Weekly Briefing #06: Banking CEO dons fintech hat.

Banking CEO dons fintech hat. It’s one thing when Blythe Masters leaves JPMorgan Chase or Hans Morris decamps from Visa to forge a new path in fintech. But it’s even more interesting when the captain of a financial ship abandons the helm and takes a job below deck. That’s why we took note when Frank M. Mastrangelo, head of Wilmington-based The Bancorp, resigned abruptly after just a year on the job to become the firm’s “technologist in residence,” tasked with focusing on the firm’s payments business and fintech initiatives. Of course, Mastrangelo may have been “invited” to make the move, but we nevertheless believe it speaks to a trend poised to accelerate next year: leaders of traditional financial services companies doing the career math and heading into fintech. It’s not exactly a story with the emotional punch of Death of a Salesman, but it’s a reminder that even well compensated kings of finance yearn for career thrills and chills.  See here for the story.

Bloomberg: Is the empire terminal? Hardcore fintechers often throw shade on Bloomberg by predicting that younger and “lighter” financial data companies will ultimately win out. But we think Bloomberg’s recent purchase of the Barclays index business is a smart move and demonstrates once again that the company will continue to grow beyond its cash-cow terminals. The index acquisition is hugely complimentary to several other Bloomberg enterprise offerings and it blocks emerging rival Markit from cornering the fixed-income index business. As a private company with ample resources, Bloomberg can keep buying quality assets without short-term performance pressure from public shareholders — a great way to evolve and build long-term synergies on its own dime and time.  See more here.

Not your father’s insurance company. When General Motors’ venerable middle-market nameplate was trying to woo younger customers, advertising gurus devised the campaign, “It’s not your father’s Oldsmobile.” We all know how that one worked. Switch to today’s insurance market and we find MassMutual and Northwestern Mutual, among others, trying harder to connect with younger prospects. See this story in the Wall Street Journal to learn more about those marketing efforts, which were long overdue in our opinion. However, the problem with the specific initiatives mentioned — such as pay-by-the-minute financial planning sessions with a plucky 27 year-old planner — is that they seem contrived. Putting a hip face on insurance products that are ill-fitted for younger Americans’ real financial challenges won’t fool many people. Sure, prospective young customers will attend events that offer free food, but rather than hiring young vloggers and bloggers to empathize with debt-soaked Millennials, insurers should develop products that actually will improve Millennials’ financial lives.  How about policies protecting them from some of the consequences of student loan defaults?
 
Online lending start-ups aren’t set-up for success next year. Amid strong demand for early-stage equity capital from a slew of new online lending platforms, caution and skepticism on the part of investors may be more warranted than ever. In addition to the demand-cooling effects of potentially higher interest rates,  California and Federal agencies are looking closely at lending practices, a Federal appeals court struck down a key legal pillar that underpinned the sector’s growth and customer-acquisition costs remain stubbornly high. Self-proclaimed fintech junkie Frank Rotman of QED Advisors shared his informed view of the landscape here and explained his reason for caution: “A slightly better model won’t cut it in this environment, and history will show that the second wave of innovation is typically marginal when looked at in the rear-view mirror.”

European banks join the not-com frenzy. If you thought only consumer goods companies were fighting for top-level domain (TLD) names other than “.com” or “.net” — making a grab for generic suffixes such as “.vodka” or “.pizza,” or trademarked names such as “.Gucci” or “.Ford” — think again.  More than 500 European financial institutions have registered to obtain a “.bank” TLD since its creation in June, following a rush by more than 4,000 U.S. banks. The hot TLD is controlled by fTLD Registry Service, a consortium of powerhouse institutions including JP Morgan, Citigroup, Royal Bank of Scotland and the British and American banking trade groups. fTLD decides which applicants satisfy the many “enhanced security requirements” designed to make online banking transactions safe.  See more about the “.bank” land rush here.
 
Real fintech innovation won’t come from fin. That’s the view of author/entrepreneur/opinionator Brett King, whose Breaking the Banks provides a terrific overview of the current fintech landscape. In a recent Forbes interview here, King explains why it’s so tough for financial giants to incorporate innovation: “It is possible to inject radical transformation into a sizeable organization, provided you create agile pockets of innovation. The danger is and always will be that the organizations will smother the ideas that come out of these fast pockets, instead of integrating them into the culture.” While we believe banks will ultimately figure out how to better exploit innovation, most are earning a “C” or worse today for creating conditions that promote true innovation. King’s analysis looks spot on to us.

Company of Note: Overstock.com.
 
Want to see Bitcoin’s potential to disrupt stock trading? Look to Utah-based online retailer,Overstock.com, which just received approval (see here) to issue stock via the Bitcoin blockchain. CEO Patrick Byrne explained that the company’s motivation was to remove the middleman in transactions, thereby reducing the risk of stock price rigging.  The company is especially sensitive to such manipulations as its stock was famously whipsawed by naked short sellers who helped cut down the company’s share price by 70% nearly a decade ago.

This week’s little known facts about…ICANN.
 
1. While investigating the mad grab for the .bank domain name, we learned more about the Internet’s naming czar. 
ICANN, the Internet Corporation for Assigned Names and Numbers, is a California non-profit that has global responsibility for maintaining the unique “namespaces” on the Internet. In other words, it’s the closest the net has to a boss man.

2. The entity has generated in excess of $60 million from recently auctioning global top-level domains including “.sucks.” and “.xxx.”.

3. U.S. led Internet governance has been a sore spot for many nations and has led to ICANN adopting a “multistakeholder approach.” France, Brazil, China and Russia have all attacked ICANN’s ongoing role despite the corporation’s internationally diverse board.