A Fortnight in Fintech: FCA, Facebook, Apples and peers
Where finance meets technology, interesting things continue to happen. While the term ‘fintech’ may not be fully in the mainstream, many of its news stories are, and their big players too.
Read on to find out more about these developments and our reactions to them.
Facebook and cryptocurrency: not enough likes?
In our previous fintech roundup, we commented on Facebook’s plans to launch its own cryptocurrency. It seems this was written both in blockchain and in the stars, because the digital currency will be called Libra.
The currency will facilitate instant international money transfer with a very low transaction fee. Facebook also seem set to team up with service providers such as eBay and Uber in an effort to boost adoption as quickly as possible.
The currency’s value relative to fiat currencies will be stabilised by being backed by other currencies and assets around the world.
As expected, regulators including the Financial Stability Board and the Financial Conduct Authority (more on the FCA later) have waded in. Concerns centre around stability, as a cryptoasset would potentially become widely used for retail payments.
This gives the financial system greater exposure, increases the risk and therefore the proposal should be subject to closer scrutiny. Things are getting so interesting that social media users could be forgiven for breaking out the popcorn GIFs.
Apple is another of the major names who appears to have identified cryptocurrency as low-hanging fruit. It seems to be preparing to follow HTC and Samsung by allowing its iPhone handsets to become hardware wallets for the storage of cryptocurrencies. This should allow users to make payments in crypto whilst on the go.
Banking on tech companies
The Bank of England (BoE) are also part of the fintech news, following an important announcement. Currently only commercial banks can deposit funds with the BoE. However, they intend to look at opening up to tech companies.
The intention is to encourage competition (which the commercial banks may be less than enthusiastic about) and innovation within payments systems.
It will be interesting to see what the consultation process comes up with, but the direction of travel is promising.
FCA + P2P
The FCA has published some new guidelines for peer to peer platforms. The aim is to increase protection for investors without stifling innovation in this space.
Rules include caps on amounts individuals can invest as well an appropriateness assessment. In addition there are marketing restrictions and requirements to support the outcomes advertised.
Whilst the rules may be onerous for smaller platforms, the proposed changes have been well received by the industry, receiving support from the P2P Finance Association.
FATF digital assets guidance
On 21 June the Financial Action Task Force (FATF) published guidance on how participating nations should supervise digital assets. This is expected to have an impact on exchanges, custodians and funds.
We think regulation of digital assets will ultimately lead to greater understanding of these asset classes, resulting in wider adoption as institutions get more comfortable. Another case of ‘watch this cyberspace’.
Back to blockchain
Finally, turning our attention to the technology at the centre of fintech, this article from the Wall Street Journal highlights well how blockchain is not necessarily the Holy Grail for everything. It needs to have a use case that adds value to an organisation and be scalable.
As further evidence of this, one of our team recently purchased a theatre ticket where blockchain was involved in the transaction. By way of a ticket, he was given a QR code to be scanned at the theatre, a small venue above a pub. However, when he arrived, his name was ticked off on a sheet of paper. He could presumably have bought a ticket on the door with cash too. For all the excitement around blockchain, perhaps not everybody is ready to play.