in the field he knows best: financial services. Robert is interested in finding the disruptive ideas and entrepreneurs that believe new or better information is foundational to businesses. He believes that financial institutions need technology to service their customers, reduce cost and compete. Some of his main areas of interest include SaaS, next generation analytics including artificial intelligence and machine learning, capital markets, banking, wealth management and insurance technology.

More Canadian Fintech Investor Interviews in this 4 part series:

 


NCFA Jan 2018 resize - News on China cryptocurrency and more reforms 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 Case for Open Banking: Benefiting The Underserved

Progressa | Philipp Postrehovsky | July 31, 2019

Canadian open banking opportunity index - News on China cryptocurrency and more reforms

The Open Banking Opportunity

The consumer owns their financial data, not the bank.

B2B:  Fintech companies are able to securely access a consumer’s financial information without having to use third party services like Decision Logic.

B2C:  More options to shop and compare products, achieving the best products and rates. More educated and active financial service consumers.

 

Benefits

  • In the open banking era, you’re linked into alternative sources of value and not being driven by a closed ecosystem/closed banking monopoly which restricts the consumer to access resources they need.
  • Consumers can get the help they need in a streamlined manner when going through challenging financial times.
  • Banks can migrate risk to fintech companies and fintechs can provide more diverse financial services and advice to better serve the consumers.

See:  Open banking data tapped to speed up laundering checks

Risks & Mitigation

  • To ensure the protection of customer data, stringent compliance standards need be implemented along with regular compliance verification.
  • Any security breach or misuse of data could significantly harm the banks’ brand reputation and confidence they currently hold, which would instantly jeopardize the program.
  • The Government needs to play a leadership role to mandate and enforce standards in order to create a unified vision.

 

Some Inspiration: The Airline Industry

Travellers historically were required to contact incumbent airline companies directly in order to book or manage reservations, check availability, check in, and check arrival times. Modern standards in our airline industry placed the customers in control and enabled customers to decide what, when, where, and how they wished to consume airline services. This amounted to expanded and improved services for the would-be travellers. The modernization of the travel industry allowed for open functionality through secure APIs. This re-visioning of the industry enabled customers and third-party apps to perform most, if not all of the travel functions, without the need to ever contact the airline through slow, analogue channels.

 

Open Banking has Already Arrived Overseas

Open banking would position us as a global leader alongside the European Union and UK.  PSD2 (Payment Services Directive 2) arrived in Europe last January, forcing European banks’ to open up their API’s to fintech and other financial companies.

Our Stance

The democratization of personal banking data while maintaining the highest level of security means happier consumers.  Progressa fully supports open banking, but companies need to be prepared to take on the responsibility of it. Canada’s current ecosystem is not prepared for open banking and it will take several years to become a reality.

 

Philipp Postrehovsky - News on China cryptocurrency and more reformsPhilipp Postrehovsky – SVP Marketing, Progressa

Philipp is a product visionary, brand builder and an award-winning marketer who has been involved in the Vancouver tech scene for over 15 years. In 2013 he co-founded RentMoola, which continues to be one of North America's leading fintech companies with the mission to eliminate the rent cheque and modernize rent collection for the enterprise. Before that, he was a brand leader for Mogo Technologies and Wonga Canada and began his career at Electronic Arts. He is the founder of Grind For Kids, a program that raised over $1 million for BC Children’s Hospital Foundation and sits on the Board of one of BC’s top independent schools.

 

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NCFA Jan 2018 resize - News on China cryptocurrency and more reforms 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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Open banking in Canada – time to prepare for change

The Sixty Percent | Dan Smith, Editor | July 30, 2019

Open Banking a reality - News on China cryptocurrency and more reformsAs legislators tentatively prepare to adopt open banking, what are the opportunities and who are the beneficiaries of a new financial rulebook?

Open banking is on its way to Canada, representing a major opportunity for the region’s fintechs. In September 2018, the Department of Finance created a committee to advise on the pros and cons of opening up consumer financial services. Its report was published in January and, despite raising concerns around the privacy of consumers’ data, is largely receptive to the concept.

At iwoca, where we provide fast, flexible business loans for SMEs, open banking has been an important part of our growth. Canada’s fintechs should prepare for the opportunity.

 

So, what is open banking?

In Europe, the open banking regulation PSD2 (Revised Payment Service Directive) came into effect in 2015. This set of rules was designed to break the hegemony of the established European banks and welcome innovative new players to the industry, while making electronic payments safer and more secure.

Under this framework, in 2016 the UK forced its biggest banks (Allied Irish Bank, Bank of Ireland, Barclays, Danske Bank, HSBC, Lloyds, Nationwide, RBS and Santander) to allow fintech startups access to their customers’ data, when requested by the consumer.

 

What does this mean on the ground?

At iwoca open banking allows us to make better credit decisions for the benefit of our customers. We can now access several years of an applicant’s financial statements direct from their bank, and as a result make highly accurate credit decisions.

Elsewhere in the UK, newcomer banks, such as Monzo and Starling are thriving by offering slick apps that help people manage their money more easily. Financial planning platform Finimize is providing millenials with a low-cost alternative to a financial advisor. Investment platform Nutmeg is democratising wealth management, helping people invest with as little as £100.

For Canadian firms looking to benefit from any forthcoming rule changes, there are plenty of areas to explore. With greater access to transaction and statement data, fintechs have more information about their customers. This will make easier for them to offer tailored products for individual customers, manage risk with greater accuracy, identify customers to onboard, offer money management solutions, and collaborate with other players in the industry.

 

A word of warning

But that’s not to say the introduction of open banking will result in success for all of the industry’s players. Much of the opportunities available to tech firms are also available to incumbent banks, which are well respected by the Canadian public. The established giants have the advantage of strong brands and significant resources to throw at developing new tools and services. Taking them on won’t be easy.

See:  Open Banking: What’s Really at Stake

In addition, any legislation would likely involve the loosening of red tape in some areas and tightening in others. Fintechs must therefore innovate with care. People’s money and financial data is a sensitive area, so accounting errors, data breaches and other lapses of trust can have a major impact on a fledgling company’s reputation.

Consumers will not stand by firms who are seen as irresponsible with their financial records.

 

What’s the score elsewhere? 

Open banking is being roll-out around the world, with several other markets poised to implement it in some form. Hong Kong, Japan, Israel, Australia, Mexico and New Zealand are all researching the area, conducting pilot schemes and drafting potential rules to implement in coming years.

It’s an exciting time to be in financial technology, with amazing opportunities to innovate and build new products. At iwoca we aim to keep our customers at the centre of everything we do. Afterall, success in the open banking landscape depends on providing a valuable, high quality service – it’s what the initiative was designed to do.

Read more from iwoca at The Sixty Percent


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

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NCFA Fintech Confidential Issue 2 FINAL COVER - News on China cryptocurrency and more reforms