Fintech Update, 7/23 - 7/29
July 23-29, 2016
Leading Off
Community bankers tell the FDIC that fintech poses a significant threat to their business; a McKinsey study shows that fintech firms are increasingly developing business-facing products and partnering with small- and medium-sized enterprises; a Florida judge rules that bitcoin is property, not money; several major banks have announced plans to develop proprietary robo-advisory services in the coming year; and Square now offers merchants same-day deposit settlement.
Policy & Regulation
Community bankers tell FDIC that fintech is a threat. During last week’s meeting of the Federal Deposit Insurance Corporation’s (FDIC) Advisory Committee on Community Banking, executives from a group of community banks said that fintech firms were their “biggest threat.” Highlighting high-speed payment systems and online lending platforms in particular, one concerned bank president described fintech firms as “eating into our traditional profit area.”
Banking & Securities
Big Bank mobile banking is up. The three largest U.S. banks have all reported heightened rates of adoption of their mobile banking products. As of Q2, JPMorgan Chase leads the pack, with nearly 25 million monthly active mobile customers, up 18% from last year. Bank of America is in second with 20.2 million, and Wells Fargo is in third with 18 million.
Fintech’s growing partnerships with SMEs. A new McKinsey report found that the share of fintech businesses with business-to-business (B2B) product offerings increased from 34% in 2011 to 47% last year, providing evidence of the growing partnership between fintech firms and small- and medium-sized enterprises (SMEs).
New information for valuing private companies. San Francisco-based Equidate, an online trading platform for private companies, will make certain data about private companies “free and open to the public.” Equidate promises to make the market for private companies more transparent, echoing Securities and Exchange Commission (SEC) chairwoman Mary Jo White’s remarks in March about the problems of fairness in private secondary markets.
Digital Currency & Blockchain
Florida judge rules that bitcoin is not money. The issue in the case was whether Florida’s anti-money laundering (AML) statutes extended to sales of digital currency; the court ruled that bitcoin is property and not subject to the state’s AML rules. The debate about whether bitcoin is money or a commodity has many regulators split, but the outcome here applies only in Florida.
Cybersecurity
Banks await new cybersecurity rules. Banking regulators, led by the Federal Reserve, are reportedly working with financial institutions to develop new cyber regulations. According to an unnamed source, the effort "isn't related to any specific recent attack [but] more to the recognition that we have an increasingly sophisticated cybersecurity environment."
Personal Finance
Banks embrace robo-advisory services. According to Deloitte, robo-advisory services are projected to grow into a $7 trillion industry in the next decade. The growing demand for these services has encouraged big banks to introduce their own robo products in the coming year. Accenture’s wealth management advisory team reports that every “major [bank] player” is expected to have “some sort of robo by the end of the fiscal year."
International News
Rocket Internet will launch a digital bank. The Berlin-based company, which helps build online startups, has partnered with Frankfurt-based FinTech Group to offer digital banking services to European customers. The new venture will operate under the banking license of FintechGroup’s subsidiary bank but will be built on Rocket’s tech infrastructure.
Dublin vies for post-Brexit fintech business. With the U.K. exiting the EU, Ireland is trying to leverage its status as “the only English-speaking country . . . in the Euro Zone” to develop its fintech industry and lure others away from London.
Company Spotlight
BoA chooses not to develop a mobile wallet. Although many of the world’s biggest banks are racing to develop proprietary mobile wallets, Bank of America (BoA) announced that it will continue to rely on those developed by third-parties. "Customers are becoming inundated with wallet options," BoA said in a statement. “[Most] platforms have yet to create a meaningful value proposition."
Square offers same-day deposits to merchants. The online payments and merchant services firm introduced Scheduled Deposit, giving sellers the option to make same-day bank deposits of their daily sales, seven days a week. Scheduled Deposit offers merchants the ability to “get their money when they need it, without extended wait times.” Square will charge a service fee of 1% of each deposit.
Thought Machine’s new banking tech. The London-based startup released its Vault OS, software that “uses blockchain-like technology and machine learning . . . to offer banks greater efficiency and digital capabilities.” Founder Paul Taylor and his team of former Google engineers aims to overhaul banks' core systems, which "are typically built on decades-old technology.”
Commentary & Miscellaneous
FCA executive discusses fintech and regtech. Speaking during “London FinTech Week,” Christopher Woolard, Director of Strategy and Competition for the U.K.’s Financial Conduct Authority (FCA), highlighted the early successes of the FCA’s Project Innovate and spoke about the regulator’s new regtech initiatives aimed at “developing technologies to improve regulatory reporting and data sharing.”
Millennials embrace fintech, risk data security. According to a recent survey by the CFA Institute, people between the ages of 25-34 are more likely than older adults to use new technologies for personal finance. Millennials’ demand for tech-enabled services has contributed to a proliferation of new products, but also to the threat of fraud and identity theft.
Have a great weekend!
The Fintech Update Team