Blockchain’s Impact on the Finance Industry, Part 2

This is part 2 of our multi-part series on blockchain. Catch up on part 1 here.

A lot of industries and areas are being disrupted by blockchain technology. We took a deeper dive to see how the new technology specifically affects Asset Management & Investing.

Mo’ Money, Mo’ Margins

Blockchain’s effect on asset management and investing firms will be significant in terms of cost reduction and improved margins. According to Accenture, the new technology could save the banks up to $12B every year. This “provides a rare concrete estimate of blockchain’s potential savings.” Because blockchain data is essentially tamper-proof, it simplifies the supply chain process, removing the need for reconciliation and potentially making it easier for auditing. Additionally, by removing the ‘middle-man’, compliance costs could be reduced by up to 50%. Blockchain-based solutions can streamline processes and cut costs by greatly improving upon the traditionally fragmented data quality most bank database systems currently use.

“The technology represents a potentially important breakthrough at a time when leading investment banks are looking at myriad ways to rebuild their returns on equity.” Chris Blain, Partner,  McLagan

Follow the Money

Because there is so much money to potentially be saved in the long-run, investment in blockchain technology is soaring. An estimated $75 million was invested in blockchain efforts specific to capital markets in 2015, up from $30 million in 2014. By 2019, that figure is expected to reach a whopping $400 million.

This list might be endless, but with what we know now, blockchain can be used to generate savings by:

The bottom line for all of this is the huge potential of significant cost savings, faster transactions, and more accurate data and reporting.

As we stated in Part 1 of this series, there are many unknowns and it’s early days for this evolving technology. As we dig into the asset management use case, we see that the potential cost savings are significant. But, how we get there and what new solutions might drive us there are still unclear. Stay tuned as we share use case scenarios for payments and banking in our next post in this series.

TradeIt’s Bot is Live on Facebook Messenger

We are excited to announce the launch of the TradeIt Bot, live on Facebook Messenger. The new bot allows investors to securely link to their brokerage accounts to view account balances, receive alerts, such as end of day market roundups on the performance of their positions. The bot also provides pricing data for the equities and crypto markets. Giving investors greater control and sense of security, TradeIt securely links investors to their accounts via brokers’ APIs; we do not screen scrape the data.

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“Our partners have reported increased engagement when leveraging TradeIt. When an end user simply sets up a watchlist, retention increases 5x over a 3 or 6-month timeframe.  With a portfolio linked via TradeIt’s technology, partners reported 10x and 12x increases in retention for 3 and 6-month timeframes, respectively,” Nathan Richardson, CEO, and co-founder, noted.  “We expect with the large volume of users on Facebook’s Messenger Bot and high retention numbers reported among our partners, TradeIt can support investors with real-time portfolio data and account balances.”  

In November 2017, Facebook reported continued growth and adoption for the Messenger app by hitting 103.5 million MAU in USA.  Global adoption was 1.3 billion MAU globally.  As we explored in our summer series on FANGs, Facebook laid out plans to embed business services into the Messenger platform, in line with WeChat’s strategy.  Ordering an uber, booking a reservation, shopping for new clothes, and with TradeIt’s Messenger Bot, now, monitoring your investment platform and track market prices for equities and crypto.  

With Messenger’s numbers increasing and Facebook’s stated strategy to follow cues from WeChat, looking to Tencent is likely a sign of what’s coming to the US markets.  Tencent, WeChat’s parent company, has received a license that allows it to sell mutual funds on WeChat and give the popular messaging app’s 980 million users.  Coupling the mutual fund license with the licenses to operate mobile payments, insurance and micro-financing on the WeChat messenger platform, the market is seeing… and validating the need… new avenues for individuals to manage their wealth and pursue the business of their lives.  

The TradeIt Bot for Facebook Messenger can be integrated for a single broker on their Facebook page, giving our brokerage partners an easy way to enter the Messenger space and provide access to their investors where their investors are active and engaged.  Also if you head over to the TradeIt homepage you can see the bot experience embedded on the page.  Over time, we expect the bot to support additional parts of the customer journey, specifically account opening.  For more information, please contact us at support@trade.it or check out the bot here.

Blockchain’s Impact on the Finance Industry, Part 1

This is part 1 of our multi-part series on Digital Assets and Blockchain, and what these could mean for the finance industry.

It seems like you can’t take one step these days without bumping into someone talking about cryptocurrencies. But for all this talk, the average investor probably doesn’t understand the underlying tech behind it — which is the real value add — the blockchain.

Developed in 2009 as the technology behind cryptocurrency, blockchain is a vast, globally distributed ledger capable of recording anything of value. Assets can be moved and stored privately, securely and from peer to peer. For the first time in human history, two or more parties can forge agreements and make transactions without relying on intermediaries to verify their identities or perform the critical business tasks that are foundational to all forms of commerce.

So let’s ask ourselves, How will blockchain affect the finance industry? There are a lot of unknowns, both potentially negative and positive. Let’s start with the potential positives:

Fees

It’s estimated that consumers could save up to $16 billion in banking and insurance fees each year through blockchain-based applications. By reducing transaction costs and essentially cutting out the middleman, blockchain offers an efficiency that cuts through costly financial ‘red tape’. And with shorter clearance or settlement times, reduced back office and compliance costs, companies could also see similar savings as well as risk reduction.

Streamlined Processes

A large majority of financial securities exist today purely electronically and are managed centrally through trusted third parties, incurring considerable operating costs. Blockchain supports the validation and execution of transactions in near real time. This means it can be used to:

  • Remove friction from the client onboarding process
  • Streamline management of model portfolios
  • Speed the clearing and settlement of trades
  • Ease compliance burdens

Data Integrity of the Audit Trail

Like most forms of technology, blockchain in accounting and audit greatly reduces the potential for errors when reconciling complex and disparate information from multiple sources. One reason is you can’t alter a record once it’s been committed under blockchain, even if you own the record. And because every transaction is recorded and verified, the integrity of the transaction is guaranteed. Plus with the advent of smart contracts, trade is enabled with fewer barriers and protected via the digital wallets on either side of the transaction.

But with any new technology there are always potential negatives or concerns:

Adoption

In June, IBM was selected to build a blockchain-based international trading system for seven of the world’s biggest banks, including Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and Unicredit. And, Microsoft and Bank of America Merrill Lynch have teamed up on a new project using blockchain in trade finance, aiming to create a framework that could eventually be sold to other businesses. However, just because companies want to start implementing it, doesn’t mean your customers are going to jump on board, especially when it concerns their money.

Regulation

While Blockchain is tantalizing to FinTech, with nearly all blockchain-based proofs of concept developed by banks having been undertaken in conjunction with fintech partners, new territory could mean the wild wild west when it comes to oversight.

“Blockchain and cryptocurrencies aren’t regulated as a technology generally speaking. It depends on the application. So, whatever they’re used for, it’ll fall under the appropriate regulator — and sometimes the inappropriate regulator.” – Marco Santori, Cooley

Scalability

Like any endeavor, how you scale could mean the difference between profit and bankruptcy. Blockchain networks still aren’t capable of handling the high transaction volumes that could rival that of large industries and financial institutions. Without the appropriate scaling solutions, transaction costs would be too high and the wait times too long for viable adoption. For example, Bitcoin blockchains can only achieve 3-4 transactions per second compared to 56,000 for Visa’s VisaNet. Plus, when you add to this the fact that more than half of the world’s big corporations are considering blockchain and 2/3 of them expect the technology to be integrated into their systems by the end of 2018, proper scaling becomes even more vital.

The one thing we can be certain of about blockchain is that we don’t know what impact this technology will have and how many industries it will affect. Even with all the excitement surrounding it and its entrance into the mainstream, it’s still in the early days. Smart investors and tech titans will tread lightly and keep a watchful eye on this continually and quickly evolving space.

Stay tuned for the next post in this series on what blockchain and cryptocurrencies mean specifically for asset management and investing vs. payments and banking.

TradeIt’s Developer Portal is Live, Supporting Ecosystem Expansion

In TradeIt’s ongoing efforts to support FinTechs, financial institutions and app developers, we are excited to launch our Developer Portal, available at developers.trade.it. The new site is designed for our partners looking to access our SDK or API and to begin integrating our platform into their apps for end users.  

Once registered for the site, a developer will be issued a key to our staging environment. For developers who already have a key to the TradeIt API, they can link their key to an account and leverage the portal for information. The site includes a hub for documentation and integration guides, including dummy accounts for deeper testing of one’s integration.  Users will be able to request production access as they prepare for deployment and reference broker details.  

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Future upgrades and additional functionality to the Developer Portal will include broker profiles, deployment checklist to help developer prep for production release, analytics, community threads, and support.  We believe the new developer portal is one more tool to help expand the ecosystem and help support our partners.

To sign up for the developer portal, click here.  For additional questions, comments or feature requests, please contact us at support@trade.it.