On Tech, Business, Society.

Tag: financial services

Blockchain in Insurance

insurance imageBelow is the presentation that I made yesterday at the Red Chalk Group Blockchain in Insurance event in Chicago. There are some new slides in this presentation, specifically one covering the landscape of companies that are involved in the insurance space with blockchain solutions, initiatives and projects.


Blockchain 2015: Strategic Analysis in Financial Services Slides Deck

  • A perspective on how FinTech started and linking that to the blockchain’s advent: were banks ready?
  • Outcomes for banking: positive or negative?
  • What is the Blockchain? (in simple, business language) – in 1 slide
  • Startups and Banks: what kind of relationship? (and some humor in the mix)
  • Themes that emerged in 2015 (blockchain vs. bitcoin, integrations, consortia, capital markets, valuations)
  • Sector Analysis: Applications and Solutions, Middleware and Services, Infrastructure and Protocols.
  • What should banks do? Challenges, Opportunities, Recommendations.
  • 2016 Predictions
  •   So, here are the Slides, or go straight to the Slideshare page for an improved experience by clicking here. Or, if you prefer, you can Download a PDF. http://www.slideshare.net/wmougayar/blockchain-2015-analyzing-the-blockchain-in-financial-services  ]]>

    The Global Landscape of Blockchain Companies in Financial Services

    FinTech has certainly made a dent in the Financial Services space, while many banks continue to be oblivious to its growth, continuing to treat FinTech startups like strange beasts that need to be examined and observed, instead of followed or emulated.

    In my opinion, the FinTech onslaught happened because the financial services industry did not innovate enough when the Internet came along 20 years ago. 10 years into the Internet’s commercialization, all we had was online banking and online stock trading. Therefore, FinTech companies started to emerge in the 2nd decade of the Internet in the mid-2000’s, and now they are flourishing as evidenced in these graphs in the US and Europe.

    Just as pure FinTech startups kept growing and many turned their dents into beachheads or fully-fledged businesses, blockchain-based startups are starting with small dents. Some of them are attacking parts of the financial services market, some are offering solutions to existing players, while others are suggesting that a cooperative process is needed to fertilize innovation.

    Large financial institutions don’t feel the impact of startups initially, because startups don’t attack existing players head-on. Rather, startups go around incumbents, and it takes a while before their market presence is visible or felt by larger players. Despite all of that, banks continue to grow and their assets continue to increase, as do their profits, but that doesn’t mean they aren’t being impacted by FinTech or BlockTech.

    I have worked several hours in the past month to create this landscape of blockchain-based startups that are involved in or around the financial services industry, globally. 192 companies are in it, categorized into the same generic 3 segments that helped me understand the Internet 20 years ago: Infrastructure, Middleware and Applications.

    Most of the 27 sub-categories are self-explanatory, but I’ll make some remarks on some of them: [Updated with newest chart]

    Blockchain in Financial Services Landscape

    In Applications, Exchanges are differentiated from Brokerage because they typically offer more real-time currency exchange capabilities, whereas Brokerages are like a bank account and there is more latency to transaction movements. These two categories were the most difficult to pair down since there are 100+ of them worldwide. Apologies if I missed any.

    When it comes to Wallets, I could have segmented them in a variety of ways, but chose to stay with a simple Soft vs. Hard wallet classification. Of course not all Soft wallets are the same. Some allow you to keep the cryptocurrency in your smartphone, whereas others use the smartphone to unlock access either via a password or cryptographic keys.

    Capital Markets is also known as the quadrillion dollar opportunity, and it is where we are seeing a lot of high stakes venture capital bets and startups that are swinging for the fences wanting to solve the many facets of the clearing-to-settlement post-trade conundrum.

    In the Money Services category, several players are gunning for another multi-billion opportunity as the end-game: global remittances. And Bitcoin ATMs are pushing the envelope into additional services, wanting to become more than money withdrawing machines.

    The Middleware category is of interest to developers who want to build applications and innovate on top of the underlying blockchain and consensus protocols. All of the segments in this category offer various entry points including interacting with APIs, overlay technologies, integrated development environments and a choice of software languages.

    Finally, the last category represents the Infrastructure and Base Protocols that are still being developed, as well as the public mining infrastructure (for Bitcoin) that validates and secures the network. This category is typically in the realm of core developers that are well versed into cryptology-based software technologies.

    Note that this is a curated list. I didn’t place every company, project, experiment or white paper that are vying for this space. I have rejected a few of them, either because I didn’t feel they had significant impact or activity in financial services, or for other reasons.

    Of course there are grey areas between some of these categories, but I tried to be as rational as possible, looking for common ground whenever possible. If I missed any companies that should be there, please let me know in the comments below or by visiting the Google Sheet where you can link directly to these companies. Here’s an embedded preview to the Google Sheets (Comments permissions only), and here’s the direct link: Click here to get access to the List via Google Sheet

    UPDATE: Here’s the link to a new post that followed that one, with the updated sheet and landscape.


    Why Isn’t There a Bitcoin Global Bank Today?

    bitcoin globalThe Bitcoin vision is a global, yet decentralized money network with users at the edges of it.

    So, I’m asking the question- Since Bitcoin is global and universal, why isn’t there a truly Global Bitcoin bank?

    This is a tricky question, because Bitcoin’s philosophy is decentralization, and a bank is everything about central relationships. However, a global bank with no restrictions on borders or transactions would be interesting to users that want to conduct global transactions wherever they are in the world with the same ease as using a credit card.

    But here’s the bad news: this fictitious Central Global Bank will never exist, because local regulatory hurdles are too high and too real. There is no existing startup or bank with the incentives to become that “UBER” bank. The hurdles that UBER is currently facing against the taxi cartels pale in comparison to the complexities and intricacies of the regulatory, compliance, and legal barriers that are intrinsic to each local financial services system around the world.

    Do you know why HSBC is not really the world’s leading global bank, despite being in 72 countries? Do you know why Coinbase is not really the world’s leading Bitcoin Exchange, despite being the only exchange available in 27 countries?

    There is a common answer to these two questions: regulatory restrictions. This means that, as a customer, your account is silo’ed inside the country you belong to. So, you don’t really get the feeling of being global. HSBC and Coinbase are global, but their customers are not, because they don’t have access to seamless global services.

    So, here’s the good news in all this: the Global Bank is YOU, armed with a cryptocurrency wallet. A local cryptocurrency wallet skirts the legalities that existing banks and bank look-alikes (aka Bitcoin exchanges) need to adhere to, but without breaking any laws.

    The challenge today with the current Bitcoin wallets is they are islands without terrestrial connections, meaning without fiat on-ramps and off-ramps.

    The future of the cryptocurrency wallet is in your smartphone because it is already a gateway to a world of on-demand services. The weak link has been the on-ramps and off-ramps to the worlds of fiat currency and physical transactions.

    Maybe we just need more on-ramps and off-ramps in order to make the cryptocurrency wallets come to life. The banks are part of those on-ramps and off-ramps, but they will not be the centers of your wallet, just as they are today the centers of online banking. In the future, the banks might be a backend or lateral window to your decentralized wallets.

    Although a global bank or exchange is not happening any time soon, the feelings and behaviors of a global bank are needed.

    There is a historical reminder that online banking does not make a global bank. There were several attempts from 1995-2000 to form Internet-only banks, starting with Security First Network Bank (SFNB), the world’s first Internet bank, but each one of these attempts was confined the jurisdiction that they were created in. SFNB, CompuBank, Net.B@nk, Netbank AG, Wingspan, E-LOAN, Bank One, VirtualBank and others are such examples, but none of them survived past the dot-com crash of 2000. The following image is a shot from the back of an SFNB T-shirt I was given in 1995, when they launched.


    Today, we are seeing a new flavor of online/mobile only banks and financial services startups such as Simple, Koho, ZenBanx, Wealthsimple, GoBank, Moven, and Weathfront, and they do offer a new generation of services that leapfrogs the traditional banking ones. But none of them has the potential to automatically become a global bank, because they still need to knock down the local financial regulatory barriers. 

    At the heart of user engagement with a decentralized wallet, lies the various actions that we typically conduct on money:

    • Buy
    • Sell
    • Pay
    • Get paid
    • Transfer
    • Save
    • Borrow


    Today, a cryptocurrency wallet doesn’t enable these functions, but I expect future generations of wallets will.

    To spend Bitcoin, the conventional wisdom says we need more merchants and services accepting it. But although paying by Bitcoin is a cool thing, if you can’t do that, any other alternative is as good, and Bitcoin doesn’t really offer significant leapfrogging, except perhaps when it comes to micro-transactions. So, having more merchants accepting Bitcoin is not what will unlock its potential.

    I would argue that the cryptocurrency networks (enabled by blockchains) are more important than the currency itself. In the old metaphor that Bitcoin is “money with wings”, the wings that give speed are more important than the money itself. You can put *any* money on wings whether crypto or not, and you’ve got something new that didn’t exist before.

    Whereas today we are using traditional banking networks to transfer any type of money, I can see a future where we are using a Bitcoin infrastructure to transfer any money, including cryptocurrency and fiat. This means that fiat is coming to cryptocurrency wallets faster than cryptocurrency will come to traditional online banking accounts. Anything traditional will be slower.

    Maybe we could each one day become our own virtual bank. Cryptocurrency wallets could subsume existing banking relationships, and are that new entry point.

    A crypto wallet is to the world of crypto-finance networks what the browser was to the world wide web.


    The Power of the Bitcoin Address

    movement of money is something that Bitcoin does very well, and with little overhead. We take our emails for granted. Imagine a world without your email. Imagine a world without a telephone number, or without an address. Soon, the same will be said about a Bitcoin address. Here are some recent examples of great things that have just happened via a Bitcoin address: Andreas Antonopolous started a fund raiser for Dorian Nakamoto, the alleged “Satoshi Nakamoto”, by publishing the donation address: 1Dorian4RoXcnBv9hnQ4Y2C1an6NJ4UrjX Within a few days, donations poured in, and totaled over 44 Btc (approx. $28,000), as tracked by this Blockchain tracking URL. Jimmy Wales, founder of Wikipedia was recently overwhelmed with donations after publishing his personal Bitcoin address – Wikipedia charity receives influx of Bitcoin donations after founder Jimmy Wales set up a personal account “to play around” with digital currency and was swamped with cash This is only the beginning. This site, Wollit has started to track these initiatives. Why is this happening? Because it’s easy. If you have a Bitcoin wallet, sending money is as easy as sending an email. Simplicity trumps complexity. The closest mechanism to paying by email is maybe PayPal, but PayPal doesn’t have the electrifying and mobilizing power that Bitcoin has. Here’s an example of my KryptoKit wallet recognizing a Bitcoin purchase for the Toronto Bitcoin Expo. The transaction simplicity is a breath of fresh air, when compared with the tediousness of entering a credit card number on eCommerce sites, or dealing with convoluted shopping cart mechanisms. My wallet woke-up when it recognized a Bitcoin payment option on the Expo site, and all I had to do is click “Send” to make that payment. I didn’t need to get familiarized with multiple shopping cart mechanisms anymore. It’s my wallet, and my choice. KryptoKit Bitcoin Expo   But there is something bigger happening. This is a continuation of the decentralization movement that is going on. Instead of having banks solely and centrally manage our accounts and money, we’ll be more self-reliant on managing our wallets ourselves, and eventually looping a new breed of financial services on top of them, via the promise of next generation cryptocurrency infrastructures and protocols such as Ethereum. Here’s an example of an off-line wallet that lets you safely transfer your Bitcoin savings into it: Crypto Cards. The Crypto Card is water and fire proof, as it should be. Money bills are not flame resistant, and most of them are not water proof. Let’s think about what happens when you have multiple wallets (and you will, if you are a Bitcoin user). Managing them may become daunting. I wonder if Bitcoin wallets will become universal, like Email is. Despite having several addresses, we can manage all of them within a single Inbox. Imagine if we had to keep track of all our email addresses via different Email software for each one. Email would have never taken off as it did. Maybe someone will develop the Email equivalent of a universal cryptocurrency wallet. I think we need that.]]>

    Powered by WordPress & Theme by Anders Norén