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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
December 08, 2015
   
   

Headlines

Financial Inclusion, Mobile Payments Become Topics Du Jour in Washington, D.C.
Last week, the Treasury Department and USAID jointly hosted a Financial Inclusion Forum, which consisted of four panel discussions focused on the benefits of inclusion. Specifically, the panels focused on how financial inclusion can advance global growth and prosperity and expand access to safe and affordable products and services. The conversations included comment from financial services industry representatives and government officials, including Sarah Bloom Raskin, deputy secretary, U.S. Department of the Treasury; Richard Cordray, director, Consumer Financial Protection Bureau; and Martin Gruenberg, chairman, Federal Deposit Insurance Corp. Several initiatives were announced at the forum to help expand access to financial services and products. U.S. Treasury Secretary Jack Lew discussed some of the challenges and opportunities in bringing more people into the fold, while PayPal CEO Dan Schulman remarked on the importance of expanding access to affordable financial services.

And speaking of financial inclusion, the Center for Global Development, based in Washington, D.C., released a policy paper recommending a number of ways to improve financial inclusion. One of the report’s central recommendations encourages governments to adopt a risk-based approach to regulation.

Separately, the House Energy and Commerce Committee held the fourth hearing in its “Disrupter Series” covering mobile payments. Representatives from PayPal, Samsung Pay (U.S.) and Merchant Customer Exchange testified about the unique features of their products and services. Lawmakers focused on security concerns, especially regarding third-party payment processors, tokenization, and how the services and products can help drive financial inclusion (see Dec. 1 real-time tweets).

Banks & Personnel / Banks & Tech
The tug-of-war continues for top talent between tech firms and banks. A recent report indicates that Barclays tried to persuade Digital Asset Holdings CEO Blythe Masters to run its investment bank division, an offer that was turned down. Recent offers that weren’t turned down, on the other hand, include Karl Gibbert, who joined Deustsche Bank from Funding Circle as VP of its global equities team; three mid-level employees at Goldman Sachs who went to Uber; and Carey Kolaja, who left PayPal to join Citi FinTech as its global product officer. Expect these reports to intensify as tech firms continue to encroach into the space occupied by traditional financial services firms, and as financial incumbents adapt to the changes.

Meanwhile, Goldman Sachs recently released a research note to clients on the potential for blockchain technology, as well as potential problems, including restricted scalability and friction between public and private blockchains. The research note comes a few weeks after Goldman filed a patent for a new cryptocurrency called SETLcoin for securities settlement purposes. Meanwhile, Deutsche Bank announced that it had successfully completed a blockchain-based experiment featuring programmable bonds. Both Deutsche Bank and Goldman are part of the blockchain consortium currently being led by the firm R3 CEV, which is expecting to roll out its shared ledger system within the next year. The developments come as Christopher Giancarlo, a member of the U.S. Commodity Futures Trading Commission, remarked that distributed ledgers “will have enormous implications for financial markets in payments, banking, securities settlement, title recording, cyber security.” These changes, in turn, will have a “greatly disruptive impact on the human capital that supports the recordkeeping of contemporary financial markets” while introducing substantial cost efficiencies for firms.

Separate from the blockchain, JPMorgan announced that it has joined with OnDeck Capital to provide JPMorgan’s clients with small business loans. According to OnDeck’s 8-K, “JPM will use the company’s small business lending platform and the OnDeck Score to serve its small business customers.” A pilot program is expected to begin in early January.

European Union Sets Sights on Robo-Advice, Sharing Economy
Last Friday, the Joint Committee of the European Supervisory Authorities, composed of the European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational Pensions Authority released a discussion paper on automation in financial advice and set a deadline for the submission of comments in early March 2016. According to the paper, “the ESAs are of the view that, even though automation in financial advice is not presently observed equally across all financial sectors and/or EU Member States, the phenomenon has the potential to continue to grow.” The call for feedback comes about two months after the UK Financial Conduct Authority and HM Treasury released a joint consultation on how to improve access to financial advice, including through the use of technology.

Separately, the European Committee of the Regions adopted its position on the sharing economy, which included an effort to properly define the economy as four separate, yet similar, parts: access economy, gig economy, collaborative economy, and pooling economy. The committee said “that if working conditions of [sharing economy] actors are framed within the EU in the same way as those of an "employee," [sharing economy] actors should receive the appropriate treatment.” The report added that a detailed study is needed to determine whether additional regulatory action is needed.

Fintech in Africa
The Society for Worldwide Interbank Financial Telecommunication announced efforts to expand Innotribe, its innovation arm created in 2009 to support emerging FinTech ecosystems, including those in Africa and Latin America. And speaking of Africa, Blackberry announced that the company would launch its mobile payments service starting in Nigeria, while Malaik launched Africa’s first impact-focused equity crowdfunding portal to connect global investors with opportunities in African businesses.

The Changing Face of Retail
As holiday shopping season commences, just how much do retailers value their mobile websites and mobile apps? According to Boston Retail Partners, 24 percent of North American retailers surveyed viewed a new or upgraded mobile website as the top commerce priority compared to 12 percent who identified a new or upgraded app as their No. 1 priority. And just how did Black Friday go for mobile payment services? A recent report from InfoScout found Apple Pay usage at its lowest rate since eligible transactions were first recorded in November 2014, while Android mobile wallet use fared even worse.

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Source: Boston Retail Partners Special Report — A supplemental report based on the findings from the 2015 E-Commerce Benchmark Survey. (link)

 

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