FINTECH ARTICLES OF THE WEEK 08/07/16
For this week, I’m moving the weekly blockchain feature to the top of the links, as blockchain continues to capture business and technology attention. The Wall Street Journal even reported that blockchain is at a tipping point, in a comparison of the technology now versus the internet 25 years ago. It certainly is in terms of FinTech attention.
Digital banking expert and entrepreneur Brett King’s “Breaking Banks” radio show kicked off a five-week series on blockchain, with a list of guests well worth listening to and following. Panelist Chris Skinner, banking consultant and blogger, put blockchain today in perspective, “This is all still experimentation. It’s nascent. There are projects and experiments and until they mature it’s not something anyone will commit to, but eventually blockchain will deliver a revolution.” For a good summary of the week in blockchain, see “10 things you need to know about blockchain this week” by panelist Simon Taylor, cofounder and director of blockchain at consultancy 11:FS.
Profiles in innovation: blockchain
A recent report from Goldman Sachs outlines the potential usage of blockchain (PDF) beyond the elimination of banking middlemen. “We believe blockchain’s transparency, security, and efficiency make it a particularly good choice for reshaping businesses that are bogged down by inefficiencies, and for enabling new business models based on distributed marketplaces and technology,” the report says. The introduction has a clear and understandable explanation of how the technology works.
Blockchain: the trust disrupter
A substantial new analysis from Credit Suisse examines the potentially disruptive impact (PDF) of bitcoin and blockchain technology on payments, capital markets, financial services, and music industry segments. Blockchain benefits are immutability of record, disintermediation of trust, and smart contracts or self-executing commitments. “Although the potential transformative benefits of blockchain are manifold, it remains challenging to estimate the extent of its impact on the real economy at this nascent stage,” the report states.
The golden age of open protocols
The time has come to turn attention away from APIs and look at the profitability of a protocol business model. “One of the problems we have had in tech is that there aren’t large monetary incentives to create and sustain open protocols. If they are open they cannot be easily monetized by traditional means,” writes venture capitalist Fred Wilson at AVC.com. “However, that is changing with the emergence of blockchain technology and crypto-tokens.”
The regulators are rightly watching
Marketplace lending and distributed database technology got mentions in the “Potential Emerging Threats and Vulnerabilities” section of the U.S. Dept. of the Treasury’s Financial Stability Oversight Council’s 2016 Annual Report (PDF), released June 21, 2016. I read the section on distributed ledgers as largely positive for the technology’s potential, with a note to keep an eye on it, and the section on marketplace lending as somewhat negative, with a warning that lending standards may become lax. Read the report’s full comments on two leading FinTech technologies at www.fintechrising.net/fsoc.
Is FinTech changing banking supervision?
Though lawmakers do not regulate peer-to-peer lending, they are taking a closer look at the sector in order to understand its impact on banks and consumers, according to a recent Federal Reserve Bank of San Francisco post. “Almost every one of these companies has a bank partner at some stage of the process. Since we regulate those banks, it’s important that we understand what those partnerships look like and the implications for banks and consumers,” said Tracy Basinger, group vice president of Financial Institution Supervision and Credit at the San Francisco Fed.