Category: Digital Disruption

A New Digital Bank IS Arriving…

As widely reported, a new digital bank with the name 86 400 is being set up in Australia and it is pitched by its founders as a potential “genuine alternative” to the big four banks. Their site went live, but it is only a placeholder.

This from Business Insider. British banking pioneer Anthony Thomson, the entrepreneur who co-founded the highly successful Metro Bank in the wake of the GFC (the UK’s first new high street bank in 150 years), and in 2014, the country’s first digital bank, the now publicly listed Atom, has set his sights on Australia with a new digital challenger bank.

Banking startup 86 400 (named after the seconds in a day) will launch in early 2019, and is wholly funded by the Sydney-based payments services company Cuscal, best known for rediATMs.

Thomson has signed on as chairman with former ANZ Japan CEO, Robert Bell as CEO. Cuscal Payments CIO Brian Parker takes on that role at 86 400.

The heavy-hitting management team also includes Westpac’s former digital GM, Travis Tyler; CBA’s former International Chief Risk Officer, Guy Harding, as CRO; and Cuscal’s former Head of Finance, Neal Hawkins, as CFO.

While the project has been set up and funded by Cuscal (which is part-owned by the likes of Bendigo Bank and Mastercard) – one of the key architects of the New Payments Platform (NPP), a real-time payments system – it will operate as a separate entity, with a separate board and team.

NPP is at the core of 86 400’s real-time banking pitch, something Thomson says the big banks “have been very slow to make available”.

The neobank will look to raise more than $250 million capital over the first three years of operation and will likely take additional shareholders on board.

Having raised more than $AU1 billion for his previous ventures, Thomson says 86 400 is his “best prepared, most capable and well-funded venture to date” and in “the unique position of not going out to look for money”.

And he’s not mucking around.

“I’m not here to build a small bank. We’re here to build a big bank,” he said.

Eight years on, Metro Bank is worth $AU1.95 billion with annual revenues in excess of $AU500 million, having floated in 2014.

By October last year, Atom – Thomson left the business in January – had around £900 million ($AU1.6 billion) in deposits, but lost £42 million ($AU75m) in 2016.

86 400’s app-based banking has been 18 months in development, with a team of 60 based in Sydney, amid conversations with Australian Prudential Regulation Authority (APRA) for a full banking license as an Authorised Deposit-taking Institution (ADI) expected by the end of the year.

It plans to launch in beta towards the end of 2018 before going public in the first quarter of 2019 with a transaction and savings account. It will operate on both iOS and Android smartphones.

The launch comes amid a litany of complaints about the behaviour of the Big Four banks at the royal commission into misconduct in the financial services sector.

Cuscal managing director Craig Kennedy, said the organisation put forward the idea because they believed “nobody in Australia is leveraging all of the capabilities available to maximise the banking experience on your mobile”.

Cuscal produced Australia’s leading white-label mobile banking app, and has led the way in digital banking solutions.

Thomson, who last year invested in Melbourne-based fintech startup, Timelio, said Australia needed another bank “because the big banks have treated customers really, really badly”.

“Look at the levels of dissatisfaction with the banks… all of the big banks have negative net promotor scores,” he said.

“I read a piece of data which really stuck in my mind. It was from the Australia Institute and said that 2.9% of Australian GDP goes to bank profits. So $3 out of every $100 hardworking Australians make in their businesses goes to the banks in profits. This is just enormous. It’s three times bigger than the UK – and I think the UK banks rip off their consumers.

“So I think there’s a real opportunity to create the first real alternative to the real banks. Someone who does put the customer first.”

Like other digital startups, part of the opportunity CEO Robert Bell sees is avoiding the baggage around the industry’s incumbents.

“Large banks have an enormous drag in terms of very big, costly legacy real estate/branch networks, legacy technology that’s very expensive to change. Most of their digital pieces have been add-ons,” he said.

“We’ve got the huge advantage that we’re starting from scratch.”

The heart of 86 400 is its investment in what Bell calls “digital working memory”. It’s data analysis that has the potential to warn you like a parent or spouse about when you’re being a spendthrift – budgeting for the avocado toast generation – with a predictive cashflow model.

“For example, helping customers know what there balance will be in one week’s time or four week’s time if the normal things that happen in their life happen over the next couple of weeks,” he said.

“No one gives any insight into what might happen in the future.”

Thomson says: “As we get to know you, and with your permission, we can use the data to better predict what your needs are going to be. So we know that in summer you go on holidays and your insurance comes up for renewal, we can start to model that and bring it to you attention in advance”.

If you’re the sort of person who runs out of cash three days before your next payday, it could come in handy to amend your spending habits.

Bell says 86 400 plans to launch with no or low fee accounts as “just the start”, promising “value customers have never had from a bank before”.

86 400’s launch could potentially take advantage of growing resentment towards the major banks in the wake of the royal commission.

While dissatisfaction may be growing, customer churn remains surprisingly low. However, the banks are facing something of the perfect storm of a potential margin squeeze from a likely rise wholesale funding costs ahead, at the same time that credit growth has risen faster than deposit growth in recent months.

The risk of out-of-cycle mortgage rate increases is rising in Australia, giving borrowers another reason to start shopping around.

While Thomson and Bell were keen to downplay any focus on interest rates for 86 400’s potential savers and borrowers, the neobank’s tech-focused low operating costs will negate pressure on its margins as it cases new business.

The RBA On Crypto

Tony Richards, Head of Payments Policy Department, RBA, spoke on Cryptocurrencies and Distributed Ledger Technology at Australian Business Economists Briefing in Sydney.

He described the basics of Crypto, with reference in particular to Bitcoin, compares it with money, and concludes  that many of these shortcomings of cryptocurrencies stem from their design around trustless distributed ledgers and the costly proof-of-work verification method that is required in the absence of a trusted central entity. In contrast, in situations where there are trusted central entities in well-functioning payment systems, there may be little need for cryptocurrencies.

He then goes on to explore the implications for central banks.

The Bank has been watching developments in these areas for about five years. Currently, however, cryptocurrencies do not appear to raise any major concerns for the Bank given their very low usage in Australia. For example, it is hard to make a case that they raise any significant concerns for the Bank’s mandate to promote competition and efficiency and to control systemic risk in the payments system.

Nor do they currently raise any major issues for the Bank’s monetary policy and financial stability mandates. There are only very limited links from cryptocurrencies to the traditional financial sector. Indeed, many financial institutions have actively sought to avoid dealing with cryptocurrencies or cryptocurrency intermediaries. So, it is unlikely that there would be significant spillovers to the broader financial system if cryptocurrency holders were to suffer valuation losses or if a cryptocurrency system or intermediary was compromised.

But given all the interest in cryptocurrencies or private digital currencies, people have inevitably asked whether central banks should consider issuing digital versions of their existing currencies. I can give you an indication of the Bank’s preliminary thinking on this issue, as outlined in December by the Governor in a speech entitled ‘An eAUD?’.

Currently if households wish to hold money, they have two choices. They can hold physical cash, which is a liability of the Reserve Bank, or they can hold deposits in a bank (or credit union or building society), which is an electronic form of money and is a liability of a commercial bank that is covered (up to $250,000) by the Financial Claims Scheme. Both forms of money serve as a store of value and a means of payment (assuming the bank deposit is in a transaction account).

Most money is already ‘digital’ or electronic in form. Currency now accounts for only about 3½ per cent of what we call broad money. The remaining 96½ per cent is bank deposits, which we might call commercial bank digital money.

Furthermore, the use of cash by households in their transactions has been falling in recent years. This next graph shows there has been strong growth over an extended period in the use of cards and other forms of electronic payments. In contrast, the dots, which are from the Bank’s Consumer Payments Survey, show a significant fall in the use of cash. In 2007, cash accounted for nearly 70 per cent of the number of household transactions. Nine years later, this had fallen to 37 per cent.

Graph: Transaction Per Capita

 

Clearly, some households are moving away from cash and finding that electronic payments provided by banks better meet their needs. And this trend is likely to continue as the New Payments Platform (NPP), which launched recently, allows banks to offer better services to households – namely real-time electronic payments that give immediate value to the recipient, are easily addressed, are available 24/7 and carry lots more data than currently.

So the question is: ‘should the Reserve Bank introduce a new form of cash – an eAUD as the Governor called it – to give households an electronic payment instrument issued by the central bank for their everyday payments?’

Our current thinking is that there would not necessarily be all that much demand for an additional form of money in normal times, though this would presumably depend partly on design decisions such as the interest rate (if any) that would be paid on this money.

But to the extent that there was significant demand, particularly if this occurred at times of financial uncertainty with households switching out of the banking sector, there could be significant implications for the Bank’s financial stability mandate. There would also be implications for the structure of the financial sector – for example, it could result in reduced financial intermediation. We would need to think through these implications carefully.

So for the time being at least, consideration of a possible new electronic form of money provided by the Reserve Bank to households is not something that we are actively pursuing. Based on our interactions with our counterparts in other countries, it is also not front of mind for most other advanced economy central banks. An exception is Sweden, where the shift away from the use of cash is significantly more advanced than in Australia and elsewhere. Sweden’s Riksbank is studying the issues regarding the possible issuance of an e-krona and expects to report by late 2019.

However, as the Governor indicated in December, there might be a stronger case for considering a new form of central bank liability for use by businesses and financial institutions.

Here it is important to remember that the Reserve Bank already offers electronic balances to financial institutions in the form of Exchange Settlement Accounts (ESAs) at the Reserve Bank. These balances can be passed between financial institutions during the banking day, with the Bank keeping the official record (or the ledger) of account balances.[10] A key function of ESAs is that they provide banks with a risk-free liquid asset for settling payment obligations through the day, to prevent the build-up of large exposures that could threaten financial stability.

However, some stakeholders in the payments area – including some fintechs – have expressed the view that the introduction of another form of central bank balances could be quite transformative. They have suggested the issuance of a new form of digital money that would be accessible to businesses and could be passed around on a distributed ledger. They argue that the availability of another form of central bank settlement instrument could reduce risk and increase efficiency in business transactions. For example, it could allow the simultaneous exchange of money and other assets on blockchains. A central bank digital currency on a blockchain could potentially also enable ‘programmable money’, involving smart contracts and the simultaneous execution of complex, linked transactions.

Moving in this direction would involve two major changes to current arrangements: it would involve the introduction of a new form of settlement asset and it would presumably involve broader access to central bank money for non-bank institutions. Consideration of the first aspect will require an assessment of issues relating to the technology. Consideration of the second aspect would get into some of the issues that are relevant to thinking about giving households access to electronic central bank money, namely the implications for financial stability and the structure of the financial sector.

As we think more about a model along these lines we will be considering whether the benefits could be equally well facilitated by other means. For example, could there be commercial bank money on blockchains – say Bank X tokens, Bank Y tokens, and the like, rather than RBA digital settlement tokens? Indeed, some models have been sketched out whereby commercial banks would put aside ESA balances at the central bank or would put risk-free assets into special-purpose vehicles, and then issue credit-risk-free settlement tokens for use by their customers. We will also need to think about whether the possible use-cases that have been proposed really need central bank money on a blockchain, or if they might also be possible using other real-time payment rails – perhaps the NPP. At the moment, it does not appear that a strong case has emerged for us to provide this new form of central bank money, but we have an open mind.

ASIC Scrutiny Good for Fintechs – Moody’s

The close attention of ASIC that prompted Prospa to scuttle its IPO will ultimately work out well for the fintech small business lending sector, says ratings agency Moody’s via Fintech Business.

In a note published on Friday, Moody’s Investors Service senior analyst John Truijens said ASIC’s focus on Australian fintech lenders will be a “credit positive” for the sector over the long term.

Ultimately, Mr Truijens said, closer regulation of fintech small business lenders will result in improved transparency and governance in the sector.

The comments come after Prospa indefinitely delayed its planned IPO on June 6 with minutes to spare following queries from ASIC about the terms of its loans.

Regulators (and the royal commission) are reviewing unfair loan contract terms, said Moody’s – and the fintech sector is working on a new code of conduct to “lift transparency” on the sector.

Because most small business loans are unsecured, lenders will have less incentive to safeguard their position by acting on non-monetary default clauses, said Moody’s.

“We therefore expect that any adjustment required to contract terms to address any of these unfair terms will have a muted impact on the credit quality or commercial value of such loans,” said the note.

“Unfair contract term law gives courts a power to find that a term is ‘unfair’. If a contract term is found to be unfair, it will be void, which means it is not binding. The rest of the contract will continue to bind the parties if it is capable of operating without the unfair term,” said Moody’s.

The fintech small business lending sector, which has already pushed for self-regulation, is in the process of creating a code of conduct with a target date of 30 June 2018.

“In light of the development of the code of conduct, we expect that the disclosure of interest rates implicit in loan contracts will be adopted by the industry as the standard practice in the future,” said Moody’s.

“Greater transparency around the cost of loans and the improved governance resulting from an industry code of conduct will enhance the sustainability of the sector.

“There is therefore reduced risk that a borrower’s obligation to pay their loan will be waived due to any of the non-monetary default clauses under review,” said the note.

Why gig workers may be worse off after the Fair Work Ombudsman’s action against Foodora

From The Conversation.

The way “gig workers” are paid and protected might be about to change, as a result of legal proceedings brought by the Fair Work Ombudsman. The Ombudsman alleges that food-delivery platform Foodora underpaid three workers by A$1620.74, plus superannuation, in a four-week period.

The Ombudsman argues that while Foodora engaged these workers as independent contractors, they were in reality employees. If the action succeeds, it could be positive for the underpaid workers, but it could also drive down working conditions.

The food-delivery platforms have stated they would be willing to give their workers more benefits, such as training. But not at the cost of workers being classified as employees. If the Ombudsman’s case succeeds, it could cause gig platforms to offer fewer protections in order to ensure workers are classified as contractors.

This could not only disrupt the food-delivery sector, but have a broader impact on the gig economy, restaurants, customers and workers.

Employees or contractors?

The difference between an employer and a contractor is significant. They fall under different laws, receive different protections and have different obligations.

If a contractor performs poor work they are legally liable for that. But an employer is responsible for the poor work of an employee.

In many cases this distinction is clear-cut. However, in the gig economy these workers operate in a grey area, one the Fair Work Ombudsman seeks to test.

Whether workers can be classified as employees or contractors depends on a variety of factors, including the nature of the work. If workers are deemed employees then they receive a greater number of protections, including minimum wage rates.

In the Australian platform-based economy (including ride sharing and food delivery), the Fair Work Commission has determined workers are independent contractors in two recent cases.

In one case, Commissioner Nick Wilson stated that “[the driver] did not bring anything especially entrepreneurial to the arrangement” but also that “it is evident that the weight of those indicators leads to the finding that [the driver] was not engaged as an employee, but instead as an independent contractor”.

The Fair Work Ombudsman’s decision to intervene in the food-delivery sector might be a response to poor working conditions for gig workers. But the decision to go after Foodora specifically could dissuade rather than encourage other platforms to improve working conditions.

As shown in the table below, the three major food-delivery platforms have varying approaches to engaging workers. For instance, Foodora, in the period under investigation, would engage workers for set periods of time, rather than per delivery. Deliveroo and Foodora also provided uniforms for workers, while UberEATS did not.

Authors’ original work based on Fair Work Ombudsman, The Australian Financial Review, The Guardian Australia, original research.

The fact that the case was brought against Foodora suggests that the company has the most direct relationship with workers, and thus its workers are most likely to be classified as employees.

Our research shows, however, that these work practices are evolving all the time.

In submissions to the ongoing Senate Select Committee on the Future of Work and Workers, both Deliveroo and UberEATS claimed they would like to provide additional benefits to workers but doing so in the existing regulatory environment might compromise their business models.

For instance, Deliveroo argued that it “… wishes to be able to provide additional benefits to [workers] without the risk of those benefits changing the relationship from one of self-employed riders to riders employed by Deliveroo”.

UberEATS similarly argued that “current employment classifications create significant disincentives: they can mean that offering training to these [workers] can compromise the self-employed status of the individual. We believe that companies should be incentivised, not penalised, for helping independent workers”.

This is why the Fair Work Ombudsman’s decision to target Foodora may be counterproductive. It sends the signal that the better you treat your workers, the more likely they are to be classified as employees, the more expensive your labour costs will be and the more inflexible your operation will become.

The Foodora case is interesting as it applies existing employment rules to “gigified” work. Currently, some gig workers earn significantly less than the minimum wage. They also miss out on other protections of employment.

However, unlike high-profile franchising cases such as the underpayment of 7/11 workers, their current classification as contractors means this practice is within the law.

If the Fair Work Ombudsman is successful and these workers are reclassified as employees, it might provide a disincentive for other platforms to protect workers. The law itself might need to change.

With this in mind, we all need to pay attention to the recommendations of the Senate Select Committee on the Future of Work, due on June 21.

Authors: Tom Barratt, Lecturer, School of Business and Law, Edith Cowan University; Alex Veen, Scholarly Teaching Fellow in Work and Organisational Studies, University of Sydney; Caleb Goods, Lecturer – Management and Organisations, UWA Business School, University of Western Australia

Bitcoin Crashes After Hack

Another day and another hack in the crypto world.

This from Investing.com.

This time the hack caused a mighty fall in the price of Bitcoin and other cryptos over the weekend.

Reportedly, a South Korean crypto exchange was hacked, which called it a cyberintrusion.

No matter the name, investors in the space had the same knee jerk reaction that has plagued the space, and that was to sell.

Let’s get right to discussing it.

Who’s to blame this time?

A relatively small crypto exchange called Coinrail is being blamed for this decline. The Wall Street Journal reported that alt coins to the tune of 70% of its digital assets were stolen.

The sleuths moved their spoils to what is called a cold wallet, according to the Journal. These cold wallets are not connected to the internet. Observers think that as much as $40 million of alt coins were made off with by the culprit or culprits.

As the news went viral, investors moved out. The loot caused cryptos to plunge more than $14 million in a short amount of time on Sunday, according to the Journal.

Sell, sell, sell

On Friday of last week, Bitcoin’s price seemed to be moving higher, however the news of this so-called cyberintrusion caused panic. In fact, Bitcoin sold off to near the lows we saw at the beginning of the year. As usual, the event served to drag prices other cryptos in the space lower, too.

During Friday’s late hours, Bitcoin was trading around $7,600. At the time of writing Sunday evening, the price was hovering around $6,700.

It should be noted that Coinrail is a small exchange. So the idea that traders would sell on news that it was hacked is interesting to say the least.

This is just one more example that shows how investors should carefully consider the space. There are going to be many more hacks like this, but the space’s resilience is noteworthy.

Airbnb regulation needs to distinguish between sharing and plain old commercial letting

From The Conversation.

Airbnb and other short-term letting websites have been a hot topic of debate for some time. In New South Wales, it seems the state government is on the verge of announcing a new short-term letting policy. Our research suggests about a quarter of Airbnb properties in the city are essentially commercial short-term letting operations.

But as cities like Berlin and Barcelona have learned, regulating these platforms is not always easy. Enforcing restrictions against individual hosts can be costly. Airbnb has also challenged regulations limiting short-term letting.

At the same time, there has been a lot of hype about platforms like Airbnb as leaders of a new “sharing economy”. This has made some governments wary of interfering with a potentially lucrative economic driver.

How do you tell if it’s sharing or business?

To ensure these new platforms are regulated effectively, it’s important that we understand exactly what they do, and the impacts they’ve having. Despite Airbnb’s efforts to promote itself as being all about sharing, there’s actually a mix of activities happening on its platform. In a new research paper, we examined these different activities, to better identify how Airbnb is being used and whether the platform should be viewed as a “sharing economy” superstar.

Overall, we found that in late 2016, about a quarter of Sydney’s Airbnb listings were best viewed as short-term letting businesses, rather than examples of the sharing economy in action. The figure was greater for other global cities we looked at – 26% in New York, 28% in London and Hong Kong, and a hefty 49% in Paris.

So how did we reach this conclusion? To start, we needed a definition of the “sharing economy”. We took this to mean economic activity involving the sharing of excess capacity in an asset or service, which is driven by a sharing attitude.

We then took a close look at listing data from the five cities and identified two categories of use:

  1. House sharing, which includes advertising part of a house (a private or shared room) or a whole house for a small portion of the year (up to 90 days). These uses suggest that the property is otherwise meeting someone’s permanent housing needs.
  2. Traditional short-term lets, meaning properties permanently offered for short-term rental, thus preventing their use as long-term housing. This includes properties available or booked for more than 90 days per year, and those where the host has multiple listings.

By categorising listings this way, we get a clearer sense of whether Airbnb is really being used to share spare housing capacity, or to run commercial rental accommodation.

Unfortunately, Airbnb keeps tight control over data about the use of its platform. This makes it challenging to quantify these uses.

To get around this, a few organisations have scraped and collated data from Airbnb’s website. While much existing research uses a dataset from Inside Airbnb, our research complements this work by using a dataset produced by the company AirDNA. While neither dataset is perfect, together they provide an increasingly clear picture of Airbnb’s impact.

What did our research find?

Our findings show a significant share of Airbnb hosts are using the platform to engage in economic activity that existed long before Airbnb did – that is, dwellings are used as serviced apartments, B&Bs or holiday rentals. This is commercial activity, not sharing. These properties aren’t just “excess” unused housing space and there’s no “sharing attitude” involved.

While commercial properties are not the majority of listings, other research suggests that this activity nonetheless generates a larger proportion of Airbnb’s income than home-share activity. In many cities this activity is also already subject to planning laws and land-use regulations about “tourist accommodation”. This means these Airbnb listings are potentially in breach of existing laws.

Furthermore, by mapping the Sydney listings we can see that while these traditional short-term lets were only about a quarter of listings, they were overwhelmingly concentrated in suburbs with very tight rental markets.

LOCATION OF TRADITIONAL SHORT-TERM LETTING

LOCATION OF HOUSE SHARING

Another factor is the rapid growth of Airbnb since late 2016. Australia now has 87% more listings than in late 2016. That’s a lot of properties in popular neighbourhoods that might otherwise be long-term rentals. So not only is this commercial activity not “sharing” at all, it’s also potentially pushing renters into shared living elsewhere, by reducing the amount of available rentals.

What does this mean for regulation?

So where does this leave our regulators? In our view, any policy decision needs to account for the different uses of these platforms, and be particularly focused on the impact of commercial short-term letting. While house sharing also raises concerns – particularly in apartment complexes – it at least fits the “sharing economy” model and arguably provides some of the shared financial, social and environmental benefits sharing economy supporters claim.

At the same time, regulators need to act on the lack of transparency in debates about platforms like Airbnb. Without good data, it will be tough for regulators to target their efforts at the most problematic aspects of new technologies. As we conclude in our research paper:

If Airbnb is genuinely committed to the ideal of ‘sharing’, as it regularly claims, it should share its data with regulators, even if it is not made publicly available. Airbnb’s unwillingness to do so (to date) indicates its sharing rhetoric is more of a sales pitch than a guiding philosophy.

Authors: Laura Crommelin, Research Lecturer, City Futures Research Centre, UNSW; Chris Martin, Research Fellow, City Housing, UNSW; Laurence Troy, Research Fellow, City Futures Research Centre, UNSW

Tic:Toc boss calls out HEM issues and ‘questionable’ third parties

From The Adviser.

The CEO of online mortgage lender Tic:Toc Home Loans says that no human judgement need enter the equation when it comes to assessing the expenses of a mortgage applicant.

With the first weeks of the banking royal commission now behind us, Tic:Toc founder and CEO Anthony Baum believes it has become clear that there is an opportunity for the mortgage industry to reconsider how customers are assessed for finance.

“One key flaw that’s been exposed is the failure to conduct basic checks and balances on the applicants’ household expenses. This includes instances where judgement on a customer’s borrowing capacity has been handed to a raft of questionable third parties,” the CEO said.

“The truth is, no human judgement need enter the equation when it’s possible to check up to a year of personal expenses at the click of a button. There’s no grey area for the vast majority of cases.

“It really is that simple — and quick. For the exceptions, a combination of digital and human assessment is the most efficient and responsible way to assess a customer. Plus, automated assessment makes the whole approval process far cheaper, and faster, for a bank than the current process.”

Tic:Toc Home Loans is one of a growing number of new entrants aiming to simplify the mortgage process by harnessing digital technologies and online channels.

Unlike some fintech players looking to disrupt the home loan market, Mr Baum has extensive industry experience, having led Bendigo and Adelaide Bank’s third-party business for close to four years.

The threat of digital disruption has increased for brokers in recent years. However, many still believe that face-to-face contact with a mortgage professional will continue to be the preferred choice for Australian borrowers.

“My opinion is home loans are not actually as complicated as the industry makes out,” Mr Baum said. “They are really a means to an end, which is more a utility-style product.

“As the CEO of an online home loan company that bases its work on the latest financial technology, I find it hard to get behind the idea that generic reference points, such as the Household Expenditure Measure, and personal judgement are being used as an integral part of the approval process, especially now we are hearing about the true cost for those on the receiving end of the so-called ‘Liar Loans’.

“The royal commission is looking at historical banking issues. And while it is vitally important we expose nefarious practices to sunlight, my concern is that there will be no industry-wide visionary leadership and legislative framework as an outcome. This is the industry’s opportunity to create a future strategy that leverages the data and technologies available to the benefit of the customer, increases the relevance of Australian financial services globally, and protects everyday Australians in the process.”

Mr Baum believes that the onus is on industry players, banks, technology providers and the government to ensure real change is enacted.

“I may make myself deeply unpopular for saying this, but that needs to include far tighter compliance, regulation and independent oversight,” the CEO said, adding that Tic:Toc would like to see legislation around data capture, storage and usage within an institutional environment.

“Data is the new cash in a banking environment, yet, other than privacy, there’s limited regulation to guard it in the same way as we do a vault. Plenty of companies are doing the right thing, but until there’s a compliance structure in place, many players, large ones included, will continue to flaunt the guidelines for their own gain.”

Neo Lender Wisr Increases Loan Limits

Wisr is Australia’s only ASX listed marketplace lender and a fintech pioneer in the rapidly growing Australian consumer finance market. The company is is increasing its personal loan limits following increased borrower demand, strong institutional lender support and continued improvement to loan evaluation.

From Australian Broker.

As of this week, Wisr will increase its personal loan limit from $35,000 up to $50,000, with a comparative interest rate up to 5% p.a. lower than the four major banks.

Loans will be available for any worthwhile purpose over three or five years, with a comparison rate of 9.36% p.a. for borrowers with a strong credit rating. The neo-lender also offers no early repayment or exit fees.

Chief executive officer Anthony Nantes said, “We have never been in a stronger position to help more Australians achieve a fairer financial future. During the past six months we’ve seen increasing borrower demand, continued strong support from institutional lenders and improvements to our lending platform.

“[The] announcement means creditworthy Australian borrowers now have more choice, to do bigger, more exciting things, and the opportunity to potentially make significant savings through lower interest rates and lower fees when compared to a personal loan from a traditional big bank.”

The move follows a period of strong personal lending growth for the company. Wisr announced record loan growth earlier this year, with originated loans growing by 42% in FY18 Q3 when compared with the previous quarter. It was the company’s largest quarter in loan originations since it began in 2014.

During the same period the company also announced ongoing improvement to its automated loan evaluation platform. The gross annualised loss rate for the loan book up to the quarter ending 31 March 2018 had also been below 2%.

Next Round In The Payments Wars 2

A joint venture backed by three of Australia’s big four banks has released its first app, with Beem It now available for iOS and Android devices according to a report in Computerworld.

 

The Commonwealth Bank of Australia, National Australia Bank and Westpac in October revealed that they would back Beem It, which the trio said would operate independently and seek to sign up additional partners as it developed cross-platform mobile payment services.

The launch of the joint venture came in the wake of the failure of the three banks, along with Bendigo and Adelaide Bank, to receive Australian Competition and Consumer Commission (ACCC) blessing to act as a cartel when negotiating with Apple over its Apple Pay platform.

More than 50 Australian financial institutions support Apple Pay. However, of the big four, only ANZ supports Apple’s digital wallet for iOS devices.

CBA, NAB, Westpac and Bendigo and Adelaide Bank lodged an application with the ACCC that would have allowed them to band together and negotiate with Apple over a number of issues relating to mobile payments.

A key goal of the banks was to force Apple to open up access to the iPhone’s Near Field Communications (NFC) antenna — which would allow the banks’ own iOS applications to support tap-and-go style payments over NFC.

Apple said in response that it would never open up NFC access.

Beem It allows instant payments between individuals signed up to the service. It can also be used to pay businesses that support Beem It and to split bills.

“We’re excited to bring instant payment technology to all Australians, ensuring that everyone can pay, request and split money via their smartphones, regardless of who they bank with,” Beem It CEO Mark Wood said in a statement.

“Beem It uses real-time banking technology to transfer funds between banks and ensure money doesn’t get in the way of great life moments.”

The service is offering $5 credit as a launch promotion. Beem It has a daily limit of $200 a day for sending money, and $10,000 for receiving money.

Earlier this year Australia’s New Payments Platform has its public launch.

The NPP facilitates real-time payments between banks, as well as additional services such as “data enriched” transactions and PayID, which allows payments to be sent using alternative identifiers instead of BSBs and account numbers.

Sleepwalking Into A Cashless Economy

In Australia, our household surveys also show significant appetite for digital payments, especially via mobile devices, and more than half of households here have not used cash for any transaction in the past month. And its rising. The drive to cashless seems unstoppable.

Yet I got caught out yesterday by the NAB systems failure, which saw their payments and internet banking services wiped out thanks to a power failure in Melbourne. My local garage has a NAB terminal and was unable to process EFTPOS payments. Luckily they had the paper based backup, which took credit cards, for later processing. Then at the local café I could not use person to person digital payments from my mobile – they were only taking cash, so I went to an ATM to find that was not working. Luckily I scraped up the spare cash I had pay for my coffee. An object lesson in frustration, and for some businesses, a loss of business, which granted NAB said they would consider compensating.

And this in the week where Telstra’s whole internet and phone system went down (without an explanation this time – at least they did not blame a lightning strike like the previous episode). And of course CBA’s payment systems had gone down previously.

Reflecting on all this, I am pulled in two directions. I am a fan of a digital migration towards a cashless society, yet it also shows there are potential risks which need to be explored further. In fact, consumers, who prefer digital, might be sleepwalking into future disaster. Time to think harder about the risks of going cashless.

And we are not alone. In some Scandinavian countries, the rush towards a cashless society is also hitting some turbulence. Take Sweden for example. It is one of the most cash-free societies in the world. The proportion of cash payments in the retail sector fell from about 40% in 2010 to about 15% in 2016. Two-thirds of consumers say they completely manage without cash; just as many say they mostly use cards even for payments under $20. More than half the nation’s bank branches no longer take or issue cash. Many stores greet the shopper with notices that they no longer accept hard currency. As a result, the total value of cash payments in the economy has fallen to less than 2% of GDP.

“In the not-too-distant future, Sweden may become a society in which cash is no longer generally accepted,” the Swedish central bank said recently. And in February, the bank warned that Sweden could soon face a situation where all payments were controlled by private sector banks. The Riksbank governor called for new legislation to secure public control over the payments system, arguing that being able to make and receive payments is a “collective good” like defence, the courts, or public statistics.

These comments have brought other concerns about a cash-free society into the mainstream. To put it bluntly, when you have a fully digital system you have no weapon to defend yourself if someone turns it off.

And in addition, no system based on technology is invulnerable to glitches and fraud. In the past year two Swedish banks had problems with card payments and by Bank ID, the digital authorisation system that allows people to identify themselves for payment purposes using their phones.  And in addition every transaction can be tracked and recorded, remember Facebook?

Now, the banks recognise that digital payments can be vulnerable, just like cash but argues that they are no more vulnerable than any other method of payment. And they say, it is being driven by the customer preference for convenient payment alternatives.

A recent opinion poll said almost seven out of 10 Swedes wanted to keep the option to use cash, while just 25% wanted a completely cashless society.

So I think it’s time to reconsider the implications of digital payments, not least because payments can be tracked, digital networks appear vulnerable and with ATMs disappearing, it will be harder to get cash when needed.

Perhaps cash is king, after all.