Snippings

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Fintech filled the gaps in product and experience, then abstracted the underlying infrastructure, but it never remade the infrastructure.

From Fintech 🧠 Food – Jan 2nd 2022 – Can DeFi fix Lending? India’s new Neobank and Messari’s 2022 Crypto Predictions are 🔥.

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He discovered that the amount had been sent from his Coinbase wallet to a temporary address provided by Chivo from which it sends money to final recipients, but within the hour it had been removed from there. And the money never arrived in his wallet.

From After Identity Theft, Salvadorans Now Report Funds Disappearing From Chivo Wallets.

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Tencent, one of China’s biggest companies and most active tech investors, has built a significant global fintech portfolio, with deals in recent years including stakes in Argentine personal finance app Ualá, French start-ups Qonto and Lydia, and South African challenger bank Tyme.

Its investment in Monzo is part of a $100m top-up to a $500m round led by the Abu Dhabi Growth Fund, first reported by the Financial Times in early December.

From China’s Tencent takes stake in UK digital bank Monzo | Financial Times:

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On the one hand, the idea of programmable money is very attractive.

Lee calls this combination of tightly coupled electronic money and accompanying programming code “coherent.” The purpose of this combination of code and data is that anyone can see the code and interested parties can agree that the smart contract is valid. An obvious problem is that one cannot guarantee that all mistakes or bugs in a particular set of code have been detected and removed.

From CBDC – How Dangerous is Programmability? – The FinReg Blog:

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EtherWrapped announced the airdrop from a now-deleted Twitter account. The team, whose identities are unknown, also verified the token contract on Etherscan, which made it look genuine.

The team used the airdrop as bait to lure traders into buying its token, and later sold off its share.
YEAR has crashed to near zero and the team can not be traced.

From Ethereum Project Airdrops Scam Token, Then Pulls the Rug – Crypto Briefing:

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Austin Baker, Assistant Professor at the Rutgers Center for Cognitive Science (RuCCS), and  J. Remy Green, who teaches at Boston University School of Law and Baruch College at the City University of New York, wrote a very interesting paper about this for the Columbia Human Rights Law Review (vol. 53, issue no. 1) in which they argue that the common notion that every person has a single, clearly defined “legal” name is “a kind of collective delusion we all seem to share (emerging somewhere in the late twentieth century), but is not grounded in legal or social reality“.

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Specifically, our attacks use hydrogel, which is a popular smart material in 4D printing. A hydrogel can achieve 4D printing effects by absorbing water and swelling to increase its volume by 400% [33]. By carefully designing 3D structures with hydrogels, the desired 4D effects can be achieved when stimulated [6].

From Physical Logic Bombs in 3D Printers via Emerging 4D Techniques.

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Soon they were struggling to find a store to change the cash in West Palm Beach — where “they don’t accept hundred-dollar bills”, Shawn explained.

From ‘Money is no object’: Ghislaine Maxwell trial shines light on class divide | Financial Times:

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 Michael I. Jordan, a leading researcher in AI and machine learning. Jordan is a professor in the department of electrical engineering and computer science, and the department of statistics, at the University of California, Berkeley.

 

Jordan should know the difference, after all. The IEEE Fellow is one of the world’s leading authorities on machine learning. In 2016 he was ranked as themost influential computer scientist by a program that analyzed research publications,

“People are getting confused about the meaning of AI in discussions of technology trends—that there is some kind of intelligent thought in computers that is responsible for the progress and which is competing with humans,” he says. “We don’t have that, but people are talking as if we do.”

From Stop Calling Everything AI, Machine-Learning Pioneer Says – IEEE Spectrum.

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Simply put, if ad-driven platforms like Facebook can’t track how people interact with other apps, they’ll work more to keep people in their apps as much as possible, especially for activities that involve money like shopping. Eric Seufert, an influential ads industry analyst and consultant, calls this phenomenon the rise of “content fortresses.”

Since these changes by Apple and regulators largely don’t restrict how apps collect data about their own users, that first-party data is now more valuable. If a Facebook user makes a purchase without leaving to complete it in another app or website, Facebook can provide that information to the advertiser who paid for the ad that led to the purchase. Advertisers, in turn, pay more money when they know their ads work.

From Super apps are coming, and they’ll never let you go – The Verge.

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There is an interesting debate about Open Banking going on in the UK right now. It was triggered by Anne Boden, the CEO of Starling Bank, who told a Parliamentary committee that Open Banking had failed to encourage people to switch banks. A group of fintech CEOs then wrote to the committee to say that her remarks were “uncompetitive and typical of banks trying to thwart the future of innovation in financial services”.

(I’m using Open Banking, capitalised, to mean open banking that is enforced through regulations as opposed to lower case open banking which is a generic term.)

First, let me say that I have met Anne several times and have always been impressed by her dynamism and entrepreneurship, but that’s not why I think that she is right. She is right because the data says that she is right. But that has nothing to do with fintech innovation or the benefits of Open Banking.

The reason why it doesn’t matter is that account switching is, and always was, a poor metric for the Open Banking ecosystem. The UK has had an automated account switching system in place for many years. The Current Account Switching Service, or CASS, predates open banking by several years. In the year to June 2021 around 647,000 people switched accounts which is about half the number switching in 2014. So, with open banking APIs up and running and account switching in place, the number of people switching accounts is still lower than it was before either of them were introduced. I don’t want to go into the reasons for that here, except to observe that it doesn’t matter. The whole point of open banking is that consumers can get access to the services that they need without having to switch current accounts!

(I should confess that was never enthusiastic about CASS: See, for example, “UK account switching a ‘complete waste of time’ claims bank panellist” from 2013. I predicted that CASS would make no difference to the number of people switching accounts, but I was wrong, as the number of people switching accounts actually fell by 5% in the first year of operation.)

Just a reminder: Open Banking was initiated in 2017 as part of a package of remedies by the Competition and Markets Authority (CMA) to increase competition in the provision of retail banking services. The CMA ordered the nine largest UK current account providers (referred to as the “CMA9″) to create and pay for an implementation entity (OBIE), to implement Open Banking in 2017 and The Payment Services Regulations 2017, which implemented the Second Payment Services Directive in the UK (“PSD2”), took Open Banking even further.

 

However, as more banks provide open banking APIs, so there is less need to change accounts. As of November 2021 the Open Banking ecosystem in the UK comprised more than 330 regulated firms made up of over 230 third party providers of services and more than 90 payment account service providers who together account for over 95% of current account market.

A helpful case study from the UK is that of Coconut. Coconut launched as a current account for freelancers and self-employed people to help them to keep track of their expenses and, more particularly, taxes. It used open banking to get a complete picture of the customers finances and aimed to optimise the use of financial services and minimise tax liabilities. A great idea and a great team — they were one of the winners of the Open Up Challenge in 2018 (disclaimer: I was one of the competition judges) — and just the sort of business that an Open Banking ecosystem can enable. They’ve now pivoted to provide the app without the current account: since they can connect to more than 25 current account and credit card providers to automatically pull in transactions, what’s the point of providing those accounts? As Sam O’Connor, the CEO & Co-founder of Coconut, says there is no need to combine the current account and the tax tool.

Open banking should mean that customers can get access to the portfolio of services that they need without having to mess around switching accounts, especially since all of the accounts are basically them same. I am a small business and now that Quickbooks can use open banking to access my accounts, life has improved even though my current accounts are unchanged. I use the Wise multi-currency account, I use Revolut, I use Coinbase etc etc. The old bundling of financial services is irrelevant: the days when I would open a savings account (or whatever) from my main bank just because I already had a current account at that bank are long gone.

We are now in the era of embedded finance, where open banking means that customers get access to the financial services that they need in the context of whatever it is they are doing. This means a seismic shift in the finance sector with ramifications across all sectors. Lightyear Capital estimates embedded finance can unlock $230 billion in net new revenue by 2025. As they phrase it, the shift will benefit companies with a “digital mindset” who can claim the opportunities across other areas of fintech innovation. They give an obvious example, which is that access to accounts will open up the banks’ data hoards to support better lending, as risk assessment will be guided by richer data on under-served markets and business owners, but this is only a beginning.

The success of Open Banking should be measured by the growth of the ecosystem. Here, the data shows significant growth at every point in value network. The number of API calls was 60 million or so in 2018, six billion or so in 2020 and I am sure the 2021 figures will show further substantial increases. Last year 2.5 million people were using services that sat on open banking interfaces, this year it will be more than four million, next year it could be twice that. Tim Waterman at Zopa recently said we could reach 40 million users in 2025 if the sector delivers more innovative services. I agree: the ecosystem is ripe for expansion around identity and reputation management, data stewardship and so on. Yet I am pretty sure that when I am one of the 40 million using these new services, I’ll still have the same current account that I have now!

So, in summary: Anne is right that Open Banking has not increased account switching, but that doesn’t mean that Open Banking is failing because account switching is not a useful metric measuring success or failure.