AntForest, an award winning Techfin gamification app – Global Climate Action

AntForest, an award winning Techfin gamification app – Global Climate Action 800 600 Efi Pylarinou

AntForest, an award winning Techfin gamification app – Global Climate Action

In early December, the Two lake forum held an event in Zurich around Fintech & Wealth management. The three Z: Zurich, Zheioang, and HangZhou; discussed about the strengths and weaknesses of the two CHs – China and Confederation Helvetica (CH) – and how to collaborate.

Obviously, `scale` is what China has with its pros and cons. Desertification is one of the scary large scale issues that China has been facing for a while.

The Swiss country head of Alipay, Karl Wehner, spoke at the forum and highlighted the tech accomplishment of MyBank (e.g. 3-1-0 lending, 1% Non-performing loans), Alipay`s fraud detection quality control, and briefly the viral success of AntForest.

AntForest is a 3yr old Corporate Social Responsibility – CSR – initiative of Alipay that took a life of its own. It won the 2019 UN Global Climate Action Award.

A great example of gamification and network effects on an ecosystem like Alibaba. At launch it was one of the many charity projects that were planning to collaborate with Chinese NGOs to plant trees and contribute towards creating the Great Green Wall to block the advancement of the Gobi desert. 

China has been facing a huge problem from the northeast, as the desert has been growing and as China has very little land that is arable [1] (only 12%). Sandstorms in Beijing have become more frequent. 

In 2016 Ant Financial launched a charity app, AntForest, for Alipay users. People could choose from a list of low-carbon activities like, using public transportation and bikes, recycling, reducing plastic usage, and more; and earn `green energy points`. These points could be used to buy virtual seeds to plant trees, and once these virtual seeds had grown a bit, through virtual caring (watering etc), then an actual tree would be planted in some desert.

AntForest users, could watch their actual trees grow through satellite images. 

One salix mongolica in Kubuqi desert, a sea-buckthorn in Tongliao,  two alxa in Inner Mongolia etc. have been planted by Jessie-Chee. She watches them and is very proud of them. She competes with other friends who have more trees than she has. 

AntForest gaming features and visuals, have created a virtual social network that Alipay did not have before (unlike WEchat). In September, it was reported that AntForest and the Chinese NGOs that support the actual planting of the trees, have planted 122 million trees and the social network has grown to 500million users! The trees cover an area of 112,000 hectares, making the AntForest initiative  the largest private-sector tree-planting initiative.

AntForest users living close to the borders with the desert have also been involved in planting the trees, changing lifestyles dramatically to earn energy points and feeling part of a virtual communities with strong purposeful ties. 

Alibaba is now using its ecosystem to extend the appeal of AntForest. 

Its new retail concept store, Hema Fresh, offers customers 21 green energy points when they shop without any plastic bags. Hema fresh, [2] not only has high quality food and online ordering and delivery but also a next level integreated smartphone experience. This includes complete product information by scanning QR codes of product labels, automated check out via RFID and payment via Alipay. 

Alibaba`s second hand second-hand trading platform, Idle Fish, rewards users recycling their old items with green energy points.

Alibaba`s Dingtalk, a chat and collaboration app for video conferencing also awards green energy points, for users that avoid commuting for in-person meetings.

AntForest has inspired and provided knowledge to GCash in the Phillipines to launch GCash Forest this past summer with the goal to 365 thousand trees in 365 days. 

Gcash [3] is the top mobile banking app in the Phillipines with 5million downloads and 20million users. 

The Crosslend & Solaris Bank partnership is key to the European debt Securitization market

The Crosslend & Solaris Bank partnership is key to the European debt Securitization market

The Crosslend & Solaris Bank partnership is key to the European debt Securitization market 800 534 Efi Pylarinou

The Crosslend & Solaris Bank partnership is key to the European debt Securitization market

Santander Innoventures has not been shy in investing in Fintechs in the lending space. Kabbage is one of their earlier and well known portfolio companies and strategic investments. Several others that offer banking services in Emerging markets, offer loans.

In October, they led a €35 million Series B round for Crosslend, a Berlin based startup offering a digital debt marketplace to securitize all forms of debt from banks and alternative lenders.

Securitization is still a tainted term even after a decade from the financial crisis.

Sadly, the European securitization market has not recovered since 2007, whereas the US market seems to be approaching pre-crisis levels. The mix has changed in the US with a clear reduction in the non-agency market and an increase in the issuance of consumer asset-backed securities and collateralized loan obligations. Issuance in Europe approached in 2018 just one third of the 2008 peak issuance.

EU 2018 issuance = € 269 billion

EU 2008 issuance = € 819 billion

Both regions created new regulations after the crisis. The EU continues to develop new standards that the market awaits to adjust to. The STS — Simple Transparent Standardized — framework is the latest one under development. [1] Can we blame the regulators in the EU for the anemic growth in the EU securitization market?

This past June, Younited Credit, a French fintech marketplace for consumer loans, placed €156million in a public securitization listed on Euronext (Youni 2019–1). They are the first to get the highest rating on its “senior” tranche, rated AAA/Aaa by Standard & Poor’s and by Moody’s.

Funding Circle has also engaged this year in securitizing loans but through private debt placement deals. By July, Funding Circle had reached the total amount of loans securitised to £755m. Its latest transaction was rated AA / Aa3 ratings by S&P and Moody’s, respectively. [2]

So, where are the Fintechs to disrupt the complicated securitization process? Since the 1970s that securitization was designed and proved its product market fit, the pros for loan issuers are clear and pretty much unchanged.

Securitization for issuers, means off-balance-sheet treatment. It is a way to unlock capital as loans move off the originator`s balance sheet.

This can reduce capital at risk requirements for banks and replenish capital (potential to borrow at lower rates through higher credit ratings).

The reality is that the process is complicated and expensive. As a rule of thumb it starts making economic sense when pooling hundreds of million of assets. This is in itself is tough because there needs to be some homogeneity in the underlying pool (common sense but also regulatory standards). In addition, a new company needs to be setup, the SPV that will hold the pool, and legal and tax issues need to be addressed.

Crosslend a German fintech is taking a stab at this tough but highly scalable problem. A new of them from their early days, through one of their early investors, Lakestar. They aimed to be a Cross-border online lending platform for institutional investors and borrowers.

They have actually pivoted since and developed a solution to automate the securitization process of loans in siuch a way that it becomes worthwhile to securitize smaller pools of loans — between 20 and 100 million euros.

Their automation includes a with a high-quality data warehouse which maximizes transparency of the newly issued securities and keeps transaction costs low.

Their total funding is now €49million and includes strategic investors like Santander InnoVentures and ABN AMRO ventures.

The combination of Crosslend and Solaris Bank, the successful German Baas provider, can become one of the growth stacks that propel the CMU (Capital Markets Union) to the next level.

The CEOs of Crosslend and Solaris Bank (already in partnership since last year) are aiming to fully automate loan securitization with no cross-border frictions and create securitized pools for as little as 20million loans.

Using the Solaris Bank balance sheet to originate loans and the transparent automated technology of Cross lend, they aim to create a new model, `Digital Securitization as a Service`.

The partnership allows Solaris Bank to establish what they call ‘The Balance Sheet Light’ model. Loans are originated using Solaris Bank`s license. These can be passed on to investors with a small delay and without putting a long-term strain on the bank’s balance sheet.

“The Balance Sheet Light model is revolutionary. As a platform, we match supply and demand in the credit sector. At the same time, we maintain the flexibility to hold loans thanks to our banking license and can actively manage our balance sheet. With this approach, we can maximize the efficiency of our equity and make the securities market much more efficient and transparent.”

Alexander Engel, CFO solarisBank

The Crosslend SolarisBank combo could become the technology that makes the STS — Simple Transparent Standardized- vision of the CMU reality.

Walmart. Bricks, Clicks & Voice

Walmart, the retail giant combining Bricks, Clicks & Voice

Walmart, the retail giant combining Bricks, Clicks & Voice 1500 1000 Efi Pylarinou

Walmart, the retail giant combining Bricks, Clicks & Voice

Retail giant Walmart is not included in the FANGs or the GAFAs but is part of the THWAC — Target, HomeDepot, Walmart, Amazon, and Costco. Walmart is also the №1 employer in the US, ahead of Amazon, the e-commerce giant that is also in other businesses like cloud, delivery, entertainment, payments, smart home devices, and physical stores.

Retail giant Walmart is a native of the THWAC tribe that can actually stand respectfully next to the Bigtech Amazon and other large non-financials that are using Fintech technologies to grow ecosystems and transform digitally.

Walmart revenues were over half a trillion in 2018 and Amazon`s were less than half. Amazon, however, has had double-digit revenue growth over the past decade, ranging around 30%, whereas Walmart has been on the defensive with single-digit revenue growth (no more than 5%). [1]

The Walmart`s Smart transformation

Walmart serves its employees

Walmart invested $2.7 billion in retraining its employees in 2016–2017.

In late 2017 it offered its then 1.4 million employees and associates (people working part-time) a free financial wellness app. Even is an Oakland based Fintech with a budgeting easy to use solution (with saving, investing and borrowing capabilities). By the end of 2018, Walmart reported 2.3million employees (including associates). Recent reports show that over 300,000 Walmart employees use the Even app.

Even features, Instapay, that allows workers to qualify for an advance of up to 50% of their paycheck based on the hours you’ve already worked. Walmart subsidizes the use of these features, which is free to use a few times per year.

Walmart offers free financial wellness tools and protects its workers from the payday loan sharks.

Walmart continuously innovates in payments — the heart of any economy

Keep in mind that Walmart clients are mostly low-affluent people. The impact in their daily lives of low-cost payment options is larger than for the typical client of Amazon, who is in the mid-affluent range and higher.

Walmart started in 2015 with banking partnerships to offer all sorts of lower cost and convivence payment options. The WalmartPay was launched in 2015 and allowed shoppers to pay at the counter with a QR code.

Walmart has been fearlessly adding more payment options.

The Walmart prepaid card is reported to have resulted in $2 billion savings for Walmart customers over the past 2 years (details here). This prepaid card was launched in collaboration with Green Dot and Common Wealth.

Green Dot is the world`s largest prepaid card company by market capitalization ( NYSE: GDOT ).

Common Wealth is a Boston based company, designing and building fintech solutions that address challengers for financially vulnerable people and focus on consumer financial health.

The Walmart money transfer offerings are several and always through partnerships that enlarge Walmart`s customer base.

First was the Walmart2Walmart offering (W2W) that was launched as early as 2014 in partnership with RIA financial. In 4,000 Walmart physical stores, people with the Walmart app can transfer money (without a bank account) and the cash can be picked up by the recipient in any of the other participating stores. The cost is $4 to send up to $50, $8 to send between $51 and $1,000, and $16 to send between $1,001 and $2,500. Slightly lower than Western union, but real-time.

The next addition was sending money to the world via a collaboration with MoneyGram.Walmart2World offers pickup at any MoneyGram.

Through BlueBird2Walmart account holders of Bluebird — a US checking and debit alternative — can send money online for cash pickup at Walmart stores.

Last month, with Capital One, they launched credit cards with high cashback features.

The cobranded Capital One® Walmart Rewards Mastercard® and the private-label Walmart Rewards Card.

At the same time, Walmart has filed for a cryptocurrency patent, the Walmart coin to be used in its ecosystem. Most probably USD backed, with rewards and interest earning. [2]

Walmart continuously innovates in Ordering & Delivery

Walmart has increased its pickup service and reports show that they are ahead in this area compared to Target, Kroger, and Whole Foods.

WalMart`s service is free. It includes 2000 store location for pickup already (compared to 22 for Whole Foods) and plans to have over 3,000 stores by next year.

Consumer data shows that not only the average order is double the size for curbside pickup but this free service has brought new clients to WalMart that more affluent and include health, beauty and household items in their cart (50/50).

Walmart. Bricks, Clicks & Voice

Cowen`s research calls for a $35billion Curbside market, pretty soon.

“Curbside is a manifestation of Bricks-Meet-Clicks”

The opportunity seems to wide open still and Walmart is a leader. According to’s Grocery Survey 2019, only 20% of Americans have used a grocery pickup service, and they are primarily located in the south (Texas, Florida, Arkansas…). Among those using grocery pickup, 39% opted for Walmart’s free service.

Walmart is also innovating in Voice-meets-Bricks market too.

Three years ago, in September 2016, Walmart bought Jet, an online retailer, for $3.3billion. Jet has been running independently but at the same time cocreating with Walmart innovative services.

For example in large cities with few or no Walmart stores, Jet has is positioned to serving these urban customers. In NY city, Jet offers a “city grocery experience”. Customer can choose 3h scheduled same-day or next-day delivery for groceries, daily essentials and other items. Shoppers can add customized delivery instructions.

Walmart has also partnered with Google and offers voice-activated shopping.

Just say ”Hey Google, talk to Walmart” and the Google Assistant adds the items directly to their Walmart Grocery cart.

Zero-commission brokers selling order flow are the new intermediaries. Who will disrupt them?

Zero-commission brokers selling order flow are the new intermediaries. Who will disrupt them?

Zero-commission brokers selling order flow are the new intermediaries. Who will disrupt them? 800 531 Efi Pylarinou

Zero-commission brokers selling order flow are the new intermediaries. Who will disrupt them?

In October the US market witnessed the Robinhood effect. Schwab slashed its stock commissions to zero, which in turn forced TD Ameritrade, E-trade, Interactive Brokers, Ally Invest, and Fidelity to follow suit over the next few days. Schwab called this the zero-commission brokerage war, on CNN. A week or two later, after Bank of America reported better than expected earnings, they also announced the expansion of their online zero-commission program through the Merrill Edge Self-Directed program.

One private Fintech, Robinhood, has managed to drag along all these publicly traded companies. Some of them are pure brokerage businesses and others are much broader financial services providers. They are all however public and disclose their business practices and their revenue sources. Robinhood, despite being a native Fintech, has been relatively opaque about the way it makes money and its revenues.

Now that one private company and half a dozen publicly traded providers have all zero stock commissions, let’s look at how things are working behind the scenes. How are they making money from the happy clients that trade stocks for free? The happiest ones being those that actively trade, the high turnover DIY individuals or smaller money managers. There are only two ways to make money from such `users`: (a) from the interest rate differential on the cash balances they hold with you, (b) interest on margin balances © from payment on the order flow data that is sold to HFT firms, (d) by charging a subscription fee for the service.

Robinhood is the only one that is offering a subscription service called `Robinhood Gold` (1st month free and then $5 a month) to use premium services like professional research, real-time market data, etc.

Robinhood has just this month figured out how to pay interest to its users through sweep accounts, after making a regulatory goof last December with the launch of a cash account. They are now offering 2.05 % interest. Which seems considerably higher than what the public companies are offering. Feb 2019 figures show that IB ranked on the top with up to 1.9%, Schwab and TD Ameritrade were around 70bps and E-trade around 40bps. [1]

Where Robinhood gets shady and is not in alignment with Digital anti-feudalism that Fintechs supposedly represent, is in selling order flow data to HFT players, like Citadel and Virtu Financial.

Alphacution has researched this area in detail and shows the latest figures of order routing revenues (2018) in equity markets. Robinhood does not need to disclose all its revenue components but as a broker dealer it has to disclose some financial data. Alphacution uses what was disclosed to estimate Robinhood`s order flow estimate. There is a surprising jump in Robinhood`s 2018 revenues from selling order flow — over 200%. This shows that Robinhood has automated this process and that customers may not be getting the Best Execution.

Zero-commission brokers selling order flow are the new intermediaries. Who will disrupt them?

Last October Bloomberg reported, that Robinhood earned more than 40% of its revenue in early 2018 from selling its customers’ orders to high-frequency trading firms, or market makers.

This heating up of Robinhood`s order flow revenues seems to be the case for the entire sector but at 1/5th the size. Alphacution looks at the main players and calculates a 40+% increase in the sector order flow revenues in 2018.

Zero-commission brokers selling order flow are the new intermediaries. Who will disrupt them?

The only company that is not participating in this business is Fidelity. As Kathleen Murphy told CNBC, they are the only ones that do not take payments for stock or ETF trade flow. At least with Fidelity, there is no inherent conflict of interest with regards to best execution.

Digitization has grown clearly benefited customers in terms of better user experience and lower fees. Robinhood has pushed the sector to offer zero stock commissions. This happened in late 2019, while 2018 seems to be the year of substantial growth in another business:

The Business of buying and selling equity order flow data exploded in 2018.
Robinhood is leading this explosion.

This market is not mainly Citadel and Virtu Financial. Alphacution shows that they handled only 15% of the flows and the sector has grown since 2013 over 70%.

Zero-commission brokers selling order flow are the new intermediaries. Who will disrupt them?

Stock commissions go to zero and behind the scenes, equity order routing payments explode.

Thank you very much Robinhood.

Discounts brokers are transforming into businesses selling order flow.

These are the new intermediaries between the end customer and those in the opaque order routing business.

Who will disintermediate this space and bring those order routing commissions to zero and full transparency so that the best execution is built-in? Are we too far away from such a disruption?

Who will offer asset managers a way to pay direct for order flow and get best execution? Will this be the reason to tokenize publicly traded stocks and use smart contracts to handle order flow?

EFT Market

Will Robo advisors take control of the ETF market?

Will Robo advisors take control of the ETF market? 800 533 Efi Pylarinou

Will Robo advisors take control of the ETF market?

Betterment and Wealthfront are 11 and 8 years old. They set the tone in the market for Robo-Advisors, that are neither Robots nor Advisors as Paolo Sironi kept saying more than 4 yrs ago. They got leapfrogged by the incumbents which as of today manage 10 times more assets through their various digital wealth offerings.

Autonomous Next Research [1] shows a ratio of $550 over $50, Incumbents over Fintech Standalones as of the end of 2018.

EFT Market

The tug-a-war between no-human advice (which was the original purists’ approach), hybrid (some human advice and or someone to call); has tilted towards the hybrid advisory model.

The tug-a-war of flat fees versus % of AUM; remains tilted towards the % of AUM which was the conventional one. Flat fee advisory have been offered by XY planning network and directly to the consumer only recently by Charles Schwab (see No Trade-offs: Give customers everything they want as cheaply as possible).

Back in 2016, just after Vanguard stepped into the market with their Personal Advisor services, most well-known institutions [2] were predicting between $ 2.2 trillion and $ 3.7 trillion in assets to be managed by Robo-Advisory services in 2020 and $16 trillion by 2025.

Well, 2020 is around the corner and we have not reached $1 trillion yet.

The customer remains king. They can get digital-only service for as low as 15bps (once Vanguard Digital is live) or for $30 per month a hybrid service from Schwab.

The ETF market, which is the main product universe that powers all digital offerings, has been growing and has reached $4.7 trillion. Digital wealth seems to be managing 12% of ETF assets (as of end 2018).

EFT Market

It took the ETF industry a decade to reach $1 trillion in assets (in 2010). But the pace of growth picked up significantly thereafter and averaged close to 20% per annum. Will this pace hold, if equity markets enter a bear trend?

Can digital wealth maintain or improve its 12% share of the ETF market?

The growth in their AUM only started to be meaningful from 2016 once Schwab and Vanguard stepped in. Edleman`s 2018 deal to buy Financial Engines, was another significant contribution to Digital wealth growth managed by robos.

Aite group`s research in 2018 predicted $1.46 trillion for 2021 and BI intelligence $4.6 trillion for 2022. [3] Aite`s numbers mean that Digital AUM needs to grow at a rate of 38% per annum from 2019–2021 to reach the $1.46 trillion by the end of 2021. If this materializes and the ETF market continues to grow by 20% (reaching $8.1 trillion), then Digital Wealth will be managing 18% of the entire ETF market.

In the more aggressive scenario suggested by BI intelligence, the implied growth rate for Digital AUM from 2019–2022, is 70% per annum from 2019–2022. If this materializes and the ETF market continues to grow by 20% (reaching $9.5 trillion), then Digital Wealth will be managing 48% of the entire ETF market.

EFT Market

[1] Infographic from Roboinvesting event in London, Lex Sokolin`s keynote. Other research groups don`t take into account Edelman and Merill Edge and therefore arrive at a lower number. Investopedia (Robo-Advisors 2019: Still Waiting for the Revolution) reports that as of mid 2019, $440 billion is managed by robo-advisory services according to Backend Benchmarking, and a $350 billion range is Aite Group`s numbers.



Size matters Digital Deployment

Digital deployment in small and medium sized banks remains anemic

Digital deployment in small and medium sized banks remains anemic 800 533 Efi Pylarinou

Digital deployment in small and medium sized banks remains anemic

Temenos released in April its annual report[1] on the State of digital sales in banking and Jim Marous provided insights in Banks Not Meeting Digital Sales Expectations. In late August, in The Illusion of Digital Transformation in Banking he categorized the digital readiness of banks in 5 degrees. Which made it painfully clear that 83% of banks are NOT yet on a  large-scale digital transformation track.

Digital Deployment 1

I was even more disappointed with these observations:

More concerning is the reality that most of the high marks for digital sales continue to be garnered by only the largest organizations.

 Larger banks ($150B – $2,500B) not only have a financial and technological advantage, they benefit from a head start in the deployment of all digital account opening capabilities, allowing them to gain a share of mind advantage through media and word of mouth. 

Fintech technology was supposed to democratize banking not only for the end-customer but also for the smaller, less national, less international financial services providers. After all, fintech is by now overweight B2B providers with a rich variety of Saas offerings. As Jessica Ellerm pointed out ‘Something’-as-a-service, is the new fintech paradigm.

Despite the plethora of B2B unbundled fintech services out there, anything you can imagine as a service; the mid and smaller size banks remain overall behind. Of course, there is a variety of metrics and KPIs that one can use to measure their digital readiness. From mobile account opening, save and resume functionality, small business account opening, etc.

Digital transformation these days requires internal cultural and technological changes whose impact will be seen 3+yrs down the road. That means that mid to small size incumbents remain at a disadvantage. Their Boards surely won’t approve a budget for a transformation plan that may see results in 3 years. Surely,  they don’t have internal strategic funding mechanisms like Goldman Sachs has. Goldman’s Principal Strategic Investments group has made key investments in Kensho and Tradeweb and helped create Wall Street chat platform Symphony, and much more.

Small and medium sized banks are also exclusively served and in touch with Fintech innovation through their existing financial software providers. They in turn will only sell them innovations that they have integrated in their offerings and keep them hostage to those legacy systems. 

One promising initiative was launched in late 2018 by Fintech Forge. The so called Alloy Labs Alliance, is focused on addressing the innovation needs of smaller banks. They have 12 founding members and 20 additional members. This is a member driven innovation lab for smaller banks. 

Small and medium sized banks remain trapped. Unfortunately, the democratization of financial services, the explosive growth of Fintech Saas offerings, has not reached them. Size matters.

[1] The report includes the Temenos proprietary ‘Digital Sales Readiness Matrix’.

Dumb Pipes

Spotting `dump pipes` during the re-bundling of banking, is not easy

Spotting `dump pipes` during the re-bundling of banking, is not easy 800 439 Efi Pylarinou

Spotting `dump pipes` during the re-bundling of banking, is not easy

`Buy versus build` continues to be a discussion for incumbents.  Shared infrastructure allows for rapid deployment, economies of scale, and expansion in additional markets. On the other hand, incumbents have cultural issues and technology integration challenges that are real.

Increased Saas model adoption and APIs, make it difficult to predict whether incumbent banks or Fintechs are becoming the plumbing of financial services. For me, we actually need to reconsider whether this should be a question at all.

Two or three years ago, the `dump pipe` debate was hot and terms like Big banks becoming Dumb Pipes or Dumb pots, were trending as discussion topics in articles, conferences and debates [1].

`The “dumb pipe” debate originated from the telecom industry and there is a lot of literature on the subject. The grandfather of the debate is David Isenberg who in 1997 published the seminal paper The Rise of the Stupid Network.` Excerpt from Andra Sonea`s post On banking “dumb pipes” and “stupid networks”

We have been using the `dumb pipe` term because it works in the attention economy which is dominated with trendy jargon. But we each map the term to a different concept.

We are actually even biased. When we look at a Fintechs with a B2B Saas offering like Mambu, then we may think that it if Mambu powers an incumbent bank to offer lending, then maybe the bank is at risk of becoming a dumb pipe. On the other hand, when we realize (if we do at all), that Mambu is powering N26, we don’t classify N26 as a bank with a high risk to become a dumb pipe.

Mambu is a great example of a Fintech specialized in a Saas core banking offering. It powers up Oak North bank, which is the No.1 UK challenger bank. It is the heart and brain of the ABN Amro`s digital banking spinoff, New10, that focuses on SME lending; and more.  Mambu does not offer the banking license (a different approach to Solaris Bank). Just by looking at these two examples – Mambu and Solaris Bank – that have unbundled financial services in different ways; we have to pose the question `Where is the value being creating?`

  • Powered by Mambu means: Go to market fast with a Saas cloud-native solution – Client has the banking license; Fintech has the tech – Who is the dumb pipe?


  • Powered by Solaris Bank means: Get into banking with a Saas cloud-native solution – Client can offer banking services without a banking license of its own – Baas – Fintech has the license and the tech – Who is the dumb pipe?

The `dumb pipe` threat was native to the digitalization phase of unbundling as the disruptive force that was going to dominate. Now we are in a re-bundling phase and fintechs are growing their stack of offerings, incumbent financial institutions are transforming their offerings, and tech companies are also stepping in. From Habito powering the mortgage offering of Starling bank; to Kabbage powering Santander`s business loan offering, to Motif launching structured products for Goldman Sachs; to Goldman powering the Apple card; to Solaris bank powering Alipay`s acceptance in Europe; and TrueLayer powering Monzo

Starling Bank & Habito
Kabbage & Santander
Motif & Goldman Sachs
Goldman & Apple
Solaris Bank & Alipay
TrueLayer & Monzo

I hope you are convinced that we can’t spot easily dumb pipes in this kind of world. If business expansion is powered through a Saas cloud offering, then the next question to ask is whether this powers your ability to offer advice by analyzing what is processed in the pipes and whether it enhances your brand through strengthening your trusted relationship. As the re-bundling continues and the commoditization of transactional banking services also continues, the

Last man standing will be Brand and Advice[2].

If you use Saas offerings towards offering advice and enhancing your brand, then there is no reason to fear becoming a dumb pipe.

[1] Are Banks Destined To Become The Next “Dumb Pipes”? via Tech crunch

Banks May Be Turning Into Dumb Pots Of Money via Forbes

The Big Banks Are Becoming `Dumb Pipes`; As Fintech Takes Over via CBinsights

[2] Inspired, copied and stolen from Gary V`s tips from his the recent at The Financial Brand Forum’s. See 9 Priceless Tips For Financial Marketers From Gary Vaynerchuk

Don`t confuse People-centric Banking with Customer-centric Banking

Don`t confuse People-centric Banking with Customer-centric Banking 800 551 Efi Pylarinou

Don`t confuse People-centric Banking with Customer-centric Banking

A bank that is people-centric is one that supports, inspires, and grows a community with strong ties. This is much more than a customer centric bank. The customer centric hashtag may mean a great app that is simple and easy to use, or an onboarding process that is fast, secure and efficient, or a rich menu of choices of products, or an adaptive learning chatbot, or a transparent advisory service,….

A genuinely people-centred approach to business, includes the way a bank handles a delinquent mortgage or loan payment. A bank that starts by asking `Why` the delinquency is a people centric business. It stays in conversation with the customer, shifting from a transaction centric mindest and focusing on supporting the client to move forward.

A bank that has customized tech solutions to advise and support the customer who can’t pay, even if that means no transaction for the bank. Gi Fernando MBE, founder of Freeformers, refers to such a case implemented at Barclays in their mortgage area. Instead of repossessing homes of people that found themselves in long term financial difficulties, they connected them to other organisations that could them (from government organisations to accessing money from different sources). His chapter `Banks at the heart of a people centered economy` in the People Centered Economy book goes into more details.

Here is another concrete example of how a people-centric bank operates. Frost Bank is a 150-year-old Texas based bank that started off as a small mercantile store and is now one the 50 largest banks in the US. Frost bank has also been receiving the Greenwich Excellence award in the middle market  and small banking category.

What caught my attention is their Optimism campaign called Opt for Optimism. They chose to link Optimism with financial health. They are a concrete use case of a bank whose focus is on supporting its customers to thrive in life, which inevitably includes financial issues.

First, Frost Bank embarked on a research study about the link between Optimism and financial health. Here are some of their findings:



They published their research in Mind over Money showing how attitude and mindset toward money impact financial health.

At the same time, they launched a campaign about Optimism through a 30 day challenge during which people can join in performing 30 acts of optimism. They also created a community sharing portal to inspire each other. People can also explore the financial habits of optimists,  watch inspiring films the bank produced for the campaign and find out why Frost Bank cares about something like optimism in the first place.

They are building a community around intangible values that we all care about even though they are not reflected in productivity and GDP numbers directly. Their lack of, is reflected in the fact that burnout has become officially a disease according the WHO. Does your bank know  that you are sick or that flirting with this disease? How would you feel if your bank  actually advised you on how to prevent falling sick from one the rising risk factors – burnout? A disease that  has multi-faceted financial health implications. 

As you read this, you may think that there are several banks that have all kinds of social responsibility initiatives. I will not disagree, but they are peripheral and segregated from the 99% transactional business they run. These activities are not strengthening the ties within the community of their users. They remain branded as a politically correct item on the corporate list.

The People Centred Economy

Robo-advisors increase AUM but the Cash pile in the market hasn’t decreased

Robo-advisors increase AUM but the Cash pile in the market hasn’t decreased 800 533 Efi Pylarinou

Robo-advisors increase AUM but the Cash pile in the market hasn’t decreased

The top five robo-advisors have accumulated over $187 billion in AUM.

Two incumbents and three Fintechs are leading.

Growth in asset gathering continues but as per Autonomous Research, the jury is out as to whether gathering assets or gathering users are good measures of success of robo-advisors.

The growth has been double-digit, the kind that VCs like. Despite the fact that robo-advisors have clearly not lowered the customer acquisition cost (CAC) and ironically, in most cases have been deploying the same old-fashioned channels to acquire customers; VCs have been generous in funding them. Just for the top three Fintech robo-advisors, Betterment, Wealthfront, and Personal Capital VCs have invested ($275, $204, $265) nearly $745million.

The market share (as measured by AUM) amongst the top 5 US robos, is 20%-80% between Fintechs and incumbents.

One of the metrics that I had chosen to follow from the very beginning of the robo-advisory trend, was Unadvised Assetscash in physical wallets and in checking & savings accounts. For me, Unadvised Assets are a measure of the market opportunity for robo businesses. Deloitte reported in 2014 that in the US there were close to 13 trillion of such, unadvised assets.

Looking at the Q3 2018 U.S. Federal Reserve report and recent Money data, from grandmothers to hedge funds holding cash, in overnight money market funds, to checking accounts and currency; I realize that the AUM served from robo-advisors have had none or negligible impact on Unadvised assets.

In the US, Unadvised assets continue their solid growth. In 2016, I had reported $13.4trillion and now we are looking at $14.5trillion. An 8+% growth over the past 3yrs.

Unadvised assets in the Euro area, have grown from a total of 10.3 trillion EUR to 11.8 trillion EUR – a 14+% growth over the past 3yrs.

In the UK, from 1.56trillion GBP to 2.4 trillion GBP – a 5+% growth over the past 3yrs.

Cash continues to be up for grabs, for robo-advisors, for P2P lenders, for crowdfunding platforms, and tokenization platforms.

It was in 2015 that Schwab and Vanguard stepped into the robo-advisory market and leapfrogged the standalone top US robo advisors, Betterment, Wealthfront, and Personal Capital. SigFig was also a big contender at the time but has pivoted since into a predominately B2B business.

Now we are 4 years later and neither the cash pile has been reduced, nor the Customer acquisition cost has dropped. Robo advisors have cannibalized the onboarding, asset allocation part of the investment cycle.

[1] Advertising, mailing services, cheap initial offers….


Tencent & Goldman Sachs fuel Nubank`s expansion

Tencent & Goldman Sachs fuel Nubank`s expansion

Tencent & Goldman Sachs fuel Nubank`s expansion 800 450 Efi Pylarinou

Telecoms, banks, and e-commerce giants

Last October, the Chinese multinational conglomerate Tencent Holdings Limited, better known as ‘Tencent’ invested $180 million in Brazilian digital bank and credit card operator ‘NuBank’ (Nu Pagamentos SA). [1]

This FinTech pioneer, an early mover in Latin America’s largest market offering fee-free credit cards and digital payment accounts, has recently obtained clearance from Brazilian Central Bank to offer loans to its customers. With a total of $330 million raised since it was founded in 2013 by Sequoia Capital ex-partner David Vélez, Nubank is one of the best-funded start-ups in Brazil. In 2016 despite the political and economic problems in Brazil, Goldman Sachs invested in Nubank by providing them a loan of 200 million reais ($50 million) using a receivables securitization structure.

To date, [1] Nubank has issued 5 million credit cards and served over 8.5 million customers. Its business model rests on providing a streamlined, transparent service to customers wish to avoid the bureaucratic and heavily administrative practices of established banks. The neobank’s systems, mainly rooted online and in a mobile application, allow users to make transfers, pay bills and earn interest on deposits.

Nubank’s impressive expansion has opened the rally to an ever growing landscape in the Brazilian financial technology market, with 188 ventures being launched in the past eighteen months. This includes independent competitors in the neobank category such as Banco OriginalSDBankLabsBankbeBank etc. and initiatives launched by incumbents. An example is Digio, that was launched by Banco do Brasil and Bradesco in 2016 to compete directly with Nubank’s fee-free business model.

It is the inefficiencies that plague the Brazilian financial system that makes the case for neobanks, and FinTechs in general. According to research, 30% of the population does not have access to traditional banking services. This represents 50 million individuals and a potential market of roughly $170 billion that FinTech ventures and neobanks can tap into. [3] In addition, the portion of the population that does have access to traditional banking services, are most likely to be clients of one of Brazil’s top five banks, that hold 84% of total loans and are characteristically more expensive than their neobank counterparts. Not only that, but Brazilian incumbent banks have proven to be delivering a poor service, with over 10’000 complaints over financial institutions registered by the central bank in the first quarter of 2018 alone. [4] As a result of these events, the Brazilian Central Bank has put forward new regulations to encourage competition in the financial sector, notably: Resolution no. 4.656/2.018 which passed on the 26th of April of this year and opens the gates to the aforementioned, strongly consolidated, credit market by the creation of two, new, regulated, financial bodies that FinTechs and Neobanks can apply for.

On a wider scale, the implications that have been observed in the Brazilian market permeate across borders and speak for the whole continent. Indeed, according to the World Bank, 50% of the Latin American population remains unbanked. [5] Brazil’s neighbouring economies have concentrated banking systems with sluggish initiatives and slow developments towards innovation. The most stimulating factor in favour of FinTechs and neobanks is surely the changes and new regulations that these governments are putting in place to increase competition in their financial systems. A case in point is Mexico, second runner up in the Latin American FinTech league, that put in place a FinTech law in March of this year, covering cryptocurrencies, crowdfunding and open banking to stimulate financial stability and prevent money laundering across the nation.

With both an inherent structural need for disruption as well as positive regulatory developments in the favour of neobanks and FinTechs to enter the Brazilian and Latin American financial markets overall, the future is bright for these companies, amongst which Nubank has managed to attract major international attention and investment. Through its investment, Tencent increased Nubank’s capital by $90 million and repurchasing the equivalent amount from Nubank’s existing shareholders, pushing the neobank’s valuation up to $4 Billion. Just a few months earlier, in May 2018, Oscar Williams-Grut in RANKED: The 27 fintech unicorns from around the worldlisted Nubank as number №13 with a $1-$2billion valuation and 3million customers!

According to Reuters, Tencent President Martin Lau explained that the investment will help Nubank “build a full-service personal finance platform.” [6] The Chinese conglomerate is no stranger to these transactions, with major shareholdings in other FinTechs and Neobanks around the world such as Italian online bank WeBank, and Chinese online insurer ZhongAn Online P&C Insurance Co Lt.

According to CEO David Velez, the investment is for Nubank a great strategic standpoint to gain insight on- and learn from the Chinese financial market. For Tencent, this is a means of expansion of their existing portfolio of challenger banks and technology-based financial services ventures as well as a robust point of entry to the booming Brazilian FinTech Market.

In early May, Nubank publicly announced its expansion in Mexico and Argentina. These are massive markets. Stay tuned.

Subscribe for our news updates and exclusive content.

Get all my best content in your inbox

Starting a project?

Contact Efi

Join my social circle

Social media


Blog articles

Fintech and Blockchain advisor

Tel: +41 78 944 3470


© 2020  Efi Pylarinou. Developed by Core Dynamix Digital Agency

    Privacy Preferences

    When you visit our website, it may store information through your browser from specific services, usually in the form of cookies. Here you can change your Privacy preferences. It is worth noting that blocking some types of cookies may impact your experience on our website and the services we are able to offer.


    Our website uses cookies, mainly from 3rd party services. Define your Privacy Preferences and/or agree to our use of cookies.