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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 17, 2015
   
   

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Headlines

An International FinTech Ecosystem
At the Bank of England’s Open Forum in the UK, Chancellor of the Exchequer George Osborne discussed his ambition to make London the “global center for fintech,” where innovation can flourish. Bank of England Gov. Mark Carney also noted that the Forum isn’t meant to only “profile progress made, but also to spur a continual process of review and reform” that includes “seizing new opportunities from fintech and market-based finance.” The Financial Conduct Authority also announced the extension of its current Project Innovate by implementing a regulatory sandbox to enable firms to test innovative products and services “without immediately incurring all the normal regulatory consequences of pilot activities.” In Australia, 32 FinTech startups, incubators, and investors urged the federal government to make necessary reforms to turn Australia into the FinTech hub of in Asia. And in Hong Kong, the Innovation and Technology Bureau is expected to be formally established this Friday and produce a blueprint outlining its priorities within six months.

Bitcoin and Blockchain Developments
The U.S. Marshals Service conducted the last auction of bitcoins seized from its investigation into Silk Road, with four bidders winning $14.3 million worth of the virtual currency. While no names were released, New York-based itBit confirmed that it won up to 10,000 bitcoins. Around the time of the auction, the Department of Justice hosted its first-ever summit focused on digital currencies and the blockchain at the Federal Reserve Bank in San Francisco. Nearly 200 representatives of government and industry participated. We’re not sure whether personnel from the Securities and Exchange Commission attended, but SEC Commissioner Kara Stein recently said that the blockchain “appears to offer potential” though cautioned that the innovative digital public ledger technology is still in its infancy. Despite this, the financial industry remains interested, with Visa Europe considering the technology’s potential for remittance purposes, Royal Bank of Canada exploring ways to introduce customers to the blockchain through a loyalty program, and Nasdaq looking to use its Estonian settlement and clearing business to develop blockchain applications. Furthermore, the London Stock Exchange, LCH.Clearnet, Societe Generale, CME Group, UBS, and Euroclear have met three times to explore how blockchain could be used in post-trade processes, and Overstock will spend roughly $8 million on its blockchain subsidiary, Medici, by the end of the year, far more than anticipated.

Payments Get Personal
You win some, you lose some. Amazon.com is turning up the heat on rival PayPal with the expansion of Pay With Amazon buttons to additional third-party mobile applications, even as it shuts down Register, which was supposed to compete with the likes of PayPal and Square. Speaking of competition, Apple Pay and Samsung Pay are likely to add a peer-to-peer option to their services in the not-too-distant future, which will put pressure on Venmo and other P2P applications. As we focus on third-party applications, let’s not forget that the New York State Department of Financial Services recently released a letter soliciting input on how startups and banks can improve their cybersecurity frameworks. The communication comes as large banks worry about lax security protocols at financial technology firms.

The Alternative Lending Landscape
While the alternative lending sector may be underperforming in the public markets, lenders are increasingly grabbing market share from banks. Of note, Banco Santander SA’s U.S. unit recently decided to pause its efforts to securitize $1 billion in marketplace loans due to criticism from the Federal Reserve, which faulted the bank for failing to meet capital management, auditing, and other standards. Meanwhile, Cambridge University has partnered with Tsinghua University and the University of Sydney to conduct another benchmarking survey on alternative finance, with a focus on the Asia-Pacific region. This is the third alternative finance benchmarking survey for Cambridge, following its examination of Europe and the Americas.

Millennials Attracted to Small(er) Banks as Bank Branches Remain Relevant
According to a recent report from Accenture, community banks and credit unions increased their share of account holders ages 18 to 34 by 5 percent and 3 percent, respectively, while large national and regional banks saw a 16 percent drop over the last year. Consumers identified online and mobile as the most important channels for banks to invest in over the next five years. That being said, only 29 percent of customers surveyed expect to use bank branches less in 2020 than they do today. “The branch network is not irrelevant; it just needs to offer a different experience,” according to the study and reaffirmed by numerous other studies.

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