Bitcoin's recent climb above the $4,500-5,000 mark is just one example of how its market capitalization continues to gain unprecedented reach. From cannabis to technology, bitcoin has impacted industries far and wide, but analysts believe that the cryptocurrency isn't done climbing.
ChineseInvestors.com Inc. (OTC: CIIX) is one business taking advantage of bitcoin's success by setting up bitcoin payment acceptance through its wholly-owned subsidiary, Chinesehempoil.com Inc. SinglePoint, Inc. (OTC: SING) also continues to develop its bitcoin cannabis payment solutions, while technology company NVIDIA Corporation (NASDAQ: NVDA), graphics cards maker Advanced Micro Devices, Inc. (NASDAQ: AMD), and bitcoin investment vehicle Bitcoin Investment Trust (OTC: GBTC) occupy their own unique positions.
ChineseInvestors.com (OTCQB: CIIX), in July 2017, announced that its Chinesehempoil.com subsidiary was ready to accept bitcoin payments, in addition to more common payment methods such as debit cards and PayPal, in order to enable consumers to purchase its hemp-based health products online. The move marked CIIX's official entrance into the burgeoning digital currency market and enabled the company to offer its customers a heightened level of cost savings, privacy and ease of use.
By August, CIIX took its knowledge of bitcoin a step further. On par with its core operation as a provider of financial information, CIIX launched its cryptocurrency education and trading subscription service on Chinesefn.com, its dynamic financial website that provides real-time market commentary; analysis related to digital currency, trends and stocks; and education-related services to Chinese-speaking investors. The subscription service covers a spectrum of vital cryptocurrency data, including news, analysis, industry trends, price movement, sector related stocks and ETFs, and more.
ChineseInvestors.com (OTCQB: CIIX), CEO, Warren Wang, in the press release announcing the new service, described why providing this information to the Chinese-speaking population represents a significant market opportunity.
"With the use and trading of cryptocurrencies on the rise in Asia, it appears that a much wider adoption of digital assets may be right around the corner. With an estimated 85% market share, China is one of the dominant players controlling bitcoin volume, along with Japan (which recently legalized bitcoin as a form of payment) and the United States," he explained. "While many see the unique opportunity that cryptocurrency poses for investors and desire to capitalize on this market opportunity, they may not have a full understanding of the concept of digital currency or how the system works. CIIX intends to provide fundamental knowledge to Chinese speaking newcomers to cryptocurrency, including straightforward explanations of the basics of cryptocurrency, how to buy it and straightforward trading guidelines. For those with cryptocurrency experience, the Company will provide more detailed information regarding currency mining, blockchain technology, stock trends and ETFs. Through its innovative cryptocurrency education and trading subscription service, the Company endeavors to be the leading Chinese educational site providing up to date news and information on digital currencies."
Headquartered in Los Angeles with offices in New York City and Shanghai, CIIX continues to grow its core as a specialized investment services company with a 100,000+ user base, providing consultation, advertising, and public relations services to China-based companies.
SinglePoint, Inc. (OTC: SING) is another cannabis industry leader participating in the cryptocurrency phenomenon. In June 2017, the company closed a round of funding with an investor to support a bitcoin payments solution that was implemented in partnership with First Bitcoin Capital. By adding bitcoin payments to its diverse portfolio, SinglePoint is helping the cannabis industry - as well as other high-risk industries - overcome the challenges stemming from a lack of adequate banking access. SinglePoint also recently purchased $Weed from First Bitcoin Capital, a new currency in the market. WeedCoin is currently listed on three exchanges, and SinglePoint said it intends to list and market the currency on more exchanges moving forward.
Taking a step backward in the cryptocurrency process helps to understand these investment options in the alternative currency market. California-based graphics chip manufacturer and technology company NVIDIA Corporation (NASDAQ: NVDA), participates in the digital currency market by providing chips used for cryptocurrency mining. While there are numerous other uses for its chips, bitcoin miners favor graphics processing units to create new cryptocurrency units. According to several industry reports, this demand helped push sales of Nvidia's graphics card line 52% higher to $1.2 billion in the second quarter.
Likewise, Advanced Micro Devices, Inc. (NASDAQ: AMD) is benefitting from demand for its graphics card by cryptocurrency miners. In June, the chipmaker told CNBC that demand for its graphics cards was fueled by the 'newly resurgent cryptocurrency mining markets'. Earlier this week Advanced Micro Devices revealed details of its 'Radeon Software Crimson ReLive Edition Beta for Blockchain Compute' driver created to help boost the efficiency of cryptocurrency mining rigs. The beta-level driver targets graphics processors that are used for mining, or a way that new transactions are added to blockchains, addressing the demand for processors used by those tapping into the cryptocurrency market.
The growth and potential of bitcoin is further evidenced by Bitcoin Investment Trust (OTCQX: GBTC), which enables investors to gain exposure to bitcoin's price movement through a traditional investment vehicle without the challenges of buying, storing and safekeeping bitcoin. The U.S.-based, open-ended grantor trust is invested exclusively in bitcoin, and its shares are the first publicly quoted securities solely invested in and deriving value from the price of bitcoin. Bitcoin Investment Trust was recently named to OTC Markets Group's 'OTCQX Best 50' for 2017. Bitcoin digital currency has already been named an official method of payment in Japan, and it is being accepted by more and more major retailers in the United States, furthering the acceptance of bitcoin's presence as a valid payment method.
Market analysts continue to predict increases in bitcoin and digital currency in general. Cryptocurrency payments have benefited businesses and consumers in the cannabis products industry and in the graphics cards markets, driving growth in both sectors. Current trends show that it is also opening the door to markets worldwide, especially in the United States and China, with little signs of slowing down. This is true if pricing is any indication; bitcoin recently surged past $4,500.
(Source: NetworkNewsWire)
Craig James, CEO of Neopay, tells Finance Monthly PSD2 will prove to be the most beneficial piece of legislation for fintech companies in years, and could completely change the face of the UK banking sector.
While technology has grown increasingly important in the financial sector, the “traditional” industry has been slow to adapt as consumers grow more frustrated by the lack of progress.
Innovative start-ups, looking to fill the gap left by the traditional establishment’s hesitation to change, have been growing in prominence as some banks, regulators and the government try to encourage new ways for businesses to engage with customers in a market suffering a long-standing loss of reputation.
Coming into force in January next year, the EU Payment Service Directive (PSD2) is the latest change facing one of the country’s oldest institutions, and could prove the catalyst for a technology revolution in the sector driven by innovation in personal banking.
Putting consumers at the heart of the fintech revolution
The most substantial change in PSD2 is enabling customers to allow third party businesses – like technology companies – to have access to all their bank data.
For fintech companies focussed on bringing new products to the market, this presents a new opportunity to create these offerings, without the infrastructure costs facing traditional banks.
Personalisation has been a buzzword in banking for some time, and there is no shortage of products from savings accounts to credit cards that are promoted as tailored to a customer’s needs.
However, while banks can provide a card with an interest rate suitable to the customer, the current offerings are incapable of working across multiple accounts, and cannot adapt to real time changes to a consumer’s individual circumstances.
PSD2 opens the possibility for fintech businesses to create “one stop shop” apps for bank services, allowing a customer to access and manage every aspect of their financial footprint from a single point.
These technology based products will put the consumer back at the heart of banking as businesses will be forced to adapt their products, or face getting left behind by smaller technology businesses which can suddenly offer better services.
It will also open entirely new ways for consumers to manage all aspects of their financial needs.
Better budgeting
There is already a plethora of products which can help customers with their finances, but they are severely limited in essentially being a replacement for paper based tracking. The onus is still on the customer to stay on top of the information.
However, by getting access to a person’s account information and financial history, a fintech company could create a genuinely personalised budgeting tool which could remove the management aspect from the customer.
By being able to monitor balances and outgoings in real time, these apps could be programmed to learn when particular bills are due and, if one account is lacking funds to pay, the app could notify a customer and then automatically transfer money from another account – or combination of accounts.
Considering that most people have more than one active bank account, this type of capability could prove invaluable for customers, helping them avoid unnecessarily falling into debt because they failed to move money around in time.
Real time debt solutions
For those customers who have already fallen into debt, new technology based bank apps could be created to offer real time solutions to help consumers pay down the money they owe, and get out of difficulties.
One of the major frustrations with current banking services, according to our research, is that balance updates are not always immediate and in some situations a user is not being shown an accurate account of their financial situation – which makes it hard to make decisions.
New banking apps could greatly benefit these customers by assessing their income and spending habits – while updating account balances in real time – and instantly suggest ways that customer could reduce their out-goings.
There is also the potential for banks to adopt these kinds of apps, which could be used to find or suggest savings plans.
The biggest benefit of this wave of products over existing services, is that they could monitor activity across multiple accounts in real time. The real-time aspect of these tools could help customers by instantly alerting them to unusual activity or if an account is in danger of becoming overdrawn.
While the “traditional” banking sector is at risk of being left behind by the speed of technological change there remains great potential for banks and fintech companies to introduce a wave of new products and tools for consumers that can help them manage their personal finances better.
PSD2 could kickstart the biggest chance the banking sector has experienced and, in the long run, will prove extremely beneficial for those institutions most able to implement technology at the heart of the customer offering.
Here Charlie Abrahams, Senior Vice President of MarkMonitor, a brand of Clarivate Analytics, discusses with Finance Monthly the problems behind cybercrime, in particular phishing and fraud.
While internet commerce has enjoyed exponential growth over the past 15 years, it has also created a significant opportunity for bad actors to indulge in cybercrime. It not only affects a brand’s revenue stream, but more importantly its reputation. As a result, organisations are investing in brand protection technology and processes – not just to prevent brand abuse and counterfeiting, but also prevent other forms of cybercrime. Keeping your intellectual property safe requires a multi-layered approach, regardless of the size of the business or the type of information you hold.
While it’s true that cyber criminals are targeting all industries, the financial services industry is particularly at risk. Firms within this sector have many high-value assets that make them an attractive target for cyber criminals — including significant intellectual property relating to their business processes and transactions, Las Vegas Immigration Lawyer and the financial records and customer data. Financial services companies stand to lose a lot more than money should cyber criminals be successful. Brand reputation would suffer, customer trust would be irrevocably damaged, and there may well be wider consequences such as fines from financial regulation bodies, especially with the deadline for compliance with the new European Union General Data Protection Regulation (GDPR) fast approaching. As a result, the financial services segment is one of the biggest buyers of enterprise security technology.
However, all that investment in enterprise security technology does not offer any protection for one of the most popular methods that is being used to take advantage by cyber criminals - phishing. The reason is that phishing attacks don’t target the enterprise, but directly their consumers, and this is where brand protection technology comes in. Phishing has been around in some form for the past few decades and are essentially emails — sent from what appears to be a legitimate source — asking for personal information, such as login details, passwords, payment card details, etc.
Over the years, phishers have evolved in the way they carry out their cyberattacks. They are creating phishing websites to collect passwords, conduct identity theft schemes and carry out online advertising scams. Despite being a relatively low-tech method of cyberattack, it remains one of the most effective. Research conducted by a German university found that 78% of respondents admitted to opening unknown emails and clicking the links within, despite also claiming that they were aware of the dangers of phishing. This shows there is still work to be done in raising awareness around how to avoid being caught out by these cyber criminals.
Given the continually threatening nature of phishing, protecting and proactively defending organisations has never been more important within the financial services industry.
The first crucial step for businesses is to be fully prepared and adopt a ‘when’ rather than an ‘if’ approach, with the aim of preventing the attacks in advance. Organisations can set up early warning systems alerting them of new domain registrations — that may misleadingly read like their brand name and may target that brand to host malicious content — before it impacts their customers, for example.
Fraudulent activity can also be detected using the right intelligence, as well as proactively monitoring and analysing key intelligence sources to detect phishing and malware activity across email and other digital channels. Fintech businesses need to shut down or restrict access to phishing sites, and should consider partnering with an anti-fraud (brand protection) vendor to share their phishing alerts with Internet Service Providers (ISPs), browsers, email providers and security vendors, helping them block malicious sites at the Internet gateway.
Lastly, all businesses — not just those within the fintech sector — should draw up an online brand protection strategy, which outlines the actions that should be taken in the instance of any particular cyberattack, including phishing. A brand protection strategy essentially means that you’re covered and ready to counter any of these infringement acts should they ever happen. Without a strategy, businesses are likely to either make snap decisions that might harm the brand, or spend precious time considering the multiple options available, by which time the damage has been done.
In this day and age, companies, regardless of the industry in which they operate, simply cannot afford to leave themselves vulnerable to phishing attacks. The risks are simply too great, and as public awareness of such cyberattacks continues to increase, the reputational damage that comes as a result is only likely to get worse. Therefore, brands must be more proactive in fighting the cyber threat, while each business should be backed up by a comprehensive brand protection strategy.
Greg Cox is the CEO and co-founder of Quint Group – an award-winning FinTech company with headquarters in Macclesfield, Cheshire which also has operations in London, America, Poland, South Africa, China and Australia. Here Greg tells us more about the FinTech giant’s beginnings and triumphs, as well as his role in achieving all of this.
Tell us a bit more about your career path, prior to founding Quint Group - what attracted you to the financial technology sector?
After learning to code at 16, I worked in a range of businesses areas, some online, before focusing in the consumer finance industry. I’ve always had keen creative inclinations (both parents are designers) and an entrepreneurial approach which, when combined with a computing background, seemed to be a successful recipe for building a business like Quint.
How was the idea about Quint Group born?
I was a passive investor in a consumer finance business in 2006, which subsequently failed in the wake of the financial crisis in 2008. When the business failed, I was asked to investigate and summarise to other investors why the business was unsuccessful and what our options were. While completing this report I started to look at the market in detail and it became apparent to me that consumer finance was primarily delivered to customers over the phone and on paper, which seemed crazily outdated. I could not believe how far behind the consumer finance industry was in terms of online technology application - this realisation prompted me to start Quint. Upon launch in 2009, my aim was to build businesses in the consumer finance space that focused on online platforms and technology.
Despite your countless responsibilities, you are still involved with the day-to-day technology developments of the business - how do you ensure you are directing the company in the correct direction, form a technological point of view?
I have lots of talented people around me that are experts in tech and product delivery. Those people work across our three separate tech hubs, allowing me to take considered views from three independent groups of experts. This is helpful and means I get a balanced perspective. The experience gained from making good decisions and the lessons learned from making bad decisions historically are also very valuable in my current decision making progress.
Do you look at others in the FinTech industry as competitors or do you take a different view?
Yes and No. As a Group, we do not have single direct competitor because we have multiple business channels combined within one group. However, we do have competitors to some of our individual businesses, although my perspective is that everyone in the sector is someone we can potentially work with and learn from. Across the Group, a competitor of one of our businesses might be a potential client or supplier of one of our other businesses, so our outlook is necessarily collaborative and perhaps more relaxed to competitors than most.
To what extent is Brexit going to affect Quint Group?
That is a very good question – I don’t think anybody knows the answer to how Brexit will affect their business! We do not import or export goods and have limited exposure to currency fluctuations so certain aspects of Brexit may not affect us in the same way they will other businesses. My feeling is that Brexit and other economic and political challenges we have ahead of us, could result in an economic downturn, which could have the potential to negatively affect the UK economy. All we can do is prepare as much as possible, diversify to mitigate risk and react timely to changes in the socio-economic landscape.
What goals are you working towards with the company? What do you hope to accomplish?
Our company is ultimately consumer focused – our greatest successes are derived when we put the consumer’s needs at the heart of what we do and this ultimately drives our commercial success. In terms of revenue, our short-term goal is to grow to £100M GBP annually and successfully develop our international territories. Our long-term goal is to create Europe’s most successful group of FinTech businesses.
What is your advice for successful leaders in the modern tech-focused world?
Focus on the medium to long term and worry about getting that right. The medium and long term will soon become the now and if you take a long term approach, you will get long term results. It can be easy to get distracted with the day-to-day, so I mindfully set aside time for strategic planning on a regular basis. Another key area for me is keeping laser focused on real profits and revenues as opposed to users or other tech intangibles. I’ve witnessed too many people give away valuable services for free because they feel user volume is more important than traditional metrics of success. I think this approach will result in many businesses failing in the coming years.
Website: http://www.quint.co.uk/
Ashok Vaswani, the CEO of Barclays UK talks to Katina Hristova about championing digital skills for all and his outlook for the future.
Barclays has a history of innovation and continues to be a leader when it comes to technological innovation in banking services – tell us more about it.
Barclays has been at the centre of British finance for over 327 years, and in that time, the world has changed beyond recognition. However, the reason we have been able to consistently deliver game-changing innovations throughout all this disruption has been a relentless focus on our customers, their needs and aspirations, and being there for the moments that really matter.
We have 24 million customers in the UK; roughly one in two adults. For me, success isn’t about driving the business to get 25 million customers – it’s about becoming indispensable for the 24 million customers we already have, by continuously making their lives easier, offering greater convenience and delivering value for them.
If we can’t do that, we won’t be around for another 327 years, or even 10 years. In this era of disruption, businesses will become obsolete unless they serve a clear purpose. Our purpose is to help people go forward.
What have been Barclays’ biggest achievements in the past 12 months?
We have been at the forefront of reinventing banking through a focus on great technological innovation with a purpose. I think our biggest achievements have been transforming the business and its culture as well as creating Barclays UK; a business that is truly fit to meet customers' needs and expectations in the digital age.
As part of that, we have rolled out a number of technology solutions to make our customers’ lives much easier, such as instant cheque imaging and video banking. Barclays was also the first bank to introduce contactless cash; a completely new way for customers to withdraw their cash using their Android smartphone or their debit card’s contactless technology.
We have also launched automated valuations for home purchases, shaving days off the processing time. Mortgage Agreement in Principle has also been introduced into 338 branches, allowing customers to obtain a mortgage decision in less than 15 minutes.
New digital processes have also helped improve the on-boarding of Business customers, and the introduction of pre-approved credit limits for Business customers has reduced the time required for customers to request an unsecured loan of less than £25,000 from five days to a matter of minutes.
In addition, we have opened 12 Eagle Labs, sites where people can use new technologies such as 3D printers and laser-cutters and which help facilitate small business growth in local communities.
We have also demonstrated a strong commitment to using technology to enhance customer security; Barclays was the first bank to pioneer finger-vein technology in the UK, and we are working to tackle fraud through innovations like voice biometrics, which over 750,000 customers have now registered for.
How would you evaluate the impact that you’ve had on Barclays achieving all of this?
In creating Barclays UK, I have set out three mains goals for the business:
Barclays UK has already made significant progress in achieving these strategic aims, and we have done this by putting the customer at the heart of everything we do.
Our investment in technology sets us apart, putting us at the forefront of innovation in the banking sector, delivering products and services that improve people’s experience, enhance accessibility and offer quicker and more convenient choices for customers.
At the same time, we have been working to make sure that no one is left behind in the digital revolution.
Our Digital Eagles have so far helped to support over 100,000 customers to become more digitally confident through dedicated Tea and Teach Sessions in our local branches, as well as delivering Code Playground sessions to teach young people basic coding skills.
We’ve also introduced the Digital Driving License, a free app through which users can earn a City & Guilds digital skills qualification, boosting their digital skills and confidence.
In 2017, Barclays UK launched its latest campaign to promote digital safety, a major nationwide initiative to raise awareness of cybercrime and help people protect themselves from fraud and scams. Since the campaign launched in May, it has already helped 2.5m people take action to become more digitally safe.
We have also pioneered Beacon Technology, improving the level of in-branch service offered to customers with disabilities, as well as SignVideo, which allows deaf people who use British Sign Language instant access to an interpreter via the in-branch colleague iPads. Talking ATMs, supersize card readers and high-visibility debit cards have also been launched for the visually impaired.
In addition to championing accessibility, we want to ensure we are doing the right thing by society as a whole. As part of our commitment to helping people move forward in their lives, we run a number of skills and employability programmes, for example, the Barclays apprenticeship scheme, through which over 3,000 apprentices have already been offered employment. I also support the Armed Forces Transition, Employment and Resettlement (AFTER) programme, which provides work placements, employment opportunities, CV and interview coaching, and money management sessions, as well as funding for education and vocational courses for service leavers.
We also have the LifeSkills Programme, which provides schools with a range of free, curriculum-linked lesson plans, workshops and resources designed to help 11-19 years olds to develop the skills employers most seek. To date, over 4.3m young people have been reached through the LifeSkills programme via either in-school lessons or directly online.
I believe we are beginning to rebuild the trust and reputation of the banking industry, but I know we still have some way to go. However, by remaining committed to the strategy of putting customers and clients first, serving our economy and earning trust, I want to build a solid foundation on which we can grow. Barclays is creating a bank that is truly good for customers and clients, good for businesses and good for Britain.
As CEO of Barclays UK, how do you ensure you are directing the company in the correct direction? How do you advise your team to make the correct decisions for the company alongside your customers?
The thing I ask myself every time I make a decision is: “are we doing the right thing for the customer?”. I learned a lot from my Mum growing up, and one of the principles that has always stuck with me is that there is no substitute for integrity. Integrity isn’t just about what you write down as your mission statement, it’s also about how people behave when no-one is looking.
When it comes to my team, another thing that my Mum taught me is the importance of humility, that is to be ready to admit I don’t have all the answers, which is why I need many brilliant minds working to deliver our game-changing innovations.
I sincerely believe everyone needs to keep learning throughout their career. We can no longer rely on what we learnt at school to last a lifetime. I encourage everyone at Barclays to keep learning, particularly digital skills, and to develop an entrepreneurial mind-set.
What was your main motivation behind being the CEO of Barclays UK and what is the most rewarding aspect of your role?
The most rewarding thing about the role is the opportunity to work for millions of people.
In terms of how I got here, as a kid in Mumbai, my Mum wanted me to be a Doctor. When I said I didn’t want to do that, she actually took me to see my local bank manager to ask what he thought a good job would be.
I’ve since come to realise that the role of a bank manager is really at the centre of a community, and I have him to thank for the fact I became a Chartered Accountant. After that, I moved to Dubai aged 27 with $10 in my pocket, and met my wife there. That was the start of a fascinating journey working around the world.
What are your plans for the company for the rest of 2017 and beyond?
There are some exciting times ahead, with next year’s PSD2 and data protection regulation set to transform the shape of the digital economy. Barclays has all of the right ingredients to remain a leader in financial services, but we must be prepared and remain agile in order to take full advantage of the coming changes.
In the longer term, customer expectations are no longer confined to one industry – we are being judged not against other banks, but against the best in class from across our customers’ favourite brands. Is Barclays a bank, an information business or a technology company? We’re all three. But we will never lose that central focus on the customer, and that’s how we will thrive in a truly connected world.
Less than a month ago, Fintech Week arrived in London with a bang, attracting hundreds of delegates from across the biggest FinTech organisations across the globe. Here Anthony Persse, Director of Strategy at Ultimate Finance, talks Finance Monthly through the challenges FinTechs face in delivering services that meet the needs of small to medium ventures.
A packed schedule awaited them, with ‘hackathons’, insurance innovation showcases and discussions on blockchain. What struck me when looking at the programme was the total absence of the word ‘customer’.
Not one talk, panel or roundtable event was planned to discuss what those using FinTech products actually wanted from the sector. Perhaps the recent successes and the incredible influx of investment has led the industry to believe it has it right already? It’s an easy assumption to make; FinTech is growing at a rate of knots, forcing the banking giants to sit up, take notice and fight to get their piece of the pie.
But, in the SME sector FinTechs are not having such a big impact and I think it’s because they are failing to ask that all important question – what does my customer need from me? Our recent research showed that the majority of SMEs in the UK still look to their main bank for financial support, even though the same research showed that small business owners didn’t feel their bank could always offer them what they needed. It’s a gap that needs filling, but it doesn’t look like FinTechs will be the plug.
That does not mean that technology does not have a huge part to play in the SME funding sector. Through an advanced online platform and a smart use of data, we were able to launch one of the fastest loans on the market, offering savvy SMEs who know what they need the option to access quick cash in an instant. We are continuing to develop our online capabilities because some SMEs do want a digital solution – it suits their needs.
And some need more of a helping hand. A human at the end of the phone who can sympathise, offer credible guidance based on their experience with hundreds of other SME customers and work through the funding options available. Those SMEs might lack experience of borrowing while others might have hit a patch of tough trading and simply not know where to turn. For these small businesses, an app isn’t going to cut it.
So will FinTechs ever meet the needs of SMEs? The answer is yes, and no. Some SMEs will find the agility that FinTechs offer works for them and that they can save money as online-only services can be cost effective. But ‘people do business with people’ is an old but still very true adage and it’s my opinion that lenders which offer a truly fair and flexible service, aligned to what SMEs really want and not what we think they want, will play an increasingly large role in the support of UK small businesses.
Robo-advice has become one of the more popular and prominent financial technology innovations of the last few years, and it’s easy to see why. However, Lester Petch, CEO at FinchTech, reckons there’s cause for concern, and below talks Finance Monthly through five reasons robo-advice may not turn out to be all it’s promised without confronting some hard-hitting issues.
In theory these platforms offer expanded access to financial advice and fill a widening RDR gap, at a lower cost and with superior ease of use. Citigroup estimates that assets managed by robo-advisors could reach a collective value of $5 trillion over the course of the next decade - and that is certainly something to aim for.
Excitement and optimism should always be tempered with pragmatism however, and practically speaking, there are reasons to be concerned. Many available and in build platforms promise innovation, efficiency, and accuracy, but have some major potential hurdles to overcome.
Robo-advice start-ups are often unknown quantities, and must therefore build from scratch. Many rely on digital and social marketing campaigns, alongside referrals, o generate revenue. The problem is that these campaigns are often expensive - sometimes hideously so. Nutmeg, for example, posted a pre-tax loss of £9 million in the last fiscal year, even as marketing and staff costs hit £10.8 million.
It’s not altogether surprising that when cost of acquisition (CAC) for clients exceeds overall lifetime value (LTV), firms lose money. The assumption is that these expensive omni-channel campaigns will of course be successful, and eventually skew the CAC to LTV ratio back in the company’s favour. This is however a precarious position for any business to find itself in, even one with fantastic technology. Deep pockets are required.
In some cases the aim might perhaps be for the business to accumulate enough assets under management to enable a sale or exit, however this is also a risky strategy. Recent 2016 research by SCM Direct, a UK wealth manager, suggested most UK robo-advisers “will go bust before acquiring the sizeable assets under management to ensure their sustainability”.
Sophisticated software is no substitute for experience. Many robo-advice platforms haven’t weathered any serious economic storms. Many have little performance history at all and rely on back testing. How much can you trust in a technology that has never been truly tested in the heat of battle, or weathered an event such as a recession or cataclysmic sell off?
Robo-advice platforms may be at risk of not always accurately assessing risk tolerance – which can cause serious problems in an economic downturn. Recent research from FinaMetrica found that 21.2% of the firm’s 100,000 customers incorrectly estimated their true risk tolerance by a significant margin, when using a psychometric risk test. Platforms could be vulnerable to recommend investments that are beyond or below the client’s capacity for risk, especially in the event that the markets exhibit extreme volatility.
In an age of sophisticated and improving technology, reliance on this tech has led some to treat algorithms with an almost mystical reverence. Many are truly impressive, but can clients truly understand them? No algorithm is perfect, and many are unproven and untested in reality. They’re theoretically created to take human error or preference out of the equation, but human error can be a factor in their design and development. Could a mistake lead to catastrophic consequences for clients and do they know what they are buying into?
For all the talk of the market’s innovation and creativity, it’s often hard to tell one robo-advisor from another. The major differences tend to be cosmetic, a technological bell here, a branding whistle there, and little differentiating focus on the client’s needs and priorities.
Those robo-advice platforms that enter the market in the near future with more niche or specialised offerings aimed at specific market segments such as cultural groups or different age brackets, are more likely to gain traction, as well as potentially spend less on client acquisition
In conclusion, robo-advisors will need to overcome these problems and more to achieve long-term viability. This isn’t to say that the technology isn’t exciting, the need isn’t there or that it doesn’t have huge potential. The right platforms could potentially redefine the market, and digital investment management is a step in the right direction. If digital investment management platforms can iron out the kinks and focus on what works for their own business model, and more importantly their customers, there is a bright future ahead of them.
David catches up with Don Ginsel of Holland Fintech. Don and David chat PSD2 and mature startups.
In the digital economy, trust is the new currency. Technology is changing the nature of trust – especially for banking and financial services as they strive to provide greater value and protection to customers, and deliver products to market quickly through machine learning, blockchain and pervasive encryption. Explore the rise of "digital trust” and its impact on business in an interview with global trust expert Rachel Botsman and IBM Industry Platform General Manager, Strategy & Market Development Shanker Ramamurthy. Rachel’s “digital trust” theory was named by TIME as one of the “10 Ideas That Will Change the World.”
People with mental health problems are three times as likely to face financial difficulties. As well as affecting our income, mental health problems can make it harder to manage money, control spending and stay on top of bills.
Tonight the MMHPI will launch a new report exploring how fintech solutions could empower people with mental health problems - allowing greater control in periods of poor mental health.
Hosted by Monzo and chaired by Ghela Boskovich, Head of Fintech and Regtech Partnerships at Startup Bootcamp, the panel includes;
Zander Brade, Product Designer at Monzo
Richard Morgans, Head of Digital Innovation Lab and fintech at TSB
Chris Fitch, Vulnerability Lead, Money Advice Trust & Research Fellow, Personal Finance Research Centre, University of Bristol
Katie Evans, Head of Research and Policy at Money and Mental Health
Kicking off July’s Game Changers section is an interview with David Taylor, the Founder, President and CEO of VersaBank. Here he tells us all about the exciting journey that building Canada’s first virtual, branchless bank has been thus far.
You founded VersaBank in 1993 – could you tell us a bit about this 24-year journey and what it has taught you?
It certainly has been an exciting journey, filled with challenges and lessons. I thought that by applying emerging digital technology to banking, I could create a bank without branches with low overheads that could economically serve small niche markets that were not well-served by Canada’s large full-service banks. Considering this ‘branchless model’ didn’t exist at the time, I expected that I would have to educate regulators, the banking industry, customers and partners about how it would work and what the benefits would be.
I think the most discouraging lesson I learned was that banking regulators like the status quo and do not welcome new ideas, even if it means that some Canadians in niche markets would continue to suffer with only limited access to economical banking.
On converse, I think one of the most encouraging lessons I learned was that some large Canadian full-service banks recognized the important role that VersaBank could play in serving niche markets, which are perhaps too small or obscure for them, and have aided VersaBank in fulfilling its mission to serve these markets.
Developing and improving the software and systems to deliver ideally suited products to our niche markets is always an ongoing challenge, but as Terence Mann said in ‘Field of Dreams’, “If you build it he will come”. I found to my great satisfaction that if you truly endeavor to deliver ideally suited products, you will never have to look for customers. They will ‘come’.
Our niche markets are diverse and include: financing hospitals and schools in the remote Canadian arctic, developing customized web-based banking packages for the insolvency industry, providing back-end funding for the Fintech industry and point-of-sale financiers so that people can lease their hot water heaters, have cosmetic surgery, or lease equipment for their retail or business operations.
In many respects, we are the original FinTech, continuing to leverage the power of new technologies to reach our customers and serve their needs, but unlike the FinTechs of today, we’re also a Schedule 1 chartered bank with access to a huge source of funds, through an expansive network of more than 120 financial advisory and brokerage firms who deliver deposits to us digitally.
Finally, we have proven that you don’t need lax credit standards to attract borrowers. Convenient access, reasonably pricing and flexible terms will attract good quality borrowers. VersaBank has had no need for a collections department and has established one of the lowest loan loss histories in the industry. My hope was that by applying new technologies to banking, we could really make a difference to our customers’ lives. I think we have been able to do this and I look forward to continuing to grow our bank and to finding more innovative ways to serve my fellow Canadians.
Could you tell us a bit about your background prior to founding VersaBank?
I was fortunate to be provided with a solid foundation in banking by working at two leading, but very different, banks. I started my banking career at a large full service Canadian bank, the Bank of Montreal, where I discovered a passion for the business. It was a terrific opportunity to learn the basics of banking and I spent eight years there, before moving to Barclays Bank of Canada. In Canada Barclays PLC employed a niche strategy. However, when, amidst a downturn Barclays decided that the country was a non-strategic market, I saw an opportunity to create a Canadian niche bank, which ultimately led to the formation of VersaBank.
What have been your biggest achievements to date?
A couple of things immediately come to mind, which are at opposite ends of the VersaBank journey. They being: getting the digital bank started back in 1993 and successfully completing a very complex amalgamation transaction earlier this year. Both of these achievements were ‘firsts’.
I soon discovered that the banking regulators had no appetite to grant a bank license for a brand new bank with an untested model. So I decided to acquire an existing financial institution and transform it into my new model. I looked for the smallest financial institution I could find and discovered Pacific & Western Trust in Saskatoon, Saskatchewan. I met with the owner - Bill MacNeill at a restaurant and sketched out a plan on how I could transform Pacific & Western Trust on a napkin. When he asked if I was there to buy his trust company, I surprised him by suggesting instead that he ‘buys’ me to run and transform his trust company. I had extensive experience in the industry and was a banker and he was, in fact, a miner. He agreed to my suggestion and that opened the door for me to build Canada’s first virtual, branchless bank.
I also believe that the completion of our amalgamation in January 2017 was a key accomplishment. It was the first successful merger under the Canadian Bank Act and enabled us to significantly simplify the structure of the bank, while also realizing some significant financial benefits. It was a very complex transaction that required approvals from the shareholders of VersaBank, PWC Capital, the regulators and even the Canadian Minister of Finance. We secured an overwhelming approval from shareholders of the two companies and the other required approvals. It was a great accomplishment and was vitally important to the positioning of VersaBank for the future. We’ve created a unique state-of-the-art bank that is profitably providing banking services in niche markets throughout Canada.
Could you please tell us a bit more about the merger with PWC Capital and what it means for the future of VersaBank?
This transaction was historic in the sense that it was the first merger to be successfully completed by a Schedule 1 bank (a domestic bank that accepts deposits) under the Canadian Bank Act. Previous attempts by other banks had been unsuccessful.
While that’s a fun fact, the merger for us was critical to our future success, as it ultimately was about creating a simplified structure for VersaBank and eliminating confusion that existed with its parent company, PWC Capital. Previously, there had been two publicly traded companies, VersaBank and its parent a financial holding company, PWC Capital. This created duplication and PWC Capital had been highly leveraged. In addition, potential investors often were confused about the differences between PWC Capital and the banking entity, Pacific & Western Bank of Canada (now VersaBank). This structure was inefficient and it impeded our ability to grow. We needed to change it.
What emerged out of this complex transaction is a growing, standalone, publicly traded, high-margin, branchless chartered bank that uses its software to reach key niche markets, traditionally underserved by the big Canadian banks. We have enormous growth potential.
You’ve also recently opened a new digital facility, which provides the infrastructure for VersaBank’s branchless model and complements Canada’s FinTech industry – how did the idea about the platform come about? What is your outlook for its future?
Right from the founding of VersaBank, we believed that we would have a significant competitive advantage by designing, developing and maintaining state-of-the-art, custom banking software that helps to address customers’ specific and unique needs, while also minimizing the required investment in physical infrastructure and human resources. We’ve tended to focus on niche markets that are traditionally underserved by Canada’s big banks.
By following this approach, for example, we’ve become the bank of choice for Canada’s national consumer insolvency firms, by creating a banking package ideally tailored specifically to the unique needs of insolvency professionals. It’s highly efficient and very economical both for us and for our clients and has become a win-win for ourselves and our customers.
We recognized that there could be tremendous synergies if we brought some of our in-house teams under one roof, which has led to the establishment of our new digital facility, the VersaBank Innovation Centre of Excellence – the modern, new home of our in-house software development division and its eCommerce division. By bringing them together, we have enabled these teams to work side-by-side to encourage collaboration to improve our existing banking solutions and create new solutions for tomorrow.
The team already is working on some innovative new solutions that likely will hit the market in the next couple of years.
Is there anything else you would like to add?
Arguably, when first conceived, VersaBank was a little ahead of the times, but the times have now caught up and VersaBank is finally able to take full advantage of its systems and model to serve people across Canada without branches. Its products are in high demand and its margins lead the industry without the usual loan losses. Twenty years ago this would have been a dream, but today, the dream has become a reality.
Website: http://www.versabank.com/
By Adam Oldfield, Vice President Sales EMEA Financial Services at Unisys
The financial services market continues to evolve digitally to meet the rising expectations of customers, particularly in relation to their experience with digital and in-store services. Consumers expect banks to be accessible 24/7, from any location, and any device. As a result, security of access continues to be front of mind for everyone in the financial services industry, and the challenges that come with it.
Multifactor authentication built into modern applications, the use of biometrics or analytics as well as artificial intelligence are all needed to be interwoven in the modern environment to keep security capabilities at a high – but why is cybersecurity such a pressing factor in the market over the last few months?
Legislative drivers
It is widely known about the multitude of financial, and reputational, incentives tied to increasing security standards in order to be compliant with a variety of legislative drivers, with the biggest and most impactful deadline being the General Data Protection Regulation. The GDPR brings consistency to the current data protection laws across EU member states, and provides guidance on how customer data should be stored and how companies must respond in the event of a data breach.
It is widely known about the multitude of financial and reputational incentives tied to increasing security standards in order to be compliant with a variety of legislative drivers, with the biggest and most impactful deadline being the General Data Protection Regulation.
The GDPR brings consistency to the current data protection laws across EU member states and provides guidance on how customer data should be stored, as well as how companies must respond in the event of a data breach. As we move towards the 2018 deadline a large proportion of companies including financial services, are still unsure on what they need to specifically do in order to be as compliant as possible.
Therefore, we are continuing to see the demand for cybersecurity advisory services, personnel as well as solutions at an all-time high - demanding higher and higher shares of annual and quarterly budgets within financial institutions.
The threat landscape and impending legislation has meant cybersecurity has moved from a once discretionary spend to a mandatory one in recent months. Financial services organisations are rapidly restructuring teams, hiring new talent and most importantly seeking advisory services to manage the journey to compliance. Cybersecurity maturity levels held with each organisation in the market also fluctuate, meaning each company has a different set of requirements, goals and timeframes to abide by.
However, legislative drivers forcing financial institutions to treat customer data with the utmost care are not withheld to just the GDPR. The Payment Services Directive (PSD2) and the 2018 mandate set by the Competition and Markets Authority (CMA) are some of the key drivers to raising data protection and security requirements as well as market standards, having a particular impact at the decision making, forecasting and budgeting level.
These legislative drivers will continue to move security up to a boardroom discussion, with advisory services taking the front line of demand as well as budget. As we move towards 2018, the stopwatch is on for new entrants, as well as established players to restructure teams, align ecosystems and improve data management. They must also fine tune effective cyber breach response strategies to ensure the legislations and regulations put in place have a positive impact on their business and customers.
No organisation is immune
Many financial services organisations are aware of technological developments taking place throughout security, as well as the evolving security postures needed to combat threats and reduce routes to entry. Biometric authentication is an example of this that adds an additional layer of personalised security for data and account protection purposes. The plethora of high-profile attacks, such as Petya and Wannacry, highlight how no organisation or industry, including financial services, is immune.
The need for flexibility and responsiveness is paramount in this ever-changing landscape, not only legislatively but operationally, driving companies to pull together best in breed solutions to ensure capabilities match fluctuating threats. Legislatively the PSD2, for example, forces organisations to contract and conduct payments in a certain way, as well as effectively store and protect sensitive data. In comparison, the CMA 2018 mandate is forcing all financial services providers to offer customers the ability to manage their products, regardless of provider, via a single mobile application of their choice. Operationally, customers are demanding seamless payment and verification options with a 24/7 responsive service. A best in breed and reactive approach is capable of managing these demands, meaning flexible and intuitive ecosystems for application roll out can be the route to success, and gone are the days of using one provider for everything.
