Financial Technology Changes in 3 – 5 years

July 27, 2016

Fundamentals of banking is dissolving and being replaced with the new fintech world now to 10 yrs ahead.
The seeds are being sown now through the last 3-4 yrs. mobile banking, millennials, ubiquitous internet, evolving technology for distributed, libertarian controls being the triggers.
Conventional technology and process is fast turning a liability in this new order.

In the year 2018 and ahead any banking technology company  will find it tough to survive… as all the customers themselves will have a huge pressure on their profitability.

  • Security considerations are a reaction to the new fintech challenges.. Tighten and push the barriers higher
  • The millennials drive the change with less apprehension of risks in using alternate financial channels across mobile platform
  • Lower n lower durations for innovation in products in the market in future
  • Change in future can be driven from even just ease of use, minor margins, superficial payback et als.. with minimal guarantee of account security
  • Banks / FIs will have to downsize considerably, invest in morphing tech space, to get similar margins as the innovators
  • Aggregators, subscription based service, SaaS model will be key to margin reductions
  • Open APIs are fast becoming the future of Financial World, not imagined 3 – 5 years back…

Implications for Tech Firms:

  • Be lot more agile, startup like in modules : Reduce cycle times for new ideas/ innovations for go-to market
  • Take calculated risks in new product developments.. 90% can fail
  • Identify the whitespaces and invest in even lower spectrum of the market in newer products independent of the main product line
  • SMBs will be key to rolling out innovations not the traditional route from large FI downward
  • Hype cycle identification is key to move forward aggressively

Lending Products:

  • P2P Lending is going to be viral and spread to SMBs
  • Syndicated lending may be the most important area of expertise as all lending converges to syndication due to P2P lending
  • Fintech innovations like blockchain can be core to syndicated or any form of lending, need to invest on it
  • Innovate in faster processing / turn-around, lesser exception handling, reduce operations pressures / workarounds as implemented today for all lending products

Syndicated Lending:

  • Higher demand for straight through processing
  • More integrated front to back office origination
  • Crowd Lending integrated with main syndicated platform
  • Streamlined payments, billing in the servicing of Deals
  • Crowd or networked trading platform
  • Move from the niche segment of high value low volume product usage to high volume, straight through processing with multiple lenders and single borrower deals
  • Blockchain based settlement process replacing the Markit and Clearpar or even depository services like DTCC or Intralinks. Or these services will adopt some of the new blockchain based new platform
  • Open up the API…

Nice infographics: It is laden with huge significance for the future..





July 13, 2016

Payments market can be viewed as merchant trading onsite or core forex driven remittance payments. TransferWise is focused on the multi-billion-dollar foreign exchange remittances and non-remittance payments.  Its intent is a libertarian goal of free flow of money beyond borders addressing the issues of high hidden fees, exchange rates and time taken to effect the payments.

Market Size:

The World Bank reports the global market for remittances was about $580 billion in 2015 and forecast to exceed $700 billion this year, with UK only estimates of $21 billion.  TransferWise’s business strategy is built on scaling in volume and value with low margins, recently joined the Billion Dollar Unicorn Club.

Per Transfer Average Amount Comparison:

TransferWise: $2300
WorldRemit, Azimo, or Remitly:  $800 - $1200
CurrencyFair:  $5000+
JPMC and other banks: $12500 - $7500

Go To Market Strategy:

GTM strategy is to provide a blueprint for delivering a product or service to the end customer, taking into account such factors as pricing and distribution.

“TransferWise’s growth strategy is centered around referral channels. TransferWise’s phone reps stood out in their ability to quickly understand and resolve issues, doing it with some humor.” [Link]

TransferWise is laying new grounds on how to engage customers, in acting as its virtual army of individual PR agents, while giving equal splits to both referrer and the referred customers, as well as testing various referral amounts.

Transferwise has presence in more than 25 countries beyond all of Eurozone with about 35+ currencies it deals in.

[GTM Link]   |  [Currency and Countries Link]

Revenue Model and Monetize Customers:

Traditional banks, Western Union and the Money Shop typically charge between 5-8% for transfers, as well as forex and other hidden fees. TransferWise charges a flat commission, ranging from 0.5% in UK to  3% for transfer to Ukraine.

Transferwise has transferred more than $4.5 billion in transactions till now, with a growth of 15%-20% month on month. TransferWise had revenues of $13.8 million with a net loss of $11 million for the year FY 2014-2015. The loss of $11milion on a $14million revenue indicates a burn rate of 25 million dollars per year.

If TransferWise were to gain about 5% of the global remittance market, their annual revenue would exceed GBP 175 million a year (0.5% fee charged on 35 billion).

[Model Link]  | [Revenue Report]

Technical Architecture:

Total internet driven with no brick-mortar presence, it is not the most efficient/ cost effective transfer mode, but the one amongst the most tech savvy. Open (proprietary) APIs now drive a larger part of its future capabilities, in effect allowing it to be partners of nearly any banking entity across the world..


Critical Note:

In the highly competitive, price sensitive USA-to-India corridor, TransferWise ranks a low 7th, thereby be cautious of advertising fees and costs as its USP. This is a market that is headed for a showdown of low fees, nett charges and the trustability factor for the consumer. Stripping in public or such acts can catch eye balls, but to retain customers will be a challenge in the post Brexit, digitally connected fintech world.

Concluding Note:

Despite the usual risks, TransferWise has already shown that it can be a leader in technology, domain, marketing, branding and is poised well.

Game Of Chess On Bangalore Roads

July 4, 2016

Chess afficiandoes are very familiar with strategies of opening, middle and end game. The deeply intellectual feeling, chess evokes and the euphoria of winning the game over an opponent. Employ these strategies over and above the usual follies either side can commit. That euphoria is now matched only by beating the Bangalore traffic in reaching your destination in a decent enough timeframe.
As you leave home or your start point, you need to have mastered all the opening moves, the routes that you can take to reach the destination. e4…e5, well that is but just the first level of graduation for all the novices, who start off with a minimal plan and knowledge of alternate routes to be taken. The google maps or your own navigation app does help a lot, but knowing the terrain well is deeply important, as they fend you off to a dirt track or a messier route, if you are careless. Even better an opening strategy is to pick an early morning start or a mid-day run that can compensate for lack of planning.
The travail starts if you have picked the peak hours and about little way into the route you take, you have the massive pile up of cars and buses, not to mention the other sundry vehicles of all hues, to challenge your brains to pick the alternate route. Nxc6 check … ka8, the middle game attacks, patience as in chess is highly recommended, plan and replan with a deep breath and do not lose your temper any time ever. Use the google maps, all tools and apps including whatsapp, the FM updates to pick a suitable alternate escape route. The middle game strategy, is the most important, as it is in chess as it is complex with alternatives and often the situation you or the opponent commits the blunders. Nary a chance that you pick that hopefully less crowded road, provided it is not washed away by rains, that gives a smooth pass. You will find it blocked by a cow or a larger vehicle that has equally decided the same route you choose. Well the huge euphoria you can get when you pass by a service road easily to half a kilometer ahead when the main route is clogged, is mostly short lived as you land right at the start point of the pile up. Not to mention the dug up road from last night of what you always believed to be just newly laid and good for the year ahead. Chess games teach each one of us the virtues of deep thinking through the middle game, nothing should be left to chance. Given all the tools and apps, I am sure it is a novice who should be left trapped in these “chakravyuh” you can barely go back from more than midway through to your destination. But presuming you have done all, that can possibly be thought through on, you ought to be on the way to be the victor in this battle with the Bangalore traffic, if you discount your frayed nerves and exhausted feel.
The end game is usually the most interesting of it all, with just the last stretch, the proverbial “last mile” to go. Typically all powers and pieces are gone, you have to trust what you have is, what gets you through. But as in chess beware of strategies of the end game, there certainly can be the impossible 40 min pile up that should have been a 5 min run. So yet again keep watching the Google map updates of the traffic delays and if you see even the slimmest chance of the last mile turning monstrous, take a detour if you can around half the city, or park your car at the nearest parking area and walk it… Pawn to h8 queen, you know the huge smile you can sport that says you outsmarted your opponent even in the last stretch.
All in all, each day, twice a day you certainly can feel the adrenaline pump with the same spirit of a tennis star, the athletic Olympians if you keep the positive spirit in it all. Never let the yogic you go off guard for that will be easiest victory the most omnipotent opponent of ours looks for. Enjoy the ride each day knowing that you are winning the race daily..!!