An Interesting Perspective On Financial Inclusion

Interesting speech from Frank Elderson, Executive Director of the Netherlands Bank, highlighting some of the risks attached to the digital revolution and the impact on potentially excluded households. For example, losing access to bank branches, or ATMs, the impact of big data and the complexity of banking products. This perspective is important.

We still face challenges here in the Netherlands. Although these challenges are of a very different order to those in many other parts of the world. That’s because in the Netherlands, a lot is already very well arranged. For example, we have a stable system of payments, and everyone has access to financial products and services, such as bank accounts, insurance and pensions. Over 99% of Dutch citizens have a bank account.

Plus, in the Netherlands, we also devote a lot of attention to financial education, another important aspect of financial inclusion. You also play a big role in this respect. These initiatives include the Money Week project for primary school pupils, the Money Wise platform, as well as the activities of Child and Youth Finance International.

Yet there’s another aspect of financial inclusion I’d like to see us pay more attention to in this country: resilience. We strive for financially resilient consumers in society. Consumers should, in order to be resilient, make prudent and sound decisions. That’s one aspect on which we still have much work to do in the Netherlands. It is apparent in several areas. Let me give you a few examples:

National issue #1: vulnerable groups

For one, the impact of innovation, and the widespread digitization of financial products and services. This development means that many more people are now able to gain access to, for instance, insurance and banking services for the very first time. It’s fantastic to see what innovation can deliver in this respect.

However, in the Netherlands we have seen how innovation has also led to certain sections of society becoming more financially vulnerable. This is due to banks closing more of their branches and reducing the number of ATMs. At the same time, the new products and services that FinTech companies offer are sometimes still inaccessible for certain groups. These include the elderly, the handicapped, and people with low digital literacy.
These days, innovative firms focus on specific or younger target groups.

The early adopters. This is a logical business strategy. However, during this transition we must also consider the needs of more vulnerable groups. After all, access to these products and services should be available to everyone. While we are dismantling old systems and introducing new ones, the vulnerable among us may not always be able to keep up.

They run a risk of becoming disenfranchised – a risk of being left out in the cold.

National issue #2: exclusion

The second development I’d like to call your attention to under the aegis of ‘financial resilience’ is the use of data analysis to make services more personalised. Again, we can see how this has had a very positive impact internationally. For example, if a financial service provider, based on data analysis, can see a customer is reliable, then such service provider is more likely to grant that person a loan to set up a small business.

But there is also another darker to this coin, also in The Netherlands. In addition to the potential violation of privacy, data analysis can also lead to the exclusion of some customers. They may, for example, be excluded from certain financial services, if, by shrewdly combining various databases, it becomes clear that they have a high risk profile, or low profit expectations.

National issue #3: understanding

The third and final aspect of financial resilience I’d like to discuss concerns people’s understanding of financial products. Getting a mortgage or choosing a pension is not an easy process. The information provided is often highly complex. If someone takes out a mortgage they can’t afford, or chooses the wrong pension, it can lead to serious financial problems.

The combination of honest communication and understandable products is an important concern in this respect.

‘Consider the vulnerable people’

I’m sure you’re familiar with these examples. But I’ve mentioned them for a very good reason. When you’re designing a product or a service, I urge you, as representatives of the financial sector, to please always stop and ask yourself the question: “have I considered the more vulnerable people
among us?”

ANZ acquires REALas to bolster digital offering in Australia’s property market

ANZ today announced it had acquired Australian property start-up REALas to help home buyers access better information about the Australian property market.

Launched in 2011, REALas offers a unique algorithm to predict property prices and has forged a strong reputation as the most accurate predictor of sale prices for listed properties.

Commenting on the acquisition, ANZ Managing Director Customer Experience and Digital Channels Peter Dalton said: “This is an important acquisition for our digital transformation as we know customers are increasingly turning to online resources for help as they navigate the Australian property market.

“It’s also a great success story of an Australian start-up, so we’re really pleased to be working with them and looking at how we might incorporate some of their features into ANZ’s products and services in the future.”

REALas CEO Josh Rowe said: “The algorithm at the centre of our site was built using the latest data science methods, local market knowledge from property experts and crowd-sourced data from buyers. Its predictions change in response to the market, which means buyers have access to the latest prediction right up to the time of sale.

“We’re thrilled that ANZ has recognised the value in what we’ve built over the past six years and we’re looking forward to growing our service and helping people get the information they need to make better decisions when buying or selling property.” will continue to operate independently as a wholly-owned subsidiary of ANZ.

ANZ to offer payments on Fitbit Ionic

ANZ has announced it had partnered with leading global wearables brand, Fitbit, to offer customers the ability to make payments on the run through Fitbit Ionic, the ultimate health and fitness watch.

From today, ANZ’s Australian customers will be able to load their eligible Visa debit or credit cards through the Fitbit app so they can make simple and more secure purchases on the go with a Fitbit Ionic.

Commenting on the new partnership, ANZ Managing Director Products Bob Belan said: “ANZ is committed to being at the forefront of new payment experiences so we’re pleased to be offering our customers a convenient way to pay on the go with their Fitbit Ionic.

“We’re excited to work with an innovative company like Fitbit to offer our customers products and services that are simple to use and helpful in an increasingly digital world.”

“Having done a lot of work with mobile payments in the past, we are well-positioned to establish more partnerships at a faster rate to meet the evolving needs of our customers.”

Customers will need a Fitbit account and an eligible device to pair with their Android or iOS smartphone so they can access the payments service via the Fitbit app. Once set up with their debit or credit card, they simply need to tap the device at any contactless merchant terminal to make a payment.

The announcement comes after ANZ successfully launched mobile payments partnerships with several other companies in the past 18 months, including the world’s largest smartphone manufacturers and software providers.

Suncorp Introduces Samsung Pay

Suncorp has announced that customers with a Suncorp Clear Options Credit Card can now access Samsung Pay.

Suncorp Executive General Manager Deposits & Investments, Bruce Rush, said the introduction of Samsung Pay was the first step in Suncorp’s plan to enhance its digital payment offering.

“As we move to an increasingly cashless society, we know that our customers need more efficient and sophisticated technology, including digital wallets,” Mr Rush said.

“From 27 September, 2017 all customers with a Suncorp Clear Options Credit Card, and compatible Samsung device, will have the option to use Samsung Pay.

“We will continue to invest in our payment technologies and are committed to delivering new services that our customers want and need.”

Samsung Pay is a secure and easy-to-use mobile payments service available on compatible Samsung devices, including the recently released Galaxy Note8. Head of Mobile Payments at Samsung Electronics Australia, Mark Hodgson, said Suncorp and Samsung are committed to improving customer experience through innovation.

“With Samsung Pay, Australians are provided with the convenience, security and choice to undertake everyday tasks when transacting,” Mr Hodgson said. “In addition, Suncorp Clear Options Credit Card cardholders can now benefit from Samsung Pay’s unique features, such as our three-layered security system, and can enjoy using the service anywhere you can pay with a contactless credit card.”

Access to Samsung Pay only applies to Suncorp Clear Options Credit Card cardholders and does not include Suncorp debit cards.

RateSetter Passes $150m in loans

Peer-to-peer lender RateSetter has now reached the $150m mark in loans facilitated thanks to a rapid influx of lenders into the platform.

They provide data on their portfolio via their web site, great disclosure (mainstream players take note!).  From this we see that debt consolidation and home improvement were the two main purposes, and the average debt consolidation loan was ~$20,000.

The average rate varies by term.

The term of loan distribution varies across the age bands.

Commentary from Australian Broker says that Millennial investors have helped to drive this growth, especially in RateSetter’s one-month market where these younger demographics make up 72% of the lender’s investors since the firm launched in 2014. This is followed by the one-year market where Millennials make up 40% of all investors.

“Far from wasting money on avocado toast, these young investors are seizing the opportunity to make their money work hard. For a variety of reasons they may want ready access to their money, so the one-month market gives them a stable, attractive return of around 4% p.a and easier access to cash if they need it,” said RateSetter CEO Daniel Foggo.

Investment in the platform has risen by 50% over the last five months alone after RateSetter hit the $100m loan milestone in March. There are now more than 7,700 investors registered with the platform, making RateSetter the largest P2P lender in Australia.

Foggo said that RateSetter had reached the $150m milestone sooner than anticipated because it provided added competition to the banking sector.

“We are giving everyday Australians a genuine alternative to traditional investment options; offering far more attractive returns across both our short term and longer term markets.

“Our growth has also been supported by banks doing a fantastic job of destroying the trust their customers once held. An increasing number of younger investors are showing they trust new economy services, including peer-to-peer lending, rather than traditional institutions, to act in their interests and help them achieve their financial goals.”

While younger investors seek more short-term lending options, older investors have more of a bias towards longer-term alternatives. A full breakdown of RateSetter’s data can be found below:

For the one-month market, the average amount invested has increased from $3,777 two years ago to $11,483 today.

“RateSetter’s savvy investors are making their money work hard. Instead of leaving it in accounts offering poor returns, they are seizing the opportunity to earn a decent rate of return, even if it’s only for a month”,” Foggo said.

“Younger Australians realise that they won’t get ahead by leaving their cash in a low interest rate bank account, so they are prepared to take a small amount of risk to earn better interest rates.”

Is a Central bank-issued digital currency a realistic prospect?

Interesting speech from Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbankentitled “From Bitcoin to digital central bank money – still a long way to go“.

He says the Bundesbank actively shapes the ongoing conversation about distributed ledger technology (DLT) by contributing insights of its own, not least because as a central bank, trust is its most precious asset. The stability and efficiency of systems alone is their primary concern.

They wish to neither hype up a “hot topic” nor hinder the development of highly promising innovations.  But, healthy scepticism, coupled with curiosity and critical analysis, is warranted when it comes to both DLT and central bank-issued digital currency. He concludes that a Central bank-issued digital currency, is currently an unrealistic prospect.

“The road to a digital central bank – assuming there would be any benefits in the first place – would be a very lengthy one. At present, there is not even a recognised basic blockchain. Major consortiums are developing different types of basic blockchains, each with their own particular features. Not all of them can be used in the financial sector”.

The original promise of Bitcoin was to forge a “trustless” payment system – that is, one that required no trust. I quote from Satoshi Nakamoto’s paper from 2008 (Bitcoin: A Peer-to-Peer Electronic Cash System): “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”

I feel that too little attention is being paid to Nakamoto’s primary goal of constructing a groundbreaking, trustless electronic payment system which, like cash, would facilitate peer-to-peer (P2P) transactions. At the same time, Nakamoto was looking to create a currency which was not based on trust. This aspect – forging a new currency that does away with central banks – has become a major talking point in the current debate. I have come here today to explain why a trustless currency is not feasible, and I will also argue that the merits of blockchain can be harnessed more readily with trustworthy institutions than without.

To get a grasp of Bitcoin, we need to put our minds to the essence of money. There are two types of money. Money as a commodity, and money as a claim.

Money as a commodity, that could be a commonly used consumer good which is mostly non-perishable. Cigarettes, for instance, were used as a money substitute in Germany after the Second World War.

But equally, money could be a durable good – gold being the most prominent example of this. Gold is extraordinarily durable, and it has an intrinsic value as a sought after industrial metal, say, or as jewellery. Indeed, for centuries, delivering gold was regarded as the ultimate form of settling a claim.

Consumer and durable goods which can be used as money substitutes both have an intrinsic, consumption or utility value.

Virtual currencies, meanwhile, which are transferred much like goods, are a fabrication. That is not to consign them straight to the category of “fraud”. Yet they have no intrinsic value, just an exchange value. You can’t consume or use them, only exchange them.

On the other hand, there is money as a claim. The bulk of our money – central bank money and commercial bank money – is a claim on either the central bank or a commercial bank.

Every euro in cash and every euro in credit balances in TARGET2 represents a liability for the Eurosystem. And the euro is backed by the Eurosystem with its constituent central banks, one of which is the Bundesbank.

Unlike consumer or durable goods, central bank money does not have any consumption or utility value. And the issuing central bank’s credit quality and integrity is reflected in the value of its currency. The value of a currency, then, hinges on trust in the central bank.

Not just that: the issuer – so in the euro’s case, the Eurosystem – takes collateral from its monetary policy counterparties as a “deposit” for providing euro currency. That indirectly anchors the euro in the real economy.

Virtual currencies, by contrast, have no issuer, no footing in the real economy. No one has to redeem them. They are a fabrication and propagate according to a fictitious set-up in virtual systems which, in some cases, can be altered or newly created at the whim of a small group of participants. What is more, their governance regime is opaque, if not to say obscure – not to mention the fact that the identity of the participant or participants – no one knows for sure how many there are – behind the pseudonym Satoshi Nakamoto remains shrouded in mystery.

Virtual currencies are exchanged in the same way as goods, but they have no intrinsic value of their own. That is undoubtedly one reason why their value is highly volatile. Over the long term, that naturally also exposes Bitcoin holders to the risk of total loss. For us, Bitcoin is not money, it is a speculative plaything. The great number of sometimes dubious initial coin offerings is a clear indication that Bitcoin is more of a funding instrument.

To repeat: it is more of a speculative plaything than a form of payment. Hence my repeated warnings against investing in virtual currencies. We are witnessing a remarkable increase in the value of some virtual currencies. But that does not alter the risk of total loss.

2 Blockchain/DLT in the world of payments

For us, Bitcoin’s most important contribution is the underlying blockchain technology, or to put it more broadly, distributed ledger technology (DLT). This technology could help boost efficiency in payment and settlement processes.

That is why we have been looking at this technology from three different perspectives. First, the Bundesbank develops and runs major payment and settlement systems, often in conjunction with other central banks, and in this context we explore innovative technical capabilities which can contribute to their stability and efficiency.

Second, the Bundesbank acts as a catalyst to forge improvements in payment operations and settlement structures. The better the Bundesbank grasps the practical implications of technologies or processes, the more forcefully it will be able to present its arguments, which always aim to preserve the stability and enhance the efficiency of payment and settlement systems.

Third, the Bundesbank monitors the stability of systems and tools used in the field of payments and settlement. Being able to gauge the relative merits of state-of-the-art technology is a key skill in this regard. That is why the Bundesbank – much like other central banks worldwide – has been putting a great deal of thought into DLT, even though this technology is still very much in its infancy.

Potentially, distributed data storage means that DLT can simplify reconciliation processes associated with complex work-sharing value added chains. DLT is seen as having disruptive potential since it generally allows transactions to be carried out directly – that is, without intermediaries.

Developed originally for the virtual currency Bitcoin, DLT will nonetheless require extensive modifications if it is to be adapted to the needs of the financial sector. For one thing, the legal framework as it stands requires participants to be identifiable, transactions to be kept secret from third parties, and transactions to be settled with finality.

For another, transaction throughput needs to be high. That said, some of the consensus mechanisms, as they are known, absorb so much time and energy that efficient settlement seems barely possible. Furthermore, they require substantial additional data transfers, which adds to the costs.

For comparison purposes, the Bitcoin network, at its peak, settles roughly 350,000 transactions worldwide every day, and given its current configuration, appears to be running at almost full capacity. The German payment system alone, meanwhile, processes more than 75 million transactions on average every business day, according to the data for 2016.

The traditional answer to the problem of mounting complexity in the interactions of a multitude of independent participants has been to use a central bank – an institution which centralises the settlement of payment transactions. Hence the name: Central. Bank. This arrangement channels the many different bilateral payment flows and order books into larger flows which are then routed via or by the central bank and posted in a central bank account. That was a huge step towards greater stability and efficiency in the world of payments.

As a matter of fact, that is why we are seeing a trend towards centralisation and hierarchical structures in the development of basic blockchains as well. There are multiple reasons why a pure P2P settlement arrangement does not appear viable.

A pure P2P world appears unfeasible without trusted institutions. I call this factor the lack of a real reference framework. Bitcoins, you see, are merely virtual, and they change hands between virtual participants. They never leave the Bitcoin blockchain, and they will never have a real point of reference until they are exchanged for real currency, which takes place outside the blockchain.

Once real transactions come into play, a real point of reference is needed. You can trade a house on the blockchain in the form of a virtual token. But on the blockchain, that tells you nothing about whether the house even exists, whether it has the features it is said to possess, and whether it belongs to the seller in the first place. To verify all those things, there needs to be a trustworthy outside third party.

The basic matter of a participant’s personal identity needs to be verifiable outside the blockchain. Only then can we conduct real transactions with that participant.

That is why I feel that the purported goal of settling transactions without trustworthy third parties is a pie in the sky proposition.

All in all, we are highly sceptical about the extent to which DLT can be put to use in the financial sector. Given the current state of the art, it is somewhat unlikely that DLT will become a widely used application in individual and retail payments.

In the field of securities settlement, though, the shrinking processing times and reconciliation costs might prove to be a more important factor and suggest that DLT does have its uses.

The Deutsche Bundesbank is analysing the pros and cons of DLT in a project it is running with Deutsche Börse. While this project indicates that DLT does indeed have its functional merits, it is still unclear how far DLT also has the edge over today’s technology in terms of security, efficiency, costs and speed.

3 Central bank-issued digital currency

When using DLT, the question might arise in future as to whether central bank-issued digital currency could be provided for the safe settlement of larger transactions.

Central bank-issued digital currency would rank alongside cash and credit balances with the central bank as another form of central bank money, and it would also need to be posted as a liability on the central bank’s balance sheet.

There are several technical options in terms of the form this would take. Transfers could be value-based (like cash) or account-based (like deposits), anonymous or registered, its use could be restricted – in terms of amount or payment purpose, say – and it could be remunerated or, like cash, earn no interest.

The specific design dictates not just how far the supposed benefits of DLT-based central bank-issued digital currency will come into play, but also the macroeconomic repercussions, which also need to be factored into any overall verdict on its merits.

Arguably, the most important question here concerns who exactly should be allowed to use central bank-issued digital currency, or, to be more specific, whether central bank-issued digital currency should be issued to non-banks as well. Because if that were the case, we would probably see substitution effects between the different forms of money. Confining its use to the settlement of transactions among banks, on the other hand, would not involve any substantial changes over the status quo.

In particular, non-banks could convert their sight deposits at banks into central bank-issued digital currency if storage as an entry on the distributed ledger appears more secure and more convenient than hoarding it as cash.

Significant parts of non-banks’ sight deposits being shifted into a blockchain, however, and no longer being available­ to the credit institutions as virtually unremunerated funding ­might have considerable repercussions for the interest margin, the scale of lending ­as well as the business models in the banking system and the banking system’s structure.

Moreover, simply expanding the monetary base accompanied by sight deposits being shifted into central bank-issued digital currency would require a larger amount of collateral and would thus have a significant impact on the structure and risk profile of the central banks’ balance sheets.

There is a wide variety of potential monetary policy and stability policy implications. And these are currently being investigated by a number of central banks. As things stand, the likely consequences remain to be seen.

In a nutshell, the title of my speech today: “From Bitcoin to digital central bank money – still a long way to go” sums up the status quo of our considerations.

The road to a digital central bank – assuming there would be any benefits in the first place – would be a very lengthy one. At present, there is not even a recognised basic blockchain. Major consortiums are developing different types of basic blockchains, each with their own particular features. Not all of them can be used in the financial sector.

At the same time, applications for payment and settlement systems are being developed on these shifting sands. There is a lot going on in this field. Technology has been advancing at a pace unseen in the past decades.

What we can do once the banks give us back our data

From The Conversation.

Macquarie Bank has started a trial, giving customers access to the data the bank has collected on them. These might include the number and types of account held, average balances, regular payments and income and credit score information. This information helps to determine both the need for products and the risk of a customer.

This idea is called open banking and will see customers use their data in a whole range of ways – to ensure they are getting a good deal on their credit cards or mortgages, to see how they are faring financially against people in similar situations, and even to make paying taxes easier. Until recently our banks have had exclusive access to all of this data. The banks used it for marketing and product design. That is, your data was used to increase their profits.

The absence of sharing meant the data was a hurdle to customer switching. But the Productivity Commission has said consumers should be given a “comprehensive right” to their data.

In fact, you can already see some of use cases for your data in services the banks themselves provide. For example, Ubank has a tool that allows customers to work out a budget, and compare themselves to others of similar ages, household types etc. And many banks and credit card companies allow you to dive into your spending habits, to see where your money is going.

Treasury is currently examining how open banking should work in practice, and the Productivity Commission is looking at competition in the financial services sector. So this Macquarie Bank trial is just the beginning of open banking in Australia.

Is it safe?

You might be worried about how these other services will access you data. You don’t have to share your passwords or bank login, rather the data is shared using a standardised application programming interface or API.

An API creates a standard for connecting to a service, similar to how there is a standard for writing down your home address. To mail a letter you write down a street number, street name, suburb, state, postcode. If you write down the latitude and longitude of the person’s house then the letter won’t get there, because it doesn’t abide by the standard.

API’s have security standards as well, with two elements. One is authentication – making sure that the machine seeking access is the machine it says it is – and the other is authorisation – making sure that the machine is permitted to access the API. In practice, the authentication component could be done by a trusted third party, such as Facebook or Google.

An open banking API would need to allow enough information about a customer to be accessed to allow for service comparisons. However, the data must not contain enough information to identify an individual. This is essential under Australian privacy law and proposed standards would also need to comply with the European General Data Protection Regulation (GDPR).

What will I use the data for?

The fact that all this data has largely been held by the banks until now means there aren’t a lot of services for us to connect to immediately.

The most immediate example is to use your data to make sure you are getting the best deal you can on your loans. This is one of the reasons the British Competition and Markets Authority decided that open banking was necessary.

Under this scheme, if you want to compare service providers, you can download your anonymised data in a standard form and then upload it to a bank, a price comparison website or an app. In the case of the app, it would present to you your best options, given your current banking profile. This would include staying with your current bank or changing one or more accounts to a different institution.

This data could also be used to get approval for a new loan. Your anonymous data, in combination with identity information, includes enough material for a lender to decide whether to give you a loan for a specific purpose.

These tools will foster more competition between banks as customers will find it easier to compare services and switch, but it will also mean customers can make sure they are getting the best product available at the bank they are currently at.

But beyond comparison and switching, there are a number of interesting examples of how you can benefit from the data in your bank.

A budgeting app connected to your bank account, for example, can use your anonymous data to help you plan your finances. Using both your banking and “tap and go” payment history, it can help you analyse your spending and set goals. These services can even tap into outside data, such as interest rates, to help you determine what to do if rates go up. It’s that spooky moment when your phone becomes your conscience.

Online accounting software such as Xero or MYOB allows daily reconciliation of business accounts. These software systems already use APIs provided by the major banks to reconcile current accounts, loan accounts and credit card services. One variant on the open banking API could let customers “mark” transactions that are employment related expenses or health related expenses to simplify tax returns.

Going beyond fintech

But beyond these examples there are any number of possibilities for what we can do with this data. For instance, we could see an app that helps you make shopping decisions to increase the amount of loyalty points you earn. That is, using data on prices, goals and financial history to benefit consumers and not just sellers.

There are already limited examples of such schemes. The Coles “Fly Buys” scheme is connected to Virgin Velocity points. Both Coles and Velocity prompt members to earn points. Adding an overlay of which credit card to use at the checkout is currently up to you. However, it would be perfectly feasible for an app in your phone to choose which credit card the phone uses to pay at the supermarket to give you maximum points.

There’s also an opportunity here to connect your stream of financial data to what might seem like unrelated data. For example, what if your smart watch prompted you to walk home if you’ve spent more on eating out than your budget allowed? That is, open banking might actually improve your fitness, or at least make you feel guilty about overspending.

Author: Rob Nicholls, Senior lecturer in Business Law, UNSW

Macquarie launches ‘open banking’ regime

From InvestorDaily.

Macquarie has agreed to make its application programming interface (API) available to third party developers – a move that has so far been resisted by every other major bank. Open Banking has the potential to drive significant customer benefits, but may also lead to digital disruption.

Macquarie has launched its new ‘open banking platform’, which the bank says will give customers “control over the everyday banking data” as well as “the power to securely manage how they want to share it”.

As part of announcement, Macquarie will now give “approved” third party providers access to its API via the bank’s open developer portal and test sandbox, called devXchange.

“While consumers typically need to reveal their banking login details to use budgeting tools and similar services, Macquarie’s open platform means customers will never need to give their login details to a third party, creating a more secure way to access these services,” said a statement by the bank.

“Macquarie’s open platform also gives customers the power to manage access to their data in real time through the Macquarie banking app. Authorised third party providers will have read only access to that customer’s data through a secure token which then reads the data from Macquarie’s systems,” said the bank.

Macquarie head of personal banking Ben Perham said, “Our customers have been telling us they want to securely connect their information into their favourite accounting software, budgeting app and other innovative services they’re interested in. Macquarie’s open platform will make this possible.

“We’ve built a highly personalised digital banking experience, so empowering our customers to securely manage how they want to use their own data is the logical next step.

“APIs are being used by leading digital companies like Amazon and Google to transform consumer experiences, and we’re excited about the opportunities the technology will bring to financial services.

“We’re looking forward to working with third party providers and developers to drive new and more personalised solutions for our customers that tie in seamlessly with daily life.”

HashChing Launches New GroupBuy Solution

Two years after launching its online mortgage broking platform, HashChing says it is shaking up the home loans industry once again with a new GroupBuy solution. They claim the potential savings are huge by flipping the usual power dynamic of a bank and borrower. Customers join a group with similar lending requirements (such as refinancing an existing home loan), and participating banks and lenders bid against each other to win that group’s combined home loan portfolio.

With Australians paying an average 4.55 per cent discounted variable rate on owner-occupied properties, HashChing CEO Mandeep Sodhi said customers could stand to save at least $80,000 off their mortgages by refinancing through GroupBuy.

“We expect lenders to match or beat the interest rates that are currently being offered through HashChing partner mortgage brokers, which currently start from 3.59 per cent. Based on an average loan size of $500,000, borrowers can stand to save a significant amount of money.

“HashChing GroupBuy is a revolutionary and exciting new way for borrowers to tap into the collective bargaining power of a group, enabling them to get a better interest rate on their existing home loan using an online wizard that takes less than 10 minutes to complete, provided you have your paperwork ready. “For less than 10 minutes of your time, you could potentially save $80,000 over the life of your home loan,” said Mandeep Sodhi, CEO of HashChing. Jobs NSW, a government backed initiative that aims to make the NSW economy as competitive as possible, has recognised the innovation behind GroupBuy with a $100,000 funding grant.

GroupBuy is free and simple to use. Borrowers sign up through the dedicated GroupBuy portal on the HashChing website and confirm their interest in a particular campaign. Campaigns group borrowers with similar loan requirements together.

Campaigns will have strict eligibility criteria, such as refinance of owner-occupied properties only with a minimum borrowing of $500,000 per applicant and a minimum credit score.

Once each campaign is full, HashChing’s panel of lenders bid for the group of loans, giving the borrowers access to a range of low and below market offers. Borrowers are able to select the most appealing loan offer, and the chosen lender then gets in touch with each borrower separately to finalise the home loan.

Borrowers who drop out of the campaign at any point will be connected with a local partner broker, who can provide them with a personalised service for negotiating a better home loan rate at no cost.

HashChing will also use key learnings from the rollout of GroupBuy to create a deeper understanding of customer usage patterns – the end goal being to connect customers with brokers at the precise moment they need assistance, with enough information captured for broker to have a meaningful conversation. HashChing will initially conduct a GroupBuy Pilot for six weeks with four lender partners – Gateway Credit Union, Pepper Money, Switzer and MortgageEzy – and offer campaigns to consumers looking to refinance their home. Upon completion of the pilot HashChing will increase the participating lenders and consumer campaigns.

Gateway CEO, Paul Thomas, highlighted the synergy between the two organisations as a key driver for the partnership. “Partnering with fintechs such as HashChing is all about helping to create a more dynamic, innovative and competitive industry. Taking part in this group buying initiative is exciting because it allows us to help pioneer a unique customer experience. It’s the perfect way for us to further strengthen our commitment to fintech partnerships and differentiate from the big banks, while showcasing our benefits as a customer owned bank that always looks to empower the customer,” said Mr Thomas.

Aaron Milburn, Pepper Money’s director of sales & distribution, said: “Pepper Money is always looking for ways to maximise a customer’s access to finance. That’s why we partner with a variety of introducers, such as HashChing, who are using innovative methods like GroupBuy to increase a customer’s finance options.”

Peter James, CEO of Mortgage Ezy, said: “Mortgage Ezy is thrilled to partner with HashChing as a strong advocate for brokers. As one of the last truly independent non-banks in Australia, we relish the opportunity to continue to give the banks a run for their money.”

Marty Switzer, CEO of Switzer GroupBuy, said: “Mortgage stress is a stark reality for one in four mortgaged households, and there’s a strong likelihood of rates rising even further. A simple increase of half a per cent would boost the number of mortgage stressed households to a whopping one in three. As an industry, we need to be looking at ways we can relieve the financial pressure on over-stretched households. HashChing has taken this challenge by the horns with its innovative GroupBuy product, and I’m excited to be a part of it.

Since launching in August 2015, HashChing has received more than $10 billion worth of home loan applications, helped upwards of 18,000 customers find a better deal on their home loan, and boasts an expansive network of more than 600 verified brokers. “We are very pleased to be working with a dedicated group of lenders given the current discontent consumers feel towards the major lenders, especially during continual periods of out of cycle rate changes,” said Mr Sodhi. “For too long now, mortgage borrowers have felt powerless against the big four banks and other major financial institutions, who continue to hike up interest rates against a climate of high household debt and stagnate wage growth.

“HashChing GroupBuy puts the power back in their hands by having banks and lenders come to them and try to win their business. We believe this will be an incredibly satisfying and empowering experience, and we’re looking forward to making this publicly available in the near future.

Blockchain Prototype Is Credit Positive for P&C Insurers and Reinsurers

The Blockchain Insurance Industry Initiative (B3i) has unveiled a prototype application that streamlines contracts between insurers and reinsurers using blockchain technology according to Moody’s. Once the technology becomes mainstream, they expect that it will significantly reduce policy management expenses and speed up claims settlement for insurers and reinsurers, a credit positive.

B3i’s application gives insurers, reinsurers and brokers a shared view of policy data and documentation in real time.

Blockchain’s shared digital ledger has the potential to increase the speed and reduce the friction costs of reinsurance contract placements. Reinsurers would use the common platform to streamline claims analysis, potentially reducing significantly their administration and management costs.

Blockchain technology is a chain of blocks of encrypted data that form an append-only database of transactions. Each block contains a record of transactions among multiple parties, each of which has real-time access to a shared database. As a block is encrypted with a link to the previous block, it cannot be altered, except by unencrypting and amending all subsequent blocks.

PricewaterhouseCoopers estimates that blockchain technology will reduce reinsurer non-commission expenses by 15%-25%, including data processing efficiencies and reduced chance of overpayment because of data errors. For illustrative purposes, the exhibit below shows the potential effect on annual pre-tax earnings for some of the world’s top reinsurance companies, all of which are included in the B3i consortium. We also expect the technology to decrease the time between primary insurance claim and reinsurance reimbursement, a credit positive for primary insurers.

B3i launched in October 2016 with five original members, including Aegon N.V., Allianz SE, Munich Reinsurance Company, Swiss Reinsurance Company Ltd. and Zurich Insurance Company Ltd. It now has 15 members. Beta testing for B3i’s program is scheduled for October and is open to any insurers, reinsurers or brokers that wish to pilot the technology, regardless of their membership status in the consortium. Although the initial pilot was for property-catastrophe excess-of-loss policies, B3i plans to broaden its application to other types of reinsurance, catastrophe bonds and other insurance- linked securities.