Weekly Briefing No. 08 | Should retail banks buy coffee chains?

Happy New Year. In our first issue of 2016, we explore the future of retail bank branches and wonder if Bitcoin is becoming the new gold.  We also cover the arrival of roboadvisors aimed at women and the coming of microinsurance, which is a really big deal according to one CEO.

Should retail banks buy coffee chains? 

As digital banking becomes more advanced and ubiquitous, retail bank branches seem headed for a Blockbuster future. In fact, we have half-joked previously that banks with a large retail presence should acquire coffee companies and retrain their personnel to become bankers-cum-baristas. But the jokes raise a real issue: Do people come to a branch only because the online experience is inadequate to meet their needs? Are they so frustrated with some digital offerings that they will visit a branch only as a last resort? These questions are explored by Thomas Jorgensen, CEO of Encap Security in Norway (See this article). He argues that banks should re-imagine the branch experience and make it complementary to a customer’s digital experience. Sounds reasonable, but we still like our coffee idea.

All that glitters may be Bitcoin. 

It may be hard to believe, but despite governmental crackdowns and large investments flowing to other digital currencies, Bitcoin’s price skyrocketed last year, trouncing the U.S. dollar and just about every other world currency. A possible explanation for the run-up is scarcity. Like gold, which is difficult and expensive to mine and refine, there soon will be fewer new Bitcoins produced. That’s because 2016 is a so-called “halving year” in which Bitcoin miners will see their reward for creating a new coin drop in half. Reducing the mining reward is intended to dampen the growth in new supply and instill confidence in Bitcoin’s scarcity value. Read more about it here.

Female fintech entrepreneurs are poised to attack robo-mancaves.

In all the 2016 fintech prediction lists issued, we did not see one that specifically mentioned the rise of finance apps or services targeted to female customers. But if the founders of WorthFM and Ellevest have their way, investing apps for women will have a breakout year. As The Atlantic points out in this article, some believe that it is patronizing to women to suggest that they need extra support for investing. Amanda Steinberg of WorthFM takes exception to that view: “I haven’t met a single woman who has said ‘I love Schwab, Edward Jones, or T. Rowe….I’ve observed for several years how little the entire marketplace of offerings resonates with women.”

Microinsurance will be the biggest thing to hit insurance in a few hundred years. 

That’s the super bullish view from Techcrunch contributor and Signifyd CEO Raj Ramanand. Although Ramanand is exaggerating to make his point, we agree with the core premise of his analysis: today, access to enormous amounts of real-time data, advanced learning software and demand for tailored protection — thanks to the sharing economy and on-demand services — will foster major industry disruption.  See more here for his take on insurance’s future.

Spoofing sparks spyware boom. 

The practice of “spoofing” — or rapidly entering and cancelling bids and offers with the intent to manipulate market prices — is driving a boom in advanced spyware tools for trading firms. With regulators more eager than ever to pounce on suspicious activity, surveillance products offered by Nasdaq, the London Stock Exchange and others are growing into a $450mm market. According to this Bloomberg story, growth will be fueled by the never-ending malevolent creativity of fraudsters. Sounds like a costly race where legitimate firms (and investors) lose and the exchanges win.  

Arrivals and Departures: James Stickland.

A few weeks ago, we covered the story of a mid-tier bank CEO who switched gears and took a fintech job within his company. This time, we are taking note of James Stickland. He’s leaving HSBC to join Red Deer Systems, which is focused on simplifying data streams used by fund managers. This move is notable as Stickland isn’t giving up a traditional banking gig. In fact, he ran HSBC’s $200mm fintech fund and was seemingly in a powerful perch within the global fintech industry. Read more here.

Company of note: Synchrony Financial.

This large spin-out of General Electric got our attention last week when we read this article describing its innovation lab in Stamford, Connecticut — not exactly a fintech hotbed. Labs sponsored by financial institutions have had a mixed track record, to put it kindly. However, Synchrony’s “innovation station” sounds like the real deal to us as it’s tasked with confronting major business challenges facing the company. As the largest provider of private-label credit cards in the U.S. (with a 42% market share), the company is strongly motivated to remain competitive with new payments and digital wallet offerings.

This week’s little known facts about…money management and gender. 

Men are more confident in their investing skills than women. In one study, 55% of women confirmed the statement, “I know less than the average investor about financial markets and investing in general,” vs. 27% of men. (Merrill Lynch)

Women were far less likely to sell out of equities during the financial crisis of 2008-09 than men. (Vanguard)

In the U.S., less than 10% of all fund managers are women. That’s far fewer than the percentages for women doctors (37%), lawyers (33%) or accountants and auditors (63%). (Morningstar)