DSV Fintech Market Intelligence Q4 2016

Coins — a startup using blockchain technology to boost financial inclusion in Southeast Asia, has raised US$5 million in a Series A round led by a fund backed by non-profit Accion. Coins is a mobile blockchain-enabled platform that enables anyone, including those without bank accounts, to access financial services directly from their phone. The firm currently operates in the Philippines and Thailand, claiming over 500,000 users. With more than 60% of Southeast Asia’s population of 600 million unbanked, and less than five per cent having a credit card, it is confident of signing up millions more. Using Coins, customers have access to a mobile wallet and services such as remittances, air-time, bill payments, and online shopping at over 63,000 merchants who accept digital currency. The firm has built up a network of banks and retailers that act as cash disbursement and collection sites, while partnerships in 40 countries enable low cost cross-border payment and remittances. Finextra

DSV Take: new populations that have not faced the venerable existing players would and often cut off by the formalities of these players, they would increasingly use those that are viral, contextual, consumption (usage) driven and that is why the only way for trad players to enable themselves in those tightly-knit societies is the API way (enable themselves throught the flood- gates built by startups that have a different world-view). One example is that the commerce and lending is disrupted not be the adoption of Union Pay but by WeChat and Alibaba (who are building alt. banking products (savings = account, investment (money market), lending (social profile scoring / behavioral scoring).

M&A and integration opportunities will increase as investment money would require quicker path to profitability / scaling due to reversal in interest rates. It also manifests the initial estimates of startups path to stardom are incorrect at best and more would be inclined to specialise and create a service platformisation effect by partnering with others — as a pretext for future M&A transactions (rebundling effect).

Traditional corporate institutions are funding fintech and *tech forays to improve return on capital as well as to progress the learning curve of building new ideas based on solid backend and sales channel opportunities using new ideas.

This further progresses the corporate innovation being pushed outside of traditional boundaries first ensconsed to generate ideas, then to bootstrap agile product development and now moving outside to generate revenue generation opportunities based on standard APIs that reinvent the business value as its being re-stacked as part of new emerging value chains.

Trends to follow

• API and contextual finance
• Payment aggregation
• Fraud prevention as a service

Contextual finance is the logical next step due to better analytical capabilities, information myopia and overall data flood amid low attention span from customers. Driven by voice, analytics and bigdata, everyday advice is reimagined

• From fact towards emotions stimulus
• From analysis of big events towards micromanagement (nudging)
• From recommending towards nudging

Moving money is, like the trend of everyday money management, pushed past the single interface and contextualised through the norms and means of living lives.

Based on the growing momentum of the acts of payment signify the actual steps of helping friends, bying things, the mechanical actions of banking are contextualised in the commerce and social communication steps. Hence, the uptake of communication first mediums like WeChat in China and continued success of MPESA in Kenya (where card transactions are falling but mobile based remittances are spiking). Based on these things again, Facebook is interested to open a lite version of Facebook Messenger for emerging markets as communication platforms are the conduit for commerce and financial services.

Trends to look for

• Payment and remittance tokenisation (PaySend)
• Chats and conversational commerce websites
• Fraud prevention (algorythms to track behavioral finance)
• To utilise the trend of emerging middle class of digital natives to access financial services, traditional players are trying to adapt. In September, Visa tried to take on M-Pesa with a mobile payment service in Kenya. A bank enabled service tries to emulate mobile payment scheme ubiquity and simplicity and tie financial services offered by banks through it — as a caveat of people upgrading from remittance-focused ecosystem

Personal authentication requires a robust infrastructure not to lose the economy of scale by serving millions of underbanked users without the need to build physical infrastructure to apply AML-KYC regulations so the advent of sustainable and appropriate ID mechanisms are very important in those countries where commerce is driving the adoption of financial services (China with selfie payments and ID) and India with Aadhar enabled KYC. Russia is also playing catchup with 115FZ ammendments and mulling use of e-gov authentication mechanism to validate users identity remotely (SAML services). This is also planned by Post of Russia (and Postal Bank) that plan to outfit couriers with biometrics enabled smartphones to accept payments, do AML KYC and man the last mile of financial services being offered for the underbanked. Where banks are retrenching their offices and Postal Bank unwilling to service unprofitable spots, offering an adequate technology to cover the last mile is the way to go.

Trends to watch

• Tokenization of payments and identity
• Blockchain for identity management (federated identity)