Deutsche Bank Opens its IT Systems
This month, Deutsche announced it would open its API software and allow third-party providers, namely fintechs, to utilize their client data in application development. They actually began this program in 2016 when they hosted their API hackathon, allowing 14 teams to access their data for use in the competition. After experimenting with the concept for the last two years, Deutsche Bank is ready to be the nucleus of a new application ecosystem. “This gives banks much greater potential for innovation and growth,” said Chief Digital Officer Thomas Nielsen.
Tech ETF’s React to Sector Adjustments
Facebook, Twitter and Google all left the Technology sector last month and have been moved to a new Communications-Services sector. They were also joined by Netflix and Walt Disney, to name a few. In preparation for this move, several Tech ETF’s began to liquidate their holding in the stocks, weighting more heavily in the stocks that remain – Apple, Microsoft, Intel, and Cisco are some of the biggest names left. Despite the huge move, Tech ETF’s have managed well so far – the Technology Select SPDR ETF and the Vanguard Information Technology ETF only saw a 10% outflow in assets through two weeks. Meanwhile, investors have also been slow to move into new Communications-Services ETF’s.
Robinhood Launches In-House Clearing Service
Robinhood has started transferring users to its in-house clearing service, transitioning away from the expensive third-party clearing service(s) it has used thus far. Co-CEO Vlad Tenev claims that their platform is the “only clearing service built from scratch on modern technology in at least the last decade”. In short, clearing services ensure that when users place trades, their order matches the order of sellers on the other end. For a seemingly simple concept, clearing services can be quite pricey. This move immediately allows Robinhood to cut some of its fees entirely: $10 broker assisted trades, $10 restricted accounts, $50 voluntary corporate actions, and $30 worthless securities processing all free according to TechCrunch. Additionally, overnight check delivery has been lowered from $35 to $20. Beyond the numbers, running an internal clearing service will allow Robinhood to expand its portfolio of financial services as it nears a highly-anticipated IPO.
In the past month, Robinhood Crypto became available in Wyoming, Ohio, Arkansas, Tennessee, Rhode Island, Alaska, and Oklahoma. 50% of the states are officially supported!
BlackRock adds to Sustainable Investing ETF Portfolio
According to CEO Larry Fink, “sustainable investing will be a core component for how everyone invests in the future” (Financial Times). BlackRock has made clear its belief in sustainable investing for the long-term, and backed that stance by launching its first ESG (Environmental, Social and Governance) Bond ETF Fund in the U.S. and six ESG funds in Europe. Fink explains that in certain areas in Europe, sustainability is already a significant factor for investors and it will only grow in importance. Assets in ESG funds tend not to be involved with fossil fuels, tobacco, or weapons and may instead incorporate renewable energy into operations. While this criteria may sacrifice significant returns today, Fink believes that will change in the near future. He claims that assets ESG-related ETF’s will grow to from $25bil to $400bil in the next decade.
Coinbase and Circle Co-Found Centre Consortium
The Centre Consortium aims to establish a standard for fiat currency on the blockchain and to, therefore, enable a more open financial system. The first measure was to introduce the USD Coin, or USDC, the first stablecoin (Backed 1:1 to the US Dollar) of its kind. USDC is quickly becoming the most prominent stablecoin because users can tokenize dollars into USDC and vice versa on either Circle or Coinbase and access the ecosystem of blockchain tokens much faster than with standard fiat currency. USDC is the first completely “open, fungible, and interoperable fiat stablecoin” according to Circle – the other prominent USD stablecoin is Tether, or USDT, but it has a much less transparent structure and is quickly losing favor to USDC.
The USD Coin offers what has been missing from the blockchain ecosystem. It can be used in smart contracts, dApps, wallets, and exchanges (imagine buying Bitcoin with USDC instead of USD, eliminating significant fees), essentially creating an ecosystem centered around USDC. In the first few weeks, more than 40 companies have already added support for USDC and it’s now the 58th largest crypto asset by market cap.
Coinbase Approved to Act as Qualified Custodian
In another big move for Coinbase, New York is authorizing the crypto startup to act as a limited purpose trust company. This means that Coinbase is not only allowed to provide custodial services for crypto assets in New York, but it is held to the same regulatory standard as other major financial institutions in New York.
Coinbase first introduced institutional-grade custodial services earlier this year and it has an impeccable track record against breaches. Nonetheless, achieving the limited purpose trust company status will make it more trustworthy for users and signals growing regulatory support for crypto assets as an investment vehicle.
Sentieo raises $19mil Series A
Sentieo, an up and coming wall street fintech, recently raised $19mil in its Series A, bringing total funding to over $30mil. Sentieo is a data analytics startup that aims to significantly reduce the time analysts from different industries spend on investment research and analysis.
The program allows users to scan through thousands of public data sources, such as financial statements, investor presentations, SEC documents, and even social media to give analysts relevant information faster and enable them to anticipate trends before they occur. According to Josh Constine from TechCrunch, the program would be able to “look through all of Tesla’s earnings calls and financial documents for mentions of guidance on Model 3 production volume… analyze the sentiment of those mentions, and chart them against Tesla’s share price.” And maybe the best part of it all: cost. Sentieo licenses run for under $1000 per year, an insignificant expense for hedge funds and private equity firms alike.
EFMA reveals 2018 Best Global Innovations in Banking
EFMA, the European Financial Management Association, is an association of more than 3,000 financial institutions and hosts an annual awards program highlighting the best global innovations in banking. This year, the categories and winners were as follows:
- Best Use of Analytics and Artificial Intelligence: Plink, a platform that allows merchants to see a wide array of information on their sales performance compared to competitors as well as customer demographics and spending habits. The platform also supports digital payment alternatives.
- “Phygital” Distribution and Experience: PeoPay, a mobile banking app that allows users to spend abroad in their home currency with a user-friendly interface. PeoPay uses fingerprint confirmation to authorize payments.
- Digital Marketing and Communication: Banco Bradesco won for its marketing work as a sponsor of the Brazilian installment of Lollapalooza.
- Neobank and Specialized Player Innovations: Fidor Bank partnered with Abu Dhabi Islamic Bank to launch the Middle East’s first financial community and smart bank concept, moneysmart.ae.
- New Product Offering Innovation: Konto Jakze Osobiste by Alior Bank is a personalized bank account that allows users to pick benefits they would not like to receive for their spending and swap those with benefits they want instead.
- Social, Sustainable and Responsible Banking: Shinhan Bank Japan won for its rollout of Internet-of-Things(IoT) devices that, once installed in a newly financed car, can deactivate the engine if the buyer misses payments. The technology stands to greatly decrease risk for auto dealers and allow them to extend loans to otherwise rejected customers.
- Workforce Experience: The TREND_LOUNGE, an event held three times a year by BAWAG P.S.K. invites employees to pitch their innovative ideas for the company’s operations. The ideas are reviewed by a jury and winners are selected from each event. BAWAG P.S.K. says that several ideas have been implemented already and the events have been a big hit with employees.
- Global Innovator of the Year (both Challenger and Established players)
- Banco Bradesco (Brazil)
- USAA (USA)
- DBS Bank (Singapore)
Berkshire Hathaway Dives into FinTech
As a significant first for Berkshire Hathaway, the conglomerate has invested $600m into two fintech startups, Paytm and StoneCo. The investments were lead by Todd Combs (not Buffett) and strategically focus on emerging markets payments solutions. Paytm is the parent company of the largest mobile payments service in India, which claims to have more users than PayPal. StoneCo, on the other hand, recently went public as one the fastest growing payment processors in Brazil.
One of the major strategies that Berkshire Hathaway likes to utilize is investing in companies with few competitors and a solid grip on the market. For this reason, it’s natural for them to stick to Blue Chips and avoid more speculative areas like FinTech. However, Paytm and StoneCo have shown to dominate their local markets and offer tech that is disruptive enough to penetrate surrounding markets as well. Furthermore, Combs demonstrated his belief in the maturity of the fintech space, and that may be the start of a trend for Berkshire Hathaway.