Category: Digital Disruption

Trustees Australia announces fintech merger

From InvestorDaily.

Fintech marketplace operator Cashwerkz has merged with Trustees Australia to create a platform that aims to disrupt the fixed interest investment sector.

According to the companies, the merger helps bring together Trustees Australia’s funds under management with Cashwerkz’s distribution platform to serve retail customers, the financial planning industry, superannuation funds, councils and other entities that are looking to invest large cash balances.

It is hoped the merged companies will allow Australian fixed income investors “to find the best term deposit and fixed income solutions to match their investment criteria and to simultaneously and seamlessly transact term deposits online between banks and buy/sell fixed interest securities, such as small parcel bonds, with or without the involvement of intermediaries”.

The merged platform will enable those seeking a term deposit or a related cash product to access Cashwerkz’s marketplace for cash. It will offer consumers a wider choice of ADIs, including access to regional ADIs such as smaller banks, credit unions and building societies. Likewise, it will offer regional ADIs and smaller banks access to a huge number of potential new consumers.

Brook Adcock, chairman of Adcock Private Equity, the company behind Cashwerkz, commented, “While some incumbents are keen to use the cost and difficulties associated with compliance of cash investments to ‘own’ their clients, consumers in many markets are now empowered by technology to break those compliance shackles and access better deals.

“There is an enormous opportunity to scale the business by expanding into the (before now), too granular and untapped retail market, the up-until-now paper-based middle-market, and the before-now too-time-consuming IFA market.”

Cashwerkz says it aims to expand into new products such as cash management accounts, high interest savings accounts, annuities and bonds.

Further, by retaining its custodial licence, the entity, listed under Trustees Australia, can offer custodial services to small and medium third parties, which it has identified as a gap in the market.

Data akin to deregulation on disruption scale

From InvestorDaily.

Digital trends and the increasing sanctity of data will be as disruptive a force on the provision of financial services in the years ahead as deregulation was in the 1980s, says CommInsure.

In a forward-looking article penned for InvestorDaily sister title ifa magazine, CommInsure head of life product and strategy Franco Crapis drew parallels between the impact of deregulation under the Hawke and Keating federal governments and the disruptive trends of the digital age, with a specific focus on the life insurance business.

“In the 1970s and before deregulation, the insurance industry was heavily concentrated, with the five largest life insurance firms accounting for more than 85 per cent of premium income,” Mr Crapis said.

“While the term disruption wasn’t as common, the legislative and economic events that took place at that time to open up the financial markets to competition definitely resulted in greater convenience and choice for customers. [This is] the desired outcome of disruption, after all.”

Use of data and digital technology in the current climate are likely to create similar disruption leading to greater competition in the insurance and financial services sector, Mr Crapis predicted.

“In years to come, we will look back and see this was the time for evolution. It will be the period when data provided the industry new ways to offer life insurance and digital provided customers new ways to consume it,” he wrote.

“Insurance providers will be impacted in ways not dissimilar to the demographic trends changing other parts of the financial services industry.”

The article singles out the emergence of P2P and crowdfunding-enabled models within the insurance market, suggesting significant changes in the customer experience of insurance policyholders.

“The prudent use of digital channels coupled with data analytics is tapping into unmet consumer needs through convenient and hassle-free technology, while increasing product choices and adding transparency to the customer service experience,” Mr Crapis wrote. “It is these trends that insurers need to be aware of and find new ways to deliver to.”

Equities markets are also likely to be affected by digital trends, evidenced by the appetite for tech start-up investment by Millennial investors who instinctively understand this economic sector, he said.

Bitcoin Surges Above $900 on Geopolitical Risks, Fed Tightening

From Bloomberg.

Bitcoin headed for its biggest weekly jump since June as rising geopolitical risks boosted demand for alternative assets.

The cryptocurrency surged 15 percent this week to $900.40 as of 2:38 p.m. in Hong Kong, taking its gain this year to 107 percent, data compiled by Bloomberg show. The last time it was at such levels was in January 2014, when bitcoin was tumbling from its record price of $1,137 following the implosion of the MtGox exchange and tightening Chinese controls.

 

Bitcoin is extending a rally that’s beaten every major currency, stock index and commodity contract in 2016. Buyers sought alternative assets this week amid the killing of Russia’s envoy to Turkey and a separate attack that left 12 people dead in Berlin. Weakening pressure on the yuan, which intensified this month as the U.S. projected a faster pace of tightening next year following Donald Trump’s election win, is also increasing demand for bitcoin in China, where the majority of trading occurs.

“Terrorist attacks in Europe boosted haven demand in capital markets, and gold has been falling since Trump was elected,” said Le Xiaotian, an analyst at Huobi, a Chinese exchange. “Global instability has to a large extent directed funds to the bitcoin market.”

Bitcoin, which trades in cyberspace and is mined by code-cracking computers, is gaining popularity among some investors as an alternative safe haven because it’s deemed to be less influenced by government regulations and changes to monetary policy. Gold, which tends to trade in tandem with bitcoin when haven demand is strong, has fallen this quarter as U.S. rates rise, narrowing its premium over bitcoin to the least in three years.

“The Fed’s rate hike announcement has probably spooked a lot of emerging-market investors, particularly those in China, who are now flocking to bitcoin as a refuge from weak fiat currency assets,” said Thomas Glucksmann, head of marketing at Gatecoin Ltd. in Hong Kong. “As we’ve passed the $800 bitcoin price, a strong resistance point in the past, and move closer towards the psychological $1000 stratosphere, anything seems possible.”

REST’s ‘mobile first’ industry-first online super advice platform launched

From Australian FinTech.

REST Industry Super became the first Australian super fund to provide its 1.9 million members with ‘mobile first’ access to personalised financial advice with the launch of the REST Advice Online platform.

REST Advice Online is delivered on Midwinter’s next generation Advice Operating System (AdviceOS) and provides REST members with the ability to receive instant financial advice and make immediate changes to their super account from any mobile device.

The innovative new platform also provides live webchat and over-the-phone support from qualified advice specialists with REST. Importantly the offering is linked to the REST member’s account to enable secure straight-through processing so members can make changes to their super quickly and easily.

The digital advice offering leverages Midwinter’s Digital Advice technology which means that regardless of which method REST members choose to receive advice (phone based, web chat or self-service), it is delivered, recorded and processed from the same integrated advice system.

REST Industry Super CEO Damian Hill said that the new digital advice platform offers user friendly and convenient access to financial advice that is personalised to each member’s unique needs.

“For many Australians, investing can be a daunting task and superannuation, which is an important long-term investment, is no exception. REST Advice Online allows members to make an informed decision about how they’d like to invest their money and grow their retirement savings with confidence.

“Importantly it allows REST members to seek financial advice on their own terms in a way and at a time that best suits them – on their mobile device, via our website or over the phone.”

REST’s new Advice Online service is supported by bespoke technology enabling REST members to explore their options for simple advice related issues and receive an emailed statement of advice after being asked a series of questions and prompts about their circumstances.

Managing Director of Midwinter Julian Plummer said there is now a generation of members who don’t necessarily want the first point of advice contact to be a face to face pitch, especially if it is for simple strategies. “Members want to experience the value of advice digitally in a way that is non-threatening and is instantly accessible.

“For REST to be able to provide this digital advice at no additional charge to its members is a leap forward because they are meeting individuals where they typically spend a lot of their time – on their smart phone or device.”

Initially the new service will help members choose an appropriate investment option and will be expanded over time to encompass a range of advice options across more channels. Mr Hill said, “As custodians of Australians retirement savings we have an obligation to ensure our members are as financially prepared for retirement as possible – introducing REST Advice Online ensures we’re able to provide personalised financial advice at no additional charge to every one of our members.”

SocietyOne hits $200m milestone

According to Australian Fintech, SocietyOne, Australia’s marketplace lender, has achieved another key milestone after breaking through the $200 million lending mark.

The last three months of the 2016 calendar year have witnessed the strongest growth in the company’s four-year history with an additional $50 million of lending made between the first weeks of September and mid-December. November saw a record month of more than $15.3 million in lending.

That took the total amount of lending made by SocietyOne to just over $200 million since inception of which $126 million – nearly two-thirds of the total – has been recorded in 2016 alone, said Jason Yetton, SocietyOne’s Managing Director and Chief Executive Officer.

The year had seen strong demand from both borrowers of personal loans and investors with every dollar lent matched by a dollar in funding from wholesale investors such as life companies, mutual banks, credit unions, SMSFs and high net worth individuals through SocietyOne’s digital auction marketplace. The total number of investor funders has now grown to 280 since the company started lending in August 2012.

“2016 has been a milestone year for several reasons, not least for the fact of us reaching a total of $200 million in lending which makes us the clear leader in marketplace lending for consumer finance in Australia,” said Mr Yetton.

“Having started the year with $70 million of originated loans since we commenced in August 2012, we have virtually tripled that amount in the last 12 months with an additional $126 million of lending to our personal loans and agri-lending customers. This is a real testament to the vision of the company’s co-founders, Greg Symons and Matt Symons, and the hard work of everyone at SocietyOne.

“We are now looking forward to an even better year to come in 2017 as the opportunity opens up for us to mount a real challenge to the big four banks in the $20 billion personal loan market and the wider $100 billion consumer finance market. This is part of our goals to achieve a 2-3 per cent share of the consumer finance market by 2021 and helping over 100,000 Australians to get a better deal.”

Mr Yetton’s comments came as SocietyOne released its latest performance figures, which show:

  • An acceleration in quarterly lending in the three months to December. SocietyOne topped $100 million in total originated loans in early-April this year, up from $70 million at the start of January, and then reached $150 million in early-September;
  • Available funding from investors for borrower customers has averaged $22 million a month for the past six months;
  • The effective annualised rate of return across the company’s portfolio of two year, three year and five year personal loans has averaged 10.66% p.a. between January 2014 and the end of November 2016(a) ;
  • The number of borrower customer accounts has grown by a further 1,800 since August 2016 to now stand at 7,800 at December;
  • Default rates of the personal loan portfolio as at the end of November 2016 were 1.1% compared to a sector average of 2-3%.

“The momentum we saw in the first half of the year has increased in the second half following our successful national TV brand campaign that was launched during the Rio Olympic Games on Channel 7,” added Mr Yetton.

“Hundreds of thousands of Australians have been empowered with their personal credit information through getcreditscore.com.au and are now aware that they can get personal loans tailored to their individual circumstances without having to turn to their major bank. Since June, the number of Australians who have obtained their credit score has risen by nearly 450,000 to 800,000 now.

“At the same they are also discovering that there is a better, trusted alternative to the one-size-fits all, higher comparison interest rates the traditional big banks offer.

“That alternative now includes even better reasons for customers to tackle the financial issues that matter to them, whether it’s consolidating credit card debt, renovating their home, buying a car, taking that well-deserved holiday, paying for the wedding of their dreams or covering off those ever-increasing school fees.

“We’re now offering interest rates that are up to 1.4 percentage points lower than our previously publicised rates as we look to help out Australians at what is arguably the most expensive time of the year as Christmas, the summer holidays and back to school come together in one huge spending moment.

“We are also responding to borrower demand by increasing the limit available on our personal loans from $35,000 to $50,000 which will give our customers the financial flexibility they are looking for.”

Mr Yetton also announced two changes to SocietyOne’s management team with the appointment of Maria Loyez as the company’s new Chief Marketing Officer and the resignation of Company Secretary Jerry Yohananov.

Omnichannel, not omnishambles

Good article from McKinsey on the problem of multi-channel strategy within banking. Although, I do not think they take the argument far enough. We need now to develop a “Mobile First” strategy for banking. Omnichannel is not good enough now.

Although consumers have quickly adopted digital channels for both service and sales, they aren’t abandoning traditional retail stores and call centers in their interactions with companies. Increasingly, customers expect “omnichannel” convenience that allows them to start a journey in one channel (say, a mobile app) and end it in another (by picking up the purchase in a store).

For companies, the challenge is to provide high-quality service from end to end, regardless of where the ends might be. That was the case for a regional bank that sensed that too many customers were falling into gaps between channels.

Mapping its customers’ journeys confirmed the suspicions (exhibit). Four out of five potential loan customers visited the bank’s website, but from there, their paths diverged as they sought different ways to have their questions answered. About 20 percent stayed online, another 20 percent phoned a call center, and 15 percent visited a branch, with the remainder leaving the process.

Exhibit
Mapping customer flows highlights pain points.

The channels’ differing performance pointed to specific problems. Ultimately, more than one-fifth of customers who visited a branch ended up getting loans. But in the online channel, less than 1 percent got a loan after almost 80 percent dropped out rather than fill in a registration form. Finally, in call centers, a mere one-tenth of 1 percent of customers received a loan—perhaps not surprising, since only 2 percent even requested an offer.

To integrate digital and traditional channels more effectively, the bank had to become more agile, with the understanding that its one-size-fits-most processes would no longer work. Complex registration forms were simplified and tailored to different types of customers. Revised policies clarified which channel took the lead when customers moved between channels. And new links between the website and the call centers enabled agents to follow up when online customers left a form incomplete. Together, these types of changes helped increase sales of current-account and personal-loan products by more than 25 percent across all channels.

 

ASIC releases world-first licensing exemption for fintech businesses

ASIC has today released class waivers to allow eligible financial technology (fintech) businesses to test certain specified services without holding an Australian financial services or credit licence.

ASIC Commissioner John Price said, ‘ASIC’s ‘fintech licensing exemption’ is unique. No other major jurisdiction has implemented a class waiver which allows eligible businesses to notify the regulator and then commence testing without an individual application process.’

ASIC has also released Regulatory Guide 257 Testing fintech products and services without holding an AFS or credit licence (RG 257), which contains information about Australia’s ‘regulatory sandbox’ framework.

That framework is comprised of:

  • existing flexibility in the regulatory framework or exemptions already provided by the law or ASIC which mean that a licence is not required. Examples include existing ASIC relief for non-cash payment products like stored value cards and regulations meaning that a licence is often not required for certain foreign exchange services;
  • ASIC’s fintech licensing exemption provided under ASIC Corporations (Concept Validation Licensing Exemption) Instrument 2016/1175 and ASIC Credit (Concept Validation Licensing Exemption) Instrument 2016/1176
  • tailored, individual licensing exemptions from ASIC to facilitate product or service testing – individual exemptions of this nature are similar to the ‘regulatory sandbox’ frameworks established by financial services regulators in other jurisdictions.

ASIC Commissioner John Price said, ‘Fintech and start-up businesses now have more pathways than ever to begin testing the viability of innovative financial services and credit services consumers, before incurring many of the regulatory costs normally associated with running their business.’

Fintech licensing exemption

ASIC’s fintech licensing exemption allows eligible businesses to test specified services for up to 12 months with up to 100 retail clients, provided they also meet certain consumer protection conditions and notify ASIC before they commence the business.

‘ASIC’s fintech licensing exemption reflects our commitment to facilitating innovation in financial services. However, we are equally committed to ensuring that innovative products and services are regulated appropriately and promote good consumer outcomes,’ Mr Price said.

The fintech licensing exemption was initially proposed in Consultation Paper 260 Further measures to facilitate innovation in financial services (CP 260). ASIC has amended its proposal in light of the feedback received, including extending the testing period and expanding the products in relation to which services can be tested.

Information about the services covered by the fintech licensing exemption, is available in an ASIC infographic, as well as in RG 257.

Businesses that are not eligible for the fintech licensing exemption are able to seek an individual exemption. ASIC’s policy on exemptions is available in Regulatory Guide 51 Applications for relief (RG 51).

‘Individual applications are an important part of Australia’s regulatory sandbox framework,’ Mr Price said. ‘For instance, this option is open to existing licensees who wish to test an innovative product or service and comply with a modified version of the law.’

Other measures to facilitate innovation

ASIC has today also released updated guidance to licensees on satisfying the requirements to maintain competence in Regulatory Guide 105 Licensing: Organisational competence (RG 105) and Regulatory Guide 206 Credit licensing – Competence and training (RG 206). These updates are also based on feedback received to proposals in CP 260.

The updated guidance in RG 105 provides greater flexibility for some ‘small-scale, heavily automated businesses’ seeking to nominate a responsible manager. These businesses may now nominate a responsible manager without day-to-day involvement in the business to provide regular sign-off on the licensee’s processes and systems and the quality of financial services provided.

RG 105 has also been updated to include six examples to help illustrate the how we assess submissions about a responsible manager’s knowledge and skills under Option 5 of RG 105.

Mr Price said, ‘These are important updates to our licensing regime which take into account the circumstances of new innovative businesses and facilitate these businesses to meet the organisational competence requirements in alternative ways.’

Download

Regulatory Guide 257 Testing fintech products and services without holding an AFS or credit licence

Reckon Loans Has Funded Over $1million to SME’s

From Australian Fintech

Australian cloud accounting software provider Reckon has announced its new Reckon Loans (powered by Prospa) platform has funded over $1million to small businesses, proving the online lending market is growing at an extraordinary pace.

In partnership with Prospa, Australia’s leading online lender to small businesses, Reckon Loans provides SME’s a fast and simple service with approvals and funding of loans from $5,000 to $250,000 available within one business day.

Reckon Group COO Dan Rabie said Reckon Loans is a disrupter in the fintech space, adding diversity and removing the red tape from the small-business loans market.

“This is a significant milestone for our business and clearly shows there’s a need for a faster and friendlier service than the banks are providing. We can access accounting data through the Reckon One platform to look at the overall health of a business, not just personal credit scores.

“There are 400,000 small businesses needing cashflow financing each year which is the highest ranked pain point that keeps small business owners up at night. This issue isn’t being served well by traditional lending sources, so we took a brave step to help the engine room of our economy thrive,” he said.

Beau Bertoli, Joint CEO of Prospa said the success of Reckon Loans was yet another proof point that small businesses want easy access to capital.

“Reckon Loans powered by Prospa is a partnership between two trusted brands. Together we’ve been able to offer business owners a customised approach to access working capital and grow their business.

“Customer feedback has been incredibly positive. To reach this figure in such a short space of time means we’re having a major impact.”

“We’re optimistic about the future. As the market leader, we’ll continue to invest heavily in developing deeper integrations to improve the partnership and customer journey,” Beau Bertoli said.

Owner of thriving WA day spa, Simply Beautiful Hair and Beauty, Suzanne Flanders, required cash flow to expand her business and after evaluating her options, she shunned the big banks and applied for a small business loan from Reckon Loans.

“I’m not a clairvoyant and don’t have the time to spend away from the business creating forecasts, and usually the banks ask you to reassess and re-submit all the paperwork. The Reckon process was a breeze and as a result of having quick access to finance I’ve been able to successfully grow,” she said.

In addition to the launch of Reckon Loans, the company has several high-growth opportunities that will move the needle of innovation forward, making it easier for SME’s to succeed.

“We’ve developed a smarter breed of online accounting software with the Reckon One platform that’s designed to disrupt high margin incumbents through a game-changing pricing model. Integrations with Reckon Loans within our core product will ensure we are providing our customers with the ultimate in responsive, agile lending,” said Rabie.

NAB to launch API Developer Portal

National Australia Bank (NAB) says it will become the first major Australian bank to launch an Application Programming Interface (API) Developer Portal as part of its commitment to improving customer experiences through collaboration.

The portal, which will go live before Christmas, will make selected NAB APIs publicly available to allow third party developers to connect to select sets of NAB data.

The developer portal will begin as a closed beta with NAB approving a small number of developers to take part in the initial concept, before running an open beta more broadly early next year.

The platform will start with two NAB APIs which will host data relating to NAB branch and ATM locations and NAB foreign exchange rates.

Developers approved to take part in the beta will be able to plug into the NAB data for testing and possible integration to their own systems (websites or mobile apps, etc).

NAB Chief Operating Officer Antony Cahill said: “We have invested in our technology and built a rich source of APIs that we have been using for both internal purposes and external partnerships to leverage capabilities and deliver better experiences for our customers.

“With the rise of the digital age and evolving customer expectations, APIs have become core to banking infrastructure to enable rapid deployment of various functions across multiple channels to meet those customer needs and quickly keep pace as those needs evolve.

“Our API strategy is based on three key streams of customer enablement, partnership arrangements and open API categorisation which this portal will be an integral part of.

“We are collaborating with a number of partners to both provide and receive data leveraging API technology including Xero, MYOB and VISA. We want to keep building our ecosystem with likeminded organisations to allow us opportunities to innovate and improve our experiences for customers,” he said.

NAB started using API technology in 2013 with the NAB Flik product (now Pay to Mobile in the new NAB mobile banking app) and has continued to evolve, with the new mobile banking platform rebuilt on our strategic API architecture and the establishment of numerous partnerships to both provide and receive data using APIs.

What is an API?

Application Programming Interfaces (API), allow the exposure of new and existing functionality from core systems within organisations. This in turn enables others (internal or external – depending on access) to place these features in their websites or mobile apps.

How does the NAB Developer Portal (closed beta) work?

NAB will provide two sets of open API data (branch and ATM locations and FX rates). For the closed beta, NAB will approve a small handful of developers to test and learn with, before opening the beta to further third parties early in the New Year. All participants will be vetted by NAB to meet our security standards.

Apple blocks Samsung pay app for iPhones

From IT Wire.

Apple has refused a Samsung pay app for iOS a place in its App Store, according to a report in the South Korean publication, The Economic Times.

Samsung had planned to introduce the app, Samsung Mini Pay, from January and getting it into the app store was the first step in the process.

Samsung had completed testing of the app with some South Korean credit card companies but when it applied for registering the app it received a notice of rejection, the newspaper reported.

No reason was given for the rejection, but the newspaper speculated that it was possible that the app had not met Apple’s policies on security and regulations.

It said Samsung had now decided not to go ahead with the app, and instead concentrate on the Android market with its Samsung Pay app instead.The paper quoted a Samsung Electronics representative as saying, “After Apple rejected registration of Samsung Pay Mini onto its app store, we have decided to focus on Smartphones with Android OS.”

Apple is apparently thinking of launching its own Apple Pay app in South Korea in the first half of 2017, the paper said, adding that the company’s representatives had not provided any indication if this was so when asked.

Samsung Pay, which was launched in August, has so far been used in nine countries. Samsung Pay Mini has been in development for more than a year.