Fintech Update, 9/17 - 9/23
Sept. 17-23, 2016
Leading Off
Sandboxes everywhere! The U.S. House will consider a bill proposing a regulatory sandbox for fintech innovation, the U.K. FCA admitted 24 firms to its Project Innovate, and Thailand announced a fintech sandbox initiative; Accenture prototyped an “editable” blockchain; hackers stole the private information of 500 million Yahoo users in the largest hack in history; “the world’s largest fintech hub” is set to open in Singapore; and experts discussed recent developments regarding limited-purpose OCC charters.
Policy & Regulation
“Sandbox” bill introduced to U.S. House. Rep. Patrick McHenry (R-NC), Vice Chairman of the House Financial Services Committee, introduced a bill to establish a U.S. regulatory sandbox for financial innovation. The bill [full text] would require several federal agencies to establish internal innovation offices tasked with helping companies develop and test new financial products and services in a controlled setting.
House resolution may be a step toward a bitcoin safe harbor. The House’s recent approval of a nonbinding resolution to encourage tech innovation has given virtual currency advocates hope for additional gains. Their goal is “an exemption from state money transmission laws” for bitcoin companies that act as conduits but do not directly hold customer funds.
Banking & Securities
SWIFT to begin offering daily reports to clients. The Society for Worldwide Interbank Financial Telecommunication (SWIFT) announced that it will offer clients “Daily Validation Reports” beginning in December. The new program is “designed to help banks pick up on fraudulent transfers” in the wake of several cyberattacks on SWIFT members in the past year.
Digital Currency & Blockchain
Accenture creates “editable” blockchain. The global advisory firm debuted the prototype of a blockchain platform that lets administrators edit, hide, and redact transactions on a permissioned ledger. Accenture believes the system will appeal to large financial institutions, while critics argue that destroying the system’s immutability also destroys its purpose.
Bitcoin: money or commodity? A federal judge in New York’s Southern District Court decided that Bitcoin is a form of money while trying a case about alleged money laundering. The ruling differs from a Florida state court decision earlier in the year, which held that bitcoin should be considered a commodity. Courts around the country remain split on the question.
Major banks use bitcoin to identify trading tags. Citigroup, Credit Suisse, and HSBC are employing technology developed by blockchain infrastructure startup Axoni to address a “technology pain point” related to identifying and sharing trade reference data.
Cybersecurity
Yahoo hack is the largest ever. The struggling former Internet giant blamed “state-sponsored hackers” for the theft of over 500 million users’ personal data, including names, e-mail addresses, birthdates, phone numbers, and encrypted passwords. Yahoo said that hackers penetrated its network in late 2014.
International News
FCA invites new firms into its sandbox. The U.K.'s Financial Conduct Authority (FCA) accepted 24 new applicants to participate in Project Innovate, allowing the companies to develop new products in a controlled environment in collaboration with the FCA and incumbent financial institutions. The FCA noted that interest in its sandbox has “exceeded expectations.”
Thailand announces new sandbox initiative. Thailand’s central bank will establish a regulatory sandbox for fintech experimentation in early 2017. Thailand joins a growing list of countries with fintech sandboxes, including Southeast Asian neighbors Singapore and Indonesia. The program will be open to lending, payment, and money transfer businesses operating in Thailand only.
“World's largest fintech hub” to debut in Singapore. LATTICE80, a non-profit project backed by the Marvelstone investment group, is set to open a 30,000 square-foot facility in Singapore’s Central Business District. LATTICE80’s proximity to large financial institutions and Singapore’s Monetary Authority promises to help participants develop new financial innovations, form public-private partnerships, and expand their businesses.
Fundraising & Deals
JPMorgan takes a stake in InvestCloud. JPMorgan invested an undisclosed amount in InvestCloud, a cloud storage startup that makes online transactions more efficient for clients with banking and investment accounts. JPMorgan is “exploring [partnerships] with a range of [fintech] vendors . . . to get to market faster and bring in innovation.”
Company Spotlight
Stripe debuts new service for “gig economy” payments. The San Francisco-based payments company announced Instant Payouts, a service allowing firms to pay contractors “within minutes” via a linked debit card. Stripe is targeting services like Uber, Lyft, and Airbnb, which rely on on-demand service from contractors, but often struggle to pay in fewer than several days.
Commentary & Miscellaneous
Experts discuss OCC charter developments. The American Banker features commentary from several experts on the OCC’s proposed rule on receivership and Comptroller Curry’s remarks regarding limited-purpose, uninsured bank charters. What this may mean for “special-purpose fintech banks” is “the elephant in the room,” said Julie Williams, former second-in-command at the OCC.
Financial institutions look to the cloud. The Chief Information Officer (CIO) at the Depository Trust & Clearing Corporation (DTCC) sees cloud computing and blockchain as the future of settlements. Meanwhile, JPMorgan’s CIO is also bullish on cloud computing, arguing that it should be central to a modern large bank’s information technology strategy.
What does a digital future mean for our spending habits? Citing study findings showing that humans “don't feel a strong sense of loss when we make purchases with digital money,” entrepreneur and Fitbit designer Gadi Amit wonders if a cashless future will be marked by “thoughtless spending.”
Have a great weekend!
The Fintech Update Team