3615, L’arrivée d’internet dans le monde de la finance – [French]

Sean Park and myself had the chance to be invited to the swiss radio show 36 15: http://www.facebook.com/3615emission to speak Finance innovation and startups.

While recorded in the English speaking swiss radio, it is in French only (well frenglish …)

EPCA Payment Summit – Innovation in the Payment space

I had the chance to be invited by the team of the EPCA Payment Summit to present on how innovation is changing the way we pay. Here is the Prezi of my talk:

The startups mentioned are:
http://squareup.com
http://paypal.com
http://izettle.com
http://movenbank.com
http://bill.com
http://tradeshift.com
http://xero.com
http://simple.com
http://stripe.com
http://braintreepayments.com
http://kabbage.com
http://facebook.com
http://bitcoin.org
http://picomoney.com

also referenced:
http://carlotaperez.org
http://www.shirky.com

The Core of the Machine – Banking as a Utility

I have been a strong partisan of Banking as a Service and posted several times on the topic on this blog. Recently I have posted more on the shiny outer layers that could be / are created in such a stack but not so much of the core services under it. So it was with interest that I saw @giyom‘s tweet

A banking utility doesn’t buy debts, issue liabilities nor do maturity transformation, it only is a trusted accountant btw borrowers&debtors

It’s an interesting view, a pure banking utility would provide the pipes to connect depositors and borrowers and maintain the accounting trust between the two, whether direct, in a P2P lending type model, or indirect by reporting aggregated assets and loans. @giyom pointed me also to Dan Kaminsky analysis of  Bitcoin: http://www.slideshare.net/dakami/bitcoin-8776098 - slide 14 and 15 are interesting in his analysis that supernodes in Bitcoin are effectively banks.

In parallel, a second French bank announced the launch of its API: AXA Banque (Credit Agricole was the first one with CAstore). I had the chance to talk with people there and while the current API is READ only, the mention of WRITE capabilities was not rejected from the outset. A Bank that proposes a READ/WRITE API is in effect giving up on a part of the their customer access and accepting its role as a utility for other services (as I pointed out before, it is something well know in the banking industry)

It seems that from both end of the spectrum, whether its is the  technology enabled P2P or traditional Banking, we are moving toward the creation of banking utilities. But what would be the business model of such players?

On one hand, in the P2P lending example and as specified by giyom, the role of the core provider is track and ensure the relationships between borrowers and lender as well as provide additional services such as transparency in the capacities of the borrowers and loan recovery in the situation of a default. In this system, the trusted core providers would have no leverage nor insurance (as deposit accounts are currently protected). In theory, insurance could be provided by an external provider up to certain amount and based on the lenders selected. The business model of such a platform is fee based.

This is the system adopted by platforms such as Zopa,

On the other hand, in a banking platform world, the bank uses the top layer as a deposits aggregators. It can provide non-interest bearing accounts and base interest bearing accounts the aggregator, as well as transaction facilities to help move money between various accounts. It provides the underlying regulated insurance to the end users. This source of deposits become a part of its core assets mix, which can be leveraged for lending. The same or other providers could be provided these lending facilities, with various rates based on risk etc.. The business model of such a platform is spread based.

This is the system adopted by platforms such as Friendsclear

The distinction made above is not as pure in reality. Zopa, LendingClub etc are using banks to manage cash accounts, payments etc..

I think the total disintermediation for banks is not for now and the two systems will live at the same time. What do you think?

Quick ramblings on Mobile Wallet UI

MWC is going full speed in Barcelona and each day has its new payment solution, mobile wallet, magic integrator. I was particularly interested in hearing more from Isis, the Super PAC of US mobile networks (AT&T, T-Mobile and Verizon Wireless).

ISIS wallet solution starts with a list of cards, based on the real world wallet paradigm. This is based on a constraint of  the real world. All your cards have to physically be present in your wallet and you choose them based on the provider (hence the leather wallet cards organization). This requires a particular thinking on the user side, reviewing cash level and benefit of each card vs the payment to be made.

Note: the feed is interesting, I could not find much details. It seems like people will be able to follow businesses for offers and information.

Google Wallet follows a rather similar scheme, with cards put upfront, and a swipeable Wallet. The history is the equivalent of the receipts mess in the wallet, though in a much organised way.

For me, this shows either in the best case a conservative fear of changing things for customers or in the worst case a difficulty to understand how much the mobile platform offers. Because the wallet looked like this for centuries does not mean it is supposed to look like this on a mobile.

It may be cliché but worth repeating:

A modern cell phone has more computer power than all of NASA back in 1969, when it placed two astronauts on the moon.

I would add that: not only that but it has an incredible array of captors: camera, GPS,etc.. and access to information and computing power via internet connectivity.

Lets use Square Card Case as an example:

From the outside it looks just the same: Wallet (with skeuomorphism – thanks @aden_76 for the word), Slots, Card. Except they are not Credit Card, they are Store Cards…. As I have said before Card Case is built around the Buying Experience, not the Payment Experience so it makes sense they highlight merchants and products.

“But wait, there are tons of merchants, how would they fit on my phone screen?” Why would they need to all be on your screen? The merchants’ cards can dynamically adjust based on location, time during the day (restaurants put forward during lunch time), past buying experience. Sponsored merchants could be given a preferred space in the wallet.

This is one possibility, but there are others. As Brett King pointed out in Mobile Banking vs. The Mobile Wallet

Whether it is simply the fact that I can see my balance before and after I make a payment (not possible with plastic, cheques or cash) or whether you can start to advise me day-to-day on how to utilize my money better – the opportunity for mobile is not the wallet, and not mobile banking. It is re-imagining the utility of banking from a mobile perspective.

The technology offer us the opportunity to help people in doing what they currently almost without thinking try to do (badly). What is my balance, what are the advantages of each card, what should I pay with? Not only a big part of this logic is better computed by a machine than by a person, but a well designed UI can inform and help in this decision.

Instead of showing cards the mobile wallet could show payment options cost and opportunities.

I am hopeful we will see more and more of the latter, designed by people who have no preconception on how it should look like. 

Financial Services and Data exhausts

I had the luck to be invited again to Finovate 2012 as a blogger, the leading conference for financial services startups and innovation. The mix of participants is always interesting, from startups claiming banks are dinosaurs on stage to core system providers demonstrating tablet interface using Arial 10 fonts and stylus on an HP table (not kidding). You see my bias.

But one of the most interesting piece of news I got was in a conversation with Kabbage. I have written before on Kabbage and its use of outside source of information for underwriting purpose. With Ebay / Amazon / Etsy score and information, it was conceptually easy to understand how this data could be a direct link into the financial performance // risk of loan.

But it takes things to a next level when Kabbage announced me that they will partner with UPS to access delivery data to better underwrite their loan. This has been publicly released since then:

Banks, payment networks,… potentially sit on top of valuable data, in the aggregated data exhausts of their clients (payments, allocations, assets etc..). But banks, financial services startups also need to consider there are other sets of data out there, generated by their users diretly or indirectly that can be leverage to disrupt their activities. These data exhausts may contain useful signal for underwriting, marketing, intelligent banking, etc..

These source of datas may be as close as trying to leverage prepaid card data spending patterns to see if they could add information to someone’s credit score or as far (for now) as understanding what role reputation and social media activities could play (with services like Peerindex or Klout / Anthemis is an investor in Peerindex). Business reputation could also be leveraged, with reputation score on platforms like Yelp being used to verify the quality of a business to allow him to accept various payment methods.

But, as seen with Kabbage, we may have to expend our view further. The best way to do it would be to start from the customers’ multiple data exhausts, with no preconceived view on how useful they may be. If someone’s ability to manage a farm on Farmville is a possible indicator of their capacity to manage their money, why not use it?

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More startups working on integrating other data exhausts in financial services:

Lenddo: Lending integrating social scoring:

What is Lenddo?

Lenddo is a scoring engine that analyzes your online social footprint (sometimes called a social graph) and provides a score that can be used to access financial services such as personal loans.