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 30, 2016

China Builds a Regulatory Wall Around Its Peer-to-Peer Lending Industry

Last week, the China Banking Regulatory Commission (CBRC) released rules governing the nation’s peer-to-peer lending industry. The rules come more than eight months after the CBRC issued proposed regulations back in December 2015. The rules set limits for retail and corporate borrowers on P2P platforms and bar P2P platforms from taking deposits and offering wealth management products, among other restrictions. According to CBRC data, nearly 2,400 platforms are operating in “normal condition,” while 1,800 platforms, or about 40 percent of all P2P lending platforms, have operational problems. Larger P2P lending platforms in China are unconcerned about the latest rules, as many already comply with a number of the requirements.

Separately, China’s government has formed a working group with ChinaLedger and the Shenzhen Consortium to promote blockchain technology and develop frameworks for the regulation of the blockchain industry in China. Mainland China is already a big player in the Bitcoin network, with 50 percent of the total hashing power supplied by miners from China.

Global FinTech Hubs Unite!

Innotribe, a Society for Worldwide Interbank Financial Telecommunication (SWIFT) initiative focused on innovation within the financial services space, together with Innovate Finance, an organization that seeks to accelerate and promote the U.K.’s FinTech position globally, launched the Global FinTech Hubs Federation “to support global engagement, best practices and knowledge sharing across the [FinTech] sector, as well as build bridges among FinTech hubs.” Current hubs, as advertised on the website, reside in Asia, Europe, Canada and South America. At this point, no listed hubs are in the U.S., though the federation plans to continue adding them.

Notable, but Not Easily Organized, FinTech Headlines

Samsung Pay has processed 100 million unique transactions in seven countries within its first year. Meanwhile, BNY Mellon, Deutsche Bank, Santander and ICAP have joined UBS to work on the Utility Settlement Coin to improve settlement and clearing processes, a development that was subsequently panned by Brad Garlinghouse, president and chief operating officer at Ripple. In the U.S., President Obama unveiled new immigration rules designed to attract immigrant entrepreneurs to establish businesses in the U.S. Meanwhile, Democratic presidential candidate Hillary Clinton unveiled efforts to support small businesses throughout the U.S., including harnessing the potential of online lending platforms and working to safeguard businesses against deceptive lending practices, and by supporting “new, innovative ways to assess creditworthiness for small-business owners while working to ensure that alternative-credit profiles are not being used unfairly.”

On the online lending front, Nat Hoopes, executive director of the Financial Services Forum in Washington, D.C., will step down to lead the Marketplace Lending Association, launched back in April by Prosper, Lending Club and Funding Circle. And in the U.K., a study from Deloitte sheds light on the adoption of marketplace lenders (MPLs) by consumers and small and medium-sized enterprises (SMEs). The report finds that MPLs “do not have a sufficiently material source of competitive advantage to threaten banks’ mainstream retail and commercial lending and deposit gathering businesses in the U.K. market.” That said, MPLs “are not a temporary phenomenon” and will continue to play a part in the lending ecosystem by providing supply to underserved or high-risk areas and by offering “a low-cost option for certain investors to gain direct exposure to new asset classes.”

Awareness and usage of MPLs, SMEs

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Source: Deloitte, “Marketplace Lending: A Temporary Phenomenon?”

New Week, New Regulatory Developments (in Asia)

South Korea’s Financial Services Commission is expected to launch a robo-advisory “test bed” open to local financial services and technology firms. In India, an 11-member committee has been established, headed by former Finance Secretary Ratan Watal, to overhaul the country’s digital payments framework, with a report covering e-payments expected within a year. Meanwhile, the National Payments Corporation of India was given clearance by the Reserve Bank of India, making unified payments interface (UPI) a reality in the nation, with 21 banks involved in the first phase having launched UPI applications on Google Play for Android mobile users. In Indonesia, the Financial Services Authority announced plans to unveil guidelines covering the regulation of its FinTech industry. Formal guidelines are expected to be released over the next day or so by a newly formed national committee, which will focus more on consumer protection than on driving a level playing field between banks and FinTech firms. And in Japan, Bank of Japan Governor Haruhiko Kuroda remarked on the need for the central bank to apply FinTech to its operations. Exactly what “best efforts” refer to in the prepared remarks cited below is anyone’s guess, as they don’t get into specifics, but Kuroda, in acknowledging FinTech’s importance, also expressed concerns about information security.

“Given the far-reaching implications of FinTech, the Bank established its ‘FinTech Center’ on April 1 in the Payment and Settlement Systems Department. The Bank has also built up a ‘FinTech network’ comprised of a wide range of staff drawn from the relevant departments of the Bank. This FinTech Network, for which the FinTech Center functions as the secretariat, promotes the sharing of information and expertise related to FinTech in a cross-sectoral manner within the Bank. The Bank, as the central bank of Japan, is ready to make its best efforts to support the sound development of FinTech in order to enhance the welfare of financial service users as well as economic activities.”

 —Bank of Japan Governor Haruhiko Kuroda, in prepared remarks at the FinTech Forum held in Tokyo on August 23, 2016

Nigeria: Mobile Payments Downturn

Even as Visa, in cooperation with Nigerian banks, is looking to bring Mobile Visa (mVisa) to Nigeria by the end of the year, the country is experiencing a downturn in mobile payments volume. According to Nigeria’s National Bureau of Statistics, mobile payments volume from January to July is down 85 percent compared with the same period last year. Interestingly, while check volumes also declined, the volume of ATM transactions increased, as did the number of point-of-sale (POS) transactions.

Money of the Future

Life.SREDA released its biannual Money of the Future FinTech report covering just about every FinTech vertical, as seen in the figure below. And for all us millennials out there, the report provides a number of colorful charts and graphics to keep attention spans from turning to the day’s most popular cat video. If your computer is still having trouble downloading the 285-page report, Managing Partner Vladislav Solodkiy provides a brief rundown of it and some of the ideas presented in a Q&A with e27.

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Source: Life.SREDA, Money of the Future