The Information SF Subscriber Summit - Blockchain Highlights
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On Friday, October 20th 2017, they held their San Francisco Subscriber Summit at UCSF Mission Bay Conference Center. Since this is a general tech conference, they had headliner speakers such as Jeff Weiner, CEO of LinkedIn, and Rachel Holt, VP & Regional General Manager at Uber. However, they also had Amanda Gutterman, CMO at ConsenSys, and quite a lot of discussion around blockchain peppered throughout the day.
Amanda Gutterman, Chief Marketing Officer, ConsenSys
The main takeaways from Amanda's talk are that distributed networks can protect data, networks like Ethereum offer identity control, and blockchain-based platforms could connect the unbanked.
“You, the user, own your identity and control what happens to it. It can granularly be permissioned rather than have it be leveraged by others on your behalf.”
ConsenSys is a nearly three-year-old company based in Brooklyn, NY and was started by one of the co-founders of Ethereum, Joseph Lubin. The digital currency, Ether, can be used on the platform for services. They developed uport, a peer-to-peer blockchain identity platform to permit secure, user-controlled transactions. The mission of ConsenSys is to create simplified and automated decentralized applications (dApps) to facilitate peer-to-peer transactions and exchanges.
Speaking with Amanda during the conference, we heard that the upcoming Ethereal Summit is now sold out! (If you are a woman or minority looking to attend however, please ping me and we might be able to help.)
Dispatches from Asia's Fintech Battlegrounds
Ken Koyanagi, Editor-At-Large, Nikkei Asian Review
Moderated by Juro Osawa, Reporter, The Information
There were several lunch breakout sessions, and one specifically regarding fintech. While this session was not specifically regarding blockchain and cryptocurrencies, these technologies are particularly relevant to the region since the developing economies in Asia, including China, are leapfrogging right over credit cards to digital payments.
Payment Trends in Asia
When discussing Asia, Ken and Juro generally divided news and trends between what is happening in China versus South East Asia. However most people in Asia are still unbanked. There are many opportunities in the fintech space - many focusing on basic services like payments. Given the regulatory ease of the region, foreign entrepreneurs have moved to Asia to start fintech companies. Given the leapfrogging phenomenon, there is an interesting mix of old and new worlds colliding. For instance, mobile payment providers are expending a lot of effort trying to bring small cash-only mom-and-pop shops on board.
Mobile wallets are mainstream in China, with many consumers relying on platforms like WeChat and Alipay. Users connect their bank account to these platforms and then can spend from their balance, similar to a debit card. One can also use Alipay to invest in things like money market funds. They use gamification tactics to keep users engaged, like showing how much interest you earn daily to appeal to a sense of progress. The great successes of WeChat and Alipay are making Chinese banks nervous, since they are now cut off from the data stream of consumer spending habits. Instead of seeing each individual transaction, they only see a transfer of a certain amount out. For what it's worth, Alipay does have a license to operate as a bank, but our experts were unclear whether they are subject to required capital reserves.
Credit card penetration in China is low, and these mobile wallet operators are taking advantage. In the quest to expand coverage to small mom-and-pop operations that only accept cash, they try to entice the operators with business consulting help. Small store owners are wary of accepting these new forms of payment because of transaction fees and a tax trail, so the value of business growth consulting could be a benefit that is attractive enough to cause adoption. In one interesting use case, there was a partnership with a shopping mall parking lot. Using machine vision to scan plates, parking could be autocharged via mobile payment, and the data for how long customers stayed at the mall would be captured and shared. The mobile payment revolution has been so widespread in China that even some beggars post a QR code so that passersby can contribute using their mobile wallet balances.
From a privacy perspective, it is interesting to note that Chinese consumers will generally trade expectations of privacy for convenience and inclusion. German and UK citizens put a much higher price tag on various forms of personal data compared to the Chinese, according to a study conducted by HBS. Due to general lack of concern around privacy and the encompassing control of the government, some of the most interesting experiments in fintech are happening in China. For instance, Alipay is using shopping data to create the equivalent of a FICO score. Since a credit-worthiness score does not exist, Chinese merchants are using data such as shopping habits to estimate credit-worthiness, versus traditional payback metrics. 100 question long quizzes, akin to personality tests, may also be used for credit decisions. In China, it is allowable to scan phone records to determine how social you are, in order to determine credit-worthiness. Note that there are stark differences in cases between mainland China and Hong Kong. Using phone records to determine credit would not be permissible in Hong Kong.
What does this mean for blockchain?
The market seems ripe for blockchain-based systems, however it could be hard to compete with huge entrenched players WeChat and Alipay. Chinese consumers also seem unconcerned with owning their data and privacy, which is one large benefit blockchain technology can bring.
60-70% of all Bitcoin mining occurs in China, and this is because players are focused on the money. The Chinese are interested in moving their assets abroad, which the government hates, and they are looking for a place to park their money. Historically the only option has been real estate. Chinese players care more about wealth creation and preservation, and less about the idealism of Ethereum and other non-Bitcoin coins. In terms of regulatory crack downs in new technologies, it has been China's pattern to initially have no rules, completely crack down when things get out of hand, then settle at a long term situation in which there are some rules. This is what occurred with the P2P lending industry, and rumors are already circulating that China will allow Bitcoin exchanges again.
South East Asia
In Indonesia, where most people are unbanked, a network of agents affiliated with Kudo help people conduct online transactions and function as human ATMs or freelance tellers. They sit in places like pawn shops and small stores, and a 1-2% fee is charged for every transaction. Kudo was recently acquired by Uber-rival, Singaporean company Grab.
Coins.ph is a remittance service in the Phillippines and serves the many Filipinos who work abroad and want to send money home. Although it is transparent to users, the system uses blockchain technology. Through partnerships with local banks, users of Coins.ph can get a one-time code to use ATMs without a bank card. They have already expanded to Bangkok and are looking to further expand throughout South East Asia.
South East Asia is about 7 years behind China, although Alipay is already trying to expand to the region. Additionally, Alipay works with merchants even selectively in the US so that Chinese tourists can conveniently pay in a manner they are accustomed.
What does this mean for blockchain? Platforms like Coins.ph are already leveraging blockchain technology to provide services, and since there are so many unbanked, the need is there. Since there are less gigantic payment providers already in place, there is opportunity for new companies to come in.
Other Including India, Japan
India has the Aadhar system, a government tracking number using biometric data. This is shared by all financial institutions and there are lots of payment options using Aadhar. In fact, the government runs a mobile payment system. Indians are not really worried about privacy. Indian mobile company Jio has even given phones out for free, resulting in a huge mobile traffic surge.
In contrast, the Japanese government tried to issue a national ID number, similar to the US Social Security Number, and faced huge resistance. In general, the concerns of developed nation citizens are different than that of those in emerging markets. Emerging economy citizens tend to care more about convenience and inclusion in the system than guarding their data.
Effects on Existing Networks - Credit Cards, Mobile Providers
The new payment models are not necessarily competing with existing credit card providers, however they are challenging their future growth. Mastercard has a startup incubator and some traditional banks and financial institutions are attempting to keep pace with technology by acquiring startups.
Grab, the afore-mentioned Singaporean ride-sharing company, is offering payments. Meanwhile telecom/mobile providers are also trying to get into payments.
Patrick Collison, CEO & Co-Founder, Stripe
The Information's Jessica Lessin interviewed Patrick Collison, CEO of Stripe, and asked him what his view is on blockchain and cryptocurrencies.
Stripe has raised over $400 million in venture capital financing, reaching a valuation of $9.2 billion, and is a digital payments company. While he noted that Stripe accepts Bitcoin, he did not have a clear answer and said "it was too early" to tell whether blockchain will be revolutionary or whether it will be just a "flash in the pan".