We end this week with an overview of the biggest fintech stories that you may have missed. This week has been big in terms of crypto, CBDCs, NFTs, new fintech partnerships, and upgrades offered by fintech startups and traditional financial institutions. The battle over crypto continues as Australian regulator is consulting the proposed practices on managing crypto assets and crypto exchanges in India are struggling after the central bank’s informal order for the banks to steer clear from crypto. Moreover, new research shows that cyberattacks targeting crypto have increased by 192% since October 2020. Meanwhile, the central bank in India is worried about the big tech giants pushing their way into the Indian financial sector and in Russia, the central banks plan to test the digital ruble in cooperation with 12 of the nation’s banks. In the world of updates and upgrades, Visa and VTB are testing “pay by glance”, Aveni launches an innovative AI tool that can identify vulnerable customers, American Express has new fintech partners that will help clients with mortgages, Ripple invests in an NFT marketplace, and a Swedish blockchain accelerator reaches a new exciting threshold. We also talk about the latest survey results that show that most global banking executives believe the branch model will be dead within 5 years. End your week with our fintech weekly.
On Wednesday, the securities regulator in Australia announced it would consult market participants on the possible ways forward when it comes to setting up good market practices for financial instruments exposed to cryptocurrency-backed assets. This move comes as Australia becomes the next country that tries to quickly and efficiently regulate digital currencies that have shown big volatility this year.
The most popular cryptocurrency, Bitcoin, has hit a record-high $65 000 in the middle of April and has since then fallen sharply, trading a little over $35 000 this week.
The Australian Securities and Investments Commission (ASIC) voiced its concerns as it sees a “real risk of harm to consumers and markets” given crypto assets are not regulated appropriately. ASIC wants to establish practices that will keep the market practices fair and protect the investors, regulating pricing, ownership, risk management, and disclosure.
“Market operators and product issuers need to be mindful of meeting their existing regulatory obligations when creating, operating, and allowing such products,” ASIC Commissioner Cathie Armour said.
The feedback report will be issued by ASIC shortly and the consultation on the proposed practices will follow.
Cryptocurrency exchanges in India are struggling heavily after the central bank, the Reserve Bank of India (RBI) has officially criticized digital assets, quoting their effect on financial stability. Informally, the RBI has asked the banks in India to steer clear of cryptocurrencies. Currently, India has almost 15 million crypto investors that hold nearly $1.5 billion.
“Banks are reluctant to do business,” said Avinash Shekhar, a co-chief executive of ZebPay, a crypto exchange that is among the oldest in India. “We have been talking to several payment partners but the progress has been slow.”
Now, the crypto exchanges in India are considering several alternatives such as smaller payment gateways, creating their own payment processors, or offering solely peer-to-peer transactions. The current approach varies depending on the crypto exchange, with some such as WazirX sticking to peer-to-peer transactions and others like Vauld favoring bank transfers with the manual settlement.
However, one of the largest issues is that with a lack of support from banks, smaller entities are also hesitant to engage in crypto activities.
“Partnership with the smaller payment processors has not emerged as stable yet, and is more of a temporary solution,” said another founder of an Indian crypto exchange.
“Predictably, alternate transaction methods such as P2P have increased, which makes the market more inefficient and also exposes customers to the risk of fraud,” he said.
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As the big tech giants are trying to push their way further into the financial sector in India, the central bank is worried the giant companies will gain too much of a dominant position in the financial services. In its bi-annual report, the Reserve Bank of India (RBI) has also highlighted it will undoubtedly create large challenges for the regulators as big tech giants, “straddle many different lines of business with sometimes opaque overarching governance structures,”.
The RBI has named several concerns including antitrust rules, cybersecurity, data privacy, operational risk, and too-big-to-fail issues. On the other side, it pointed out possible efficiency gains and broader access to financial services. The statement by the RBI does not come as a surprise as the tensions between the Indian government and the tech giants from the United States have been increasing for some time.
Currently, basic payment services by Amazon and Google have been approved in India. Having said that, both giants as well as Facebook and several others have applied for licenses that would allow them to operate a broader retail payment system.
The Scotland-based Aveni has just secured an investment of £1.1 that will allow them to launch an AI tool. The new platform, Aveni Detect, will leverage the latest and most advanced AI and natural language process (NPL) to improve quality assurance efficiency, improve client experience and identify vulnerable customers. The investment was led by the TRICAPITAL Angel syndicate and supported by Scottish Enterprise’s Growth Investments, Old College Capital – the University of Edinburgh’s in-house venture investment fund – and Wallace Equity.
“Consumer behavior and business needs have changed significantly over the past 18 months as the service industry digitized in response to the pandemic,” comments Joseph Twigg, CEO of Aveni. “This created a new base of consumers comfortable with video conferencing led, digital-first services.
“In the new world, AI can be adopted throughout the customer journey, driving new insight, significant efficiency gains, and better protecting the vulnerable,” Twigg adds. “It’s a win-win situation. By using AI to help automate processes like quality assurance and risk monitoring, material cost reductions can be achieved. At the same time, companies gain targeted insights on customer experience and training opportunities for customer-facing staff.”
The Aveni Detect has been developed by Aveni’s team cooperating with several prominent UK businesses. One of the big selling points for Aveni is that its new platform will decrease the cost of compliance through supporting businesses in meeting the FCA’s guidelines on the Fair Treatment of Vulnerable Customers.
Jo Nisbet, Partner at Harper Macleod, said, “Aveni is a brilliant example of a potentially world-leading tech business coming out of Scotland’s entrepreneurial ecosystem. It is phenomenal to see the business grow so rapidly and to play a part in helping them negotiate the challenges associated with scaling up.”
The cyberattacks targeting victims’ bitcoin have increased by 192% between October 2020 and May 2021. The report released by security solutions provider Barracuda Networks attributes the surge in attacks to the rise in price and demand for Bitcoin over the past year. Moreover, Barracuda Networks highlights that the number of global consumers interested in cryptocurrency is far higher than it has ever been. Moreover, as crypto is unregulated and decentralized, cybercriminals are given the chance to commit crimes targeting cryptocurrencies while remaining anonymous.
Barracuda team observed that just as attackers used to impersonate banks to steal one’s banking credentials, the same tactics are now used to steal bitcoin. By impersonating crypto apps and digital wallets and issuing fake security alerts, hackers are trying to steal bitcoin.
“Accelerating interest and demand for bitcoin has provided cybercriminals with a payments method which is virtually untraceable, enabling a multi-billion pound economy of ransomware, cyber-extortion, and impersonation attacks, primarily targeting individual investors and private companies,” comments Fleming Shi, CTO for Barracuda Networks. “Thus, it’s more important than ever for organizations, workers, and investors to keep their data and financial assets completely secure. Continuing to train users and employees to recognize the latest tactics used by hackers is imperative to maintaining blanket security for any given organization, and all businesses and potential victims are heavily encouraged to back up their data with a third-party cloud-based data backup solution to prevent data loss, reduce downtime in the event of a cyberattack, and insure themselves against surging ransomware threat levels.”
Russia’s VTB is collaborating with Visa and a small local fintech to let restaurant customers pay for their meals by simply looking at a camera. All the customers have to do is download and install the O.Vision mobile app, register with a phone number, link a payment card, and save their facial biometrics. When it comes to payment, they just need to look into the camera at the restaurant payment terminal.
The O.Vision identification algorithm is tested on a database of over a million people. The identification of facial biometrics and approving the payment takes just over a second. Right now, Visa and VTB try to encourage this type of payment by offering the customers a 20% discount during the first four months after the initial launch of the service.
Yulia Kopytova, VTB, says: “New solutions allow trade and service enterprises not only to improve the user experience but also to provide additional opportunities for the development of their own ecosystem in future.”
Ripple has joined the Mintable $13 million funding round. Mintable is an NFT marketplace providing customers with the possibility to create, buy, and sell digital items using cryptocurrency. Other investors include blockchain gaming developer Animoca Brands, NFT investment fund Metapurse, and angel backers Doug Band, the founder of Shutterstock.
Zach Burks, CEO, and founder of Mintable, says: “Throughout 2021, NFTs have reached mass appeal, has touched almost every sector spanning entertainment, fine arts, sports, and many more. As the technology continues to mature and space rapidly evolves, this is a critical company milestone for Mintable and we are thankful for the support from our investors who hold the same shared belief of the many opportunities that NFTs can bring among mainstream users.”
Following the investment, Mintable wants to integrate with Ripple’s XRP Ledger to achieve lower fees and energy consumption.
In a statement, Ripple says: “We couldn’t be more excited to work with our friends at Mintable to provide creators and developers with a best-in-class experience and bring more participants into the blockchain ecosystem with NFTs.”
The central bank of Russia announced it will start testing its digital ruble platform in cooperation with 12 of Russia’s banks. The digital ruble prototype is supposed to be ready by December and the testing will commence shortly after, in January of 2022. At the end of the pilot, the central bank plans to publish a roadmap for possible implementation.
Olga Skorobogatova, first deputy governor of the Bank of Russia, says: “A digital ruble project is aimed to create new payment infrastructure to improve the availability of payments and transfers and to reduce their cost for households and businesses.
“For the convenience of its use, we need to ensure a seamless migration between the forms of the ruble. This is why it is highly important for us to cooperate with market participants at all stages of the pilot project. To organize this cooperation, we have promptly formed the first pilot group of banks for them to have enough time to technically and technologically prepare their systems and processes for piloting,’ Skorobogatova noted.
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According to the Economist Intelligence Unit survey, almost two-thirds of banking executives globally believe the branch-based banking model will be dead within the next five years. Out of 305 senior executives included in the survey, 65% believe the branch model will be gone soon, a big increase from 35% believing that back in 2017. The executives from the Asia Pacific region are most skeptical towards the prediction, with the bankers from North America being the most confident.
Moreover, almost two-thirds of the study participants believe that emerging technologies such as AI and cloud will have the biggest impact on the banking sector, an increase from 42% three years ago. Over 80% now believe that leveraging the strengths of AI will be the biggest competitive advantage for banks and one-third of bankers are focusing their investments on AI platforms.
In terms of the business opportunities, microfinance and accounts for the unbanked population were viewed as most promising by the executives.
American Express got two new fintech partners that help Amex customers in getting home loans. Now, the eligible Amex customers that get their mortgages from Better or Rocket Mortgage can get a $2000 statement credit for conforming mortgages, or $6000 for jumbo mortgages.
“Amex has tons of different partners that they’ve used throughout the years, which used to be a lot more travel-focused, and now they’re broadening out into financial services,” D.A. Davidson analyst Chris Brendler said.
“If Amex can offer value that exceeds the membership fee of the card each year, that’ll ensure the cardholder continues to transact with Amex,” said David Sica, partner at fintech-focused Nyca Partners.
Today, the BlueBarricade blockchain accelerator has achieved a new threshold in the sector, managing 1400 blockchain transactions per second. Performance tests have been conducted with the support of HCL and IBM and the speed and scalability have both been improved after the tests conducted by a global team.
“We are excited to bring forth our ground-breaking efforts that show a consistent result of 1,400 blockchain transactions per second on the BlueBarricade blockchain accelerator,” says Mikael Bramstedt, innovator and founder of BlueBarricade Blockchain & AI Technology AB.
“Five weeks of testing was a success in reference to the goals that were set up for the project,” says Lars Bäck, co-founder of BlueBarricade. “Our product can consistently perform 1,400 blockchain transactions per second on large multi-tenant and multi-peer installations.”
The newest threshold set by BlueBarricade is not only a breakthrough in the sector that could change the transactions, it has surpassed the accelerator’s initial goal of reaching 1000 transactions per second.
“Traceability, security, trust, and transparency have been the main benefits of using blockchain technology for years,” adds Mikael Bramstedt. “The new and ground-breaking efforts of BlueBarricade enable enterprises to build next-generation business applications, creating the digital economy of tomorrow”