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
March 29, 2016

FinTech in Focus is available via e-mail, arriving in your inbox every Tuesday. If you would prefer to receive our weekly highlights in your inbox rather than wait for us to tweet out the post, please sign up today by selecting the “FinTech in Focus Weekly E-Newsletter”. As always, please contact Jackson Mueller with any questions.

Payments Firms Expand to Cuba...
As U.S. President Barack Obama visited Cuba last week with a number of U.S. businesses and congressional lawmakers in tow, a few payments firms made headlines by announcing efforts to expand services to the island nation. PayPal announced in a blog post that it would expand its global money-transfer service Xoom to Cuba, while Stripe also will launch there and has begun taking applications from Cuban firms for its Atlas service, which was just recently offered to firms operating in Russia. Money-transfer service incumbent Western Union announced that the company would begin remittance services to Cuba.

... and to the UK and China
Google’s Android Pay is expected to make landfall in the UK “in the next few months.” The statement follows on the heels of Samsung’s announcement that it will unveil Samsung Pay at some point in 2016. More than 450,000 UK retail shops are able to accept “tap and pay” through the Android device, and financial services firms such as MasterCard (which is currently working on a “Selfie Pay” application), HSBC, Lloyds Banking and others have confirmed that they intend to offer their customers the service. Meanwhile, China-based Huawei has teamed up with Chinese bank card processing firm UnionPay to launch Huawei Pay across China and into an already-saturated mobile payments marketplace (Alipay, WePay, Apple Pay, etc.). However, there is the potential for significant growth of Huawei Pay given that Huawei currently controls 15.5 percent of China’s smartphone market.

And speaking of Apple Pay, the payment service is expanding to the mobile Web, according to various media sources, in an effort to simplify the online checkout process through the use of fingerprint sensors, for instance. The move places Apple in more direct competition with PayPal. Roughly 30 percent of PayPal’s total payments volume last year was through mobile devices, with Apple iOS devices estimated to represent up to 20 percent of that volume.

Hedge Funds' Relationship Status with Silicon Valley? Difficult
Hedge funds aren’t too happy with Silicon Valley anymore. Case in point, this quote from Jeremy Abelson at Irving Investors: “I’m done with intangible valuations, unknown exits, unknown liquidity — and I want something that if I put my money into it now, I’m not going to hit a grand slam, but I’m going to get something that’s immediately yielding.” According to Bloomberg, hedge fund participation in VC-backed deals fell nearly 40 percent between the third and fourth quarters of 2015. That doesn’t necessarily mean the dark days of FinTech investing are here, as UniCredit’s $200 million FinTech fund and the news that Founders Fund had closed a $1.3 billion fund (Founders Fund VI) show that money and investors are still out there and interested.

Headlines That I Can't Organize Correctly (or Don't Want To)
The UK Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission signed a “FinTech support pact” last week. The agreement states that its purpose “is to provide a framework for co-operation and referrals between the Innovation Hubs of each Authority. The framework centers on a referral mechanism which will enable the Authorities to refer innovative financial services businesses between their respective Innovation Hubs,” along with other specifics. As Christopher Woolard, director of strategy and competition at the FCA, stated in a press release, this agreement is “the first of many, we hope.”

Meanwhile, payments processing firm Square has begun offering business loans. The firm was already offering merchant cash advances through its Square Capital service, but has, as of last week, transitioned out of the merchant cash-advance business and into providing customers with bank loans through a partnership with Celtic Bank, a Utah-chartered industrial bank. As of Q4 2015, Square Capital “extended over $400 million through more than 70,000 advances in 2015, with nearly $150 million advanced in the fourth quarter.” Sticking with online finance headlines, Intuit has announced that it plans to shut down its financial data API service, while investors in a recent bond offering tied to Prosper Marketplace loans demanded higher yields — as much as 5 percent higher than a similar deal structured last year. Lastly, oral arguments in a case brought by Montana’s state auditor against the SEC’s Regulation A+ final rule will take place on April 14. The SEC adopted final rules a year ago, and both Massachusetts and Montana filed separate legal challenges two months later.

From FinTech to RegTech
Last week, the Institute of International Finance published a white paper, “RegTech in Financial Services: Technology Solutions for Compliance and Reporting,” which focused on the promise (as well as the challenges) of applying innovative technologies to the regulatory landscape to increase efficiency and improve compliance. The report comes in response to the Financial Conduct Authority’s call for input on supporting the development and adoption of RegTech back in November. A quick synopsis of the RegTech solutions to issues such as real-time payments, risk data aggregation and management, identity verification and others can be found on pp. 16-18. Among the list of impediments, the IIF discussed how nascent the RegTech market is, where no widely used solutions have yet emerged; the still-changing regulatory landscape; the lack of networks composed of regulatory experts and software developers, for instance; and barriers to knowledge between those active on the “tech” side and those on the “reg” side.

FinF 3.29


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