PwC’s strategy& group just put out its DeNovo Q3 Fintech review, and it is a really good read. The focus this quarter is on banks moving core platforms to the cloud and digital identification. It is a full 44 pages long, so if you don’t have the time, my biggest takeaways are below. Enjoy!

1.      Bank back-end systems have fallen behind the front-end.
“Core bank systems were designed largely for controlled and expected queries and transactions by customer service representatives, bank tellers, and bank personnel who interact with these systems in a fairly predictable manner… [however], consumers now check individual transaction activity several times throughout the day and often request real-time information from batch-oriented systems. In general, this places significant strain on systems due to the exponential increase in simultaneous activity beyond what the core system was designed for. This… will restrain the ability of banks to innovate quickly until core processes are migrated to modern systems – namely, the public cloud.”

2.      Digital ID solutions are costly and duplicative across the industry.

“New approaches to digital identity could untether these … functions from each individual bank to a quasi ‘industry shared service’, which would result in significant cost reductions and improvements in the customer experience … ”

Examples explored are distributed ledgers and Open APIs, which could maintain and facilitate validated repositories of personal data and digital signature verification.  This leads to shifting ownership of data from organizations to individuals. New York-based Datacoup is mentioned as having built “a platform that leverages federated ID log-ins to aggregate individual data from financial, social, and activity sites”, which allows users to choose which data to monetize through selling anonymously or sharing with specific organizations.

3.      Regulation can be a catalyst for adoption of these new technologies

I have written in the past about PSD2, the European directive that obligates financial institutions to build open APIs to facilitate customer data sharing. This is taken a step further by the EU’s General Data Protection Regulation, which, in 2018, will…

“[reposition] control of one’s digitized personal information as a basic right … To comply, companies must delete personal data that consumers no longer want stored. In addition, individuals have a right to portability, meaning companies must transmit consumer data to each other upon the consumer’s request. Obtaining the rights to control personal data should have a material impact on consumer expectations of data management.”

I highly encourage you to take the time to review the full report. These trends and challenges present a new world of opportunity both for incumbent financial institutions and startups to prepare for the future of open data.

Zopa seeks full banking license

Zopa, launched in 2005, is one of the oldest peer-to-peer lenders. Zopa recently announced it has applied for a banking license to enable it to accept deposits protected by the Financial Services Compensation Scheme. Zopa seems to have test-piloted the idea last year by partnering with Metro Bank to be able to offer deposits through its website. Managing a hybrid bank/p2p lender will be a new challenge for the industry.

Ex-LendingClub CEO has started over

Renaud Laplanche, former CEO and founder of LendingClub before he was forced to leave the country’s largest marketplace lender, is starting a new online lender. The new firm, Credify, was incorporated less than a month after he separated from LendingClub, and expects to begin making loans next year, targeting $50MM in revenue. Other former LendingClub executives have also joined the firm, which has offices in San Francisco.

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