Category Archives: Innovation and Resources

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

BIS | Agustín Carstens | Nov 14, 2019

BIS Agustín Carstens - Singapore Fintech Week:  Data, technology and policy coordination - BIS SpeechKeynote speech by Mr Agustín Carstens, General Manager of the BIS, at the 55th SEACEN Governors' Conference and High-level Seminar on "Data and technology: embracing innovation", Singapore, 14 November 2019.

Introduction

It is a great honour to address this distinguished audience today. We meet against the backdrop of the Singapore Fintech Festival and the opening, here in Singapore, of one of the first three BIS Innovation Hub Centres.

Singapore has positioned itself as a centre of innovation, research and development at the heart of the world's most dynamic economic region.1 The impressive achievements in fintech relate in no small part to the work of the Monetary Authority of Singapore (MAS) and Singaporean authorities in creating a solid public infrastructure to foster innovation.

This morning, I will discuss the role of personal data in digital financial innovation. The use of new technology with such data holds great promise, but it also presents new and complex policy trade-offs, and a clear need for domestic and international policy coordination. I would also like to share some thoughts on how the work of the BIS can contribute to this debate.

The value of personal data

Personal data are often touted as the gold of the 21st century.2 Our transactions data, browsing histories, geolocation and broader digital footprint can all be highly valuable in assessing credit quality, pricing insurance policies or marketing financial services. For example, one recent study finds that a user's operating system (iOS versus Android) has information content on income, that the time of day purchases are made (morning versus night) is correlated with character, and that the use of lower case or a name in the user's email address has information on reputation.3 Another study finds that non-traditional information from mobile phone applications and e-commerce platforms can significantly improve the predictive power of credit scoring models.4 Very often, this results in greater efficiency and lower costs.5 In many cases, there are benefits to consumers and society from new applications. For instance, the use of data can foster greater financial inclusion, greater convenience and more tailored and personalised products.

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

In credit, we are already seeing evidence that fintech and big tech credit, using alternative data, has been a boon for borrowers who are unserved or underserved by banks.6 In China, the major platforms have facilitated credit for hundreds of millions of new personal and business borrowers.7 In many countries, including here in Southeast Asia, access to transaction data, payment of utility bills, platform reviews, etc is driving greater access to financial services. Leveraging their personal data, taxi drivers can borrow to buy their own cars, and students can finance their education. Even in the United States, research suggests that personal transaction data can help the 45-60 million "thin credit file" Americans, ie those who have inadequate credit history, to obtain loans.8

In insurance, the use of personal data can help extend coverage to clients who did not previously have access. This can include small farmers in need of crop insurance, based on geolocation and weather data. Similarly, big techs and large insurers are using data on everything from people's search histories to their driving behaviour to price insurance policies.

Yet as we all know, there are important questions about how best to organise the access to personal data - in other words, rights or control over data. If data are the new gold, what is the new gold standard? There are important questions about the distribution of the gains from the use of data among customers, financial institutions, big techs and others, and about the impact on competition. Finally, there are fundamental policy questions about data privacy. Answers will depend in part on the science - for instance, on the technological possibilities presented by machine learning and big data. However, they may also depend on social preferences, which have deep cultural roots.

The scope for gains from better tailoring of products will depend on the type of personal data shared. Some data are purely private or only meant to be shared with a restricted number of users - eg medical records. At the other extreme are data that people may want to share freely, and which can be shared without causing any harm. In between, there may be data that can be lent out (temporarily) and combined with other data, eg for credit assessments or insurance pricing. There may also be data that are not valuable to users (eg browsing histories), but may be valuable to private sector companies as they may help better target both general and customer-specific services. As a user, I may want to sell such data to the highest bidder.

The complex trade-offs between stability, efficiency and privacy

This must all be conducted within a carefully calibrated regulatory and policy context. For public policy, there are broadly three objectives at play here: not only the well known areas of financial stability and fair competition, but also data protection. The growing importance of data protection and privacy introduces new problems that could alter the usual trade-offs between the three objectives.9

One problem is that ownership of personal data is rarely clearly defined. In many countries, the default outcome is that financial institutions or big techs have de facto ownership of customer data. As such, these firms often reap a large share of the profits from new data use. For instance, if companies can estimate more precisely how much customers are willing to pay, they can engage in price discrimination, charging varying prices for the same service, and capture a greater share of the consumer surplus.10 Left to its own devices, this will not lead to an increase in consumer welfare.

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

One solution is to assign property rights over data to consumers (ie the "Coasian solution", named after the Chicago economist Ronald Coase). But this brings legal, regulatory and conceptual challenges. For example, especially big techs in particular are able to obtain data from activities outside financial services. How should we assign the property rights for such mixed data? Another issue is the importance of network effects. Data can only be efficiently used in large amounts. In other words, there are returns to scale and scope in data. This gives incumbents that already have extensive data on customers an advantage over potential competitors, which might deter entrance of new firms. However, even if we could create a level playing field between providers of financial services, it is not clear that we should: fragmenting the data landscape might preclude potential benefits from being generated in the first place. Finally, data are non-rival, ie multiple parties can use data without diminishing the availability for others. As such, some argue that we should not be talking about ownership around data at all. They prefer the term data rights.11

In the light of these challenges, solutions like data stacks can help. We will hear more later today about Aadhaar in India and MyInfo here in Singapore. Digital identity can be an important foundation for digital services, and once these digital infrastructures are in place, payments, government services and a host of other solutions are made possible. Making consumers data-rich, and giving them greater ability to give informed consent over their data can bring important improvements.12 Recent research suggests that assigning control rights to consumers can generate outcomes that are close to optimal.13

Another issue is that there can be costs to the widespread sharing and use of data. People value their privacy, and breaches of personal data are harmful.14 Arguably, data privacy also has attributes of a fundamental right that cannot be traded off against economic benefits. Even if data privacy is guaranteed by law, breaches of personal data can occur - and they can erode trust in the financial system. A number of recent high-scale breaches of consumer data underscore these risks. Think for instance of the theft of credit card information on over 106 million American and Canadian customers in the Capital One hack, or theft of personal data from 9.4 million Cathay Pacific passengers. Until now, these large-scale breaches have not led to large changes in consumer behaviour or effects on financial stability, but one can imagine cases where such breaches could have broader effects. There is research suggesting that given certain characteristics of data, especially non-rivalry, firms may have an incentive to underinvest in data security.15

Available evidence suggests that cultural views towards data privacy differ across countries, and across age cohorts. For example, in one recent survey, respondents were asked if they would be open to their bank securely sharing their data with other organisations in exchange for better offers on financial services.16 In India, 65% of respondents said yes. In the Netherlands, this was only 13%. At the country level, it appears that willingness to share data is correlated with the level of income per capita, declining as incomes increase. That suggests that these preferences may change as economies develop. In the same survey, 38% of 25- to 34-year-olds globally were willing to share their data, but only 16% of those over 65 were.

See:  FCA: Regulating innovation: a global enterprise

Finally, there are important questions about how data are processed, and the potential for discrimination, financial exclusion and even exploitation. Different algorithms on the same raw data will result in very different outcomes. This has led observers to say that "algorithms are opinions embedded in code".17 There is some evidence on discriminatory outcomes in credit. For instance, one recent study of the US mortgage market found that black and Hispanic borrowers were less likely to benefit from lower interest rates from machine learning-based credit scoring models than non-Hispanic white and Asian borrowers.18 Even more worrying is the potential for intentional harm. There is evidence on new methods for actors to misuse personal data to manipulate the behaviour of consumers, through their understanding of factors like emotional contagion and behavioural biases. For instance, one study based on about 670,000 Facebook users unaware of the experiment found that people's emotional state can be transferred to others through contagion. This can lead people to experience the same emotions without being aware of the cause. Beyond the scientific result, this experiment clearly raises economic, not to mention ethical, concerns about a firm's ability to manipulate consumer and investor sentiment.19 Could similar capabilities, in the wrong hands, be used to manipulate markets or cause financial instability?

Continue to the full BIS speech --> here

 

 


NCFA Jan 2018 resize - Singapore Fintech Week:  Data, technology and policy coordination - BIS Speech 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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Release: Canadian securities regulators sign Fintech co-operative agreement with the MAS

Canadian Securities Administrators | Nov 12, 2019

CSA enter - Singapore Fintech Week:  Data, technology and policy coordination - BIS SpeechMontreal and Singapore - Members of the Canadian Securities Administrators (CSA) have signed a fintech co-operation agreement with the Monetary Authority of Singapore (MAS). The members are the securities regulatory authorities in Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Québec and Saskatchewan.

The agreement extends the work of the CSA Regulatory Sandbox Initiative and the MAS Fintech and Innovation Group. Notably, it includes a referral mechanism for innovative businesses, and will enhance and clearly define information-sharing between these jurisdictions.

“This agreement with MAS will allow innovative businesses in Canada and Singapore access to new regulated markets,” said Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. “Flexible regulatory environments with appropriate investor protection measures are best-placed to support the rapidly growing fintech industry.”

“Singapore and Canada are no strangers in fintech collaboration. MAS and Bank of Canada had collaborated on a project to explore cross-border payments transactions on blockchain. This co-operation agreement will strengthen our co-operation between the 2 countries, specifically in developing innovative solutions for the securities sector,” said Sopnendu Mohanty, Chief FinTech Officer, MAS.

The co-operation agreement exchange ceremony was held at the Canadian Pavilion at the Singapore FinTech Festival, which drew close to 50,000 people from around the world. The CSA was represented by Oumar Diallo, Director, Fintech and Innovation at the Autorité des marchés financiers, and H. Zach Masum, Manager, Legal Services at the British Columbia Securities Commission. MAS was represented by Jacqueline Loh, Deputy Managing Director (Markets & Development).

See: 

For certain CSA members, the agreement with MAS will come into effect once all governmental approvals have been obtained.

View original release

 


NCFA Jan 2018 resize - Singapore Fintech Week:  Data, technology and policy coordination - BIS Speech 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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Banks have lost a quarter of the payments franchise to new players

Finextra | Nov 6, 2019

changing landscape payments - Singapore Fintech Week:  Data, technology and policy coordination - BIS SpeechNon-banks now account for a quarter of the institutions offering payment services or payment instruments, up from 14% in only six years, according to a fresh batch of statistics from the Bank for International Settlements.

The data comes from the Basle-based BIS's annual Red Book report on payments and financial infrastructures. It reveals increasing incursions by non-bank competitors into both retail and wholesale payments.

"The traditional bank-based ecosystem is being disrupted from below by fintechs and from above by well established big techs," states the report. "When asked which financial products and services are most affected by technological developments and competition, banks often rank payments the highest - both today and over the next five years."

Non-bank providers now account for 10% of direct participants in RTGS systems in jursidictions covered by the BIS-convened Committee on Payments and Market Infrastructures. In contrast, non-banks accounted for only four percent in 2012.

The payments landscape continues to morph, says the BIS: "Driven by innovation and shifts in consumer preferences, new systems, new methods and new players are shaping the future of payments."

The report also checks in on the drive towards a cashless society. It finds the value of card payments relative to GDP is increasing for all but a few CPMI jurisdictions. In contrast, the value of small-denomination notes and coins in circulation is either decreasing or flatlining.

At the same time, the use of large-denomination notes is generally increasing , even faster than that of small-denomination.

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NCFA Jan 2018 resize - Singapore Fintech Week:  Data, technology and policy coordination - BIS Speech 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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Google is getting into banking with the search giant set to offer checking accounts next year

CNBC | Jeff Cox | Nov 13, 2019

big tech unable to self regulate - Singapore Fintech Week:  Data, technology and policy coordination - BIS SpeechKey Points

  • Google plans to offer checking accounts next year.

  • The project, code-named Cache, will be run in conjunction with Citigroup and the Stanford Federal Credit Union.

Google will offer checking accounts next year, according to a source familiar with the company’s plans, representing Big Tech’s boldest move yet into the consumer banking business.

Most previous efforts have focused on credit cards and payment platforms.

The accounts for the project will be run by Citigroup and the Stanford Federal Credit Union, the source said, confirming a report in The Wall Street Journal.

As part of a project code-named Cache, the company will become the latest Silicon Valley leader to try its hand at the banking space. Previous attempts by Apple and Facebook faced obstacles, with consumers growing increasingly skeptical over providing large technology companies with their personal information.

Google does not intend to sell customers’ data, Caesar Sengupta, an executive at the firm, told the Journal.

“If we can help more people do more stuff in a digital way online, it’s good for the internet and good for us,” Sengupta said.

For years, banks had been concerned about competition from small, nimble fintech upstarts. But it turns out that Big Tech companies like Google and Amazon, already armed with relationships with hundreds of millions of consumers, may prove to be the larger threat.

See:

 

Last year, Amazon had reportedly been in talks with J.P. Morgan over a checking account. Apple launched a credit card for iPhone users earlier this year with Goldman Sachs. Uber announced its push into financial services last month, and just Tuesday Facebook announced a new system to facilitate payments across its social media and messaging systems.

Apple’s offering has run into multiple issues. Its partnership with Goldman has been tense after Apple said it created the card without help from a bank. Also, complaints have arisen recently that the algorithm used to determine customers’ credit limits is biased toward men.

Facebook’s foray into digital currency saw major financial backers drop out over regulatory concerns.

Sen. Mark Warner, D-Va., a leading voice on regulating tech companies on Capitol Hill, told CNBC’s “Squawk Box”  on Wednesday,

“I’m concerned when we got, whether it’s libra or the Google proposal, ... these giant tech platforms entering into new fields before there are some regulatory rules of the road.”

Continue to the full article --> here

 


NCFA Jan 2018 resize - Singapore Fintech Week:  Data, technology and policy coordination - BIS Speech 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 the UK: what’s happened so far

11fs Pulse | Joanne Kumire | Aug 27, 2019

open banking 2 - Singapore Fintech Week:  Data, technology and policy coordination - BIS SpeechIntroduction to Open Banking in the UK

The first step towards banking automation came in 1967 following the installation of an ATM in the UK. Over 50 years later, Open Banking arrived, ushering in a new era of digital banking, which ironically is lessening the need for ATMs.

It is no secret that the financial industry was in dire need of a makeover, I mean except for a few bankers (if that), no-one really understood how most of banking worked even though it plays an integral role in our everyday lives. The 2008 global financial crisis was evidence of that and this disaster led to a review of regulations, from which Open Banking – the first enactment of PSD2 – was birthed.

Since January 2018, we have heard a lot about Open Banking, the regulation that has released the financial data of consumers from the banks’ ownership and into the hands of consumers. That means regulated banks in the UK are now required to let customers share their transaction data such as spending habits and regular payments with authorised third-party providers (TPPs) offering other services – as long as the customer has given permission. This is done in a secure manner through the use of Application Programming Interfaces (APIs), which provide TPPs with access to banking systems and customer databases. This allows end-users to manage bank accounts via third-party service interfaces that do not belong to the primary bank. There has already been a lot of discussion on what it is and how it will revolutionise the financial industry going forward, so I will skip all that and focus on the impact that it has had on the UK banking industry thus far.

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

Many of those in the media and the financial industry are still questioning whether there has been any change as a result of Open Banking’s implementation. The short answer is “Yes, a lot has changed.” It took us over a century to build the mess that was the banking industry, especially the lack of transparency for consumers, and somehow Open Banking is expected to result in a complete overhaul in one year (go figure). We can liken this to how contactless cards are now an essential component of payments, yet they were only initially introduced in 2007. The massive rates of adoption we’ve seen (and even then only in some countries) have only occurred in the past three years. Change takes time and the wheels are in motion.

Open Banking has brought a lot of significant propositions that were impossible two years ago to market. The use of open APIs to expose various data from a bank to TPPs has become one of Open Banking’s great achievements. To assist with delivering Open Banking, the organisation Open Banking Implementation Entity (OBIE) formed by the Competition and Markets Authority (CMA) have developed a suite of tools to enable firms to join the Open Banking ecosystem, share data securely and swiftly via the APIs and implement the standards consistently. More in-depth analysis on Open Banking APIs can be found here.

Ecosystem Players

Open Banking platforms

In response to the introduction of Open Banking standards, a lot of financial services providers launched their own Open Banking platforms. These platforms enable access to various banks in different countries through a secure, single API.

One of the largest such platforms is offered by payments firm Klarna, the most valuable fintech company in Europe as of August 2019. The firm offers a range of online services including direct payments, instalment plans and pay-later options, for both consumers and businesses. Klarna’s XS2A API enables access to more than 4,300 banks across 14 European markets and can be used by fintechs and other businesses, to develop, test and bring new services and products such as payment initiation and switching services to market.

Volt, a Dutch payments provider, is another platform which operates across 14 markets and enables TPPs access to over 4,000 banks. By connecting to this platform, these TPPs can perform a range of services such as the ability to initiate payments on behalf of consumers.

See:  The Case for Open Banking: Benefiting The Underserved

The significant advantage Open Banking platforms promise to the industry is the ability to empower consumers by increasing their ability to find new products and offering clarity over their finances and, in doing this, bringing the focus back to customer needs. Firms can meet this goal by connecting to the platforms in order to develop offerings like payment initiation, new credit products, advisory services and the ability to switch between mortgage providers.

What is also interesting is that in an effort to maintain their positions in this ever-changing market, card scheme providers are also looking at ways in which Open Banking can expand their offerings. Mastercard recently launched suites of Open Banking applications and has four separate offerings, which include verifying the real-time status of TPPs and an advice centre for banks building out Open Banking strategies. Educating consumers on the potential benefits of Open Banking will be critical to enabling adoption at scale and the platform aims to assist banks in this. As an organisation with a global reach, it will be helping banks explore and access solutions that are safe, reliable and trusted by customers. By entering the Open Banking ecosystem, it can also provide the nascent sector with expert advice – especially regarding data security, one of the key concerns when it comes to consumer adoption. Therefore, an organisation that already specialises in payments technology and securing consumer data will support adoption.

Such platforms are essential components of the Open Banking ecosystem, as they assist both financial institutions and TPPs navigate the opportunities and challenges presented by the API economy.

Third-party providers

PSD2 has identified two types of TPPs; Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs). An AISP is any business that uses a customer’s account data to provide services such as aggregating financial information in one place, tracking their spending or planning their finances. A PISP is any company that initiates digital payments on behalf of the user, directly from their bank account, offering an alternative to the use of a card.

All TPPs wishing to connect to bank APIs have to be authorised by the UK’s financial regulator, the FCA and can be found on this register. There were 137 regulated providers, made up of 85 third party providers and 52 account providers, and 32 regulated entities with at least one proposition live with customers by the end of June 2019, according to OBIE. This is in comparison to 57 regulated providers, 36 TPPs and 21 account providers a year earlier, evidencing the growth of the ecosystem and potential for its use.

So far, AISPs are the most common type of TPP, and a lot of the changes enabled by Open Banking that this report will explore are heavily linked to AISPs. Some of the services and tools that are associated with ASIPs include; price comparison, money management tools, quicker and more accurate access to financial products and speeding up manual processes such as applying for a mortgage, a loan and so on.

Services already being offered by banks

A single view of accounts

Account aggregation is the most common implementation of Open Banking so far, as account information APIs were the first type of API mandated on the CMA9 banks. It is a service which many customers including those unaware of this regulation are taking advantage of. Those customers that have adopted account aggregation found the benefits of keeping track of many different bank products in one place out-weighed the reluctance to share their data.

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

The initial focus was just on debit accounts; however, banks found customers needed to see different types of accounts in order to get the most use out of the products, and are starting to include credit and savings account aggregation. Lloyds has already introduced this feature to its app, and Monzo will be rolling out this functionality soon. It should be noted, however, that though open banking will be applied to this, this functionality is still largely achieved via screen scraping.

Aggregation also paved the way for new personal finance management (PFM) tools, something newer market entrants built in-house, from the beginning as part of their customer acquisition strategies. PFM tools and the best-in-class offerings in this space were already extensively covered in a previous report.

PFM

Traditional banks have done well at providing basic payments functionality and infrastructure but arguably have done less well at helping customers effectively manage their spending. PFM tools help with this by providing insights into spending habits and guidance around budgeting and savings they can garner from accessing transactions. HSBC was the first UK incumbent bank to offer PFM tools via it’s Connected Money app, which lets customers view their accounts at up to 21 different banks; however, this is done via screen scraping. Other providers in this space include Yolt, built and owned by Dutch bank ING, which is integrated with all CMA9 banks and many more. It also offers a marketplace of services, connected via APIs, and payment initiation services.

A change in business models

Challengers vs. Incumbents – who benefits most?

On the surface, Open Banking plays into the hands of challenger banks as connectivity and agility of this nature are very much their domain; they are selling themselves on their technology and the ability to provide integrated, on-demand and tailored services. At the same time, the regulation was widely hyped as bad news for incumbent banks as it risks turning them into commodity providers. That’s because most banking solutions are outdated, and interfaces are not intuitive. However, Open Banking APIs offer real opportunities to deliver innovation internally. It has provided mainstream banks with the opportunity to increase loyalty by offering their customers the best-of-breed products and services via already widely-used APIs.

That said, the enforcement of Open Banking threatened the very existence of the traditional banking business model and incumbents couldn’t help but resist. Deadlines were met with excuses, case in point, five of the UK CMA9 having to be issued with warnings after failing to implement Open Banking functionality meant to allow third parties consent within their mobile apps by March 2019.

A lot of the resistance has been blamed on the lack of clarity and the debates around how to comply. It could also be argued that incumbents were non-cooperative as they felt it was not in their best interests to actively engage in something that offers new challenger brands even more opportunity to disintermediate them.

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

One thing is becoming evident though, the incumbents have come to the realisation that their disdain for Open Banking is not going to stop it, and if anything it will only slow their progress in addition to costing them a lot of money in hefty fines for failing to comply, not to mention the potential loss of customers. This has resulted in a tangible shift on the part of banks, who are now viewing Open Banking as an opportunity to compete and innovate, rather than a compliance exercise. This is evidenced by the number of incumbents introducing account aggregation.

Partnerships and platforms

Open Banking has brought about new business models including deep partnerships and marketplace banking. It is safe to say, it was about time customers were offered such options in a space as important as personal finance and banking. This model offers convenience to customers as they have a digital shop window for the best products and services on offer in a single place, irrespective of who supplies them.

On the banks’ part, Open Banking has allowed them and their partners to build platforms that include integrations with other service providers, enabling them to build up their offerings faster and create a one-stop-shop without having to develop additional proprietary products. Challenger banks took to this idea with alacrity – Monzo developed a dynamic API system from the beginning, allowing different fintech front-end systems to communicate with its back-end core systems. Starling built a marketplace which features insurers, mortgage brokers and many other kinds of financial services providers.

Continue to the full article --> here

 


NCFA Jan 2018 resize - Singapore Fintech Week:  Data, technology and policy coordination - BIS Speech 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 based parametric weather insurance in first payouts

Artemis | Steve Evans | Nov 7, 2019

blockchain use cases3 - Singapore Fintech Week:  Data, technology and policy coordination - BIS SpeechA blockchain based parametric weather insurance product has made its first payouts, after severe weather impacted smallholder farmers covered by the product in Sri Lanka.

The parametric insurance was launched in a pilot phase a year ago, as Oxfam in Sri Lanka teamed up with insurance and reinsurance broker Aon and insurtech blockchain solutions provider Etherisc, alongside local insurer Sanasa, to deliver a responsive risk transfer solution that could be rolled out affordably in developing regions, with the goal of making automated payouts to smallholder farmers when extreme weather conditions occurred.

The pilot launched with around 200 farmers enrolled that were exposed to the risk of losing their crops due to extreme weather. After the first year, the system has made some pay-outs to farmers in this initial operations phase, the parties behind the product announced.

Now, the parties involved will move onto the next phase of the project as cropping season starts in November, seeking to solve any issues raised during the pilot with the goal of refining the system’s efficiency and increasing the scale the number of farmers that will benefit from the parametric microinsurance.

“We are proud to have real-world, on-the-ground success from a blockchain solution for microinsurance,” commented Michiel Berende, Chief Inclusive Officer at Etherisc. “We are delighted with the first phase results and we are excited to drive on and help more farmers.”

The blockchain based solution simplifies a number of issues related to insurance that can challenge the uptake of new products in developing regions, in particular thanks to the fact payouts can be automated and based on easily tracked weather parameters.

See:  Canadian Insurtech Breathe Life Secures C$4.5 Million Through Latest Seed Funding Round Led By Diagram Ventures

As a result, the claims process is significantly simplified, meaning a farmer does not need to submit a claim while the insurer does not need to send a claims adjuster into the field.

This means greatly reduced administration costs for delivering the crop weather insurance product, so more of the premium can be used for claims payment and making immediate pay-outs.

The next phase will involve looking into issues raised during the pilot around lack of connectivity for some farmers, the lack of adoption of digital payments, and the need for more weather data sources to augment weather station data.

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NCFA Jan 2018 resize - Singapore Fintech Week:  Data, technology and policy coordination - BIS Speech 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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Podcast Strictly Legal: Who Owns Blockchain?

Osgoode Professional Development York University | Nov 2019

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Strictly Legal, an Osgoode Professional Development podcast, is about all things legal. Each episode, we unpack current issues affecting the legal landscape with the help of some of the industry's leading thinkers.

Heated fights over intellectual property are nothing new in promising technology markets. Are we poised for a revolution in the protection of all types of IP?  The blockchain can be used to control and track the distribution of protected IP.  Imagine a world where you could easily register and claim ownership over your original creative works – from music to photos to blogs. With the use of blockchain technology, that world is not so far away.

As the world reacts to the current blockchain mania, many businesses in the community are having discussions on what the future of innovation in the blockchain space looks like.

This week's guest:

 

Paul Horbal - Singapore Fintech Week:  Data, technology and policy coordination - BIS Speech

BIO:  Paul Horbal is a partner with Bereskin & Parr LLP. He is a member of the firm’s Electrical & Computer Technology group and is Chair of the Financial Technology group. His practice focuses on patent, industrial design and technology law, with an emphasis on securing and leveraging intellectual property rights for high-tech and Fintech clients.

He advises clients of various sizes, but particularly enjoys working with startups and high-tech entrepreneurs. In addition to his work preparing and prosecuting patents, Paul advises clients regarding their intellectual property licensing needs.

He has prepared and filed patent applications relating to block chain technology, payment processing, telecommunications systems, integrated circuits, digital signal processing, biomedical and biomonitoring devices, power systems and power electronics, computer networks, computer software, along with many other technologies.

Paul is a member of the Ontario Bar Association (OBA) Executive Committee on Practice Innovation & Technology, Sub-Committee on Curating Technology. He is also a member of the American Intellectual Property Law Association (AIPLA). Paul is former Chair of the Toronto Intellectual Property Group, Vice-President of the Ukrainian Canadian Professional and Business Association of Toronto.

Paul has been a faculty member for the Osgoode Certificate in Blockchains, Smart Contracts and the Law (2018/2019), an educational course developed for lawyers, business leaders, managers and influencers with an interest in blockchain technology.

He speaks and writes regularly regarding intellectual property and is an active tweeter (@horbal).

 

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PODCAST TRANSCRIPT

Intro: You're listening to Strictly Legal Osgoode Professional Development Podcast about all things legal. Each episode, we unpack current issues affecting the legal landscape with the help of some of the industry's leading thinkers.  This week who owns the Blockchain?  Can this revolutionary technology transform my keylog?  And now your host Amy ter Haar.

Amy ter Haar: This morning I'm very excited to welcome Paul Horbal, who is with me in our Toronto studio today. Welcome, Paul.

Paul Horbal: Thank you, Amy glad to be here.

Amy ter Haar: For a few announcements before we get into our topic today.  Blockchains, smart contracts and the law is being presented by Osgoode Professional Development on November the 15th. This is a really important event in the blockchain calendar. It is a one day program where 17 top legal, tech and financial industry experts from the U.S. and Canada will discuss the biggest legal issues facing the blockchain with an unparalleled speaker roster, blockchain, smart contracts and the law delivers an exemplary experience highlighting the boldest and best of the industry. Our second announcement is also very exciting. Bearskin in Paris, FinTech Group is planning an intellectual property seminar focusing on fintech this fall. Paul, I think, yes, that's right. And details will be announced shortly. But you can follow Paul on Twitter. His handle is at H O R B A L that at or Horbal or you can check out Bereskin & Parr Twitter or their Web site, their Twitter handle at B.E r e s k i n p a double R. You can check those out to find out more. So, Paul is an associate at Bereskin & Parr, where his practice focuses on pac-10 industrial design and tech law with an emphasis on securing and leveraging intellectual property rights for high technology clients. He advises clients of various sizes, but particularly enjoys working with startups and high-tech entrepreneurs. In addition to his work preparing and prosecuting patents, Paul advises clients regarding their intellectual property licensing needs. He speaks and writes regularly regarding intellectual property and is an active tweeter again. Check him out at Hobal. Thank you for being on the show today, Paul. Thanks, Amy. We're in the middle of blockchain mania in the midst of this craze for bitcoin and Ethereum on the power of the blockchain tech behind these currencies is real. Last January, the Bitcoin trading price broke $1000 for the first time in three years. And today, already it's nearly $5000. So heated fights over intellectual property are nothing new and promising technology markets. Are we poised for a revolution in the protection of all types of IP?

Paul Horbal: I think we're going to see some some interesting applications of blockchain in protecting different types of intellectual property. Blockchain obviously can serve as a database of sorts. And I think you're going to find applications of a blockchain in it as applied to different types of IP. So, for copyright, for example, we're already seeing as we'll be talking about a little bit later on in the show. We're already seeing applications of blockchain technology for registering copyright and maintaining ownership databases. And I think we'll see some of that applied to other types of IP. And there will definitely be battles over IP in the blockchain. And I think we'll see some of that in the near future as well.

Amy ter Haar: Exciting, exciting times ahead for your practice.   Since blockchain is another creation of the mind constitutes intellectual property and invention stemming from blockchain, which may also, I guess, constitute intellectual property. Since we're lawyers let's first try to understand a few definitions. As Lawyers usually do. That's where we start. So, Paul, maybe you can give us two definitions. First, what is intellectual property for those of our listeners who don't know? And secondly, what is the blockchain?

Paul Horbal: Sure. So intellectual property and I'll borrow a definition here from the World Intellectual Property Organization. Intellectual property refers to creations of the mind, such as inventions, literary and artistic works, designs, symbols, names and images used in commerce. And IP is protected in law by patents, copyright trademarks and industrial designs, which lets people earn recognition or financial benefit from what they've invented or created. And intellectual property law is generally trying to strike a balance between the interests of the innovators or creators and the wider public interest. And so there is a sort of quid pro quo that's available. You want to give inventors and creators the benefit of their invention and some exclusivity, but you want the public to benefit from those inventions and creations as well. And so there is a balancing act that takes place.

Amy ter Haar: That was a great answer for IP. Secondly, what is a good definition of the blockchain?

Paul Horbal: So the blockchain is a technology that's perhaps best described as a distributed ledger system. It allows many parties to keep their own record of the transactions that take place over time and in a way that is mutually agreed upon and difficult, almost impossible to change after the fact. And it uses techniques that have been available for quite some time. There are some things like public key cryptography, hash functions and merkle trees to make this happen. And that's a way of saying that you're using special math to do two things. Number one, keep secrets. And number two, do that in a way that you can easily verify that information is not tampered with. Merkle trees were patented in 1979. Yeah, they were. And you know, there are a lot of things in blockchain or in the in Bitcoin at least that were available well before Bitcoin came out. Bitcoin kind of combined a number of technologies and algorithms in a clever way that allows you to do transactions in an easily verifiable way without allowing tampering after the fact. And one of those things that enables that to happen is the concept of the Merkle tree also called a hash tree. And it's a way to sort of compress the blockchain over time. So rather than storing all of the information about all the transactions that are taking place, you sort of make a mathematical representation that's much shorter and very hard to fake. And you build up a tree of those over time so that each as as a tree branch gets full use sort of permanent and replace it with this little hash and then you build up those trees of hashes over time. And that's how the blockchain stays usable without having to carry around all the all the information where every transaction that's happened since the dawn of the blockchain.

Amy ter Haar: Wow. I'm really fascinated about them. The Merkle. Yeah. Being patented so long ago.

Paul Horbal: Yeah.  There's a there's probably other parts of it that were also patented. Public key cryptography is one. There are parts of that that were patented in the 70s. Yeah. It's existed before.

Amy ter Haar: What we're they using public key cryptography in the 70s.

Paul Horbal: Well for espionage for for keeping secrets. Public key cryptography is it's a technology has many applications. It started out being used mainly for the military. It's a way of exchanging secrets with an untrusted channel. So you can have people hear what you're communicating back and forth and still guarantee that what the information exchange with another party is going to be secret. Even though some everyone, the people in between can hear everything that you're exchanging, and you can still keep a secret and public key cryptography lets you do that. He uses some really fancy math to do it. And this technology's been around for 30 or 40 years at least.  And it finds many applications. You use it when you go to a Website and you see a little lock icon. The H.T T.P.S. is being protected with public key cryptography. And it's found in many areas today.

Amy ter Haar: I think to see original cypherpunks really rely on established body of research.

Paul Horbal: Yeah. In this this. I like to say technology is oftentimes and most of the time incremental. So you're building on what already exists and public key cryptography is a major, major building block of the internet today.

Amy ter Haar: And you have an engineering background.

Paul Horbal: Than I do. Yeah. Electrical engineering background. I studied microelectronics, so making microchips when I was a student and then I went off into law school and became a patent lawyer.  It's such a great application. I didn't want to lose the engineering side of things. And I always say that I used one of the things I really loved about engineering was learning new things all the time. And this is a great combination where I can apply my engineering knowledge and still learn new things every week or every couple of weeks. I have really smart, brilliant clients that come to us with great ideas and they teach me all about them. So perpetually learning.

Amy ter Haar: That's amazing. So, I mean, blockchain really implicates, I guess, a host of IP related laws and legal constructs, as you mentioned from licensing to distribution to the doctrine of for sale in the states, we've got the Digital Millennium Copyright Act and also here in Canada, the Copyright Modernization Act.  Will the blockchain influence the development of IP law as dramatically as the Internet did? Yes, I guess that's my first question. And then secondly, how do you see blockchain impacting IP intensive industries?

Paul Horbal: So I think the impact of blockchain technology on IP law will. It will happen. But I think initially to be modest for one main main reason is that IP rights exist because governments say they exist. Governments provide the means with which to enforce rights. And without those enforcement means; I don't think you'll find blockchain replacing IP laws anytime soon. There'll be more of a complement that, you know, it sort of runs against the nature of the blockchain industry today, which says that you can have distributed decentralized systems, replace old centralized authorities, and you see that in Bitcoin, which does away or promises to do away with central banks, with credit card credit card providers and other financial institutions. But Bitcoin works without a central authority for two reasons. It guarantees an artificially scarce resource and it takes an enforcement mechanism. Bitcoin's can't be copied to make more, and you can only acquire or get rid of bitcoin if everyone agrees to what's happened. So for Bob to acquire one bitcoin, Alice has to update the ledger to reduce her bitcoin balance and increase Bob's by the same amount.  And everyone has to agree that that's what happened. There's no easy way for Bob to behave badly. But IP rates are different. The resource isn't created by computers according to an algorithm like Bitcoin. It's created by people through creativity. More importantly, intellectual property inherently can be copied because at some point has to be seen or heard by a person to serve its purpose. And since intellectual property can be copied, it's difficult to protect using blockchain technology in the same way that you can protect your bitcoin.

Amy ter Haar: Right. So, I guess we're seeing the emergence of blockchain based solutions for intellectual property management, I guess, which is really one of the most obvious applications of blockchain technology. A registry of IP rights to catalog and store original works. And since the blockchain is immutable. Once the work has been registered to a blockchain, that information can't really be lost or changed. So in theory, third parties could use the blockchain to see the complete chain of ownership of a work I guess, including any licenses, sub-licenses and assignments. And then and then we can imagine start to imagine a world where you could easily register and claim ownership over your original creative works from music to photos to blogs. So gone would be the days of seeing your work duplicated all over the internet without proper credit and having no way to prove ownership with the use of blockchain tech.   I guess I mean, theoretically, that world is not so far away. Do you think distributed ledger technology promises to transfer form the way intellectual property rights are established and enforced and the way IP creators are compensated?

Paul Horbal: I think the way they're established and the way they're recorded is definitely something that could change with the advent of blockchain technology. Right now, IP databases are maintained just like financial records were maintained, their maintained by one big institution. And in this case, the government the government keeps a database of who owns patents and who owns trademarks and who they're license to. And the same thing with copyright. You can register your copyright ownership with the government, and they keep it all one big database. It's available online. But the mechanisms for getting that information in there and getting out of there are firmly rooted in past decades. So maybe that's something that governments can explore going forward as a way to modernize or to improve the way that this information gets recorded and shared and stored to take advantage of some of the blockchain technology that that allows this. This updating this record to be maintained in a robust and verifiable way.

Amy ter Haar: But do you think that distributed ledger tech promises to transform or transform the way intellectual property rights are established in and forth? OK.   So are the way IP creators are compensated?

Paul Horbal: Yeah. So the way they're established or enforced and the way their IP creators are are are giving credit or compensated. I think I think blockchain is an interesting concept and it definitely has the potential to disrupt more traditional models in the music industry. But I don't think that's necessarily because of the blockchain. And it's going back to my earlier point. I don't think the blockchain really solves the enforcement problem. With IP rights, A lets you record who owns technology and something. There is technology such as smart contracts which are coming along which can provide some sort of compensatory mechanism. But the proposals I've seen so far only get you so far. They can record. They can offer a way for artists to get paid, but they don't give you a solution for enforcing rights when someone doesn't want to play along. And so what do you do if someone isn't willing to behave with existing IP systems? You have institutions provided by the government to allow for enforcement. You have noticed regimes like the DMCA in the US and the notice and notice system in Canada. You have the courts, of course, and in some cases you even have the police that will help enforce your rights. Those are all ways to compel good behavior, sometimes by punishing bad behavior.   And I don't think a blockchain based approach can replace the role of government anytime soon because it doesn't solve the enforcement problem, at least not that I've seen. So in that sense, I think we can view these applications of blockchain in intellectual property space as complementary solutions. They won't replace the existing legal framework and they don't offer a complete solution, especially when it comes to enforcement. But at the end of the day, they can coexist. You can have a blockchain give you most of the things that are a blockchain is really good. And then you can still fall back on the legal system for the enforcement mechanisms when you have two or hopefully you don't have to. But if you do, it's there.

Amy ter Haar: I think Imogen Heap is a great example. She's for those listeners who don't know that Grammy Award winning music artist. And she's really been, I guess, leading the charge when it comes to compensating artists. So she use distributes and receives her digital payments through a blockchain platform. And the system allows her and artists like her to have control over access to the works and to ensure faster direct payments to the artists themselves. And really, I guess it could impact the role of i-Tunes or other intermediaries that insert themselves between the artists and consumer. So by putting IP on the blockchain, in that sense, creators can have an immutable, secure timestamped record of the creation and distribution of their works.  The blockchain can be used to establish and enforce licenses for IP through smart contracts and even to transmit payments in real time to IP owners. So, I mean, how do you think the distributed ledger technology promises to transform how artists are compensated in that way and how they distribute their IP on the blockchain?

Paul Horbal: I think I think it's a perfect example of the strengths of blockchain technology with what they're doing here essentially is replacing or maybe building on digital rights management technologies, which have been around for 20 years now. And blockchain is really good at establishing who owns something. And then with smart contracts, providing a payment mechanism. And so if I was i-Tunes or Spotify or or Netflix, for example, I might be a little bit nervous with this technology because it it might do away with a middleman that that provides that payment and digital rights management solution. And if you can use the blockchain to do this in smart contracts and find some way to get paid, each time someone plays the music or download some songs, then that's that's a great application of blockchain technology. But going back to my earlier point, I think it still doesn't provide you with an enforcement mechanism. If someone decides not to play along. So if someone copies a song from Imogen Heap and finds a way to start playing it without paying the micropayments or without honoring the smart contracts, then there's still there's nothing that can be done at that point using the blockchain other than to prove that Imogen Heap is the owner and that you shouldn't be playing it.   But if there's no way to stop that person other than going through the enforcement mechanism mechanisms that have that have been established by governments and that provide legal recourse.

Amy ter Haar: All right. So what is the state of blockchain IP in Canada at least?

Paul Horbal: There's a lot of activity. I did a little bit of research a couple of months ago and found that since about 2012, the number of patent applications that have been filed that Meng mentioned the words blockchain or distributed ledger, they've been on the rise steadily. And there are now dozens, if not hundreds of patent applications that have been filed that at least mention the word blockchain. And many of them are directed to applications of blockchain technology. So the technology itself is it was published in the last decade and it built on technology that's been around for a long time. There's some. The blockchain uses called Merkle Trees, which is a computer science term that was patented. I believe in 1979 and the patent has long since expired. So it's free. It's free to free to use for the world.  And so some of the blockchain technology is is out there. It's free to the public to use. And so what you're going to see with patents in the blockchain space is not a patent over. Not a patent over all of blockchain, but patents on implementations or applications of the blockchain technology to different problems. And one is, for example, digital music distribution. There might be others. Another good example is bitcoin. Cryptocurrency is a great application of the technology to a particular problem, which is currency or on the online space. And there are many other applications of blockchain technology, one that we're seeing a lot of activity in right now. As I'm sure you know, Amy, is identity. Digital identity, which is a major problem. We saw the Equifax hack and which wasn't last week. It was months and months ago. And, you know, as consumers, as citizens, we have no way to opt out of that system, really. And blockchain technology might promise or does promise to give people control over their online identity. And I think there's going to be a lot of there's a lot of activity in that space and where there's a lot of activity and it's industrially valuable, commercially valuable, then you can expect patenting to follow. And so that's that's an area where I'm excited personally as a patent lawyer. And I think there's also I mean; the trademarks are used when it comes to business.  They're a way of identifying a brand or a business identity. And so just like any other area of business, you're going to see activity when you have companies and individuals developing products and they get a brand, a reputation that they want to protect. And that's where trademarks will come in. So I don't think that's any different than any other area of business. But the patent side of things will be interesting for sure. Do you think there's a looming patent war? I don't I don't know. I don't have a crystal ball. If I did, I'd probably be out chasing somebody’s car and trying to find out if if they're interested in hiring Bereskin Parr. But I think, you know, where there's commercially valuable activity, where there's a lot of money on the line and there's high technology in use. It's not unusual for there to be patent disputes that develop. You saw that in the smartphone space with an Apple going after Samsung and Nokia going after Apple and many, many different companies suing each other with large companies they will often come to an arrangement because they all have patents there is a sort of mutually assured destruction if you continue through the courts. But you never know. I don't think we'll get through the next 10 years without seeing any patent lawsuits regarding blockchain.  That's probably my most ambitious prediction. My prime at least ambitious prediction.

Amy ter Haar: That seems like it's safe one to bank on. So, I mean, really, it's clear the implications of blockchain tech are robust and diverse in many areas and especially in IP. Whether you're a tech company or a professional service provider, I think it's really important to do your homework and understand blockchain, how blockchain tech might secure or affect your business. What would you what do you tell your clients about blockchain and IP?

Paul Horbal: Yeah, I don't think we're telling clients anything about blockchain that they don't already know. Maybe that's the best way to put it. Our clients are telling us what they're doing with blockchain. Right?

Amy ter Haar: Thank you so much for being on the on the show today, Paul. This has been most enlightening. I've really learned a lot and I had no idea that Merkle trees were patterned 1979. So this is this is really, really cool to know. So hopefully we'll see you at our program on smart contracts, blockchains and the law on November the 15th. That one, Dundas Street Street West here in Toronto. Register soon if you're interested, because space is running out. You can register it at osgoodepd.ca/blockchainlaw. Thanks so much, Paul, look forward to seeing you then.

Paul Horbal: Thanks Amy. My pleasure.

 


NCFA Jan 2018 resize - Singapore Fintech Week:  Data, technology and policy coordination - BIS Speech 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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