Under-the-radar Wilmington fintech companies burst onto consumer credit scene

Under-the-radar Wilmington fintech companies burst onto consumer credit scene

WochitAs Wilmington struggles with violent crime and vacancies in offices buildings, a band of high-tech entrepreneurs, many of whom left jobs with big banks, are bringing in millions of dollars to the city's financial technology, or fintech, scene.One is Fair Square Financial, which last week snagged a $100 million investment from Vikram Pandit, the former CEO of Citigroup.It's an infusion of cash that the online credit card company says will allow it to expand beyond its downtown co-working space this year while doubling its workforce to 100 employees during the next two years.The expansion decision is the result of surprisingly strong customer demand for its online-serviced, low-fee Ollo cards, Fair Square CEO Rob Habgood said. The credit cards carry a variable interest rate that currently sits at a lofty 24.99 percent. Their high demand emerged as the company last year secured a $200 million private equity investment as well as a nearly $800,000 grant from the state of Delaware."It does take a substantial investment to build out a credit card company from scratch," said Hapgood, who spent two decades in the credit card industry and at Bank of America and Capital One.With machine-learning algorithms and access to big data sources, Fair Square and its brethren of similarly situated early-stage companies are carving out a niche in the Delaware lending industry, even as credit card operations at Wilmington's largest banks have declined or stagnated. "Who wants to work for these large, regulated banks anymore where you can't do interesting things?" asked Sabrina Basht, chief strategy officer at Marlette Funding, a Fairfax-based company that offers online fixed-rate, lump-sum consumer loans."A lot of people like ourselves. Without state laws limiting interest rates, MBNA and other massive financial institutions hired thousands of Delawareans for their credit card businesses.  A decline began in 2005 when Bank of America purchased MBNA when it had over 10,000 Delaware employees. While Bank of America doesn't reveal the size of its Delaware workforce, thousands suffered layoffs or were transferred in subsequent years. A possibility that Delaware fintechs could fill a credit card job gap first began to emerge last year when SoFi, a San Francisco-based online provider of personal loans, announced it would add 400 workers to its Claymont office by the end of 2018. Also, last year, a Wilmington-based online student lender, College Avenue, announced it had received a $30 million venture capital investment.Then, in March, Marlette Funding told The News Journal that it would nearly double its Delaware workforce to more than 200 employees.Like Fair Square, the company uses machine-learning algorithms to determine if borrowers are creditworthy for its loans.Unlike Fair Square, Marlette says it is profitable.Buy PhotoMarlette is one of various financial technology companies in Delaware that anticipate growth by carving out a niche using new technologies and online servicing in the consumer lending market. (Photo: Jennifer Corbett, The News Journal)The company, which lends money through the website Best Egg, says it took in a net income of $11 million in 2017. They are companies that are really substantial."Even the once-controversial Delaware Board of Trade, which has yet to meet employment promises it made before receiving $3 million from taxpayers in 2016, sold in December a 27 percent stake of the company to Beijing-based Seven Stars Cloud Group – a transaction likely worth more than $6 million.While the millions of dollars flowing to Wilmington is positive for what has been a volatile Delaware job market, consumer credit analyst Sanjay Sakhrani said it still is uncertain whether the state's cluster of fintechs will be able to survive a future economic downturn. "We're in a pretty good part of the cycle right now, and so there might be opportunities to fund and, obviously, receive funding," said Sakhrani, who works for the Manhattan-based investment bank Keefe, Bruyette, & Woods Inc. "The issue comes when things aren't as good because then there are a lot more jitters in the marketplace." There are opportunities in niche areas, he added, but Delaware's fintechs could struggle to capture market share in core consumer lending areas where big banks are dominant.Other New York-based analysts, not including Sakhrani, have predicted that the consumer credit market is, in fact, headed for a downturn as interest rates have begun to climb above historic lows that have persisted since the end of the Great Recession.  CLOSE The resignation of Citigroup CEO Vikram Pandit comes after an extraordinary period in which he helped the bank emerge from government conservatorship. (Oct. 16) Still, Pandit, who led Citigroup through the tumultuous years of the Great Recession until being ousted in 2011, is bullish about Fair Square, saying in a statement that the company is beefing up the credit card business "with the latest data and machine-learning technology."Pandit and two other executives connected with his investment firm, the Orogen Group, now are members of Fair Square's board of directors. Are credit scores accurate?Hapgood argues that his company is well-positioned to ride out a future economic dip, noting that his team of executives, on average, have decades of credit card experience."There's a lot of understanding of how the credit card market performs through different credit cycles and how to structure our business to be resilient," he said. “We are developing machine-learning models for both the targeted marketing and the underwriting stages of our business.”While his company aims loans at traditionally sub-optimal borrowers, with credit ratings in the 600s to low-700s, Habgood doesn’t think a financial score is always an accurate gauge of a customer's potential value. "It's an imperfect score. 202 from Fair Square's headquarters, Marlette Funding also does not have depositors supplying its loan funds.The company uses its underwriting platforms and its credit return models to loan money obtained from big investors, such as hedge-funds and medium-size banks, company CEO Jeffrey Meiler said.The loans are then sold off to other banks, but still are serviced by Marlette, he said.“We are not a bank," Meiler said. “We use institutional investors to lend money to consumers."Yet, it is the lack of a security that customer deposits provide that causes Sakhrani, the consumer finance analyst, to question in part the staying power of many fin-tech startups.Whether investors will continue to see companies, like Marlette and Fair Square, as a profitable place to put money, even during rough economic times, is unclear, he said."In fairness, there's a little bit of a vacuum in that space because … the larger card issuers are now relying more on deposits so there is an appetite," Sakhrani said.Meiler said the industry has evolved since the Great Recession.

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3 Fascinating Companies Using AI to Forge New Advances in Healthcare

3 Fascinating Companies Using AI to Forge New Advances in Healthcare

According to BTAI this approach uses "existing approved drugs and/or clinically validated product candidates together with big data and proprietary machine learning algorithms to identify new therapeutic indices." Everything you need to know about retirement via TheStreet. The advantage is twofold: "The potential to reduce the cost and time of drug development in diseases with substantial unmet medical need," says BioXcel. Indeed, we are talking $50 – 100 million of the cost (over $2 billion) typically associated with the development of novel drugs. The stock has received five buy ratings in the last three months with an average price target of $20.40 (115% upside potential). "Unlocking efficiency in drug development" is how H.C Wainwright analyst Ram Selvaraju describes Bioxcel's drug repurposing and repositioning. "The approach BioXcel Therapeutics is taking has been validated in recent years by the advent of several repurposed products that have gone on to become blockbuster franchises (>$1 billion in annual sales)." However, he adds that "we are not currently aware of many other firms that are utilizing a systematic AI-based approach to drug development, and certainly none with the benefit of the prior track record that BioXcel Therapeutics' parent company, BioXcel Corp., possesses." Microsoft Corp. According to Eric Horvitz, head of Microsoft Research's Global Labs, "AI-based applications could improve health outcomes and the quality of life for millions of people in the coming years." So it's not surprising that Microsoft is seeking to stay ahead of the curve with its own Healthcare NExT initiative, launched in 2017. The goal of Healthcare NExT is to accelerate healthcare innovation through artificial intelligence and cloud computing. AI has the potential to do everything from predicting readmissions, cutting human error and managing epidemics to assisting surgeons to carry out complex operations. The purpose here is to use AI to create a system that listens and learns from what doctors say and do, dramatically reducing the burden of note-taking for physicians. According to Microsoft, "The goal is to allow physicians to spend more face-to-face time with patients, by bringing together many services from Microsoft's Intelligent Cloud including Custom Speech Services (CSS) and Language Understanding Intelligent Services (LUIS), customized for the medical domain." On the other end of the scale, Microsoft is also employing AI for genome mapping (alongside St Jude Children's Research Hospital) and disease diagnostics. Most notably, Microsoft recently partnered with one of the largest health systems in India, Apollo Hospitals, to create the AI Network for Healthcare. Microsoft explains: "Together, we will be developing and deploying new machine learning models to gauge patient risk for heart disease in hopes of preventing or reversing these life-threatening conditions." From a Street perspective, Microsoft certainly has the thumbs up. In the last three months, 15 analysts have published buy ratings on the stock vs just 1 hold rating and 1 sold rating. These analysts are modelling for upside potential of 13% from current levels. "Microsoft remains one of our highest conviction cloud stocks to own. However, he adds that any sign of a cyclical rebound or secular share gains in AI and cloud would build the case for his $124 bull-case scenario. Here we take a closer look at three intriguing stocks using AI to forge new advances in treating and tackling disease. This medical device company is pioneering minimally invasive surgery, including with the assistance of the ExcelsiusGPS robot. Globus Medical (GMED) describes how the Excelsius manages to combine the benefits of navigation, imagery and robotics into one single technology. He explains: "Currently, ExcelsiusGPS supports the placement of nails and screws in both trauma and spine cases, and we expect Globus to leverage the platform for broader orthopedic indications in future years." Encouragingly, Rose notes that management has already received positive early feedback and robust demand for the medical robot. This could even include using augmented reality to construct a 3D view of the patient's external and internal anatomy. To pinpoint these three stocks, we used TipRanks' data to scan for 'Strong Buy' stocks in the healthcare sector. Overall our data shows that Globus has received four buy ratings and one hold rating from top analysts in the last three months. TheStreet presents on May 22: "How to Stomach Market Volatility." Hosted by Fisher Investments and TheStreet's Jim Cramer, the exclusive live webinar will give you the tools to successfully navigate market volatility and discuss why having a wealth manager is more critical than ever before. BioXcel (BTAI) applies AI and big data technologies to identify the next wave of neuroscience and immuno-oncology medicines.

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States Could Utilize AI for Improved Healthcare Interoperability

States Could Utilize AI for Improved Healthcare Interoperability

There must be continued development of human and technological capabilities though, researchers stressed. “The trend toward next generation technology on the data analytics spectrum appears to be artificial intelligence,” the team wrote. “Unlike traditional data analytic systems, cognitive computing can consume both structured and unstructured data and present it in ways that are actionable for decision-makers,” researchers continued. “Moreover, similar to the human brain, cognitive computing systems possess the capacity to improve and develop over time with the input of additional information.” Implementing AI will likely bring forth its own set of challenges, the report acknowledged. The states were at different levels of “leveraging data and pursuing interoperability to inform state policies and improve outcomes,” the team explained.  “Data, and the ability to share data, sits at the center of these cross-governmental and health care collaborations,” researchers explained. “Data has the potential to connect distinct hospitals, clinics, government agencies, and community-based organizations and provide a more complete and accurate picture of an individual and their needs.” One of the top challenges for HHS enterprises is that they tend to have complex organizational structures, and they utilize programs operating under multiple state agencies (or divisions within umbrella agencies), local social service organizations, and health care settings, researchers explained. READ MORE: Recognizing Healthcare Interoperability as a Moving TargetTherefore, structures have “evolved under separate systems operate under different regulatory and governance structures, and utilize varied IT infrastructure.” “This creates unique challenges involving the data itself, and introduces a variety of secondary considerations including governance, privacy, regulations, and financing,” wrote researchers. “Unlocking data’s potential means ­first understanding and then addressing these challenges.” Various state organizations also do not collect the same amount or type of data, and processes must be implemented to ensure data integrity, standardization, and accuracy. Interoperability is a key way to overcome such data fragmentation, but the variety of IT systems, diverse levels of sophistication, and varied interoperable capabilities also make seamless connectivity difficult. “Challenges also exist with data governance, interagency relationships, and developing common data de­finitions across the state HHS enterprise,” the team wrote. “Legal, regulatory, ethical, and political concerns around data ownership, security, and use can impede an agency’s willingness or ability to share their data across the state HHS enterprise.” READ MORE: Allscripts Debuts Machine Learning, Cloud-Based EHR System AvenelFinancial challenges can also impede improved data system capabilities. For example, enterprises may need to upgrade or replace old IT systems, train staff, or hire new staff who are already knowledgeable on new analytic capabilities. “Even when a state has money, it can be difficult to make the case for large investments in the IT department over more programmatic spending,” researchers explained. “Overcoming resource barriers requires a tangible vision for how investment in analytics and interoperability can improve outcomes.” Even so, researchers found that the five reviewed states are making efforts to improve healthcare interoperability, showing that different strategies could positively impact the population. The Washington State Department of Social and Health Services (DSHS) has a longitudinal client database that pulls and uses data from over 30 systems both inside and outside of DSHS. “Predictive analytics also allows the state to determine that foster youth who are parents, or who have been homeless, or who are African American have the greatest risk for experiencing homelessness after aging out of foster care,” researchers said. “Based on these predictive analytic capabilities, the state can develop more targeted, more effective interventions.” READ MORE: New York PDMP Achieves Healthcare Interoperability with 25 StatesAdditionally, the Colorado Department of Healthcare Policy and Financing (HCPF) is using champions to drive data analytics and interoperability efforts. “Colorado developed an integrated eligibility system that allows for real-time eligibility assessment across 20 programs, such as Medicaid and Temporary Assistance for Needy Families (TANF),” the research team stated. “HCPF [also] has the data and the analytic capabilities to run predictive analytics to assess the likely trajectory of an individual’s health condition.” HHS enterprises are at different stages of utilizing data analytics options, but Leavitt maintained that there is a consistent push among all of them to implement more advanced technology.

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PayPal to Acquire Swedish Fintech iZettle

PayPal to Acquire Swedish Fintech iZettle

On Friday, CEO and Co-founder of iZettle, Jacob de Geer announced he and his team have reached an agreement with PayPal to acquire the Swedish fintech. We’ll continue to work in much the same way we always have, just as a member of a global family with great expansion opportunities. We’ll continue pursuing our mission of helping small businesses succeed in a world of giants and our teams and culture will remain our key strengths. By joining the PayPal family we’ll become iZettle with superpowers and jump on a fast track to realise our vision. Late in the IPO process, PayPal got in touch and showed a serious interest in iZettle. But during our discussions with PayPal’s President and CEO Dan Schulman and his team, it has become obvious that we share the same belief in the power of small businesses. “iZettle will become a center of excellence for PayPal’s in-store product and services offerings for small businesses going forward, which I’m really excited about. Creating a center of excellence in Stockholm with a global reach means a lot to me. Sweden has been a great breeding ground for us and has birthed success stories like Spotify, Skype, Klarna, Mojang and King.

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Powering Insight-Driven Enterprises with GigaSpaces’ InsightEdge and Intel

Powering Insight-Driven Enterprises with GigaSpaces’ InsightEdge and Intel

GigaSpaces’ InsightEdge platform and Intel are set on delivering fast-data analytics through in-memory computing to accelerate data access, processing, and provide the right platforms to build artificial intelligence applications. Basically allowing organizations, enterprises, financial, transportation, and other verticals to build their applications on top of our platforms. I came from the R&D, I also went with my career to BI companies, business intelligence, and now focusing on pre-sales and biz dev and seeing a lot of a traditional multi-tier architecture in many of the enterprises, and I think the world is kind of shifting from that traditional approach to a more big data and, even more specifically, fast data architecture. Tal: So, using In-Memory architecture or memory computing is basically leveraging distributed platform to increase performance, lower costs, or should I say, lower TCO, and at the end of the day, basically it's simplifying everything by leveraging a microservices platform that takes care of everything you would basically do in order to keep the architecture working as fast and as highly available as possible. Jake: Where is it that GigaSpaces can add the most value through analytics for their customers? In this talk, converted to a transcript for my readers, I'll be talking about how GigaSpaces is utilizing Intel® Xeon® Scalable processors along with Intel® Optane™ technology to reduce storage access latencies and improve application throughput for mission-critical, real-time analytics and actionable insights. How do we allow aggregation, correlations, and patterns, and I think what we are kind of looking at now is an insights platform. We are taking the past 17 years of in-memory computing know-how and applied it to building one platform to serve many aspects of the fast data challenges. Jake: What kind of vertical markets, you know, if our customer works in transportation or one of our listeners works in oil and gas, how can GigaSpaces help them? Then just the data, the archive data, to create actionable insights to allow this data to increase business performance, to cut down costs, and how to make money. We're talking about ingesting hundreds of thousands of transactions per second and the question is know how to actually store the data but how to leverage the data for predictions, for descriptive analytics and other use cases. Customer challenges, the way we see the industry, enterprises are slow design, not computation. So, how do you transform traditional architecture, enterprise architecture, multi-tier architecture, the same way we transform the multi-tier architecture into the 17 years of In-Memory computing XAP. So the kinds of challenges we are seeing are how to reduce hours of data simulations into seconds. How do we build IoT Edge and IoT HUB, how do we implement predictive analytics and anomalies detection? How do we trigger a transactional workflow according to the prediction data? These are the kind of challenges we are seeing in the industry where the more high-end enterprises, especially we see that in finance, trying to build live risk result stores. Not as a matter of aggregating and storing the data but actually being able to turn around and query the data in real time, the transactional data. These are the kind of challenges we're seeing in the industry. Everybody is trying to solve them, we believe, or should I say, from other articles that I'm reading, about 20% to 30% are actually being successful in being data-driven. Can you talk for our listeners so that they understand what are some of the things that we're working on? Tal: Insight Edge is basically an insights platform. The idea here is to unify the different tiers, especially if we're talking about the big data complex workflow into one platform that can handle many of the aspects. My name is Jake Smith, and you've joined us for a chip chat conversation in the cloud. The first one is on the hardware part, leveraging Intel's new NVMe and Optane technology. So we actually do off-heap persistence from the memory, which as we know, is a costly hardware. We're able to persist the data to the disk. Now, with the new Intel technology, we're talking about 8 to 10 times performance improvements for throughput, operations per second. We have done many benchmarks with previous NVMe technology and the new Optane drives, and it's pretty amazing. Leveraging Intel's software on top of our platform, we are able to leverage traditional CPU's for deep learning, using our distributed platform. On-premise, on the cloud, does GigaSpaces really care where the analytics happen? GigaSpaces as a software vendor, we don't really care where the analytics takes place. It could be on-premise, it could be on a virtual machine, it could be on the cloud, hybrid cloud. So basically, you can deploy the software anywhere you want, obviously leveraging our RESTful API and customize RESTful API. Jake: Can you talk a little about how InsightEdge is really transforming deep learning and data analytics? We believe we've solved that by leveraging our distributed in-memory data fabric underneath the hood of Apache Spark and by adding that and a few other solutions into the mix, we're able to produce the right platform for machine learning, deep learning and all that is converged together with transactional processing. Leveraging our off-heap persistence, we are able to scale into the multi-terabytes range and enable Spark to access warm data in memory and also on SSD, and of course, by leveraging Intel's BigDL we are enabling deep learning to be actually used on top of commoditized servers, leveraging CPUs rather than expensive GPUs and GPU farms, so anyone can actually scale into deep learning. It doesn't have to expensive, it doesn't have to be a slow and agonizing process. It's just a matter of taking an “Insights Platform” and take a few data scientists, a few developers and start developing. You know, our listeners are really going to get a lot from that because we want our listeners and we want users around the world to begin using GigaSpaces and Intel Xeon and Intel Optane technologies immediately. So what are ways that our listeners can find out more information about GigaSpaces than we were able to cover today, Tal? All the information can be found on the site. I would recommend some of the recent webinars we had and of course, listeners are always welcome to send an email whether to GigaSpaces or to me directly. I'd be more than happy to answer any question anyone has around their “Insights Platform” or the integration together with Intel technologies. Jake: Well, on behalf of Intel and our "Chip Chat: Conversations in the Cloud," our production team, my name is Jake Smith, it has been my honor to be here today with Tal Doron, director and solution architecture at GigaSpaces.

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Long term guidance key to leveraging technology for financial inclusion in Africa

Long term guidance key to leveraging technology for financial inclusion in Africa

The “Financial Inclusion” session was moderated by Barry Cooper, Technical Director of the Centre for Financial Regulation and Inclusion (Cenfri).Technology Consultant and Project Manager, Regulations Department, Central Bank of Liberia, Ounzuba Kemeh-Gama talked about Liberia’s efforts to enhance its credit reference system with facial recognition, which is moving the system to a unique identifier after years of indexing people by name.Baaj Group LLC Principal Consultant Tarvinder S. Sembhi spoke about how interoperable identity systems could unlock economic potential and foster financial inclusion through public-private partnerships.Credence ID President & CEO Bruce Hanson advocated for a multi-biometric approach to establishing identity for financial inclusion. “If you are going to put your population through the trouble of an enrollment process, you might as well get as much as you can,” he pointed out.Dipo Fatokun, Director of the Banking and Payments System Department of the Central Bank of Nigeria, delivered a presentation on the evolution of the financial clearing system in the country. It benefits Nigerian citizens by making it easier to register and open an account, while also benefiting institutions.“The key objective of the BVN is to authenticate a customer of financial institutions using a unique identifier across the industry,” Fatokun explained. “The BVN enhances the effectiveness of KYC, reduces exposure to fraud, enhances credit advancement to bank customers, checks identity theft and promotes a safe and sound financial system in Nigeria.”With identity-proving barriers removed, and a safe and sound financial system established, the system’s stakeholders, including the Nigerian Central Bank, will be in a position to expand the system’s reach to include more people. When asked about what kinds of approaches can achieve universal inclusion Cooper sounds a cautionary note.“The concept of frontiers is much more important and sound in terms of economics,” he says. “You service the frontiers that gain scale, and you utilize that scale to get further and further out into the more costly frontiers, and you cost-subsidize that way. That’s the hard facts of it.”Cooper agrees with Hanson’s assessment that multiple modalities are necessary, saying that fingerprints are of limited use in some places in Africa due to the effects of manual labor and agricultural work, but technology itself is only part of the solution to a complex problem. Political will came up frequently in discussions throughout ID4Africa, and the need to educate legislators was one of the priorities indicated by the ID4Africa annual survey. When asked about the role of biometrics companies in advancing financial inclusion the day before the survey results were presented, Cooper tabbed the same issue.“Adding new systems into the mix is not affecting the root issue,” he explains. “I think the root issue is that they need to come together as an industry or as a body, and they need to start lobbying or giving technical assistance. The Nigerian financial system has begun using biometrics as part of a system to provide customers with credible, reliable, and efficient payment systems, while encouraging a shift toward electronic payments.Nigeria’s efforts to increase the trust and efficiency of payment systems can be seen as part of a continental trend, in which ineffective elements of legacy colonial systems are replaced with modern practices to unlock obvious economic opportunities, Cooper told Biometric Update in an exclusive interview.“There are a lot of opportunities that just pass people by, particularly local trade. Neither can the millions of unbanked people in Africa, or the governments that work for them.“On the FINDEX 2017 figures, its 30 percent of population; you can really start changing their lives and giving them access if they’ve got a very strong biometric, and we just need to start pushing the concept that proof of address does not constitute any risk mitigation whatsoever.”Surely this argument is not difficult to make, and well worth the effort. So now you’re starting to get a lot more interoperability happening between countries, and I think biometrics needs to further that.”Biometrics-backed digital identity can provide a level of assurance that enables a range of opportunities legacy identifiers are often not sufficient for.“You need legal certainty around an identifier, and many of the jurisdictions don’t have that. Some of them don’t even have population registration legislation, so there’s a big gap,” Cooper says. “So nobody really knows, and it causes a lot of confusion, a lot of court cases, so I would say that it needs to be underpinned at the legislative level.”What to legislate for depends on the context in the country. Cooper says those provide a method of establishing trust more appropriate to the circumstances of many African countries than the system currently used.“FATF 10 does not require proof of address, and if you can have a sufficiently robust biometric identifier, you can really do away with a lot of the strife where people have to go through dragging boxes of paper to banks for every single transaction,” he points out.Many people do not even posses the documents they would need to establish proof of address, Cooper notes, meaning their inclusion in the financial system is blocked by a lack of documents that should not be required.

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Germany’s 2nd Largest Stock Exchange To Launch Zero-Fee Crypto Trading App

Germany’s 2nd Largest Stock Exchange To Launch Zero-Fee Crypto Trading App

As of press time, Cryptoradar’s algorithm on the Bison website shows Bitcoin, Ethereum, Litecoin as neutral, with Ripple edging towards the positive spectrum.A prototype of the app was presented today at the finance and investment trade fair Invest in Stuttgart, with Dr Ulli Spankowski, Managing Director at Sowa Labs, commenting that Bison “is the first crypto app in the world to have a traditional stock exchange behind it.’ Sowa Labs claims that their survey of over 1,000 participants showed that the majority of investors would like “easier” access to the crypto markets.Last week, Cointelegraph reported on stock trading mobile app Robinhood raising $363 mln in funding in order to expand its crypto-specific platform US-wide, with plans to support 16 different cryptocurrencies, all zero-fee.

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Why banks are turning to fintech for help

Why banks are turning to fintech for help

@doondevil/Twenty20 As banks look to improve the products and features they offer you, they are turning to startups for help. This would have seemed unlikely five or so years ago, when a plucky group of financial technology companies began popping up with the goal of upending the traditional financial services industry with simplified products, easy-to-use interfaces and great looking apps. That’s not to say these aren’t substantial improvements to their ability to deliver products and services digitally. For instance, TD Bank has a wildly successful budgeting tool called MySpend that is offered in Canada and was built by Moven, one of the original neobanks. TD also announced late last year that it’s working with Kasisto to add a conversational chatbot to its digital products. “This leading AI platform will give customers instant support and access to real-time spending insights through an experience that really is as natural as texting with a friend,” Tim Hogarth, vice president of innovation framework and strategies at TD Bank Group, said in an email. Neobanks sought to change the way we manage our money in our checking accounts and eliminate the fees that creep up when we run out of money. Marketplace lenders used technology to make the process of getting a personal loan super fast and easy and found a woefully underserved market. Robo-advisers found a way to bring investing to people who don’t have enough assets to garner the attention of traditional providers. Turns out it wasn’t so easy to put the likes of Bank of America or Chase out of business. Many of them are trying to become more customer-centric, but it’s tough to do within the confines of a well-established company with legacy systems, bureaucracy and “that’s the way we’ve always done it” thinking. “Fintechs have had a lot of success in removing customer pain points,” says Trish Wexler, chief communications officer for JPMorgan Chase’s retail operations. “Our customers are showing us where we need to improve, and we’re paying attention. With TrueCar, Chase is making it easier for people to pick out the car they want, secure financing and then go to the dealership. With Roostify, Chase is trying to make the mortgage application process easier and says it has managed to reduce the time it takes to process a refinance by 15 percent. The combination of embedded trust in the safety of well-established institutions and customer inertia has made getting customers to sign up for new services a major challenge. Banks are partnering with fintechs to make the digital solutions they provide to you much better. The thinking is that even if they aren’t the ones providing the money directly, they still get the good association of giving the customer what they want. Be sure to understand if your money is being managed by the bank using technology provided by a fintech firm, or if this is just an affinity relationship and your money is being managed elsewhere. Even the most successful fintech companies have managed to grab just a sliver of the market, in things like personal loans, deposits and wealth management. Instead, over the past few years, banks and fintech companies have figured out that not only can they co-exist, they can develop symbiotic relationships — with fintech firms bringing the innovation and fresh thinking and banks bringing the regulatory understanding and, well, the customers (not to mention the proven business model and regulatory understanding). That’s partially because it’s hard to define what constitutes a fintech company and a partnership versus a vendor and a contract.

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High-Frequency Trading for Bitcoins

High-Frequency Trading for Bitcoins

Crypto colo.It is not original to me, but one thing that I think and write a lot is that cryptocurrency enthusiasts keep re-learning the lessons that regular finance learned decades ago, and that you can see a lot of financial history replaying itself, sped up, by observing cryptocurrency. (I have occasionally also argued that the story of cryptocurrency might actually be the opposite, that it’s about traveling back in time to progressively forget the lessons of modern finance, but never mind that.)In many ways this is a snarky and condescending thing to think; the implication is that the crypto people had simplistic and naive expectations about how trustless decentralized purely market-based finance could work, and are slowly discovering the obvious-to-the-rest-of-us benefits of trust and central counterparties and regulation and non-market mechanisms. U.S. securities laws, for instance, have an onerous and one-size-fits-all set of disclosure requirements for anyone who wants to raise money by selling securities to the general public; this makes it much easier to police fraud, but also makes it harder for disruptive entrepreneurs to raise money to fund real projects and for small investors to participate in high-growth investments. And there are those in the crypto community who argue that the tradeoff should go the other way in cryptocurrency regulation: Let a million blockchain projects bloom, accept that most of them will be frauds, but do it anyway to foster innovation.That is interesting, or at least potentially interesting. (Not all of the regulators are moved by it! But some seem to be.) Watching cryptocurrency create an alternate financial history, one in which some of those choices go another way, in which the balance is struck (say) in favor of more fraud and more innovation, or more democracy and less professionalization, or whatever, is the real appeal of the cryptocurrency revolution. Here's a story about how “the smell of marijuana wafted through a half-filled event space in Manhattan’s Meatpacking District, as a group of cryptocurrency believers downed champagne and blood orange margaritas” and listened to Snoop Dogg at an afterparty thrown by Ripple Labs Inc.:Around 9 p.m., Snoop Dogg arrived to an adoring crowd sporting Patagonia fleeces, button-up shirts and Team Ripple tees.“So what we get drunk, so what we smoke weed,” they sang along as Snoop strutted onstage flanked by dancers in rhinestone bras and a person in a canine costume, wearing a jacket with ‘Dirty Dogg’ written on the back.Do you think that the majority of people at the majority of Snoop Dogg shows circa 2018 are wearing button-up shirts and Patagonia fleeces? On the other hand that’s not actually how many people think of financial history! “The most important financial innovation that I have seen the past 20 years is the automatic teller machine,” Paul Volcker famously said, and there are plenty of people who would argue that at least the past few decades of financial history have been a story of reckless deregulation, risk, scandal, inequality, over-financialization and rent-seeking. These days I feel like the dress code for any Snoop Dogg show is probably business casual.CBS v. Redstone.We talked yesterday about CBS Corp.’s amazing effort to get rid of its controlling shareholder, Shari Redstone’s National Amusements Inc., by issuing enough voting stock to other shareholders to dilute away NAI’s control. A flaw in CBS’s plan is that it had to give Redstone notice of the board meeting (scheduled for tomorrow) at which it will issue those new shares, and so she can fire them before they hold that meeting. But it asked a Delaware court to enjoin her from doing that, so it could go and get rid of her in peace.Later yesterday NAI filed its reply to that lawsuit, which denies the basic conflict that CBS claimed—Plaintiffs suggest that NAI intends to force such a merger by removing and replacing the CBS independent directors. Plaintiffs’ supposed belief to the contrary is based on unsourced media reports and conjecture.—but also notes that, even if it were true, diluting away Redstone’s ownership “would still be egregiously overbroad and unjustified”:If Plaintiffs were genuinely concerned that NAI would seek to force a merger upon the company, and NAI had not committed to refrain from doing so during the pendency of this action, the relief to which Plaintiffs would even plausibly be entitled would be an injunction to prevent NAI from forcing a merger upon the company while this litigation is pending. If the controlling shareholder wants to do something bad and wrong over the board’s objection, then the board should say no. The board shouldn’t fire the controlling shareholder. Firing the CEO for doing bad things is how the board exerts its power, how it demonstrates that it is in control of the corporation. If the board really is supreme, if it is in control of the corporation and the shareholders are just sources of capital, then why shouldn’t it fire the shareholders too, if they make it mad enough?By the way yesterday I expressed some surprise that the board would even try, but apparently there is precedent for boards trying to get rid of their controlling shareholders while the shareholders weren’t looking. (“You go on one long vacation out of cell-phone coverage and, bam, you’re out,” I wrote yesterday.) It didn’t work though. There, the Court recognized that where a controlling stockholder has the power to forestall board action by preemptively removing directors, the board cannot take steps to neutralize the controlling stockholder’s voting power in order to effectuate the board action. In Adlerstein, the controller had the power to remove certain directors and, recognizing this, the board kept the controller in the dark about a board proposal that destroyed his voting control over the corporation until it was too late for the controller to act. Recognizing that the controller was entitled to an adequate opportunity to protect his interests, the Court held that the directors’ decision to keep the controller uninformed about the proposal invalidated the board’s approval of the proposal.Still, good effort.Oh, disclosure: CBS’s lawyers here are from Wachtell, Lipton, Rosen & Katz, where I worked long ago. I remain very fond of Wachtell, and I don’t think that I am biased when I say that it is undoubtedly the U.S.’s leading advocate of the theory of “board primacy” in corporate governance. Cryptocurrency’s original promise wasn’t simplistic and naive; it was idealistic and pure, and importing all the controversial features of scandal-plagued modern finance will be a tragedy.Anyway Bitcoin has discovered co-location for high-frequency traders:Coinbase Inc., which operates the largest U.S. cryptocurrency exchange, said on Tuesday that it would upgrade its systems with services that cater to ultrafast traders. I don’t really think they will, but if they do convince a Delaware court that boards of directors should be able to get rid of shareholders they disagree with, then that would be quite a total victory for board primacy.Should index funds be illegal?No, write Thomas Lambert and Michael Sykuta of the University of Missouri, in “The Case for Doing Nothing About Institutional Investors’ Common Ownership of Small Stakes in Competing Firms”:We show that the theory of anticompetitive harm from institutional investors’ common ownership is implausible and that the empirical studies supporting the theory are methodologically unsound. The empirical studies purporting to demonstrate anticompetitive harm from common ownership are deficient because they inaccurately assess institutional investors’ economic interests and employ an endogenous measure that precludes causal inferences. Even if institutional investors’ common ownership of competing firms did soften market competition somewhat, the proposed policy solutions would themselves create welfare losses that would overwhelm any social benefits they secured. The point that “intra-industry diversified institutional investors are also inter-industry diversified” is worth emphasizing. When people worry that common ownership of multiple firms in the same industry by big institutional investors reduces competition in that industry—the antitrust worry that I often shorthand as “should index funds be illegal?”—the theory is more or less that if all the airlines raise prices, rather than compete with each other on price, then they will all make higher profits and benefit their common shareholders at the expense of customers. A leading Vanguard fund, for example, holds around 2% of each major airline (1.85% of United, 2.07% of American, 2.15% of Southwest, and 1.99% of Delta) but also holds:• 1.88% of Expedia Inc. (a major retailer of airline tickets),• 2.20% of Boeing Co. (a manufacturer of commercial jets),• 2.02% of United Technologies Corp. (a jet engine producer), • 3.14% of AAR Corp. (the largest domestic provider of commercial aircraft maintenance and repair),• 1.43% of Hertz Global Holdings Inc. (a major automobile rental company), and• 2.17% of Accenture (a consulting firm for which air travel is a significant cost component).Each of those companies—and many others—perform worse when airlines engage in the sort of supracompetitive pricing (and corresponding reduction in output) that maximizes profits in the airline industry.If you do want to believe the index-funds-should-be-illegal thesis, then it may not be as simple as “giant diversified mutual funds that own lots of companies in an industry want to maximize the profits of that industry in anti-competitive ways.” Their objective function has to be a bit broader: They must want to maximize the profits of corporations, broadly, at the expense of individual consumers (and workers). That is a more nebulous theory; it is not as simple as “companies in an industry should try to keep prices high and not undercut each other by competing for market share,” but more like “companies in every industry should try to keep corporate profits high generally and not undercut each other by being nice to household consumers or workers.” It is harder to see how corporate managers would maximize that. But it is a pleasingly Marxist diagnosis of institutional investors as advocates, not of reduced competition in any particular industry, but of the interests of the capitalist class generally against those of workers and consumers. People are worried about unicorns.Private markets, I sometimes say, are the new public markets; companies used to have to go public to raise a lot of money or create secondary liquidity or achieve widespread name recognition or whatever, but now they can do all of that in the private markets. Still companies do go public sometimes, often because their venture capitalists find it easier to cash out by selling to the public than by relying on the relatively limited liquidity in private secondary markets. But the VCs are working on fixing that problem too:New Enterprise Associates, one of Silicon Valley’s largest venture-capital firms, plans to sell off a big chunk of its startup investments in response to a dearth of initial public offerings, according to people familiar with the discussions.The firm plans to sell roughly $1 billion worth of its stakes in about 20 startups to a new firm it is seeking to create, one of the people said, in an effort to return capital to its limited-partner investors. The upgrade, planned for later this year, will make Coinbase one of the first bitcoin exchanges to welcome the controversial business of high-speed trading. …San Francisco-based Coinbase plans to introduce “low-latency performance,” the company said in a blog post, using a term in the exchange industry that means extremely fast processing times.Coinbase also said it would allow trading firms to place their servers directly in its data center, a practice called co-location.That’s fine! You are a private company, you go to a pot of money called “venture capital,” it gives you some money, you grow, the venture capitalists want to cash out, you go public, and the VCs sell to another pot of money called “mutual funds” or whatever. If the VCs set up a new pot of money called, like, “private secondary liquidity funds” or whatever (you might want a catchier name), then you kind of get rid of the need to go public. The trick is that those funds have to look more like mutual funds than the VC funds do; if they are buying big high-valuation stakes in mature but somehow-not-yet-public companies, then they need to be big, and they can’t expect too many of those stakes to produce enormous returns. Catering to professional market makers—having professional market makers, for that matter—is probably a way to make the market better and more useful for most investors. “These additions will allow for a more efficient price discovery process to occur, creating tighter markets, deeper liquidity, and increased certainty of execution,” says Coinbase. It is a stage of enlightenment, an adoption of useful ideas from conventional finance. (Along with the co-location, Coinbase is also “developing several tools to lure institutional investors onto its platform,” including “custodial services where investors can store large amounts of digital currencies”; obviously having a safe place to put your Bitcoins would be a positive development—and a change from Bitcoin’s original promise of decentralization.)On the other hand that’s not actually how many people think about exchanges that cater to high-frequency traders! Critics like Michael Lewis, author of the 2014 best-seller “Flash Boys,” have alleged that HFT firms take advantage of slower-moving players.Some number of people got into Bitcoin because they felt like the conventional financial system was rigged against them, and I suspect that some number of them felt like that because stock exchanges let high-frequency traders pay to run their algorithms right next to the exchanges’ servers so they could have faster access to the exchange than anyone else.

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Credit Suisse just announced a major shakeup in its electronic trading business to compete with the fastest traders on Wall Street

Credit Suisse just announced a major shakeup in its electronic trading business to compete with the fastest traders on Wall Street

Alexander Englander joined the bank in May as the head of equity sales in the Americas from Barclays, Business Insider previously reported. The build out also comes as banks reported record equities revenue in the first quarter, as volatility sparked and markets whipsawed back and forth on account of fears of a potential US trade war. Abenante said in an interview with BI that the new structure will hopefully enable Credit Suisse traders to incorporate technology more efficiently into their day-to-day to give clients a better experience. "How do we incorporate machine learning to help our sales traders be better at their job?" Abenante said. "Ultimately this will make for a much more efficient desk, exchanging information at speeds you couldn't imagine today." Other changes to the group announced in the memo include: John Comerford to run execution products; Doug Crofton, Jim McKeever and Gerry Milligan to continue to run America's execution; Chris Marsh and Stuart McGuire to head EMEA execution; and Julian Corner as COO for global execution services. "In line with our Equities growth strategy and building on our historical strength in the space, this new business structure will allow us to focus on technological innovation within our execution business and foster closer collaboration across product lines to deliver best-in-class service to our clients," Stewart said. Credit Suisse is bolstering its equities business in the US more broadly with new senior talent as it tries to grab market share from leaders Morgan Stanley, Goldman Sachs and JPMorgan.

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