Are there any areas of fintech that are particularly strong in your jurisdiction?
Fintech (2nd edition)
Payments/billing continue to lead the way in innovation and growth in fintech in the United States. That is followed closely behind by technology investment in Investment/Wealth Management. These trends are not different from other jurisdictions, but the United States continues to provide a fertile market for these areas to grow and develop.
After a few years of activity in the alternative lending and crowdfunding industries, we would say that today’s fintechs are mainly active in the fields of payment, regulatory tools (‘regtech’), and insurance (‘insurtech’).
Bermuda is one of the world’s leading offshore financial centres with a long history of providing pragmatic financial and professional services to the international business sector and it has more recently been gaining international attention as a leading centre in all areas of fintech.
The digital banking system is growing in Brazil´s jurisdiction, revealing the inefficiency of the traditional banks in interesting new generations. An example of such prosperous scenario is Nubank, a Brazilian startup in the payment and credit segment. The traditional banks are trying to compete with such innovations, exemplified by Santander Innoventures stating its investment in the Series C of Creditas, a big online lending platform in Brazil. So the main areas fintechs are strong are: lending, credit, payments and receivables discount
According to Finnovista Fintech Radar 2019 payment and remittances platforms are the core of the Fintech industry, representing 26% of the Chilean market. This includes companies like PagoFacil, Global 66, Mach, Flow and Amipass. There has been an increasing demand for payment solutions for consumers that don’t qualify for commercial banking solutions (e.g. credit cards).
Enterprise Financial Management (EFM) solutions, represent 17% of the industry which provide automated solutions for managing operations within companies. As many of these Fintechs state: using EFM
Mobile payments, dominated by two apps, WeChat Pay and Alipay, have become so common in China that paying with cash is practically unheard-of, even with street vendors and taxi drivers. Competition for market share has propelled innovations such as Alipay’s ‘Smile to Pay’ facial recognition system through which customers can authenticate their payments by having their faces scanned. Such rapid development in mobile payments is partially due to China’s unique fintech ecosystem: a tech-savvy population, an underdeveloped banking industry and a permissive regulatory environment.
Tencent’s WeBank was China’s first digital bank, established at the end of 2014, upon receiving its banking licence, and it was closely followed by Alibaba-affiliated MyBank, as well as Baidu and China CITIC Bank’s aiBank. Such digital banks provide financial services to people who do not have access to traditional financial services. For example, WeBank’s most popular service is Weilidai Consumer Loans, available through Tencent’s WeChat app, which provides unsecured personal loans in a range of between RMB 500 (USD 75) and RMB 300,000 (USD 44,100). Weilidai Consumer Loans give borrowers 24/7 digital banking experience with the flexibility to borrow and return at any time.
It would be difficult to point to any area of fintech that is particularly strong within the UK, given the strong presence of fintech businesses across the board. Fintechs are active within the business- and consumer-credit space, payments (including account information services and the services built on this), e-money (including e-money as a means to authorisation by challenger banks), robo-advice and insurtech. The UK’s financial regulatory system is effective in enabling products and service offerings across a wide range of regulated services, facilitating innovation across the financial sector.
Nasper’s owned PayU LatAm branch was mostly grown for a Colombian startup which aided in the development of a strong payments fintech community. Also, Venezuelan migration coupled with international sanctions against Venezuela have provided a fruitful environment for crypto-currency based payment remittances startups. Finally, due to financial institutions failure to provide credit products in a large scale, online lending is also very strong with an ample room for additional growth.
To a certain extent, fintech services is present in many sectors in the UAE. As illustrated above, the payment services sector of fintech is particularly strong, with banks and government bodies launching cutting-edge technology in this sector.
The major market players in Taiwan have been devoting in the improvement of customer experiences by deploying big data, artificial intelligence and insurance technologies in the fintech industry. Two Taiwan insurance companies were awarded by the Asia Insurance Technology Awards as the 2018 winners of the field of 'digital and omnichannel technologies'. For example, the industry first introduced in 2018 the 'video-based due diligence service' (of which the patent right application has been approved), which has the advantage of simplifying the insurance underwriting process, improving the operational efficiency and reducing waiting time. This innovation was further expanded into 'video-based claims service' whereby it becomes feasible for an insurer to acquire 'proof of survival' from the policyholder by arranging a video conference session between the policyholder and the insurer's medical personnel on the agreed payment date using mobile device. As compared with past practice whereby the insurer is required to conduct on-site due diligence, the approval processes have been expedited through the launch of the relevant technologies and services.
A study of the Lucerne University of Applied Sciences and Arts about fintech in Switzerland in 2018 concluded that there are significant numbers of projects in the field of investment management and banking infrastructure, followed by projects in analytics, DLT, deposits and lending, and payments. In 2017, Switzerland became known in particular as an ICO location. For 2019, security tokens became a key feature of the fintech scene; for 2020, it is expected that infrastructure projects will dominate the scene.
The strongest area for fintech in Denmark is within the B2B segment, where the payments area is most competitive, followed by tools for managing finances, tax, invoicing and accounting targeting SME’s. Within the B2C area there has been a focus primarily on innovative investment solutions.
Fintechs are currently operating in all financial sectors but, as previously mentioned, peer to peer business lending is particularly strong in Spain.
This might be case because Spain was one of the pioneering countries regulating crowdfunding and, for instance, there are almost 30 platforms registered with the Spanish Securities Commission, which is a rather high number in comparison with other jurisdictions.
With the implementation of the Regulatory Sandbox in Spain we expect to see significant growth in all other fintech areas.
In our perception the strongest and most dynamic fintech areas in Germany are payments, banking-as-a-service, crowdfunding/investment marketplaces, robo advice and DLT applications.
Various areas of Fintech are being developed in Korea, and especially the simple payment service area is developing rapidly with a fierce competition among the business operators, which has promoted commercialization of technology and system aimed at enhancing customers’ comfort. For instance, Samsung Pay, which can be used via Samsung mobile phones, uses MTS method which can be used with the conventional credit card readers which makes it easy for customers to use. Also, NaverPay, which is one of the simple payment services in Korea, can also be used in stores in Japan with QR code payment method without incurring currency exchange fees or overseas card usage fees. There are other innovative simple payment services being developed in Korea.
As Iceland has a very strong payment system in place the strongest area of fintech is through payment services. Fintech companies have many started as payment facilitators and expanded their business to consumer lending operated through the same platform.
The somewhat recent entering into force of the crowdfunding legal framework has seen a surge in new players and stakeholders on the market, introducing new crowdfunding (mostly debt crowdfunding) platforms, which in turn have opened new funding alternatives to either individuals and corporations.
Payments is also a business which has seen an increased relevance, with the introduction of new solutions and platforms, notably, the so-called Mbway, a service by SIBS allowing for instant transfers between bank accounts. Following its success, incumbent banks have started to incorporate the service in their proprietary homebanking apps and started to charge somewhat high fees for users of the original, standalone Mbway, in an effort to bring back the small-amounts payments and transfers to their own systems.
Digital lending, PPI instruments (mostly pre-paid mobile wallets) and UPI enabled payment systems dominate the Fintech space in India; however the sector continues to evolve at a rapid pace and several new developments are expected in light of RBI’s regulatory sandbox regime and its vision statement for 2019-2021.
According to the report of Finnovating News (2018), the FinTech map of Peru registers only 3% of startups dedicated to “online insurance” within the Peruvian FinTech ecosystem. Which, as mentioned before, it shows that Peruvian Insurtech Industry is still in an embryonic phase of development, so it is not possible to conclude that there is a particularly strong area in this industry.
The foregoing, however, represents an interesting opportunity for Insurtech businesses to take impulse and take off, considering the special conditions of the Peruvian market, such as the need to promote greater financial inclusion as part of the Government’s agenda (ENIF), the increasingly widespread use of mobile technology by Peruvians, cultural and consumption habits, among other reasons; that could contribute to the proliferation of innovative business models, especially in the field of microinsurance, where the current Government is committed to continue supporting initiatives and efforts aimed at insurance education (ENIF).
The Israeli fintech ecosystem boasts a large and diverse amount of startups spread over the various sub-areas of the fintech landscape. In general we believe that enterprise fraud management (for example Actimize) and payment solution (eg Payoneer) technology will be areas in which Israeli technology will dominate
Fintech covers a broad spectrum of technology-driven innovation in the financial services sector. The Financial Stability Board divides fintech activities into five categories based on their economic functions, as follows (see www.fsb.org/wp-content/uploads/R270617.pdf):
- payments, clearing and settlement – examples include the new payment services under the second Payment Services Directive (PSD2) (payment initiation services and account information services) and the use of APIs to achieve a more open banking environment;
- deposits, lending and capital raising – examples include alternative financing and crowdfunding platforms, whether or not based on blockchain technology;
- insurtech – examples include insurance policies programmed as smart contracts and Internet of Things developments and similar big data collecting wearables, sensors or software;
- investment management – examples include robo-advisory investment services, mobile trading applications and algorithm-based trading robots; and
- market support – examples include cloud computing solutions (software as a service, platform as a service, business process as a service, data as a service and infrastructure as a service), regtech and innovative digital and biometric ID (know your customer) services.
The payments, business lending and market support sub-sectors are the most embedded in the Netherlands.
New types of money transfer and payment services have been multiplying. An increasing number of companies entered into or expanded their businesses in the mobile payment market. In 2018 and 2019, several companies launched QR code payment services and have been providing customers with good amount of incentives. As a result, this market sector has become highly competitive.
Yes, Jersey has an exceptional pool of blockchain expertise developed from the JFSC’s forward-thinking attitude, combined with Jersey’s flexible range of corporate vehicles and favourable tax regime. As a result, Jersey is particularly strong at dealing with digital assets, whether that is the issuance of coins and tokens or the launch of exchanges. In particular, we at Carey Olsen have advised on the following:
(i) ICOs/STOs/non-security token issuances
Jersey has seen a large number of ICOs. This is in part because the JFSC recognised that ICOs with proper substance and backed by a credible promoter should be nurtured.
For example, Carey Olsen advised on the launch of Jersey’s first ICO in December
2017, ARC Reserve Currency. ARC is an asset-backed “stablecoin” cryptocurrency which is designed to act like a currency without the volatility spikes one sees in other cryptocurrencies such as Bitcoin. Carey Olsen worked closely with the JFSC to ensure that
the ARC coin launched ahead of time and with a degree of regulatory scrutiny that should
give prospective purchasers a degree of comfort not available in other jurisdictions.
Subsequently, Carey Olsen built on its ICO expertise by advising on AX1 token, an ICO
designed to raise capital for investment in a cryptocurrency mining operation based in the
(ii) Virtual Currency Exchanges (“VCEs”)
Jersey has seen a number of VCEs launch from Jersey. This is, in part, due to the fact that the JFSC has brought the provision of VCE services in Jersey under Jersey’s regulatory umbrella by extending the scope of existing laws and regulations. As a result, the Proceeds of Crime (Jersey) Law 2009 (“POCJL”) requires VCEs to comply with the Island’s laws, regulations, policies and procedures aimed at preventing and detecting money laundering and terrorist financing. As such, Jersey’s VCE regulation balances the need to provide robust regulation with a desire to foster the development of the Island’s burgeoning crypto-currency and digital asset credentials.
Binance, the world’s largest cryptocurrency exchange, established an exchange platform in Jersey.
(iii) Security Token Exchanges
Jersey has recently seen an influx of potential security token exchange platforms and Carey Olsen is working closely with credible promoters to advise on these matters. The JFSC have indicated that security token exchange businesses will be required to be regulated under the FSJL to undertake “investment business”.
(iv) Custody services and arrangements for holding digital assets
These services are closely related to the VCEs and security token exchanges that we have seen launch from Jersey, and concern the custody of the digital assets. There are two models: (i) custody services provided by the exchange itself (or a related entity) to investors and exchange users; or (ii) custody services outsourced to a third party custody provider to be provided to investors and exchange users. Early advice should be sought on this and Carey Olsen are experienced in this area.
(v) Jersey Private Funds and Jersey Expert Funds
Jersey fund structures are used in the digital assets space. For example: CoinShares Fund I, a venture capital fund investing in Ether (a cryptocurrency used as a payment on the Ethereum blockchain platform) and Initial Coin Offerings.
(vi) Payments Services
Platforms relating to electronic payments.
The use of electronic ID and verification techniques in Jersey and compliance with the Jersey AML regime.
Generally, Jersey strives to promote fintech development by supporting local fintech talent. Digital Jersey, a government-backed economic development agency and industry association dedicated to the growth of the digital sector, aims to do this. Further, the JFSC is a member of the Global Fintech Innovation Network and participates in the cross-border testing pilot.
 - In the fintech space, the ICO terminology has now largely been superseded by
reference to security and non-security tokens, a reflection of the evolving regulatory
backdrop. We retain reference to ICOs in this article because we, Carey Olsen, have
advised in relation to a number of ICOs and that was the terminology used at that time.
The settled approach now is to determine whether a coin or token or other digital asset issued constitutes a security or not and therefore whether it is a “security token” or not.
At this point in time, projects based on blockchain and the cryptocurrencies/token economy are very popular in Liechtenstein (i.e. attempts to obtain licences to trade digital assets in various ways/exchanges and issuance of tokenized financial instruments).
See Q 9 above, other than those (especially, the credit and financing segment) the payments and transactions, financial consulting and management services and the insurance sectors.
Fintechs being established in Luxembourg cover a broad spectrum of financial services. Areas of particular importance, however, include Big Data & AI, insurtech, cybersecurity & authentication, fundtech & investments AML/KYC, regtech, payments, lending, cryptocurrency and blockchain.
Malta is one of the front-running dark horses on the Blockchain front. It is one of the few countries, on a global scale, with the legal and economic foresight to provide a non-intrusive regulatory solution to the delicate market of cryptocurrencies which yearns for certification of quality. Three legislative acts, featuring a well-matched intersection of law and technology, were enacted, re-confirming the important role which Malta is playing in this field. The momentum is reflected in the market with many established names in the industry setting up operations in Malta. New entrants are being announced almost on a weekly basis. Few examples include Binance, which recently relocated its business to Malta, and the setting up of a crypto trading platform to be powered by Bittrex technology. A local fintech company has just struck an exclusive partnership with Bitfury, one of the largest blockchain infrastructure providers in the world. ICOs have been on the rise as many entities have been utilising DLT as a medium to raise finance.
Based on the statistics from BNM, it is clear that online banking is still the dominant channel for Malaysians to perform transaction. Both mobile banking and e-money shows a considerably larger volume in transaction. The data tells a narrative that mobile payments whether through digital wallets or mobile banking is the preferred channel to perform micropayments rather than the traditional way. Both payments and wallets, much like last year’s report, remains the largest representation of the fintech Malaysia scene. Payments represents 19% of the market whereas wallet represents 17% of the market, compared to previous year’s 18% and 12% respectively.
It is likely that the digital wallet growth is caused by a combination of players being aware of the growing demand for mobile payments and others jumping into the bandwagon. AliPay, Boost, Touch ‘N Go, VCash, iPay88 and MOLPay are among the instances of fintech companies’ applications currently available in Malaysia. Nonetheless the space is becoming increasingly crowded, it’s difficult for a month to pass in Malaysia without an announcement of a new wallet player in town.
In Singapore, digital payments have been gaining traction. An increasing number of merchants in Singapore accept digital payments, alongside other traditional payment methods.
In 2017, the PayNow service was introduced, enabling customers of participating banks to transfer funds directly to one another using their mobile phone number or personal identification number (i.e., NRIC/FIN), almost instantly and on a 24/7 basis, without the receiver needing to download the app.
Contactless and cashless payment services (for example, through the use of NFC, QR codes, etc.) offered by established international players such as Apple Pay, Android Pay and Samsung Pay are also prevalent, allowing users to tap and pay for goods and services at any Visa payWave and Mastercard PayPass contactless payment terminals. Other cashless mobile payment options offered by private sector players include GrabPay, Singtel Dash and Alipay.