This week we look at bank-fintech partnerships, a critique of Google Analytics and what’s on the mind of Bloomberg’s head of venture investing. Also on tap: MiFID II, circuit breaker silliness, a big law firm accepting Bitcoin, money-market rule changes and The Scotcoin Project.
Editor’s note: The FR will be on vacation next week. In its place, we will distribute a list of curated podcasts that touch on financial innovation. We hope you find them informative and useful. See you in two weeks.
Worried about bank-fintech friction? Watch Snoop Dogg.
Banks need to become better at partnering with fintech companies, or so goes the conventional wisdom as recently expressed by Dan Latimore, a partner at financial services consulting firm Celent. The storyline is that bureaucratic banks, with their spaghetti-like reporting and approval matrices, must make the first move in working with their newer, more nimble partners in order for the collaboration to be successful. There’s truth in that view, but it’s also true that the seemingly inevitable friction that emerges in bank-fintech partnerships isn’t always the bank’s fault. Many times, we see entrepreneurs who could do a better job of managing their corporate partners. Sure, many banks want their partnerships to yield not only a learning experience but also here-and-now solutions. That irks some change-the-world type entrepreneurs, who sometimes lapse into Fred Wilson mode and treat their corporate partners as the devil. Since many more bank-fintech partnerships are likely, we suggest entrepreneurs try a different approach. One pairing that might be instructive is the hotly anticipated VH1 TV cooking show featuring Martha Stewart and Snoop Dogg. The success of the show — after the novelty of the diva-rapper pairing (see the banker-tech entrepreneur analogy?) wears off — will hinge on whether Snoop can demonstrate both restraint and outrageousness in equal measure. Since no one expects Martha to change much, even if she’s gung-ho on the partnership, it will be up to Snoop to keep the show on a high.
Is Google Analytics a blight on the face of marketing?
Kinda, says Samuel Scott, Director of Marketing and Communications at Logz.io in this opinion piece. His core point: Google Analytics and other automated platforms have led many entrepreneurs to incorrectly believe that use of a marketing channel equals a strategy. He says the widespread reliance on GA has transformed many so-called marketing campaigns into dumbed down, canned awfulness devoid of any value: “People tolerate offline advertising and publicity campaigns — and they even fondly remember the few that are the most creative. But people hate online advertising — which is actually almost always direct marketing by another name — and increasingly rush to block it however possible. The online advertising industry is committing slow suicide through the use of intrusive platforms that are so invasive that people are choosing to block ads altogether.” For entrepreneurs banging their heads against the wall at stubbornly high customer acquisition costs, Scott’s sharp point of view might serve as inspiration to make sure that creativity sits at the center of all marketing activities.
Bloomberg’s in-house VC head seems pretty cool.
"I think one of the most important dynamics will be older and older people doing things we previously thought of as a young person's game...I'd like to see the [startup accelerator] Y Combinator of people over 55 — maybe Y Combinator will become the Y Combinator of people over 55.” That’s one of several interesting perspectives offered by Roy Bahat, a former News Corp. vice president and gaming entrepreneur, who now helms Bloomberg Beta. The $150 million fund is focused on making early-stage investments in machine learning and AI early-stage companies — and is exclusively focused on return unlike other corporate VCs. Bahat’s sense of humor also shows through, describing his “Time To Her (TTH)” metric that measures how long it takes before the Joaquin Phoenix movie “Her” comes up in any AI conversation. Read more here.
Making sense of MiFID II.
No, it’s not a programming language or a new Mercedes model. It’s the awkward acronym given to an EU financial services directive aimed at increasing competition and consumer protection in investment services. MiFID II, which is set to come into effect at the beginning of 2018, will further unbundle equity trading and research, creating a new buy-side, sell-side business model. Ahead of the shift, firms in Europe — and to some extent in the US — are evolving their business models. To learn more, check out this article and this Greenwich Associates report (sign-up required).
When will a stock exchange have its next 'Delta' moment?
Does anyone believe that the massive technical glitch that plagued Delta Airlines this week, leading to the airline’s biggest disruption of flights since the 9/11 terror attacks, is an isolated incident? With the airline’s 52 year-old reservation system in place (Deltamatic), things like this will happen. Fortunately, when things go haywire at a major exchange, circuit breakers are triggered to allow market participants to catch their breath. But as this Bloomberg article points out, nobody can agree on when those trading curbs should kick in. After the wild swings that occurred last August, we hope that ICE, Nasdaq and Bats can get their act together soon.
Banks, firms are beginning to put their digital money where their mouth is.
Leading the way here is UBS, which has been fast at work on a settlement coin and is purported to be building a bonds platform on the Ethereum protocol. Meanwhile, 103 year-old law firm, Steptoe & Johnson, announced that in addition to expanding its blockchain practice, it would start accepting Bitcoin as payment. Does that mean that Steptoe’s lawyers will quote their hourly rate in Bitcoin?
An early Halloween for prime money-market funds?
It could be coming if you believe this article in The Wall Street Journal, which predicts further chaos for the $2.7 trillion money-market industry once a new SEC rule hits on October 14th. Fintech entrepreneurs take note: institutional money-market funds are not a high-margin area, but potential unintended consequences associated with this huge market could provide opportunities for the agile.
This fall, Chaincode Labs will be launching a hacker residency program to help build the ranks of those capable of developing in the Bitcoin environment. According to program founder Matt Corallo, a developer must be comfortable with “in-depth incentive structures” and other subjects that require “a certain nuance.” That sounds like code for ‘being a Bitcoin developer is very hard.’
Company of note
The Scotcoin Project.
In the wake Scotland’s opposition to Brexit (Scots voted 62-38 in favor of remaining in the EU), talk of Scottish secession has once again entered the public discourse. That possibility is raising the visibility of Scotcoin, a Scottish altcoin created in 2013 that runs on the Bitcoin blockchain. The Scotcoin Project is a non-profit at the center of Scotcoin advocacy. Check out the organization’s site here.
Comings and goings.
LendingHome, a San Francisco-based mortgage marketplace lender, has hired Cynthia Chen as its Chief Risk Officer. She had been the head of risk management at OnDeck Capital. Also this week, on the back of Lending Club’s second quarter earnings report, CFO Carrie Dolan, formerly CFO of Charles Schwab Bank, resigned.
Quote of the week.
“Before I refuse to take your questions, I have an opening statement.”
~ President Ronald Reagan