'Tis the Season for Open Banking
Kicking off 2018 in style on Fintech Insider David and Simon were joined by colleagues Andra Sonea and Benedict Shegog to tackle the latest news for the week, and look ahead to what 2018 has in store. And what does it have? Regulation, mostly.
Listen to the episode in full here or play and read below
Ant Financial/MoneyGram deal abandonedStarting off with the big news Stateside, Ant Financial's MoneyGram takeover was abandoned as the US authorities refused to back the deal due to concerns over national security and the safety of data used to identify US citizens. This becomes the most high profile Chinese deal to be shut down whilst Trump has been in office. The Donald had previously vowed to take a harder line on Chinese trade deals. MoneyGram's shares fell 8.5 percent in after-market trading after the deal was called off. In what could be viewed as a consolation prize, Ant Financial said it paid MoneyGram a $30 million termination fee for the deal’s collapse. Read more here
Open BankingIn the first of many Open Banking related stories, we began with a hard hitting headline from the BBC stating that open banking "threatens the survival of traditional banks". While this is almost certainly clickbait, in David Brear's eyes it is a "refreshing perspective" from a big bank boss, to view the changes in this way. The team also discuss the impact of the big banks being given an extension to meet the requirements for open banking, leading Benedict to question that if everyone can't make the deadline, does the deadline even exist? They also debate how much of a problem is that 92% of customers haven't heard of Open Banking, according to a Which? survey. Do customers have to know about it to feel the benefits? Simon and Benedict debate. Andra points out that banks didn't make the most of the data they had available to them while they had it, so can fintechs and tech companies now make better use of it as a result of Open Banking?
"Banks didn't make the most of data while they had it" - Andra SoneaDavid highlights the huge opportunities for fintechs as a result of Open Banking - Starling, Monzo and Revolut made a strong start last year but now it must be about to snowball. Watch this space. They also discuss Dave Birch's piece for WIRED on Google, Facebook, Amazon, Apple, Baitu, Alibaba and Tencent replacing big banks in the future - the team agree but are we unfairly assuming that big banks themselves will never change or evolve? Let us know if you agree. MiFiD II Next up is yet another regulatory change coming into force this week: MiFID II or, The Markets in Financial Instruments Directive II, which aims to emphasise and highlight the importance of transparency of transactions and fees. It also shifts how and where fines are given out and creates greater visibility for asset managers and investors so they are aware of exactly what they're getting into from the off. This is a hugely heavy and technical development that can take some reading into, but one thing the team all agree on: regulation is defining 2018.
Fat Cat ThursdayMoving on, this story in the BBC reveals how an average bank chief executive still earns 120 times more than the average full-time worker, who earns a median average of £28,758. As such, bosses only need to work 32 hours to reach the median full-time employee salary. This means that assuming they went back to work on Tuesday 2nd 2018, they only need to work until EOD Thursday 4th to earn the full annual salary of a large proportion of their workforce. "It's awesome" said David Brear, shortly before revealing he had anticipated the story being about cute, chubby cats, or an overweight Top Cat, and was disappointed once he'd read the whole thing.
"Top Cat's let himself go" - Simon TaylorThis leads to a debate as to whether big bank bosses bring enough value to justify their big payouts. Did they learn enough from the 2008 crisis and was there enough punishment for those at the top? Andra calls out the lack of transparency as to how those amounts of pay are calculated and how someone gets to that position in order to better inspire employees to try to get into such positions. They also debate the impact of personal liability for big bosses. Currently they are not personally liable for the bank's actions, and seem to be rewarded even in bad times, despite a lack of risk to themselves, but if they were, would that better justify their salaries? Let us know your thoughts here.
Zelle the Venmo KillerSassy Benedict questions why Zelle, a product that's been live for six months, is making a headline in Business Insider as a "little known" alternative to Apple Cash. He thinks it's embarrassing that this is newsworthy when Zelle is currently offered by over 30 banks, including Chase, Bank of America, and Capital One and already has 85 million customers. It can also be downloaded as a standalone app, like Venmo. Venmo is a third-party app, while Zelle transfers money directly between bank accounts. Read more here
Banking and savings appsThomas Cook plans banking app called "Sumo" to help its customers save for holidays, with perks including four free ATM withdrawals, holiday booking from within the app and an overdraft for your holiday spending. The app “is designed to simplify the way that holidaymakers plan and save for their travels and manage their spending when overseas”, according to Thomas Cook. It's currently available in Sweden, and will be rolled out to more markets, including the UK, in the course of 2018. This caused much debate among the team about whether this should be a feature of an existing banking app in partnership with Thomas Cook, rather than a product in its own right. It is also too similar to other products - Monzo's Pots and Starling's Goals to name but a few - is easily replicable and won't last, in the eyes of our panel. Do you agree? As one savings app comes into being, another one folds… Folio, a banking app which automates small amounts of users’ savings for specific goals, has stated that it will be closing operations this month after it failed to meet its fundraising target. It currently maintains savings accounts for around 10,000 users, backed by Barclays PLC. The platform had planned a £320k raise as the first ever savings app to launch on the Crowdcube platform in July last year but did not reach target. Should Folio be a cautionary tale for other fintechs and similar ventures with just one product that can easily be repeated? In Simon's words, "you can't patent rounding up".
"You can't patent rounding up" - Simon Taylor.
Chinese credit scoresThe next story is actually a Tweet brought to our attention by Curve’s Callum McCaig, posted by Emily Rauhala:
Emily Rauhala on Twitter - “I'm on the Tianjin to Beijing train and the automated announcement just warned us that breaking train rules will hurt our personal credit scores!"This is not necessarily a standard news story but follows on from a story we discussed a few months back, regarding the Chinese government giving everyone a personal credit score based on their behaviour and trustworthiness. The system will aim to instil trust by combining carrot and stick: those with a good score will reap rewards, while a bad score will lead to punishments, such as public blacklisting and restrictions. By 2020, the government hopes that the system will “ensure that those keeping trust receive benefits in all respects, and those breaking trust meet with difficulty at every step”, according to an official state planning document. Tencent are moving at speed to implement this, in a example of tech giants working closely with the Chinese government. This understandably caused a lot of fear on the podcast, as well as comparisons with the TV show Black Mirror, as well as the question about how beneficial this is - and who benefits? It is also doubly scary that social interactions, (such as behaviour on trains as Emily's tweet suggests) can influence citizen's financial capabilities, this seems like an unfair correlation. Tell us what you think here.