Chinese P2P Lending – The Red Dragon Gets Fiery with the Industry

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Continuing with my fintech posts once again, I return to Asia and look at Chinese P2P Lending.

Chinese P2P Lending – A brief insight

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China’s peer-to-peer lending sector has emerged as the largest and most dynamic online alternative finance sector in the world. (ACCA, October 2015)

The P2P lending industry has increased since 2011, with 2,600 platforms by the end of 2015, but has experienced stops and starts due to issues in controlling risk. Over the past year around 1,000 businesses have closed. Risk has been a major talking point, especially with credit risk – a few commentators have mentioned that data mining could provide a way to identify better borrowers, but this ultimately depends on availability and dimensions of data.

In addition, many have stressed that standards need to be put in place in the industry such as being more transparent, the requirement of loan loss provisions, as well as having safety requirements that are put in place to modernise and regulate the industry.

Chinese P2P Lending – Ezubao Scandal

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It’s no surprise that many have commented on the industry and how measures need to be put in place after the Ezubao scandal. At the start of the year, it was announced on Chinese state media that the company cheated over 900,000 investors out of US$7.6 billion.

According to a few sources, 95 percent of investment projects on Ezubao’s site were fake.

The downfall of Ezubao definitely tarnished the industry’s reputation in China, however, the government are clamping down on companies that don’t play by the rules.

They have banned P2P platforms from securitising assets or offering debt transfer mechanisms that mimic securitisation. Companies are prohibited from using P2P platforms to finance their own projects according to The FT.

These regulations mark the first comprehensive framework for regulating the P2P industry in China.

Xu Hongwei, chief executive of Online Lending House told the FT : “In the past when there basically were no limits, and lots of people operated in the grey area. It won’t be like that any more. Now that we have standards, you just follow the standards. The whole industry will become more normalised.”

The Chinese government has a made a push on alternative finance to help people who struggle to access loans from banks (who are known to lend to large corporates or those with hard assets to pledge as collateral).

There are still over a 1,000 what has been dubbed as “problem platforms” in China and these equal to nearly half of all platforms.

Other rules that have been in place that standout include restricting P2P groups from operating “fund pools” in which investor funds are not matched with specific loan assets.

Also, a cap on the amount consumers and businesses can borrow has been put in place. For consumers the cap stands at 200,000 yuan on one platform a 1 million yuan over multiple platforms. For businesses the cap is 1 million yuan on a single platform and 5 million yuan over multiple lenders. (Crowdfund Insider, August, 2016)

Moreover, P2P companies will not be allowed to operate “offline”. Platforms must abide to transparency regulations such as lending statistics and the rate of defaults.  In addition, a blacklist will be put together to block bad actors from fraudulent activities.

Before these P2P rules came into play (and the Ezubao scandal), people didn’t really judge on which platform is good or bad, however, now they have a clearer idea on what’s going on. As a result, investors have become more vigilant on platforms that are breaking the rules.

*Ezubao Image : Fortune

Manchester Fintech : An Alternative To The London Scene

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Manchester Fintech – Unlocking The Northern Powerhouse’s Potential

 

Continuing once again with my fintech series, this time I head to the north west of England and look at the Manchester fintech scene.

Anyone that follows the goings-on in fintech knows when it comes to UK fintech, London is the dominant city. According to Startups.co.uk Only 31 of the top 100 start-ups listed (In May of this year) were based outside of the capital. Even more, interesting, Devon based crowdfunding company Crowdcube broke the London scene’s monopoly (it took the crowdfunding platform just 16 minutes to raise £1.2m from private investors to help fund its expansion plans, read more on the story here). Ernst & Young stressed in one of their reports that regional centres are a must – so it makes sense that the city behind the Northern Powerhouse is ripe for fintech.

Back in May, AccessPay secured a £1m package from Barclays to support its growth, the first in the city to benefit from the bank’s new Innovation Finance product. Anish Kapoor, Chief Executive Officer at AccessPay mentioned in Finextra : We felt that the local Barclays team in Manchester demonstrated from the start that they fully understood our market proposition and drive to make business payments as easy as possible, recognising the potential of the business to achieve rapid growth. They also saw the huge opportunity to deepen the existing working relationship between the two companies. We are very excited to be going on this journey with Barclays.”

When it comes to fintech Barclays is a leader, mainly due to its Rise centres that work alongside the digital community. Their Manchester hub is one of seven globally, and the only UK branch outside of the capital.

One commentator mentioned that the Manchester fintech scene is still in its infancy and that it is fair to say that Leeds has been stronger, due to the fact that the Yorkshire city has a background of customer contact centres and back-end processing in finance.

Manchester Fintech in DueCourse

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Image Source : DueCourse

A recent Manchester fintech case study found that hit the headlines is fintech start-up Duecourse who raised £6.25 million in angel funding.

According to Tech City News, the total investment includes £1.25m equity funding, and £5m of debt for lending to UK SMEs.

The Manchester cloud-based invoice financing service’s backers include investors of property portal giants ZooplaLinkedIn, LoveFilm, and fellow fintech company, TransferWise.

DueCourse launched their invoice software a year ago and is primarily aimed at SMEs who invoice clients on a regular basis.  In a nutshell, the start-up uses it’s propriety risk engine to assess and unlock cash tied up in unpaid invoices.

Company co-founder and CEO Paul Haydock told Tech City News : “We saw the opportunity for a company to disrupt the market and help SMEs get access to the cash they need to fuel their business, in real time.”

In addition, he mentioned in Manchester Evening News that the company started because they realised traditional methods of finance are completely out of sync with what today’s SMEs need. They saw the opportunity for a company to disrupt the market and help SMEs get access to the cash they need to fuel their business, in real time. In addition, DueCourse wanted to be viewed as a new kind of cash flow utility – to put it simply, once a business has linked their accounting package for free, the invoice company is there in the background for them to access the money in their unpaid invoices whenever they need it.

Invoice trading is a popular tool for SME finance and according to the Cambridge Centre for Alternative Finance (CCAF), approximately 5015 SMEs used online invoice financing during 2015 so there is plenty of room for growth. DueCourse have stated that they expect to top £16.5 million in SME advances by the end of the year.

Manchester Fintech : Standing on the shoulders of giants

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It’s fair to say a lot of firms have taken inspiration from the fintech scene in the capital and this form of disruptive form of tech seems to be of an opportunity rather than a threat.

However, there  are challenges that remain, the need more for more infrastructure within the city as well as continuing to attract talented individuals hat can meet the pace of expansion will be a major area of focus.

Focusing more on the Northern Powerhouse will help transform another UK fintech centre, the likes of Tech North and Tech UK will help support companies that are dotted around the city by giving them the best advice, networks, support and inspiration they need to further the growth and success.

Bustling Berlin : A Look At The City’s Startup Scene

Bustling Berlin - A Look At The City's Startup Scene

Berlin – An Attractive Place For Startups

The German capital’s low rents, cool image and open attitude has attracted an array of creative startup businesses and the startup scene continues to flourish with a new startup being founded every 20 minutes, according to advisory agency Gruenden.

The city has grown up and become more professional according to Ahoy! co-founder Nikolas Woischnik. As a result, bigger companies are moving to the East German city and a lot of talent has been produced from the first wave of start-ups who are now churning out additional start-up businesses.

I recently started this post (well title idea and left it as a draft for a couple of months) and I am now resumed writing it in post-Brexit Britain, which has left many commentators (including myself) whether Berlin can topple London’s start-up and fintech scenes respectfully.

The Berlin start-up scene has already overtaken the UK capital in terms of venture capital investment and many argue that it offers a pool of talented international developers who may avoid the UK once new migration laws are put in place, in addition, commercial rents that are about a third of those in London, and has a better party scene.

From taking a huge interest in fintech this year, one thing that particularly fascinates me since the majority of the nation voted to leave the European Union is will UK fintech sustain its reputation for being the European fintech capital.

The likes of Berlin in my opinion have an opportunity to steal its fintech crown. For example, fintech start-ups such as Chicken Financial have already expanded their operations in the German capital after the Brexit vote.

Chicken Financial’s co-founder Samuel Ely told The Guardian last month that : “We expect there will be a long-term shift of fintech and banking from Frankfurt to Berlin and that Berlin could eventually become continental Europe’s new financial capital.”

Fintech giants TransferWise mentioned that they will not close their London office, however, they we will probably not grow the team based in the capital much more. Headquartering elsewhere is a possibility mentions Taavet Hinrikus (company co-founder) but the company hasn’t made a final decision yet.

N26 Inspired

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Image source  : FT

Any UK fintech might take inspiration from Berlin company Number26 (now N26) who has recently been given a banking license and giving a huge opportunity to shake-up financial services across the continent.

What’s even more inspirational besides fintech champions such as N26 is that compared to the likes of London and New York, it does not host a stock exchange or even have a major bank.

Unlike German banking giant Deutsche Bank which does come from the country’s financial hub, Frankfurt. The David vs Goliath battle here between N26 and Deutsche Bank has recently gained media attention, with the Frankfurt based bank currently going through an identity crisis, there has been reports that the bank is thinking about splitting itself into a lender focused on capital markets and another targeting retail and corporate clients.

Whilst Deutsche Bank seems to be going through an identity crisis, in the German capital N26 has attracted 200,000 customers with its virtual banking model. In addition, the fintech is already operating in six European countries.

N26 are working on some new features such as allowing customers share expenses between friends with a simple swipe between friends (similar to splitting an Uber fare).

N26’s chief executive officer Valentin Stalf, was recently interviewed by Bloomberg’s Caroline Hyde, she asks Mr. Stalf about the importance of being based in Berlin, she questions that many would have thought that Frankfurt would be an obvious place for a fintech company. Stalf mentions that he feels that it is a good thing not to be in the centre of finance, he stressed that at N26 they wanted to build a product that didn’t like it has been created from a traditional bank, Berlin is the place to attain the best creative people in Europe. N26 are very happy to be in the city where they can get the minds to work with them. He also mentions that Berlin (post Brexit) is even more attractive to Europe.

So what can we learn from Berlin? Firstly, from looking at the N26 example, the fintech has stayed in the capital because of the array of both domestic and international talent, the city as a whole is an international magnet for talent, similar to London which has attracted many tech enthusiasts and young entrepreneurs.

In order to keep its talent, Berlin has helped people relocate, it’s common for start-ups in the city to help with paperwork and with an employee’s first month of accommodation.

They also go that extra mile and provide free language classes, as well as help people open their first bank account and register in the city.

Start-ups in the German capital work hard to give their employees reasons to stay. Employees seem to stay at one company, and rarely switch from one role to another. The likes of offering flexible working hours to offering loyalty programmes are some of the methods used by Berlin start-ups.

In addition, Berlin definitely has more of a grass roots feel compared with London which has more of an established start-up scene. Berlin has a tenacious approach, and a main reason why the city has been put on the start-up map. A ‘we can do it’ attidude (whether that involves money or not) is apparent in pretty much all the start-ups in the city, with a strong ‘nothing will hold us back’ approach.

We’ve learnt from Berlin that all you need is a forward thinking and engaged approach for your start-up as well as having a strong community focus, this can make so many differences, regardless of where you are situated.

This type of philosophy that the German capital has on the start-up scene might sound very tempting for London start-ups and fintechs who are looking to relocate due to the Brexit vote, with lower rent prices compared with the UK capital and also having a wealth of talent in Berlin, many would find relocating to the East German city very tempting.

Spanish Fintech : Spain Bullish on the Fintech Scene

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When it comes to European fintech, for the majority, the likes of the UK, Sweden, and Germany all spring to mind straight away with all having a vast amount of companies dealing with an array of areas from money transfers to P2P lending.

However, Spain shouldn’t be overshadowed by its northern European counterparts. Spanish fintechs such as Kantox, Coinffeine, and peerTranfer for example, have caught the industry’s attention, and as a result have had very successful venture rounds.

Kantox from Barcelona, a foreign exchange service provider, offering SMEs and mid-cap companies a comprehensive solution to their foreign exchange needs, based on transparency, efficiency and value (as described on their website), has received over 7 million euros in investments from Partech Ventures, IDinvest Partners, Cabiedes Partners as well as a number of business angels.

In Addition, other fintechs such as Coinffeine which have also put Spanish fintech on the map, from developing a bitcoin and foreign currency exchange platform (and the first company in the world to be created using Bitcoins!)

Spanish Fintech : BBVA Turns To Fintech

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Image source : Fortune

From fintech start-ups to banks, national bank BBVA early this year bought Finnish fintech Holvi which provides online banking and financial planning services for small businesses.

The Spanish bank also took a 29.5% stake in U.K.-based mobile-only bank Atom, they also purchased U.S. banking service Simple (which is very similar to Holvi and only focuses on customers in North America).

BBVA have been very bullish on fintech and have a long term plan of becoming more and more digital savvy.

Chief Development Officer Teppo Paavola mentioned in a City A.M. article that : “We’re excited about Holvi as we share a vision about the benefit of technology for the customer. They use digital to bring a new approach to small business banking, where services essential to a business’ future such as invoicing are built into their core offer.”

Spain’s largest and most well known bank, Santander, has also been investing in fintechs and has launched a $100 million VC fund for fintech investments.

It’s particularly interesting to see the contrasting views in Europe with regards to fintechs, staying in Iberia, the region sees fintechs as acquisition targets. Research conducted by IDC and SAP found 29% of Iberian respondents linked fintechs with acquisitions, in contrast, only 14% of French respondents shared the same viewpoint.

French banks were the most likely to see fintech companies as a major threat, whilst Italian respondents viewed fintechs as a way of collaborating with banks (nearly half had this viewpoint).

With last month’s news of the UK leaving the European Union, many have questioned if London will be able to sustain its global fintech crown. It will definitely be interesting to see how the future will pan out for the city, the likes of Barcelona is a perfect place for any fintech that is looking to relocate. Since the 2008 financial crisis people in Barcelona have been forced to become more innovative, creative, and independent. As a result, a surge of office spaces have popped up and like-minded people have come together to create a tight knit community in the Catalan city.

It seems that the lesson learnt particularly in Spain is that if you can’t beat them, join them and BBVA have shown this, as Business Insider’s Andrew Meola points, out : “BBVA’s approach adds even more credence to the growing belief that established financial institutions and startups must work together in order to move ahead”.

Fintech Euro 16 : Who Will be Crowned European Champions?

Euro 16 – The Fintech Tournament

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This post is just a bit fun for anyone who has an interest in footy and fintech, what if the tournament was based on fintech investment – who would be crowned champions of Europe?

Euro 16 – Fourth Place – Germany

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Die Mannschaft would finish the tournament in fourth place, investors in Germany have put in over $80 million. Berlin leads the way and puts the German fintech scene on the map with almost half the firms based there, German financial centre Frankfurt also contributes to Germany’s success, with quite a few fintechs based in the city.

Euro 16 –  Third Place – Netherlands

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The Dutch missed out on this year’s tournament as they finished behind Czech Republic, Iceland and Turkey in Group A to miss out on their first Euro tournament since 1984. However, in the fintech tournament, Oranje qualify and finish the Euros in third place. In 2014 it was reported that the Dutch invested over $300 million in fintech. Companies such as BitonicAdyen, and AcceptEmail have helped put Dutch fintech on the map.

Euro 16 Runners-up – Sweden

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Sweden, representing the Nordics is the Fintech Euro 16 runner-up. The Nordic region invested over $340 million on fintech, companies such as iZettle which has as a high valuation of $244.04 million puts the Swedes as clear runners-up of the tournament.

Euro 16 Winners – England

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The Three Lions are crowned the Fintech Euro 16 tournament champions. Thanks to the London fintech scene, UK fintech firms have a combined value of £1bn. From looking at this number alone, fintech in London has a proven track record and also the pedigree to deliver continued value and forward-thinking startups in any market conditions.

Blockchain : It’s All About Trust

Blockchain - It's All About Trust

Many industries are buzzing about using blockchain technology – so what is this buzz all about and what is it exactly?

In a nutshell, blockchain is a way of recording data and also the foundation for cryptocurrencies such as Bitcoin. This innovative form of technology is made up of blocks of transactions (think of it like strands of DNA being joined together), and are added in chronological order.

The blockchain stores a wealth of information such as addresses and account balances from the genesis block (the first transaction), this is then added to the most recently completed block.

The blockchain acts as a public ledger which means that is simple to query any block explorer (details information about Bitcoin blocks, addresses, and transactions e.g. Blockchain Info) . The beauty of this is that you can view your own wallet address and view your bitcoin transactions.

Besides cryptocurrency, blockchain can also be used as a registry based system and can record, monitor, track, and transact an array of assets.

A good of way of thinking of how the blockchain functions is to see it as a giant Excel spreadsheet that can be used as an accounting system for transactions on a global scale. This can include a variety of areas such as finance, physical property, votes, health data, the possibilities are literally endless!

In addition, what is even more exciting about the “Internet of Value” as it has been dubbed, blockchain tech will further the value of the Internet of Things (IoT). Connected devices in the home and across various industries could automatically pay for the energy they use by writing to the relevant blockchain, creating a transfer of value based on the precise usage of the device (as mentioned by Forbes’ Bernard Marr)

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So how does trust come into play with blockchain? Users can trust the blockchain from the public ledger which is stored on decentralized nodes and maintained by miner-accountants, meaning there is no need to have a third party such as a bank. In essence, the blockchain allows the decentralization of all transactions on a global level.

Companies such as Lloyd’s have been open to adapt to new technologies such as blockchain. Their director of operations, Shirine Khoury-Haq, (who mentioned in a recent CoinDesk article)  that : “blockchain has the potential to improve the way insurers record risk, increasing the speed, accuracy and transparency of our processes.”

Lloyds have recently has taken on the responsibility of underwriting blockchain insurance startup SafeShare – “The insurance solution for the sharing economy” as quoted from their homepage.

So how was trust made? Trust was made directly from the blockchain and not directly with SafeShare itself to enter the business relationship. All Lloyds had to do was to approve SafeShare’s ledger, there was no need to study in detail their daily operations. The reason behind this is is that blockchain technology adds transparency by having a distributed ledger in place, therefore, it’s really hard for business to hide any dubious activities.

Trust and transparency are made in an instant, and this innovative form of technology has only just scratched the surface. It isn’t surprising that banks such as Lloyds are getting so excited about blockchain technology, even if the benefits for now seem quite distant. If we look at Cryptocurrencies for example, such as Bitcoin, which might be seen as innovative (depending on your point of view on the cryptocurrency), however, the innovation doesn’t come from the digital coin itself, it’s the trust machine that mints them.

Here I have just given a very basic overview on blockchain if you would like to know more about the technology I recommend  visiting the Reddit community r/BlockChain for the latest news as well as reading Blockchain Revolution : How the technology behind bitcoin is changing, money, business, and the world by Alex and Don Tapscott.

 

 

Fintech East : A Look How The Scene Is Flourishing In Asia

Fintech East - A Look How The Scene Is Flourishing In Asia

 

From previous looking at Nordic Fintech I have now turned my attention to the Fintech scene in the East.

Starting with China and the most dominate fintech country in Asia, it seems that a lot in the fintech world have forgot how powerful The Red Dragon actually is. The main players in Chinese fintech include : Alibaba, Ping An Bank, and WeChat, and these guys are way ahead of the West.

If we look at Alibaba’s Alipay and WeChat for example, neither started as a big fintech player or as bank disrupter. In an article published by BANKNXT’s Jessica Ellerm, after both companies mobilised millions of users through their respective platforms, they realised continued growth could be found by moving laterally into other markets, such as banking.

The beauty of such fintech products that the likes of WeChat provide is that it delivers a financial integration experience into a user’s life, from allowing for P2P payments, bank transfers and wealth management mixed with food delivery orders, taxi bookings and mobile phone top-ups. All from a quick swipe.

When I previously said companies such as WeChat are way ahead of the West from that example alone clearly shows it – there hasn’t been a western company that I can think of that has such a streamlined app integration with financial products and other amenity app services.

This could be where the likes of Paypal are going wrong (and need to play catch up). In addition, this multi-integration is ideal for Chinese users since nowadays they seem to skip plastic and go straight to their mobile wallets.

Another key factor that sticks out in China is online scoring. This type of behaviour monitoring system takes into account a person’s social media and e-commerce activities and churns out a relevant score.

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Since January last year, Alibaba’s Ant Financial Services announced a new credit-scoring system that uses information from various Alibaba services like Taobao to determine someone’s credit-worthiness.

The new service which is called Sesame Credit is an example of how far Alibaba has started to dominate the Chinese online ecosystem. Sesame Credit looks at the over 300 million registered users on Alibaba platforms such as Taobao and tracks their payment history from Alipay and other financial services to create a credit score (yes it does sound like something out of 1984!).

Alibaba/Ant Financial make it dominant player in Chinese fintech – its latest round of fundraising gives it a roughly $60 billion valuation after it was previously valued at about $45 billion last year (as mentioned in WSJ)

In addition, Ant Financial is gearing up for a future IPO (WSJ, April 2016. The company hasn’t revealed any future dates, however, they have mentioned in the press that there are plans in the pipeline to list shares on both a the Chinese Stock Exchange and overseas. It is expected that Ant Financial’s domestic IPO to come first, possibly in 2017.

Image source : Ant Financial Twitter

Fintech East : Singapore

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From Beijing to now focusing on Singapore. The Asian country is ranked the 4th largest financial centre in the world and was ranked 1st in the World Economic Forum Global Information Technology Report 2015. As Markus Gnirck and Gerben Visser mention in The Fintech Book in the “Singapore, The Fintech Hub for Southeast Asia” chapter : “The confluence of financial maturity and technological readiness is critical fir the acceleration of the Fintech industry, and naturally points to Singapore as a Fintech Hub.”

So who are the main companies in Singapore that are championing fintech?

  • M-DAQ – M-DAQ – “World Without Currency Borders” as their homepage states. In a nutshell, M-DAQ lets investors trade in any foreign currency denominated into the local currency of their portfolio without having to worry about exchange rates.

 

  • Numoni – Another exciting fintech, Numoni‘s goal is to provide financial services for the 2.4 billion people across the world who survive on less than US$2 per day. Numoni target the “unbanked” are their standout product is an ATM machine called Nugen. Since it was founded back in 2012, Numoni has expanded from Singapore to other Asian countries such as Malaysia, Indonesia, the Philippines, and Hong Kong. Last August the Singapore start-up raised a series B round of US$4.76 million.

 

  • Tradehero – Tradehero – Tech in Asia dubbed them as “one of the best start-ups in Singapore”. So how does Tradehero work? The app allows users to trade virtual money, betting on real-world stock exchange and commodity data. Tradehero is ideal for inexperienced investors who want to learn the tricks of the trade without taking many risks.

There are plenty more fintechs in the Southeastern Asian country and more up and coming companies will will undoubtedly soar as they continue to drive innovative forward and seek to make fintech solutions more efficient and user friendly for consumers.

 

Fintech East : South Korea

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From China via Singapore to now ending today’s fintech trip in South Korea.

Just like many Scandinavian countries that plan to go cashless (as mentioned in my previous blog post). South Korea also has the same aim.

Only about 20 per cent of all payments here are made with cash – among the lowest in the world – according to the Bank of Korea (BOK). (The Strait Times, March 2016).

The Bank of Korea is now aiming for the country to go cashless by 2020, beginning with plans to reduce the production of coins and  is cutting back on issuing paper money.

So how will a cashless society work in South Korea? Currently, a system is being tested for retailers who receive cash to give back change in credit form in a customer’s T-money card or credit card.

If you’ve never heard of T-money before, back 2004 the country introduced a smart card for public transport payments. T-money is a stored-value card with a smart chip for fare deductions and by the end of 2014, T-money was used in 43 million transactions daily in South Korea.

Although this innovative payment has been popular in South Korea it has had its criticisms, for example, some have mentioned that the elderly will struggle to adapt to using cashless payments. Moreover, some are concerned about credit card security and overspending.

Dr Sohn Sang Ho, senior research fellow at the Korea Institute of Finance, told The Strait Times that the Bank of Korea’s plan to go cashless by 2020 is “too ambitious”. He said there is still a big group of older people who rely mainly on cash transactions, especially in traditional markets, and it will take a long time for them to convert to electronic payments.

Sang’s view is that a cashless society is a long term goal, however, it is not possible in the near future.

Fintech East : Conclusion

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In conclusion, the Asian fintech scene is completely different to Europe, as both continents face different regulators and challenges. However, there are some similarities that both the East and West share. For example, The digital revolution has helped break down barriers between countries, and also between industries. In addition, international commerce has helped international payments and has helped an array of start-ups drive innovation forward by creating products that have meant sending payments without fees and sent instantaneously. China has shown just how fast paced Asia has become when it comes to making fintech products and have got it spot on with creating one app services where multiple payments take place, something that the West need to improve on. Although the Asian fintech scene is clearly flourishing, it still isn’t perfect, it still needs a lot more regulations in place.

 

Nordic Fintech – A Look At How The Scene Is Shaping Scandinavia

Nordic Fintech - A Look At How The Scene Is Shaping Scandinavia

From briefly looking at fintech in Africa to now my turning my attention to the fintech scene in Scandinavia.

The scene is really hotting up and who would have thought the concepts of finance and tech could result in something quite exciting? (As Susanne Chishti and Janos Barberis mention in The Fintech Book) London has been at the centre of fintech with an array of world class start-ups as well as being the finance capital of Europe.

While the media has been focused on the London scene, Scandinavia has continued to increase its fintech presence as the region plans to go cashless, in addition, digital banking and electronic payments have become commonplace.

Bills and coins represent only 2 per cent of Sweden’s currency, and Denmark has a goal to “eradicate cash” by 2030. (Bobs Guide, March 2016) Michael Kent, the CEO of  Azimo, an international money transferring site recently mentioned in Bobs Guide : “Sweden and Denmark are two of the most vibrant and cosmopolitan countries in Europe, where digital payment innovation is ahead of the global curve.”

Between January 1, 2014 and end of March 2016, 51 fintech investments were made all over Scandinavia totalling $390.17 million. This number maybe small compared to the $5.4 billion that has been made by fintech firms in London, however, nearly one in 10 investments in Scandinavia is now made in the fintech sector.

According to data from The Nordic Web, Sweden is flying the fintech flag in the region by having 32 out of 51 fintech investments, and Stockholm has had a robust financial industry and history. Companies such as iZettle have really helped Nordic fintech gain interest from all over the world.

Klarna, another fintech company from the Swedish capital and one of the most prominent in Europe is championing this disruptive form of technology by allowing users to buy without the use of cards and is valued at over $2.25 billion and has raised $291.33 million in 6 rounds from 12 investors. iZettle also has a high valuation, and is currently valued at $244.04 million. Despite the hype of the London fintech scene, both of these companies clearly show how powerful the Nordic fintech scene has developed.

Nordic Fintech – A Cashless Society

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Image source : The Memo

It has been well documented that Scandinavians avoid cash and using tangible currency is decreasing. In Sweden, there’s less than 80 billion Swedish crowns in circulation (about €8 billion) and according to Niklas Ardvidsson of Stockholm’s KTH Royal Institute of Technology only 40 to 60 percent is actually still in regular circulation. The decline in physical cash clearly shows that Swedes prefer apps and credit cards when it comes to making a payment.

The rise in mobile usage and banking apps such as Swish, which was collaborated by Swedish and Danish banks respectively, allows users to transfer money via their bank account to anyone else with a bank account, no matter where they are.

Nordic countries are known for having a high sense of trust, this linked with a forward thinking approach and embracing new technology has made using these apps even more desirable to use.

An Alternative Way Of Thinking

Nordiske-flag

It can be said that the Scandinavian management style has contributed to the Nordic fintech scene and has helped shape the region as a major player in Europe. A bottom-­up structure that focuses on “all for one and one for all” attitude gives a completely different dynamic that you wouldn’t find anywhere else.

Another factor that is particularly interesting is that in Scandinavia is rather than seeing successful firms as competition, they look up to them as real­-life role models.

Their culture and management styles has without a doubt helped push these array of innovative fintech products/services to the next level. The Nordic fintech scene maybe behind with what has been achieved in London, however, fintech start-ups from around the globe can learn a lot from the likes of iZettle and Klarna. They have helped shape Scandinavia as an educative fintech hub and a place that inspires others who want to live in a virtually cash-free society.

Could Bitcoin Be An Alternative For Argentina?

Could Bitcoin Be An Alternative-

A century ago Argentina was one of the most richest countries in the world and was part of an ‘elite club’ of prosperous nations and as we have seen in recent years countries such as neighbouring Brazil overtook Britain in terms of total GDP. However, this was expected, as World Finance’s Tom Bailey points out in a recent article, European nations comprise a small corner of the earth, and as larger nations turn their subsistence farmers into industrial workers (and then service sector employees), overtaking the old powers of Europe is inevitable. It is less of a fall and more of an expected correction and relative decline.

Sadly, those prosperous years of being part of an ‘elite club’ are well and truly over. Cast your minds back to 2001/2002  the Argentinian Peso lost three-quarters of its value (linked to various external shocks such as low prices for agricultural commodities and the devaluation of the Real in Brazil) and registered unemployment exceeded 25% which resulted in numerous public protests and violent scenes on the streets of Buenos Aires.

Macri-presidente

The Kirchner dynasty maybe over in Argentina, but newly elected Mauricio Macri (former Buenos Aires mayor and pictured above) has got a mammoth task of steering his country to economic safety. The centre-right leader intends to attract investment flows that will make Argentina globally competitive again.

As mentioned in Foreign Policy Magazine, Macri’s macroeconomic challenges are vast, however, and success will depend on his administration’s ability to curb a 5.4 percent GDP budget deficit (the biggest since 1982), temper soaring inflation (current annual levels are about 36 percent), and stimulate economic growth.

The question that remains in the Latin American country is whether Macri has enough time and support to put his agenda in place. Unfortunately unlike when Cristina Fernández de Kirchner was in power she had a full congress to back her, for Macri, he has less back-up when things take a nose dive. If that happens, you’ll bet your bottom Peso that Peronists will be ready to pounce.

Could Bitcoin Be An Alternative?

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Moving away from the politics slightly, with a volatile currency and a string of dysfunctional banks in the country, could cryptocurrencies such as bitcoin be an alternative for Argentina?

It seems that quite a few in Argentina are pondering this very question and have already adopted the digital currency. Argentina has had the most bitcoin enthusiasts per capita, troubled economies in Latin America have also looked at the idea, with neighbouring Brazil and Venezuela playing catch up.

Bitcoin has proven to be a solution for many of the problems caused by inflation and subsequent capital controls. (Tech Crunch, March, 2016) As a result merchants and workers alike have started to look for an alternative and have started to use the cryptocurrency.

Bitcoin start-up BitPagos,  is currently helping more than 200 hotels, both cheap and boutique, take credit-card payments from foreign tourists according to the NY Times. The money brought to Argentina using Bitcoin payments bypasses the high level of bureaucracy which is usually involved with receiving conventional payments from overseas.

A popular online retailer in the country, Avalancha, has been accepting bitcoin since last summer and has seen a large amount of bitcoin transactions grow steadily since using the cryptocurrency on the site. Avalancha offers their customers a 10 percent discount when they use Bitcoin. The reason behind this is because credit card payments cost Avalancha more than 10 percent as a result of the troubled Argentine financial system.

Looking for alternative methods such as bitcoin has led to like-minded people joining in unison and creating a bitcoin embassy in Buenos Aires; a four-story building that’s home to eight start-ups whose businesses depend on Bitcoin transactions.

From start-ups to even local politicians have shown an interest in the cryptocurrency, Argentina’s youngest mayor Martín Yeza tweeted back in January about having a bitcoin agenda in place as well as regulatory approval for the popular ridesharing platform Uber.

Adopting bitcoin as an alternative for Macri aka “President Facebook” because of his big social presence would be a massive step in countering its current economic crisis. Argentina and the rest of Latin America has a lot of opportunities to push the cryptocurrency and make it more mainstream.

A Brief Insight Into FinTech In Africa

A Brief Insight Into FinTech In Africa

Fintech has taken off as a major buzzword since around 2014 and this form of disruptive technology will change the way we access and transfer our money.

In Africa mobile payments for example have  revolutionised the financial sector with a majority of people having access to mobile devices and about a third having bank accounts has made sending payments electronically  easier than ever before.

Companies such as M-Pesa from Kenya (a money transfer system which used across the continent)  have changed the way the likes of customers and investors manage their transactions.

So who else is championing fintech in Africa?

  • Zoona – Zoona which translates as  ‘It’s real’ in Nyanja (one of the main languages spoken in Zambia) like M-Pesa, operates a cellphone-based money transfer service and has really helped both Zambians and Malawians who a) don’t have a bank account and b) caters for remote places and works with old mobile devices.

 

  • Aella Credit – Nigerian fintech company Aella Credit is a personal loan lender that underwrites loans with a proprietary algorithm. According to Techpoint.ng, the tech-powered online lender, is closing in on a $8m funding round with a consortium of US based investors and debt funders.

 

  • GetBucks – The South African start-up gives customers access to short term loans and other financial products, without having to travel to a bank branch.GetBucks uses a combination of traditional credit scoring and artificial intelligence when looking at the credit risk of low income consumers.

 

  • SnapScan – SnapScan from South Africa allows customers to pay retailers and stores for products and services using their mobile devices instead of debit, credit cards or cash. The app is available on iOS, Android, and Blackberry devices and users need to download it then take images of their credit cards and create a pin number for the accounts.

 

  • Paga –  The mobile money transfer service from Nigeria was founded in 2009 but started operating in 2011 after receiving its operating license. Paga users can pay bills, transfer money, access banking services and other financial services from a simple swipe from their mobile devices.

There are quite a few more fintech companies across Africa that are also doing some remarkable and innovative ways of transferring payments electronically and the fintech industry can without a doubt influence other sectors such as education and healthcare.

Africa is not on the same level as continents such as Europe when it comes to fintech, however, Africa is definitely at a unique point in time it’s able to grab the opportunities more than any continent because of the rapid growth of digital connections and because of its youth (as mentioned in a recent CNBC Africa article).

In order for fintech to continue its innovative presence the younger generation are key, Africa is known for having a younger generation compared with other continents which makes them more likely to be tech savvy.

Funding has always been an issue in Africa and there is a lack of funding when it comes to innovating new technology. On the flipside, it can be said that despite the lack of funding, many start-ups have not seen it as a barrier and have looked at other avenues of utilising financial technology (as the company examples above show).