FINRA published a new DLT white paper and requested public comment on DLT-related policy issues; several fintech firms launched the Consumer Financial Data Rights group, aiming to protect consumers’ access to their own financial data; China’s Ant Financial announced its intent to buy U.S.-based money transmitter MoneyGram; JPMorgan and Intuit formed a data-sharing partnership; and the Wall Street Journal profiled Chinese messaging app WeChat in its battle for mobile-internet market share in China.
The Big Idea
The story: This week, we read two stories about big names in China’s fintech sector: first, the WSJ discussed how multi-purpose messaging app WeChat has won significant market share in China’s crowded mobile-internet marketplace by embracing quick-response (QR) codes, now used for almost all WeChat in-store payments; and second, Alibaba spinoff Ant Financial, the world’s most highly valued private company, signaled its plans to expand its payments foothold in the U.S by buying money-transfer provider MoneyGram for $880 million.
Why we care: Any time there’s a disruptive new innovation in the world’s largest economy, or an incursion from that market into the U.S., it’s worth paying attention. In this case, it’s both. The Chinese mobile-internet market is vast and currently dominated by two companies: Tencent (WeChat) and Alibaba/Ant Financial (Alipay). The two seem locked in a race for growth that likely will spill over to our side of the Pacific — whether by choice (U.S. firms copying their strategies) or by force (acquisitions). This week’s MoneyGram announcement is one tally in the latter column.
What we think: WeChat is unlike any app available to U.S. consumers based on the types of functionality available to users. WeChat includes thousands of automated bots, allows for in-app payments and money transfers, and has helped reshape how companies relate to the 768 million customers who use it. It seems only a matter of time before that kind of disruption comes to the U.S., and we’ve already seen small moves in that direction from both startups like Kik and well-established apps like Facebook Messenger. Beyond U.S. firms assimilating Chinese app functionality, it also seems likely that Chinese firms may increasingly set their sights on U.S. expansion. 2016 saw a “buying spree” by cash-rich Chinese companies across a number of American industries, and there’s nothing to suggest that this capital wouldn’t be directed at potentially high-growth fintech firms in the coming year. However, it remains to be seen how the Committee on Foreign Investment in the U.S., which must approve any such deal before it is finalized, will treat Chinese buyout offers under the Trump Administration’s “America First” policy.
In Other News…
Fintech firms form new lobbying group. Several fintech firms, including Affirm, Betterment, and Ripple, launched the Consumer Financial Data Rights group to help “defend consumers’ access to their data.” “Each consumer’s right to their own financial data is vital in helping to understand their finances,” said Max Levchin, co-founder of PayPal and founder and CEO of Affirm.
JPMorgan partners with Intuit on data-sharing. The two companies entered into a non-exclusive partnership to share data through an application programming interface (API). The partnership is designed to give both firms an alternative to the practice of “screen scraping,” which requires customers to share their usernames and passwords with third-party apps. Davis Polk hosts WebEx on OCC’s fintech charter.
Digital Chamber of Commerce publishes smart contracts paper. In collaboration with Deloitte, the blockchain-focused advocacy firm has created a primer on smart contracts and how they can be used in conjunction with blockchain-based platforms.
What’s really going on in the cloud? Quentin Hardy, the NYT’s deputy technology editor, provides one of the best, quick summaries of “the cloud” we’ve ever read. He also discusses some of the misconceptions related to storing personal information in the cloud, which he says is “probably more secure than conventionally stored data.” Worth a read.
Davis Polk hosts WebEx on OCC’s fintech charter. Members of the firm’s Financial Institutions Group discussed the regulatory environment for U.S. fintech firms and how an OCC charter could benefit a number of fintech businesses. The presentation can be found here.
Have a great weekend!
Joe Oehmke and Austin Tuell