Weekly Briefing No. 72 | SXSW Goes Gaga for Fintech, March MiFID II Madness and T-Mobile as a Case Study

The Fed hiked and a blizzard hit NYC. Stormy weather? Sure, but things still look sunny for financial innovators. On our lounge chair this week:

  • The fintechization of SXSW
  • MiFID II mania has taken hold of some US fund managers
  • The financial services industry could use a dose of John Legere
  • Synthetic identity fraud, Google’s new payments feature
  • Fintech’s real-time functionality edge, Uber’s threat to the sharing economy
  • Company of Note: ClearGraph.

IN DEPTH

SXSW as seen in the North by Northeast.

“We are going through the process where software will automate software, automation will automate automation. I would not want to be a CPA right now. I would not want to be an accountant right now. I would rather be a philosophy major.” Those provocative words were uttered by Mark Cuban during this past week’s SXSW conference in Austin, which assumed a more fintech flavor than in previous years. Sure, cutting edge tech, film and music were present, but panels entitled “FinTech's Future: Banking & Beyond” and “The Globalization of Finance” took on a celebrity feel this year. That’s because an increasing percentage of the audience (and the nation as a whole for that matter) is making the connection between financial innovation and overall societal advancement. “Of all the notable things at SXSW this year, what really stood out to me was the emphasis on bringing digital technology to rural America, specifically in using fintech to help entrepreneurs and consumers in less populated parts of the country,” said Theodora Lau, who leads the fintech innovation activities at AARP. So while the east coast may have been preoccupied with digging out from a winter’s snow, many in Austin were focused on using fintech to dig our way out from other challenges facing the country. And to the forecasters who once predicted that winter was coming to fintech in 2017, we’d say that you got your coordinates wrong.

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MiFID II March Madness.

It’s March, also known as the time of year in which otherwise well-adjusted people develop feverish loyalties to college basketball teams from places to which they have no connection. That last point stems from a desire to identify a cinderella team which emerges from obscurity to upend the elite college teams. And speaking of obscurity, a one-time little discussed EU rule, MiFID II, is whipping elite US-based investment managers with European operations into a frenzy as well. The reason? While global firms don’t have to comply with MiFID II for their US operations, there’s a sense that it will “leak” into the US, says Tom Conigliaro of Markit. The rule, which provides a new governance framework for investment management, upends the way in which asset managers can pay for research, and appears to be a boon to European fintechs providing solutions around research tracking, data, commissions and trade reporting. If the leakage becomes a roaring river, it could provide similar opportunities/drama for US entities too.

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The un-brokerage?

Lately, T-Mobile has been in the news a lot. Aside from its possible role in a 911 glitch in Dallas, most of the news has centered on the company’s earnings momentum, rumors that Sprint still wants to merge with it and its acclaim as one of the world’s most ethical companies. For these reasons, we think that consumer-facing financial firms should take note of telecom’s “un-carrier,” which also seems to have found a winning formula for appealing to millennials and Gen Zers. The key to the company’s momentum starts with the head of T-Mobile USA, John Legere, who is a living embodiment of his brand. Scoff at his bad boy image if you’d like, but under his leadership, T-Mobile USA is cleaning the clocks of its larger rivals and notching unmatched customer satisfaction and market share gains. Should a mutual fund or bank honcho change their hairstyle and launch a cooking show? Not necessarily, but a dose of rebel mixed in with strategic boldness can disproportionately benefit those who act — Magenta track suit not required.

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Are you leaving data dollars on the table?

Perhaps your organization doesn’t have a cohesive strategy to leverage its data. Or maybe your firm doesn’t have great data assets. Either way, you might be leaving money on the table. That’s why we’d suggest you attend DataDisrupt’s upcoming conference on March 29th and 30th that will focus on the strategies, benefits and challenges of fielding a cutting edge data strategy. Act now and pay only $595 ($300 savings) for each ticket when using the promo code "FR" at checkout.

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IN BRIEF

Synthetic identity fraud is on the rise.

If the world’s identity thieves had an annual conference — say “Fraud Con Expo 2017: Pyongyang” — a likely hot topic in the breakout sessions would be the rise of synthetic identity fraud in banking and payments. This type of fraud, which involves the theft of authentic data to create fictitious identities, is an effective way for tech criminals to circumnavigate existing identity verification processes. That’s relevant because as the attached article points out, fraud is moving away from the point of sale and to online scenarios in which a real or synthetic identity is needed.

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Let me google that cash to you.

For some time, we’ve been big fans of the cheeky tool, Let Me Google That For You, which is designed to point out that if you have access to Google, you really shouldn’t ask anyone to do basic research for you. But now that Google is enabling android mobile users to send money to anyone using the gmail app (hopefully iOS will soon follow), people may start saying, “let me google that cash to you.”

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Tradérmon.

This week, and despite the belly aching by state regulators, the OCC doubled down on its fintech charter plans. In addition, financial regulatory rockstar and CFTC acting chairman, J. Christopher Giancarlo, sang fintech’s praises. These are all positive developments from our view, but we are attaching an article that adds another important dimension to fintech: its ability to save Pokémon. That’s because real-time functionality, which is often absent in other applications, is the standard for many trading and banking apps.

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The sharing economy’s Uber problem.

In watching the flow of horrible surrounding Uber, we’ve wondered if management believes its current challenges can be finessed away with the hiring of a COO, a few tearful town halls and a rebuke from Eric Holder. That won’t be enough in our view. Moreover, Uber’s slash-and-burn-and-spurn culture could have blowback that extends to the entire sharing economy. A case in point is the attached paper on the “taking economy,” which conflates Uber and the sharing economy. Granted, Uber may be the biggest sharing-economy platform, but it’s not alone. Nonetheless, in the paper, Uber is mentioned 317 times vs. 46 for AirBnb and 33 for Lyft.

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COMPANY OF NOTE: ClearGraph. The fundamental insight behind Palo Alto-based ClearGraph is that banks and other financial institutions often excel at collecting, cleaning and synthesizing data, but still fail to utilize the data in real world settings. An issue behind the challenge is that not every potential user of internal data (e.g., a compliance officer, risk manager or executive) knows how to code in Python or another programming language. That’s where ClearGraph’s natural language search solution comes into play. The 15-person company, which is backed by Accel Partners and a host of prominent financial services executives, has built an advanced search engine for anyone within an organization to access its own raw data using its existing ontology. Currently utilized by Capital One, CME Group and other leading institutions, its solution promises to speed-up decision making and anticipate commonly asked questions. “We hope to advance the collective knowledge and intelligence of the financial services community by deepening our involvement with banks,” says the company’s co-founder and CEO, Andrew Vigneault.

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CAREER & INSIGHTS

Spark: Recently, Professor Robert Kelly’s BBC interview turned his family into an overnight global sensation that highlighted the challenges of working from home. In a brilliant turn, however, we are attaching a clip from the New Zealand TV show, Jono and Ben, which used the story to make a broader point about the challenges women face in balancing career and family.

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Quote of the Week

My father had one job in his lifetime. I will have six jobs in my lifetime, and my children will have six jobs at the same time.

~ Robin Chase, Co-founder and former CEO of Zipcar