What’s Next for the Fintech Sector in 2017?

David E. MickeyFinancial technology has historically moved slowly, but a number of new trends are breathing life into what many view as an uninteresting segment of the tech sector. Here are a few exciting fintech developments to watch out for in 2017.

A Credit Card for the 21st Century

Many data breaches have highlighted the fragility of our credit card system. While the slow expansion of chip-and-pin readers address some of its issues, there are many areas in which fintech can change the face of credit card transactions and processing.

One example of such innovation is Final, a credit card built for the 21st century. Final cards support creation of one-time or limited-use numbers, limits on charges, and other features that minimize the frustrations caused by data breaches or nefarious merchants. As credit cards become easier to obtain and use, financial technology must address the risks posed by a single set of credentials that give merchants access to a consumer’s finances. We are sure to see more companies like Final attempt to address this pain in 2017 and beyond.

Faster Processes

While technological innovation advances at an ever-increasing pace, much of fintech thrives on standards not updated in decades. This is understandable from the perspective of regulation and bureaucracy, but the sluggishness of financial processing propagates across many layers of business, causing delays that become increasingly difficult to justify.

Thankfully, large financial institutions are beginning to develop interfaces and services that speed up common interactions. American Express recently opened up some aspects of its platform to developers While these changes may seem small when taken individually, they will ultimately pave the way for a more open and programmatic way to move money between individuals and businesses.

Blockchains in the Back Office

Pioneered by the popular Bitcoin digital currency, blockchains are methods by which groups of users who do not trust each other can agree on an outcome. Blockchains can clear transactions, track ownership of assets, and record agreements in a way that does not depend on a single entity or server.

Though Bitcoin itself has many challenges that make adoption risky, the underlying blockchain technology has broader uses. Microsoft laid the foundations for its adoption with Blockchain as a Service, a platform that simplifies experimenting with and deploying blockchains for custom purposes. Instead of driving entire currencies, we’re beginning to see blockchain technology used to move and quantify assets between small groups of financial institutions. The full usefulness of blockchains has yet to be explored, but they are likely to play a crucial and growing role in the future of finance on both large and small scales.

Conclusion

The future of financial technology is defined by openness, speed, and greater consumer protection. As innovation becomes easier, we are likely to see more interest and excitement in an area of business that has to date been dull, uninteresting, and slow to evolve.

Swedish Bank SEB Backing its First Bitcoin Business, Coinify

seb_416x416Swedish Bank SEB (Skandinaviska Enskilda Banken), headquartered in Stockholm, has long been interested in venture capitalism, evident by their active investment in “deep technology” for 20+ years. Now, SEB will be backing its first bitcoin business.

The investment branch of SEB, SEB Venture Capital, has involved itself with investment into a wide range of startups since 1995.

Post-trade securities startup Information Mosaic and management app Tink are among the many startups SEB has funded over the years. CA Technologies purchased SEB investment Arcot for $200 million in 2010, and four years later Cisco purchased SEB investment-funded Tail-f for $175 million.

SEB’s team of nine investors assigned $250m (2bn SEK) from SEB Group to Coinify,  with early-age Danish venture capital firm, SEED Capital Denmark, contributing support as well. SEB Venture Capital, which reportedly has a voting share of between 5 percent to 9.99 percent in the company, acknowledged the investment is “purely financial,” but insists that Coinify’s presence in its portfolio is about far more than an exit strategy.

“Coinify has developed a unique platform for blockchain payments and fits perfectly in our portfolio of FinTech investments,” David Sonnek, SEB’s head of venture capital, said of the new investment. “We, at SEB Venture Capital, really look forward to contributing to Coinify’s future development.” He added, “This kind of platform really unleashes the innovation of us all, and that may be the most important aspect.”

Coinify launched in 2014, benefitting from a multi-million dollar deal with SEED. Coinify supports payment in 15 digital currencies, and it plans to expand its payment and trade services throughout Europe and Asia. Coinify offers payment solutions for the digital payment (ex. Bitcoin and digital currencies). SEB’s Stefan Olofsson and SEED Capital’s Lars Andersen  joined Coinify’s board of directors, and SEB investment manager Filip Petersson is acting as the deputy director for Coinify.
While SEB will take on roles outside of their $4m investment, Sonneck has said that his team isn’t expected to become involved with Coinify’s day-to-day operations, but will focus on larger strategy. SEB intends to help grow the company and become a “more tech savvy bank.”

Did Bitfinex Security Breach Prompt Bitcoin Dip, Expose the Digital Currency’s Vulnerabilities?

11297241203_453f1342a6_bBitcoin, the digital currency, took a dip on Wednesday following the hacking of Bitfinex, which is a Hong Kong-based exchange. During the hacking, funds were stolen.

In reaction to the event, the exchange has been paused. Also, withdrawals and deposits are being investigated. Consequently, Bitcoin’s trading value plummeted about 20 percent during early hours in Hong Kong, according to the New York Times. However, by early afternoon, it had recovered about half of its loss. Director of Community and Product Development Zane Tackett didn’t respond to NYTimes request for a comment, but he did indicate via a Reddit post that 119,756 Bitcoins had been stolen.

Prior to the public announcement about the hacking, the loss was was equivalent to $72 million. That loss has lessened, bringing the figure closer to a still astounding $65 million. The Hong Kong exchange, which is one of the world’s largest, said the following in a blog post, ““As we account for individualized customer losses, we may need to settle open margin positions, associated financing, and/or collateral affected by the breach.” Additionally, Bitfinex  indicated that any customer’s losses would be investigated and acknowledged in the future.

The viability of Bitcoin has been questioned thanks to security breaches such as this one. Just two years ago, in 2014, Mt. Gox, an exchange based in Tokyo, was targeted. Hundreds of thousands of Bitcoins were stolen in a heist that still has law enforcement officials and experts baffled. More than $50 million worth of Ether, another form of digital currency was nabbed by a hacker during June of this year. The funds were taken from the Decentralized Autonomous Organization experimental virtual currency project.

While some exchanges may be shaken by these recent events, others are unruffled. Chief strategy officer at the large digital currency exchange OKCoin, Jack Liu, indicated he wasn’t concerned about his company’s security because he’s using a different system. He believes there should more conversations launched about best practices. If hackers are getting better and adapting that isn’t safe for the industry overall.

The Bitcoin community views the digital currency as the future of finance, ensuring faster and transactions, but there’s internalized competition and debates surrounding technology that could potentially permit vulnerability. Part of the coding that underlies the currency is known as the blockchain ledger, and it’s gaining traction as banks see the benefit of using technology to speed up trade. Nonetheless, they all exchange and trade to be secure.

Bitfinex has reported the crime.

5 Ways Banks Can Use FinTech to Build Trust, Support Customers

online-banking-advantagesBanks can use fintech to build trust, believe it not. When catering to a consumer base that expects nothing less than instant gratification, fintech companies, and partnerships can offer traditional banks tools that guarantee convenience and seamless customer service.

Wasteful and cumbersome, physical pieces of paper aren’t convenient and can challenge customer service for many in the banking institution. For that reason alone, many people refrain from using banks, expecting that it’ll be time-consuming –that’s on top of a preexisting distrust of the traditional banking system. However, banks are demonstrated that they’re interested in address distrust and negativity. They’re willing to take on public perception by using digital tools to move products that are customer-centric. They’re interested in doing a number of things in order to better satisfy the communities they service, and among those things are the following:

  1. Demonstrate that they’re customer-center: Since the birth of the banking industry, the focus has been on the products, but technology has offered an opportunity to focus on customers first and foremost. Through engagement via social media and other platforms, banks can inquire about customers’ specific needs, their desires, and concerns about wealth management. In order to do this, banks must be able to focus on internal data analytics, which fintech can assist with. Fintech has made data more comprehensive and palatable. It also eases customization, automation, and tailored bank offerings.
  2. Develop seamless banking systems: Among the numerous things fintech companies are able to do, they’re great at helping banks to implement solutions, which makes it easier for customers to access necessary services and they help with customer interaction with banks at every level. Ultimately this leads to greater satisfaction.
  3. Offer targeted service offerings: Data analytics are another specialty offered by fintech companies. They’re able to provide targeted insight, incentives, and opportunities to clients. Based on needs or desires of certain clients, companies can accurately suggest services or products after gauging after gauging requests made by clients in similar situations.
  4. Correct and address any concerns faced by the underbanked and unbanked: Fintech can be used to serve an important, overlooked segment: the underbanked and unbanked. Financial technology can equip banks with easy and inexpensive mechanisms to educate and equip customers, facilitating access to convenient options that make digital payment, mobile payment, and online banking possible for those in the U.S. and abroad.
  5. Broaden a prospective client base: Those banks with enough foresight to employ the expertise of fintech companies, they’ve gained access to a wider variety of customers. Fintech companies can provide low-cost insights on upscale and as well as those with lower net worth. Data analytics and robo-advisory advancements are making wealth management attainable. Incorporating fintech innovations into organizations will help banks to reach a greater collection of customers.

Fintech is easily improving the relationship between customers and banking institutions. Connectivity, convenience, and customer-specific interactions have emboldened the banking population.