Ideas fresh off the wire

Money2020 – The Future is Blockchain, China and Partnerships

“Is there a China play?” was probably the most repeated phrase of Money2020 2016. “Is this built on blockchain?” was likely the second. This year’s conference—by far the biggest of the six held thus far—saw companies like IBM, Google and Microsoft unveil to the world their plans to use the blockchain to reimagine payments ledgers. At the same time, hundreds of startups walked the show floor talking frictionless payments, NFC and China. It’s an exciting time to be in FinTech.

 

Blockchain

While the blockchain isn’t new, 2016 will be remembered as the year it truly went mainstream. Money2020 got off to bang on Sunday night with IBM’s VP of Blockchain leading a conversation around regulating distributed ledger technology. The panel—with participants from across the FinTech, legal and business communities—particularly discussed the question of how to protect consumers without stifling innovation. Of the numerous approaches discussed, the one that most clearly came through was greater transparency and partnership between FIs, the tech space and regulators.

 

But while IBM’s session showed an industry pretty much in lockstep, earlier that day Credit Suisse, NASDAQ and Overstock.com had starkly differing opinions on the commercial utility of blockchain. NASDAQ, which started trialing blockchain ledgers for settlement last year, argued that certain inefficiencies in the equities market could be solved by using elements of the blockchain, a position supported by others on the panel—in particular Credit Suisse. On the other hand, Overstock.com’s Judd Bagley fiercely disagreed. He asserted that the technology would make forensic investigation of settlements “virtually impossible” and that the average processing time of 10 minutes really wouldn’t be all that useful for retailers, especially as the Clearing House shifts to a near-real-time payments infrastructure.

 

China 

On Monday afternoon, the main stage saw Alibaba’s SVP of International Operations, Doug Feagin, followed by Google’s Global Head of Payments Pali Bhat. Unsurprisingly, Alibaba and its payments subsidiary Alipay are bullish on cracking the Chinese payments space, particularly its burgeoning mobile-first middle class. More surprising were Bhat’s comments that Google is “currently exploring ways to play in the market.”

 

Beyond the big players, a huge number of startups and mid-market companies are training their sights on the Chinese. The massive market size and upward economic mobility make it far too tempting a space to ignore. In fact, of the companies that I spoke to, at least three quarters were actively looking to penetrate the market in some way. Perhaps the most interesting of these were POS and payments companies looking to not only expand into China but to use it as a trial market for the U.S and Europe because of its pace of innovation and inclination to adopt new technologies.

 

Partnerships

If the blockchain and China represent the future of finance, then partnerships represent the current reality. In the past year, FIs and FinTechs have realized that they’re actually more alike than they are different—the ecosystem is stronger in unity. As evidenced by partnership announcements from Alipay’s alliances with U.S. and Chinese banks, Santender’s alternative lending approach driven by Kabbage and Lendkey, as well as OFX shoring up its SMB play through a partnership with fellow “down-underer” Xero, Money2020 2016 showed that when there’s money on the table, differences can be put aside.

 

Interested in learning more about Money2020 or what’s next in the FinTech space? Feel free to get in touch with my colleague Kim Paone or me—we’d be happy to chat!