Everyone welcome & happy Wednesday!
In this edition:
Wirecard Crisis Looms Large Over Europe's Fintechs
Here Are The Fintech Sectors Which Are Thriving (And Those Which Are Just Surviving)
Mass Adoption Of AI In Financial Services Is On The Near Horizon
Amazon Patented A Blockchain System For Supply Chain Tracking
It’s A Great Time To Be Involved In IP Finance
Central Bank Digital Currency: An Innovation In Payments.
Wirecard Crisis Looms Large Over Europe's Fintechs.
Wirecard, one of Europe’s highest profile fintechs, is facing a full-blown crisis after admitting that €1.9bn of cash that it thought was in one of its businesses probably does not exist. At one point, Wirecard was worth more than Deutsche Bank and was seen as a trailblazer for the European fintech scene.
Last week, chief executive Markus Braun resigned after Wirecard said that it could not release its annual results because €1.9bn was missing. On Monday, the company admitted that the money probably does not exist and withdrew its results for last year and the first quarter of this year. Yesterday, Markus Braun was arrested on suspicion of false accounting and market manipulation.
Wirecard is now in talks with its lenders about its credit lines, and says it is looking at cost cuts and disposals “to ensure continuation of its business operations.” Its shares, which were trading at €98 a week ago, have lost 85 per cent of their value and now trade as €14 each as of Monday afternoon. For the full story on the company’s woes, from the concerns over its accounting to the tumultuous events of the past week, visit the Financial Times’s Wirecard homepage.
Here Are The Fintech Sectors Which Are Thriving (And Those Which Are Just Surviving).
After a bout of turmoil during the first half of the year, things are looking up in the world of fintech. Public market confidence is returning, especially in the US where fintech stocks have outperformed listed SaaS and Consumer equities. However, with central banks setting interest rates at historic lows and the prospect of a global recession very much looming, venture capital is growing far more selective about which fintechs get funded.
What coronavirus has done, in effect, is accelerate change and adoption in certain segments of fintech, while slowing change in others. This article takes a look at some of the fintech verticals which are thriving, and others which are just surviving.
Mass Adoption Of AI In Financial Services Is On The Near Horizon.
In the last 10 years, investment in the FinTech industry exceeded $350 billion dollars. During the same period, a similar amount of funding was invested in other industries such as AI, healthcare, and aerospace. There have been a number of important breakthroughs in these other areas but not in FinTech. So far, the money invested in FinTech has not yielded significant results compared to other domains. However, recent advances in the development of practical AI tools are enabling new FinTech solutions.
In the near future, FinTech, AI, and data- driven technologies will converge into a single advanced technology. The resulting FinTech 2.0 will offer unprecedented potential for growth and disruption. Next–generation financial companies will use engineering methods with integrated systems to treat business, finance, and technoIogy as a singIe unit with complementary parts.
Amazon Patented A Blockchain System For Supply Chain Tracking.
World’s top ecommerce firm, Amazon, filed a patent for a blockchain system that tracks goods as they move on the supply chain. Amazon’s patent — dated May 26 — describes a “distributed ledger certification” system that ensures that consumer goods that are sold on its ecommerce site are authentic. The document explains that traditional tracking solutions mapped a limited portion of a supply chain, usually the one accessible to its developer and that such systems do not fit the modern fragmented supply chains.
The reliable and immutable nature of blockchain technology is a natural fit for supply chain tracking solutions. The reason is that such systems necessitate infrastructure that can be expected to work continuously over long periods of time without interruptions and that data — once written — cannot be edited.
It’s A Great Time To Be Involved In IP Finance.
IP lending is a financing transaction in which a borrower receives funds secured on the value of their intellectual property. Usually the IP pledged as collateral (re-registered in the name of the lender) are granted patents. Due to the low density of patents in biotech/medtech (a direct, often 1:1 relationship exists between patents and revenues) royalty financing is in effect IP lending and there is a multi-billion-dollar market in such loans.
Biotechnology is a perfect sector for IP lending, because it is capital hungry and valuations/access to capital are event-driven. A great drug trial (or a pandemic) may act as a catalyst for promising companies to raise funds easily. A failed trial or an out of favour therapeutic area can destroy value overnight in a manner that is rarely seen in other sectors; and with that the ability to finance growth or repositioning is lost. Often companies may have strong IP but for various reasons weak commercial traction, it is these companies that are most suitable for IP finance.
Central Bank Digital Currency: An Innovation In Payments.
Central Banks are starting to think seriously about issuing their own digital currencies, both to wholesale networks of banks, along with corporates, FinTechs and the general public. The resulting flood of excitement around Central Bank Digital Currencies (CBDC) is beginning to activate a diverse group of participants across the payments ecosystem. This white paper explores a range of proposed models and applications of these offerings from across the globe, while expanding the discussion on the necessary technology tools.
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