Weekly Analysis And Opinion Highlights – 20 February 2023

And we’re kicking off the week with new analysis and opinions on fintech with new finance space for 2023, payments, crypto, fintech stocks and more. Dive into the latest fintech insights and have a great start of the week!

FSB says many current stablecoins will not meet future regulatory standards (Finextra)
The Financial Stability Board has warned that many existing stablecoins would fail to pass muster under new risk management rules currently being formulated. The events of the past year, such as the collapse of FTX, have highlighted the intrinsic volatility and structural vulnerabilities of crypto-assets, wrote FSB chair Klaas Knot in a letter to G20 finance ministers. Emphasising the critical nature of regulatory oversight for the sector, Knot says: “We have now seen first-hand that the failure of a key intermediary in the crypto-asset ecosystem can quickly transmit risks to other parts of that ecosystem. And, if linkages to traditional finance grow, risks from crypto-asset markets could spill over onto the broader financial system.” Read more

The future of financial services depends on global connectivity (Fintech Futures)
The past year has no doubt seen its share of challenges. The aftermath of the pandemic, ongoing geopolitical tensions, and a rapidly globalising world have meant that all businesses and industries have had to adapt, financial services included. At the same time, the headwinds of change have also served as a catalyst for new forms of money to come to the fore – the number of cryptocurrencies tracked by CoinMarketCap reached the 22,000 mark in early December. The World Economic Forum also estimates that the tokenised assets market could potentially be worth as much as $24 trillion by 2027. The frameworks for how global payments are executed are also being informed by the evolution of money and consumers’ shifting expectations. The G20 roadmap for enhancing cross-border payments prioritises collective action to make international payments faster, more transparent, and more accessible, at a lower cost. Read more

Fintech threat to big banks fizzled in 2022 as rates rose – report (Reuters
The competitive threat of financial technology companies to big banks diminished over the past year as rising interest rates constricted funding, a new report from Moody’s Investor Service found. A decline in venture capital funding in 2022 particularly hurt fintech firms that rely on outside capital to fund their operations and acquire clients, Moody’s analysts wrote in the report on Wednesday. The report cited figures from CB Insights that showed global fintech funding fell 46% from 2021 to 2022. Traditional banks that have long benefited from established brands and customer relationships have accessed stable deposit funding over the past year, which has given them an edge over many fintech companies, Moody’s said. Read more

The entire fintech industry is not in distress – here’s who is hiring (Tech Crunch)
With so many fintechs laying off staff, it can be easy to assume that the entire industry is in distress. But that’s not the case. In fact, some companies are finding opportunity in the masses of layoffs. Rex Salisbury, founding partner of Cambrian Ventures and formerly on the fintech investment team at Andreessen Horowitz (a16z), believes that early-stage fintech founders, particularly at the pre-seed and seed stages, “are the big winners in the current job market and are pulling in top talent that would have been inaccessible six months ago. The buzz and momentum for these companies is unlike anything I’ve seen before, it’s incredible.” And Lee Hower, a co-founder and partner at NextView Ventures who was on the founding team of LinkedIn, believes that despite the downturn, there remain fintechs that are “thriving.” Read more

India Bets on Digital Banking to Improve MSME Access to Finance (Fintechnews Singapore)  
India, a world leader in digital payments and fintech innovation, is entering the next phase of its digital finance transformation, now eyeing the prospects of digital banking to address the credit gap faced by micro, small and medium-sized enterprises (MSMEs). The government is said to be readying a framework that would allow MSMEs to more easily and securely obtain digital credit, information technology minister Ashwini Vaishnaw said on February 09, 2023, quoted by the Financial Express. “We are working on a Reserve Bank of India (RBI)-regulated framework so that digital credit also becomes secure and reliable like the country’s digital payment system,” Vaishnaw said, adding that even small businesses like street vendors would be able to access credit. “This year, we will be rolling out digital credit and the National Payments Corporation of India (NPCI) will take a big lead in that. Over a period of the next 10 to 12 months, a good construct of digital credit will be created.” Read more

Facing the FCA armed with data (Fintech Futures)
Anti-money laundering (AML) enforcement continues to be a focus for regulators around the world. While the bulk of enforcement action relates to financial institutions, fintechs are finding themselves increasingly subject to scrutiny by regulators and in the media. Responding to allegations of money laundering can be a daunting experience for any company, but for fintechs, the scale and breadth of the data to be searched is especially challenging. Fintechs frequently scale rapidly and their business can develop and diversify quickly. These changes serve to increase a fintech’s AML risk profile. As a business grows, an increase in transaction volumes can also result in greater opportunities for products to be misused. This rapid growth may lead to deficiencies in money laundering controls, which are no longer proportionate to the firm’s risks. Read more

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