How to profit from the now likely failure of Facebook Libra.
3 boxers.001

Move fast and break Facebook. It will soon be conventional wisdom that Facebook Libra will fail and you only make money before the herd catches on. In this article, Daily Fintech Subscribers learn why Facebook Libra will likely fail and who/what will win if Facebook Libra fails and how to profit from that. 

Like everybody else in this space I pored over the tea leaves scattered by Facebook when they announced plans for Libra in June. I was excited because I had predicted that Facebook would try to monetize their WhatsApp acquisition via payments when they hired David Marcus in 2014 (link to not so humble-brag post here).  At the time of the announcement in June,  I offered my 10 takeaways from the Facebook Libra announcement which included this:

“Yet many of the partners have more to lose than to gain. For example credit card networks will lose if payments moves to crypto”.

That news forecasting proved accurate when first Paypal and then Mastercard, Visa, eBay and Stripe withdrew support.

The reason Facebook is in trouble is what I described in the June article as “Takeaway 5. Facebook’s delicate dance with regulator.”

The regulator is only a front for the Governments that pay them and those Governments will do whatever they can to stop Facebook creating a global currency that will challenge state monopoly over currency creation. That is why we use the image of 3 boxers in the ring.  Facebook is powerful for sure but a) they are regulated entity that exists at the pleasure of the state and b) Bitcoin is the unregulated honey badger that has been attacked by so many rich & powerful and yet still goes strong.

The Qui Amisit (who loses)story is simple and the same as we told our readers in June:

“ The biggest losers will be global banks. Even if Libra fails, the banks will lose. This is now a boxing match with 3 boxers in the ring. When push comes to shove, governments will throw banks under the bus if they think it will save their monopoly over money from either Libra or Bitcoin.”

Now we focus on what subscribers really want which is our Qui Bono (who wins) Analysis. Keeping to the Latin theme, each Qui Bono story  has a “fac pecuniam” (make money) analysis:

Qui Bono = Bitcoin

Why: Facebook raised awareness of crypto and one crypto that looks like a survivor is Bitcoin.

fac pecuniam = buy Bitcoin and hold it for a long time.

Qui Bono = USD 

Why. This seems to contradict the first Qui Bono = Bitcoin and this one is more short term trading focussed. When the next market crash happens it will likely be on the periphery first ie in developing markets so there will then be a short term flight to safety and that will lead to a short term bump in USD value. Sentiment will change when it becomes clearer that a) there are alternatives to Fiat currencies and b) that the problems are endemic to all Fiat currencies and not just some of them.

fac pecuniam = buy liquid short dated  USD assets and sell as soon the first wave of panic recedes.

Qui Bono = Gold backed CBDC 

Why: if is unlikely that the reserve currency will shift from USD to the next rising power, because a) the next market panic will lead to a questioning of all Fiat currencies and b) geopolitics will resist so much power to one country. The likely successor to USD will be a) a tokenized digital currency (because the cross border payments will be easier b) issued by Governments (because mainstream acceptance of the idea of stateless currency will take time and c) backed by Gold (because a market panic will cause people to lose faith in government’s ability to print more money at will).

fac pecuniam = buy gold and hold it for a long time. Convert your physical gold into a gold backed CBDC when you want to spend some.

Qui Bono = Crypto Payment Processing using Stablecoins

Why Crypto Payment Processing. Merchants want lower costs and less risk of being blacklisted by Legacy Payment Processors.

Why using Stablecoins. In a word, volatility.

fac pecuniam = find a stablecoin that you believe will be resistant to state shutdown and invest in it.


Confessions of a writing junky. I should give up writing to focus on being the Editor and CEO of Daily Fintech, but I love writing and cannot quite quit.

Inserted by my lawyer: I Am Not A Financial Adviser, just a blogger bloke on the Internet.

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Is it time to Decentralize the World?


Is the current state of blockchain development ready to attract a large number of users? For the technology to become mainstream, it needs to be applied in ways that people actually find useful and provide a much better experience than what is already available. Can social media be crypto’s killer app? Decentralized and decentralizing technologies are challenging and changing how we manage our digital identities and who has access to our data. 

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech.

A couple of weeks a couple of stories surfaced in the news. The first was that Kik was shutting down its messenger app and cutting its staff from over 100 people to just 19 employees. Kik climbed to prominence alongside other well-known messenger apps like WhatsApp, Facebook Messenger, and Telegram with its distinguishing feature of being privacy-centric. The second was that officials in the U.S., U.K. and Australia were pressing Facebook to give authorities a way to read encrypted messages sent by ordinary users, re-igniting tensions between tech companies and law enforcement.

If there’s one thing the Internet lacks, it’s privacy.

The cryptocurrency industry is 10 years old. The Internet was developed in the 70s, 80s and 90s and it didn’t really take off until the browser was created. Just like the Internet the cryptocurrency market needed to build its bridges and roads. I think that our Netscape moment has come. We now have the infrastructure to launch scalable decentralized applications on blockchain. The future of the internet is distributed, decentralized applications and not just things like cryptocurrency.

Some of the things, that are going to drive mass adoption for cryptocurrencies and blockchain, will be the same things that we use on the today on Internet, things like new decentralized social networks and messenger apps.

More and more, trends point to decentralization being the next step for social media. Almost all traditional social media apps track user activity and sell the aggregated information, behavior, and habits to provide the highest bidder with better targeting for their advertising and marketing campaigns. Two years ago, Facebook brought in $9.32 billion in revenue in the second quarter, mostly from mobile ads, and kept the profits to themselves.

At this point you can build just about anything on blockchain that you can build on the traditional Internet. Today, you can build a new Facebook entirely using a blockchain, and best of all, users could have absolute control of their data. We could control who has access to our data and give our permission to advertisers to access our data. We might even be the beneficiary of any renumeration that occurs because of access to our data. Imagine a world where you, the user, receives all of the revenues that are generated from your data and you know who has access to it.

Is that something you’d be interested using? I think that most of us would be.

It’s going to be exciting to watch how things develop over the next year, in the battle between the centralized social networks and the decentralized networks that are fighting for privacy, consent and user participation in the revenues that are generated.

Even more exciting will be messaging. Today, most of us are concerned over privacy. Is your Signal, Telegram, WhatsApp or Skype applications secure? Do you know? No, you don’t. You have to trust those platforms are doing what they say they’re doing. Blockchain enables a security layer to secure messaging systems, that even the companies offering the systems cannot access your data.

Decentralization doesn’t just mean more protection for personal data. It puts the power back into the hands of users by allowing them to have complete control over the information they give and receive, by eliminating the bias of ad-based centralized models that use our personal data.

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Venture Capital in Europe peaks, China falls as investors shun IPOs

KPMG released their pulse report on global venture capital trends for Q3 2019 yesterday. There were some key highlights from the report worth discussing about. The most pleasantly surprising trend is the increase in VC investments in Europe.

Despite Brexit and Germany moving towards a recession, venture and scale up investments in Europe hit a record quarter in Q3 2019. On a global note, Asia has seen sustained slowdown in VC deals, largely dampened by action from China.

Here are my views on where I agree with the report, and where I don’t.

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on sustainable deep-tech investments

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Let us first talk about Asia VC before coming back to Europe.


Over the past few months, I have been closely tracking Venture capital trends in India and China in particular. In Q1 and Q2 2019, India had outperformed China, thanks to a few big deals in India. But most importantly, thanks to a massive fall in VC investments in late stage deals in China.

This trend has continued into Q3 2019 – across the money chain, top-down. Limited Partners (LPs) have become cautious about market conditions and have held back capital commitments to VC/PE funds in China. Liquidity has hence dried up, which results in startups moving towards a profitability mode rather than a growth mode. This was a much needed correction for a long time.

Deal Sizes and Volumes

We often talk about deal sizes and volumes when we discuss Venture capital/private equity performance. Deal size refers to the size of the investments and deal volume refers to the number of investments. Both need to be healthy in an innovation ecosystem. A quick look at the global trend below shows a downward trend in both deal sizes and deal volumes.

VC Global Trend

Globally VC-backed companies raised $55.7 Billion across 4154 deals. A breakdown based on investment stage (Early/Venture/Growth) offers key insights into sustaining and developing trends.

I have written earlier on DailyFintech about the rise of Corporate Venture Capital. Especially in Europe, the role of Corporate VC has been very pronounced. What does that do to these stats? Corporate VCs generally get into deals later in the game. Over the past 36 months or so, the rise of CVCs has increased the median sizes of late stage deals.

The other usual suspects to talk about are late stage VCs like the Softbank fund. A $100 Billion fund can move these stats one way or the other pretty significantly. The trend in late stage deals (increased size), has been amplified due to Softbank’s deployments too.

Late Stage deals

But I would be surprised if these trends are not affected in the medium term due to a couple of reasons. Global economic sentiments are poor, and corporates are holding on to capital more and more. This trend is particularly visible in the US, where Q3 2019 saw CVC investments fall below 7%. I expect this trend to continue.

Coming back to the Softbank fund, the Wework saga that has unfolded in the last few weeks has affected Softbank’s plans for their fund 2. If Fund 2 doesn’t happen or gets delayed, it will have its effect on late stage funding too. We will start seeing fewer deals by these players, and there is a good possibility that these deals will get smaller too.


About $10 Billion invested in Europe startups across 777 deals – These are healthy numbers, with both UK and Germany (considering the political drama) leading the way with big deals across Babylon health and N26. However, the worrying sign for me, is the fall in the number of deals in Europe. Generally a fall in the number of deals is caused by a fall in early stage deals – as early stage deals get closed faster. That is certainly the case with Europe.


The above chart shows a massive dip in Angel and Early stage deals. I believe the health of an innovation ecosystem should be measured more by Angel and Early stage deals than late stage deals. Late stage deals that we have seen in Europe are largely due to investors moving away from IPOs and funnelling capital into the private markets in desperation.

However, the real litmus test is if there was capital flowing into early stage VC. I believe Europe is failing that litmus test, although the implication of that will be evident over the next 24 months or so. As early stage funding dries up, we will start seeing less and less late stage deals too.

I have personally seen two trends based on my work at Green Shores Capital. In the last quarter alone, we have seen atleast four series A funding rounds fold due to LPs pulling capital out of VC funds. This is a worrying sign for Europe.

The other trend is that Family offices have become desperate with allocating capital. I have seen some unusually big and overpriced deals where family offices have deployed capital. This is largely because they have wanted to move away from the IPO market, and have chosen to deploy their capital in desperation into bigger VC tickets.

I have been in deal discussions where I have been shocked at the unfortunate enthusiasm from family offices towards bad deals. I fear, they deploy too much capital into too many bad deals as they sometimes lack the ability to identify top startups to invest into. This trend can’t last.

The short and sweet of it is that, I don’t agree with KPMG’s assessment that the “European Venture Ecosystem is definitely thriving”.  I believe, this quarter results are due to a few successful late stage deals going through, and is more of an anomaly. There is a systematic slow down globally, and the trend is obvious in early stage deals in Europe too.

When the slowdown really hits Europe, it may not be as pronounced as it is in China and Asia. However, I believe the headline of this post could perhaps be, “If China is going down, can Europe be far behind !”.

‘Growth’ valuations for startups- losing its allure?


Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

 There has built during the past few years an InsurTech chase to ‘unicorn’ status  not uniformly based on NPV, but on growth. Fellow Daily Fintech columnist, Ilias Louis Hatzis, wrote well this week on “Tokenized Venture Capital” and VCs’ chase for investment valuation lightning in a bottle.  However, in that pursuit and as the growth value method broadens in use adverse indicators may be upon us.

There is one primary measure of success within the InsurTech startup ranks- reaching unicorn status.  Sure, innovation, disruption, and collaboration have been noted as InsurTech’s raison d’etre, but getting funded at a level that allows a unicorn ‘valuation’ of more than USD 1 billion based on potential, or growth- there’s the success differentiator.  Unicorn status currently opens doors- funding, IPO consideration (or ICO, or IEO, per Mr. Hatzis), key to the unicorn’s executive suite WC, and so on.

I have held that growth valuation is an arbitrary and incomparable standard between organizations and speaks little to the fundamental financial position of a respective company. A billion-dollar valuation founded on a $209 million funding level to date (Hippo Insurance) cannot be verified next year based on operations (not that The Hippo is less deserving of the designation than others- Hippo is to date an effective insurance entrant).  Lemonade enjoys an estimated two-billion-dollar valuation based on $480 million funding to date, another valuation that would be impossible to empirically peg this time next quarter (and Lemonade certainly is operating as an insurer on the move and experiencing increased value), and per SoftBank investor/Lemonade board member, Shu Nyatta,  “we’re confident that the best is yet to come. The value Lemonade provides, together with the values baked into its model, are fast making it one of the most intriguing, differentiated and compelling brands.”  Growth as value.

Where the arbitrary values become problems to the market is when those values are trumpeted and leveraged by funding companies to build finances to invest in further startups, or to support IPOs or other exit strategies.  The inestimable Wolf Richter expounded on the inherent dangers of spurious valuations in his podcast 10/06/2019,  THE WOLF STREET REPORT, and transcribed here.  I’ll not paraphrase Mr. Richter’s explanations and arguments but the podcast’s message is quite clear- wholesale leveraging of investments in startups in the eternal chase for winners is fraught if unbridled, as SoftBank is finding out.  The cascading effects on the market when big players grab- loss of VC confidence, increased tightening of requirements for those looking for funding, certainly financial losses for VC investors, and ripples into neighboring industries.  And then there is a resulting big gorillas in the startup room that spook others- the WeWorks (valuation arbitrarily dropping from $50 Bn to $25 Bn), and Ubers – IPO at issue $45, now at $29 per share.  Both firms being substantial positions for SoftBank, and significant causes for the heavy debt burden the firm has.  Combine the chase for successful IPOs, significant unicorn status, the firm’s asset sheet that includes more than 1/3 of its value as intangibles, the need to leverage valuation to keep the debt churning, and untenable bubble status comes to mind. That is no help to the VC community.

Take an example of an InsurTech that successfully posted an IPO, Germany-based insurer, DFV_AG,  Deutsche Familien Versicherung AG.  The firm’s IPO generated approximately 75 million euro, the funds and all financial operations can be reviewed in quarterly statements, and the market can apply financial accounting valuation methods if so interested (of course there are many so interested as there is a traded share price).  Capitalization and value are simply a matter of math and allows comparison with peer companies.  DFV_AG can take a valuation to the bank- literally.

Another option for startup funding- home grown initiatives.  Consider yesterday’s announcement by Santander Bank in Chile of its InsurTech spinoff, Klare.  The firm identified customer needs and a potential competitive advantage, worked the plan and numbers, received regulatory approval and are creating the start of a fintech ecosystem through organic growth.  I haven’t looked but it’s certain that the bank’s financials and capitalized valuation are available for review.  Certainly there are some internal sponsors of the action that have some growth valuations in mind, but those they keep to themselves for discussion over a  Nescafé.

And my final comparative, OYO, a startup in India that has built a multi-billion dollar valued firm operating in 80 countries, overseeing operations in 1.2 million lodging rooms.  Generating revenues before, during, and residually after consulting with lodging owners, and benefiting from investment by its founder, Ritesh Agarwal to the tune of some billions.  Yes, SoftBank is an investing parent but in this instance the founder has big ‘skin in the game.’  Again, there are financials that investors and the accounting regulators can see and apply valuation techniques to.  One expects OYO will grow, but that will be only a collateral basis for valuation.

Seems time to value ‘value’ as value in the economics sense, not the emotional.


The new wisdom in credit ratings for SMEs

Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia.

Back in 1968, Dr Edward Altman was responsible for a major innovation in the field of credit risk analysis for corporate businesses – the Altman Z-score. While it transformed risk assessment for this sector, for over 70 years it failed to cross the turnover divide, in any meaningful way, and enter the world of SME finance. This is now changing, thanks to Altman himself, and the fintech revolution currently taking place.

The Altman Z-score is a formula for predicting the probability of bankruptcy, within a time period of 2 years. It is comprised of a combination of common financial ratios, and has been found to have an accuracy rate of around 80% – 90%, when predicting bankruptcy one year out from the event.

Since its creation, multiple variations of Altman’s formula have gained traction in the credit risk assessment of manufacturing businesses, non-manufacturing businesses and privately held companies. Until now, the Altman score has been predominantly used for large businesses, however this is now changing, and Altman is at the heart of it.

Wiserfunding, Altman’s company vehicle for the model he’s become famous for, has now created a version of the original Z-score that specifically caters to small businesses. The company has partnered with modefinance, a company that claims to be ‘the first fintech credit rating agency in Europe.’

The technology is culturally and technically game-changing for small business, who are typically subjected to opaque risk assessment practices from lenders. If Altman’s ratings end up being widely accepted and trusted by lenders, like personal credit scores are, it could eliminate the typical assessment bottleneck that often delays or blocks access to much needed capital. From a cultural perspective, it could also significantly shift the power dynamic in lending, back to the SME customer, who’s ownership of their rating will enable them to better control pricing.

From a ‘future of the industry’ perspective, if Altman’s score gains traction, it could mean building a lending business on the premise of being ‘better at risk assessment’ won’t be quite as interesting or valuable any longer. Obviously if you could beat Altman’s score with your proprietary model, then you would, but if you couldn’t, it wouldn’t make commercial sense to use your own IP. Instead, in this view of the future, a fintech lending business would need a better product, experience and overall offering to an SME to remain competitive.

The problem to solve for SMEs is access to credit, in a responsible way, that helps not hinders growth and doesn’t trap a business into a debt cycle it can’t escape from. Once that problem is solved, the next problem might be how to optimise use of it. If the first problem is on the cusp of being solved, maybe we need entrepreneurs who are ready to start solving for the next one?

The Complex Post-Trade world of Securities and its API transformation

Internal communication and client communication in Securities Services remains a nightmare. This sector is actually a great example of batch processing, lack of cross border interoperability and standardization.

In July, BCG consulting and SWIFT published a white paper, looking at APIs in the Security Services industry. Adoption is low but awareness amongst asset managers grew from ~46% to ~72% (2018 data).

In late September, BNP Paribas Securities Services announced the release of 22 APIs for its client asset managers. They have worked with SWIFT so that this set of APIs are interoperable across different platforms.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

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A glimpse at the complexity of the post-trade cycle

Currently, Securities services are not real-time and messaging adheres to the ISO 20022 standard (processed by SWIFT). I won’t recommend reading the ISO 20022 for Dummies book (unless you plan to work in this area). Just think of ISO 20022 as the standard for electronic data interchange between financial institutions (FIX protocol, ISDA, SWIFT use it). It covers any messages and business processes around securities trading and settlement. Despite this standard, the Securities industry lacks interoperability, especially for cross border interactions with different regulations.

Asset managers that need data (e.g. NAV calculations, distributions, settlement status etc) cannot obtain these real-time. They actually receive such data typically in files that they then have to integrate to their internal systems for monitoring positions, risk control and reporting. No straight-through processing is available.

BNP Paribas Securities Services has just initiated the process of unlocking value for the Securities industry with these APIs.

BNY Melon[1], the largest custodian bank, has started to tackle this complex issue in Asia and for over the counter derivates. Their first API offers clients the streaming of data such as counterparty names and positions into their own data lakes and analytics systems. This obviously makes better risk management and investment decision making intraday (instead of waiting for the end of the batch delivery of the data).

RBC Investor and Treasury Services[2]  intends to develop APIs for the Transfer Agency part of post-trade process. This would stream the data of clients and redeemers of mutual funds.

Clearly, the industry is still taking baby steps in this direction and Philippe Rualt, head of digital transformation at BNP Paribas Securities Services, believes it will take at least 3yrs to stream via APIs globally, even for data as simple as NAVs.

Fragmentation is hard to crack. Lack of standards and different regulations are real challenges for post-trade securities sector. The real issue is that a new business model is needed that will incentivize industry players to scale the development of APIs for securities services.

It is clear that asset managers will benefit from real-time data, and both providers and clients will benefit from cost savings and efficiencies, but the key is to identify the value-add services that can be launched from API adoption.

Will some BNY Melon – incumbent large custodian and Securities service provider – become the global API marketplace for the Securities industry and provide the metadata also?

For now, we are at the first stage, during which API`s will be mostly inter-firm and within the company’s closed network. The BCG-SWIFT white papers, reports that API maturity in post-trade seems to be mostly experimental (56%).

The world is marching towards real-time processing one way or another, and the Securities Services industry is lagging.

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[1] Custodians on API quest of Holy Grail of Scale

[2] RBC Investor and Treasury Services, is a specialist provider of asset services, custody, payments and treasury and market services for financial and other institutional investors worldwide.

Tokenized Venture Capital


Tokenization has the power to impact the entire VC industry, from the way venture capital is raised, to the way it is invested in startups and projects. In an interview by David Sacks, the former PayPal COO, said: “I think Limited Partner interests are likely to be tokenized, along with most other illiquid assets. Eventually, illiquidity will be a competitive disadvantage in fundraising that only the top firms will be able to justify.” To further elaborate on David’s thought, tokenized funds will reshape the dynamics of how private equity and venture capital raise money and bring greater transparency that drives innovation and growth. 

Ilias Louis Hatzis is the Founder at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech

It was January 2012 on the Bitcoin Talk forum, when a software engineer from Seattle published a white paper with the title: “The Second Bitcoin White Paper“. The paper stated things like: “We claim that the existing Bitcoin network can be used as a protocol layer, on top of which new currency layers with new rules can be built …. We further claim that the new protocol layers … will provide initial funds to hire developers to build software which implements the new protocol layers, and … will richly reward early adopters of the new protocol.”

Little did J.R. Willett know that his crazy idea would fuel a the start of a “Cambrian explosion”, that created a couple of thousands tokens and raised over $32 billion in the last seven years during their ICOs, and left venture capitalists trying to figure out the future of their business.capital_invested_in_tokens


Tokens are a powerful new way of funding companies. The ICO phenomenon presents a  huge threat to the traditional VC model. They offer an opportunity for liquid investments and faster exits. In 2017 and 2018, funds raised by blockchain startups through ICOs surpassed VC investments in the sector. The primary reason for the rise of ICOs is the difficulty that startups face, when they try raise a VC round.

While Initial Coin Offerings (ICOs) have had their fair share or problems, they are still here with us. They have matured and morphed into IEOs (initial Exchange Offerings), with cryptocurrency exchanges acting as underwriters.

Token Sales 1.0 were a completely out of control, with the issuer marketing directly to the contributor and raising too much money, far beyond their needs. But with IEOs, we are seeing a much more rational and sane approach. Exchanges are in the middle, acting as underwriters that filter projects, limit the number of projects and the size of the offering. This allows innovators to access capital markets to get the resources they need.

Beyond, IEOs. you can expect that in the future, Security tokens (STOs) are going to be huge. It’s going to be a while before STOs really take off, but when they do everything will be tokenized, including private equity and venture capital markets.

In the last four decades, VCs have helped create some of the greatest companies, like Apple, Microsoft, Google, Amazon and Facebook and in the process made tons of money for themselves and their LPs (Limited Partners).

Venture capitalists invest in equity, so they look for startups that have big and fast exit potential. VCs look for startups that can scale quickly, in a few years from initial funding, and will be acquired or go public at high valuations. With nine our ten startups failing in their first three years, venture capital is high risk. From their winning picks, VCs need to recover their loses and make money for their investors. Wins don’t happen a lot, but when they do, they’re huge. Venture capital is a skewed-distribution business, sustained by highly lucrative, but low-probability payoff events. It’s very much like whaling in the nineteenth century.

When you look at the VC market, it’s a very competitive industry. VCs need to raise money to turn on the lights in the office. Limited Partners provide the capital, while General Partners invest it, into multiple startups, based on their investment thesis.1_9BjX2ScoHbqw5j9q2UysPQ

Source: Wikipedia

But regardless of the competition and the high risk involved, billions of dollars are poured into VC funds around the world, because of those few, big wins.

The biggest problem that venture capital industry faces is that VC funds are not liquid.

When it comes to investing in private companies, putting money into a venture is often the easy part. It’s getting the money out, hopefully more than what was originally invested, that’s the problem. Limited Partners are locked in for several years and in most cases are restricted from trading or selling their investments to other parties. Invested companies are expected to execute flawlessly for  5–7 years, and provide appreciation on the invested capital, through multiple fundraising rounds. An “exit” through merger or an acquisition is usually the most common way startup investors are able to liquidate their positions. After an exit event, VCs pass back the returns to the Limited Partners.

In the “The Business of Venture Capital”, Mahendra Ramsinghani describes the problem as follows: “A VC partnership is a 10-year blind- pool, a long relationship in which investors have limited ability to exit, and no clarity of outcomes.”

Making VC funds liquid can and will transform the entire industry.

Venture capital funds will become more inclusive, within regulatory frameworks, and potentially attract billions of new dollars. Liquid VC funds, will not only give qualified investors the option to exit early. It may also provide opportunities to increase IRR (Internal Rate of Return). Liquidity can provide a faster feedback loop. If people believe in the fund, the token price will go up. When a company exits, the returns go back into the fund. Smart contracts can seamlessly transfer money and ensure LPs and GPs receive the correct returns instantly. With increased IRR, General Partners will be in a better position to raise a new fund.

Liquidity opens venture capital to new audiences, making funds more inclusive. This is a huge advantage because more investors can afford to participate, without the need to forget about their money for 7-10 years. Tokens will be easily tradable on cryptocurrency exchanges. While secondary markets exist for LP positions, they are illiquid and the process can be very slow. In a tokenized fund, an investors can enter, exit and re-enter a fund as many times as they want. If an investor decides they would rather invest elsewhere, they sell their tokens at the current market price.

Venture capital is a powerful investment vehicle that allows emerging technologies to grow and develop. Tokenizing funds removes rigid positions of GP’s & LPs and allows them to collaboratively map investment efforts, with more liquidity to invest in even more startups. Tokenizing venture capital is even more powerful, and lets early-stage startups, not only survive but thrive.

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Corda powered SWIFT GPI Link could be a game-changer in global trade finance

In September, SWIFT – the inter-bank messaging firm, announced the successful proof of concept (PoC) of the “GPI Link” platform in collaboration with R3. The SWIFT Global Payments Innovation (GPI) platform has previously trialled Hyperledger without much luck. 

However, with R3’s growing network of corporates, the pilot seems to have gone better. The pilot also had used Ripple’s XRP, although R3 have stressed that they are agnostic to cryptos or fiats that the transactions are in.

This is a major announcement. Will this be a game-changer in Trade Finance? What does this move from SWIFT, do to trade finance DLT consortia like Marco Polo or Voltron?

Arun Krishnakumar is a Venture Capital Investor at Green Shores Capital, focused on Sustainable Deeptech investments.


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SWIFT have been experimenting the usage of DLT in some shape or form for its GPI platform for almost two years now. We have been following that closely at Daily Fintech. I had covered two previous key decision points in the past. The first one was in Dec 2017 and again in March 2018.

The GPI platform has been one of the key additions to SWIFT’s capabilities for cross border payments. In the past, cross border payments between institutions have been inefficient due to the opaque correspondent banking process. The GPI was built on top of SWIFT’s messaging capability.

SWIFT’s members can now use the GPI to perform international payments. SWIFT offer a set of cloud based tools that its members can use. Members can track payments and monitor service levels at any point, which wasn’t possible before GPI. Within a year of launch GPI has processed $300 Billion in cross border payments.

Having tasted some success with the GPI’s roll out, SWIFT have taken the next step in piloting the integration of DLT with GPI. The integration will target inefficiencies in trade finance. Today’s trade finance processes are so slow that Mr Vijay Mendonca, Head of Trade Products at HSBC jokingly mentioned this at SIBOS last week.

“The time it takes for a ship to move goods is faster than the time it takes documents to move between the importer and exporter” 

– Vijay Mendonca, Head of Trade Products, HSBC

There is a dire need for a platform that is ubiquitous, and can solve this challenge within trade corridors across the world. Several banks have tried to solve this over the past few years using DLT. They have had successes in executing safe and controlled trade finance transactions on the Blockchain. Some of them have used it for the sake of marketing as well.

SWIFT can make a world of difference to this space through their GPI capability. The solution they have started with is GPI Link. Swift’s GPI and R3 have worked together to integrate trade platforms to GPI members and offer off-ledger settlements of transactions.

The platform can address the following use cases,

  • Payment Initiation and Tracking
  • Control of Payments and acknowledgement/confirmation of receipt
  • A confirmation on the trade platforms, and a subsequent movement of goods

The tool that enables this from Corda’s end is the Corda Settler. The Corda Settler used XRP for this pilot, however, it can accept other cryptos or fiats too.

“This integration with SWIFT GPI will enable obligations created or represented on Corda to be settled via the large and growing SWIFT GPI network. “

– Todd McDonald, Cofounder, R3.

SWIFT also confirmed that banks are sceptical about using cryptos as a settlement mechanism. Regulatory uncertainties around cryptos also make them less desirable as a cross-border payments mechanism between institutions. Hence, the system will need to support traditional payments mechanisms.

Marco Polo and Voltron have been operating as DLT consortium models for trade finance. However, they haven’t been able to see mass adoption of their platforms. I have spoken to several start-ups focusing on trade finance, and solving them using DLT. Most of them focus on a specific corridor, as they need to start somewhere.

They (startups) also crib about how hard it is to add efficiencies to a largely paper based industry (trade finance). But when an established player, with a network like SWIFT gets into this space, the benefits can be huge.

The GPI network processes over 50% of its transactions within minutes, and almost all transactions within 24 hours. Integrating this with trade platforms to provide comparable service levels across trade corridors will be a game changer. Watch this space.

Hope springs eternal- did ITC 2019 foster a ‘customer first’ future for InsurTech?

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

It’s a week since ITC 2019 wrapped up for the 7,000 attendees; debriefs and observations abound- kind of. McKinsey & Co. posted a follow-up on the themes that were observed, kudos were conveyed to Jay Weintraub and Caribou Honig. Matteo Carbone mentioned 70 meetings he enjoyed. What say the customers? If it’s akin to daily perspective of the InsurTech concept then customers yawned.

The greatest annual collocated meeting of insurance executives, vendors, advocates, innovators, movers and shakers occurred last week in Las Vegas.  From all reports it was a well-run conference (outside of registration lines 😊 ) with scores of sessions, panels, and hosted soirees.  It is certain that TBs of selfies were filed and transmitted from the event (Nigel Walsh and Robin Kiera!)  7,000 insurance persons focusing on a common theme- connecting and customers. Sort of.

Let’s look at some ITC feedback (and some other related stuff), and place an arbitrary Insurance Elephant #innovatefromthecustomerfirst   grade on how the industry (on average) focused on the topic:

McKinsey sees Five Themes from InsureTech Connect 2019 :

  • Leveraging digital and analytics to reduce costs and streamline current operations. This reads like Captain Obvious stuff- InsurTech efforts have been focused on the expense portion of the combined ratio since the initiative’s inception.  What the authors do identify is a need to apply cost savings into customer and agency experience (not simply a bottom line booster.)  In addition and as is practical, analytics solutions should also be focused on the big dog of insurance- claim cost. This may not mean simply digitizing claim handling, even if the tech exists, as customers may not be willing to embrace it yet.  Grade- C+, copied last year’s homework.
  • Using data to enhance customer experience. “Customer experience begins with knowing your customer.”  A good premise; the summary’s position is that data is a key determinant in understanding and supporting customers.  Let’s look at your data customers, and we’ll know you well; “maintaining and organizing data, and making decisions using data are the best ways to enhance and customize customer experience.”   Or, we could simply watch your habits, surveys, and ask you what is important to you.  Data and analysis thereof can help us fine tune underwriting, sales and service once we have listened to your expression of needs.   Grade- B, customer experience was noted, but you needed to show your work.
  • Insuring and managing risk. This bullet focuses on new types of risk becoming more common- cyber, cloud computing (risk and operation), autonomous vehicles.  Then the reader sees this bullet is focused inward, for the carriers’ purpose in protecting operations and underwriting risk. Of course there is prudence in using the best tools and data analysis to ensure underwriting new risks is operationally palatable, but what would be wrong with a perspective of using innovation to better understand risks in order to better serve customers who have evolving needs due to emerging risks?  One can’t blame the messenger for the message, but the authors might have turned this concept toward the insured population.  Grade- C.  Good form but the conclusion needed work.
  • Finding growth outside the core. This section got off on too narrow of a perspective. Sure the P&C and Life markets are bumping into saturation issues in the U.S. and Europe and new products need, but there are new products emerging (pet, travel, etc.) and new approaches to SME business lines.  Oh, and then there are three billion potential customers in Africa, LatAm, and Asia (outside of China) that are significantly under-served and eager for attention.  Incumbents working with continuous improvement, digital upskilling (SIC) and adopting VC style approaches to looking at opportunities is a common refrain of the past few years.  What about collaborating with new staff in training initiatives to merge perspective and insurance skills?  And lastly- what about the efforts being made by reinsurers to become mainstream players in first-line products?  Grade- C-.  Missed most of a hemisphere and industry cousins.
  • Securing top-tier digital talent. The insurance industry in the U.S. alone employs several hundred thousand agents, admin, claim, and managerial staff, and many data scientists, technologists, coders, programmers, hardware operators, etc.  Having top-tier EVERYONE is the real goal.  Training is the competitive advantage that can be employed as firms chase solid digital talent; everyone in an insurance company is a customer service person first, and a technical expert second.  Grade- B.  A core skill that most try hard to perfect.

(Thanks to authors David Hamilton and Matt Leo of McKinsey & Company)

Concurrent with the aforementioned summary and ITC there were other folks speaking up this week about what the future may hold for insurance, its operators and its customers.

Not focusing solely on insurance but in the perspective of changes Lloyd’s is undertaking, Paul Lucas of Insurance Business Asia cited observations made by UK Chartered Institute of Personnel and Development (CIPD) CEO, Peter Cheese in light of challenges all firms face going forward.  Mr. Cheese responded to “what’s the future” by reminding all, “The best way to predict the future is to help change it.”  Continuing,

“There is a saying that there’s a changing nature of jobs- young people don’t have a job for life they have a life for jobs.” 

Insurance carriers are wise to not only see the challenges for engaging staff, but in how customers’ insurance needs will remain in flux as opposed to how their parents had the same insurance products for decades.  Among other cool observations in the interview the CEO suggested, it’s about “putting human back into the heart of the business” as that will drive creation and innovation.  I keep checking my ITC 2019 notes and can’t find that perspective in feedback.

Not wanting to rely solely on summaries of others I conducted a review of more than fifty social media posts that contained the hashtag ITC2019, to gauge attendees outlook on how the conference touched on CX.  Here are my anecdotal data:

  • Post count- 54
  • Keywords noted and frequency-
    • CX -1
    • Customer- 8
    • Insured- 1
    • Policyholder-1
    • Beneficiary- 1

24% mention percentage.  Underwhelming.

The review prompts a special shout out to Brent Haley and Sathyanarayanan Sethuraman of UiPath, who co-hosted a CX discussion video from the conference.  Sathy was a ubiquitous presence within social media.

Additional encouragement to Bobbie Shrivastav and team of Benekiva (#beneficiaryfirst) and Geoff Tetrault of InsureLife who have been on the customer-first train since the early days of InsurTech and were also present at ITC 2019.  Well, that’s about 6995 attendees to go in ensuring it’s ‘customer first’ focus for ITC2020, and for innovation efforts ongoing.


Fintech startup Adatree first to market with Australian Open Banking aggregation

Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia.

In July of this year Australia’s first Open Banking APIs went live, under the umbrella of the government’s broader Consumer Data Right (CDR) legislation. The first APIs to be released publicly by the major 4 banks are Product APIs, that conform to the API standards built by Data61. They include public information such as product rates, fees and Terms and Conditions across a bank’s consumer and business banking deposits, transaction and credit card products.

It’s TBC when individual customers will be able to share data via API, however some are pegging this to be as early as February 2020.

Product APIs are a step forward for the technology community down under, but it’s clear the real rubber will hit the road once rich personal data is made available at the consumer level. Once this happens, it’s easy to see 4 APIs ballooning to 40, which gives rise to some interesting business opportunities for those with an eye for API streamlining, and time poor developers.

This week, Adatree, a new Australian technology company specialising in CDR compliance released their first product to market – a simple API that aggregates the first Product APIs available from the major banks.

Consumers of these APIs could be comparison sites or Big 4 competitors, although the possibilities are endless. There is no doubt though that anyone looking to access real-time insights on the pricing of Australia’s banking gorillas will be hungry for this data. As Jill Berry, founder and CEO of Adatree pointed out to me, this data could allow a product provider to build financial products that could always price adjust in real time, virtually guaranteeing to their customers that they would always be 10% lower than the largest 4 banks, no matter what pricing moves take place.

This is powerful stuff, and changes the dynamic around how consumers choose a financial provider. If you could set-and-forget with one provider, knowing they would always be better than the bank/FI you could switch to, the definition of customer stickiness reaches far headier heights than anything we can really envisage today.

CDR is the burning platform that has real potential to completely transform the fintech space in Australia. The question now will be whether local businesses are ready to take advantage of this opportunity, or the scene is perfectly set for offshore smarts to finally make their move. Companies like Adatree, will no doubt be happy either way.

Category 5 hurricane in cash markets – Dollars, Bitcoins, …

The USD suffered a serious cardiac liquidity episode in late September. Not as bad as the 2013 China`s one but of course, with substantially larger global impact. This time it even affected the seemingly unaffected digital asset class.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

It has been two full years now that it is not science fiction anymore in my mind, that we could build a dashboard showing real-time global cash flows in a knowledge graph format. Of course, there are several reasons that this may not happen but nonetheless, it is becoming plausible.


One of the main reasons that it won’t happen is we cannot and will not agree on, who will control this dashboard. It is a dashboard much like the ones on Star Trek and Captain Jean Luc Picard of cash flows, unfortunately, cannot be found because there are at least 3-4 almighty existing reserve currencies (USD, Euro, Yen, Pound) and one other species (Renminbi, pegged to the USD for now) that cannot and will not arrive at a consensus for a Captain.

Cash flows and liquidity nightmares in the banking system, have surfaced again recently, as madness hit the USD repo market in September. It brought shivers to many all timers, as we are all old enough to remember so well the 2007 precursor of the subprime crisis.

The short-term funding mechanism – repo market – is in the trillions and the past two weeks, the Fed has been increasing substantially the amount of overnight cash loans and 2-week loans. The latter was doubled in size, reaching $60billion and the overnight $100bill.

These dealings (lending USD) are all digital in the conventional sense of the term[1]. The Fed intervened to calm the extreme interest rate spikes in the repo interest rates.

Matt Levine[2], reported on Sep 18, wild swings in these wholesale market interest rates between 9%  and 5.25%. While previously the range had been 2.21% – 2.09% and with the 52week high just over 3%.

This volatility is happening, in a market with a Fed Funds rate is 2.25%, one-month Libor is about 2.04%, one-month Treasury bill rates are about 1.96%.

This is a cardiac episode caused by the lack of Liquidity in USD and on a historical basis it looks like one of a kind.

REpo history

This situation seems an extraordinary global macro event that needs to be put into perspective, as the new normal is `Abnormal spikes and volatility`.

BoFA economists[3] report that the Fed needs to pump around $400billion in the market to normalize and have a buffer (in short term loans and Treasury purchases).

Some puzzling and worrisome snapshots, of the market of cash and short-term loans (at the wholesale and retail level):

  • Paying to lend: The amount of negative-yielding debt has crossed the $17 trillion mark and is rising.
  • Paying to hold cash – passing on the costs to wealthy individuals: UBS plans to charge its Swiss clients 60bps per annum for deposits above 500,000 euros ($560,000), down from an earlier limit of 1 million euros. Credit Suisse will impose 40bps on accounts of more than 1 million euros.
  • Holding more cash – USD: In the 1st quarter of 2019, Capgemini[4] reports that wealthy investors had increased their cash holdings to 27.1% of their assets (in the US).
  • Cashing out of Cryptos: The recent crash in cryptocurrencies of roughly $30billion and the Tether/BTC surge (more than 25%), could mean an exodus for USD. Bitcoin remains benchmarked against USD anyway.

Screen Shot 2019-09-30 at 11.27.56

The Question remains

We humans are not comfortable with uncertainty. Data and AI, could help us on this front, if only we agree on building that Digital dashboard to monitor real time cash flows. But since we won’t, we will continue operating with lots of questions in mind. These recent interest rate spikes are very worrisome. They also bring up another valid question

`Are cryptocurrencies really uncorrelated with fiat currencies, repo markets, and QE?`

It is logical to infer, that a liquidity squeeze in a fiat reserve currency as powerful as the USD at the wholesale level, is very much related to cryptocurrency exchange rates to fiat.

It is also obvious to me that this USD shortage is related to the disappointing Bakkt BTC futures launch.

Keep asking this question.

`Are cryptocurrencies really uncorrelated with fiat currencies, repo markets, and QE?`

Source of images:

“Nobody Knows What’s Going On”: Repo Market Freezes As Overnight Rate Hits All Time High Of 10%

The Unstoppable Surge in Negative Yields Reaches $17 Trillion

Neo4j Graphs

[1] Digital in the conventional sense because they are all accounting entries in a database (not actual printed physical dollar bills). They are not, however, tokenized assets in the Blockchain sense (an asset that can be held in natively in a digital wallet and transferred peer-to-peer).

[2] Money Stuff Interest Rates Shouldn’t Be Interesting, Bloomberg

[3] The Fed Becomes the Repo Man

[4] Capgemini wealth Report

Bitcoin could be America’s greatest weapon


Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech.

Some governments feel that Libra poses a threat to cross-border payments, monetary policy and even financial sovereignty. China certainly feels that way. Facebook’s plan to launch its own cryptocurrency has pushed the Chinese central bank to step up its efforts to release the digital yuan, as soon as November 11, to coincide with the Singles’ Day online shopping festival. Why isn’t the United States jumping into the race, to challenge all those that are trying to undermine the dollar’s reserve-currency status? Maybe it feels it can deter attempts to supplant the dollar’s role in the global financial system by other sovereign currencies. Maybe by committing to this course of action the United States becomes the center of an open digital financial system. Maybe it understands full well that no matter what it does, people will choose a currency that governments can’t control.

The US dollar is the world’s reserve currency, but only a fraction of the world’s population has access to it. Outside the United States, the only way that most people can get or use dollars, is by physically getting a hold of dollar bills.

In inflation plagued nations like Venezuela, Turkey, Iran, and Zimbabwe, people don’t have a way to store the value of their money and their life savings are disappearing into thin air. Some have resorted to buying Bitcoin, but that has its own set of problems, primarily the volatile nature of cryptocurrencies. With the advent of digital currencies, for the first time, anyone with an internet connection will able to to dump their worthless domestic currencies for a digital dollars or yuans.

It’s coming and it’s like gravity, pulling everything in the same direction. Every global currency will be digital. China is tokenizing its currency and you can expect that every country in the world will follow them, including the United States. It’s no longer about digital and non-digital currencies.

When the Chinese release the digital yuan, you can expect the United States to release the digital dollar. A tokenized version of the yuan will be accessible to more people in the world and this will potentially drive its usage levels. No question about it, the US would have to digitize the dollar to keep the status quo and maintain the dollar’s status as the global reserve currency.

In the past, the dollar has faced plenty competitors. In some ways the euro was created to chip away at the dollar and China has been pushing the yuan and now the digital yuan to de-dollarize the planet.

Since 1989, the dollar hasn’t lost any of its share in central banks’ foreign currency reserves, in currency trading, or in the cross-border liabilities of banks. There are at least 66 countries that either peg their currency to the dollar or use the dollar as their own legal tender. The dollar is tied to commodities. For example, back in the 1970s, the United States made a deal with the Saudis for oil in exchange for US dollar power, by pricing oil in US dollars. The dollar is too dominant to be replaced by another currency or a digital currency. The dollar is tied to everything.

The real threat to America comes less from cryptocurrencies like Bitcoin, Libra or El Petro and more from not embracing and accelerating technological developments in the financial sector, to maintain its role as the gatekeeper for digital innovation. The question is how can the United States be relevant in a world of decentralization.

The United States should not fight the forces that challenge the dollar’s reserve-currency status. Instead, it must incubate technologies that will enable future digital currencies to power transactions and act as a future global reserve.

The US dollar is still the most popular peg currency among traditional and alternative stablecoins. Even in “basket” type of situations, with multiple global currencies, the dollar holds more weight against other sovereign currencies and assets, keeping the United States in the driver’s seat.

If history can teach us anything, fostering and supporting innovation can only unleash economic development. Three decades ago, the United States supported the development of the Internet and it changed everything, leading to phenomenal economic growth and huge startup and job creation. Today the companies valued at billions, companies that have disrupted every industry, came from that decision: Google, Amazon, eBay, Facebook, Netflix, Uber, Expedia, Salesforce, Twitter, Linkedin and the list goes on. The world is on the brink of a digital financial revolution, that has the potential to be just as significant as the Internet.

A few days ago on CNBC, Anthony Pompliano said that people: “Ultimately I believe that people are going to opt for something that is not manipulatable, is not ceasable, is not censorable, that’s not debasable. I think people are going to continue slow at first, but over time more and more people will choose a currency that a government does not control.”

The country that is first to introduce a digital currency, that is easily stored and used abroad, than its physical counterpart, will have a first-mover advantage. China will most likely be first. But, Bitcoin could be America’s greatest weapon. Bitcoin is America’s next Internet, an open, transparent microcosm of how a new decentralized, and automated financial system could work. The United States could retain its leadership in the global financial system, by investing in research, experimentation and development of open and transparent cryptocurrency technologies like Bitcoin. If it does, it will thrive in the new, emerging financial world.

Image source

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Singapore opens doors for digital banking boom in South East Asia

Earlier this year, Hongkong offered digital banking licenses to Alibaba, Tencent and Xiaomi. Therefore, it is not surprising to hear that the Monetary Authority of Singapore (MAS) are opening up their doors to digital banks too. Applications are open for firms wanting to set up a digital bank in Singapore.

The deadline for applications is the 31st of December. MAS have announced that five applications will be accepted in this round. Two of them will be full digital banks and three wholesale digital banks.


Image Source

Hongkong and Singapore have locked horns to be Asia’s Fintech hub. While Hongkong enjoyed its access to China’s consumer base, Singapore had the ASEAN bedrock. With the emergence of South East Asia as a big potential consumer Fintech base, Singapore is well placed to make the most of the growth.

MAS have set several criteria that the applicants need to meet to have a good chance at winning the banking license.

  • Capitalisation: A S$15 Million paid up capital and a paid-up capital of S$1.5 billion within three to five years’ time of setting up business.
  • Deposits: A total deposit cap of S$50 Million and per customer deposit cap of S$75,000.
  • Track Record: At least one entity that holds a 20% stake in the applying entity will need to have a track record of 3 years in running a technology or e-commerce business. (This is an interesting rule)
  • Path to Profitability: Applicants should submit five year financial projections, through which they should be able to demonstrate a roadmap to profitability.

It is interesting to see the last two criteria. It invites Tech companies to apply for the license, however, only the ones that can convince the decision makers that they can make a profit. In a WeWork era, “Profitable tech companies” is perhaps oxymoronic though.

MAS have announced that, applicants that show a consistent loss making pattern will not be provided their digital banking license.

Firms like Ping-An from China, and Grab (a Softbank fund’s portfolio firm) from Indonesia are openly declaring their interest to apply for the banking license. We have seen several lifestyle businesses move into digital payments, and some into lending. Grab might be the first ride sharing business that would be a digital bank.

This could trigger a massive market in South East Asia for digital banks, if MAS can demonstrate viability. Singapore is a key member of ASEAN, and there are other national regulators waiting to open up their doors for digital banks. Malaysia could be open up applications for digital banks this year.


As a financial inclusion follower, it is exciting to see these developments. In 2017, roughly 39% of the adult population in low- and middle income countries did not have a bank account. 55% of this population live in Asia. However, with an extremely high rate of mobile penetration over the past few years, this trend is improving.

The IMF report that provides this data clearly articulates that there are definite macro economic benefits for low and middle income nations that embrace financial inclusion. With technology firms joining the digital and financial inclusion wave, Asia (not just China) could be the new consumer fintech hub of the world!

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on sustainable deep-tech investments

ITC 2019 as mixer, and a mixed bag of InsurTech topics


Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

Just as swallows return to Capistrano, the insurance innovation world returns to Las Vegas for its InsureTech (sic) Connect conference, this year attended by 7000.  Well, if Jay Weintraub and Caribou Honig can host a sumptuous buffet of ideas, this column can present a buffet of InsurTech related items, too.  And ponder- what is the opportunity cost of 7000 insurance persons being occupied off site for three or four days?

ITC2019 covers every aspect of insurance and its participants; the agenda and needed venue are both expansive.  Can real work get done when the options for interaction are so many?  Guess the attendees will know if an ROI is calculated as positive.  Having not attended I kept track of goings on vicariously through communications made/posted by others, and through this week’s news.  The reader can decide if this week’s findings are as valuable as being in Nevada’s temporary global insurance capital.

Get your plate, and follow down the buffet line:

Salad course

  • Ever hear of a conference ‘hangover’? CX and colleague support guru, John Bachmann, discusses the concept in this short video . Best hint- take notes, highlight, then highlight again and prioritize to distill to a few key concepts.
  • Read a note on agency value addition posted by Billy Van Jura, co-founder of the Engagement Network and active insurance agent that included a reference to HomeServe, a home repair service company. Not insurance, but certainly could dovetail with an agency ecosystem and IoT installations, akin to what IoTinsObs founder Matteo Carbone has suggested.
  • German InsurTech, Deutsche -Familienversicherung AG reported 2019 H1 sales comparison of 150% of the same period in 2018, per Lutz Kiesewetter of the firm. Recall the company was a first IPO as InsurTech for the European market. And- the company is happily transparent in providing financials for the world to see.

Main course

  • Allstate Insurance is leveraging back office innovations by taking an estimated 75% of agencies’ admin activity off the agents’ hands per this. The company states efficiencies gained through innovation will help the agents;  of course the agents’ commissions will take a 20% hit as the plan rolls out.  Allstate is a leading insurance innovator, but there’s a need to also include agents and staff in the integration.
  • Had a cool discussion with Jason Keck, CEO/founder of Broker Buddha, an agency/customer platform, “helping commercial insurance brokers grow sales by simplifying the application and renewal process for you and your clients.” Clever tech that eases a lot of the need for forms completion, retention service review, and in general- taking work off the agency producers’ desk, opening time for direct customer service.  I forgot to ask how Buddha ties in with insurance.
  • Mike Daly, of 360GlobalNet presented some interesting information here about insurer digitization of claims- plenty of activity shown but not necessarily customer-effective. The main conclusion- digitization is more fashionable than functional, and not a lot of evidence of #Innovationfromthecustomerbackwards.

Dessert course

  • A major P&C insurer is implementing an analog process measure to confirm the level of staff integration/use of a digital claim tool. Analog measuring digital.
  • Enjoyed a discussion with smart insurance players, Mica Cooper and Lakshan De Silva, of what differentiates ‘innovation’ from ‘disruption.’ My suggestion held a little sway- innovation typically serves to reduce the numerator of combined ratio, and disruption typically serves to increase the denominator.


A pretty good spread to sate your appetite for conference week (follows on the heels of MOI Vienna 2019- Erika Kriszan’s well-conducted get together of last week.)  No indigestion, please.

Now, as for ITC2019 opportunity cost- 7000 attendees, estimate $3000 cost each, $21 million gross direct cost not counting vendor costs (more than the cumulative profits for insurance startups for H1 2019, I’ll bet.)  ROI from that investment is not yet calculated so for now, it’s anyone’s guess as to net cost.  Whatever the cost was, from what I have read it was worth every penny.


First principles for Fundbox gives it the visionary edge in SME lending

Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia.

This week US SME lender Fundbox landed fresh funding, raising $176 million from new and existing investors. What sets Fundbox aside from other lenders in the market is its 1st principles approach to solving the millennia old problem of trade finance. Rather than build a pure-play lending business, the company has looked deeper into the architecture of B2B lending. It now has its sights set on becoming a Visa-like payments network for B2B sales, minimising the friction in counterparty risk assessment.

Why is this so important? Because sluggish payments in supply chains are hurting economies all over the world. According to data from the U.S. Small Business Association, $3.1 trillion is the amount owed by buyers to sellers on any given day in the US.

Hurting to the point of killing. In Q2 of this year, company bankruptcies saw an up-tick from Q1, to 22,823. While this is still well below the long-term average of 44,594, given financing and cash flow issues are often underlying causes of bankruptcy, just how many could have been prevented by smarter funding solutions, like Fundbox?

This is the billion-dollar question that Fundbox’s founders and investors believe they have the answer to, in their quest to automate underwriting and remove the need for businesses to credit assess each other, prior to entering into a transaction. After all, very few small business owners are bankers, or wish to be one.

The fact that the small business economy still operates on ‘invoices’ makes little to no sense in a world where consumers have embraced credit, whether that be traditional Visa, MasterCard or Amex products, or the new flavours of credit, in the form of buy now, pay later.

While consumers have proven they can rapidly adjust to new flavours of credit, businesses have typically struggled to follow suit. Many fintech lenders report that educating business borrowers about different types of credit can be the most challenging part of prising them away from the expensive or inflexible bank credit they’ve grown accustomed to.

Fundbox might be able to change this. The business has shown a willingness to lend to businesses with as little as 3 months trading history, which in itself, is a game changer. If it can build a smart set of financing rails that small business owners (who are far closer to consumers in mindset than corporates) can actually understand, then they have a real shot at unleashing some of those trillions of dollars, back into the economy.

Efficiency not necessarily growth is the story here, and there is much to be gained by achieving it.

Vanguard undercuts Digital only `advisory ` offerings

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer – No.3 influencer in the finance sector by Refinitiv Global Social Media 2019.

The Vanguard effect is well known in the ETF market and now it could extend into the digital advisory space. The Vanguard Digital Advisory service is pending SEC approval.

Screen Shot 2019-09-23 at 10.04.05

Vanguard`s Personal Advisor services were launched in 2015 and as of June 30, 2019, $140billion are managed through this hybrid approach. This is more than four times higher than Schwab`s robo services.

This month, about 4yrs later, Vanguard is adding to their offering, the Vanguard Digital Advisory service. This is pure digital, no human advice, low minimum of $3,000. A simple allocation amongst four Vanguard ETFs, the usual simple questions to access risk and goals.

Vanguard`s Digital Advisory service uses

  • Vanguard Total Stock Market ETF
  • Vanguard Total International Stock Market ETF
  • Vanguard Total Bond Market Index ETF
  • Vanguard Total International Bond Index ETF

The cost is 15bps and if we include the ETF fees, it could go up to 20bps.

This is cheaper than the Vanguard hybrid offering which starts with a human advisor and a minimum of $50,000. The Personal Advisor Services are 30bps and up. So, the new Vanguard Digital Advisor could entice customers starting with less than $100k that don’t need a person to start investing.

The other attractive feature of the Digital Advisor is that it offers clients the capability to include other accounts, towards their goal setting. For example, a 401k account from an employee managed elsewhere, can be aggregated on the Digital Advisor dashboard and taken into account, in order to determine the optimal asset allocation. This feature is similar to what Personal Capital offers to its clients (Personal Capital offers a hybrid service).

Which brings to the harsh realization that no private bank in Switzerland offers this capability to its clients. Most HNWs hold portfolios in more than one bank and there is no one provider that offers this digital aggregation capability for online tracking and rebalancing.

Vanguard Digital Advisor is in invitation-only mode. It is for lower minimums; it is the lowest priced non-hybrid offering in the market and has chosen a very simple allocation with 4 only ETFs.

We can start checking on the Vanguard effect in 2020.

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Related readings on Dailyfintech by Efi Pylarinou:

A mid-year look at Digital investing

Robo-advisors have not reduced the Cash Pile

High-quality Low-cost, Active Index investing

Robo-advisory: Women, Freemium, and Subscriptions Robo-advisory: Women, Freemium, and Subscriptions


Robo-advisors With the Most Assets Under Management -2019

Vanguard to Offer a New Robo-Advisor with Vanguard Digital Advisory Service

Is Libra the Future of Money?


The world needs a stable, digital currency that provides autonomy and better control of money. Cryptocurrencies like Bitcoin emerged with the promise of fulfilling this need, but high volatility hindered their usefulness. People in emerging economies need a way to protect their money, an easy and fast way send and receive money and merchants need a stable way to do business without intermediates. Stablecoins promise to fulfill these needs and Libra has set us on a course that will redefine money in the 21st century.

Since Facebook’s announcement of Libra in June, there has been a heated and ongoing debate about the the future of money.

A blend of blockchain and partnerships with 28 companies, Libra has been pitched as a money transfer service and a unique currency rolled into one, that will speed up and simplify payment transactions. According to Facebook, the initiative is designed to reach the world’s poorest people, including 1.7 billion without a bank account. Libra’s goal is to create a global digital currency that allows people to avoid the fees associated with credit cards and remittance services.

Governments and policymakers have been in an uproar ever since Facebook debuted Libra to the world. Since Facebook unveiled its plans in June, its proposed cryptocurrency has met with regulatory and political skepticism, with France and Germany pledging to block Libra from operating in Europe. Recently in an OECD conference, Bruno Le Maire, the French Finance Minister said that Libra puts at risk the sovereignty of governments and should be banned. The government of India is considering a Libra ban. Singapore is one of the friendliest tech-financial center in Asia, warned that Facebook’s digital currency raises global financial risks. Many policymakers in the United States, France and United Kingdom and other countries have spoken out about the dangerous course Facebook is pursuing by trying to launch a currency that challenges well-established fiat currencies and the governments that back those fiat currencies.

If Libra wasn’t enough, Venus showed up in August.

On August 19, Binance, the world’s largest cryptocurrency exchange, announced that it will launch an open blockchain project called Venus to help businesses all over the world build their own stablecoins pegged to fiat currencies.

One big difference with Libra, is Binance’s focus on the regulatory concerns expressed by governments, ensuring that Venus won’t be a threat to the sovereign authority of their national currencies. Binance is partnering with governments and companies in non-Western countries, specifically targeting smaller countries with unbanked economies.

If I was to focus on one thing, it would be the statement by Binance co-founder Yi He, because foretells the future of money:

“We believe that in the near and long term, stablecoins will progressively replace traditional fiat currencies in countries around the world, and bring a new and balanced standard of the digital economy.”

We are seeing a transformation from fiat to crypto. A shift from government issued money to stablecoins, issued by large corporations. A money revolution is one the way and its only getting started.

Libra set off a chain reaction. We can expect new digital money coming from everywhere.

Big brands will create their own money. JPMorgan Chase announced that it’s developing its own USD-pegged coin. Walmart could be working on issuing a USD-pegged stablecoin, according to a patent filing, that aims to provide an alternative choice for low-income households that find banking prohibitively costly.

Countries will create digital versions of fiat money. China is leading the pack and has been aggressively working on the development of its own digital currency. The PBoC has stepped up its efforts after fears that Facebook’s Libra was going to bring dominance of the US dollar to the digital world. But the new currency is more of an attempt towards digitization and control rather than being a real challenger.

In the short term, we will see a slew of new stablecoins. Today’s stablecoins, Tether, Gemini, USDS, PAX and others, address the volatility issue, with a 1:1 ratio between digital coin and a fiat currency or commodity. Next generation stablecoins will be “branded stablecoins”, that continue to offer price stability, but will also offer things like loyalty and rewards. Facebook and Walmart the first giants to expand into the cryptocurrency space, but they will not be the last. All of your favorite brands will have their own brand of money.

Digital payments are happening, whether governments around the world like it or not. For example, Norway has the lowest cash usage in Europe, with two-thirds of the population making digital transactions. Money needs to evolve in order to keep up with the unstoppable progress of the digital environment.

The real question is whether we want a global digital currency controlled by governments and banks or by a company like Facebook. We are witnessing an inevitable wave of change and policymakers meed to find the right balance between innovation and consumer protection.

Today’s money is anachronistic. It comes from an analogue world and we’ve moved into a digital realm. In the last three decades, just about everything was disrupted by digital technology, from the way we communicate and consume media, to the way we travel and vacation.

If stablecoins overcome their challenges and build sufficient trust, they could become a standard global payment method. If algorithmic, non-collateralized stablecoins manage to stand the test of time, we could see a new era of money, that is no longer dictated by governments and their central banks. A programmable era, where money no longer moves at the speed of humans or at the speed of institutions. Money will be than just a static unit of value, it will combine software and currency, that doesn’t need to rely on institutions for security. When this happens, it won’t even feel like we’re transacting anymore and things will change in ways that we can’t even imagine.

Whether or not Libra succeeds, money is a technology that is due for change and Libra has stirred up things enough, to realign everyone’s attention.

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Ilias Louis Hatzis is the Founder & CEO at Mercato Blockchain Corporation AG and Weekly Columnist at Daily Fintech.

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Revolut Youth targets new customer segment – Kids and Teenagers

Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on sustainable deep-tech investments.

Catch ‘em young is banker marketing mantra – people rarely change from their first bank. UK with c. 20% of the population under 18 is an example. This is where top neobank Revolut offers “Revolut Youth” for 7-18 years old. Neobanks cannot use the parental inertia route (use the bank that parents always used). This is a parent controlled child account – parents make the decision, but sub accounts are specific to the child – appealing to parents with low fees, controllable, educational. Good for both parent & kids = winner.

Just when I think Fintechs are starting to run out of ideas, I see one that is focusing on kids and teenagers, and my hopes are up again. Almost about a year ago, I did an interview with Arman Rousta, the CEO of Kidcoin.

It was with so much enthusiasm that he described why Financial education at an early stage would help kids with real life challenges as they grow up. Arman explained that kids learn the concept of value at an early stage – as they bargain toffees for good behaviour.

Since then, there have been a series of Fintech firms focused on kids, teens and the next generation of potential users.


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As per the Office of National Statistics in the UK, about 20% of the UK population are under 18 years old. That is approximately 13 Million kids. In the context of the UK, that is a shrinking market due to the ageing population, but still a big market. Many top Fintechs have started looking into this space.

Revolut is looking to launch an experience called “Revolut Youth” for 7-18 years old. The roll out will involve first creating a parent controlled child account. In the UK children of this age range earned about £4.5 Billion in 2018. That is roughly about £350 per child per year.

This may not look like a lot of money for a bank. However, these children get absorbed into mainstream Revolut accounts as soon as they hit 18 years of age. As per behaviour of account holders go, customers tend to stick to their first bank account for life. Therefore, this is definitely a market to tap.

On the other side of the pond, Atlanta based Fintech startup Greenlight raised $54 Million in Series B funding. Greenlight provide a debit card and a financial education platform for kids. JPMorgan and Wells Fargo participated in this funding round. The idea is to train kids with financial concepts, and teach them about the importance of saving money at an early age.

The Greenlight app allows children to perform chores and earn money through that. They can also receive funds from parents, with limits defined on spending. Parents will receive alerts when their children spend. The app also allows kids to have savings goals, and allows parents to decide the retail outlets that kids can shop in. The app has brought over 500,000 customers to Greenlight so far.

Greenlight offers parents an opportunity to build that core competency of financial literacy in their child’s formative years.

– Thomas Richardson, Head of Strategic Partnership Investing. Wells Fargo

Another startup, that focuses on Children is Go-Henry, which is a Children’s pocket money card. They have a similar proposition to Greenlight. They put the parents in control by providing them spending alerts on the childrens’ accounts. Kids can learn about money through completing tasks, spending responsibly and working towards savings goals.

While most of these existing apps onboard children through their parents, US based firm Step and France based Kurd, directly go to Children and involve parents in the onboarding process (KYC). It is a riskier strategy, but Kurd reports a 80% success rate with onboarding.

With so many different players getting into this market, and a few different approaches being tested, this space is getting really interesting. I personally believe that Neobanks  have an edge here. Revolut has got their noses ahead, can they stay there?

Flood risk AI is now a reliable tool- is there a desire to put it to work?


Flood insurance has been a wallflower at the coverage dance- an eager participant but not able to find a suitable partner.  Innovation efforts have found suitable risk prediction partners for carriers- FloodMapp, Hazard Hub, and Previsco among others- but is the flood insurance market ready?

Politics, inertia, customer preferences and regulation might keep the music from playing.

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

Flooding causes damage globally in tens of billions of dollars/euros per year, and the bulk of that amount is uninsured.  Choose your source for insured/uninsured percentages- the conclusion is the same- flooding is a risk with global effects, and flooding is a risk that is globally accepted as difficult to underwrite.  Flooding is hard to predict, has regional effects involving huge numbers of properties, and subject to moral hazard perspective by property owners.  Consider these indicative data from McKinsey :

ins gap

Hard to predict is a real problem-if the probability of risk cannot be reasonably calculated, and the extent of possible risk is elusive, that sure makes an actuary’s job difficult. In the U.S. those problems were finally acknowledged as nonviable issues for the private insurance industry and a government program was established in the early 1970’s to address the risk, the National Flood Insurance Program (NFIP).  The underpinning of the NFIP was flood cover that was limited, was driven by a property’s location within flood maps drawn by risk exposure over time, and by the relative elevation of a property to risk (creeks, streams, rivers, wave and surge, etc.)

Fast forwarding to today that program morphed into a moral hazard, subsidized, under-funded monster that even in high risk areas had a low take up rate among property owners.  Mapping data became political footballs (no one wants a property that is in a designated Special Flood Hazard Area, SFHA), premiums became unbearable due to the effects of moral hazard/adverse selection, and outside of mortgagee requirements there is little societal or economic coercive pressure for a property owner to obtain the cover.  SFHA- a one in a hundred probability of a damaging flood?  I’ll take those odds and my chances, most property owners said.  And over time?  Persons who obtained the cover and suffered losses often simply repaired and waited for the next event, being indemnified multiple times without any underwriting consequence other than premium creep.  Those who had no cover either self-repaired or waited for government support in the form of grants or low-interest loans.

Human nature prevailed after 2005’s Hurricane Katrina, when flood/surge losses exceeded $100 Bn, and the number of US flood policies peaked the following few years to 5.7 million, only to decline more than 10% since then (see below):


And here’s a well-kept secret of the NFIP- claims can be adjusted only by flood-certified adjusters due to policy differences from private plans, and of course the bureaucracy’s zeal to restrict how flood funds are spent.  Subsidize the heck out of the program, but restrict efficiency in handling when indemnity is needed to jump-start recovery.

What of  countries other than the US?

There are few government subsidized flood programs elsewhere; most flood programs that are available are tied to property policies as extensions of cover (hello again, adverse selection issues) or bundled cover with more traditional policies.

An exception to lack of subsidized cover is the UK’s Flood Re initiative that cedes risk in excess of premium calculations to a not-for-profit organized as a backstop for carriers that is in the end supported by all insurers by market share.

Parametric options are becoming more accepted as alternatives to the complex nature of flood indemnity predictions.

So, it’s agreed that flood damage is a growing problem, and options for carriers and customers have been few.  However- if the probability of flood risk can be assessed and ‘tightened’, does that not move flood risk into a more traditional risk role?  The ongoing issues with US flood maps are that not only are the maps supported primarily by property elevation data that may have been influenced by politics, but that the mapping results are static until the next official surveys, and the mapping data are narrow in their basis- elevation, proximity to the water risk, and calculation of risk probability that is always backwards looking.

Consider some of the risk assessment/prediction innovators:

  • FloodMapp, a real-time flood prediction software platform that “uses proprietary technology for large-scale, rapid predictive flood and hazard modeling.” Large scale and rapid, words that have not been typically found in the flood risk lexicon.  And here’s a real innovation- the real-time aspect of the tech can be leveraged by insurers to advise policyholders of flooding potential before it actually affects properties, allowing insureds time to mitigate potential losses, and while the company’s information does not touch on this aspect, it’s important- potential reduction in immediate danger to residents. FloodMapp has proven its concept with insurers in the US and globally, and will roll out its primary products, Predictive Mapping (flood modelling to predict an extent of flooding), and Hazard Mapping, (tool for underwriters to apply in determining the risk of a particular property).  As co-founder Juliette Murphy suggested, “if we can have an app that tracks when our pizza will arrive, with proper, detailed flood risk data we should be able to have an app that tells when a flood may arrive.”
  • Hazard Hub, a company that promises, “the most comprehensive risk data ever created.” Whether that promise can be proven, the company can prove that for multiple risks (air, fire, earth, water, and man made risks) its proprietary ‘scoring of properties for exposure to any or all of these risks is comprehensive and accessible.  Yes, the firm does want to be a carrier’s go-to tool to aid in underwriting, but it also wants to be a risk understanding tool for individual property owners through its com website, where the firm will provide a free risk analysis for dozens of risk category, assigning the respective property a score of ‘A’ (low or no risk) to ‘F”, substantial risk.  In terms of comparison with traditional flood maps, Hazard Hub’s analysis will narrow the risk measure to the subject property as opposed to a broad assessment, potentially advising that a property in an ‘X’ flood hazard area (low risk) may have elevated risk due to its immediate geographic placement.  It educates customers and agents to allow better insurance decisions.
  • Previsico, a newer entrant whose purpose is, “produc(ing) round the clock street-level flood risk predictions and analytics. Uniquely, these are continuously modelled and updated using a combination of different weather forecasts. This allows us to map the likelihood of short and long-term surface water events in real-time to the street level. Real-time data production, working to allow property owners to protect structures and residents. The company has a robust staff of data scientists and modeling experts; the firm plans rollout of the product offerings- mapping, individual risk assessments, training and ‘nowcasts’ in greater breadth during 2019 and beyond.

With the advent of availability of these and other risk prediction tools, will the insurance industry leverage the detailed analyses into more widely available, less costly and more desirable flood products?

Some considerations:

  • A generally available flood cover within the US could produce a $40 Bn premium ‘bump’ for carriers, if the risk is aggregated back into standard HO policies. ( Flood Insurance Gap Represents a $40 Billion New Market, Guy Carpenter)
  • Detailed flood risk information can be leveraged into parametric programs, including municipalities establishing immediate financial response programs if a flood trigger/index is met
  • New parametric programs such as that offered by FloodFlash will become more widely available due to the availability of risk data, and changes in market tendencies related to flood risk
  • Reliance on government subsidies may be reduced as less costly alternatives become available within the private flood market.
  • There will be a more affirmative approach to risk education as information becomes more robust.  As John Siegman of Hazard Hub noted, the biggest change in flood risk will be when there’s a recognition that agencies are best suited as trusted advisors re: flood risk for customers, and carriers are able to regularly communicate risk proactively to their customers based on empirical, topical risk data.
  • Will opt-out choices become integrated into policy applications, e.g., risk scoring supports flood cover and prices it, prospective customer chooses to not have it included? Or the carrier opts to not extend HO cover?
  • Flood programs will evolve from subsidized, backward looking programs to forward looking, risk-rated private plans.
  • Private flood insurance plans integrated into HO policies opens the door to a wider spectrum of adjusting/methods of settlement.

There’s plenty to discuss about flood insurance, its magnitude of insurance gap, subsidization of cover, and potential if the private market becomes the primary flood insurance vehicle.

The presence of innovative AI risk analysis, predictive programs, and reasonably inexpensive access to same by carriers and insureds just might prompt a new tune for flood insurance, which surely would be a welcome addition to the insurance dance card.

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Payments giants battle it out for the new breed of retail customer

Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia.

Payments processor Adyen has prized eBay away from PayPal and a high profile customer from Square.  Is there a changing of the guard afoot in the global fintech payments hierarchy, dominated by PayPal and Square?

The context is the seismic change in retail/eCommerce. Brands who embrace the future of retail – a blended and friction-free buying experience across in-store and online, on a global scale – will do well. Of course, to achieve this goal, a fluid and flexible payments partner is key.

While PayPal was at the forefront of the eCommerce revolution, Square and Adyen have been coming up from the rear incredibly quickly, for some time now. We’ve taken a look at all three companies recent investor announcements, to get a sense of how each is tracking in this new competitive landscape.

Processing volume growth

In H1 2019, Adyen reported it processed €104.6 billion in payments, up 49% year-on-year. Over Q1 and Q2 2019, PayPal reported a cumulative processing volume of $333 billion, with both quarters posting solid year-on-year growth metrics of 22% and 24% respectively. Square was the minnow of the three, with a reported gross payment volume of $49.4 billion across the first two quarters of this year. It too, like PayPal, had year-on-year growth in both quarters in the mid 20%’s.

Notably, 11% of Adyen’s reported revenue was directly related to point-of-sale transactions, representing  €11.0 billion and a significant uplift on the prior year, of 67%.


Adyen booked net revenue of €221.1 million in H1 2019, up 41% year-on-year. PayPal booked $8.44 billion over the first two quarters, with growth across both compared to the prior year of 12%. Square also cracked into the billions club, booking net revenue of $2.129 billion across Q1 and Q2, up 43% and 44% respectively on the prior year’s corresponding quarters.

For Adyen, Europe remains the largest contributor to net revenue, comprising 65% of the total amount in Q1. However, the business is making inroads in Square and PayPal’s home territory, with North America accounting for 15% in net revenue, the fastest-growing region for the business, with year-on-year growth of 46%.  While most of this is business PayPal possibly lost or missed out on, it won’t come as welcome news to Square either. While Adyen focuses on enterprise customers for now, cross over can occur, like Adyen’s snaffling of juice chain Joe and the Juice from Dorsey’s company.


Adyen’s reported EBITDA for H1 was €125.8 million, while Square reported adjusted EBITDA across Q1 and Q2 of $167 million. Adyen’s EBITDA margin, a measure of a company’s operating profit as a percentage of its revenue,  is significantly higher than both PayPal and Square, at 57%.

Who has the edge?

While all three companies have unique strengths that can position them ahead of each other in various sub-sectors, the trillion-dollar opportunity that exists in bricks and mortar payments seems pivotal to securing sustained growth, giving the likes of Square and Adyen a possible edge in terms of future growth ahead. Bricks and mortar still outpace online by over $20 trillion in volume, and eCommerce is actually slowing down. It doesn’t help that a good deal of prior growth attributed to the sector was due to Amazon, which clearly clouds any numbers.

The game is far, far from over for PayPal though, who back in March announced a tie-up with Instagram to power their checkout experience. Earlier this year the company also purchased Hyperwallet, and completed the iZettle acquisition. To this day it remains the gorilla in the payments space, and will not give up that mantle easily.

Whatever the case, all three businesses are forging new paths in the payments space and should be on your radar.

Photo by Blake Wisz on Unsplash