Fintech Update, 7/30 - 8/5
July 30-August 5, 2016
Leading Off
Ant Financial, the fintech spinoff of China’s e-commerce giant Alibaba, is using blockchain technology to bring transparency to charitable contributions; hackers stole more than $60 million in bitcoin from the Bitfinex exchange; Facebook is integrating P2P transfers into its popular Messenger app; the British and Chinese securities regulators are cooperating on plans for a “landmark” financial services agreement; and the Ethereum digital currency variant split into two distinct versions.
Banking & Securities
Fed official talks online lending and bank supervision. In the Federal Reserve Bank of San Francisco’s 2015 annual report [full text], Tracy Basinger, vice president of the bank’s Financial Institution Supervision and Credit group, discussed the impact of online lenders on bank supervision activities. “Almost every one of these companies has a bank partner, [so] it’s important that we understand what those partnerships look like and the implications for banks and consumers,” said Basinger.
Payments
A silver lining in the chip-enabled credit card debacle? Many have been unimpressed by the U.S.’s transition to chip-enabled credit cards, which has included unsteady rollouts, dysfunctional card readers, and continuing uncertainty at the register. However, the Wall Street Journal’s Joanna Stern finds solace in the knowledge that the new payments infrastructure is “laying the groundwork” for smartphone-based payment to “replace our wallets once and for all.
Digital Currency & Blockchain
Bitcoin exchange hacked, over $60 million stolen. More than $60 million worth of bitcoin was stolen from Bitfinex, one of the world's largest digital currency exchanges, on Tuesday. Details about the hack are still sketchy, but it is the largest theft of bitcoins since the 2014 hack of Japan’s “Mt Gox,” which ultimately caused that exchange to cease operations.
Alibaba spinoff testing bitcoin. Ant Financial, the fintech spinoff of China’s e-commerce giant Alibaba and the world’s second largest private tech company, is using blockchain technology to bring transparency to charitable contributions. The company will pilot a blockchain program to track individual donations for its new charity platform, Ant Love.
Ethereum splits in two. Ethereum, the popular digital currency variant started three years ago, split into two distinct versions in response to a hack that took place in June. The two versions are nearly identical, except one’s code has been rewritten to erase evidence of the hack and return lost money to its users. Users with “a philosophical disagreement” against the new code may continue using the old version, “ethereum classic,” which is now managed by a new team.
Cybersecurity
A cyber primer. Reporting on the BlackHat conference in Las Vegas -- the annual event for hackers, government agencies, and corporate information security professionals to discuss key topics in cybersecurity -- TechCrunch highlights four hot-button cybersecurity terms: “behavior baselining,” “active response,” “security analytics,” and “public key cryptography.
Personal Finance
The race for robo-advisor market-share. An article in Forbes discusses the booming “institutional and retail interest” in robo-advisors, which “is creating a fierce race among startups, brokerages, wealth management firms, and insurance companies to serve a shifting and evolving account base.”
Facebook integrates digital money transfers into Messenger. The social network partnered with Azimo, a digital money transfer service, to allow users to exchange payment with anyone on on their Facebook friend lists. Azimo said the new service would reduce the the risk of mistyped payment details and limit delays. CEO Michael Kent remarked that “sending money should be as easy as adding a friend on Facebook.”
International News
Some good news for post-Brexit U.K. fintech. According to Business Insider (BI), British fintech startups raised at least GBP 40 million in the month following the country’s Brexit vote. Although most of the deals were likely in progress prior to the vote, BI suggests that “the fact that these deals weren't called off” should boost confidence in the U.K.’s status as a center of fintech.
The U.K. establishes regulatory partnership with China. The British and Chinese securities agencies are outlining plans for “landmark financial services projects between the countries.” While details have not been confirmed, sources shared that the proposed partnership includes a bilateral framework for cryptocurrency, a proposed London-Shanghai link for trading shares, and cooperation on fintech initiatives.
Singapore creates a fintech advisory panel. The new regulatory group, established by the Monetary Authority of Singapore and composed of industry and thought leaders, will “discuss fintech developments around the world and how Singapore can harness new technologies to enhance its financial services industry.”
Company Spotlight
Square revenue jumps 41%. The mobile payment provider announced “better-than-expected” growth last quarter, driven by a “sharp” uptick in transaction volume. Square had been expecting lower revenue totals due to Starbucks’ decision to switch to a different payment service, but the company was buoyed by the continued success of its lending arm, Square Capital.
Commentary & Miscellaneous
Nonprofits in the fintech ecosystem. The Chicago Tribune highlights the work being done by FinTech Sandbox, one of a growing number of nonprofit organizations dedicated to fostering fintech startups. The Boston-based FinTech Sandbox provides fledgling companies with resources and six months of free access to data feeds, software, and APIs from financial companies like Morningstar and CME Group.
Brookings releases annual report on financial inclusion. The report [full text] finds that, despite widespread use of digital financial technologies, nearly “[two] billion adults across the world are excluded from the formal financial system.” Brookings based its findings on four criteria: country commitment, mobile capacity, regulatory environment, and adoption of digital financial services.
Have a great weekend!
The Fintech Update Team