Community

@TomHay:

I agree with your conclusion, "Handling the resulting...instant payment schemes". When banks refuse to provide a merchant acquirer account to small merchants - the typical target audience and raison d'être of SQUARE et al - I suspect it's because of a similar risk of liquidity in the event of chargeback.

I've read about the failure of Herstatt Bank hours before settlement, which led to the founding of CLS Bank. I also know that some banks failed during the GFC. Maybe I'm naive but, to me, they all seem like Black Swan events and I've always wondered if

This one-off risk should hamper real time payments;

There wasn't some insurance product to mitigate this risk? After all, investment banks have been innovative enough to come up with CDS type of insurance products that cover seemingly more exotic and unpredictable risks.

Maybe the affect vendor/s have put an embargo under NDA on release of that info?:)

@MattScott + 1.

Just that cash / plastic seems to be more convenient even when compared to Apple Pay, which is arguably the most frictionless mobile payment. 

95% of Apple Pay eligible instore payments still happen by cash / plastic (http://www.pymnts.com/opinion/karen-webster/2015/five-from-15-the-2016-payments-pace-setters)

Apple Pay usage has actually dropped in Year 2 compared to Year 1 (https://twitter.com/s_ketharaman/status/685484148631453696).

Why has TransferWise recently started tying up with banks if enough people are willing to use its service directly?

15% of Apple Pay usage? Even if TransferWise's survey sample comprised solely of owners of iPhone6 & above, 15% is not compatible with other reports e.g. PYMNTS.com article (http://www.pymnts.com/opinion/karen-webster/2015/five-from-15-the-2016-payments-pace-setters), according to which Apple Pay usage is 5% of eligible users. Besides, Apple Pay usage has actually dropped in Year 2 compared to Year 1 (https://twitter.com/s_ketharaman/status/685484148631453696), which does not bode too well for its chances of greater adoption in the future. 

Fact is banks are shedding customers in order to stay profitable (Are Banks Losing Customers Or Shedding Customers?). They're also exiting cross-border remittances due to mounting regulatory pressures (e.g. HSBC). Wealth managers are not touching people with less than US$ 20K portfolios (http://qwt.io/s_ketharaman/LcMY). This creates a market at the bottom of the pyramid that banks are not interested in serving. This could comprise a sizeable market for fintech to capture but it's silly to claim that fintech is posing any threat to banks since banks are not interested in this market in the first place.

Right now, fintech is sitting on top of billions in VC funding and can service this market without concern for revenues / profits. Question is how long this luxury will last. When it ends, it's questionable whether fintech can make profits from this segment of the market.

FICO has stood the test of time and measures the track record of repaying debts. SoFi wishes to take its loan decisions based on ability to repay debts. Sounds fine on paper but, historically, poor people have a near 100% track record of repaying their consumer loans whereas banks are regularly forced to restructure their loans to many apparently rich corporations. Only time will tell whether ability to repay debt is the same as the intent and, therefore, the action, of repaying debts. 

I read a comment from Ryan Conley below a WSJ article on the same subject. Since it resonates so well with my own thoughts, let me reproduce it below:    

QUOTE

Let's see... They are granting credit to the borrowers the traditional lenders don't want at low, low rates. Where have I heard this before? Unbelievable. ... I predict the returns of these new lenders' loans, throughout a full cycle, will be miserable if not disastrous.

ENDQUOTE

If it works well in practice using only the standard camera on an entry level smartphone, facial recognition could help bring biometric authentication into the mainstream. The need for a separate reader - and availability of that reader as a standard feature only on higher end smartphones - has been a major hurdle towards the widespread adoption of fingerprint authentication technologies despite their being around for over a decade.

We've been hearing for a long time that Japan (along with South Korea) has a lead of 5-6 years over the West in mobile payments. At the same time, according to Life in Japan: Where cash is king, cash is still heavily used in Japan. I don't see this as a contradiction. Instead, I see it as evidence of my long-held view that consumers are comfortable with multiple payment options. It also debunks the finsurgent notion that a newer payment method (e.g. mobile payment) will kill an older payment method (e.g. cash).

Great advice. Every now and then, a wannabe entrepreneur approaches us with an idea for an aggregation-based startup. Very often, it turns out they're solving their own problem rather than their customer's problem. So far, we've been politely telling them not to waste their time. Going forward, I'll simply refer them to this post! I'm guessing that, out of the 5K-6K fintech startups, fewer than 10-20 will survive your four filter criteria of a potentially successful fintech startup.

I thought CRM has gotten well past its initial adoption challenges by now. But, per this Gartner blog post, it looks like I was too optimistic: 

CRM efforts still fail for most companies

The spread of IoT will only be limited by the imagination of its suppliers / customers. Re. bargain hunter, LBS deal apps have been around for years, with GPS serving as the "location tracker". Not sure what's the role of IoT here.