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Fintech Insider News: Banking's Kodak Moment and other stories
This week on Fintech Insider News David and Jason were joined by colleagues Pete Townsend and making his Fintech Insider debut, Ross Gallagher, from our Pulse and Research Team, to tackle the latest news from the last week. They were joined by regular guest Sarah Kocianski and Charlie Wood.
Listen to the episode in full here or play and read below
Has the FCA banned BYOD (Bring your own device)?Kicking off with one of the bigger and more controversial stories of the week was this one in The Register, where, in what David Brear called a "poor copy/paste job" the FCA missed out a word in a MiFID regulation and at a stroke banned all employees in financial services bringing and using their own devices at work. The original version of the rule in MIFID II, restricted BYOD only to investment firms – not applying it to the entire financial sector. The FCA missed out the word “investment” in their version, effectively prevents employees from using any devices to communicate internally or externally on any device they are “unable to record or copy". The team discuss whether this was an error or they actually intended to do it. It also opens up a debate as to how often people still have to have two devices - one for work and one for outside of work, and does this therefore make clear how your personal tech is much better than what you're offered at big firms?
Kodak's Kodak MomentKodak made two big announcements this week in what David described as a "last gasp attempt at relevancy". The first was the launch of their cryptocurrency, KODAKCoin, which pushed their stock up 44% after the announcements, proving the volatility of the market and the impact that adding anything blockchain or crypto related to your portfolio can have on prices. The purpose of KODAKCoin is a "photo-centric" cryptocoin allowing photographers to log their images on DLT to allow for more secure licensing and image usage. The second was the launch of their bitcoin mining rig where if you use it you have to hand over half of the profit you make. Sarah questions the legality and ethics of this one and everybody seems sceptical. Perhaps the Kodak moment has passed? Share your thoughts here.
"[It's Kodak's] last gasp attempt at relevancy" - David Brear
Tencent's licence to sell fundsPete takes us through this new development of Tencent's where the new licence to sell funds on WeChat will also give Tencent more say on what products are sold on its platforms, and grant users more options to help boost funds sold on WeChat – home to more than 980 million users, analysts said. The tech giant launched the promotion of a new service that will allow users to pay their credit card bills via the money-market funds available on WeChat’s wealth management app. If, for instance a user gets a credit card-bill on December 5 due on December 20 for 5,000 yuan, if they automatically transfer their outstanding amount into one of the funds, they can enjoy interest from the fund in the December 5-20 period and have no need to worry about forgetting to pay the due. Sarah questions whether this is really a good idea giving such easy access to funds in a country with huge consumer debt as it is? The team also debate whether regulators have a duty to protect people or whether the end consumer has to take responsibility for their own risk going forward, Jason thinks they will. Does this then create a two tier system of the financially educated and risk aware vs those who aren't? Or even simpler, the rich who can afford financial advisers, and those that can't, which can only serve to increase the gap between rich and poor. Much to think about with this story, share your thoughts here.
Payment card announcementsMoving on to news slightly closer to home, we have three stories around payment cards, starting with Transferwise's launch of their debit card to borderless banking account holders. They are rolling out debit cards to 1000 people with borderless accounts for an initial trial with a full rollout to come, later in 2018. The card allows account holders to spend local currency around the world, which is the "next natural step", according to Ross. Don't forget, the Tranferwise Borderless banking account journey can be viewed in our insights tool, 11:FS Pulse. The debit card brings it in closer competition with Revolut - both companies are backed by the same VC firm. £1.5bn is sent and received across the Transferwise platform every month and £4.5bn in transactions to date with Revolut, but are they actually competitors? David is not so sure, do they have different target demographics, so that despite seemingly offering similar services, they're actually operating in very different ways? Share your thoughts on this, here.
"[Transferwise's borderless debit cards are] the next natural step" - Ross GallagherTransferwise also got in trouble with German start-up, Penta for using the same luminous green colour on their card. Charlie says Bradesco NEXT also have a lime green card - they went live about 6/7 months ago, but the colour palette was agreed 2 years ago, that means they win the race to be the first to use the luminous green before both Penta and Transferwise. Next up the team turn to Revolut's Visa cards - is this actually a big deal? For now Revolut customers can only use Mastercards and Visa cards will soon be available to Revolut app users. The team debate whether it actuallly makes a difference which you use, the acceptance of both seems to be universal, in the UK at least. However perhaps it is Vosa upping their competitive edge in the fintech space as previously Mastercard fought hard to be the chosen vendor of startup prepaid and debit cards, perhaps now Visa is challenging this monopoly. Tell us what you think here. The final story in the trio of payment card stories this week is Sprint's "self-charging digital payment card," which results in general mockery from all present as to what "self charging" means in the context of a payments card - and what use case is it actually solving? Card profiles can be downloaded onto the card, which has a 65,000-pixel display and UI, so a user can switch between different cards and screens. The perks of this (according to Sprint) are: it can be activated immediately, anywhere, it can also be replaced easily and cancelled in case of fraud, and allows users to personally trigger fraud alerts. But, is having so many cards downloaded onto one a risk, and if it runs out of battery, is that actually less useful than a debit card? `it also isn't neon, clearly a big mistake if it wants to get ahead in fintech. Tell us what you think of this one here.
FleishmanHillard global fintech report - fears, fads and the futureIn an interlude from the week's news, Simon spoke to Claudia Bate, from FleishmanHillard, specifically about her Global Fintech Report, where she worked with the biggest names in the industry to compile a list of the biggest trends and a look forward at what they think will be the biggest talking points in 2018. Fads included:
- Fintechs vs banks
- The Bursting of the Fintech Bubble
- Regulation, particularly GDPR
- Open Banking
- AI - overhyped in 2017, hence in the “fad” category, but experts suggest it will have a “real and lasting impact” in 2018
The Guardian’s take on Open BankingBack to the week's news the team discuss this feature on Open Banking in the Guardian, ahead of PSD2 "Deadline Day" on Saturday 13th.We discussed on last week’s show how a survey revealed 92% customers had never heard of Open Banking - does this help? Or with headlines such as “radical shake-up, or a threat to your private data?”, is it just scaremongering? (Guardian BLT comments section would seems to suggest it’s the latter). It also opens up questions around whether customers know what's being done with their data now and whether Open Banking will make a difference to that. Not to mention Sarah highlights the importance of the phrase "with the customer's permission" - many reports seems to be giving customers the wrong idea because the nature of it being permission-based data sharing is not emphasised - "permission is paramount".
"Permission is paramount" - Sarah KocianskiRoss also reminds us that this legislation is regulation being forced into the user experience, which is almost a unique case and the true value of it hasn't been advertised well to the consumer. He suggests that there won't be true adoption [of open banking] until the true value of it is clear - what does the customer get in return for sharing their data? Share your thoughts here.
Brexit - good for fintech?...Quartz says yes. Another week another Brexit story, this time the article is suggesting that in terms of VC investment the fintech space is thriving, despite Brexit. $7.7bn raised by UK companies in 2017, more than double 2016 and fintech companies took $2.9billion, the biggest share of investment. The number of deals decreased, but the size of deals increased. However this is an imperfect experiment: nobody knows how much money companies would have raised had UK stayed in the EU. Worries remain about hiring talent once Brexit is finalised, a sentiment echoed by Sarah: "Money isn't the problem with Brexit, it's people". Not only that but the overall risk to the economy is firms are holding back investing because of Brexit or actively moving away from the UK because of the uncertainty - "Uncertainty's expensive" says Sarah.
"Uncertainty's expensive" - Sarah Kocianski
Wealthfront's fund raiseWealthfront, the software-based wealth management company that is targeting the millennial segment, has raised $75 million in a funding round led by Tiger Global Management. By 2030 the Millennial Generation and Generation X will control the majority of financial assets in the United States, projected to be $33 trillion. CEO of Wealthfront, says: “People under 45 now represent 85% of our clients. We believe our success with this group is based on our unique ability to optimise and automate our clients’ personal finances". Pete sings Wealthfront's praises and Sarah agrees, in comparison with Betterment, their main competitor, and for their efforts in keeping things cheap and software focused to best attract their chosen demographic, millennials and Gen X.
A breakdown of Meltdown & SpectreThis story in American Banker attempted to tell bankers what they need to know following the Meltdown and Spectre chip flaws. Meltdown: breaks down the barriers between an operating system kernel and the applications that run on it. Malware can use the technique to read operating system and application memory and potentially get access to passwords etc. Spectre: breaks the memory isolation between different applications, allowing malware to access application memory. Hackers could use Meltdown and Spectre to read sensitive information stored in a computer’s memory, including passwords and account numbers. Charlie gives us more detail on this saying that where Meltdown is "an easy fix and almost not worth mentioning," Spectre is the real issue. Not the Daniel Craig Bond film, but a genuine threat to server speeds around the world, it needs fixing at microcode level which is much harder to do. Watch out banks.
Some good news?In an effort to inject some good news into proceedings, our next story was this one in the Mirror regarding over £300m of "lost money" to be stripped from dormant bank accounts and given to charities and those in debt.“Lost cash” defined as “money that's untraceable or sitting dormant in bank accounts” and hasn’t been touched for over 15 years. Believed to be £2 billion of “lost cash” - only £330 million the governments wants to put into charitable causes, it’s not clear what they will do with the rest, although David thinks that in this case, "the house rules" and the banks should get to keep it all. He thinks this story is a "weird Robin Hood" story, taking people's money and redistributing it. It's also not great if those banks accounts belong to you, Sarah points out that 15 years as a millennial is probably as long as it could take to get a house deposit, so it's not surprising some accounts are untouched for so long.
"The house rules...if someone leaves money down the back of my couch, I keep the money" - David BrearDavid points out the irony of the Minister for Sport and Civil Society being the spokesperson on what banks should do with this money. Her statement is: “This is part of the Government’s commitment to building a fairer society[...]Working in close partnership with the financial sector and civil society, we are determined to help create a country that works for everyone and build a Britain fit for the future." On the subject of social responsibility, Ross points out that while well intentioned, this fund of lost money doesn't really address the bigger social issues of financial inclusion, poor financial education and wide scale debt in the UK at the moment. Perhaps it wasn't such good news after all...