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Robinhood Makes Cryptocurrency Affordable And Accessible Jacob Parker Bowles

Cryptocurrency is rapidly becoming one of the most popular investments, especially among young people. Dedicated investment platforms that focus on the currencies, such as Robinhood Crypto, are starting to come into use. More than a million people signed up for the platform’s early access program, largely due to the way that it makes trading easy and affordable for the average investor.

Zero-Fee Trading

Zero-fee trading is the primary reason for Robinhood’s popularity. Most trading platforms charge fees of at least 1.5% for trades and fees that reach up to 4$ are fairly common. That isn’t a huge problem for experienced investors, but it does prevent new or casual investors from taking part in the system by eliminating a large portion of their profits.

Robinhood is popular with that segment of the market because it does not charge any fees. That reduces the profit margin that the traders need to attain to justify their risks, which makes it easier for novices to come out ahead. Robinhood funds its platform by collecting interest on money that is deposited into investor accounts, just like the way that a bank makes money on deposits.

Ease of Trading

Part of Robinhood’s popularity also comes from the tools that it offers to make trading easier. Most of these tools were already in use for stock traders but had not become available to people who invested in cryptocurrency.

The platform allows a rapid transfer of up to $1000 from a bank account to the investment account, with the usual ACH transfer being necessary for larger sums. That money can be used to purchase cryptocurrencies at any time, and some transactions will even be automated through the system. Stock trading is also integrated into the platform for the convenience of investors.

Security

Security is the final factor that is causing people to use the Robinhood platform. The platform helps to address security concerns by using a mixture of both hot and cold storage systems for the cryptocurrency, which provides a layer of protection from hackers. Regular reviews of the system’s code and careful management of the company’s personnel will also help to prevent the loss of data that could expose investments to theft. Taken together, these policies provide an adequate level of protection for investors.

What Is PSD2?

By Jacob Parker-Bowles

On March 23, 2018

In FinTech, Jacob Parker-Bowles

PSD2 (or the second Payment Services Directive) is a law in the United Kingdom and other parts of Europe that has affected payments since January 2016. All payment service providers (PSPs) were required to adhere to the new policies by January of this year. Although many Europeans may not assume this law affects them, let’s look at the ramifications of adapting to these new standards.

What does PSD2 consist of?

In order to understand the impact of PSD2, we should first explore what it is comprised of. According to waar.ch, the law is meant to open the payment services market up to more competition by regulating standards. Some of these include:

Stating of exchange rates when making a payment in another currency, such as an online purchase from a foreign site.
Increasing security measures, including a two-factor authentication system.
Limiting payer liability in the event of an unauthorized purchase, either from information theft or vendor error.

How does PSD2 affect consumers?

Consumers had previously been exposed to unfair and deceptive banking practices, which includes limited access to fee schedules and hidden interest rates. A lack of competition in the banking sphere reinforced these practices. As a result of PSD2, customers can expect more transparency and open communication regarding the status of purchases, rates/fees, and other financial services.

Another benefit is the ability for third-party payment providers to offer better solutions to traditional banking services. This may include investment products, accounts, and payment vehicles. Even online banking can change, as consumers can use sites and apps to easily access information.

How does PSD2 affect the marketplace?

Competition is expected to increase as a result of this law due to exposing unethical practices. I expect many fintech companies to debut, with solutions for every client concern. These can range anywhere from budgeting apps to alternative payment platforms. One area that should see substantial growth is wearable payment devices.

Regardless of the amount of competition this brings, we can expect to see more secure platforms and better incentives for consumers. A bank cannot simply bring people in because they exist; they must now prove they are worthy of your money. Payment systems likely will increase their move toward digital, as new businesses provide vendors with plenty of options for cashless payment accessibility.

In Conclusion

Although you may not see immediate changes in your banking routine, you can expect to hear news of increased options in the near future. I anticipate this change will affect the general population in a very positive way. Even further, this law opens the door to fintech entrepreneurs who would normally shy away from competition. In a year’s time, I believe traces of this law will show up in our everyday lives, and it may even influence other countries’ banking systems.

The Cashless Trend

By Jacob Parker-Bowles

On November 22, 2017

In FinTech

Every day, society is making moves toward becoming more cashless. It started with the wave of debit cards and credit cards making it less necessary to carry cash. Now, with the rise of cryptocurrencies, Apple/Android Pay, and other fintech services, carrying cash on you seems to pose more risk than reward. Today, I want to break down what society will look like as the world continues to adopt cashless options and moves away from paper money.

To begin, let’s look at cryptocurrency. Bitcoin is an example of a desire for anonymous, neutral money. By this, I mean people like being able to go anywhere and use their money without having to worry about foreign exchange rates and understanding how foreign currency works. Now that countries are more readily utilizing Bitcoin, at least in major cities, people don’t have to worry as much about preparing for their next trip.

Speaking of trips, we make trips regularly, whether it’s to a corner store or across the sea to another country. Going cashless would make traveling so much easier. There are still many cities (particularly in the USA) where buses and subway trains only take exact cash. Consider how many people would rather pay with a card or their phone, rather than having to count out dollars and cents, and overpaying if they don’t have the exact change. Luckily, many European countries are adapting to the cashless wishes of their citizens. One stellar example is the London Underground. Oyster cards are easy to use for residents and tourists alike, and I expect to see most countries utilizing similar technology in the years to come.

Restaurants and businesses also gain huge benefits from running cashless. While gas stations may be easily robbed now, in a few years they may not accept cash anymore, which can lead to a decrease in robberies. Sure, companies who run strictly cashless need to invest in cyber security to prevent hackers from exploiting their faults, but guarding against hackers is a much safer situation than guarding against men with guns.

One area that I imagine could easily move cashless is utilities. Many people (perhaps most) pay for their utilities online in some capacity. Nobody sends real money, and older people are the ones most likely to write a physical check. I don’t necessarily expect companies to begin accepting Bitcoin immediately, but I do believe there will come a point where they refuse to take a paper check as payment.

Of course, all of this leads up to banking. Banking is going to be one of the most rapidly evolving fields over the next decade or two. Traditional banks will begin shutting down as customers flock to online banks, where interest rates on savings and checking accounts are substantially higher. It is also predicted that AI will automate many financial services, making physical locations with real people irrelevant. Also, if cryptocurrencies keep their upward momentum going, there may be no need for a bank, traditional or online.

The next few years will be interesting, given the rise of so many fintech companies. Old systems are sure to be phased out, and I predict that the landscape of finance is going to change drastically. For now, we have to wait and see what the newest technologies will bring.

Fintech Around the World

By Jacob Parker-Bowles

On September 21, 2017

In FinTech, Jacob Parker-Bowles

Fintech, short for financial technology, is a commonplace term in first world economies such as those of the United States and Europe. Even if you don’t work in the finance sector, you are probably familiar with it. It makes its way into the news all the time with hyperbolic speculation about how fintech will be the ultimate disruptor of traditional banking, overturning archaic legacy systems. It’s true that financial technologies have shaken up traditional financial markets to a certain extent, but exactly how much and in what ways varies across the globe.

To get a sense of how much the fintech sector is disrupting markets, we should look at stock investments in the major fintech markets around the world, on both a macro and micro scale. Overall, fintech has taken the world by storm. According to statistics collected from the 2017 FinTech Adoption Index, the average adoption rate of fintech products around the world is 33 percent- up from 15 percent in 2015. Even in emerging markets such as India, Brazil, China, Mexico, and South Africa, the adoption rate is about 50 percent. Fintech funding around the world totaled $49.7 billion between 2010 and 2015, and $25.8 billion in 2016 alone. As of 2016, there were approximately 1,400 fintech companies throughout 54 countries.

In the macrocosm, it is clear that fintech is a dominant and growing force, but to understand its impact on a deeper level, one should examine regional trends. Here is how the fintech sector plays out across European, U.S., and Asian markets, based on recent data from GP Bullhound and CB Insights.

United States

The United States is a hotspot for fintech activity, representing nearly half (46%) of all global fintech startups valued at $1 billion or more (or unicorns, in finance speak). The United States exhibits a fairly consistent trend over recent quarters where the volume of fintech deals being made is decreasing while the amounts are increasing. The reason for this trend can be attributed to a shift toward large-scale private investments, which could affect the supply of venture capital funding to other startups.

Europe

Fintech investments in European markets, in contrast to the purely capitalist United States, tend to be smaller and more regulated. Only one European fintech investment as of the second quarter of 2017 exceeded $50 million in value. Although the volume and value of investments have decreased since the first quarter of the year, investments follow a pattern according to the European financial year, whereby investors seeks to capitalize on early-stage fintech startups before the end of the fiscal year. Additionally, traditional banking models in the UK are starting to give way to technology-driven ones, as can be seen in ClearBank, the first UK clearing bank built on cloud technology rather than legacy systems.

Asia

The Asian fintech market has experienced rapid growth in the second quarter of the 2017 fiscal year, with deal value and volume both experiencing five-quarter highs. The reason for the spike in Asian fintech markets can be explained by huge investments in financial technologies alongside traditional financial institutions. Rather than disrupting traditional institutions, fintech businesses in Asia tend to supplement the existing infrastructure.

It’s easy to make generalizations about fintech and the effect it has on traditional financial markets around the world, but when we take a step back and examine how it plays out across key markets, it becomes apparent that fintech has a long way to go before it becomes the ultimate disrupter of financial markets people speculate. For now, it exists within a highly volatile market where traditional systems such as legacy banks continue to exist alongside fintech startups, many of them gradually morphing their financial offerings.

Jacob Parker Bowles: The Shifting Paradigm Of Venture Capitalists And Fintech

The Shifting Paradigm of Venture Capitalists and Financial Technology

By Jacob Parker-Bowles

On August 2, 2017

In FinTech, Jacob Parker-Bowles

Several years ago, before fintech (financial technology) became a household name and widely accepted form of banking and finance management, venture capital firms specializing in this area did not exist. In recent years, however, fintech has become one of the fastest-growing areas for venture capitalists.

Venture capitalists invest in companies that they believe to have large growth potential, so it is no surprise that so many venture capitalists have chosen to funnel their funding into fintech startups- the industry is worth nearly $900 billion, comprising over 1,000 companies and $105 billion in funding. According to VB Profiles’ Fintech landscape report, outside funding for fintech companies more than doubled between 2014 and 2015, from $17.8 billion to more than $38 billion.

With all that growth in the past few years, it seems that it would have to plateau at some point, and as recent trends suggest, that just may be the case, with financial technology experiencing a paradigm shift. In 2016, global venture capital investment dropped off to $25 billion from $47 billion in 2015.

So what gives? Venture capitalists are not losing faith in startups, but they’ve had a sort of reality check. According the Morgan Stanley, “Pullback in fintech investment over the past year is indicative of a realization of lower return on investments than initially hoped due to some unique challenges to disrupting in the financials industry, and our suspicion is that VC investors will continue to scale back investment.”

As venture capitalists step back, legacy firms step in. A fear of disruption can be attributed to the reason traditional financial firms are now hopping on the fintech bandwagon. The threat of disruption from fintechs is forcing incumbents to up their investments in technology to gain operating efficiencies and preserve market share,” Morgan Stanley explains.The proposed deregulation of Wall Street from the Trump administration is another factor. Deregulation would free up incumbent firms’ spending as they wouldn’t have to put out as much money for regulatory compliance and would have more to invest in fintech startups.

This shift in investment patterns is unlikely to have a direct, adverse effect on fintech startups. What is likely, though, is that established Wall Street firms will gain a competitive edge with fintech companies, putting them on a more level playing field as they adapt new technologies to improve their business models.

5 Top FinTech Companies

By Jacob Parker-Bowles

On June 28, 2017

In FinTech

Fintech is, as its name alludes, a field that combines both finance and technology. The companies that fall under the fintech category often specialize in account management, lending, financing, financial assets and capital markets. However, fintech’s main point of attraction for businesses large and small is its dedication to meeting customers’ needs.

Unsurprisingly, the fintech industry is booming, with at least a dozen new companies reaching unprecedented success shortly after their inception.

With that in mind, let us take a closer look at the top fintech companies around the globe:

Adyen

Founded in 2006, this Netherlands-based company provides its clients with the ability to accept payments from around the globe with a single platform. Since it expanded its software to accept payments from online and mobile orders, Adyen has seen an influx of high-profile clients — namely, Facebook, Netflix, Uber, L’Oreal, Burberry, and Microsoft. Because of this spike in popularity, the company nearly doubled its revenue to $700 million in 2016.

Klarna

Headquartered in Stockholm, Sweden, Klarna is focused on improving the online shopping experience via an optimized checkout system. Since the company got its beginning in 2005, it has served over 45 million end customers and added big names such as Disney, Spotify, and Samsung to its list of clients. At the end of 2016, Klarna was valued at over $42 billion.

Avant

Founded in 2012, Avant is an online lending platform that is dedicated to lowering the barriers consumers face in borrowing money. Although this United-States-based company does not necessarily have any high-profile clients, it has reached over 500,000 customers and accrued a loan portfolio that is worth over $3.5 billion — an impressive feat for such a young company.

Oscar

Founded in 2013, this innovative company has taken the customer service aspects of fintech and applied them to the health insurance industry. Oscar’s goal is to encourage uninsured Americans to purchase policies by quickening the application and approval process, and providing access to full-coverage plans that boast affordable premiums. In addition to its admirable mission statement, Oscar also boasts a prominent list of investors that includes Google Capital, Fidelity, and Khosla Ventures.

SoFi

Launched in 2011 by four Stanford business students, this San Francisco-based fintech startup promises to be “a new kind of finance company.” Clearly, SoFi’s unconventional approach to lending and wealth management has been successful, as the company now boasts over $19 billion in funded loans and over 300,000 members across the country.

How Retailers Are Retaining Relevancy

By Jacob Parker-Bowles

On June 7, 2017

In FinTech, Jacob Parker-Bowles

It’s not hard to spot the decline in brick-and-mortar stores. If you were alive in the 90s, you probably remember lounging with a book and listening to the CDs in Borders, testing out the gadgets in Sharper Image, checking out the flat-screen TVs at H.H. Gregg, picking out your next VHS for movie night at Blockbuster, and trying on sneakers at Sports Authority. None of these stores exist today. Even shopping malls are gradually becoming obsolete, with many closing a vast majority of their retail stores and becoming these cavernous, eerie ghost towns.

As more and more retail stores switch to e-commerce only or become acquired by other retailers, the ones left standing will have to get creative and come up with ways to retain their relevance in a tech-dominated world where 79 percent of U.S. consumers shopping online and 42 percent ranking convenience as an important factor for shopping online versus traveling to a store, according to a study from Pew Research. Online shopping grew at a rate of 12% year-over-year since 2009 compared to 4.5% for retail sales according to the U.S. Census Bureau’s monthly retail report.

When technology is the name of the game, the most logical thing retailers could do is utilize it to appeal to a tech-driven society- and that is exactly what some retailers are starting to do. According to leading technology research and consulting firm, Gartner, “traditional stores will have a place in the future with a new model that will blend the digital with the physical.” Enter, artificial intelligence (AI).

Artificial intelligence is the use of machines to perform tasks that normally require human intelligence. AI has both amazing potential and also some concerning implications- if we continue to outsource human tasks to robots, will we reach a day when there is no longer the need for human labor? Thankfully, that day has not yet arrived, and maybe it never well. AI is just starting to manifest in the form of personal assistants like Amazon Echo and Google Home.

One of the ways brick-and-mortar retailers are competing with online retail is by collecting customer data through video surveillance. Online vendors have always had an advantage over physical retailers in combatting cybercrime in that they store all of their customers’ data. Now, facial recognition technology and floor-level cameras allow retailers to predict the age and gender of customers and even analyze customer reactions to products. Retailers like Walmart and IBM are already implementing this technology.

Another way retailers are employing data and AI to stay on the cutting edge is through in-store help. Target plans to equip all associates with technology that will enable them to deliver superior customer service by searching inventory across the company, setting up shipping, and taking payment from the customer mobly. Lowes is taking it one step further by launching robots to assist customers on the floor, keep track of inventory, and analyze shopping patterns.

A final way retailers can take advantage of AI is by leveraging the internet to obtain key data about customers and make their shopping experience more personalized. By monitoring trends among shoppers, retailers will have a better idea of what to sell and how to attract customers.

Technology ultimately encroaches upon every corner of human life, albeit at a slower place in some parts of the world, and it is the difference between institutions that succeed and those that fail.

Fintech: Startups vs. Big Banks

By Jacob Parker-Bowles

On May 31, 2017

In FinTech, Jacob Parker-Bowles

Fintech is taking control of the future of finance across the world. There are multiple aspects of financial technology that will be shaping the way we handle the exchange of money. Whether it be transactions from smartphone or advancements in accounting, fintech has full control of how we manage finances in the 21st Century.

Adapt or Die

With apps already out like Venmo, large corporations are trying to get ahead in the technological race to adapt fintech. Apple has already begun to get a leg-up on the fintech world by releasing Apple Pay. The accessibility of money has been demanded by consumers and Apple is listening. Big banks are starting to find they may be losing the battle against financial technology if they do not adapt. While this may be bad news for traditional small banks, large financial corporations are beginning to invest in fintech start-ups.

The advantages for big banks to invest in these start-ups are due to their ability to have fast innovation and edge. As well, financial technology allows users to make decisions that are more precise and fast. Why would customers stay at slow financial institutions when they have the ability to utilize resources like one-click loans or secure credit card processing?

A Mutual Relationship

Banks have viewed the growth of financial technological companies as a threat to their business and industry. Yet, there is a great opportunity between large financial corporations and fintech companies trying to gain traction. Large banks need the innovation that these start-ups have and the start-ups need the financial support and tracking that the banks can give them. Partnerships between the industries could prove beneficial for both.

Essentially, it comes down to both parties finding a middle ground to benefit from one another. The heart of fintech comes down to innovation, collaboration, and openness. If banks do not realize this and change their business model, they may end up on the sidelines while small start-ups take their place.

Across The Globe

Countries like Brazil have started to see the effects of banks not collaborating with new fintech businesses. Many large banks such as Itau and Banco Bradesco has slowly been closing their physical banking centers due to the changes in the industry.

India’s banks, which dominate the country’s financial landscape, also have a grim outlook. An online payment company, Paytm, announced a $1.4 billion invest while large banks are struggling to keep up.

Convenience Over Customer Service? How Online Banks Appeal to a Changing Clientele

By Jacob Parker-Bowles

On May 8, 2017

In FinTech, Jacob Parker-Bowles

There is an unfortunate tradeoff with the implementation of new technology: the more advanced technology becomes, the less personalized our world is as a result. When simple jobs can be performed by robots, as many now can, there’s no need to invest the money into human labor. At certain restaurants, people can place their orders via iPads. You can pay your friends back through an app on your phone without having to travel to an ATM to take out cash. You can book an entire vacation from your phone. You can place an order online without the need to talk with a human until your food arrives at your doorstep. Luckily, the need and desire for human interaction in the way we conduct business still exists, so technology has not eclipsed customer service entirely. But it seems that things could be headed in that direction, and banks are one sector where we can already see that trend.

Without that crucial customer service element, what remains to retain customers? As paradoxical as it may sound, banks are attracting new customers by keeping them away. “Banks are finding new growth opportunities through online and mobile channels, proving once more that consumers are increasingly attracted to the convenience and speed of mobile and online solutions,” says letstalkpayments.com.

When so many people, especially the millennial generation, turn to their phones for just about everything, it only makes sense that banks would tap into that lucrative channel, prioritizing convenience over customer service. Bank transactions dropped off by nearly 50 percent between 1992 and 2012, as online and mobile capabilities came into play. In order to retain customers, banks have had to play by new rules to appeal to a changing clientele.

Some banks are combining new technologies with traditional banking elements to appeal to a younger generation. For example, Savings Bank of Danbury in Connecticut just opened a new branch, and they pulled out all the bells and whistles to cater to tech-savvy millennials. Instead of a person, a large screen recounting the bank’s history in an ongoing loop greets customers as they walk through the door. The new branch features lounges with iPads and laptops where customers can interact with bank staff through technology, rather than face-to-face in a traditional teller line.

According to Martin J. Geitz, president of Simsbury Bank, the millennial generation are outgrowing the baby boomer generation, and as such are coming to define the economy. Says Geitz:

We are now embarking on the threshold of the millennial generation driving the economy as so many are entering the workforce and their demands and tastes for products and services will really define what banks offer and other consumer-driven products. The millennial generation grew up with a smartphone in their pocket. They have a different relationship with technology than we do. It’s important that we provide functionality at their fingertips.

Banks are offering a variety of features that allow customers to conduct all of their finance needs remotely, without ever setting foot in a bank. For instance, people can now transfer money to one another through cardless ATMs and checks can be deposited through an app on one’s phone just by taking a picture of it. In fact, there is an entirely new breed of banks that’s risen up in response that is moving away from brick and mortar locations entirely, operating solely online. An example of an online bank is Simple, aptly named for its mission to make the banking process as simple and convenient as possible. The bank gained more than 100,00 customers in its first two years and was promptly snatched up by Spain’s second largest bank, Banco Bilbao Vizcaya Argentaria (BBVA).

For the time being, brick and mortar banks are here to stay. They may not be the grand, pillared buildings of years past, with imposing high ceilings and marble floors, but nonetheless, there is a large fraction of the general populace that doesn’t fully embrace or understand technology, and still desires a certain degree of customer service. Mobile banking technology will continue to expand, but it will need to do so in such a way that combines the service of traditional banks with the convenience of online banking.

Jacob Parker Bowles Mobile Payment Apps (3)

The Role of Artificial Intelligence in Finance

By Jacob Parker-Bowles

On March 30, 2017

In FinTech, Jacob Parker-Bowles

You’ve probably heard of the word fintech before, short for financial technology- just about everyone has these days. It’s usually a trending hashtag on Twitter. However, for those outside the finance sector, your understanding of what financial technology actually is and how it affects the industry may be somewhat limited. I don’t mean to insult anyone’s intelligence here; I simply mean that unless you actually keep up with trends in the finance industry, it would be difficult to have a firm understanding of the technologies that are being applied to it, as they’re constantly evolving.

Up-and-coming financial technology companies have the user in mind, as they work to optimize the user experience and streamline financial transactions through artificial intelligence. Artificial Intelligence, often abbreviated AI, can be thought of as a group of related technologies training machines to respond to and simulate the human brain. These related technologies include: “natural language processing (improving interactions between computers and human or ‘natural languages), machine learning (computer programs that can ‘learn’ when exposed to new data) and expert systems (software programmed to provide advice).” While this is all well and good for everyday people who just want to simplify their finances, banks are being forced into a position where they will have to either respond and adapt, or fail.

The financial landscape is rapidly changing, and it isn’t sticking around for stragglers. According to BBC News, “Machines are now responsible for most of the activity on Wall Street.” The stock market floor of a few years ago, with traders frantically shouting and signaling to make deals on commodities, is not the floor of today. Computers can respond in a matter of nanoseconds, whereas the average human response time is half a second. When it comes to stocks, every millisecond matters, so machines and high efficiency traders trained in these machines have started to take the place of traditional traders.

With Wall Street already responding to changing technology, it’s only a matter of time before banks and financial services will be forced to respond as well. As the latest Technology Tool for Today (T3) conference demonstrates, a number of finance companies are eager to jump on the bandwagon. Fidelity’s eMoney conducted a live AI demonstration of an interaction between Alexa and eMoney’s eMX personal finance platform in which Alexa could answer questions such as how much is in one’s bank account. EMoney also showed off a new virtual reality 3D financial planning experience where users can learn how to manage their finances through an online guide and communicate with an advisor afterwards through a video session- all from the convenience of home. Another fintech company, Redtail Technology, introduced a newer, more user-friendly version of their CRM software.

While AI presents a major disruption to business across multiple industries, the finance industry realizes its incredible potential. The finance industry is very much user-dictated, so any technology that will enhance the customer experience and make them more likely to trust in a bank’s services cannot really be a bad thing. Banks will simply need to rise to the challenge, because as research suggests, AI could double economic growth rates in 20 countries and increase labor productivity by 40 percent by 2035. According to Forbes:

Artificial intelligence provides banks, capital markets firms and insurers with an enormously powerful set of tools to transform and streamline some of their most fundamental financial processes. The challenge for many, however, is not only to identify and adopt the best AI technologies but to reshape and rethink their operating model and talent development to take advantage of AI’s transformative capabilities.