Murphy Dan
Dan Murphy
Senior Associate, FinTech Program, Center for Financial Markets
Capital Access and Europe and Finance and FinTech and U.S. Economy
Dan Murphy is a senior associate at the Milken Institute’s Center for Financial Markets. He focuses on FinTech and access to capital issues. Prior to joining the Institute, Murphy was a policy fellow at the Democratic Senatorial Campaign Committee.
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FinTech in Focus

By: Dan Murphy
August 07, 2018

In this issue:

Industry Headlines »

Global Developments »

FinTech’s Big Week

Hello FinTech in Focus readers, apologies for the late release this week. For some reason, the U.S. Department of the Treasury and the Office of the Comptroller of the Currency (OCC) saw fit to make some of the biggest FinTech announcements of the year on the same week that I moved into a new apartment. Murphy’s Law, am I right?

Anyway, as attentive students of FinTech, I’m sure you all have read Treasury’s Nonbank Financial, Fintech, and Innovation report by now. If not, the report covers a wide range of topics and is well worth your time. Some of the more talked-about items in the report include:

1.     Endorsement of regulatory sandboxes
2.     Endorsement of the OCC’s FinTech charter
3.     Call for the codification of “valid when made”
4.     Call for the payday lending rule to be rescinded
5.     Call for increased consumer control over financial data
6.     Call for a national standard for data breach notification
7.     Call for harmonization of money transfer rules across states

Shortly after the report was released, the OCC announced that they would begin accepting applications for a special purpose national bank (SPNB) charter for FinTech firms. Some of the above positions, such as the codification of “valid when made” and rescinding the payday lending rule, have drawn criticism from consumer advocates, who have also voiced concerns about the SPNB’s revised financial inclusion planIndustry groups, on the other hand, have been largely upbeat on the report’s contents and Treasury’s openness to financial innovation.

For our part, the Milken Institute released a statement on the report, which can be found here.

Industry Headlines

Big Tech: Despite a rocky financial news cycle for the tech giants, Apple reported some impressive metrics for Apple Pay. On their earnings call last week, Tim Cook revealed that Apple Pay’s transactions have tripled since this time last year. Apple now leads Square in transactions and leads PayPal in mobile payments.
payment transactions

Meanwhile, Facebook is reported to have held discussions with several large banks over the past year about ways it can collaborate to offer financial insights to bank customers. Some of the features discussed include fraud alerts and checking account balances offered through Facebook’s platform. Privacy concerns have been the main obstacle to such a deal thus far, but the effort reflects Facebook’s ambitions to compete in the FinTech and ecommerce spaces.

Blockchain & Crypto: The Wall Street Journal came out with an eyebrow-raising analysis over the weekend, showing that dozens of groups of cryptocurrency traders are effectively coordinating “pump and dump” schemes on messaging apps such as Telegram. The analysis found 175 different schemes involving 121 different cryptocurrencies. One group called “Big Pump Signal” has promoted 26 pump operations with $222 million in trades since December.
to the moon

Elsewhere, Goldman Sachs made waves late last week by making some strikingly bearish statements on cryptocurrencies. Chief Investment Officer Sharmin Mossavar-Rahamani stated that Goldman’s prediction that cryptocurrencies would not retain their value came true more quickly than even they expected. Mossavar-Rahamani said that, “We expect further declines in the future given our view that these cryptocurrencies do not fulfill any of the three traditional roles of a currency: they are neither a medium of exchange, nor a unit of measurement, nor a store of value.” Speaking of Goldman, former Executive Director Benedicte Nolens will join Circle as its new head of global regulatory affairs and head of compliance for Europe and Asia.  

On a more positive note, Intercontinental Exchange Inc. (ICE) announced they will form a trading platform for cryptocurrencies called Bakkt. ICE, which owns the New York Stock Exchange, does not have a launch date yet, but says the exchange will be launched using Microsoft’s cloud and in partnership with Starbucks and the Boston Consulting Group, among others.

Digital Banking: BBVA reported strong quarterly profits last week, led by a significant uptick in digital customers, as well as robust earnings in Mexico. The bank, which has made a name for itself by being digitally savvy, saw a 26 percent increase in its digital customers since last year.

Payments: Paytm is on the defensive in India after a member of Parliament argued that Alibaba’s stake in Paytm is a national security threat. The member of Parliament in question, Narenda Jadhav, raised concerns that Alibaba having access to data from millions of Indian citizens could constitute a significant geopolitical risk, given Alibaba’s close association with the Chinese government. In response, Paytm stated that it does not share data with any investors or foreign firms. Elsewhere, Alipay will target a group of customers who may be less concerned about geopolitics: Australian buskers. The pilot program will be launched in Melbourne, giving Chinese tourists the option to pay the street musicians in a manner that is cash (but not irony) free.

Finally, Dunkin Donuts announced their intention to build a mobile ordering and payment platform. The platform comes after Starbucks, Dunkin’s competitor, has had success with their own mobile platform. For coffee drinkers who prefer mobile payments and coffee that isn’t burned, this could be great news.

Wealth Management: Barron’s released a ranking of robo-advisors last week, with Vanguard’s Personal Advisor Services taking the top spot. Vanguard’s robo-advisor claims $112 billion assets under management. Betterment, the largest independent robo-advisory service, took second place.


 Global Developments

China: China’s State Administration of Foreign Exchange fined Alibaba, Tencent, and 25 other firms $88,000 each last week for breaking rules related to foreign exchange transactions.

Cyprus: The Cyprus Securities and Exchange Commission announced the launch of an innovation hub last week. The hub will focus on innovation in FinTech and RegTech and will serve as a venue for innovators to engage with regulators.

India: The discussion about personal data protection is accelerating in India, with a draft bill being submitted last week. The Personal Data Protection bill is not without critics, however, as the report in Quartz discusses in detail.

Iran: Iranian state media reports that the central bank is working on a central bank digital currency for the country in an effort to evade U.S. sanctions. This comes as a similar effort in Venezuela has gotten a great deal of press. 

Romania: The Romanian Ministry of Finance has drafted an emergency bill to regulate cryptocurrencies. The bill would limit the types of organizations that can issue cryptocurrencies to credit institutions, electronic money institutions, the European Central Bank, and the national central banks. Regulation for cryptocurrencies will fall under the Romanian National Bank.

United States: In addition to Treasury’s report and the OCC’s charter announcement, there have been several other notable developments in the United States. First, the Securities and Exchange Commission (SEC) is said to be taking a closer look at brokerages who deal in cryptocurrencies. Specifically, the SEC is seeking information about fees, ICOs, and any involvement by investment advisors. Second, the Federal Housing Finance Agency has suspended their plans to update their credit scoring models, citing a need to focus on implementation of the recently enacted Economic Growth, Regulatory Relief, and Consumer Protection Act.



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