Fintech Update, 10/15 - 10/21
October 15-21, 2016
Leading Off
U.S. regulators released a joint notice of proposed rulemaking regarding cyber risk management in banks; the R3 blockchain consortium tested blockchain’s ability to make cross-border transactions cheaper and more efficient; Visa partnered with Chain on a blockchain-based B2B funds transfer system; Citi Ventures invested in an AI-based fraud protection company; and the NYT profiled SoFi’s strategy of building personal relationships with customers through ancillary service offerings.
Policy & Regulation
U.S. regulators announce new proposed cyber rules. The FRB, FDIC, and OCC jointly issued an advance notice of proposed rulemaking on “enhanced cyber risk management standards” for large banks and their affiliates [full text]. Among other things, the rule would mandate that all covered entities develop a cyber risk management framework for their businesses.
Payments
Stripe rolls out new anti-fraud service. The payments services startup added a new fraud prevention tool, Radar, to its platform. Radar will use machine learning to monitor transaction data on Stripe’s platform and provide businesses with “prioritized lists of flagged charges . . . as well as ‘traditional fraud checks,’ such as card verification code and address verification.”
DocuSign launches new payments tool. The digital signature processor partnered with Stripe on DocuSign Payments, which allows sellers to “collect payments and signatures in just one step.” Sellers may now connect DocuSign to an existing payment gateway, allowing buyers the option to “pay with a credit card or a mobile wallet . . . in as many as 130 currencies” at signing.
Digital Currency & Blockchain
R3 tests blockchain for cross-border transactions. The blockchain consortium, comprised of over 60 global financial institutions, completed a test of its cross-border payment system using Ripple's XRP currency. The test was conducted to show that blockchain could help banks avoid the need to hold fiat currencies in local accounts around the world ("nostro accounts"), typically a high-cost aspect of cross-border transactions.
SBI partners with IBM on blockchain bond trading platform. Japan’s SBI Securities is developing a new type of bond-trading platform based on IBM’s Hyperledger blockchain technology. IBM will give SBI access to its Tokyo facilities, as well as research and consulting services. After testing, IBM and SBI plan to make the platform commercially available.
Visa works on blockchain-based B2B funds transfer system. Visa partnered with blockchain firm Chain to develop a “funds transfer system for high value bank-to-bank [B2B] and corporate payments.” The system, known as Visa B2B Connect, “promises near real-time notification and finality of payment aligned with an immutable system of record."
Privacy & Cybersecurity
Could selfies replace passwords? Companies as diverse as Uber and Mastercard have begun asking customers to use selfies, rather than passwords, to prove their identities. While facial recognition has benefits and may help limit the need to remember a variety of passwords, some experts worry about the efficacy, privacy, and security associated with the technology.
GoFundMe has helped raise $3 billion. The crowdfunding platform announced that it has helped others raise over $3 billion since going live. The total is particularly notable given that the company only passed the $2 billion mark in May. However, as TechCrunch notes, the dollar spike is largely due to repeat users making larger donations, rather than an increasing user base.
International News
Malaysia joins the regulatory sandbox club. The country’s central bank announced that its forthcoming regulatory sandbox will be open to firms “looking to . . . improve the accessibility, efficiency, security and quality of financial services,” while regulators work to “improve risk management” in the Malaysian economy.
Fundraising & Deals
Citi buys into AI-based fraud detection. Citi Ventures invested an undisclosed amount in Feedzai, a company that “applies machine learning technology to large data sets to detect . . . potential cases of fraud associated with banking and shopping.” Feedzai claims its software can detect fraud up to 10 days earlier than competitors, with greater efficacy and fewer false alarms.
Biometric security company Hypr raises $3 million. Hypr, a New York-based biometrics firm, raised $3 million in funding to increase adoption of its authentication system, which transforms a user’s biometric identity (voice, face, and palm recognition) into a security token that can be used to authenticate mobile or desktop payments and wire transfers.
Company Spotlight
SoFi finds success with ancillary service offerings. Amid a broad downturn in the online lending industry, SoFi “is emerging as the new leader” thanks in part to its strategy of building personal relationships with customers through services like date-matching, career counseling, wine tastings, and home-buying workshops.
State Street assists with proposed bitcoin ETF. State Street was named the “administrator and transfer agent for the Winklevoss Bitcoin Trust,” a proposed exchange-traded fund (ETF) backed by bitcoin investors Cameron and Tyler Winklevoss. According to a SEC filing [full text], the bank would be responsible for the "day-to-day administration of the Trust" upon its launch.
Events
FTC forum on P2P and crowdfunding, 10/26. The Federal Trade Commission (FTC) will host a forum on Wednesday, 10/26 in Washington, D.C., the second in a series of events discussing regulation and fintech. The forum will focus on the risks and benefits of peer-to-peer (P2P) payment platforms and crowdfunding, with an emphasis on consumer protection concerns.
NVTC cyber summit, 11/2 - 11/3. The Northern Virginia Technology Council (NVTC) will host a two-day cyber security summit in Tysons Corner, Virginia. The event will convene regulators, investors, and business leaders to share thoughts on “emerging cybersecurity technologies, digital solutions, operations and enforcement.”
Commentary & Miscellaneous
Chancery judge backs blockchain for shareholder voting. Vice Chancellor Travis Laster of the Delaware Chancery Court proposed using blockchain-based voting as a way to put more power in the hands of corporate shareholders. According to Laster, proxy services have damaged the “plumbing” of shareholder voting, and the “plunger is distributed ledger technologies.”
Have a great weekend!
The Fintech Update Team