Weekly Briefing No. 87 | Is Fintech Ready For a Biotech Innovation Explosion?

Welcome to our July 4th edition. We invite you to sit back and take in this week’s fireworks:

Salvador Dali
  • Can our financial and economic systems handle rising life spans?
  • Will bank dividends and buybacks win out over cybersecurity budgets?
  • Our first nomination for the 2018 fintech “Buzzy” award
  • The payments-lending convergence heats up; New blockchain developments
  • ICO bacon crowdsale scores big!!!
  • Spark: The future is bright for B- students
  • Company of Note: AdvisorEngine 

IN DEPTH

High-class financial problems of living to 100.

On Tuesday, America turns 241. That lofty number ─ as well as the surreal events that have led to the upcoming exhumation of Salvador Dali ─ turned our thinking to life, death and Social Security. In 1935, the US set the official retirement age at 65. Fast forward 82 years, and today’s full-benefit retirement age is 67. But here’s the punchline: since 1935, average life spans have increased by 18 years. Clearly, government policy has chosen not to acknowledge the reality of our longer lives.

Although life expectancies have plateaued at around 79 for now, we started looking more deeply into innovations being developed today that could lead to another lifespan leap. Our conclusion: thanks to technologies such as CRISPR (an editing tool for a person’s genetic code) and regenerative medicine (using stem cells to restore damaged tissues and organs), life-extending innovations that fight cancer, diabetes and other diseases are the real deal (not just side hustle projects for Google and eccentric Silicon Valley rich folks). But that promising news is also frightening when we consider America’s retirement savings crisis and the creakiness of our economic structures and many financial products. Theodora Lau, market innovation leader at AARP, thinks so too. In a recent essay, she raises the great question: What if we lived to 100? Are America’s entrepreneurs agile enough to pick up the slack from a slow-moving government to build new insurance, savings and financial planning products to address an era where 70 is the new 40? We hope so, but if you are a fintech entrepreneur looking for your next idea, it might be wise to look beyond business and technology news this summer and pick up a biotech journal.

Buyback, dividends or cybersecurity?

Eternal Blue is the innocuous nickname given to an NSA-discovered vulnerability in Microsoft’s Windows operating system that’s been exploited to the detriment of global corporations and government entities everywhere. Its first manifestation was the WannaCry cryptoworm that demanded Bitcoin payments from the unlucky souls whose computers were affected. This week, a different strain of the virus (a.k.a. “Petya,” “NotPetya” or “GoldenEye”) wormed its way through the world. By mid-week, the virus, which started in a Ukrainian company’s tax accounting software, had affected Chernobyl monitoring stations and companies such as FedEx, WPP, DLA Piper and Maersk. But as the week wore on, many experts came to conclude that unlike WannaCry, the new virus wasn’t ransomware. Instead, it was disguised “wiper” malware that was unleashed by a state actor so as to inflict havoc on critical infrastructure. If that’s the case (and even if it isn’t), we hope America’s large banks remember that they have a permanent bullseye on their backs as they evaluate their 2018 budgets. Dividend hikes and buybacks are nice, but unless you think that cyberattacks won’t get more sophisticated, wouldn’t the “swing dollar” be better spent on cybersecurity?

IN BRIEF

Our first nominee for 2018’s “ Buzzy” award for the hottest fintech thing.

Last year, blockchain won “The Buzzy,” our fictitious in-house award for the hottest thing in fintech. This year, it was AI. Next year, though, we’re not sure if the white hot center of gravity for all things financial innovation will be in a specific technology like biometrics or virtual reality. That’s why our first nomination is for the concept of leapfrogging. But unlike the two former “Buzzy” winners, we think that leapfrogging has the legs to weather the hype (maybe we should award it “The Leggy” too). CB Insights, to its credit, gave a suitable platform to the concept during its fintech conference this week, corralling Alfred Lin of Sequoia Capital and David Vélez of Brazilian credit card issuer Nubank on stage to discuss how developing countries, which lack aged layers of legacy financial infrastructure, may represent more attractive growth opportunities for fintech companies.

Blockchain news from the Navy to Natixis to Schuldschein to Goldman...

Despite our previous commentary on blockchain tech’s buzziness, we’re still noting the steady progress of blockchain tech in the news. This week, for example, the US Navy announced that it is looking at using blockchain to bring more security to its “additive manufacturing systems” (i.e., 3-D printing). Enhancing security throughout this process is a high priority as the Navy looks to print more of its mission-critical equipment. In another concrete development, IBM announced that it has partnered with seven large European banks to build a track-and-trade system so that small businesses can follow the physical transfer of goods. Also, Daimler AG announced that it has issued a €100-million corporate bond known as a Schuldschein loan via blockchain. And last but not least, Goldman Sachs added an extremely cool set of pages dedicated to blockchain tech on its web site. Kudos to the designers.

The payments-lending convergence heats up.

This week, Swedish financing and payments powerhouse Klarna rang in Midsummer by announcing a new investment by Visa to broaden its menu of offerings. Meanwhile, in the US, payments powerhouse PayPal announced that it was making an undisclosed investment in LendUp, an ethical lender and educator to subprime borrowers. Finally, another formidable payments company, Square, let it be known to the The Wall Street Journal that it intends to move beyond its roots and expand into consumer lending. Could the boundary between payments and consumer lending be blurring any faster?

Bacon ICO PorkCoin raises $24mm in 16 seconds. 

Ok, that’s fake news. But we concocted the headline to get your attention and reinforce a point: many of the ICOs currently riding the crowdsale mania will be worth zilch. However, there will be winners, which is why we’re highlighting a recent interview with Dan Morehead and his colleagues at Pantera Capital. The firm is planning to launch a first-of-its-kind ICO-only fund. Of course, identifying legitimate opportunities (we think the upcoming ICO for Rialto.AI is intriguing, for example) will be challenging. But Morehead, an ex-Tiger Management trader, seems well positioned to navigate this crazy-amazing time for crypto-innovation. He’s also likely to have company if folks like Mark Cuban and Michael Novogratz continue to balance near-term skepticism with long-term enthusiasm for the burgeoning cryptocurrency market.

COMINGS AND GOINGS:

SPARK: B- students with heart will run the world.

We were delighted to read a new study (See below) asserting that valedictorians aren’t usually the most economically successful folks over the long term. According to Boston College’s Karen Arnold, it’s because they’re good at following the rules ─ perhaps too good as it turns out. Conversely, a preponderance of American millionaires sported college GPAs of just 2.9, but plenty of grit and disrespect for boundaries. Still, past performance doesn’t mean much moving forward given the torrid pace of innovation. That’s why we liked this piece asserting that the future is brighter for workers who possess a high degree of emotional skills (where computers don’t yet shine), especially in fields like law enforcement and medicine. We’d throw in wealth management and insurance too.

COMPANY OF NOTE: AdvisorEngine.

Today, there is no shortage of software solutions taking aim at the massive market for financial advisory services.  But what’s notable about New York-based AdvisorEngine is the primacy it places on the human-to-human connection between investment advisors and their clients. That emphasis on empowering RIAs and other advisers led the company to develop a multi-channel wealth management platform that incorporates interaction in person, over the phone and through digital channels. In late 2016, the three-year-old company led by Rich Cancro was given an added boost when it raised $20 million through a strategic investment made by WisdomTree. Then, in April of this year, the company announced that it had purchased Kredible Technologies to help advisors bolster their online credibility by helping them to polish their social media and web presence. “We are fully committed to growing the set of fully integrated capabilities available to advisors,” said Cancro. “If an offering can deepen the relationship between advisor and client and serve as the catalyst for new business generation, we’ll work relentlessly to bring it to our clients.”

Quote of the Week

”If you look for truth, you may find comfort in the end; if you look for comfort, you will not get either comfort or truth, only soft soap and wishful thinking to begin, and in the end, despair.”

~ Francis Lewis (Queens, New York signer of the Declaration of Independence)