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Mueller Jackson
Jackson Mueller
Associate Director, Center for Financial Markets
Jackson Mueller is an associate director at the Milken Institute's Center for Financial Markets. He focuses on fintech, capital formation policy and financial markets education initiatives. Prior to joining the Institute, Mueller was an assistant vice president at the Securities Industry and Financial Markets Association (SIFMA), where he focused on...
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FinTech in Focus

By: Jackson Mueller
August 02, 2016
   
   

The Weekend

Yes, it was two days ago, but we can still ask one another that common Monday-Tuesday question, what did you do this weekend? Now, almost all of us will provide a sentence or two covering the highlights of our weekend activities before heading back to filing TPS reports, with the exception of Luke Aikins. Who is he? Oh, some guy who decided to jump out of an airplane at 25,000 feet without a parachute and land in a net. Move over Joey Chestnut, this guy is my new favorite American.

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U.S. Forecasts China Will Be Top Export Market for Payments

The International Trade Administration (ITA), part of the U.S. Department of Commerce, released its 2016 Top Markets report covering FinTech. While much of the report reflects on previous research and findings, the ITA provided its own rankings estimating the size of foreign markets for U.S. payments and overall FinTech exports in 2017. The report also includes case studies covering the UK, China, Singapore, Brazil, and Australia on how government and private-sector efforts are shaping their FinTech markets. “The U.S. government can play a role in stimulating greater U.S. competiveness in FinTech export markets through participation in trade and investment agreements,” the report says, including the Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership, and the Trade in Services Agreement. It adds: “The United States can work to lower or remove trade barriers to FinTech business through bilateral engagement and informal dialogues in select FinTech markets.”

Ranking of Projected Export Markets for FinTech Subsector: Payments (2017)

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Sandboxes and Standards

The Central Bank of Malaysia released a discussion paper on the formation of a regulatory sandbox in an effort to foster an environment conducive to the responsible growth of financial innovation. Interestingly, the paper states that priority “will be accorded to applications for the deployment and operation of a Sandbox received from financial institutions and/or fintech companies that intend to collaborate with financial institutions.” The paper also requests details on such collaborations.

Meanwhile, the British Standards Institution (BSI) released A Roadmap for Fintech Standards. Although the report notes that the UK is taking the lead "on creating an environment in which fintech innovation can blossom safely," BSI states there "could also be an opportunity to complement regulation with voluntary standards." Certain areas are identified where standards, if applied correctly, could further unlock FinTech's potential, among them the procurement and onboarding processes between banks and FinTech, integrating FinTech firms into the standards and language of the financial services industry, and the application of standards to gain consumer trust.

Online Lending Numbers: Shield Your Eyes

PitchBook analyzed the online lending space for the first half of 2016. The report reads, somberly: “We’ve seen just $2.2 billion invested across 65 deals; comparing 1H 2016 with 2H 2015 yields a significant 44% drop in terms of capital invested.” Additionally, "While we've already seen substantial layoffs at high-profile lenders including Avant, Lending Club, CommonBond and Prosper, platforms will also need to raise additional equity, perhaps accepting a drop in valuation in the form of a down round.” And since we’re focused on online lending, news came out last week that Prosper is setting up a private fund, the Prosper Capital Consumer Credit Fund, to purchase consumer loans arranged through its platform, and FICO's chief executive discussed alternative credit scoring metrics in a Q&A with the Los Angeles Times.

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Meanwhile, the Peer-to-Peer Finance Association—the UK industry’s self-regulatory body—released second-quarter 2016 lending data that showed a decline in new lending from £715 million registered in the first quarter to £658 million in the second. That said, the number of borrowers and lenders increased, with more than 150,000 lenders and 330,000 borrowers currently using peer-to-peer platforms in the UK.

Banks Team Up and Other Headlines

A dozen commercial banks in China, including Citic Bank and China Merchants Bank, have formed an alliance to enable customers to transfer funds online and over mobile phones without being charged in the process. In Australia, three large banks lodged a joint application with antitrust officials accusing Apple of anti-competitive behavior in restricting the use of its mobile wallet technology to near-field communication.

In other news, Venmo has partnered with 11 retailers to enable customers to use Venmo to make purchases through participating apps and at checkout counters. Apple announced that its Apple Pay service accounts for three-quarters of U.S. contactless payments, while nearly half of all transaction value comes from outside the U.S. Meanwhile, Fidelity Investments has formally launched its robo-advisory service, and Hedgeable has announced that it will roll out a peer-to-peer lending product by the end of the year, becoming the first robo-advisor to do so. On the bitcoin and blockchain front, a Florida judge has ruled that bitcoin doesn't qualify as money, the first European-regulated bitcoin product was launched by the Gibraltar Stock Exchange, and IBM is expected to go live in September with one of the largest commercial uses of blockchain, which could cut the cost of resolving transaction disputes between IBM Global Financing partners and customers. In trials, IBM says it has drastically reduced the time that process takes from 44 days to 10.

Mobile Africa

According to a report by GSMA, there are nearly 600 million unique mobile subscribers in Africa. Egypt, Nigeria, and South Africa make up roughly one-third of Africa's subscriber base, which is expected to grow by 170 million people over the next five years. Mobile technologies and services generate nearly 7 percent of Africa's GDP and have created 4 million jobs. Efforts continue to bring mobile technology to the more than 400 million people who lack a basic form of identification and places where 60 percent of the population remain unconnected to the Internet.

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