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Category Archives: FinTech

What Visa and R3 are doing with blockchain technology

In the online Fintech course that I’m currently doing, every other course video is about blockchain and the possibilities it offers. Earlier this year, I wrote about blockchain, trying to demystify some things I’d heard about it up to that point. If anything, watching my course videos with Blockchain experts such as Shaul Kfir, CTO at Digital Asset, has raised my curiosity about blockchain technology even more. In the past week alone, I came across two interesting blockchain related developments, which caught my eye: (1) Visa B2B Connect and (2) R3 Corda:

Visa B2B Connect

visa-b2b-connect

Fig. 1 – Visa B2B Connect diagram – Taken from: https://usa.visa.com/visa-everywhere/innovation/visa-b2b-connect.html

Recently, Visa has started partnering with Chain, a US-based blockchain technology company, to create a proof of concept called “B2B Visa Connect” (see Fig. 1 above). Instead of building a more ‘correspondent’ type of integration between Chain’s core blockchain technology and Visa’s infrastructure, it’s looking to create a peer-to-peer relationship between banks. The essence of Chain’s blockchain network is a shared ledger that allows banks to move assets more securely and efficiently.

I listened to Adam Ludwin, Chain’s CEO/Founder, explaining on a recent podcast that Chain are effectively building “a business-to-business payment network.” Adam highlights that, in essence, Chain are applying cryptography to financial services. As result, entities – whether’s its financial institutions or customers – can have direct control over their financial assets, using a (private) cryptographic key. Adam stresses that there’s no single currency on the different Chain networks. Instead, the currency is specific to the currency issued by the participants of the network in question.

The main thing that I’m taking away from Visa B2B Connect is that Chain is looking to “digitise Visa’s existing currency” by building blockchain technology for Visa from scratch, aiming to design an architecture to solve Chain’s specific problems in mind. In contrast, the likes of Digital Asset, Ethereum, R3 and Ripple, are more like existing architectures which can be modified to meet the needs of specific financial institutions and their customers.

R3 Corda

Last week, R3 – a consortium of 75 banks – announced the introduction of an open source blockchain, to be used by banks. It was announced as “distributed ledger designed for financial services”, called Corda. The ledger hasn’t been built yet, but it was interesting to already get a flavour of its underlying principles:

  • Corda has no unnecessary global sharing of data: only those parties with a legitimate need to know can see the data within an agreement
  • Corda choreographs workflow between firms without a central controller
  • Corda achieves consensus between firms at the level of individual deals, not the level of the system
  • Corda’s design directly enables regulatory and supervisory observer nodes
  • Corda transactions are validated by parties to the transaction rather than a broader pool of unrelated validators
  • Corda supports a variety of consensus mechanisms
  • Corda records an explicit link between human-language legal prose documents and smart contract code
  • Corda is built on industry-standard tools
  • Corda has no native cryptocurrency

Fig. 2 – Overview of Corda’s underlying principles – Taken from: http://www.r3cev.com/blog/2016/4/4/introducing-r3-corda-a-distributed-ledger-designed-for-financial-services

The other thing that I took away was the business problems that R3 Corda is looking to solve:

  • Bank A and Bank B agree that Bank A owes 1M USD to Bank B, repayable via RTGS on demand.
  • This is a cash demand deposit
  • Bank A and Bank B agree that they are parties to a Credit Default Swap with the following characteristics
  • This is a derivative contract
  • Bank A and Bank B agree that Bank A is obliged to deliver 1000 units of BigCo Common Stock to Bank B in three days’ time in exchange for a cash payment of 150k USD
  • This is a delivery-versus-payment agreement
  •  … and so on…

Fig. 3 – Business problems R3 Corda is looking to solve – Taken from: http://www.r3cev.com/blog/2016/4/4/introducing-r3-corda-a-distributed-ledger-designed-for-financial-services

In essence, R3 Corda is looking to significantly improve the way in which banks share and managements agreements between them. The goal is remove any duplication of data or confusion about inter-bank agreements or transactions. Given the immutable nature of blockchain technology, it’s easy to see why banks are collectively developing Corda:

“What I see is what you see and we both know that we see the same thing and we both know that this is what has been reported to the regulator”

Main learning point: Understanding how blockchain applications are built to solve specific problems (R3 Corda) or improve existing experiences (Visa B2B Connect) really helps in painting a better picture of the tangible value that blockchain technology will deliver.

 

Related links for further learning:

  1. https://usa.visa.com/visa-everywhere/innovation/visa-b2b-connect.html
  2. https://chain.com/technology/
  3. https://sharetheledger.com/reading-list/beginners/
  4. https://chain.com/docs/protocol/papers/whitepaper
  5. http://www.forbes.com/sites/laurashin/2015/06/24/nasdaq-selects-bitcoin-startup-chain-to-run-pilot-in-private-market-arm/
  6. http://www.the-blockchain.com/2016/05/03/chain-inc-rolls-open-standard-blockchain-capital-one-citigroup-fidelity-first-data-fiserv-mufg-nasdaq-state-street-visa/
  7. http://bankinnovation.net/2016/10/chain-releases-open-source-code-partners-with-visa/
  8. https://chain.com/press-releases/visa-introduces-international-b2b-payment-solution-built-on-chains-blockchain-technology/
  9. http://www.r3cev.com/blog/2016/4/4/introducing-r3-corda-a-distributed-ledger-designed-for-financial-services
  10. http://www.ithome.com.tw/news/105319
  11. http://11fs.co.uk/podcasts/ep119-back-blockchain-gang/
 
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Posted by on November 14, 2016 in FinTech, Product Management, Startups, Technology

 

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Varo Money and its focus on the banking – customer relationship

Varo Money is a US based Fintech startup that provides mobile banking and personal financial management services. We’ve seen mobile banks launching in various forms left right and centre over the last two years; think N26 in Germany, Simple in the US and Monzo in the UK, just to name a few. I’m keen to explore Varo more and learn more about its focus on personal financial management and building an ongoing relationship with its customers.

I listened to a podcast interview with Colin Walsh – CEO and Co-Founder of Varo – recently, in which he outlined as Varo’s core proposition and its main points of differentiation:

  • Next generation of consumers – In the interview, Colin explains how Varo sees the so-called generation of ‘millennials’ as a white space, currently not addressed well by existing banks. Varo aims to provide these target customers with an easy way to manage their accounts, but also focuses on providing them with financial guidance on how to manage their money.
  • Mobile first – Given that Varo targets ‘millennials’, Colin made a point of explaining that Varo’s customer experience needs to be intuitive and mobile first, since this has become the standard for millennial users. He describes this mobile first approach as a key differentiator for Varo, along with “delivering meaningful insights to customers.”
  • Relationship focus – Varo is all about “earning the relationship with the customer.” This means gathering customer data so that Varo can advise customers better and deepening the relationship with the customer by addressing their needs. This doesn’t make Varo any different to any other banks in my opinion, but it will be interesting to see how Varo will design an experience tailored to the needs of its customers. I liked Colin’s point about using data to enhance customer relationships, and I wonder how Varo will build this ‘customer understanding’ into its experience.
  • Goal-based – Similar to Qapital, Varo is all about helping its customers reach certain financial goals and outcomes. For example, if you want to save money for a big expenditure, Varo is looking to create an experience which will make it easier to set related goals and manage your money accordingly (see Fig. 1 below). I like how Varo enables users to have a single view of their money across a number of accounts (Fig. 2 below).
  • Underpinned by partnerships – Like many Fintech startups, Varo partners with a number of established third parties to provide the components of their platform. Varo is partnering with companies like Galileo (payment processing) and Socure (identity verification) who, as Colin explains, “things they do very well at scale” and will help with Varo’s speed to market. Varo configures these existing technologies in order to not have the reinvent the wheel. Instead, Varo wants to focus its efforts more on a human-centered approach to design and experience, providing customers with insights to help deepening relationships with them (see Fig. 3 and 4 below).

Main learning point: For a company that hasn’t even yet released its product into Beta, Varo has done a good job in creating a buzz around its proposition and its services. With so many new banking platforms popping up, it will be interesting to see how Varo will differentiate itself and establishes a critical mass of US customers and, as Colin says will become “a credible alternative to a traditional bank account.”

Fig. 1 – Screenshot of Varo’s goal-setting functionality – Taken from: http://www.varomoney.com/whatisvaro.php#2

varo-3

Fig. 2 – Screenshot of Varo’s ability to provide a single view of all their accounts – Taken from: http://www.varomoney.com/whatisvaro.php#2

varo-1

Fig. 2 – Screenshot of Varo’s card functionality – Taken from: http://www.varomoney.com/whatisvaro.php#2 

 

varo-2

Fig. 4 – Screenshot of “V”, providing insights to customers – Taken from: http://www.varomoney.com/whatisvaro.php#3

varo-4

Related links for further learning:

  1. https://soundcloud.com/wft
  2. https://blog.varomoney.com/2016/10/05/from-toasters-to-mobile-banking-moving-to-better-experiences-and-better-outcomes/#more-775
  3. http://www.wsj.com/articles/silicon-valley-looks-at-something-new-starting-a-bank-1462146047
  4. http://www.varomoney.com/data/Varo-Bancorp-Partnership-Announcement-2016.pdf
  5. https://www.sofi.com/
  6. https://www.prosper.com/
  7. https://www.crunchbase.com/organization/varo-money#/entity
 

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App review – Qapital

As my readers might know by now, I’m always on the lookout for new apps or any other technology innovations that provide a simple but great customer experience. I think I’ve found another one in Qapital, an app that enables people to “Save small” and Live large.” The app lets people make small savings in an automated fashion. Qapital makes it easy to create (1) saving goals and (2) set up rules to trigger deposits into one’s Qapital account (see Fig. 1 below).

Fig. 1 – Qapital user interfaces – Taken from: https://letstalkpayments.com/keep-lookout-amazing-pfm-app/

qapital_01-1024x501

These are the main components of the Qapital app:

  1. Choose a Goal – User can set monetary Goals through the Qapital app. Unfortunately, the Qapital app isn’t available in the UK yet, so I couldn’t set up a Goal through the app. However, once you download the Qapital app, users can set their own saving goal or select one of Qapital’s pre-selected goals.
  2. Create a Rule – Qapital users can create Rules to managing their saving habits. Rules are events that trigger the Qapial app to transfer money fro a user’s linked account to their Qapital account. For example, if you find yourself spending a lot of money on guilty pleasures like tech gadgets or trendy trainers, you can set up your own “Guilty Please Rule” (see Fig. 2 – 3 below).
  3. Connect to IFTTT – Users can link their Qapital account to their everyday (online) activities through IFTTT. IFTTT is a free web-based services that enables users to create “recipes”, which are simple conditional “If This Then That” statements. These statements are triggered based on changes in services such Gmail, Facebook, Instagram and Pinterest (see Fig. 4 below).

Main learning point: I love how Qapital encourages people to save and makes it very easy to do so! Call it gamification or jusr great user experience, Qapital has created a very compelling proposition and product in my view.

Fig. 2 – Screenshot saving Rules on Qapital’s app – Taken from: http://www.tested.com/tech/android/564019-google-play-app-roundup-qapital-dub-dash-and-evo-explores/

qapital-2

 

Fig. 3 – Rules that users can create on Qapital – Taken from: https://www.qapital.com/how-it-works

  • The guilty pleasure rule – This Rule has been design to help users curb their spending habits. If you feel that you really gotta have it, you can create a Rule to save a set amount when you give in to your guilty pleasure.
  • The spend less rule – Users can decide on a cap for how much they want to spend in one place, and they can then challenge themselves to spend less than that. When you come in under budget, the remaining amount is automatically to sent to a user’s Goal.
  • The roundup rule –  This Rile lets users round up their change every time they make a purchase with their card linked to their Qapital account. Qapital’s average user saves $44 each month with this Rule.

Fig. 4 – Connecting users’ Qapital accounts to their online actvities – Taken from: https://ifttt.com/p/qapital/shared

screen-shot-2016-10-26-at-07-49-34

Related links for further learning: 

  1. http://www.advisoryhq.com/articles/qapital-review/
  2. https://ifttt.com/p/qapital/shared
  3. https://ifttt.com/qapital
  4. http://www.ourfreakingbudget.com/qapital-app-review/
  5. http://www.americanbanker.com/news/bank-technology/can-mobile-apps-prod-millennials-to-save-this-startup-thinks-so-1073121-1.html
 
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Posted by on October 26, 2016 in FinTech, Gamification, Mobile, User Experience

 

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Lending revisited: Bond Street

Bond Street lends to small businesses that might typically struggle to get a loan from traditional banks. In a recent talk on a MIT Fintech course that I was doing, David Haber – Bond Street’s CEO/Founder – mentioned how Bond Street saw a clear niche in the market for small business loans and acted on it. Haber encountered a problem that seemed pretty common for early stage, online small businesses: banks or other financial services offering small loans for short durations at high rates. To resolve this problem, Bond Street offers loans range between $50k-$500k, for as long as 1-3 years and with rates starting at 6% (see Fig. 1 below).

Fig. 1 – Loan size, rate and terms comparison between Bond Street and other small business lenders – Taken from: https://bondstreet.com/

screen-shot-2016-10-11-at-07-42-33

Fig. 2 – Overview of Bond Street positioning – Taken from: https://bondstreet.com/blog/an-introduction-to-small-business-financing/

bond-street-v2

In the MIT talk, Haber mentioned that OnDeck – a direct competitor of Bond Street – offers small business loans for an average amount of $35k, 10 months’ duration and charges of 40% Annual Percentage Rate (‘APR’). Bond Street competes on rate and speed, but as Haber explained, the business is very focused on “offering more value beyond the economics of a loan, since capital is essentially a commodity.”

Haber then explained that technology allows Bond Street to not just innovate on the loan transaction itself, but to provide a great customer experience on either side of the transaction. For example, by offering a borrower data about similar size businesses, the borrower can then make a better informed decision about taking up a loan.

Fig. 3 – Screenshot of Bond Street online loan application form – Taken from: https://www.nav.com/blog/376-decoding-a-loan-offer-from-bondstreet-4788/

screen-shot-2016-10-11-at-07-56-36

Haber mentioned one other thing which really resonated with me: “building an ecosystem around your business.”  By, for example, leveraging data on an entrepreneur across a network of (similar) entrepreneurs, Bond Street and others can really help people grow their businesses. This doesn’t mean committing data violations, but using data to build an ongoing relationship with one’s customers, and being able to warn them about potential risks or suggest new market opportunities.

A great example is how easy Bond Street makes it for its customers to link to their accounting packages (see Fig. 4 below). I see this is a simple but good example of creating an ecosystem where data is combined in such a way that people and business can derive tangible benefits from it. Through linking to your accounting package as part of the loan application process, businesses save a lot of precious time and effort, since they no longer have to manually input all kinds of financial data.

Fig. 4 – Screenshot of Bond Street’s functionality which links to one’s accounting software – Taken from: https://www.nav.com/blog/376-decoding-a-loan-offer-from-bondstreet-4788/

bondstreet-accounting-link

 

Main learning point: Even though lending isn’t a new proposition, I really like what Bond Street are doing when it comes to offering loans to small businesses. It has carved out a specific market niche – small, early stage businesses – that it targets with a compelling proposition and an intuitive customer experience to match.

Related links for further learning:

  1. https://www.thebalance.com/what-does-apr-mean-315004
  2. https://bondstreet.com/blog/category/resources/
  3. http://www.forbes.com/sites/laurashin/2015/06/18/6616/
  4. http://www.peeriq.com/p2p-explosion-business-models-may-change-risks-still-need-managed/
  5. https://bondstreet.com/blog/an-introduction-to-small-business-financing/
  6. https://bondstreet.com/blog/a-beginners-guide-to-cloud-based-accounting-software-ii/
  7. https://www.fundera.com/blog/2016/06/01/application-process-works-bond-street
  8. https://angel.co/bond-street
  9. https://www.nav.com/blog/376-decoding-a-loan-offer-from-bondstreet-4788/
  10. https://www.fundera.com/blog/2016/06/01/application-process-works-bond-street

 

 

 

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App review: Swish

New payment technologies seem to be springing up left right and centre … Swish is another innovative payment platform which I encountered recently. About two years ago six Swedish banks launched Swish. Swish is a mobile app that lets people use their mobile phones to make payments and transfer payments to someone else’s banks. The money gets sent in real-time between the bank accounts and consumers subscribe to the service via their bank.

swish_app

Fig. 1 – Screenshot of Swish – Taken from: http://www.windowscentral.com/send-and-receive-funds-easily-swish-windows-phone

“Payments. Anytime. Anywhere.” is Swish’s motto. I can see how Swish’s mobile point of sale functionality competes directly with the likes of Square, iZettle and Klarna. The biggest difference between Swish and iZettle is that for the later retailers need to have a card reader to accept payments. With Swish this isn’t strictly necessary, provided you’ve authenticated your account details via the Swish app (see step 3 in Fig. 2 below).

 

screen-shot-2016-10-08-at-08-17-20

Fig. 2 – Swish Mobile POS – Taken from: http://swishme.com/mobile-pos/

Other competitors in Swish space are Whywallet and Seamless. With Seamless for example, consumer payments are encrypted and secured through one’s PIN code. As a result – similar to Swish – there’s no longer a need for a user to enter her bank or credit card details when paying (see Fig. 3 below).

downloadproces_01092015_ie_eng

Fig. 3 – Onboarding process for Seamless’ SEQR mobile wallet – Taken from: https://www.seqr.com/nl/en/faq/

Main learning point: Even by just looking at the number of competitors in the payments space, it’s easy to see how payment experiences will become ultra seamless in just a few years’ time. With its focus on simplifying payments as much as possible, Swish is no exception in this respect.

Related links for further learning:

  1. http://ecommercenews.eu/swedish-banks-want-use-swish-ecommerce/
  2. https://www.finextra.com/pressarticle/61536/swish-payments-obtains-visa-membership-ahead-of-european-pilot
  3. http://www.paymentscardsandmobile.com/swish-mobile-payments-amazing-success/
  4. http://www.windowscentral.com/send-and-receive-funds-easily-swish-windows-phone
  5. http://swishme.com/mobile-pos/
  6. https://www.seqr.com/nl/en/faq/
 
 

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App review: Abra

abra-1

The main reason why I’m excited about Abra – a US-based peer-to-peer payments startup – is that people become tellers or ‘human ATMs’ who expense cash at hand to the recipient. The Philippines is a key target market for Abra, and it facilitates seamless payments between residents of the US and the Philippines.

Recent stats show that about two-thirds of the adult Philippine population is still unbanked. Currently, Filipinos will have to go to a local exchange ‘business’ (often a one-man band or small operation that does foreign exchange as one of its activities), fill out paper forms to send or receive money abroad. This can be very time-consuming, costly or unreliable.

Abra’s mission is to change all this and make cross-border peer-to-peer payments as easy and seamless as possible. This is how they do it:

  1. Deposit money into the Abra app – Users can deposit money into the Abra app either via a linked bank account, or by using Abra’s network of Abra Tellers, which are like human ATM machines (see Fig. 1 below). Each Teller will set their own fee with the customer, after which the Teller and the customer will meet up in person to accept a cash deposit and credit the customer’s account with funds (or vice versa, if the user wants to cash out) (see Fig. 2 below).
  2. Convert into Bitcoins – After a user’s account is credited with the necessary funds, the money is instantly converted to bitcoin behind the scenes, but still denominated in a traditional currency. What I like about Abra is that it doesn’t really talk that much on its website or its other comms about using bitcoins to underpin these payments. Abra, however, does use bitcoins and shared ledgers to facilitate peer-to-peer transactions without the need for an intermediary.
  3. Send and withdraw money – Customers can use the Abra app to send and withdraw money, or buy things online where Abra is accepted by the seller. The company generates revenue by charging a .25 percent fee to a customer upon transacting with an Abra Teller.
  4. You don’t need a bank account – One of the key upsides of Abra in my opinion, is that you don’t need to have a bank account to do a transaction through the platform. Competitors like Simple and Venmo still require users to add their bank accounts, whereas Abra let’s people transact without the need for a bank account.

Main learning: I’m really excited about innovations like Abra; using bitcoins and blockchain technology to solve a real-world problem and enabling unbanked people transact easily and cheaply.

Fig. 1 – Add money through Abra – Taken from: http://fintechranking.com/2015/03/05/why-we-started-abra/

 

abra-2

 

Fig. 2 – Finding and engaging with Abra Tellers – Taken from: https://techcrunch.com/2015/09/10/abra-raises-12m-in-series-a-funding-for-its-bitcoin-based-remittance-service/ 

abra_maria_teller

Related links for further learning: 

  1. https://www.goabra.com/
  2. https://www.goabra.com/blog/were-live-in-the-us-and-other-updates/
  3. http://www.coindesk.com/abra-remittance-app-us-launch/
  4. https://www.finextra.com/pressarticle/65114/bitcoin-remittance-app-from-abra-goes-live-in-the-us
  5. http://uk.businessinsider.com/mobile-payment-company-abra-launches-with-blockchain-technology-in-us-2016-6
  6. http://techcrunch.com/2015/09/10/abra-raises-12m-in-series-a-funding-for-its-bitcoin-based-remittance-service/
  7. https://www.reddit.com/r/Buttcoin/comments/4qq794/can_someone_explain_to_me_how_abra_tellers_are/
  8. https://www.mybanktracker.com/news/new-startup-to-be-uber-of-banks-abra-turns-everyday-people-into-atms
  9. http://money.cnn.com/2015/06/08/technology/abra-bank/
 

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Seamless payments – Learning more about Dwolla and their API platform

I recently heard Shamir Karkal, Head of Open APIs at BBVA, talking about open platforms and I was intrigued. In the podcast episode Shamir talked about the power of APIs, but at the same time stressed the importance of having a strong platform that these API end points can hook into.

Shamir talked about building a product with a platform attached. Instead of just building a set of APIs, we should treat APIs as a way in for customers, developers and third parties to hook into the capabilities of our business. For example, hooking into all the things that banks typically tend to do well: compliance, risk management and customer support.

My ears really perked up as soon as Shamir started talking about Dwolla. Dwolla is US based peer-to-peer payments company, whose mission it is to facilitate “Simple payments. No transaction fees.” Dwolla is powered by APIs, making it easy for US users to link their Dwolla account to a US bank account or credit union account to move money. Setting up a Dwolla account is free, and there’s no per transaction fee. Users can collect payment on an invoice, send a one-time or recurring payment, or payout a large number of people at once. Dwolla also offers this a white label solution (see Fig. 1 below).

dwolla-white-label-api

Fig. 1 – Dwolla’s white label version of their API – Taken from: http://apievangelist.com/2015/09/03/dwolla-just-released-a-white-label-version-of-their-api-are-you-ready-for-the-wholesale-api-economy/

In essence, what Dwolla does is enabling real-time payments between Dwolla accounts and another bank account that users want to send money to. Dwolla are integrated with banks such as BBVA, having Dwolla APIs ‘talk’ to the bank’s APIs. Dwolla has created some form of a protocol in the form of FiSync which aims to make it more secure for users to transmit information between accounts. FiSync enables the use of secure authentication and tokenisation in the comms between Dwolla and accounts like those of BBVA Compass. This way, BBVA Compass account holders don’t have to share their account info with Dwolla (see Fig, 2 below).

screen-shot-2016-09-27-at-20-35-26

Fig. 2 – Workflow of a connecting a FiSync-enabled bank account to Dwolla – Taken from: https://www.dwolla.com/updates/breaking-down-real-time-secure-authentication/

Main learning point: I love how Dwolla’s proposition is almost entirely API based, making it easy for its users to transfer money to bank accounts and credit union accounts. Dwolla definitely feels more seamless, secure and cost-efficient compared to the way in which users traditionally transfer money from one account to another.

Related links for further learning:

  1. http://11fs.co.uk/podcasts/ep111-interviewed-innovators-really-changing-banking/
  2. https://www.bbva.com/en/news/disciplines/shamir-karkal-building-financial-future-bbvas-platform/
  3. http://finovate.com/open-api-shamir-karkal-to-head-bbvas-new-developer-platform/
  4. http://apievangelist.com/2015/09/03/dwolla-just-released-a-white-label-version-of-their-api-are-you-ready-for-the-wholesale-api-economy/
  5. http://www.ibm.com/support/knowledgecenter/SS9H2Y_7.5.0/com.ibm.dp.doc/oauth_threeleggedflow.html
  6. https://www.dwolla.com/updates/breaking-down-real-time-secure-authentication/
  7. http://help.dwolla.com/customer/portal/articles/1940212-bbva-compass-dwolla-faq?b_id=5440
  8. https://www.bbvacompass.com/compass/dwolla/
 
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Posted by on September 27, 2016 in Data, FinTech, Open Data, Technology

 

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