Are there any strong examples of disruption through fintech in your jurisdiction?
Notwithstanding there have been many obstacles and challenges in the rapid growth of the development of the fintech industry in Bermuda, as discussed above, the Government of Bermuda and key stakeholders have been extremely proactive in addressing those potential disruptions. However, Bermuda remains to be subject to international regulatory standards and is under constant pressure to ensure compliance in order to thrive as both a fintech harbour, as well as a reputable international jurisdiction.
Disruption through fintech has mainly occurred not in the domestic market but developments by businesses based in the SEZ and/or operating through a Cayman Islands entity.
The traditional bank distribution channels are currently threatened by the drive towards platform models of banking. This is evident through the manner in which banks define customer expectation, which is no longer by looking at what customers expect from their banking experience, but instead, it is fintech and large technology companies that currently set the standards. This may eventually alter power dynamics given the increased competition and open environment which in fact could ultimately benefit customers.
A strong example of fintech disruption in Denmark is Danske Bank's Mo-bilepay, however, Mobilepay was actually invented and developed by Dans-ke Bank's own internal disruption IT-hub "Mobilelife". The Mobilepay app made peer-2-peer wire transfers fast and easy. Suddenly everyone could transfer money to each other by way of just using the Mobilepay app. Mo-bilepay is also accepted as a payment instrument in a wide number of shops and stores in Denmark.
Another strong example is the Danish peer-2-peer lending platforms count-ing Lendino and Flex Funding.
Finally, neobank LunarWay, credit company ViaBill, cryptocurrency exchange Coinify, and company card monitoring tool Pleo are worth mentioning as well established Danish fintech companies.
There has been a lot of discussion on possible disruption through fintech, but so far fintechs have not been willing or able to kill off traditional banks or other incumbent financial institutions in Finland. As described above and shown by various examples, most incumbent financial institutions trust in cooperation. Even though fintechs have scalability, banks do still have wide trust from their customers.
There are no strong examples of disruption through Fintech in France to our knowledge.
A real disruption has not yet happened.
DLT businesses and the industry as a whole is still in its infancy, with the first two firms being issued DLT licences and a further five firms receiving in-principle licences under the DLT Regulations. Once the remaining five businesses receive their full licences from the GFSC in the coming months we expect some disruption in the jurisdiction although we anticipate that the disruption caused by these businesses will be felt strongly in other jurisdictions worldwide as they will primarily use Gibraltar as their base of operations.
Fintech companies in Malta have been witnessed to disrupt several sectors such as payments, insurance, investment, and risk management. The vast majority of fintechs in Malta are e-money institutions and payment institutions with the former offering services such as prepaid card services, e-wallet services, and money transfer services; while the latter mainly offer payment processing services, and virtual card payment services.
The Israeli insurtech company, Lemonade, is an excellent example of disruption in fintech. Lemonade, which has raised approximately US$180 million, uses AI and bots instead of brokers to provide property and casualty insurance and promises zero paperwork and an unbiased algorithm that decides which incidents are approved and are therefore paid immediately. This has changed the entire dynamic of the old fashioned insurance industry.
Another example is Behalf, an Israeli lending and payments company that raised approximately US$306 million, which provides an innovative platform targeting small and mid-sized businesses that offers short-term financing and can also be used for business purchases in place of nearly any other payment method, within a customizable payment schedule. Loan applicants undergo a one-time, hard personal credit inquiry to determine their eligibility, while the payment solution for merchants provides their business customers with more buying power and flexible payment option. Behalf created a linking factor between merchants and their business customers which allow the merchant to conduct their business without being subjected to fluidity (theirs or their customers) or to the interest of the banks, which increases sales and improves cash flow for both merchants and their business customers.
There are no strong examples of disruption through fintech in Japan. However, even though ICO regulation is getting stricter globally and raising capital by ICO is becoming more difficult, it is reported that the raising of capital by ICO far exceeded that of venture capital during the first quarter of 2018. Although the future development for ICO in Japan is not clear yet, it is possible that ICOs will be established as one of the crowdfunding methods.
Absolutely, Fintech has become a disruptive industry in the recent years.
From a regulatory point-of- view, cryptocurrencies have become a trending topic for regulators and tax authorities to define the strategy on how to deal with such type of assets and also, it has now become obvious that Fintech institutions will be of the highest importance in the development of the financial markets in Mexico, and will have an impact on several topics such as privacy, competition, anti-trust and consumer protection legislation.
British Virgin Islands
From a macro perspective, creating a new branch of fintech (corptech), the BVI is excited about its recent launch of the Micro Business Company that will maximize automation and offer an end-to-end user experience with users being able to form and manage their micro business companies through their smart phones, via apps developed by local corporate service providers.
This end-to-end user experience will also utilize electronic identity solutions through app integrations available through smart phones. As most are aware, despite advances in production methods, it remains possible to create counterfeit physical identity documents such as passports, birth certificates and driver’s licences that will pass a cursory examination. As electronic identity solutions are proving to be a more robust solution to combatting money laundering, the BVI has recently amended its AML legislation to embrace the acceptance of digital identity processes. In so doing, the BVI is demonstrating its willingness and diligence to combat money laundering and terrorist financing whilst acknowledging that shift in business models will inexorably cause a shift in the associated governing principles.
SSEK: There is no one specific example of major disruption through fintech in Indonesia. However, as discussed in point 20 above, financial services institutions are generally threatened by the increasing number and growth of fintech companies, especially those offering peer-to-peer lending services.
Despite fintech-related businesses and initiatives being currently in a very early stage in Portugal, the recent surge in crowdfunding platforms has begun to make some impact in what concerns the market perception regarding the different financing sources, with more and more individuals and small businesses resorting to this new financing alternatives instead of more traditional bank-based lending solutions.
Non-bank payment systems, including Stripe, PayPal, Apple Pay, Braintree and Square have gained significant market adoption in payment services traditionally dominated by financial institutions.
A strong example of disruption through fintech in the UAE is the lower requirement for over the counter banking services due to the availability of digital services. Another strong example is the launch of crow-funding platforms, which result in a decrease in demand for loans from banks, e.g. Smart Crowd, which was a part of the DIFC Fintech Hive program and now a company licensed by the DFSA, obtained an operating license in April 2018 as a property crowdfunding website.
The implementation of a digital online bank in Ukraine that has drastically changed the existing approaches of commercial banks to card business is the most significant breakthrough. For the first time in the banking business of Ukraine, the receipt of a card was effected by way of filling in the request in a mobile application, and the card received through Mobile application mail is currently one of the most functional among other alternatives. In addition, the said online-bank was one of the first in the jurisdiction who implemented technologies of Android Pay and Apple Pay.
Due to the innovation technologies and customer-oriented approach the bank succeed in attracting more than 500 K clients in a short time.
Disruption occurred with the ICO boom of 2017; ICOs became a major competitor to private equity funding. It may continue which the establishment of security tokens as a fully accepted alternative to the listing of securities at a stock exchange. Disruptive to a certain degree were automation of derivative products (such as the Lentec model) or robo advisors, although often there will be a combination of models (robo advisors supporting the relationship managers of banks) and not a full disruption.
Yes. Some key examples of disruption are as follows: (i) Digital only Banks, such as DBS Digibank, IDFC Digital Bank and Kotak Mahindra Bank’s 811 Accounts are branchless paperless banks offering a smartphone enabled no-frills banking experience for typically higher interest rates on savings, (ii) Deployment of Chatbots for customer support by leading banks such as HDFC Bank, ICICI Bank and Axis Bank looking to automate customer support. (iii) Peer – to – Peer lending marketplaces such as Faircent have flourished since the RBI brought in regulations for this in 2017 (iv) Non-bank payment intermediaries such as Razorpay, Instamojo, MSwipe have made it much easier for merchants to accept digital payments.
The UK boasts many examples of fintechs disrupting the traditional financial, payments and insurance systems. The UK has seen more challenger bank activity than other regions, hosting Atom Bank, Tandem Bank, Monzo (the first online-only challenger bank with a full banking licence) Monese, Pockit, Starling Bank, Tide and Revolut, among others. A number of these have already obtained a full banking licence whilst others have followed the path of first obtaining an e-money licence.
The implementation of the second Payment Services Directive ((EU) 2015/2366) paved the way for a host of providers of account information services (“AISPs”) and, to a lesser extent, payment initiation services providers (“PISPs”). Notably, UK AISPs have taken the initial regulatory description of provision of account and transaction data from multiple accounts to a consumer and elaborated on this, developing innovative uses for this data to bring new fintech products to market, whether by improving on existing processes or creating new offerings. For example, AISPs are currently using account and transaction data to speed up the process of evaluating SME and consumer credit eligibility, thus streamlining the process of obtaining loans. Providers of accounting services use access to account data to provide faster and more accurate accounting services to their users. Other uses of AIS include innovative applications such as automated loyalty point and cashback provision. This space has also seen the growth of intermediary providers of account data, such as TrueLayer and OpenWrks, who are registered as AISPs and provide AIS as a service to third parties in the fintech space who then use the data to provide services to end-users.
Other areas in which UK fintechs lead run the gamut from robo-advising and app-based investing (Nutmeg and Wealthify), peer-to-peer money remittance (Transferwise), business-to-business lending (Funding Circle), providers of SME small- and micro-loans (Iwoca), identity-verification (Onfido, Yoti), peer-to-peer lending (Zopa), invoice factoring (Market Invoice), and open banking (Fractal Labs, Fluidly).
XS2A is one of the most important examples of disruption through fintech since payments is such a critical business for the banking industry. XS2A will no doubt impact current business models and require a rethink of business strategies – probably leading to a new wave of collaboration and partnerships in the new competitive landscape. Although bigtechs already have projects in the financial arena, it remains to be seen whether they will actually take the opportunity and claim their role within the payments chain and other financial services such as the loan market. If they do, this would certainly be a major potential threat with a disruptive effect. It is one thing to compete with new fintechs. Clearly, it is quite another thing to compete against major online platforms such as Google, Apple, Facebook and Amazon.
P2P lending has become an important channel and a useful supplement for small-to-medium sized enterprises to obtain financing. However, the collapse and transformation of some bad platforms, especially the illegal use of P2P online loans to illegally absorb public deposits or fraud, seriously disrupted the order of the Internet financial market and dampened market confidence and brought property losses to users.
For the past few years, compared to the insurance industry, the securities industry and bank industry, P2P lending industry has been the least regulated area. For instance, Zhongbao Investment Network Platform (中宝投资), which was established by Zhou Hui on 2011, has illegally raised funds of almost 2000 unspecified objects nationwide, totalling more than RMB 1.03 billion. In addition to the payment of principal and income return of RMB 691 million, there are still more than RMB 356 million yuan that could not be returned. However, currently the P2P lending sector is going through a regulatory shakedown. In the past 2 years, nearly all of the P2P platforms have had to cease their operations in 2018 for self-examination, in accordance to a series of rules and regulations issued by the Chinese government, in order to meet the newly adopted stricter standards.
Unfortunately, there has not been any strong “disruptive” force in the fintech market in Taiwan. Given that offering of financial services is subject to strict scrutiny by the regulators of the financial industries as well as our central bank, many fintechs have been struggling in trying to find ways to sustain their operations. For example, before the FSC allowed e-payment services, local players had fought really hard against the foreign exchange regulation and the traditional banking system. Although the new e-payment law was finally promulgated, none of the new players granted with the required licenses have reached the “critical mass” thus far. P2P lending and crowd-funding may be two other areas where a few players have made their presence on the market, but the scale of their operations is still small.
There is no one specific example of major disruption through fintech in Malaysia. However, the disruption is visible mostly in payments and digital wallet, followed by lending, wealth management, marketplace, crowdfunding, and know your customer (“KYC”). The digital wallet from established player such as AliPAy, Wechat Pay and others will continue to disrupt the payment market and impact bank’s revenue. It must be highlighted that fintech start-ups that engage in activities under the purview of the central bank must comply with existing laws. The regulated businesses which include banking, insurance or takaful, money changing, remittance, operating a payment system or issuing payment instruments.
The regulations that govern fintech industry in Malaysia are regulated by BNM and other relevant authorities help to alleviate and mitigate the disruption that arise through fintech. The fintech players are also moving fast in their alliances and partnerships with financial services institutions in order to ensure the innovation of their products and better solutions. With a large migrant worker population in Malaysia, the payment services sector has been disrupted recently with entry of non-bank local and foreign owed businesses.
Furthermore, those that continue to rely on physical documents and wet signatures will likely be the first to fall. KYC is a tedious task for customers. For the KYC to be done, customers have to be physically present to meet face to face with bank representatives for many types of banking products. BNM has recently published the e-KYC guidelines for remittance companies and is currently mooting an industry wide adoption. Should the e-KYC be approved a wave of change would be seen on how customers apply and sign up for products digitally in the future. Nevertheless, this would be a great innovation for the financial sector in Malaysia.