News from around the world
On Monday, Forbes published “The Most Innovative Fintech Companies In 2019,” their fourth edition of what is known as the “Fintech 50 2019.” Not all their chosen companies are based in the U.S. (Transferwise and Bitfury made the list), but all are private companies that have some sort of operations or impact in the U.S. Forbes reports:
While crypto prices and ICOs collapsed, overall investment in fintech surged in 2018, hitting $55 billion worldwide, double the year before, Accenture reports. Big fintechs are getting bigger—19 of the 2019 Fintech 50 are valued at $1 billion or more.
There are 20 new startups to the list, and the most noteworthy areas to see such additions are payments technology and companies working for the underserved.
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With the Paris Fintech Forum wrapping up last week, the biggest takeaway was that crypto fever truly is over. At the time of last year’s forum, bitcoin and imitators were rising rapidly. Thus, sessions on blockchain were overflowing with attendees. Bloomberg reports:
No such problem this year. With the top 10 crypto assets down 80 percent in the last 12 months and skepticism mounting, many fintech pros concluded that the technology may not be ready for prime time, especially in an industry this heavily regulated.
Instead, the conference was about getting back to banking basics. Sessions on building branchless lenders were standing-room only, investors buzzed about how 2019 could be a banner dealmaking year, and the most controversial moment came at a panel on old-fashioned lending.
As the EU new payments law now requires banks to share customer data with fintech companies, the general feeling was that “there’s plenty of action without messing around with crypto.”
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Forbes Finance Council members don’t believe that fintech companies are doing what they should to help millennials with financial security. In fact, a panel shared their reasons as to why they think these companies are failing this generation. Some points touch on the fact that fintech companies are no help for people not able to clearly define their goals, and that there are too few companies using newer technology to encourage millennials to easily invest. Forbes reports:
Low incomes, high urban rents, hefty student debt, and spending habits are just a few reasons millennials struggle with their finances. That’s why this generation is an easy target for fintech companies, which often claim to help people save money and manage their spending.
However, many current efforts fall short because they’re focused on the wrong aspects of financial health.
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Last week, the BBC’s weekly “The Boss” series profiled Kristo Käärmann, Estonian co-founder and CEO of TransferWise. They discuss the initial spark that led to the company’s inception, which stemmed from a poor exchange from a U.K. bank to an Estonian bank in 2008. While Käärmann expected the bank to give him the same rate he saw when he looked at Reuters and Bloomberg, he saw that the bank used a 5% less favorable rate. He realized this is because banks take their cut, and from that day he set out to find a way to transfer money abroad without involving banks in the process. BBC reports:
So in 2011, they launched London-based TransferWise, a financial technology or “fintech” website that allows users to transfer money overseas to a different currency at the mid-market rate for a set fee of 0.5%.
Today, TransferWise is a global business, and investors include Virgin boss Sir Richard Branson and PayPal co-founder Max Levchin.
TransferWise’s website and app are available in 50 countries and 49 currencies and has been used by over four million people.
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One year after a global regulatory sandbox was proposed by the U.K.’s Financial Conduct Authority (FCA), The Global Financial Innovation Network (GFIN) is now accepting applications for its cross-border testing pilot. Business Insider reports:
Accepted companies will be able to use the cross-border innovation sandbox to test their products, services, and business models. To participate in the six-month-long pilot phase, expected to start in the second quarter of 2019, firms must meet the regulators’ application requirements in all the jurisdictions in which they wish to test.
This cross-border sandbox has the potential to mutually benefit companies and regulators. Fintech companies can test their products in a safe and broader, cross-border environment, while it allows for regulators to collaborate and ensure these new ideas are focused on compliance.
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