This week in our tech weekly overview, we take you through European Union’s progress in developing European Blockchain Service Infrastructure, Revolut expanding into BNPL and potentially becoming a big competitor to Klarna, Mastercard’s newest acquisition, Australian Fintechs speaking against the “de-banking” practices, BIS’s Cœuré calling on banks to speed up the CBDC efforts, Bank of Montreal announcing an interesting AI partnership, one of UK’s mobile network operators backing out of its plan to not charge for roaming, Microsoft increasing its cybersecurity spending heavily, and big funding in the AI orthodontics.
The European Commission has just announced that the non-profit IOTA has been named as one of the seven providers that will create the European Blockchain Services Infrastructure (ESBI). Back in 2018, the Member States and the EC have agreed on a European Blockchain Partnership (EBP). One of the key missions of the EBSI is leveraging blockchain to create cross-border services. The network nodes will be run jointly by the Commission and the member states and some examples of proposed use include audit trails in notarization, SME financing, European digital ID, data sharing, or digital management of educational credentials.
Apart from The IOTA Foundation, another six companies that EU selected areIOV42 Ltd; Stichting Dyne.org, Infocert Spa, Riddle, and Co Gmbh; Orange Business Belgium SA; Chromaway AB; Billon Spolka Z Ograniczona Odpowiedzialnoscia; Westpole Belgium, Net Service Spa, Flosslab s.r.l
Dominik Schiener, co-founder and chairman of the IOTA Foundation said, “EBSI is an excellent fit, both technologically and ideologically. We do not need to adopt an existing blockchain or to start developing a new solution that fits EBSI’s needs. Our core technology already offers a near-perfect match to the strict requirements and precise specifications for a European ledger infrastructure, and it is ready for widespread adoption with only minimal adjustment.”
Dr. Navin Ramachandran, deputy chairman of the board of directors of the IOTA Foundation added: “The notion of an open-access, scalable, and versatile distributed ledger technology that will form the backbone of Europe’s digital single market is a natural fit to our own guiding principles.”
The interesting news is appearing in the BNPL world, as it has been revealed that one of the most popular fintechs, Revolut, wants to expand into the “buy now, pay later” market. This could be a cause for concern for Klarna which is currently leading the BNPL market.
Nikolay Storonsky, founder and CEO of Revolut, said the startup is currently working on a feature that would let the customers spread the costs of purchases using the Revolut cards. Timeline for launch? Nothing has been officially confirmed yet but it may be expected in some European markets next year.
“Simply a button which you switch on and then your card becomes a buy now pay later product,” Storonsky explained. “Instead of paying upfront everything, you pay a third and then in two weeks time we charge you a third and then another third.”
“For Revolut to succeed in such a crowded market, it’s going to have to offer something most of its peers don’t — that could be enabling users to convert purchases made using Revolut to installment payments at a later point, for example,” said Sarah Kocianski, a strategist at Founders Factory.
“One fear is people will get into debt accidentally because they can’t keep track of all the BNPL purchases they’ve made, often through many different providers,” said Kocianski. “There is also concern that people don’t fully understand the different products offered by providers — interest-free installment payments vs credit, for example — and end up unable to manage payments, or not realizing they will have to pay interest on purchases until it’s too late,” she concluded.
Big news from Mastercard as the tech giant seems to be increasing its digital asset capabilities. The company just announced the acquisition of the crypto startup CipherTrace. CipherTrace distinguishes itself on the market by its ability to analyze huge amounts of blockchain transactions and detecting potential fraud and security threats. By integrating CipherTrace’s solutions into Mastercard’s cybersecurity technology, businesses using Mastercard can manage their digital assets more effectively, not having to worry about breaching compliance obligations.
Ajay Bhalla, president, cyber and intelligence, Mastercard, says: “With the rapid growth of the digital asset ecosystem comes the need to ensure it is trusted and safe. Our aim is to build upon the complementary capabilities of Mastercard and CipherTrace to do just this.”
Financial details were not disclosed by either of the companies.
During a Senate inquiry into “Australia as a Technology and Finance Centre”, several fintechs have criticized the Australian banks for what they referred as de-banking practices, withdrawing banking services from the market. Aus Merchant, Bitcoin Babe and Nium have all address the topic, sharing their experience with the issue, by addressing the Committee.
Nium’s Asia-Pacific head of the consumer business, Michael Minassian said, “It is within the bank’s terms and conditions, (they can) cease offering services at their will. So to that end, there’s no real opportunity to appeal the decision and to gain any further clarity as to why you’d be denied.”
“The reasons that are given by the banks are very opaque,” Minassian added. He also pointed out that out of more than 40 markets that Nium operates in, the de-banking only occurred in Australia.
This was supplemented by Bitcoin Babe’s Michaela Juric who claimed that she has been refused service by 91 banks, put on a terrorist watchlist, and “bullied” the Australian financial watchdog. All three fintechs that voiced their concerns are reporting with Austrac (the financial watchdog) and they must provide SARs (suspicious activity reports). However, CEO of Fintech Australia, Rebecca Schot-Guppy, stated that this level of compliance is not recognized by certain banks. She said, “I’ve got at least 40 anecdotal issues, but I’d say that there’s at least 150 of them that have been de-banked over time.”
“I would say at least 100 of them are fintech businesses, given that the highest amount of de-banking occurs probably in that payments space…but this is also an issue for our wealth tech businesses. And it’s not the wealth techs necessarily being de-banked themselves, it’s their customers, the likes of trading platforms, robo-advisors,” Schot-Guppy added.
The head of the BIS Innovation Hub, Benoît Cœuré has spoken out about CBDCs, urging central banks to speed up their CBDC efforts in the face of stablecoins and the expansion of Big Tech into finance. Currently, central banks across Europe are in the research phase when it comes to introducing CBDCs. However, Cœuré has called for a greater urgency during the Eurofi Financial Forum in Slovenia, stating that “the time has passed for central banks to get going. We should roll up our sleeves and accelerate our work on the nitty-gritty of CBDC design.”
While Cœuré addressed the concerns of the commercial banks and assured the audience central banks are keeping these concerns in mind, he claimed that commercial bank should rather be worried about the threats connected to DeFi, stablecoins, and big tech companies.
Cœuré states that there are three main points that should be considered as CBDCs are being developed: why consumers would want to use CBDCs and how they would want it to look like, how CBDCs would meet public policy objectives, and what technology should be chosen to ensure the smooth and secure introduction of the CBDCs.
Cœuré concluded, “A CBDC’s goal is ultimately to preserve the best elements of our current systems while still allowing a safe space for tomorrow’s innovation. To do so, central banks have to act while the current system is still in place – and to act now.”
Bank of Montreal started cooperating with Riskfuel Analytics which is a Canadian AI startup. The partnership is linked to developing AI-based models for pricing and scenario analysis of structured derivatives transactions. The current work is a continuation of a pilot that has shown very promising results in terms of accelerating the valuation of autocallable notes.
Graham Wells, head, equity quantitative modeling, global markets engineering, BMO, says: “Riskfuel has delivered a cutting-edge proof of concept that promises the most significant step forward in quantitative finance in a generation. Removing the runtime hurdle opens the door for significant advancements in accuracy and realism of structured notes pricing models.”
Ryan Ferguson, CEO, Riskfuel, adds: “Structured notes are traditionally priced using slow numerical techniques that simulate an extremely large number of possible future states of the financial markets. Riskfuel uses Deep Learning to replace these slow simulators with very fast neural nets.”
The UK network operator Three decided to back out of one of its key selling points and announced it will charge its customers for roaming.
“From 23 May 2022 customers who have taken out a new contract or upgraded with Three from 1 October 2021 will pay a charge of £2 per day when roaming within the EU and £5 a day when roaming outside the EU,” said the Three statement. “Pay as you go customers and customers who have taken out a contract before 1 October 2021 are unaffected by these changes. Customers roaming in the Republic of Ireland are also unaffected.
“We know that Go Roam has always been important to our customers and we had hoped to retain this benefit, but unfortunately there are now too many unknowns, which has made it commercially unviable for us to continue. This includes variations to the underlying cost of roaming, meaning we now have no visibility over the maximum amount it will cost us to provide a service for our customers to use their phone while abroad.”
That change has resulted in O2 being the only mobile network operator in the UK that did not introduce flat roaming fee yet.
Microsoft announced it will quadruple its cybersecurity spending to $20 billion in the next five years. Speaking to CNBC, the president of Microsoft, Brad Smith, said that the cybersecurity investment in recent years has not been reflected in the level of protection.
“It’s a big problem,” said Larry Ponemon, chairman and founder of information security think tank Ponemon Institute. “We see lots of organizations making investments in technology that never get deployed.”
So, ironically, Brad Smith is planning to solve the problem of increased spending that does not result in increased protection by spending even more. “I think we have a real shortage,” Smith told CNBC. “Many businesses don’t have the people that they need, either to implement the protections they, in some cases, are already paying for.”
“We see this ALL the time in our customers,” David Kennedy, founder, and CEO of Trusted Sec, said. “These companies will buy products, but not include direct staff to support it or else they can’t get the internal funding approval to support it. So the cybersecurity investments are only half-installed or not at all and just languish. They barely get any value.” He added, “Without the right people in position, you’re never going to be secure, no matter how much money you spend. You can’t simply throw money at the problem by buying a lot of fancy new security devices and software, but that’s often what companies do.”
We don’t often hear about big funding rounds in the orthodontic startup market. The market itself is a niche in the tech sphere. However, here comes the exception. Inbrace, a startup that leverages AI in its teeth-straightening technology, offering an easier and more discreet alternative to braces and aligner trays.
The startup just closed its series D funding, raising a total of $102 million. The round was
led by Farallon Capital Management and Marshall Wace with other investors including BlackRock, Endeavour Vision, Vivo Capital, Novo Ventures, venBio, and several other existing and new investors.
Inbrace offers a Smartwire device that is customized to each patient and programmed to fix any orthodontic issues using 3D modeling and AI software. The new funding will support InBrace in expanding its sales and marketing initiatives across the U.S.
“InBrace taps into the recent Zoom culture that has caused a surge of interest among consumers who want to improve their smiles with a more predictable and less disruptive process to their daily lives,” said CEO John Pham, D.D.S. “InBrace is offering an entirely new option for orthodontists to meet the needs of the 178 million consumers who could benefit from orthodontic treatment but who are currently not walking into their practices.”