Questioning Banking

posted by Collin Canright on October 4, 2016 - 10:03am

Bankers have accepted that FinTech is here, reports The Daily FinTech in its SIBOS 2016 wrap-up story. Realism in FinTech among both banks and startups, the move to realtime payment, and (naturally) semi-real blockchain topped its list of takeaways.

It may be a long leap from last week's conversations on banking, cybercrime, and blockchain to this week's links. But both raise more questions on the present and future of banking technology than I've seen in a while.

Plus a special Blockchain Watch, with coverage of a talk given by William Mougayar, author of The Business Blockchain, at Chicago's 1871 technology accelerator.

FinTech federal charter could trigger community lending rules
The new regulations imposed upon FinTech firms would be similar those placed on banks by the 1977 Community Reinvestment Act, which is limited to depository institutions, according to Bloomberg. The Office of the Comptroller of the Currency is considering creating FinTech charters and wants to draw on the law’s principles of giving credit and other financial services to low- and middle-income communities and extend it to other banks.

Are banks becoming more like tech companies?
Banks, which were once reluctant to embrace new technology, now are becoming the centers of technological improvements. “Today, we are clearly benefitting from our collaborative, experiment-based approach to innovating banking and how we look at everything from a digital lens,” writes Neal Cross in a post for LinkedIn.

Make branches integral to cross-channel sales and delivery
For some reason, banks have held a rather traditional view of what functions their branches should have. But with such technological changes sweeping the financial services sector, it’s time to rethink their physical branches, asserts Ron Shevlin in a post for The Financial Brand.

Are banks still relevant?
Banks need to take a new look at their analytics capabilities to see what information they can glean from data analytics, writes Jeffry Pilcher for The Financial Brand. As digitally native companies tap into data that helps to tailor their services to consumer needs, banks need to pick up the pace in order to remain competitive.

SWIFT’s global payment innovation initiative sounds intriguing. But will it improve payments?
The Global Payment Innovation initiative is meant to facilitate same-day availability of funds, end-to-end payments tracking, clarify and simplify fees, and improve remittance information, according to the Association for Financial Professionals. But it is yet to be seen whether such improvements will make payments more transparent on both ends.

New report says the global FinTech landscape reaches over 1,000 companies

VBProfiles’ FinTech landscape report found that more than 1,000 FinTech companies startups and historical incumbents, and together they raised more than $105 billion. “One of the most striking data points that we found was that investments in FinTech more than doubled between 2014 and 2015, from $17.8 billion to more than $38 billion,” Baptiste Parravicini, head of marketing at VBProfiles, told Forbes.

THE BLOCKCHAIN WATCH
Blockchain Presentation Draws 250 Businesspeople in Chicago

It's late Monday afternoon in Chicago, and more than 250 people pack into the main presentation room at the 1871, the city's largest startup workspace and accelerator. From the looks of it, most of the audience members are business people, not the usual tech types.

Indeed, the presenter, William Mougayar, asked the crowd how many were blockchain developers. Just a few hands raise. The Toronto-based investor and startup advisor, is author of The Business Blockchain. The event's sponsor, West Loop Ventures, turned people away for lack of space.

People who usually leave for their trains as soon as they can on a Monday afternoon came to 1871 to learn about blockchain.

Mr. Mougayar takes a pragmatic approach to blockchain. He avoids hype, suggesting the blockchain adoption will be evolutionary, not revolutionary. He is not a crypto-purist, speaking positively about private blockchains. Following are some of the topics he touched on with my favorite quotes from his talk:

Blockchain Implementation
"Let's not confuse . . . proof of concepts, pilots, implementations, and testing. There are lots of smart scientists who are inventing but let's not confuse what works today with what might work in three years."

At the same time, "I think we have enough basic technology that works today (to suggest) that proof-of-work is working today. . . . Whatever works today, let's use that and try to take it into a true implementation."

Blockchain Disrupts Databases
"Just replacing a data base is one step." A lot of what banks and securities firms are discussing is taking existing technologies and replacing them with blockchain-based systems. This makes existing processes less expensive and more efficient, but that's how the internet itself started. "The banks don't want to disrupt themselves, but they do want to improve themselves."

"The next phase of blockchain development will be driven by business, rather than technology." At that point, new business models will develop. "The best things happen when you put a business person and a developer in the same room."

Blockchain Authenticates Identity
There was a bit of skepticism on this point, reflecting both a lack of understanding and a difficulty in explaining how a decentralized system could possibly engender trust.

"We have been brainwashed to believe that we need third parties to authenticate identity."

Monetization
OK, it wasn't really a blockchain comment per se, but it speaks to the means that today's centralized web systems generate income by selling personal data:

"Facebook should be giving us tokens. They are monetizing our attention. They are good at it. They should be spreading that wealth."

As he wrapped up audience questions, I decided Mr. Mougayar was an optimist, not just because he speaks so passionately about a future technology but because he believes in the power of individuals working together: ""The wisdom of the crowds always wins."

Nearly as soon as he finished, the room emptied. Time to catch the train.