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
November 08, 2016

Good Morning America!

Hello, FinTech readers. Welcome to a special edition of FinTech in Focus, where yours truly is looking forward to voting for an end to my year-long headache. If I am elected president, the first thing I will do is enact an executive order compelling all schools to remain open today. Instead, I’ve got to figure out how to prevent my four-year-old from accidentally voting and my five-month-old daughter from eating my ballot. Stay safe, vote only once, and enjoy today (to the best of your abilities).

Scoring the 'Unscorables'

VantageScore released a new report, “Exclusionary Credit Score Modeling Limits Access to Credit for Millions of Consumers ... Even Perhaps Your Next Door Neighbor.” According to the study, "among consumers with similar VantageScore credit scores, traditionally scorable consumers and those in the larger population proved strikingly similar with respect to their suitability as borrowers." As the report finds, “lenders' reliance on a single brand of scoring model in automated systems can hinder consumers’ access to credit despite their credit-worthiness." The option of using more inclusive credit scoring models "could rectify this miscalculation of consumer risk and open up a highly attractive population to lenders."

Expanded Population of Consumers’ Score Migration (2012 – 2014)

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Source: VantageScore, "Exclusionary Credit Score Modeling Limits Access to Credit for Millions of Consumers ... Even Perhaps Your Next Door Neighbor."

SMBs & Payments Technology released its Q3 2016 SMB Technology Adoption Index last week. The report found that small and medium-size businesses are adopting payments technology at a "steady pace," however, only 13 percent of respondents are willing to implement new types of payments. The report also identifies various distinctions between small and large SMBs when it comes to technology adoption with larger SMBs preferring contactless payments, mobile and tablet technology, while smaller SMBs prefer mobile POS technology, for instance. Less than half of surveyed SMBs accept EMV cards and 92 percent "still do not accept contactless payments." Old payment processes still rule, with merchants spending more than 60 hours and $13 billion annually to write and process checks, according to the report.

Type of Customer

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Source:, Q3 2016 SMB Technology Adoption Index.

Global Developments

Here’s a recap of some of the notable domestic and international developments in FinTech this week:

Japan: SBI and Ripple have co-launched a new blockchain consortium in Japan that has attracted more than 40 local and regional banks. According to the release, the consortium "will promote discussion, from both technical and operational perspectives, on activities required in domestic and foreign exchange services to utilize blockchain and other new technologies, consolidate domestic and foreign exchange services, and build 24-hour and real-time remittance infrastructure," among other things. The consortium first started soliciting members back in August. Separately, large and regional banks in Japan are collaborating to develop a joint framework to “safely provide their customers’ information” to FinTech startups. A report on the framework is expected by the end of the fiscal year.

Australia: The Australian Competition and Consumer Commission is scrutinizing bank acquisitions of FinTech startups and agreements concerning distributed-ledger technology. Meanwhile, the Australian Securities and Investments Commission has signed an agreement with the Ontario Securities Commission that calls for both regulators to support innovative FinTech companies seeking to enter into each market. Both regulatory bodies will "share information on emerging trends in each other's markets and the potential impact on regulation." And lastly, for those interesting in reading a report the size of Leo Tolstoy's "War and Peace," the Australian Government Productivity Commission released a draft report covering consumers' ability to access and control how their personal information is used, and recommendations to promote better governance through leveraging big data. As the report notes, "The legal and policy frameworks under which public and private sector data is collected, stored and used (or traded) in Australia are ad hoc and not contemporary. The impetus for changes in governance structures around data — changes that deal head-on with the fact that data is increasingly digital, revealing of the activities and preferences of individual people or businesses, and held in the private sector — will not diminish. It is a global movement and, to its detriment, Australia is not participating.”

South Korea: The Financial Services Commission released new guidance last week that imposes and investment cap of $8,750 a year for individuals seeking to invest in a peer-to-peer lender. Of course, this news did not sit well with Korea's P2P Finance Association, with Lee Seung-haeng, head of the association, remarking that such investment caps will force P2P companies to commit more resources to attracting new customers. Separately, Korea’s FinTech Center signed an MOU with 500 Startups and Silicon Valley Forum following the Center’s FinTech Demo Day in Silicon Valley.

Malaysia: The Malaysian Securities Commission introduced six registered peer-to-peer lenders in Malaysia to boost SME finance. They are expected to be fully operational by first-quarter 2017. Malaysia becomes the first ASEAN country to regulate the peer-to-peer finance space.

Hong Kong & Singapore: Those of you in one of these financial hubs have the opportunity to enjoy a week-long FinTech bender. Hong Kong's FinTech Week began on Nov. 7 and the Singapore FinTech Festival starts Nov. 14.

China: Alibaba’s finance arm, Ant Financial, will continue to focus on expansion in Asia with its recent tie-up with Thailand-based firm Ascend Money. Meanwhile, the number of P2P platforms operating in China is on the decline, according to a recent report. From November 2015 to September of this year, P2P lending platforms have fallen from roughly 2,600 to 2,200.

Switzerland: Switzerland's cabinet has approved "light-touch" regulations covering FinTech. The draft legislation is expected to be sent to parliament by mid-2017, following a public consultation. The legislation includes a 60-day holding deadline for money sitting in settlement accounts, creating a sandbox for innovative platforms with public funding support and oversight by FINMA, and establishing FinTech-specific licenses. The developments come less than a month after Switzerland was ranked fifth in offering an ecosystem conducive to FinTech.

France: Additional reforms to France's crowdfunding industry went into effect in late October. The new measures "enlarge the scope of securities and loans that can be offered through crowdfunding." For instance, crowdfunding platforms can allow projects to seek up to €2.5 million in equity funding, up from €1 million prior to the revisions. Meanwhile, a French privacy advocacy group is the latest to challenge the recent EU-U.S. personal data pact over concerns about businesses storing Europeans’ data on U.S. servers.

UK: The government's plan for Brexit became more difficult after the UK High Court ruled that parliament must vote before the government can trigger Article 50. In short, even more uncertainty, especially as the government plans to appeal the decision. With so much attention focused on Brexit, FinTech firms are increasingly finding it difficult to have a voice in the UK and in Brussels. (The discussion on Brexit and FinTech can be viewed here around 12:03:00). Even so, Treasury held two roundtables covering the FinTech sector last week and the UK Financial Conduct Authority recently announced the first cohort of firms that will undergo testing through its regulatory sandbox. Meanwhile, less than 6 percent of total staff expenditure in Project Innovate has gone to the regulatory sandbox, according to a freedom of information request, and the FCA’s Innovation Hub has received 600 requests for support from Project Innovate as of the start of November.

Canada: The Alberta Securities Commission adopted rules to enhance crowdfunding for businesses to raise capital across Canada. The Bank of Canada, meanwhile, has indicated that it will publish "the results of its experiment with a payments system based on the technology behind bitcoin virtual currency." Payments Canada and R3 were also involved in the project.

U.S.: Put the champagne bottles away, FinTech folks. As we all await for the Office of the Comptroller of Currency to release its “limited” FinTech charter, Comptroller Thomas Curry gave prepared remarks covering innovation, regulation and consumer choice last week. Curry stated that he does not support the creation of a "safe space" to allow companies "to try out new products and processes without the risk of penalty if the trial runs afoul of consumer protection laws and other regulations." Stating further, waiving compliance with consumer protection or safety and soundness "never makes sense, nor does our agency have the authority to waive compliance requirements." On a limited purpose FinTech charter, "if the OCC decides to grant a national charter in this area, the institution will be held to the same high standards of safety, soundness and fairness that other federally chartered institutions must meet." Meanwhile, the Securities and Exchange Commission published the agenda for its Nov. 14 FinTech Forum.

International: The secretary-general of the Financial Stability Board, Svein Andresen, gave prepared remarks last week focused on FinTech and the risks the sector poses to the broader financial system. According to Andresen, “We have seen many interesting trends over (the) last few years in FinTech. However, it is quite possible that a number of the changes either do not pose new risks or may pose risks that are already effectively regulated.” Svein also remarked that the FSB is conducting a study with the BIS' Committee on the Global Financial System on the financial stability implications of peer-to-peer lending, the key elements underlying FinTech and their implications for financial stability, and beginning to develop an understanding of machine learning.

Mobile Money & Remittances

According to a new GSMA report, the cost of sending international remittances with mobile money "is, on average, more than 50 percent less expensive than using global money transfer operators (MTOs)." The average cost of sending $200 from a mobile money account was 2.7 percent, compared to 6 percent when using MTOs. The report notes that mobile money “is even more competitive for low-value remittances: using mobile money is 58 percent cheaper for $50 transfers, compared to 55 percent cheaper for $200 transfers (36 percent cheaper for $50 transfers compared to 21 percent cheaper for $200 transfers when the cash-out fee is included).” As such, “mobile money caters to the needs of low-income migrants who may find it more convenient to make low-value transactions on a frequent basis.” 

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Source: GSMA, Driving a price revolution: Mobile Money in international remittances.


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