J.P. Morgan Chase launched a digital-only banking service aimed at millennials; German digital bank N26 announced plans to expand into the United States; bank-backed P2P service Zelle partnered with IBM to expand its reach; the U.K. Treasury determined that cryptocurrencies are a “low risk” for terrorist financing; and the DTCC published a white paper on the current state of fintech and its impact on the financial system.
The Big Idea
Get ready for a European fintech invasion, America.
It may be surprising, given that fintech in the U.S. is as big and buzzy as ever, but certain aspects of U.S. fintech noticeably lag behind Europe. For example, last week, the New York City Metropolitan Transportation Authority (MTA) announced that it will install e-payment readers at “500 subway turnstiles and on 600 buses by the middle of 2019,” bringing contactless bank cards and mobile apps to New York’s public transit. That would be great (an update to the MTA’s sagging payments infrastructure is long overdue), but for the fact that New York is shockingly late to the game. The MTA’s chosen partner, Cubic, helped roll out a similar system in London between 2003-14, which recently logging its one billionth contactless payment.
And payments isn’t the only point of lag. When it comes to regulatory responses, U.S. agencies are losing a PR battle with their neighbour across the Pond: Last week’s Money20/20 demonstrated the differences between American and British regulatory responses to fintech, as the head of the U.K.’s Financial Conduct Authority (FCA) discussed some notable achievements of the FCA’s regulatory sandbox while U.S. agencies struggle to develop a coherent framework for fintech. As the American Banker noted, the juxtaposition between U.S. and U.K. regulators showed how “the push and pull between . . . agencies is . . . a barrier to the kind of regulatory experimentation that the U.K. is pioneering.”
This lag has created a market opportunity for European firms eager to bring their successful products to American customers eager for more consumer-friendly and mobile-focused services. European challenger banks N26 and Revolut are both planning U.S. launches in 2018 (noted N26 CEO Valentin Stalf, “banking products in the U.S. are even worse than in Europe”), and they’re joined by a handful of other European startups.
Of course, it’s not like U.S. firms are oblivious to this opportunity. Firms like Robinhood, Circle, and Betterment have been successful appealing to millennials, and now big banks are getting in on the act (see, e.g., Goldman Sachs’ Marcus and J.P. Morgan’s Finn). However, greater emphasis on fintech adoption and regulatory collaboration in Europe has left the U.S. on its heels, putting it at risk of being outshone by forward-thinking European competitors.
The Week in Review…
JPMC has a new standalone digital bank. J.P. Morgan Chase launched Finn, a digital-only banking service aimed at millennial customers. Finn uses Chase’s “digital account opening platform [to allow] consumers to sign up directly from their phone and start banking in minutes.” The app currently is available only in St. Louis, but will be rolled out across the U.S. in 2018.
The race for top AI talent is on. The New York Times highlights the supply-demand imbalance between AI projects and top industry talent. According to the report, tech firms are engaging in an arms race to bring in top AI academics and industry professionals, offering lucrative compensation packages and negotiating contracts “much like [with] a professional athlete.”
Zelle teams up with IBM. The payments service partnered with IBM to expand its reach to any bank using IBM’s Financial Transaction Manager. The collaboration allows firms to support the “full lifecycle of P2P transactions . . . without heavy IT spend or disruption,” said IBM. Zelle has reported significant growth since launching, averaging “65,000 signups a day during [Q3].”
You can now “Pay with Google.” The company’s Pay with Google service is now live, “making it easier for people to pay on their Android devices, using any card they have on file with the firm’s various services.” Pay with Google is based on the Google Payment API, which allows customers to use any “verified credit or debit card without having to enter their details.”
U.K. says cryptocurrency is a “low risk” for terrorist financing. A new paper [full text] from the British Treasury says that cryptocurrencies are a “low risk” for money laundering and terrorist financing — although it also notes that cryptocurrencies are used to “launder low amounts at high volume,” and that the level of risk increases as digital currencies gain greater adoption.
SBI pushes further into DLT. Japan’s SBI Holdings indicated in its most recent financial report [full text] that it wants to create a “new financial ecosystem based on cryptocurrency.” The company’s plans include acquiring digital currency assets through purchases and mining, investing in DLT R&D, and developing new blockchain-based products and services.
Uber launches rewards credit card. The ride-hailing app partnered with Barclaycard US to roll out “a rewards-heavy Visa credit card.” The card has no annual fee and will “come with a host of benefits,” including 4% back on dining transactions and 3% on hotels and airfare.
Australia drafts new fintech legislation. Prime Minister Turnbull’s government issued “draft legislation . . . to create an enhanced regulatory sandbox,” loosening certain restrictions on the financial services sector and allowing “a broad scope of activities to be tested without [meeting all] licensing requirements. The draft has been called a “game changer” for Australian fintech.
The DTCC’s fintech report. The Depository Trust & Clearing Corporation (DTCC) recently published a white paper on key innovations and debates impacting fintech [download full text]. In addition, the report sets out a list of nine factors “that risk managers should consider to help identify and assess emerging fintech risks.”
Finra’s SpOoOoOky financial glossary. Get ready for Halloween by boning up on Wall Street’s most ghoulish terms… Here at TFU, we’re debating whether ‘ghosting’ is worse in the context of finance or dating apps and what we’d do if faced with a ‘zombie bank’-pocalpyse. Then we’re gonna watch Tom Hanks get weird as David Pumpkins… again. Happy Halloween!