FF18 pitch night – Melbourne semi-final

As part of the Intersekt FinTech festival, Next Money ran the Melbourne semi-final of their 2018 Future FinTech pitch competition.

Ten startups presented, in the following order, in front of a panel of judges representing different parts of the Melbourne startup ecosystem:

BASIQ

Describing itself as “the future of finance”, and quoting the trendy mantra of “Data is the new oil”, BASIQ is an API marketplace for financial data. Designed to counter-balance “the Faustian pact” of big data, social media and search, and to compensate for the information asymmetry of bank-owned data, BASIQ espouses open banking, even though it is backed by two bank-related VC funds (NAB Ventures & Reinventure – see last week’s blog). With a focus on the needs of app developers, the commercial model is based on a licensing fee per user per transaction. Leveraging the AWS security layer (presumably to maintain privacy and data integrity), the pitch also mentioned “screen scraping” – so it wasn’t clear to me whether the data is only coming from publicly available sources? Currently, the platform only connects to financial institutions in Australia and New Zealand.

Breezedocs

A participant in the FF17 Semi-Final earlier this year, Breezedocs is a robotic document processing solution. In short, it can read/scan, sort and extract relevant data from standard documents that need to be presented by customers in support of a loan application. Operating via an API, it can work with multiple document types and multiple formats: data can be structured, semi-structured, or even unstructured. The benefits for lenders and brokers are reduced loan approval times and increased conversion, with much
better CX for the loan applicant as well. The goal is to help the standard loan origination process to go paperless, and could be extended to life insurance, income protection insurance, and immigration and visa applications.

Doshii

Doshii ensures that apps and POS solutions can connect to one another, via a common POS API platform. Apparently, there are 130 different POS providers in Australia, and many merchants use multiple services. Now backed by Reinventure, Doshii has a focus on the hospitality sector. The biggest challenge is physically connecting a POS to the API, so Doshii has developed a SDK. However, so far, only five of the 130 providers have signed up.

egenda

I hope I got this right, but egenda appears to be the new product name for the WordFlow solution for board agendas and meetings. Offering an “affordable web-based solution for every meeting”, the product is currently being trialed by a number of universities. The platform can convert PDF/word files into HTML, transforming and enriching them into a single secure website.
The panel asked how egenda compares to say, Google productivity suite or IntelligenceBank. A key aspect seems to be that egenda is platform agnostic – so it doesn’t matter the source of the document (or where it needs to be published to?). A key challenge in managing board papers is that it’s like herding cats – so a single but highly functional repository would sound attractive?

HipPocket

This US-based app is looking to launch in Australia. A phone-based financial decision app linked to a user’s bank account, it is designed to help with personalised goal-setting, budgeting and financial engagement. Asked whether it can support long-term goals, the pitch referred to data that suggests an increasing number of people are effectively living from pay-day to pay-day, and have no capacity to meet even the smallest of unexpected  bills. Having attracted a grant from the Queensland government, they are currently experimenting with different customer acquisition models, but they hope to prove that with daily engagement, it is possible to build a long-term relationship.

ID Exchange

With a tag line of “privacy protection power”, ID Exchange addresses a key issue of the “consent economy” – how to control who has access to your personal data, and how much, and for what purpose. With the whole notion of “trust” being challenged by decentralised and trustless solutions such as Blockchain applications; the plethora of data connections with the growth of IoT; and the regulatory framework around KYC, AML, CTF, data protection and privacy, there is a need for harmonised solutions. Under an “OptOut/OptIn” solution (from the website, it looks like this is a partnership with digi.me?), the idea is that users take more responsibility for managing their own data. ID Exchange offers a $20 subscription service – but unfortunately, based on the pitch, it was not clear what does this actually meant or included.

Look Who’s Charging

This is a platform for analysing credit and charge card transactions, to identify anomalies and reduce disputed charges. Currently with about 7.5% market penetration (based on merchant volumes?), it can help with fraud checks and spend analysis, by combining AI, crowd-sourcing and data science. But from the pitch, it wasn’t clear where the data is coming from. Also, a key part of the problem might be the data mismatch between card acquirers (merchant services) and card issuers (banks and financial institutions). Given that the growth in credit card fraud is coming from online shopping and CNP (card not present) purchases, it would seem that a better solution is to tighten procedures around these transactions?

Plenty

Plenty describes itself as a “financial GPS”, and is designed to address the issue of poor financial awareness. Only 20% of people see a financial planner, but now with robo-advice tools, even personalised advice can be scalable. Essentially a self-directed financial planning tool, it is free for customers to create a basic financial plan and when searching for a mortgages. For a subscription fee, customers can begin to access other products and advisors, which generates commission-based fees to Plenty.

Proviso

Another of these FinTechs to have featured in this blog before, as well as competing at FF17, Proviso makes “financial data frictionless”, in particular the loan application process. With 250,000 users per month, and 150 financial institutions signed up, their success can be ascribed to the way they standardise the data and the UX. Plus, they can access more data, from more sources, quicker. And then there are the analytics they can offer their institutional clients. In the future, there will be open banking APIs, plus insights, such as the categorisation of transaction types, affordability analysis, and decision-metrics.

Trade Ledger

This is a new platform that supports SME lending based on receivables, that also reduces the effort for SMEs seeking this form of financing. Given that cashflow issues are inextricably linked to insolvency risk, Trade Ledger has developed a unique credit assessment method, and is product-type agnostic. It also aims to offer automated solutions, with an emphasis on the digital UX of products, and use machine learning to generate a predictive probability of default (PPD). Currently the biggest challenge is in the multiple variations of bank credit and lending processes and models that need to be integrated or streamlined.

Of the ten pitches on view, I have to say that none really had a “wow” factor (although if Trade Ledger can scale their PPD model, and if ID Exchange spent a bit more time on defining their key message, both could be huge products). They were mostly worthy ideas, but still defined by current banking and finance procedures. Maybe these platforms need to do more with the transactional and customer data they generate or process, to uncover more opportunities. Or think about what they could do to disrupt adjacent markets? Anyway, on the night, Proviso proved the favourite with the judges.

Next week: Conclusions from the Intersekt Festival

 

The NAB SME Hackathon

The recent week-long Intersekt fintech festival kicked off with a 48-hour hackathon, sponsored by NAB, hosted by Stone & Chalk and York Butter Factory, and designed to meet the needs of NAB’s SME customers.

Using NAB’s own transaction data APIs, participants were asked to come up with a solution to one of the following challenges:

1. How to make the lives of SME owners easier
2. How to help SMEs generate more business

12 teams competed over the weekend, and each presented their ideas to a panel of industry experts. Clearly, these were not the usual startup pitches (and none have a public website), but it was interesting to see the results. Projects are listed here in the order they presented:

NABTax – “tax audit insurance”
Designed to encourage better/best practice tax governance among SMEs, it uses a combination of a tax risk rating linked to a reduced cost of premiums for tax audit insurance.
The solution would help SMEs to be better prepared for an ATO request for information, aid understanding of the ATO’s current small business benchmarks, and provide insights on the ATO’s data matching protocols.
Essentially it would generate a risk rating based on quantitative and qualitative analysis of supporting documents supplied by the SME.

EasyPay – “reconciling invoices and receipts”
Deploying an e-invoicing model, the platform would generate a unique reference number, linked to an ABN, and generate a QR code to be scanned by the payer.
At its heart, it would better match invoices and payments. The service would be sold under a freemium model, and would be compliant with the New Payment Platform (NPP).
The main challenge would be in reaching and gaining traction with consumers (the bill payers).

ORDR – “managing cash-flow, inventory ordering and sales”
Drawing on a dashboard showing SKUs of items in stock, it would use machine learning
to predict stock ordering requirements. Although this concept was based on actual SME experience, the panel felt that there would be integration issues with existing POS and supply chain systems. Also, how would it link to CRM data, and how would it be able to both accommodate new season stock, and accurately forecast demand?
Finally, what level of SKU data is actually available from NAB transaction data?

Just-In-Time MBA – “a financial/business coaching app for SME owners”
According to data presented by the team, 60% of SMEs fail within their first three years. And given there are something like two million micro-businesses in Australia, and 250,000 new ones established each year, if nothing else, there is a huge opportunity to reduce this failure rate.
Using the available APIs (plus data from the SMEs’ accounting systems), the platform would analyze payments data and issue alerts designed to prompt remedial action.
Based on the presentation, it seemed that the proposed analysis is only capturing cash-flow – clearly, the real value and insights would come from holistic health checks.

NAB SME Connect – “connecting small business to customers”
Using a number of data inputs, this service would push deals in real-time to your smart phone. The customer app shows only relevant offers – based on preferences, proximity, etc. The client SMEs can see the level of interest and demand, to generate “Smart Deals” based on transaction data. The panel wondered about the opt-in model, and also felt there were already similar competitor products, or that any competitive advantage would be difficult to defend.

Wait< – “wait less for elective surgery”
Aimed at time-poor SME owners, the team wanted us to think of this as an “eBay plus Afterpay for elective surgery”. Taking the approach of a two-sided marketplace, it would
support transactional loans to cover the cost of surgery, and match customers (patients) to suppliers (health care providers). Drawing on NAB’s current healthcare payment services, the solution would combine NAB’s transaction banking and health APIs, plus Medicare APIs (for patient and practitioner verification), to generate a pre-populated lending form. No doubt designed to appeal to NAB Health, this was a very niche project.

Tap & Go – “turning customer loyalty into rewards more easily and more cheaply”
This idea would enable SMEs to use transaction data to decide who gets a discount, and how much. Built on a merchant administration platform, it would capture transaction data from POS systems. It would be offered as a subscription service for merchants. The panel wondered how this solution compared to the competition, such as Rewardle.

TAP – “smarter marketing solutions”
Commenting that only 16% of SMEs are maximizing their online presence, this service is designed to increase merchants’ digital presence. It would use NAB APIs to manage and track campaigns – by comparing the data to past sales periods and previous campaigns. Campaigns would also be linked to social media accounts. The panel questioned how the solution would fare against competitors such as Hootsuite.

StopOne – “integrated hub for making data driven decisions and connect with a NAB banker”
Conceptually, this was a very ambitious project, designed to let SMEs use dashboards and forecasting from NAB transaction data (and other sources), to drill down into visualized data records. It would also integrate with social media insights, incorporate a messaging platform to allow SMEs to communicate with their bankers, and enable SMEs to share their dashboard with a business banker. The panel queried the cost of the data analytics for the SME, which presumably comes on top of their existing accounting software.
They also suggested the team take a look at what 9 Spokes is already doing in this space.

Spike – “accounts payable solution”
Currently, paying invoices can involve a 10 step process. The average SME has 90 suppliers. Accessed via a NAB accounts payable login, the solution incorporates the Google vision API to capture an image of the invoice and extract key data points. The SME then chooses the date and account for payment, the invoice is stored in the cloud, from where is posted to the Xero ledger, and the NAB payments portal. In addition, the client can share purchase order data with their supplier to pre-populate the invoice. It could
also optimize expenses, by recommending offers or product switches. When asked about the commercial model, the team suggested it could be offered free by NAB, who get access to extra data.

nablets – “focus on things that matter”
According to this team, 90% of SMEs are not taking full advantage of digital tools. Using NAB APIs and event-based triggers, clients would use their NAB Business Connect account login to create “if this then that” rules and tasks. It would also leverage open banking data APIs. The panel asked about the logic and the parameters to be embedded in the rules-based activities, as well as the proposed categories and range of functions to be automated. They also wondered how it would actually help SMEs to adopt digital tools – some of which are already integrated into the current banking portal.

NAB Hub – “Small Business Hub”
Designed to present banking data the way customer wants to see it (P&L, balance sheet, net asset position etc.), it would also help in generating leads for pre-approved loan products, and help with investments via optimized rates, and for insurance cover it would
assist with policy reviews, claims and risk analysis. The panel asked if this was intended to be a NAB add-on or a standalone product. They also suggested the team look at what Tyro is doing around lending analysis – but recognized that there was possibly a place for this type of tailored advice.

Based on the judging, the winners and runners-up were:

1. Just-in-time MBA
2. Spike
3. NABTax

Meanwhile, the crowd favourite was Just-in-time MBA, and the best innovative idea was TAP.

If I had to summarise the presentations, it would be as follows:

1. Most of the presentations were still talking about yesterday’s/today’s banking products, rather than products of the future
2. There was very little evidence of projects designed to help SMEs grow their business
3. Any effort to gain traction for these projects will revolve around changing customer (and bank) behaviours….

Next week: VCs battle it out in the reverse pitch night

 

 

Token ring – a digital ID solution

The latest event organized by DIG ID (the Melbourne Digital Identity Meetup) featured a Q&A with Steve Shapiro, CTO of Token, moderated by Alan Tsen, General Manager of Stone & Chalk Melbourne. Given the current level of interest in solutions to address online fraud, ID theft, data protection, privacy and personal security, the discussion covered a lot of conceptual and technical topics in a short space of time, so here are some of the key points.

First off, Steve spoke about his start-up and tech journey, that took him from IM (Digsby, Tagged, Bloomberg IB), to cryptocurrency and digital wallets (Case), to digital ID with the Token ring. The pivot towards an ID solution came about after working on Case, where he realized that most consumers don’t understand private key management and the issue of permanence (as compared to the internet, where password re-sets are relatively easy, and often regularly enforced upon users).

If the goal is to provide fool-proof but highly secure end-user authentication, the solution has to focus on the “signing device”, by making it much easier than the status quo. Hence the combination of two-factor authentication (2FA) and bio-metrics to enable Token ring users to live key-less, card-less and cashless, and without having to constantly remember and update passwords. In short, the Token ring works with anything contactless, as long as the relevant permission/authentication protocol layer (challenge and response process) is compatible with the ring’s circuitry.

In assessing the downside risk, gaining consumer adoption is critical, to ensure that users see the benefits of the convenience combined with the credentialing power. Equally, success will depend on the ability to scale as a hardware manufacturer, and the potential to drive traction through virality.

There is still a lot of design work to do on the hardware itself (to enable assembly, customization and distribution as locally as possible). And the platform needs to bring on more partner protocols, especially in key verticals. At the end of the day, this is still a Blockchain solution, with a UX layer for the cryptographic component.

When asked about the future of ID, Steve felt that in the medium term, consumers will no longer have to carry around multiple cards or have to remember multiple passwords. Longer term, governments will no longer be the central authority on managing ID: unlike today, a driver’s license will no longer be the gold standard – instead, solutions will be based on decentralized, contextualized and user-defined ID.

This led to a discussion about Sovereign IDe-government and digital citizenship (e.g., Dubai and Estonia) – and the break up of big government in favour of more city-states. (Which could result either in a “small is beautiful” approach to self-governing and sustainable communities, or a dystopian nightmare of human geo-blocking, as in a film like “Code 46”).

For the tech buffs, the Token ring’s IC hosts a total of 84 components, including the main secure element (as with mobile phones and other devices), finger print reader, optical scan, Bluetooth, NFC, accelerometer, MCU, Custom inductive charging etc.

Finally, there was a discussion about the risk of cloning, mimicking or breaching the unique and secure ID attributes embedded in each Token ring. While it is possible for users to encrypt other knowledge components as part of their individual access verification and authentication (e.g., hand gestures), there is still a need to rely upon trusted manufacturers not to corrupt or compromise the secure layer. And while the public keys to core protocols (such as credit cards and swipe cards) are maintained by the protocol owners themselves and not stored on the device or on Token’s servers, it will be possible for other third parties to on-board their own protocols via a SDK.

Next week: Startup Vic’s EdTech Pitch Night

 

 

Bitcoin – Big In Japan

I spent the past week in Tokyo on behalf of Brave New Coin, meeting with various participants in the cryptocurrency industry – from exchanges to brokers, from industry bodies to information vendors, from connectivity providers to technology platforms. Given its share of Bitcoin trading volumes, and the legal developments currently in motion, Japan is now the focus of attention as it navigates towards a fully regulated and orderly cryptocurrency market.

Bitcoin is now accepted in Bic Camera stores in Japan (Photo: Rory Manchee – all rights reserved)

On my previous visit to Japan, I commented on the extent to which it was still a cash economy – even major museums and galleries don’t accept plastic, and my pre-paid foreign currency card issued by a major Australian bank was only accepted at a limited number of ATMs: 7-Eleven, and Japan Post. But according to expats I spoke to last week, this situation has changed over the past couple of years.

One of the reasons I was given as to why Japan is taking a lead in regulating cryptocurrencies is its previous perception of having a somewhat lax approach to money laundering. Part of this might be explained by the limited technical integration and interoperability with the global banking system (somewhat akin to Japan’s approach to telecoms, where in the past, it was impossible for overseas visitors to use their mobile phones on the domestic network).

In addition, as China has cracked down on most things crypto, so has Bitcoin trading activity shifted to Japan. This growth in Bitcoin trading volumes can also be linked to Japan’s passion for retail forex trading, now expanding into crypto.

Earlier this year, the Japanese government passed legislation that recognises bitcoin as a legal form of payment. (Note: this does not mean that bitcoin is legal tender – shops do not have to accept it; but if they choose to take it as payment for goods and services, then it is no different to paying in cash or by credit card when it comes to things like consumer rights, for example.)

Later this month, the main regulator, the FSA is expected to announce new regulations to govern cryptocurrency exchanges and brokers. Currently, exchanges that accept Yen deposits for cash trading of crypto must be licensed as payment institutions. By the end of March 2018, my understanding is that all exchanges and brokers must be fully licensed to operate – for both cash trading, and futures and margin trading. Anywhere between 20 and 50 exchanges have applied for a license.

Currently, participants in the “legacy” securities and futures industry are either registered with the JSDA or the FFA. Likewise, it is expected that the FSA will appoint a similar self-regulating entity to have official oversight of the cryptocurrency markets, under the overarching authority of the FSA. However, there are two rival blockchain and cryptocurrency industry associations that are vying for this role – which is where things become a little political. One group claims to represent the “pure” crypto world, whereas the other might be seen to represent more of the traditional market. No doubt the FSA would prefer not to have to choose…

Key considerations for the FSA are retail investor protection, and market stability. The total market cap of all cryptocurrencies is now around US$150bn. If we assume that 10% of these assets are held in Japan, when compared to the total capitalisation of the cryptocurrency exchanges themselves, this creates a significant risk for the FSA should there be a market collapse or a run on Yen-based crypto deposits.

Equally, the FSA does not want to stifle innovation in an area of financial services where Japan is keen to take the lead. For example, Japan has witnessed a couple of bitcoin-denominated corporate bonds (more like privately syndicated short-term commercial paper) that demonstrate an investor appetite for this new asset class.

Meanwhile, in preparation for this new regulatory environment, and in anticipation of the increased interest by major banks and asset managers, there is a project underway to create an institutional-strength order management platform connecting banks, brokers and exchanges. I also heard of offshore fund managers looking to launch a crypto-based ETF for distribution in Japan.

Finally, at the risk of blowing our own trumpet, Japan’s leading financial vendor, Quick is now quoting the Bitcoin Liquid Index (BLX) alongside other FX data it distributes from around the world:

 

NOTE: The comments above are made in a purely personal capacity, and do not purport to represent the views of Brave New Coin, its clients or any other organisations I work with. These comments are intended as opinion only and should not be construed as financial advice.

Next week: Tech, Travel and Tourism