Paul Schulte, Advisor, Banking and Financial Services
August 22nd, 2019
Paul Schulte is the Founder and Managing Editor of Shulte Research based in Singapore. Paul's roles[...]
Tech’s raid on the banks
The Economist | May 2, 2019
OVER THE past two decades people across the world have seen digital services transform the economy and their lives. Taxis, films, novels, noodles, doctors and dog-walkers can all be summoned with a tap of a screen. Giant firms in retailing, carmaking and the media have been humbled by new competitors. Yet one industry has withstood the tumult: banking. In rich countries it is perfectly normal to queue in branches, correspond with your bank by post and deposit cheques stamped with the logo of firms founded in the 19th century.
See: Why Open Banking Represents a Seismic Shift for Fintech
Yet, as our special report this week explains, technology is at last shaking up banking. In Asia payment apps are a way of life for over 1bn users. In the West mobile banking is reaching critical mass—49% of Americans bank on their phones—and tech giants are muscling in. Apple unveiled a credit card with Goldman Sachs on March 25th. Facebook is proposing a payments service to let users buy tickets and settle bills (see article).
The implications are profound because banks are not ordinary firms. It is one thing for Blockbuster Video to be wiped out by a technological shift, but quite another if the victim is Bank of America. It is not just that banks have over $100trn of assets globally. Using the difficult trick of “maturity transformation” (turning deposits that you can demand back at any time into long-term loans) they enable savers to defer consumption and investment and borrowers to bring them forward. Banks are so vital that the economy reels when they stumble, as the crisis of 2008-09 showed.
Bankers and politicians may thus be tempted to resist technological change. But that would be wrong because its benefits—a leaner, more user-friendly and more open financial system—easily outweigh the risks.
Banking is late to the smartphone age because entrepreneurs have been put off by regulations. And, since the financial crisis, Western banks have been preoccupied with repairing their balance-sheets and old-fashioned cost-cutting. Late is better than never, however. Several new business models are emerging. In Asia payment apps are bundled with e-commerce, chat and ride-hailing services offered by firms such as Alibaba and Tencent in China and Grab in South-East Asia. These networks link to banks but are vying to control the customer relationship. In America and Europe big banks are still more or less in control and are rushing to offer digital products—JPMorgan Chase can open a deposit account in five minutes. But threats loom. Mobile-only “neobanks” that do not bear the cost of branches are nibbling at customer bases. Payments firms like PayPal work with Western banks but are expected to capture a greater share of profits. Lucrative niches like foreign exchange and asset management are being harried by new entrants.
See: Open banking data tapped to speed up laundering checks
The pace of change will accelerate. Younger people no longer stay with the same bank as their parents—15% of British 18- to 23-year-olds use a neobank. Tech firms that people trust, such as Apple and Amazon, are natural candidates to grow big financial arms. The biggest four American banks are spending a total of over $25bn a year on perfecting better customer applications and learning to mine data more cleverly. Venture-capital firms invested $37bn in upstart financial firms last year.
The benefits of technological change are likely to be vast. Costs should tumble as branches are shut, creaking mainframe systems retired and bureaucracy culled. If the world’s listed banks chopped expenses by a third, the saving would be worth $80 a year for every person on Earth. In 2000 the Netherlands had more bank branches per head than America; it now has just a third as many. Rotten service will improve—it is easier to get money to a friend using a chat app than it is to ask your bank to transfer cash. The system will get better at its vital job of allocating capital. Richer data will allow banks to take risks that currently baffle underwriters. Fraud should be easier to spot. Lower costs and the democratising effect of social media will give more people better access to finance. And more firms with good ideas should be able to get loans faster, boosting growth.
Yet change also poses risks. Because the financial system is embedded in the economy, innovation tends to create turbulence. The credit card’s arrival in 1950 revolutionised shopping but also sparked America’s consumer-debt culture. Securitisation lubricated capital markets in the 1980s but fuelled the subprime crisis. In addition, it is unclear who will win today’s battle. One dystopian scenario is that power becomes more concentrated, as a few big banks learn to exploit data as ruthlessly as social-media firms do. Imagine a crossbreed of Facebook and Wells Fargo that predicts and manipulates how customers behave and is able to use proprietary economic data to squeeze rivals.
See: Fintech firms want to shake up banking, and that worries the Fed
Another dystopia involves fragmentation and destabilisation. Banks could lose depositors to untested neobanks, creating a mismatch between their assets and liabilities that could lead to a credit crunch. If bank customers transact via tech or payment platforms, banks could end up with huge balance-sheets but without a direct connection to their clients. If they thus became unprofitable, they could be broken up, with the job of financing mortgages and absorbing short-term savings left entirely to capital markets, which are volatile.
Continue to the full article --> here
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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ConenSys | Dec 3, 2019 On January 3rd, 2009, in the wake of a global financial crisis that accelerated the growing chasm of inequality throughout world economies, a mysterious figure named Satoshi Nakamoto launched a virtual currency named Bitcoin that functioned atop what s/he called a ‘Proof of Work chain.’ In its ‘genesis block,’ Nakamoto permanently embedded a brief line of text into the data that signaled the inspiration behind the newfangled tech: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” It was a rallying cry for a better way. What proceeded over the next decade has been a stratospheric rollercoaster ride for cryptocurrencies and digital assets, alongside the early phases of a total reworking of economic and human systems atop a philosophy of decentralization and democratization of access to value. See: How Big Data and Blockchain are enhancing FinTech There have been inconceivable highs and corresponding lows in the ten plus years since Bitcoin’s genesis block, as development of blockchain technology and awareness of its potential marches ever forward. As this decade draws to a close, it’s an opportune moment to view ten years of blockchain development in retrospective. The technology has grown from a digital ...
Read More
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Of Dollars and Data | Nick Maggiulli | Dec 3, 2019 Psychological Tricks for Worry-Free Spending I want to teach you how to spend money. You may think that statement sounds ridiculous and say to yourself, “Nick, I don’t need help with spending money. I’m an expert at that!” But I’m not talking about how to spend money extravagantly. I’m talking about how to use your hard-earned cash in a worry-free way. There have been thousands of personal finance articles written on how to spend money. Some of these articles emphasize frugality and reducing your expenses, while others focus on growing your income so you don’t have to worry about expenses at all. But, the problem with many of these approaches is that they are based upon one thing—guilt. Between Suzie Orman telling you that buying coffee is equivalent to “peeing away $1 million” and Gary Vaynerchuk asking you whether you are working hard enough, mainstream financial advice is built upon sowing doubt around your decision-making. Should you buy that car? How about those fancy clothes? What about a daily latte? Guilt. Guilt. Guilt. This kind of advice forces you to constantly second guess yourself and creates anxiety around spending ...
Read More
Cointelegraph | Anatol Hooper | Dec 5, 2019 Blockchain is transforming the financial industry right before our eyes, with many market onlookers anticipating a complete replacement of existing payment, trading and banking infrastructures. Blockchain and finance seem like the perfect match, but there are other sectors, for which the technology may play a game-changing role. For one particular industry, the latter adjective isn’t figurative at all, because blockchain can do just that – change the gaming market. This is a unique chance for investors, and it seems like they don’t want to miss it. During the last few years, the gaming industry has been pampered with several innovations at once – virtual reality (VR), augmented reality and artificial intelligence. But it is blockchain that can have the greatest contribution, bringing more transparency and trust to the gaming space. Investors don’t want to be simple observers and are jumping on the blockchain gaming bandwagon. For them, the technology has a disruptive potential that can be converted into profitable deals. Thus, they consider this emerging technology to be a breakthrough in the gaming industry. See: Podcast Ep27-Mar 1: Blockchain Gaming and Esports with Shidan Gouran Transforming gaming at all levels But how can ...
Read More
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Read More
Entrepreneur | Murray Newlands | Dec 3, 2019 You can raise a million, too. Here's how to be successful with equity crowdfunding. There's an art to raising money for a startup. I recently joined Commerce AI as Chief Strategy Officer, and my role has two main functions: fundraising and marketing. My goal in the first 30 days was to raise a million dollars from crowdfunding. This can be a viable goal for your company as well. Here’s how. Equity crowdfunding Under the Jumpstart Our Business Startups (JOBS) act, there are a number of routes to crowdfunding. The starting point is a Form C round, which in essence means you can raise $1.07 million per year -- yes per year -- from non-accredited investors. This means anyone can invest over $250 at a time. This time we worked with accredited investors only but most people will start with a Form C round. Architecting a New World: Investment Crowdfunding and Digital Assets This model is like Kickstarter, but you give backers equity rather than a product. The equity can be a convertible note, a safe note or a fixed price round. If your goal is to raise more than $107,000, an independent CPA ...
Read More
Novacap | Release | Dec 3, 2019 Novacap is the first private equity firm in Canada to launch a fund dedicated to financial services. MONTREAL, Dec. 3, 2019 /PRNewswire/ - Novacap, one of Canada's leading private equity firms, announced the introduction of a new sector fund and its first closing. Novacap Financial Services I (the "Fund") gathered initial commitments of C$260 million, a strong start toward its target of C$500 million. A second group of institutional investors is expected to close in Q1 2020. Driven by strong demand from new and existing investors, the Fund will be managed by three seasoned executives: Marcel Larochelle, as Managing Partner, as well as Rajiv Bahl and Alain Miquelon as Senior Partners. With a dedicated investment team, they will fully leverage Novacap's infrastructure and apply Novacap's proven investment methodology. Novacap Financial Services I aims to invest in mid-market companies established in North America, with a focus on Canada, with strong growth potential. Four segments are of particular interest: 1-specialty insurance and distribution, 2-asset and wealth management, 3-alternative lending and 4-financial infrastructure. The Fund will make equity investments in order to support companies with their organic growth initiatives and to drive strategic acquisitions. See: Portag3 Ventures ...
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Read More
Wealthsimple | Isabelle Kirkwood | Dec 2, 2019 Toronto-based FinTech startup Wealthsimple is separating its direct to consumer and Wealthsimple for Advisors businesses and will transition the advisor-focused offering to a new company, BetaKit has learned. “We’re currently focused on identifying the right partner to support your business on a future platform.” Wealthsimple for Advisors is the company’s automated management platform targeted toward financial planners, investment advisors, portfolio managers, and dealers. The company announced the news to separate the entities in an email obtained by BetaKit and sent to clients on Monday. Wealthsimple plans to announce the move on Tuesday morning. In a statement to BetaKit, the company noted that Wealthsimple for Advisors will transition in the coming months, and is currently looking for partners to support advisors on a new platform. See: Wealthsimple launching zero-commission trading platform “We are at a pivotal stage in our business where we have a very real, very unique, once-in-a-generation opportunity to transform financial services for Canadians,” said Michael Katchen, co-founder and CEO of Wealthsimple, in the statement to BetaKit. “To take full advantage of that opportunity, we need to be laser-focused on delivering transparent, accessible financial services to consumers, both directly and in ...
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OECD | Mats Isaksson | Nov 27, 2019 27/11/2019 - Asia is rapidly growing into the world’s largest stock market. In 2018, 51% of all equity capital raised through initial public offerings (IPOs) went to Asian companies. Today more than half of the world’s listed companies are from Asia. This development is reshaping global stock market in several ways, according to a new OECD report: Households outside of Asia have increased their investments in Asian companies through pension funds, mutual funds and other intermediaries; it is increasingly common that listed companies are majority owned by the public sector or by other private companies; and smaller growth companies from Asia are using capital markets to raise money more extensively than smaller companies from the rest of the world. See: Social equity must be central to urban tech innovations OECD Equity Market Review of Asia 2019 says that Asian non-financial companies raised an annual average of USD 67 billion during the last decade. This means that they surpassed the combined amount of equity raised by companies from Europe and the United States. The development in Asia is largely due to a significant increase in the use of public equity markets by companies ...
Read More
ConenSys | Dec 3, 2019 On January 3rd, 2009, in the wake of a global financial crisis that accelerated the growing chasm of inequality throughout world economies, a mysterious figure named Satoshi Nakamoto launched a virtual currency named Bitcoin that functioned atop what s/he called a ‘Proof of Work chain.’ In its ‘genesis block,’ Nakamoto permanently embedded a brief line of text into the data that signaled the inspiration behind the newfangled tech: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” It was a rallying cry for a better way. What proceeded over the next decade has been a stratospheric rollercoaster ride for cryptocurrencies and digital assets, alongside the early phases of a total reworking of economic and human systems atop a philosophy of decentralization and democratization of access to value. See: How Big Data and Blockchain are enhancing FinTech There have been inconceivable highs and corresponding lows in the ten plus years since Bitcoin’s genesis block, as development of blockchain technology and awareness of its potential marches ever forward. As this decade draws to a close, it’s an opportune moment to view ten years of blockchain development in retrospective. The technology has grown from a digital ...
Read More
Read More
Collaborative Fund | Morgan Housel | Oct 16, 2019 An irony of studying history is that we often know exactly how a story ends, but have no idea where it began. Find something that’s important to you in 2019 – social, political, economic, whatever – and with a little effort you can trace the roots of its importance back to World War II. There are so few exceptions to this rule it’s astounding. But it’s not just astounding. It’s an example of something easy to overlook: If you don’t spend a little time understanding World War II’s causes and outcomes, you’re going to have a hard time understanding why the last 60 years have played out the way they have. You’ll struggle to understand how the biggest technologies got off the ground, and how the most important innovations are born from panic-induced necessity more than cozy visions. Or why household debt has risen the way it has. Which raises the question: What else is like World War II? What are the other Big Things – the great-grandparents – of important topics today that we need to study if we want to understand what’s happening in the world? The three big ...
Read More
Read More
Of Dollars and Data | Nick Maggiulli | Dec 3, 2019 Psychological Tricks for Worry-Free Spending I want to teach you how to spend money. You may think that statement sounds ridiculous and say to yourself, “Nick, I don’t need help with spending money. I’m an expert at that!” But I’m not talking about how to spend money extravagantly. I’m talking about how to use your hard-earned cash in a worry-free way. There have been thousands of personal finance articles written on how to spend money. Some of these articles emphasize frugality and reducing your expenses, while others focus on growing your income so you don’t have to worry about expenses at all. But, the problem with many of these approaches is that they are based upon one thing—guilt. Between Suzie Orman telling you that buying coffee is equivalent to “peeing away $1 million” and Gary Vaynerchuk asking you whether you are working hard enough, mainstream financial advice is built upon sowing doubt around your decision-making. Should you buy that car? How about those fancy clothes? What about a daily latte? Guilt. Guilt. Guilt. This kind of advice forces you to constantly second guess yourself and creates anxiety around spending ...
Read More
Read More
Cointelegraph | Anatol Hooper | Dec 5, 2019 Blockchain is transforming the financial industry right before our eyes, with many market onlookers anticipating a complete replacement of existing payment, trading and banking infrastructures. Blockchain and finance seem like the perfect match, but there are other sectors, for which the technology may play a game-changing role. For one particular industry, the latter adjective isn’t figurative at all, because blockchain can do just that – change the gaming market. This is a unique chance for investors, and it seems like they don’t want to miss it. During the last few years, the gaming industry has been pampered with several innovations at once – virtual reality (VR), augmented reality and artificial intelligence. But it is blockchain that can have the greatest contribution, bringing more transparency and trust to the gaming space. Investors don’t want to be simple observers and are jumping on the blockchain gaming bandwagon. For them, the technology has a disruptive potential that can be converted into profitable deals. Thus, they consider this emerging technology to be a breakthrough in the gaming industry. See: Podcast Ep27-Mar 1: Blockchain Gaming and Esports with Shidan Gouran Transforming gaming at all levels But how can ...
Read More
Read More
Financial Post | Julius Melnitzer | Dec 5, 2019 Canadian banks have become 'incubators and accelerators' for tech talent, helping to get new innovations to market more quickly For all the buzz about the disruption that’s occurring in Canada’s financial services sector, the country ranks a lowly 23 among 27 countries in its market adoption of fintech. The information appears in an infographic prepared by Fortunly, an online knowledge base and financial product review-website. The charts examine the significant disruption that fintech solutions are causing in the world of finance, including mobile wallets, cash transaction systems, the rise of blockchain currencies and artificial intelligence. See: A major UK lender just launched a digital bank to compete with Monzo and Revolut | Interview with Bó CEO Which is not to say that Canada is standing still. The country’s market adoption rate of fintech stands at 50 per cent, not insignificant but still way behind China and India, leading the pack at 87 per cent. Rounding out the top 10 are Russia and South Africa, Colombia, Peru, Netherlands, Mexico, and Ireland and the United Kingdom. Canada’s adoption rate, however, is ahead of that in the United States, France and Japan. Globally, adoption ...
Read More
Read More
Entrepreneur | Murray Newlands | Dec 3, 2019 You can raise a million, too. Here's how to be successful with equity crowdfunding. There's an art to raising money for a startup. I recently joined Commerce AI as Chief Strategy Officer, and my role has two main functions: fundraising and marketing. My goal in the first 30 days was to raise a million dollars from crowdfunding. This can be a viable goal for your company as well. Here’s how. Equity crowdfunding Under the Jumpstart Our Business Startups (JOBS) act, there are a number of routes to crowdfunding. The starting point is a Form C round, which in essence means you can raise $1.07 million per year -- yes per year -- from non-accredited investors. This means anyone can invest over $250 at a time. This time we worked with accredited investors only but most people will start with a Form C round. Architecting a New World: Investment Crowdfunding and Digital Assets This model is like Kickstarter, but you give backers equity rather than a product. The equity can be a convertible note, a safe note or a fixed price round. If your goal is to raise more than $107,000, an independent CPA ...
Read More
Read More
Novacap | Release | Dec 3, 2019 Novacap is the first private equity firm in Canada to launch a fund dedicated to financial services. MONTREAL, Dec. 3, 2019 /PRNewswire/ - Novacap, one of Canada's leading private equity firms, announced the introduction of a new sector fund and its first closing. Novacap Financial Services I (the "Fund") gathered initial commitments of C$260 million, a strong start toward its target of C$500 million. A second group of institutional investors is expected to close in Q1 2020. Driven by strong demand from new and existing investors, the Fund will be managed by three seasoned executives: Marcel Larochelle, as Managing Partner, as well as Rajiv Bahl and Alain Miquelon as Senior Partners. With a dedicated investment team, they will fully leverage Novacap's infrastructure and apply Novacap's proven investment methodology. Novacap Financial Services I aims to invest in mid-market companies established in North America, with a focus on Canada, with strong growth potential. Four segments are of particular interest: 1-specialty insurance and distribution, 2-asset and wealth management, 3-alternative lending and 4-financial infrastructure. The Fund will make equity investments in order to support companies with their organic growth initiatives and to drive strategic acquisitions. See: Portag3 Ventures ...
Read More
Read More
Brookings Institution | Dec 4, 2019 Facial recognition technology has raised many questions about privacy, surveillance, and bias. Algorithms can identify faces but do so in ways that threaten privacy and introduce biases. Already, several cities have called for limits on the use of facial recognition by local law enforcement officials. Now, a bipartisan bill introduced in the Senate proposes new guardrails for the use of facial recognition technology by federal law enforcement agencies. See: Smart Cities Offer Promises and Concerns Over Privacy On Thursday, December 5, the Center for Technology Innovation at Brookings will feature Senators Chris Coons (D-Del.) and Mike Lee (R-Utah), who introduced the bipartisan Facial Recognition Technology Warrant Act this past November. The discussion will focus on how placing procedural safeguards on facial recognition technology, such as requiring warrants and limiting the duration of surveillance, can alleviate concerns over security and privacy while encouraging innovation. Thursday, Dec 05, 2019 8:45 AM - 9:30 AM EST Brookings Institution Falk Auditorium 1775 Massachusetts Avenue N.W. Washington, DC 20036 More information on registering for the Webcast or attending --> here The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry ...
Read More
Read More
Wealthsimple | Isabelle Kirkwood | Dec 2, 2019 Toronto-based FinTech startup Wealthsimple is separating its direct to consumer and Wealthsimple for Advisors businesses and will transition the advisor-focused offering to a new company, BetaKit has learned. “We’re currently focused on identifying the right partner to support your business on a future platform.” Wealthsimple for Advisors is the company’s automated management platform targeted toward financial planners, investment advisors, portfolio managers, and dealers. The company announced the news to separate the entities in an email obtained by BetaKit and sent to clients on Monday. Wealthsimple plans to announce the move on Tuesday morning. In a statement to BetaKit, the company noted that Wealthsimple for Advisors will transition in the coming months, and is currently looking for partners to support advisors on a new platform. See: Wealthsimple launching zero-commission trading platform “We are at a pivotal stage in our business where we have a very real, very unique, once-in-a-generation opportunity to transform financial services for Canadians,” said Michael Katchen, co-founder and CEO of Wealthsimple, in the statement to BetaKit. “To take full advantage of that opportunity, we need to be laser-focused on delivering transparent, accessible financial services to consumers, both directly and in ...
Read More
Read More
OECD | Mats Isaksson | Nov 27, 2019 27/11/2019 - Asia is rapidly growing into the world’s largest stock market. In 2018, 51% of all equity capital raised through initial public offerings (IPOs) went to Asian companies. Today more than half of the world’s listed companies are from Asia. This development is reshaping global stock market in several ways, according to a new OECD report: Households outside of Asia have increased their investments in Asian companies through pension funds, mutual funds and other intermediaries; it is increasingly common that listed companies are majority owned by the public sector or by other private companies; and smaller growth companies from Asia are using capital markets to raise money more extensively than smaller companies from the rest of the world. See: Social equity must be central to urban tech innovations OECD Equity Market Review of Asia 2019 says that Asian non-financial companies raised an annual average of USD 67 billion during the last decade. This means that they surpassed the combined amount of equity raised by companies from Europe and the United States. The development in Asia is largely due to a significant increase in the use of public equity markets by companies ...
Read More
Read More
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