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Growth in Canadian FinTechs Having Impact on Canada’s Banking Landscape

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TransUnion Canada | Release | Feb 24, 2020

transunion fintech report on lending trends - Growth in Canadian FinTechs Having Impact on Canada's Banking LandscapeNew TransUnion study considers common myths around the profile of FinTech borrowers in Canada

  • FinTechs are not just attracting younger Canadians: 46% of FinTech borrowers are over the age of 40
  • Short-term loans are not the primary focus for FinTechs: 88% of FinTech loan terms are between 13-60 months
  • FinTechs are not just catering to 'underbanked': 51% of FinTech consumers have 3 or more existing credit products

TORONTO, Feb. 24, 2020 /CNW/ - A new study from TransUnion explores the evolving trends around the FinTech lender landscape in Canada. The research study analyzed over 21 million non-mortgage credit products originated in Canada from Q1 2017 to Q2 2018. The study's findings reveal key insights that appear to debunk commonly held beliefs around the profile of FinTech borrowers in Canada, as well as the ways that FinTech lenders are employing and embracing different credit strategies compared to some of the more traditional lenders.

See:  Robocop vs. Terminator in Fintech; Comparing DeFi originations to Digital Lenders in the early years

The study defined FinTech lenders as those who rely on advanced computer algorithms or other technology as their primary platform to enable, support or improve banking and financial services, and do not have an established physical network of branches or stores. Typically, these are start-ups or emerging lenders that have an emphasis on an agile and sophisticated use of technology to deliver a fast and unique lending experience, or use analytics to penetrate typically underserved markets.

"The explosive growth of the FinTech industry has already had a significant disruptive impact on the traditional consumer lending landscape, and has fueled a race for digital capability amongst banks and FinTechs," observed Matt Fabian, director of financial services research and consulting for TransUnion Canada of Canada, Inc. "It is apparent that FinTechs attract Canadian consumers across different ages and levels of credit experience by providing a differentiated, seamless consumer experience. Looking to the future, this creates both competitive challenges and opportunities for increased partnerships between traditional banks and FinTech firms."

Key findings include:

FinTechs appeal to both older and younger generations.

  • Contrary to popular belief, FinTech borrowers are not exclusively younger, while many FinTech borrowers are more digitally savvy Millennials and Gen Z consumers, FinTech consumers have a diverse age demographic.
  • Specifically, nearly half (46%) of Canada's FinTech consumers are over the age of 40, compared to 53% for consumers with personal loans from traditional banks.
  • This suggests that Gen X and older consumers are almost equally attracted to what FinTechs offer, challenging the notion that older age groups are more likely to only engage in traditional lender relationships.

See:  The 5 Debates That Will Shape Fintech In The 2020s

FinTechs cater to all types of Canadian consumers – versus focused on the 'unbanked' or 'underbanked'.

  • While FinTech lenders are sometimes perceived to cater largely to the unbanked or underbanked, the study reveals that many FinTech consumers have multiple existing sources of credit elsewhere.
  • More than half (51%) of FinTech consumers have three or more existing credit products with traditional lenders at the time they originate a FinTech personal loan.
  • This mix of other products held includes credit cards, lines of credit, installment loans and home loans.

FinTech lending extends across the full spectrum of loan terms.

  • FinTechs are comfortable (and actively) lending across the full spectrum of personal loan terms; contrary to the common perception that they are primarily focused on offering short-term loans less than 12 months in duration.
    • Around 88% of FinTech-issued personal loans have a term longer than 12 months, versus 68% for personal loans issued by banks. In fact, banks issue a far higher percentage of personal loans with terms of 12 months or less (32%) compared to FinTechs (12%).

FinTechs are willing to embrace increased risk compared to traditional lenders – with associated higher delinquency rates

  • The study findings show that FinTech portfolios are generally comprised of riskier consumers than other installment loan lenders (those consumers with lower credit scores), with a significantly higher consumer base within the subprime space. This appears to be an intentional strategy, as these lenders seek to satisfy market demand among consumers who may not have access to traditional lending sources.
  • Over the course of the study period, 65% of FinTech installment loans were originated to consumers in the subprime segment (TransUnion CreditVision risk scores below 640). In contrast, traditional banks and lenders issue more than half of their personal loans to borrowers with prime and better risk scores (TransUnion CreditVision risk scores 720 and above).
  • FinTechs also have higher delinquency rates across all risk tiers, which they compensate for by charging generally higher interest rates for personal loans. In the subprime segment, FinTechs have delinquency rates that are on average between 100-500 basis points higher than traditional banks and traditional lenders, but price for that risk with interest rates ranging from 20% to 30% within this segment.

See:  Fintech’s next decade will look radically different

"The ability to be agile, potentially with lower overhead compared to more traditional lenders, may enable FinTechs to operate in higher-risk segments and carry higher delinquencies. But it is still critical to have a strong credit risk framework, and a detailed understanding of portfolio risk," said Fabian.

"FinTech consumer profiles span diverse demographics and loan terms. As the industry continues to evolve, there are some key factors that will contribute to FinTech growth, including technology advancement, access to capital – especially at a lower cost –  potential shifts in regulations, and an increasing percentage of Generation Z and Millennials in the population. But there is no doubt that we will likely continue to see growth and evolving competitive dynamics in the FinTech space in Canada."

While the industry is still relatively new, with 61% of FinTech start-ups founded between 2012-2017, FinTechs now represents over 25% of the PayTech market.

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NCFA Jan 2018 resize - Growth in Canadian FinTechs Having Impact on Canada's Banking Landscape 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 LendingClub’s Acquisition Of Radius Bank Is A Smart Deal

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Forbes | Ron Shevlin | Feb 21, 2020

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LendingClub, one of the nation’s first peer-to-peer lenders (oops! I mean, “marketplace” lenders—real ”peer to peer” lending lasted all of about a month), announced it plans to acquire Radius Bank, a relatively small Boston-based bank, unknown to most people outside of the industry (and within, for that matter).

The press release announcing the pending deal contained the usual platitudes from the acquiring CEO:

“This is a transformational transaction that allows us to reimagine banking in a way that is free from legacy practices and systems. We will create a category-defining experience for our members that will dramatically enhance the resilience and earnings trajectory of our business.”

Despite the buzzword-laden proclamation, this acquisition makes a lot of sense for both parties for reasons that go beyond what many observers have reported on.

The Short-Term Benefits Aren’t About Radius Bank

Much of the discussion about the deal has focused on the obvious and shorter-term benefits of the acquisition, including a more stable source of funding and a $40 million reduction in bank fees and funding costs, both of which will help boost the spread Lending Club earns on the loans it keeps on its balance sheet.

If that was the only impetus for the acquisition, however, LendingClub could have acquired WebBank, the current issuer of loans through LendingClub’s platform.

Or it could have acquired any number of banks with a bank charter, no?

Radius Bank is a Strategic Acquisition

Lending Club went after Radius for a higher purpose: Its APIs and banking-as-a-service business.

See: 

Lending Club’s long-term vision is to become what it calls a “marketplace” bank. In my terminology, that means pursuing a platform strategy: attracting both buyers and sellers (borrowers/savers and lenders/investors) and providing transaction integration and processing capabilities.

Amazon is a great example of a successful platform strategy: It makes money by serving both buyers and sellers, and in fact, there doesn’t seem to be any limit to how much Amazon can make by increasing the services (e.g., AWS) it provides to the merchant side of the coin.

It’s the same with LendingClub.

Yes, LendingClub wants (needs) to expand beyond being just a monoline lending provider. It could have achieved that goal by acquiring any bank willing to sell itself to the company.

With Radius Bank’s APIs—and fintech relationships—LendingClub takes a big step forward towards becoming a multi-line platform, and not just a multi-line bank.

Many banks are falling over themselves trying to partner with fintech companies. In its latest survey, Cornerstone Advisors found that 70% of financial institutions consider fintech partnerships to be an important aspect of their 2020 strategies.

For better or worse, many are focusing their partnership efforts on digital account opening instead of product and service expansion.

LendingClub’s acquisition of Radius leap frogs a lot of those institutions.

See:  Citibank to Save $600 Million in 2020 Through Digital Investments

Through its banking-as-a-service offering, Radius brings relationships and integration with firms like Brex, MaxMyInterest, Aspiration, NerdWallet, Stackin’, FutureFuel, and NorthOne.

Any bank can provide a charter. Not any bank can provide those relationships. And not any bank can bring to the table the APIs that Radius has already developed. With the exception of the largest banks, most banks are playing catch up on the API front.

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NCFA Jan 2018 resize - Growth in Canadian FinTechs Having Impact on Canada's Banking Landscape 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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N26’s UK Customers Scramble After Bank’s Exit

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Pymnts | , 2020

N26 and Brexit - Growth in Canadian FinTechs Having Impact on Canada's Banking LandscapeOnline bank N26‘s decision to exit the U.K. has customers feeling left behind, CNBC reported.

The Berlin-based digital bank said it would not be able to operate in the country anymore in the wake of Brexit, as it will no longer have a license to do business there. The startup will shutter all of its U.K. locations on April 15.

N26 made its entry into the U.K. in October of 2018 — more than two years after the U.K. made its decision to leave the European Union, but six months before Brexit was officially planned.

However, the fact that N26 used Brexit in its reasoning to leave the U.K. hasn’t sat well with some.

One customer in London told CNBC that he was “outraged” that the company had used Brexit as an excuse, calling it “fake news.” He said N26 needed “an excuse” for investors, and had found in Brexit a convenient scapegoat so that it wasn’t N26’s own failure.

Others said they were disappointed in the closure, enjoying the extra bonuses that come with accounts.

See:  Majority of London FinTechs not prepared for no-deal Brexit

N26 is one among a new breed of branchless banks, looking to gain favor with consumers through a parade of slick marketing and eye-catching slogans. The entry in Britain pitted N26 against challengers like Monzo and Revolut, which were trying similar things.

The competitors, meanwhile, have pounced on the exit of N26 as a way to attract more customers to their own brands.

Starling Bank, posted in a Tweet on Monday (Feb. 17), “Just found out your bank’s making a swift Brexit? Don’t worry — we’re here to stay.”

Monese tweeted, “If you’re in need of a Brexit-proof GBP account, we can be your perfect match.”

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NCFA Jan 2018 resize - Growth in Canadian FinTechs Having Impact on Canada's Banking Landscape 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 blockchain regulations will change in 2020

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TechTalks | Andrey Sergeenkov | Feb 12, 2020

blockchains - Growth in Canadian FinTechs Having Impact on Canada's Banking LandscapeAs 2018 drew to a close, crypto skeptics were ready to write obituaries after the devastating bear market that year. Talk of blockchain and cryptocurrency demise was rife among seasoned analysts. Just over twelve months later, the industry has shown remarkable resilience to rebound back.

Regulators are a segment of stakeholders who seem to be appreciating that crypto is here to stay, with Federal agencies in the US and Chinese authorities praising the potential of this technology in their respective countries’ digital future.

Blockchain technology has gained independent credibility over and above its application in cryptocurrency. The opportunities are endless as the emerging enterprise sector continues to draw plaudits. So far, this technology has grown in spite of regulatory infrastructure rather than because of it. A suitable regulatory climate is essential for widespread adoption.

See:  The Decade in Blockchain — 2010 to 2020 in Review

This is how Jason Lee, Vice President of NEM Foundation, describes the industry’s evolution:

“2017 was the year of the blockchain craze. In 2018, we hit the brakes towards the end of the year. For 2019 and the start of 2020, Don Tapscott at the World Economic Forum Annual Meeting reports says that the ‘blockchain revolution ground to a halt.’ This is because not all initiatives are going past the proof of concept stage just as blockchain regulation shapes progressively as it moves forward in the right direction. In 2020, real use case projects are starting to shape up and will play a crucial role.”

Therefore, industry leaders and enthusiasts at large are eagerly following regulator sentiment. Themes like consumer data protection and harnessing tech will be constant in these discussions. What is going to be the major themes around blockchain regulation in 2020?

Privacy and anonymity on enterprise blockchain

Anonymity and privacy were defining aspects of the decentralized blockchain projects. This sector went mostly unchecked until blockchain platforms became increasingly popular.

Last year, the release of the Libra project whitepaper by Facebook brought these issues to the fore.  Specifically, concerns about blockchain enterprises, including cloud services and handling customer data gave regulators an opening to legislate on such platforms. Blockchain enterprise will continue to draw unprecedented legislative scrutiny in 2020.

In late 2018, the US Department of Homeland Security started scrutinizing privacy tokens that shield user information. Similarly, G20 countries issued regulations in June 2019 for exchanges to comply with “anti-money laundering” (AML) and “know your customer” (KYC) requirements. In February 2019, the Cyberspace Administration of China (CAC) implemented additional guidelines specifically for blockchain companies.

See:  Blockchain Fundraising Can Benefit African Tech Startups

Chinese regulators claimed that these measures are aimed at settings the standard for blockchain development in the country. In the US, the Blockchain Promotion Act of 2019 focuses on finding potential applications for the distributed ledger and opportunities through which government agencies can explore and incorporate the technology. 2020 is sure to bring more scrutiny and legislation on this premise.

Crypto regulation over perceived threats to national currencies

Many countries initially took a position of ignorance about cryptocurrencies. However, as bitcoin took a larger-than-life profile after the monster rally in 2017, this position was no longer tenable. The only reason that blockchain experienced the crypto winter was due to being unregulated rather than the breakdown by governments.

The unchecked printing of money before and after the financial crisis of 2008 by the Central Bank led to some people becoming disillusioned about centralized financial systems. Bitcoin and other cryptocurrencies offered an alternative to these people. As with any power structure, the entities in charge will not relinquish power with ease.

China took drastic measures against trading cryptocurrencies in 2017. Last year, India went even further and completely banned non-sovereign cryptocurrencies. The fundamental aspect of decentralization is an existential threat to the ability of major central banks to control monetary policy.

See:  Visa R&D Arm Develops a Blockchain System That Could Replace Financial Data Aggregators

Even without expressly stating this position, the Securities and Exchange Commission in the U.S. decided to classify coins like Telegram Open Network (TON) as securities to regulate their rise. Regulators in the U.S. see blockchain currencies and commerce as an issue that needs to be addressed.

As 2020 begins, some countries are looking at digital currencies as an opportunity rather than a threat. China astonished the world last year when the People’s Bank of China announced that it was researching on a national digital currency. Such a development could trigger an arms race of sorts between nations that want to be the first to innovate in this space.

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NCFA Jan 2018 resize - Growth in Canadian FinTechs Having Impact on Canada's Banking Landscape 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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Can Fintech Make the World More Inclusive?

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Wharton Knowledge | Kalin Anev Janse | Oct 10, 2019

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Can Fintech Make the World More Inclusive?

The potential gains for the start-ups driving fintech (financial technology) are obvious. But the possibilities for extending financial services to the underserved – or those without services at all – are already being realized. With proper oversight and regulation even more is possible, notes this opinion piece by Kalin Anev Janse, secretary general and a member of the management board of the European Stability Mechanism (ESM), the Eurozone’s lender of last resort, and Gong Cheng, senior economist and policy strategist at the ESM. “It is thus essential for researchers and technical experts to shed light on the considerable social impact and promise fintech is offering and to find solutions to contain potential risks.”

Financial inclusion – making banking services accessible and affordable to everyone globally – has been a buzzword for the last few years. Technology-based financial services have propelled innovation to “bank the unbanked” making daily financial operations accessible and user friendly for almost everyone – especially people who had no access to banks before.

Emerging markets like China, Kenya and Indonesia are leapfrogging the developed world. So – how is fintech making the world more inclusive?

See:  Fintech As a Pathway to Financial Inclusion? The Case of China

On Top of the Global Agenda: Financial Inclusion

Financial inclusion has been a recurring theme of financial sector reforms that the IMF and World Bank have advocated in financial assistance and macroeconomic consultations. Financial inclusion is especially important in emerging markets, like Asia, Africa and South America. It is a multifaceted concept that encourages access to formal financial services at affordable costs that can boost an economy’s overall growth and welfare. Often those targeted – families and small- and mid-sized companies – have either no or only very limited access to financial services.

To speed financial inclusion, the World Bank and the IMF launched the Bali Fintech Agenda in October 2018 during their annual meetings. The Agenda comprises 12 high-level principles to guide member states in elaborating appropriate policies to harness the benefits of what fintech can offer to bank the unbanked while mitigating any inherent risks. In her agenda-launching speech, IMF managing director Christine Lagarde estimated that 1.7 billion adults worldwide are currently deprived of access to financial services and fintech’s recognised comparative advantages is filling in the gap that traditional financial institutions could not.

Financial innovation propelled by fintech plays a key role in bolstering financial inclusion and makes simple financial instruments accessible. Two examples highlight the power and benefits of fintech, its role in enabling access to credit for small- and medium-sized enterprises (SMEs) as well as in reducing households’ financial transaction costs.

Fintech Provides Trade Credit to SMEs

In emerging markets, we often see economic distortions created by domestic financial market underdevelopment, especially credit market frictions. This is more prominent in fast-growing emerging market economies, such as China, where certain types of firms – mostly private – face credit constraint in the formal financial sector because of exorbitantly high costs or a credit rationing bias towards larger, state-owned enterprises. Small businesses, therefore, find it difficult to access trade credit, which plays an essential role in businesses’ daily operations and represents a large proportion of all trade transactions. The trade credit market has tightened even further since the global financial crisis, given that provision is falling in emerging markets.

See:  Fintech is Driving Financial Inclusion

In recent years, fintech companies have played an important role in complementing the formal banking sector and providing trade credit to small firms. Chinese mobile and online payment platform Alipay, for example, has since 2006 provided credit to vendors operating on the Chinese e- commerce platform, Alibaba. Alipay, and subsequently Ant Financial, developed an algorithm-based internal rating system taking data from vendors’ real-time transactions on commercial platforms, such as the Chinese online shopping website Taobao, to provide credit facilities.

Three key features show how Alipay/Ant Financial credit to SMEs helps to alleviate credit market frictions in China. First, using the data and information Alibaba has on its 16 million merchants, Ant Financial reduces information asymmetry between itself and potential borrowers, allowing it to extend credit to firms that traditional banks will not help due to information scarcity. This is especially important for start-ups, because they are unable to show the long record of business operations needed to be eligible for bank credit. For Ant Financial as a creditor, the information available enables a more accurate risk pricing, as it can tailor financial terms to the risk profiles of individual firms.

Fintech Reduces Transaction Costs for e-Payment

Thanks to e-payment and transfer services, consumers see fintech-supplied financial services as a way to reduce transaction costs. Transferring earnings home in a safe, quick and cost-efficient way, for example, is a fundamental concern for individuals working abroad. IMF statistics show remittances are very large, especially in low-income countries, and often are costly – notably for smaller remittances, such as those under $200.

See:

By allowing quicker and less expensive transfers, fintech companies have provided concrete windfalls for those with the greatest need and are helping us move towards achieving the United Nations’ Sustainable Development Goals. Alipay in China is just one example. Other developing countries have pioneers, too. Vodafone launched M-PESA in Kenya in 2007. Kenyans use M-PESA for salary payment and wage transfer. Studies show that digitizing transfer payments significantly reduced travel and wait times, thereby raising the income of the rural Kenyan households using M-PESA by 5%-30%.

The rapid expansion of financial digitization significantly lowered the costs of access to finance, especially for the lower-income cohort of the population. In this area, fintech is really “banking” the previously unbanked. Although they may have no bank account, they can still benefit from financial products as long as they have a mobile phone. It gives access to micro-loans and helps social mobility. Reduced transaction costs have also made access to other financial services, such as investment and financial risk management options, more affordable, making households more resilient to financial shocks and improving the country’s overall financial literacy.

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BIS Working Report:  On fintech and financial inclusion

BIS | Thomas Philippon | Feb 12, 2020

Focus

Innovation in the financial sector (fintech) could disrupt existing business structures, change how existing firms create and deliver products and services, or widen access to financial services. Yet fintech also poses significant challenges to privacy, regulation and law-enforcement. It could also worsen some forms of discrimination. A key question is whether the potential efficiency gains that fintech could bring will be shared equally or lead to a rise in inequality.

See:  Singapore Fintech Week: Data, technology and policy coordination – BIS Speech

Contribution

This paper first investigates whether the rise of fintech has pushed down the unit cost of financial intermediation. If financial innovation over the last years has improved efficiency in the financial sector, this should manifest itself in lower costs. In a second step, the paper asks whether the potential gains from fintech will have distributional consequences. Will fintech increase access to financial services for previously unbanked or under-banked individuals? Or will it increase inequality by favouring some groups more than others? The paper also investigates the role of machine learning and big data.

Findings

The paper shows that the unit cost of financial intermediation has fallen since the Great Financial Crisis, concluding that fintech has made the financial sector more efficient. It then develops a simple model of robo-advising, showing that fintech's net effect on welfare crucially depends on the type and size of fixed costs it entails. Even if there is an overall increase in participation, various income groups might be affected differently. Finally, the author analyses the impact of big data on discrimination. Based on a model that features a new technology to analyse non-traditional consumer data, the author concludes that big data and machine learning will probably reduce human biases against minorities, but at the same time erode the effectiveness of existing regulations.

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Download:  BIS Working Paper on Fintech and Financial Inclusion -> 19pg PDF

 


NCFA Jan 2018 resize - Growth in Canadian FinTechs Having Impact on Canada's Banking Landscape 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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These 4 trends will define the future of development, Achim Steiner says

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DevEx | William Worley | Feb 11, 2020

Achim Steiner UNDP - Growth in Canadian FinTechs Having Impact on Canada's Banking LandscapeOXFORD, England — The head of the United Nations Development Programme has outlined four key factors he says will define the future of development.

In a speech at the Oxford Forum for International Development, Achim Steiner — the UNDP administrator who previously led the U.N. Environment Programme and the U.N. Office at Nairobi — highlighted how rapid global changes will affect development and should be embraced by professionals in the sector.

e argued that the Sustainable Development Goals already encapsulate these challenges, describing them as a “manifestation of wisdom about the great risks of the 21st century.”

1. Inequality

Steiner said the economic paradigm of the last century, while imperfect, was “incredibly successful.”

See:  Social equity must be central to urban tech innovations

“Deficiencies should not mask the story of development success … We live in a world today that I think nobody in the 1850s would wish to trade in terms of possibilities,” he said. “But the era of the 20th century is over now — that period where we thought that science and technology allows us to exploit planet Earth … to create extraordinary wealth … but at what price?”

Steiner said recent mass unrest around the world had different political expressions but ultimately had “a lot” to do with unfairness, inequality, and uncertainty about the future.

“We are now on the verge of shifting into an economic paradigm that is not about communism or capitalism; it is about recalibrating equity and sustainability into a development paradigm,” he said. “Trickle-down” economics is “over,” he added.

2. Decarbonization

Reducing and eliminating carbon emissions across energy supplies — once seen as the preserve of niche environmental campaigners — is “not a hypothetical anymore,” Steiner said.

“It is now a fact, and it will happen in the next 30 to 40 years, and it will change everything,” he continued. “This is fundamental to what happens next in every aspect of development: transport, energy, agriculture, urbanization, trade.  This is not the end of the future — it's just the beginning of the next future,” he said.”

Steiner stressed that some economists view decarbonization as a great growth opportunity.

See:  Blockchain Technology and the UN: The Sustainable Development Goals

“This is not the end of the future — it's just the beginning of the next future,” he said.

3. The Fourth Industrial Revolution

This term, coined by World Economic Forum founder Klaus Schwab, describes the rise of digital, artificial intelligence, and other technologies and how they impact the way we live. These developments, Steiner said, will “change everything.”

“This is not just a matter of technology, but also governance,” he said.

As an example, Steiner cited the potential use of digital finance platforms to enable greater citizen participation in monetary systems.

“Our financial system has become a bizarre rationale in which our money, handed to institutions, suddenly becomes institutions’ money that has to be invested in ways most of us don’t agree with anymore,” he said.

“It is high time, with digital finance, that we reoccupy that space. Citizens [will] become far more able to track what their money is doing and what it shouldn’t be doing.”

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NCFA Jan 2018 resize - Growth in Canadian FinTechs Having Impact on Canada's Banking Landscape 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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Blockchain Fundraising Can Benefit African Tech Startups

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Forbes | Oluwaseun Adeyanju | Feb 10, 2020

African startups - Growth in Canadian FinTechs Having Impact on Canada's Banking LandscapeAfrican startups raised a record $1.34 billion in venture capital in 2019, up from just under $200 million in 2015, according to WeeTracker, a media firm focused on the African entrepreneurship space. That’s about a 46.3% increase on a compound annual growth rate (CAGR) basis. WeeTracker estimates show that the total African venture funding had reached $725.6 million in 2018.

Despite the impressive growth rate, there are still huge funding gaps that the continent needs to fill and here’s why.

The larger portion of funds being raised by African startups comes from venture capital firms outside the continent. Given how the technology ecosystem in Africa is still in its nascent stage, coupled with how venture capital funds are typically directed toward growth, many early-stage startups on the continent still struggle to raise early-stage funding. And that’s because there aren’t sufficient local angel investors to fill this gap.

See:  EU rules to boost European crowdfunding, platforms agreed

For instance, in Nigeria, only about $1.5 million of the $133.5 million that the country attracted in 2018 came from the Lagos Angel Network, Africa’s largest angel network, according to online business news publication Quartz. Nigeria attracts the majority of African venture capital — nearly 50% in 2019.

The consensus within the African angel investing community during the 2018 Africa Early Stage Investor Summit is that the lack of clear exit opportunities is a major contributory factor.

“It is easy to invest money in Africa right now, but it is hard to make money in investing here. The key is to be exit centric — we only invest in entrepreneurs who are focusing on building sustainable businesses that can exit,” Ben White, the CEO of Venture Capital for Africa (VC4A) said. “This conversation succinctly captures the challenges venture capital faces in Africa and why we need to keep working to strengthen and support the entire African venture ecosystem.”

How blockchain can solve the early-stage liquidity problem

Traditionally, investors in startups are able to exit and make money from their investments through three major avenues including IPOs, acquisitions and mergers. Each of these typically requires that a company achieves a reasonable level of growth. For a technology ecosystem that’s still at its nascent stage like Africa, reaching this level of growth can take a longer time frame than in matured markets.

The implication of the longer time frame here is that convincing investors and high net worth individuals (HNIs) to inject funds into the African startup landscape can be tough. They already have access to more stable investment opportunities elsewhere. For instance, the Central Bank of Nigeria’s Open Markets Operations Bills returns about 15% per annum.

See:  Getting In Early: SEC Sees Growth In Equity Crowdfunding

One of the ways to encourage investors to inject money into startups in the early stages is to develop a liquid market.

“One of my key thesis is that if we have more secondary markets in Africa and that allows early-stage investors to get some kind of liquidity, we will be able to recycle funds within the ecosystem,” said Yele Bademosi, a Binance Labs director and founder of Nigeria-based angel investment firm Microtraction.

“However, the current infrastructure for capital markets across Africa doesn’t necessarily support this.”

Here’s where blockchain comes into play.

The distributed and trustless technology has powered a new method of fundraising that can be borderless. This is evident in the initial coin offering boom and subsequently the emergence of the security token market.

While ICO fundraising, for the most part, has sought to circumvent regulatory spotlight, the development of security tokens has been about redesigning the regulated capital markets to increase access and remove the inefficiencies that presently exists.

In Africa, blockchain can help increase market access for early-stage companies for a start.

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

“There is an opportunity to create our own funding infrastructure using blockchain to issue security tokens or hybrid tokens,” Bademosi added. “We will need to define our own guidelines and regulations around that, but what gets me excited about blockchain is that it can allow us to rethink capital formation and capital markets from the ground up in a way that could be trustless.”

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NCFA Jan 2018 resize - Growth in Canadian FinTechs Having Impact on Canada's Banking Landscape 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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