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Daily briefing - 22 March 2019

Just as mobile wallets are driving adoption of digital currencies and digital assets, banks are going to drive adoption of stablecoins, digital currencies tethered to central bank currencies, aka stablecoins. Last week it was JPMCoin. The big news this week was IBM's offering of a Blockchain network and the ability for traditional banks to issue stablecoins based on dollars or central bank currencies. The notion that the private banking system, though a private blockchain, can recreate the resilience of bitcoin is laughable, but it's being taken completely seriously by banks, including JPMorgan and digital businesses such as Facebook. Of course, this is the old way: issue your own sovereign. As Aaron Brown writes in Bloomberg, JPMCoin is the "wildest big bank idea in years", as JPMorgan seeks first-mover advantage. But as Brown acknowledges, JPMorgan is simply building on top of open source technology that is widely available for free, while trying to retain control of the currency and the network. This goes against all of the principles at the heart of the bitcoin experiment. Indeed, the need for a digital currency is that strong that Mark Zuckerberg, king of Facebook, is trying to mash WhatsApp, Instagram and Facebook Messenger together at rapid speed to create the basis for a FacebookCoin. Read more here on why centralised coins such as JPMCoin are not cryptocurrencies. As you know, dear reader, we are big fans of Twitter here at Lafferty News. Look, there's Jack Dorsey in the Blue House this week meeting South Korean president Moon. These people look like they actually have a clue about what's going on. So refreshing. Dorsey yesterday announced that Square is hiring bitcoin engineers to contribute to building the bitcoin infrastructure. "Square is hiring 3-4 crypto engineers and 1 designer to work full-time on open source contributions to the bitcoin/crypto ecosystem. Work from anywhere, report directly to me, and we can even pay you in bitcoin!" Dorsey has long advocated the use of a digital currency for the internet, but has shown no desire to issue a TwitterCoin, advocating instead for the use of bitcoin, and pushing the Lightning Newtork. (Dorsey is an investor in Lightning Labs.)At what point does a business look at itself in the mirror and decide — on seeing, for example, an airplane — and think, 'you know what, I look like a finance company'. Earlier this week we reported on the ambitions of Uber, Grab and GoJek — among other apps — to get into financial services. But those aren't the only transport businesses looking for a new market. Air Asia has decided that it is now a data-rich platform and founder Tony Hernandes wants to take on the banks. "He has started with a foray into the payments space with his new venture, BigPay, with ambitions of making it a digital bank that will pay, lend and remit," he told Money2020 Asia. "We carry a hundred million people and are more than just an airline. AirAsia is a powerful, data-rich digital platform. BigPay is our version of a challenger bank."Brexit leaves Britain, moves to Europe An Indonesian Plot Twist: Fintech Akulaku Buys Stake into a Bank

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Daily briefing - 21 March 2019

In the heady days of 2018, Wirecard reached a valuation of $21.3 billion, smashing past Deutsche Bank. By September it had replaced Commerzbank in Germany's DAX Index. By March 2019, Deutsche and Commerzbank were in merger talks and Wirecard had shed a third of that market value. German regulators have behaved appallingly in the matter, taking the side of plucky Wirecard against the beastly FT, which this morning suggests that Wirecard COO Jan Marsalek had oversight of the transactions in question. "The transfers in March 2018 were routed from the payment group's Munich bank to a company in Singapore as part of what whistleblowers allege was a fraudulent accounting scheme," writes the FT. "The documents indicate that Jan Marsalek, Wirecard's chief operating officer, was aware of the transactions, which were delayed in February 2018 while German and Singaporean executives awaited key information from him.""What if messaging, clearing and settlement could be done together, in one solution?" asks IBM, as it launches its Blockchain World Wire, intended to offer an alternative to the SWIFT system, and to fend off new challenges from Visa (via Earthport) and Mastercard (via Transfast). Banks joining the system can use a stablecoin, central bank currency or other digital asset to transact. Interesting. IBM's video appears to suggest that the network will deliver bitcoin alongside dollars, rubles and yuan. Can someone explain though why multi-billion dollar companies such as IBM launch billion-dollar projects using the same tinkly beat that comes free with animation software and pollutes every event from Money2020 to the Web Summit? When is the musical future going to arrive? Grab or GoJek? That's the battle for the hearts and wallets of Southeast Asia's 600 million strong population, pitting Singapore-based Grab against Indonesia's GoJek as both aim to be the Southeast Asian superapp or superwallet — the equivalent of WeChat Pay in China. After doing battle with Uber (ie both companies losing vast amounts of money), Uber took a share in Grab and exited the market, and now Grab is laying out its stall to include micro-loans and insurance. "Grab acquired Uber's Southeast Asia business in 2018 and it has spent the past year or so pushing a 'super app' strategy," notes TechCrunch. "That's essentially an effort to become a daily app for Southeast Asia and, beyond rides, it entails food delivery, payments and other services on demand. Financial services are also a significant chunk of that focus, and now Grab is switching on loans and micro-insurance for the first time." Grab will use its recent investment of $1.5 billion by Softbank's Vision Fund to pursue opportunities with underbanked SMEs, which may find this a great service. New UK bank OakNorth has announced a profit of £33.9 million for 2018. In a statement, the bank announced it is committing to "donating 1% of all future net profit to charitable causes and social entrepreneurship". In 2017, OakNorth surprised observers by turning a profit of £10.6 million on lending of £850 million which increased to £2.2 billion in 2018. "OakNorth has now lent over £3bn since its launch in September 2015 without a single default to date, helping to create 10,000 new homes and 13,000 new jobs across the UK," said the bank. Keep calm and carry on? The British stiff upper lip is quavering furiously now, and European officials who publicly lament Britain's exit from the EU are privately thrilled to see the back of the UK, which has now declared itself in crisis. On practical matters, the Bank of England has ordered UK banks to triple their holdings of triple-A bonds. According to the FT, the Bank of England has asked some lenders to "triple holdings of top-rated securities which can easily be sold at short notice," in the event of a chaotic British departure from the European Union. "Sales of public sector issued securities are up 55 percent year-to-date, according to data from Dealogic, with British banks under instructions to up their buffers of easy-to-sell assets to weather any post-Brexit crises," reports Reuters. With only eight days to go until the current exit date of 29 March, expect demand to ramp up more.N26 hires UK country manager

Daily briefing - March 2019

Part of Instagram's attraction is that its one billion users stay inside the app. There's no straight way to link to another website — such as eBay — from Instagram. But the visual-first nature of Instagram has proven irresistible to marketers, and now Instagram steps closer to an e-commerce site by providing for in-app purchases. "Merchants will only get the details necessary to fulfill an order, including contact info and address, but not your actual payment info," reports Techcrunch. "Users will see an opt-in option to share their email address with the seller for marketing purposes. Checkout with Instagram could leave merchants with a little less data than if the purchase happened on their website. But Instagram says it will provide info on which sales it generates for a merchant." The checkout feature will launch in beta in the US with big brands involved, including Adidas, Zara, Prada and Michael Kors. Users who see a product tag will notice it will be joined by a 'Checkout on Instagram' tag also. Customers will enter information once, with payment details stored in Instagram. The news was treated sceptically by card schemes. "Storing your payment credentials on social media," wrote one cards executive. "That's brave!" Indeed. All the more reason for Mr Zuckerberg to ram together Instagram, Facebook and WhatsApp before regulators get their act in gear and keep these businesses separate. "Instagram has fiercely protected the right to link out of its app in order to keep you steadily consuming its content," notes Techcrunch. "Now with more than one billion users, Instagram has trapped people's attention inside, and it's finally ready to sell the right to sell there." Singapore-based telco Singtel will partner with NETSTARS to offer Singtel customers a way to spending money in Japan. Singtel has big plans to be the mobile wallet of choice in the Asia Pacific region, and Japan is a nice pearl on its string. "Southeast Asia, where a chunk of the 650-million population is underbanked, is becoming a crowded market for mobile payments," reports Reuters. "Singtel wants to stand out by permitting users to be able to pay with their e-wallets outside their home country. Singtel plans to expand the mobile wallet alliance to India, the Philippines and Indonesia." Singtel International Group's chief executive Arthur Lang said that with scale, Singtel will be able to convert payments wallets into multiple use instruments.With the booming success of Worldpay, investors are paying close attention to processors and their IPOs. Last week we heard news that the Network IPO will indeed take place in London in April, and that Worldpay executive director Ron Kalifa will take over as chairman at the processor. Simon Haslam, formerly of Elavon, is the chief executive. "The global payments sector is undergoing a period of rapid change," Mr Kalifa told the FT. "Businesses have to demonstrate deep local market expertise together with sophisticated and innovative technology solutions. Network International has a long successful history of combining both these factors."

Featured Articles

Tuesday 19th March @ 10:45am

Last week we observed how the Brexit process is uncovering significant differences between the legal systems of the UK and the EU. Reporters in Brussels were said to have cried out in surprise when the grandstanding Speaker of the Commons John Bercow announced on Sunday that Theresa May would not be allowed to bring forward her unchanged Brexit agreement for a third time. The announcement threw the Brexit process into even more chaos. Bercow cited a precedent from 1604. Some political...MORE

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Wednesday 13th March @ 9:08am

A hard Brexit it will be, as things now stand. Lafferty's Brexit Council met in Westminster yesterday as the House of Commons was getting ready to vote on the latest but essentially unchanged offering from Theresa May, which the Commons promptly rejected by a margin of 145. This, remember, is the deal already negotiated between the UK and the EU. The Prime Minister had hoped to limit that loss to 100 seats. Today the Commons will vote on whether to prevent a no-deal, which...MORE

Friday 8th March @ 9:57am

The equivalent of belatedly shutting a country-sized barn door, banks in the Nordic countries have launched a massive recruitment drive to hire compliance professionals. As a compliance worker based in Copenhagen told Reuters: "We've become the new 'business rock stars'". The delusional compliance professional needs to up his game: DJ D-Sol over at Goldman knows that kids these days are into banging EDM, not dad rock. "He saw a 50 percent jump in...MORE

Thursday 7th March @ 10:37am

Italexit? EU mandarins (yes, we jest) are feeling queasy this morning as Britain inches down the diving board and other bits of the EU suddenly look less secure. It's the great merchant princes of Italy that are often credited with inventing modern banking, flush with wealth from trading across the Silk Road that once ran from Venice to Xi'an in central China. Modern Italy has been a US protectorate, but like Greece and the other peripheral countries of the EU, it...MORE

Wednesday 6th March @ 10:10am

When Airbus announced last year that it would close down its UK operations, one Brit lamented on Twitter that the country was literally losing its wings: the UK plant manufactures wings for the planes. Now it's getting even trickier. Bombardier in Belfast is now whispering in the ear of the DUP, warning that it faces a similar disaster. The Canadian manufacturer took over Short Brothers, the Belfast-based aerospace group that along with famed shipbuilder Harland and Wolff...MORE

A Revolut payment card
Tuesday 5th March @ 10:16am

Revolut has much to live up to, with a name like that. If its online community board is anything to go by, Revolut's customer numbers will be falling this week. "This article completely changed my attitude towards Revolut," writes one user. "I will now look for an alternative service and cancel my Revolut account." The article in question, published last week in Wired magazine, describes a culture that sounds in thrall to the 'move fast and break...MORE


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