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Weekly Analysis And Opinion Highlights – 21 November 2022

And we’re kicking off the week with new analysis and opinions on FTX collapse & crypto future from now on, ESG framework, open banking, and more. Dive into the latest fintech insights and have a great start of the week!

Coinbase: FTX’s Collapse Will Likely Lead to an Extended Crypto Winter (CoinDesk)
The collapse of crypto exchange FTX derailed an emerging positive situation in cryptocurrency markets after the significant deleveraging of May and June left few, if any large, marginal sellers in the digital assets space, Coinbase (COIN) said in a research report Tuesday. The new turbulence in the cryptocurrency market and the lack of large buyers has left the sector vulnerable, potentially extending what was an already long crypto winter, analysts David Duong and Brian Cubellis wrote.
FTX bankruptcy proceedings will be closely watched, but for the digital assets sector, a lot still depends on the path of interest rates in the U.S, the report said. The market is highly likely to see “second order effects” arising from the unraveling of FTX, as it emerges which counterparties have lent or interacted with either the exchange or its sister company, Alameda Research, and what those exact liabilities are, the note said. Read more

Banks Are Failing To Keep Up With Consumer Demand for Subscription Management Services (Fintech Times)
This is according to Minna Technologies‘ latest report, produced in partnership with FT Strategies and with data and analysis from Savanta. The report highlights not only the rising popularity of subscription services but also their maintained use and relevancy during times of economic crisis. Ninety-three per cent of the consumers surveyed by the report feel more aware now of the amount they spend on subscription-based products and services compared to 12 months ago. Many reported having subscriptions for online streaming services, gaming and gym memberships. In line with the cost of living crisis, the report also found that 46 per cent are spending more on subscription services than they were a year ago. With this, the report questions how the future of subscription services will cater to its growingly youthful audience. Read more

The comeback of traditional banks (London School of Economics)
The banking scenario has turned in favour of legacy banks. The rise in interest rates is a big factor. Higher rates make banks more profitable and help them grow. Terence Tse, Mark Esposito, and Danny Goh write that despite the favourable winds, traditional banks must push past legacy solutions and come up with initiatives fast to fend off new entrants. For the past decade, the future of finance has seemed to belong to fintechs and fintechs alone. Traditional banks are seen as obsolete and having no role to play in an everything-tech economy. It is understandable why many have subscribed to this view. Start-up banks could run at a lower cost and offer more customer-friendly services, gaining more and more market share. Low interest rates in the last eight years made funding cheap for these new entrants, an essential condition that enabled them to pay for costly new customer acquisition and hence growth. It is no coincidence that the British Bank Awards have gone to challenger banks in the past years. Read more

The Age of Megathreats (Project Syndicate)
For four decades after World War II, climate change and job-displacing artificial intelligence were not on anyone’s mind, and terms like “deglobalization” and “trade war” had no purchase. But now we are entering a new era that will more closely resemble the tumultuous and dark decades between 1914 and 1945. Severe megathreats are imperiling our future – not just our jobs, incomes, wealth, and the global economy, but also the relative peace, prosperity, and progress achieved over the past 75 years. Many of these threats were not even on our radar during the prosperous post-World War II era. I grew up in the Middle East and Europe from the late 1950s to the early 1980s, and I never worried about climate change potentially destroying the planet. Most of us had barely even heard of the problem, and greenhouse-gas emissions were still relatively low, compared to where they would soon be. Read more

Outlook for the euro area economy and financial stability (ECB)
Speach by Luis de Guindos, Vice-President of the ECB, at the 25th Frankfurt Euro Finance Week.
We are living in a period of high uncertainty due to a deteriorating economic outlook, inflationary pressures, tighter financing conditions and geopolitical tensions. A resilient financial sector is essential in these times. Thanks to regulatory advances and active use of prudential policies since the global financial crisis, the banking sector is in a good position to withstand economic shocks. The currently high inflation is expected to stay above our target for an extended period. Our monetary policy must therefore remain focused on reducing support for demand and guarding against the risk of second-round effects. Amid the present uncertainty, future decisions on policy rates will continue to be data-dependent and taken on a meeting-by-meeting approach. The policy decisions we will take at our next meeting will be based on various elements, including our December macroeconomic projections. At this meeting, we also expect to lay out the key principles for reducing the bond holdings in our monetary policy portfolios. We will proceed with prudence, continuing to normalise our monetary policy in line with our medium-term price stability objective. Read more

US banks to pounce on fintech deals as valuations plunge (The International News)
Financial technology companies, long seen as a threat by the likes of JPMorgan Chase & Co, are increasingly becoming acquisition targets for traditional U.S. banks as rising interest rates and falling valuations crimp their expansion. The valuations of listed financial technology firms have plunged 70% in 2022, analysts at Jefferies Group said in a note last week. In the same period, the valuations of banks in the S&P 500 are down 33%, while valuations for the S&P 500 (.SPX) are down 23%, according to data from Refinitiv IBES. The decline presents an opportunity for Main Street banks to buy companies and beef up their technology for digital banking, online payments and other financial services and diversify beyond lending. Read more

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