Category: Digital Disruption

Another Day, Another Data Breach

Reports of data breaches are an increasingly common occurrence. In recent weeks, Ticketmaster, HealthEngine, PageUp and the Tasmanian Electoral Commission have all reported breaches.

It is easy to tune out to what is happening, particularly if it’s not your fault it happened in the first place.

But there are simple steps you can take to minimise the risk of the problem progressing from “identity compromise” to “identity crime”.

In 2012 former FBI Director Robert Mueller famously said:

I am convinced that there are only two types of companies: those that have been hacked and those that will be. And even they are converging into one category: companies that have been hacked and will be hacked again.

The types of personal information compromised might include names, addresses, dates of birth, credit card numbers, email addresses, usernames and passwords.

In some cases, very sensitive details relating to health and sexuality can be stolen.

What’s the worst that can happen?

In most cases, offenders are looking to gain money. But it’s important to differentiate between identity compromise and identity misuse.

Identity compromise is when your personal details are stolen, but no further action is taken. Identity misuse is more serious. That’s when your personal details are not only breached but are then used to perpetrate fraud, theft or other crimes.

Offenders might withdraw money from your accounts, open up new lines of credit or purchase new services in your name, or port your telecommunication services to another carrier. In worst case scenarios, victims of identity crime might be accused of a crime perpetrated by someone else.

The Australian government estimates that 5% of Australians (approximately 970,000 people) will lose money each year through identity crime, costing at least $2.2 billion annually. And it’s not always reported, so that’s likely a conservative estimate.

While millions of people are exposed to identity compromise, far fewer will actually experience identity misuse.

But identity crime can be a devastating and traumatic event. Victims spend an average of 18 hours repairing the damage and seeking to restore their identity.

It can be very difficult and cumbersome for a person to prove that any actions taken were not of their own doing.

How will I know I’ve been hacked?

Many victims of identity misuse do not realise until they start to receive bills for credit cards or services they don’t recognise, or are denied credit for a loan.

The organisations who hold your data often don’t realise they have been compromised for days, weeks or even months.

And when hacks do happen, organisations don’t always tell you upfront. The introduction of mandatory data breach notification laws in Australia is a positive step toward making potential victims aware of a data compromise, giving them the power to take action to protect themselves.

What can I do to keep safe?

Most data breaches will not reveal your entire identity but rather expose partial details. However, motivated offenders can use these details to obtain further information.

These offenders view your personal information as a commodity that can be bought, sold and traded in for financial reward, so it makes sense to protect it in the same way you would your money.

Here are some precautionary measures you can take to reduce the risks:

  • Always use strong and unique passwords. Many of us reuse passwords across multiple platforms, which means that when one is breached, offenders can access multiple accounts. Consider using a password manager.
  • Set up two-factor authentication where possible on all of your accounts.
  • Think about the information that you share and how it could be pieced together to form a holistic picture of you. For example, don’t use your mother’s maiden name as your personal security question if your entire family tree is available on a genealogy website.

And here’s what to do if you think you have been caught up in a data breach:

  • Change passwords on any account that’s been hacked, and on any other account using the same password.
  • Tell the relevant organisation what has happened. For example, if your credit card details have been compromised, you should contact your bank to cancel the card.
  • Report any financial losses to the Australian Cybercrime Online Reporting Network.
  • Check all your financial accounts and consider getting a copy of your credit report via Equifax, D&B or Experian. You can also put an alert on your name to prevent any future losses.
  • Be alert to any phishing emails. Offenders use creative methods to trick you into handing over personal information that helps them build a fuller profile of you.
  • If your email or social media accounts have been compromised, let your contacts know. They might also be targeted by an offender pretending to be you.
  • You can access personalised support at iDcare, the national support centre for identity crime in Australia and New Zealand.

The vast number of data breaches happening in the world makes it easy to tune them out. But it is important to acknowledge the reality of identity compromise. That’s not to say you need to swear off social media and never fill out an online form. Being aware of the risks and how to best to reduce them is an important step toward protecting yourself.

For further information about identity crime you can consult ACORN, Scamwatch, or the Office of the Australian Information Commissioner.

If you are experiencing any distress as a result of identity crime, please contact Lifeline.

Author: Cassandra Cross Senior Lecturer in Criminology, Queensland University of Technology

Credit Card Compare Acquires Singaporean Financial Marketplace Finty

Australia’s largest credit card comparison website, Credit Card Compare
(CCC) announced a seven-figure investment to acquire Singapore’s first rewards-based financial comparison marketplace, Finty.

Credit Card Compare Co-Founder and CEO, David Boyd says that by acquiring Finty, it allows Credit Card Compare to establish its presence in Asia.

“We want to get off the island. Singapore is the natural gateway to the fast-growing ASEAN region where GDP growth outpaces here in Australia. This acquisition is a key plank in our company’s growth strategy,” said David.

“This acquisition allows us to build upon a successful business which dovetails with our own vision for a comparison service that makes financial decisions easier, more rewarding, and, ultimately, more fun.”

Finty Rewards, the innovative cash rewards program unique to Finty in Singapore, pays out cash on a revenue sharing model to customers when they apply for credit cards and personal loans via the Finty website.

Since its launch in April 2017, Finty has made strong inroads into the credit card and personal loan space in Singapore, having developed strong relationships with key banking partners despite operating in the highly competitive financial services comparison space.

“This deal is the culmination of months of work. The Finty team has built a great business in a short time, overcoming challenges and building their brand along the way. They are an extremely dynamic, hard-working, and smart team. We are delighted to be working with them as we expand into Asia.”

“We are excited to work with new banks and brands, and to continue building on our existing relationships with international partners including American Express, HSBC, and Citi.”

Co-Founder and Managing Director of Finty, Kwok Zhong Li, said that by partnering with Credit Card Compare, the Finty brand will be better positioned to thrive in Singapore. Together with Credit Card Compare, we now have more resources, manpower and expertise to thrive in Singapore while making a strong entrance into other countries,” Zhong Li said.

“Finty makes financial decisions simple, enjoyable, and rewarding. It’s the first financial marketplace in Singapore to offer cash rewards based on a revenue sharing model.”

Credit Card Compare is currently the largest comparison site in Australia dedicated to credit cards, where more than two million consumers have used its marketplace in the last 12 months to compare and apply for a credit card.

“At Credit Card Compare, our mission is to connect Australians with credit cards that will improve their financial lives. Comparing cards can be a daunting task, however we have developed a platform that easy to use with the best offers in the market.

Credit Card Compare is Australia’s largest comparison site designed exclusively to help Australian consumers compare, research, and apply for credit cards. We help millions of Australians confidently select the most suitable credit card for their lifestyle and financial needs. Founded in 2008 by brothers David and Andrew Boyd, Credit Card Compare remains independently co-owned by the two original founders to this day. It features data, calculators, tools and reports on 200+ cards from Australia’s largest banks and credit unions, and maintains a prime online ranking and share of voice in one of Australia’s most competitive online fields: comparison sites.

Finty  is Singapore’s first rewards-based financial comparison marketplace that makes financial decisions simple, enjoyable and rewarding. Finty offers cash rewards based on revenue sharing and the online platform uses a proprietary predictive model to determine the value of cash rewards for customers when they apply for a range of credit cards and personal loans from major bank partners.

Kabbage Reaches a New Milestone of $5 Billion of Funding to Small Businesses In US

Very interesting release from Kabbage, highlights the growth of lending to small business online, and outside banking hours. Another example of the digital revolution well underway. 24/7 access rules…!

ATLANTA – June 28, 2018 – Kabbage, Inc., a global financial services, technology and data platform serving small businesses, reports its 145,000-plus small business customers accessed over 300,000 loans during non-banking hours, reaching a record total of more than $1 billion in funding. In total, Kabbage has now provided access to more than $5 billion in funding to its customers across America. The non-banking hour analysis illustrates how Kabbage’s fully automated lending solutions remove the age-old hurdle of normal business hours by offering companies 24/7 access to working capital online.

“The findings illuminate the true around-the-clock nature of business owners,” said Kabbage CEO, Rob Frohwein. “While we wish small business owners could reclaim their nights and weekends, we built Kabbage to allow business owners to access funds on schedules convenient to them, not us.”

Economic Impact of $5 Billion

A new report from the Electronics Transactions Association (ETA), in partnership with NDP Analytics, a Washington, D.C.-based economic research firm, finds that for every $1 provided to small businesses via online lending platforms, including Kabbage, results in $3.79 in gross output in local communities. The study provides context to how the new milestone of $5 billion provided through Kabbage has helped to stimulate the U.S. economy.

After-Hours Lending on the Rise

The total number of dollars accessed through Kabbage outside of typical banking hours increased more than 6,000 percent between 2011 and 2018. The growth illustrates small business owners are increasingly comfortable accessing capital online, and they rely on the convenience of managing cash flow needs any time of day, particularly outside of open business hours for most banks. Non-banking hours in this analysis represents the local time between 6 p.m. and 6 a.m. on the weekdays, and the full 48 hours over the weekends.

Weekday vs. Weekend Lending

The majority of after-hour lending (64 percent) was accessed during the work week, totaling $754 million. The remaining 36 percent occurred on Saturdays and Sundays, totaling $429 million. The data is a nod to the dedication of business owners as more than one-third extend their work weeks to handle cash flow needs even on the weekends.

About Kabbage

Kabbage, Inc., headquartered in Atlanta, has pioneered a financial services data and technology platform to provide access to automated funding to small businesses in minutes. Kabbage leverages data generated through business activity such as accounting data, online sales, shipping and dozens of other sources to understand performance and deliver fast, flexible funding in real time. With the largest international network of global-bank partnerships for an online lending platform, Kabbage powers small business lending for large banks, including ING and Santander, across Spain, the U.K., Italy and France and more. Kabbage is funded and backed by leading investors, including SoftBank Group Corp., BlueRun Ventures, Mohr Davidow Ventures, Thomvest Ventures, SoftBank Capital, Reverence Capital Partners, the UPS Strategic Enterprise Fund, ING, Santander InnoVentures, Scotiabank and TCW/Craton. All Kabbage U.S.-based loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC. For more information, please visit www.kabbage.com.

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.”