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.

Telecoms, banks, and e-commerce giants

Telecoms, banks, and e-commerce giants

Telecoms, banks, and e-commerce giants 800 517 Efi Pylarinou

Telecoms, banks, and e-commerce giants

MPesa`s early success in Kenya will remain the mobile money business case study of payment innovation in Emerging markets. [1] It was 12 years ago; in 2007 when Vodafone launched the service.

Africa continues to be the continent where `Necessity is the mother of invention`.  Africa brings to market further efficiencies, improving the MPesa business model and pushing innovation in financial inclusion (be it remittances, micro-payments, or micro insurance). 

However, it is not as easy as it may seem. As Chris Skinner notes:

Not only was M-Pesa a roaring success, but its concept was copied in most countries across Africa, Asia and South America. I say concept because M-Pesa itself has failed to repeat its success in other countries. [2]

Today, EcoCash, is a success story in Zimbabwe. It is a rich mobile payment platform hosted by local telco, Econet. Despite recent tech glitches on the Ecocash platform [3], Econet the parent telco continues an expansive digital strategy. It spun off Cassava Smartech, an entity that offers more financial services than just mobile money. From remittances, digital banking and all kinds of insurance.

Orange Money, started in 2008 in Côte d’Ivoire and has currently 40million customers in Africa in 17 countries (francophone and anglophone)

Late last year MTN Money [4] and Orange Money, teamed up to create a JV, called Mowali [5]. They are targeting the 300 million mobile money users in Africa. MTN and Orange alone operate in 22 African countries. Mowali is built on the open-source software payment platform Mojaloop, of the Bill & Melinda Gates Foundation. The aim is Interoperability at a pan-African level.

South African startup, Wala, has launched its own mobile money solution, with the Dala utility token, using blockchain technology. Wala provides no-fee banking services and is creating a decentralized financial platform (Defi) functioning with the Dala coin. Listen to my interview with founder Tricia Fernandez on the unique approach of the Wala foundation.

Dala is one example of the opportunity that Telecoms can grasp by using tokens, be it stablecoins or some such, in order to offer their existing customers ways to manage their digital lives. Alex Mifsud, Co-founder and CEO, Open Payments Cloud emphasizes this point [6] and uses the example of Dala in South Africa and another approach used in Mongolia. The Mongolian telecom company, Mobicom, has received approval to issue a stablecoin (pegged to the national currency), called “Candy”.  Every Mongolian citizen will be able with a mobile phone to pay bills, shop online, transfer funds and take out microloans. The pilot will start in the capital, Ulaanbaatar.  [7]

Now back to the West – US and Europe. The recent T-Mobile announcement of a bank account offering did create some talk. For me, it is a move from a Telecom to extend services to non-T-Mobile customers. But the business innovation is lacking, as it is backed by a conventional bank  Customer Bank is behind the Baas service of T-Mobile Money.

Telecoms, banks, and e-commerce giants

This is actually very different to Orange Money, that has also a bank of its own that was launched in 2017.

Orange bank is built from the start with a customer relationship model based on AI technology. It has signed up 200,000 customers as of the start of Q1 2019. It has set a target of reaching 4 million customers and €500 million of net income from banking within five years.

Back in the US, there is another potentially interesting move in the works from Amazon who maybe looking to buy Boost Mobile, a prepaid telco business unit that has been divested from Sprint.

Will Chris Skinner`s 20yr old dream soon come true?

Banks and Telcos? Two become one!

“My conclusion was that banks would merge with telecommunications firms and become hybrid institutions. Twenty years later, it hasn’t happened.” excerpt

Efi Pylarinou Quotations Pointer

Will Orange become the business case or some African entity?

Who will customers trust for their financial digital business?

Will blockchain be the enabler?

or will AI banking be enough?

Advertising is the new high-priced tobacco and vendors are addicted to it

Advertising is the new high-priced tobacco and vendors are addicted to it

Advertising is the new high-priced tobacco and vendors are addicted to it 800 583 Efi Pylarinou

Advertising is the new high-priced tobacco and vendors are addicted to it

We have to fly high to get a different view of what is happening in the world. I started looking at the revenues of Big Tech companies like Amazon to see where growth is happening.

Looking at the 2018 revenues of Amazon, there are three main businesses lines: e-commerce, cloud computing, and ad revenues. What struck me was that growth came from ad revenues which are `lumped` into a generic category labeled `Other`.

Remember 2015 was the first year that Amazon reported cloud revenues separately, revealing specifics about its AWS business.

Today, four years later, Amazon reports advertising revenues in a category that is named `Other`. According to the GeekWire for 2018, Amazon reported $10.1 billion for the “Other” category. According to Amazon`s financial statements this category “primarily includes sales of advertising services, as well as sales related to our other service offerings”. Fortune reported that in Q1 2019,

Sales in Amazon’s “other” segment, which is mostly advertising, increased 34%, to 2.72 billion. The company’s digital advertising franchise has grown into the third largest in the U.S., trailing only Alphabet’s Google and Facebook, researcher EMarketer estimates.

Let me spell this out loud: Amazon`s advertising business is getting ready to be publicly disclosed as one of the main businesses competing openly with Facebook and Google`s Alphabet. This is important because the top marketplaces are Ad driven and don’t seem to intend to switch from that business model. Actually, it isn’t easy for them to switch to another marketplace business model.

Are you aware that merchants that want to sell on the Amazon marketplace have to compete amongst themselves to reach end customers? That means, paying advertising to Amazon in order to move algorithmically up the ranking on the Amazon marketplace. This is the game that each and every Western Bigtech uses in its closed ecosystem. You have to understand the algorithm and pay to play based on the rules of algorithm; be it Amazon marketplace, Facebook, Alphabet.

This realization makes me think that maybe, I only say maybe, merchants borrow from the SME lending arm of Amazon, to finance their advertising campaigns on Amazon. So, Amazon wins twice. I don’t have data on this, so it is only a conjecture.

We know that the technology is there to launch an e-commerce marketplace that vendors can reach end customers (B2C or B2B) without having to pay high advertising fees and incur costs to play on the platform whether they sell or not. Who can execute on this? We just need one success story of such disintermediation. Will it be in selling books or music or baby formula or online education? Will it happen in the West or the East? Will Amazon dare to cannibalize its e-commerce business at least in one area?

What we do know, is that it won’t happen from Facebook whose business is 98.5% based on advertising and their plans for a Facecoin won’t change that business model. It won’t come from Alphabet either, who earns 15% of revenues from non-google ads but 70% from advertising of the Google family (youtube, gmail etc). Both are Titanics in advertising and can`t disrupt themselves.

Advertising is the new tobacco and merchants are addicted to it

A few days after I published this opinion piece, Business Intelligence put out a thorough report `In The Rise of Amazon AdvertisingThis is exactly what Amazon is doing to siphon billions of ad dollars from Google and Facebook and why brands love it`

Do you envy Goldman Sachs? Join Marcus.

Do you envy Goldman Sachs? Join Marcus. 800 534 Efi Pylarinou

Do you envy Goldman Sachs? Join Marcus.

Come on, lets admit it. The world has long envied Goldman Sachs. This never faded away, even while Goldman Sachs was going through an identity crisis after the 2008 financial crisis.

Goldman Sachs is an example of how an incumbent builds a Fintech business. It is not in a lab, nor as a rebranding exercise. Goldman Sachs`s Marcus ecosystem is unique because it is positioned in the value stack below its established competence – an investment bank getting into retail banking and wealth management for mass affluent & the hoi polloi.

Goldman Sachs is an example of how an incumbent financial institution can grow Data pools by offering free access to its analytical tools SecDB – explained in my article in the 2018 WealthTech Book  `Empowering Asset Owners and the Buy Side`.

Goldman Sachs is an example of how an incumbent financial institution can grow Data pools by partnering with Apple on a credit card – Apple has 900 million devices and it is expected that the Apple Card will bring 21 million users to GS by year end.

Goldman Sachs is a publicly traded company that is trading right now below book value and there are more than enough GS analysts out there to get estimates on the revenues from the different GS `consumer banking` new initiatives.

For now, Goldman Sachs has been building up aggressively deposits (the usual way of offering above-market deposit rates when entering a new market). The 3yr old deposit business has accumulated now $46billion across the US and the UK! The expected growth is in the order of $10billion per year going forward.

Marcus has issued $5billion in personal loans. These are unsecured loans that naturally, may worry shareholders, who typically get nervous easily (even though this is crumbs when taken in context).

The credit card part of the Goldman Sachs business is newer and could also grow at double-digit annual rates. Goldman Sachs knows well that credit card lending gets favorable regulatory treatment – less capital is required against this kind of debt – and as long as this holds it is a win-win situation. Why? Simply because Goldman Sachs will get their hands on valuable data from retailers and their shoppers, in order to process the Apple credit card application.

Goldman Sachs hits two birds with one stone. It gets to issue consumer debt on a global scale with lighter capital requirements, and it gets to process new, valuable consumer data globally.

The Apple & Goldman Sachs card economic terms are not known. Even if they are not that juicy for Goldman Sachs and even though the GS logo is on the back of the Apple card; the consumer data access and processing from 40 countries that this brings to the table is invaluable.

Marcus Goldman Sachs

The Apple & Goldman card will grow an important global data pool for Goldman Sachs to leverage in its planned WealthTech offering.

Apple credit card

In case you haven’t noticed, Marcus has been moved into the Goldman Sachs asset management unit, which will be renamed the consumer and investment management division. The October 2018 memo says that Marcus has plans to “launch a broader wealth management offering.”

A global consumer outreach is being built in preparation for this broader wealth management offering. And for all those concerned about a growing unsecured loan book, Goldman has great risk management experience and could with great elegance securitize part of this debt, once there is enough to do so. Elizabeth Dilts and Anna Irrera, raise this point too in ` Goldman’s Apple pairing furthers bank’s mass market ambitions`.

Marcus is a brand whose heritage is in risk management and investment banking. They will use these competencies to manage growth in their retail-focused wealth management offering. This is a huge advantage compared to Fintechs that started with unbundling a specific financial service (be it loans, or deposits, or investments) and is now, growing by re-bundling additional services (e.g. adding robo-advisors to loans, or deposits to trading, etc).

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No Trade-offs: Give customers everything they want as cheaply as possible

No Trade-offs: Give customers everything they want as cheaply as possible

No Trade-offs: Give customers everything they want as cheaply as possible 800 420 Efi Pylarinou

No Trade-offs: Give customers everything they want as cheaply as possible

XY planning Network XYPN deployed successfully a subscription based offer for financial advisors in the US, 5years ago. They actually celebrated their 5yr birthday on April 4th with 900 members that use the service. This is evidence that a subscription service for financial advice works at the B2B2C level.

On the 28th of March, Charles Schwab took the subscription service of financial advice to another scale.

Charles Schwab subscription service rhymes with Apple`s news service.

For $30 a month, Schwab offers a financial planning package.

Schwab Intelligent Portfolios Premium (rebranded name) is offered at $30 a month after a one-time $300 fee with a $25k minimum. Asset allocation is from a universe of 50+ ETFs, including a financial plan with a customized roadmap and unlimited one-to-one guidance from a CFP professional. Regulated financial-investment advice at $630 a year. 

Schwab Intelligent Advisory (the original robo name) was at 28bps per annum 0.28% of assets.

Think of the 300,000 Schwab Intelligent Advisory accounts ($37 billion). Some will remain in the free, no-advisory offering. But a significant part will switch over to Schwab Intelligent Portfolios Premium and get advice.

Evidently, any account with enough assets ($125k seems to be the magic number) will switch over.

What will this move do to the rest of the large players?

When will Vanguard follow suit?

This is another discount brokerage moment in the investment industry. This is the subscription financial advice retail moment.

Eric Balchunas, the Bloomberg Intelligence analyst, has baptized the fee war that has been going on in the US, “the Vanguard Effect” simply because the major ETF producers rush to cut their fees, responding systematically to the lead of the 43yr old low-cost producer.

Now the Vanguard Effect` for financial advice is upon us but led by Schwab.

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[1] “You’re able to get extraordinary quality at extraordinary value now,” Bettinger says. “That’s where our industry is. And in reality, that’s where the whole economy’s going.”
Bettinger is president of the Charles Schwab corporation

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post. 

Data Centers, AI and finance

Data Centers, AI and finance

Data Centers, AI and finance 800 533 Efi Pylarinou

Data Centers, AI and finance

Future data centers of all kinds will be built like high performance computers,” — Nvidia CEO Jensen Huang 

We are living in a world in which, more or less unconsciously, we increasingly “Trust in Math”. After the GPU adoption in business, we moved to new hardware that is not only faster but also smaller in size. We basically reinvented how data rooms looked.  

And this the world from Nvidia’s angle. They have facilitated the growth and new value creation, all powered by Artificial intelligence tools.  The use cases in Finance are immense. Fintech solutions for:

  • Operations: automating claims processing and underwriting in insurance
  • Customer service & engagement: alerting customer for fraud, chatbots, recommendations
  • Investing/Trading: automating research, trading signals, trading recommendations
  • Risk & Security: fraud detection, credit scoring, authentication, surveillance
  • Regulatory & Compliance: AML, KYC, automating compliance monitoring and auditing.

Marc Stampfli, the Swiss country manager at Nvidia shared the journey of the Artificial Intelligence Fall, Winter and into Spring, during his talk at the Fintech+ conference last year in Zurich. He explained neural network concepts borrowed from biology and the initial difficulties of neural network computations outperforming statistical approaches. The first tipping point came with increased data availability through the internet, and only then we had evidence that neural networks could outperform statistical models.

Data Centers, AI and finance

After that point, we ran into the next problem which was the lack of computing power to process all this data and multi-layer neural networks. And this is where GPU – a kind of parallel computer – was created and first used in vector mathematics. This is the technology of Nvidia’s processor.

The next inflection point came with the use of GPU to accelerate the next generation of machine learning algorithms. This led to an explosion of AI research, development and application, all powered by NVIDIA.

Today, NVIDIA is turning into a data center company. This positioning has become evident with NVIDIA’s announcement to buy the data center networking company Mellanox for $6.9B. This is the first large size acquisition for NVIDIA and one that is in alignment with their belief that Datacenter will play an ever-increasing changing strategic role whose architecture will need to be agile and scalable.

“Future financial service centers will be powered like high performance computers”.

2020 is only a year away. In March NVIDIA`s GPU Technology Conference (GTC) is the place to hear use cases and innovative approaches to AI from some of the world’s largest financial institutions at GTC.

Banks should steal the 2002 Bezos internal memo

Banks should steal the 2002 Bezos internal memo

Banks should steal the 2002 Bezos internal memo 800 533 Efi Pylarinou

Banks should steal the 2002 Bezos internal memo

Dear Banks,

It only takes an internal memo to ignite your own Bezos moment.

Five clear and crystal commandments[1] (“good artists borrow, great artists steal”)

that you can steal from Jeff B.:


All teams will henceforth expose their data and functionality through service interfaces.


Teams must communicate with each other through these interfaces


There will be no other form of inter-process communication allowed: no direct linking, no direct reads of another team’s data store, no shared-memory model, no back-doors whatsoever. The only communication allowed is via service interface calls over the network.


It doesn’t matter what technology they use. –(tech neutral)


All service interfaces, without exception, must be designed from the ground up to be externalizable. That is to say, the team must plan and design to be able to expose the interface to developers in the outside world. No except

Bezos ended his 2002 now famous mandate with a chilling little twist:

“Anyone who doesn’t do this will be fired. Thank you; have a nice day!”

Just 17 years later, you can feel free – I would say you should feel inclined to do so – and steal this. You can end your internal memo with a kinder twist:

“Anyone who doesn’t do this will no longer be with the team. Thank you; have a nice day!”

2019 in Finsev

I am using `Banking` to refer to financial institutions that have traditionally been in the business of serving retail, institutional, and corporate clients across all the spectrum of their needs. The Banking business model has been a PUSH operating model and the opaqueness and regulatory barriers to entry have allowed them to morph into a predominantly product business.

I celebrated this past March, 4yrs with Daily Fintech., during which I have been writing every single week on global innovations in Capital markets, wealth and Asset management[2].

I can safely say by now, that the only sustainable banking model is a PULL operating model that at its core becomes a platform as a service business. Much like Bezos transformed Amazon from a digital bookseller business, into a platform as a service.

For this to happen, the core transformation needed is in the `middle office` (conventional parlance) via APIs. Unless banks realize this, they will become suicidal and victims of a `lemming effect`. Their herd behavior to keep up with digitizing the `front office` to improve their customers` experience and even their engagement; will prove futile. The reason being, that as long as the culture remains that of selling products eventually; banks will find themselves in a commoditized business with margin going to zero.

“Any bank that does not transform its `middle office` via APIs; will become extinct. Thank you; have a nice day!”

The good news about this transformation is that it has lots of possibilities and variations. But a bank has to start its platformification process, first internally.

Think first Private APIs that enable each and every department to access data and workflows in real time. Then, one can think of Public APIsPartner APIs, and the Οpen Banking obligation or opportunity. Banking transformation needs to look more like 2/3 internal APIs in the first phase.

Bank API Bezos Article

Chris Skinner and Jim Marous, have been preaching relentlessly about these issues. But it seems that it is difficult to convince `Doubting Thomas`[3]. There is no reliable data (to my knowledge) on this topic that is essential, despite the fact that it may seem a `detail`. The devil always hides in the details.

Over the past 3yrs, I have been monitoring the Financial APIs from the Programmable Web and there is clearly an increase. From 2016 to date, we have gone from 1700+ to 3800+ financial APIs. Of course, there is no quality differentiation or usage stats with this doubling. And none of these stats, are related to the paramount internal transformation measured by Private or Internal APIs, and their usage.

Caravaggio incredulity of saint thomas.

The one piece of evidence that I can share with you, is from Goldman Sachs. Marquee [4], is the GS sophisticated freemium platform for its institutional clients, which I have used as a great example of `Empowering Asset Owners and the Buy Side` WealthTech Book, 2018 Wiley.

Adam Korn, who has spearheaded the project of giving out Marquee for free, reported late last year that:

` After months of work, Marquee now fields more than 100 million API calls each month, about 5 million of which come from outside Goldman’s four walls. Marquee now has roughly 12,000 monthly active users, split evenly between internal and external clients. And the number of users is beginning to increase, according to Korn.`

Efi Pylarinou Quotations Pointer

It only takes an internal memo to ignite your own Bezos moment.

[1] The API Manifesto Success Story


[3] A doubting Thomas is a skeptic who refuses to believe without direct personal experience—a reference to the Apostle Thomas, who refused to believe that the resurrected Jesus had appeared to the ten other apostles, until he could see and feel the wounds received by Jesus on the cross.

[4] Named in honor of CIO R. Martin Chavez, known by everyone as “Marty”.

 I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Are robo-advisors about Low-cost products or `Passive beats Active`?

Are robo-advisors about Low-cost products or `Passive beats Active`?

Are robo-advisors about Low-cost products or `Passive beats Active`? 800 449 Efi Pylarinou

Are robo-advisors about Low-cost products or `Passive beats Active`?

We live in a world that is using new words in an accelerated pace. I recently ran across the hashtag #phygital. Which reminded me of the hybrid nature of robo-advisory services that has emerged from the growth of robo-services.

The various robo services that have been launched over the past ten years, have transformed the investment management space into a predominately low-cost product space.

Last year, Victor Hagahni and James White – Victor is the Founder and CIO of Elm Partners, and James is Elm’s CEO – wrote an article Is Vanguard More Rolls Royce, or Hyundai? that highlighted an investment world particularity:

With most products and services – cars, doctors, food etc – better quality normally goes hand-in-hand with a higher price. Not so with investing.

They even quote Bill McNabb, former CEO of the Vanguard Group saying:

The whole cost argument from an investment perspective is counter-intuitive.

Listening to Bill McNabb`s short interview at the 2019 Academic and Practitioner Symposium on Mutual Funds and ETFs, he makes a very important point that is not well understood.

The transformation in the investment management space is clearly turned the space into A low-cost product space.

This often is confused with a transformation into A passive beats active space.

The growth of robo-advisory (apologies for the umbrella term) is Not about passive over active. Robo-advisory is about the wide spread use of low cost products. We live in a world that it is becoming more difficult to imagine high cost investment products.

One of the best examples of low cost, active and passive management, is Elm Partners.

12bps, tax harvesting, portfolio construction based on economic fundamentals and other liquid risk premia in addition to equity market Beta.

Listen to Victor Hagahni and James White discuss their approach which is for accredited investors only. Their offering includes less than half a dozen investment programs and the possibility of SMAs.

Elm Partners does not aim to do everything for everybody. Low cost and transparency is paramount for their business. You can follow their quarterly reporting on Seeking Alpha, here. You can follow their thoughtful research here. You can savor Victor`s Tedx Talk Where are all the Billionaires? & Why should We Care?: where he uses the puzzle of the missing billionaires to help us explore how and why most investors fail to capture the returns offered by the market. This actually leads into the main reasoning for Elm Partners investment strategy, the so-called “Active Index Investing.”

Listen to Victor Hagahni and James White discuss with me their approach which is for accredited investors only. Their offering includes less than half a dozen investment programs and the possibility of SMAs. Elm Partners does not aim to do everything for everybody. Low cost and transparency are paramount for their business.


[1] Former Chairman and CEO of Vanguard, Bill McNabb Discusses the Future of the Investment Industry from the 2019 Academic and Practitioner Symposium on Mutual Funds and ETFs. Presented by UVA Darden and the Investment Company Institute.

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