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From Amazon to Uber: why Invisible Finance is imminent

From Amazon to Uber: why Invisible Finance is imminent | Disruptive Finance and Fintech | Scoop.it
It may look like shoplifting, but it's actually Amazon's latest real-world shopping experiment.
Huy Nguyen Trieu's insight:

Amazon's latest announcement of Go, a supermarket where consumers can get in, "grab what they want and simply walk out" was funnily described as "shoplifting" by CNET. 

But this is of course not a surprising development, since we might expect most supermarkets to move towards such frictionless experiences in the future. Because this replicates in the real world what Amazon has been doing for years with 1-click buying on their website. Or our experience of getting in an Uber and exiting the car without the need for a physical act of payment.

 

Because we are now used to 1-click buying or Uber's frictionless payment, we tend to overlook the fact that this is one of the most important trends in finance today: Invisible Finance. (this is one of my favourite trends, together with "data monetisation" and "white space"). At a high level, one of the objectives of finance is "just" to facilitate commerce, and there is no need for finance to be visible. If I receive groceries from my supermarket and pay with my credit card, the act of "receiving groceries" is important, but "paying with my credit card" only exists because there is no other way for the supermarket to debit my account.

But in a distant past, the grocer would keep a tab of my spendings because he knew who I was - which is what technology is bringing back to the table today through my smartphone and finance can become invisible again

Whether Amazon succeeds in their endeavour is still to be determined, but there is no doubt in my mind that invisible finance will be a very significant trend in the future. First, because with shopping cart abandonment that can reach 97% on mobiles (i.e. only 3% of consumers complete their purchase!), there is a very strong need for e-commerce to make the process as easy as 1-click. But also because consumer behaviours are changing, and they will be less and less tolerant of confusing checkout processes. 

 

This of course will have a very profound impact on the business model and value proposition of banks and credit card companies. Who still remembers what credit cards they are using in their Uber account? Even when consumers have stored multiple cards in their Amazon account, it's likely they will always use the same one: the default credit card. The brand power and marketing strategies of credit card companies and banks will therefore need to adapt. 

But more importantly, losing the customer relationship can be a significant game changer for finance. From a credit card to mortgage, from a saving account to a loan, financial institutions have always been very visible to their clients - and own the relationship. If these financial transactions are totally embedded by the e-commerce companies, how will banks continue to own the relationship? If this concept of "customer relationship" seems a bit theoretical, look no further than the hotel industry where hotels have lost the customer relationship to the benefit of websites such as Booking.com. The result is that Booking.com now has more pricing power than the hotels. That results in a market capitalisation higher than all the major hotel companies combined...

 

On the other hand, there could be many opportunities for banks to offer new services, from automated mortgages to API-based loans.

 

There will therefore be interesting strategies for financial companies to consider, but one thing is sure: the emergence of Invisible Finance has begun...

 

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What do finance professionals think of AI?

What do finance professionals think of AI? | Disruptive Finance and Fintech | Scoop.it

"AI and machine learning will undoubtedly alter both the headcount and the nature of skills required in the industry. A significant minority of survey respondents fear the effects on the workforce will be negative within the next few years. But wholesale displacement of humans is for the longer term – nearly seven in ten believe AI will bring complete or substantial change to their own jobs over the next 15 years. Even in trading, where automation is already widespread, human roles will remain critical in areas such as algorithm validation and monitoring, as well as compliance. At this point, few believe machine learning models can or should drive financial-market operations completely independently of human control...."

Huy Nguyen Trieu's insight:

A while ago, I wrote that AI and machine learning was more and more used in our daily lives - but that finance had so far failed to embrace these techniques. 

Euromoney Thought Leadership just published a very interesting report, where they surveyed 400 senior managers in finance and analysed their views about AI.

I was actually slightly suprised by the results: the majority of participants thought that the main impact would be on 1) trading strategies, 2) credit scoring and 3) compliance. For trading strategies and credit scoring, we could argue that this is business as usual - these businesses already are big users of algorithms, and AI/machine learning, etc will be just another tool to improve their models (although it introduces some ethical/regulatory issues because of the vast amount of data used). So it feels that it would be more incremental than a real game changer in my opinion.

On the other hand, tools such as recommendation engines a la Amazon (rumored to be reponsible for 1/3 of Amazon sales) would be much more disruptive in my opinion - since they have rarely been used before in finance.

In a world where proprietary trading and creating alpha is much more challenging, using AI to improve sales and customer relationship might be an easier strategy than optimizing trading strategies. 

 

PS : thanks to Tom Upchurch for the document

 

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Who said: "Our competition could be Google or Facebook" ?

Who said: "Our competition could be Google or Facebook" ? | Disruptive Finance and Fintech | Scoop.it

"The incoming chief executive of French insurer Axa has said in his first interview that he wants the company to focus on the group’s digital transformation rather than making more big acquisitions. 

Axa announced on Monday that Thomas Buberl, the 42-year-old head of the group’s German operations, would take over as CEO of the insurer in September, replacing Henri de Castries, who has held the job for 16 years."

Huy Nguyen Trieu's insight:

If I remember correctly, it was Jamie Dimon, the CEO of JP Morgan, who was very vocal about the competition from Silicon Valley, and the threat to banks. 

 

But to my knowledge, that's the first time that I see a newly-nominated CEO of a financial institution (in that case an insurer, Axa) explicitely mention digital transformation as a strategic axis.

 

Axa has been very active in innovation recently (from Axa Seed Factory, to Axa Labs to Axa Strategic Ventures), perhaps one of the most active ones together with Generali or Aviva in Europe, and it is therefore not surprising to see such a focus on innovation. However, innovation is rarely seen as a strategic focus  for large organisations*, and this first interview from Thomas Buberl is therefore eminently interesting. It will be fascinating to see how this develops at Axa.

 

If you read the FT article, you will see that it's not what we normally expect to read in the first interview of a CEO of a large financial institution. Is it the beginning of a trend, where senior management of large organisations are much more digitally aware?

 

*most organisations have a digital strategy - that is "easy". But it is very different from having a strategy in a digital world - that is much harder. 

 

 

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Fintech in 2016: why you need a different strategy

Fintech in 2016: why you need a different strategy | Disruptive Finance and Fintech | Scoop.it

With the current volatility in the markets, some people are starting to question the viability of investments in Fintech – or technology in general. Although it’s not the majority, I suspect that we will hear more skepticism about the Fintech investment thesis over the next few months

Huy Nguyen Trieu's insight:

2016 is likely to be totally different from the previous years, with startups and investors alike needing to change their mindset...

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6 days left to register for the European Fintech Awards

6 days left to register for the European Fintech Awards | Disruptive Finance and Fintech | Scoop.it

"Join the European FinTech Awards and Conference where innovative and disruptive FinTech companies are awarded. Meet 400 hand picked entrepreneurs, bankers, investors and advisors, extend your network and develop business."

Huy Nguyen Trieu's insight:


The European Fintech Awards (Amsterdam, April 14) should be one of the interesting Fintech events of 2016. There are obviously a lot of Fintech awards, rankings, etc. and they should be taken with a pinch of salt - in my opinion, the only important award really is the commercial success of the startups.

But in an industry where there are now thousands of startups, there is a certain merit in having other people do the work, scan the market and discover promising projects.

So I'll be one of these people who likes to spend hours reviewing startups (together with a stellar panel of judges) and tries to identify the next Googles of finance. To be fair, it won't be only the judges who will do the work, since the Fintech 100  will be selected through an online voting process first, and only then will the judges select the overall winners.

So if you are a startup and want to participate, you have until January 24th to register... 


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Free passes for Fintech Connect Live in London!

Free passes for Fintech Connect Live in London! | Disruptive Finance and Fintech | Scoop.it
Europe’s most exciting exhibition of fintech startup innovation is here! 2000 Fintech professionals all together in one place for two …
Huy Nguyen Trieu's insight:

As a perk for being on the advisory board of Fintech Connect, I've received free passes for Fintech Connect Live - which is one of the largest Fintech conferences in London this year. 

The agenda is great, from blockchain to Insuretech, from digital transformation to online lending. 

There will be 2,000 attendees, of which 30% are startups, 15% investors, 25% coming from traditional finance, and the rest being split between government, providers, etc. With a superb line-up of speakers, it should be an amazing event. 


If you'd like to attend, just register and enter the code FTCL100 that gives a 100% discount, i.e. a free pass! The code expires after the first 25 readers of Disruptive Finance have used it, so don't wait if you're interested....


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World Economic Forum: Fintech will revolutionise SME financing

Huy Nguyen Trieu's insight:

This is an excellent report from the World Economic Forum, and it is very telling that they chose SME financing as one of the key topics in the future of finance. The WEF is interested in topics that are important for society but also tries to identify the levers that have the most leverage to "create a better and more stable world". This is the reason why SME financing is important (SMEs represent 60% of global GDP, both in developed and emerging markets). 

On the other hand, I also believe that SMEs are one of the most interesting markets for Fintech - many of them would be unbanked or underbanked, especially in emerging markets, and the financial services offered to SMEs haven't really evolved for the last 50 years. 

In conclusion, the SME market is a good business opportunity for entrepreneurs, and improving finance for SMEs has a clear positive impact for society and the economy.  One of the reasons I love Fintech...


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Sheeba Hernández's curator insight, November 20, 2015 7:27 PM

A study on the future of fintech, by the World Economic Forum.

 

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Blackrock continues to innovate, creates JV with Google

Blackrock continues to innovate, creates JV with Google | Disruptive Finance and Fintech | Scoop.it
BlackRock is in discussions with Google, the technology group, to create a joint venture that the world’s largest fund house hopes will enable it to improve returns. The tie-up, which would be a first for the fund market, will seek to explore how
Huy Nguyen Trieu's insight:

Article in the FT about a joint-venture between Blackrock and Google. Although there is not much detail about the initiative itself, it'a s good reminder that Blackrock is in my opinion one of the most innovative asset managers.

They were one of the first ones to identify p2p lending as an asset class to invest in, they also created a fund to invest in Prosper and Lending Club loans, they also actually bought equity in the p2p lenders themselves. They are also one of the few asset managers to assess how social data such as Twitter can be used for trading decisions. 

Oh, and let's not forget they also bought a robo advisor not that long ago...

Common knowledge says that it is usually hard for incumbents to innovate - because of size, because of culture, because of legacy systems. Blackrock - the largest asset manager in the world - shows that it is not a curse however, and that even very large organisations (which are not tech groups) can innovate, and in that case their size can become a huge asset for innovation. Interesting to see that there is another good example of a large organisation embracing innovation: Fidelity.  It seems like that in asset management, innovation will come from startups but also from the traditional players. 


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Free Instant Payments for Challenger Banks: Why the UK is 1st for Fintech

Free Instant Payments for Challenger Banks: Why the UK is 1st for Fintech | Disruptive Finance and Fintech | Scoop.it
Small banks have to pay their bigger rivals for access to the payments system, but a new scheme will see technology firms offer the service to challenger banks instead
Huy Nguyen Trieu's insight:

A lot of payment startups have been setup to make payment (between individuals, with merchants) faster and cheaper than banks. 

In the UK however, Faster Payments is free and instantaneous, and it's hard to beat that. It's a good example of innovation driven by regulation, with traditional financial providers working together (via Vocalink) to create a new service in a very short amount of time. 

But not all banks access directly to the Faster Payments network though - some of them do, some of them have to go through a sponsor member for example - some challenger banks found it very difficult to find an existing member willing to give them access. 

It is now getting easier for challenger banks and Fintech companies to access the network (in other words, there will be more aggregators, so that costs could be lower). For me, it's another very good example that shows how pragmatic the regulator / government is in the UK, and why Fintech is growing so quickly there. 

On another note, last year Paym (the equivalent of Faster Payments on mobile) was also launched. Same idea : instant, free, but on mobile. I haven't seen the latest figures, but it seems that a lot of people tried it, but not many actually use it - it's an interesting example for the adoption of mobile payments. 


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Why Asian Fintech is Different: Example of The SuperCharger

Why Asian Fintech is Different: Example of The SuperCharger | Disruptive Finance and Fintech | Scoop.it
Different from? Different from Europe and the US mainly, where we see most of the initiatives, buzz and unicorns in Fintech… However, we shouldn't un
Huy Nguyen Trieu's insight:

Why many Fintech innovations will happen in Asia, why it's fundamentally different from Europe and the US, and what the SuperCharger tries to do


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What are Innovation Labs for?

What are Innovation Labs for? | Disruptive Finance and Fintech | Scoop.it
Start-ups are increasingly turning to large banks – the very institutions that fintech is supposed to be disrupting – for mentorship and money.
Huy Nguyen Trieu's insight:

Very interesting overview of innovation labs by Simon Mortlock with a few quotes from yours truly. 


I will not try to paraphrase the article but a few observations come to mind:

- Innovation labs are extremely useful to large organisations, as a way to interact with startups, get new ideas and source potential suppliers/investments. However, it seems that innovation labs are not that common yet (vs. corporate venture funds for example)
- For startups, I believe that units like innovation labs are a must. I previously wrote that working with a large company  can be a fatal experience for a startup and innovation labs are certainly a valuable entry point into the large organisations.

- Finally, if anyone doubted the interest of Fintech for bankers, then have a look at eFinancialCareers. It is the largest careers site for finance professionals, and Fintech articles are now commonplace  - whereas they were much scarcer even a few months ago.  


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When innovation will make you pay more for your insurance

When innovation will make you pay more for your insurance | Disruptive Finance and Fintech | Scoop.it

"With healthcare costs rising across the developed world, many arguethat the rise of wearable technology as a way to determine health insurance premiums is inevitable–and one company in Switzerland is putting the idea to the test."

Huy Nguyen Trieu's insight:

Many new services have been launched in Insurtech (i.e. tech innovation in insurance) based on the argument that consumers will be paying less

For example, if you were to go to wear an iWatch and go running everyday, your insurance premium should go down - because you would be considered as a "better risk". But I always wondered when we would see the opposite - if you do nothing and are a couch potato, wouldn't your premium go up? This was for me one of the examples that show that Fintech and Insurtech could have important social impacts, and that we should talk more about ethics and values in our industry

So, that has happened. CSS, a Swiss insurer is designing new services around wearables, that will - as expected - reduce the cost for active members, but - and that's a first - increase the cost for couch potatoes. 

And if we remember that insurance is the mutualization of risks, it's not surprising that we will face more and more of these challenges as technology allows us to individualise risks...



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Trends in Fintech Startups: Data, Payments, Lending and SMEs

Trends in Fintech Startups: Data, Payments, Lending and SMEs | Disruptive Finance and Fintech | Scoop.it

Fintech hackathons and competitions occur globally. In January 2012, Swift launched theInnotribe Startup Competition as an initiative to bring together disruptive startups and incumbents in financial services...

Huy Nguyen Trieu's insight:

Very interesting overview of the most popular sectors for Fintech startups (or at least those that manage to win events such as hackathons).

I am happily surprised by the number of startups involved in data analysis (which is one of the most promising opportunities in my opinion). I am not too surprised though by the large number of startups in payments, lending and SMEs, they are usually quite popular sectors. 

It seems that Blockchain is under-represented in the rankings, especially considering the huge noise in that space. 

And if there was one obvious category missing, that would clearly be insurance. They might be aggregated in "Others", but still it shows that the focus on Insurtech is still very low - this is certainly one of the interesting opportunities for startups in financial services.

If we take a step back, it's quite incredible that the writer found 186 winners across 18 Fintech competitions - how quickly the world has changed in just a few years, where there were not even 186 Fintech startups globally! There is definitely a healthy eco-system for entrepreneurs in Fintech today..

And on a separate note, very proud to be on the advisory board of  Trusting Social - one of the 4 startups mentioned (out of 186).


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Revolut in Luthania: impacts of Brexit and how Fintech is becoming fiercely competitive

Revolut in Luthania: impacts of Brexit and how Fintech is becoming fiercely competitive | Disruptive Finance and Fintech | Scoop.it
Bank of Lithuania, the country’s central bank and regulator, has signed a memorandum of understanding with UK-based payments and fintech start-up Revolut.
Huy Nguyen Trieu's insight:

Over the last few weeks, I've had countless discussions about the impact of Brexit and its impact on Fintech in the UK. The current situation could be easily summarised in the following way:

- The UK has been at the forefront of Fintech, and is still very much open for business.
- Other countries such as France or Germany have realised that Fintech will be key for the next stage of development for finance, and see Brexit as a golden opportunity to attract good companies.

- But it's not just European competitors: all large financial centres are seeing Brexit as an opportunity to attract Fintech. 

 

In my opinion, the impact of Brexit on Fintech is quite simple:

- London has become the world capital for Fintech because of a combination of 5 factors :

1) Strong ecosystem of traditional banks, asset managers, etc. but also helped by the very high number of accelerators.

2) Talents, many coming from Europe, and also proximity of Oxford, Cambridge, Imperial College, LBS, etc.

3) Money, and especially a very deep pocket of seed money from business angels thanks to EIS/SEIS schemes

4) A very pragmatic and pro-active regulator (in loose term, i.e FCA, Bank of England)

5) And last but not least, a very strong political willpower to build the UK as a Fintech hub, that started with the Budget in 2011.

 

For 1), 3) and 4), I think that's unchanged - the ecosystem is still present, money is unlikely to dry up, and the regulator has a mindset which is very "innovation-friendly". 2) obviously is a big unknown, but in my opinion what will impact the continued momentum of Fintech in the UK is 5). The UK government has been a driving force behind many of the initiatives that helped Fintech, and set the tone for everyone else. On the one hand, the government might identify Fintech as one of their priorities in a post Brexit world, and will invest even more in that space. Or Fintech will just be forgotten, buried below many other Brexit priorities, and lose its momentum in the UK. 

 

All of that is happening at the time where many  countries have woken up to the future potential of Fintech, and the opportunity to build the financial centres for the 21st century. The example of Revolut launching in Lithunia, and applying for a banking license there - that could then be passported to the rest of Europe - shows that the competition is now widely open. But it's clearly not just a European competition: apart from New York, Silicon Valley, Singapore or Hong Kong, we are also witnessing new initiatives in New Zealand, Korea, or South Africa.

 

Conclusion? 

- For European startups, it was a no-brainer to move to London when you were in Fintech. Today, some startups will still move to London, but only after careful consideration. 

- All European countries are now competing to attract the startups (UK or otherwise) that need the coveted European passport. As seen by the example of Lithuania, it's a wide open competition. 

The dominance of London in Fintech - at the global level - has been challenged by Brexit. Other financial centres see that as an opportunity and are redoubling their efforts.  

 

 

 

 

Those things can happen very quickly - London and Singapore have built their ecosystem in just a few years, which means that others could easily do the same. The next few years will therefore be very interesting...

 

 

PS : for those who don't know Revolut, it's a very interesting model. In my taxonomy of banks, that would be a neo-bank, that is slowly morphing into a challenger bank and an iBank (which tends to show that my taxonomy wasn't that great!). What I like about them is 1) very cheap infrastructure 2) great value proposition, resulting in very low customer acquisition cost. The big unknown is of course their revenue model, but 1) and 2) go a long way to help them figure it out.

 

 

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How Fintech is forcing banking to a tipping point [Citi report]

With advances in technology, the relationship that customers have with their bank and with their finances has changed. Customers rely less and less on walking into a branch for their banking needs, and instead have digital options to help them —ATMs, on-line chat, mobile phones, and Internet banking. So far these have been seen more as additive to a customer's banking experience but when do we go over the digital disruption tipping point and see a change in the fundamental banking business?

Huy Nguyen Trieu's insight:
Huy Nguyen Trieu's insight:
Excellent report about Fintech and digital transformation in finance by the team at Citi - a real treasure mine of 100+ pages! Link to the report here 

 

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Why the payments market is - still - huge

Why the payments market is - still - huge | Disruptive Finance and Fintech | Scoop.it

"In the VC world, there seems to be a fairly strong bias against pitching your company by saying, “We’re like X, but for Y. Most commonly, the “X” in the aforementioned sentence refers to Uber or Warby Parker..."

 

Huy Nguyen Trieu's insight:

A very insightful piece from Doug Nelson about the potential to launch payment solutions in various verticals. In general, it's a very good example of how Fintech startups need to carefully choose their markets, and define their positioning in great detail - notice how a simple application (payments) can be adapted to many different customer bases in very different ways. It also shows that the market size for Fintech is huge, with many different segments still unadressed. Great read (and great picture too!).

 

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VisionFunder's curator insight, March 4, 3:24 PM

A very insightful piece from Doug Nelson about the potential to launch payment solutions in various verticals. In general, it's a very good example of how Fintech startups need to carefully choose their markets, and define their positioning in great detail - notice how a simple application (payments) can be adapted to many different customer bases in very different ways. It also shows that the market size for Fintech is huge, with many different segments still unadressed. Great read (and great picture too!).

 

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The most interesting challenger bank you’ve never heard of

The most interesting challenger bank you’ve never heard of | Disruptive Finance and Fintech | Scoop.it

Most people who have an interest in Fintech have heard of AtomStarlingFidorMondoor Number 26. Some might have heard of Loot, or Holvi. But there is a fascinating bank that most people have never heard of, and that’s certainly because this French challenger bank doesn’t seem to seek any international visibility.

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And it's French!

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Fintech: what's happening in Australia?

Fintech: what's happening in Australia? | Disruptive Finance and Fintech | Scoop.it
This article contains an overview of the Australian FinTech ecosystem with some of the most interesting startups and successful accelerators/incubators.
Huy Nguyen Trieu's insight:


I believe that a lot of interesting Fintech innovations will take place in Asia. But for me, Asia was more naturally Hong Kong, Singapore, Indonesia or the Philippines than Australia… 

Over the last few months however, we have observed more and more  interesting initiatives in Australia - from the launch of a Fintech hub, to partnerships between banks and startups, to the first investment of Australian pension funds into Fintech startups….

Australia is definitely a market to follow, and this article from Let's Talk Payments provides a great overview of the latest developments. 

Don't hesitate to send me a tweet if you see interesting Fintech startups in Australia...


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And now Blackstone: the Big Guns are entering Online Lending

And now Blackstone: the Big Guns are entering Online Lending | Disruptive Finance and Fintech | Scoop.it

"The start-ups that have come to dominate the online-lending industry will now have to compete with the world’s largest private-equity firm.

B2R Holdings, a portfolio company of a Blackstone Group fund, said on Thursday that it was getting into the business of providing loans for consumer purchases of big-ticket items as well as small-businesses loans."

Huy Nguyen Trieu's insight:

I previously wrote about a game changer in Fintech, when Goldman Sachs announced the launch of an online lending business for their SME clients (and very proud that you read about it in Disruptive Finance one month before the FT and the WSJ!). To my knowledge, this initiative is still moving ahead, and GS is hiring people from Lending Club / Prosper to develop the platform. 

At that time, I also said that "it will be fascinating to see what happens over the next few months, and if other banks will follow suit", and they have! Most recently, ING, Santander and Scotiabank have invested in Kabbage (a data-driven lender, and one of my favourite Fintech startups) and ING and Kabbage will launch an online lending business in Spain. In my opinion, there is no doubt that online (data-driven) lending will be the norm, and banks will move towards that model, whether through internal development, partnership or acquisition. We are therefore likely to see more news of this type in the future. 

When we think of finance, let's not forget however that private equity firms are also very massive. It was therefore extremely interesting to see Blackstone is launching an online lending platform, Lending.com.  Which means that after startups doing online lending, banks doing online lending, we now have shadow banking doing online lending. Whereas banks are very aware of the potential disruption from startups, does it mean they also need to watch the competition from private equity firms? What is clear, is that technology is currently reshuffling the financial sector, and disruption might come from players we don't suspect. 


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SXSW Competition looking for Fintech Startups

SXSW Competition looking for Fintech Startups | Disruptive Finance and Fintech | Scoop.it

"Of the 305 companies who participated in SXSW Accelerator between 2009 and 2015, over 63% received funding, with combined funding in excess of almost $2.613 billion (does not include undisclosed grants, angel and seed funding). Of these 305 companies, 13% have been acquired by the likes of Google, British Telecom, Huffington Post, Apple, Live Nation, OpenTable, Constant Contact, and Harmon."

Huy Nguyen Trieu's insight:

SXSW is one of the most high profiles events in tech and also runs the SXSW Accelerator during the conference. The name "Accelerator" is a bit misleading though, because it's not an accelerator in the way we think of it today: it's really a competition where startups go through their elevator pitch in front of a panel of judges. 

In terms of competition and networking, it's a great event for startups to increase visibility and to raise money from top VCs. Past judges are for example Tim Draper, Paul Graham, Mark Suster, Scott Weiss, Guy Kawasaki, etc. 

Until this year, Fintech was not represented in the competition, but Payment and Fintech is now a proper category for 2016 - another sign of the huge growth of Fintech. It is therefore a great opportunity for Fintech startups looking for funding (especially because most people wouldn't know about the Fintech stream, so less competition!). Deadline is 6 November


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First P2P Lender to Fold in Europe: What Next?

First P2P Lender to Fold in Europe: What Next? | Disruptive Finance and Fintech | Scoop.it

"In an unsettling about face TrustBuddy, a peer to peer lending platform based in Stockholm, has shut down.  The home page has transitioned from lending platform into a public statement (republished below) in both Swedish and English explaining a series of alleged misconduct"

Huy Nguyen Trieu's insight:

A very good summary from Crowdfund Insider on what's happening with TrustBuddy

This is the first major p2p lender to fold in Europe, and there is much to learn from it. In a few words:

  • Trusbuddy was an average-size p2p lender (EUR200m deployed), but one of the few to be listed (EUR 100m market cap last year)
  • New management (ex Klarna) joined 2 months ago
  • Have now discovered that there were frauds, all some of the money was not invested

My (cynical?) view is that this kind of behaviour will happen in any new and unregulated industries. Remember that we saw the same in China with thousand of p2p platforms folding or the $400m that disappeared with Mt Gox. But the fact that will happen doesn't mean that it won't have repercussions on the p2p industry. 

  • There will some pressure for more regulation on p2p lending. I don't know the regulatory framework for p2p lending in Sweden, but there is already a decent one in the UK
  • I don't think that more regulation will help for p2p lending. For example, ban king is highly regulated, but fraud still happens. At the same time, heavy regulation for startups is certain to kill the development of that industry
  • There is much to do for the industry themselves in terms of a chart of conduct and ethics - and which shouldn't be about mere marketing, but what the industry really believes in
  • In general, it feels that p2p lenders should do much more effort in terms of education - and show the potential risks of p2p lending. There are clearly risk warnings on their websites, but more could be done IMO.
  • Perhaps also some good business models for startups to rate and do due diligence on p2p platforms? In the same way that there are rating of online retailers - in that case from consumers themselves - I'm sure someone can think of smart ways to rate the p2p lenders themselves


I think that these kinds of events are bound to happen in any new industry. Actually, it also happens in old industries, but the difference is that it could create a credibility problem for the whole p2p industry. In my opinion, it is not life-threatening, on the contrary it could be the opportunity for the good platforms to differentiate. 

Any nascent industry will go through these stages where some black sheep will compromise the credibility of the whole sector. But if the value proposition is strong enough, consumers will look past through it and go towards the most reputable companies. Remember the example of Pere-Noel.fr in France (yes it means Father Christmas!) in the early 2000. Thousands of people ordered on their site, didn't receive any goods, and it was a huge scandal. This didn't prevent however people from continuing to buy on the Internet, and there was a premium for the more reputable e-tailers. 


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Credit scoring can even predict your love life!

Credit scoring can even predict your love life! | Disruptive Finance and Fintech | Scoop.it

When people are looking for a significant other, they often try to find someone whose values, education, earnings, hobbies and even height match their own. But new research suggests there's one promising measure for finding a committed partner that most daters overlook -- credit scores.

Huy Nguyen Trieu's insight:

This is an excellent article in so many ways! Any Fintech student (does that even exist…?) should spend hours thinking about the ramifications evoked by this topic.


I haven't read the actual study behind, so can't comment on the methodology of the Fed researchers. So I am less interested in the results (to be happily married, increase your credit score!) than in all the the structural trend happening in credit scoring:
- Credit scoring will have more and more of an impact on our lives, and not just for lending decisions. Like mentioned in this article, it could even impact dating (Tinder not with pictures, but credit score??)
- The biggest change to credit scoring is the availability of real time data - your credit score used to be very static, it can now be a dynamic number based on real time factors

- In a virtual world, there is a need to assess the trustworthiness of people we've never met (hence the reviews on Amazon, etc.). Credit scoring (or scoring in general) will be more prevalent

Garbage in, garbage out: we can try to predict anything based on anything, so for example your credit score based on the number of friends you have. It could work, it could well be rubbish too, and the easy access to a huge amount of data is likely to make pseudo-scientific scores more prevalent
- For lenders, there is clearly a benefit to have real time - and automated - information about their clients' creditworthiness - just look at Kabbage and you'll see how the future of credit scoring could be

- And there are of course a lot of ethical issues about what should or shouldn't be used, and we can see that undesirable things could happen quickly.


In all cases, credit scoring (and scoring in general) will be hugely transformed, it will have a huge impact on the way we are perceived (online, for loans, for mortgages, as a reliable/untrustworthy person), it will be real time. But there is also a risk that because it looks scientific, people will blindly trust a number that shouldn't really be trusted...


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Bank for Boston carpenters wants to become Fintech Bank

Bank for Boston carpenters wants to become Fintech Bank | Disruptive Finance and Fintech | Scoop.it
Radius Bank, started by and for local union carpenters, is about to be bought by the ultimate capitalists.
Huy Nguyen Trieu's insight:

This is an interesting strategy - and perhaps not as crazy as it sounds. The Boston Globe relates the sale of First Trade Union Bank (rebranded Radius Bank) to private equity, which intends to transform it into a pure digital bank, as well as a bank serving Fintech providers

Since Radius is a tiny bank ($1bn assets), it faces the same issues as many of small community banks. It doesn't seem that crazy therefore to focus on 1) digital and 2) serving Fintech startups. As I mentioned in a previous article, Fintechs such as Neo-Banks need an actual bank to operate, and Radius could be such a bank. This is for example what WebBank did with Lending Club. 

For Radius, a very small bank under huge competitive and regulatory pressure, selling shovels in the Fintech gold rush might be an exciting opportunity...


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Great example of Banking 2.0: Fidor

Fidor TecS enables disruptive banking Fidor combines a full banking license with its own technology: a strong focus on APIs ensures meeting the demands of the …
Huy Nguyen Trieu's insight:

There has been a lot of press recently about the launch of German Fidor Bank in the UK. 

In the UK, a lot of challenger banks have launched or are in the starting blocks, so people might feel a bit blasé about the launch of Fidor. Even for people in Fintech, we might feel that Fidor has been around for a long time, so it has lost a bit of its novelty aspect.

But it would be a mistake to underestimate Fidor: if you  spend time on their company presentation above, you would see that almost each single slide (and there are 49 of them!) shows a totally new way to design a bank. From open APIs to credit scoring, from user testing to virtual currencies, this is radically different from a traditional bank.

So definitely a very good presentation to read (again), with a lot of very good metrics too. 

The biggest question for Fidor (and other challenger banks) though is whether - in spite of all these innovations - consumers will find the value propositions compelling enough to switch. 


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Can startups keep growing without IPOs?

Can startups keep growing without IPOs? | Disruptive Finance and Fintech | Scoop.it
So much for that IPO, I suppose. Good Technology, a long-time IPO candidate with reams of public financial data, was snapped up by BlackBerry this morning..
Huy Nguyen Trieu's insight:

An excellent analysis from Alex Wihelm (TechCrunch) about the acquisition of Good by Blackberry. I was very surprised to see that Good was acquired for $425m (having raised $300m).

My reasoning for Good was as follows:

- Blackberry was the dominant player in the market for corporate emails

- With Blackberry losing market share, corporate clients focusing on costs (Bring your own device), the ubiquity of corporate email, Good was ideally positioned as leader of email solutions. 
- And with healthy revenue growth, Good should have been able to raise money or go to IPO.


This didn't pan out as expected, with an acquisition cost that seems disappointing (it doesn't mean however that investors lost money, it depends on the terms of the pref shares). And this is very strange, because 1) a market leader in 2) a huge market with 3) good revenue growth should have been able to raise at huge valuations.


This, together with quite a few other examples, makes me wonder:

- Are we starting to see much more focus on revenues and (horror!) profits for startups? In other words, are we seeing the end of the bubble? 

- Can startups stay indefinitely private, without going to IPOs? Can VCs keep accounting in "mark-to-market" terms without a real cash exit? 

- Many of the Unicorns had the choice to go to IPO or stay private - is it still the case? Can these startups actually access the public market today?


Or I might be totally wrong, and Good is an anomaly. But there are definitely some signs which are disturbing...


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