Fintech Talk – June 1, 2016
As avid Fintech and tech followers will know, blockchain is undoubtedly one of the hottest topics around and, is currently being tested and developed, in some shape or form, by many of the world's largest financial firms.
To illustrate this point, Nasdaq, last week, launched its Nasdaq Financial Framework, a central platform, which will host the different technology solutions it sells to exchanges, brokers, clearing houses and central securities depositories. The platform will recognise new applications that are launched and powered by the distributed-ledger technology, and will enable clearing houses to use a blockchain-powered collateral management system. This will, in turn, allow it and the clearing software to run simultaneously, with the process managed centrally via the Framework. Adena Friedman, Nasdaq's president and chief operating officer, said the ability to incorporate new technologies, including the blockchain, was a huge reason behind the move and that it “creates a common way to have all of the various Nasdaq systems connect and work together.”
Similarly, Goldman Sachs published its Profiles in Innovation report, which found that the use of blockchain technology for clearing and settlement in the cash equities market could save financial institutions around the world an estimated $6 billion a year. While the execution of cash equity trades has been streamlined in recent years, the post-trade process remains complex and expensive, and could benefit from the use of blockchain to eliminate duplicative confirmation steps, shrink the settlement cycle and cut risk. The report also predicts that big savings could also come from the streamlining of back/middle office activities through reduced headcount (up to $900 million) and fewer platforms and systems ($700 million), reflecting the reduction in trade errors and the elimination of manual reconciliation.
Moving to a more consumer focused aspect of blockchain, Santander has become the first UK bank to introduce blockchain for international payments through a new app. Once approved and expanded to its customer base (currently being rolled out as a staff pilot), the app will connect to Apple Pay, where users will be able to confirm payments securely using Touch ID. Users will initially be able to transfer between £10 - £10,000 into euros and dollars. Interestingly, the blockchain technology underpinning the app is provided by Ripple, a company which Santander Innoventures has invested in, and illustrates the increasing trend of incumbent banks investing in and partnering with smaller, fintech firms.
Along similar lines, TransferWise, the London headquartered money transfer start-up and fintech darling, has confirmed that it has raised a further $26 million in funding, which was led by investment firm Ballie Gifford and existing investors. According to TechCrunch via two sources close to the company, this bring the value of the company to $1.1 billion.
Finally, Simmons & Simmons, a London-based law firm, has launched a Fintech fund and has set aside £100,000 a year to provide free legal advice to fintech startups in an attempt to increase its efforts to support the UK’s Fintech sector. The initiative will help fintech businesses deal with the legal issues they face in their early days, including securing regulatory authorisation and protecting their intellectual property. The Fintech fund will allow the firm to build on its existing fintech activity, which includes advising some of the UK’s most well-known Fintech companies, such as marketplace lenders Funding Circle and MarketInvoice.