About Haseeb Awan

Haseeb Awan is a Financial Technology (FinTech) entrepreneur with a track record of two successful business exits, raising over 100M in venture capital & growing the customer base from 0-4 Million users & expanding to 15 countries across 4 continents within 18 months. He has been included among the top 100 influential people in FinTech globally, won multiple international awards, wrote for and is mentioned on multiple international media & frequently speaks at international conferences & government committees. He is Engineer by degree with Master’s in Engineering Management & also has studied Financial Markets from Yale University & holds Project Management Professional (PMP) designation. He is also a Y-Combinator Alumni as well Next Founders & couple of other associations. He is among the earliest entrepreneurs in blockchain space & personal investor in 30+ companies & advisor to over 10 companies.

Interest rates increased after almost a decade

So Finally FOMC increased the interest rates this week by .25% after almost a decade as expected. Though it was fixed since 2008 at 3.25%, June 2006 was the last time it was increased.

Federal Open Market Committee (FOMC) mandate is to determine the prime interest rate & money supply.It was formed through the  Banking Act of 1933 & were supposed to meet four times a year. However since 1981, they are meeting every five to eight weeks at least 8 times a year to fulfill the same mandate.

Federal_Open_Market_Committee_Meeting

Increase in interest rate indicates confidence in the economy by the Feds. Although they would be aiming for much higher increase, this increase would be a litmus test to see how far can they stretch. Higher interest rate means it is expensive to borrow money driving valuations of assets down. For a common man, increased mortgage rate makes it less affordable to own a house.

This increase in interest rate was expected and overdue. A twitter survey indicated mixed result as below.

Screen Shot 2015-12-16 at 7.41.49 PM

Increase in interest rate will strengthen the dollar because it attracts more investment in the country. Investors can earn more money by keeping their money in saving accounts in US and demand of US dollar goes up. Interest rates are still very low. Just as a comparison it was 21.5% on December 19th 1980. Following is the graph of interest rates since 1947.

Interest Rates

We are living in economy of 3.25 prime rate for the last 7 years. Higher interest & dollar rate have negative impact on international loan-burdened economies . They are already struggling with repayment of loans & now they have to pay even more. On the flip side, it will make it difficult for US vendors to sell internationally because their product have became more expensive and the competing products from other countries have became cheaper. At the moment, effects would be minimal but it would be interesting to watch out for their next meeting on January 27 & 28.

Looking forward to post 3.5% economy.

2016-03-06T15:46:03+00:00December 18th, 2015|Categories: Fintech|1 Comment

Will FOMC end the history’s longest interest rate freeze tomorrow ?

Prime rate is the interest rate at which bank is suppose to lend money to their best customers. It is set as a reference to determine what are the best possible terms at which some one can get interest. In actual, interest rates could either be higher or lower than the prime.

Federal Open Market Committee (FOMC) mandate is to determine the prime interest rate & money supply.It was formed through the  Banking Act of 1933 & were supposed to meet four times a year. However since 1981, they are meeting every five to eight weeks at least 8 times a year to fulfill the same mandate. FOMC is meeting again today and tomorrow to see if any changes are required before the next meeting in January 26-27th.

Federal_Open_Market_Committee_Meeting

Interest rates are frozen at 3.25 since Dec 16th 2008. As a reference, it peaked at 21.5% on December 19th 1980. This is the longest unchanged interest rate in the history.

Here is a historical data on interest rates.

 

Interest Rates

With such low interest rates, it is becoming more and more difficult for banks to offer saving accounts. Margins are shrinking for them and people are looking for alternatives to get higher returns. Lower interest rate is responsible for the higher valuations of companies & real estate.

Technically any deposits in saving accounts is the money lent by banks to lend it further. If they are unable to lend it faster than they are getting deposits, they have to pay interest from their own balance sheet. This is why banks are allowed to lend up-to 9X of the deposits they have. Just as an example for every $10, they can lend up-to $100. Bank with higher lend to deposit ratio will always have a healthy P/L statement.

Higher interest rate will hurt the banks with lower lend to deposit ratio.

There is a high probability that this meeting will end the longest interest rate freeze, it would be a good news for bank stake-holders. It would for sure lower down the demand for capital since it is more expensive to borrow, however will also correct the market valuations. Not correlated, but the oil price have rebounded above $35 for the first time since 2009.

Let’s wait till tomorrow to see if there are any changes announced.

2016-03-06T15:44:51+00:00December 15th, 2015|Categories: Fintech|Comments Off on Will FOMC end the history’s longest interest rate freeze tomorrow ?

FinTech startups don’t want to be a Bank

Banks are boring & claim to be next generation bank is rarely heard in startup world. Banks were born out of need to store the cash safely.  Banks generally have a very good perception of trust & security among masses which led to position themselves as one-stop shop for anything financial related. Over time they built the brand , distribution & resources to up-sell other financial products such as loans, insurance, money transfers etc.

As any other business, competition have started to hurt the banks. However, new entrants are not keen to attack the core competency of the bank i.e holding people’s money. The main reason behind lack of competition is the resource intensive regulatory process. With low ROI. it’s not worth the effort for startups. Although bank fees brings lot of revenue to the bank, holding money is not profitable. It’s more of a liability than an assets.

Startups will take away the profit-making products of banks leaving them with liabilities to hold cash only

When it comes to retention, banks are doing really good job. When was the last time you changed the bank ? As per a survey, approximately in any given year 3% of people change bank. While 57% of the people are with their bank for last 10 years, 37% people are still trusting their bank even after 20 years.

For startups, it is easy to launch other financial products due to less barrier to entry in terms of regulations. In no specific order, popular products are

  • Lending
  • Remittance
  • Bill payments
  • Credit card processing
  • Insurance
  • Hedge funds
  • Credit cards

Lending being the most popular product, FinTech startups are focused on creating the most efficient P2P lending marketplace. As per Goldman Sach estimate, 20% of bank lending will move to alternative finance, costing 12 billion dollar in profit loss for the bank. This is 7% of total profits for the banking sector.

Over next few years, due to regulation burden, number of players in banking will reduce. More and more consolidation will happen in the industry due to shrinkage of profit margins. Industry have already started to search for solutions to sustain their retail locations with reducing operational expenses and innovating to compete with startups in term of products & services. Though they have an edge in term of resources, corporate culture makes it difficult to innovate.

It a race between Innovation vs distribution as beautifully written by Alex Rampell .Will FinTech startups be able to get the distribution first or banks will be able to innovate first ? Race is ON.

2016-03-06T15:46:14+00:00December 3rd, 2015|Categories: Fintech, Startups|Comments Off on FinTech startups don’t want to be a Bank

Biggest challenge for a money remittance company

Every week, a new startup is born to grab the 600 Billion remittance market volume . With an average fee of 7% approximately 40 billion dollar are paid in fees and despite dozens of startups trying to reduce it, fees are not coming down as anticipated. Even though we blame the remittance companies for higher fees, the industry have some additional challenges which other industries haven’t even heard of.

The biggest challenge in running a MSB ( Money Transfer Business ) isn’t higher cost of acquisition,  technical debt, marketing but a Bank account. All MSBs are considered High Risk Accounts (HRA) irrespective of size. It started with the Operation Choke Point which was announced in 2013 by United States Department of Justice. Every bank which is doing business with high risk clients such as payment processors, payday lenders, cheque cashing business & money service businesses are being investigated under this operation. Things have gone worse since then and accounts are being shut down. “De-Risking” is the common term used while closing a bank account. Banks are not interested in dealing with the MSB due to redflags that are raised both internally and externally in terms of compliance.

Maintaining a bank account is the biggest struggle in a money remittance business

Banks are justified on their end since in some cases, the cost associated with enhanced due diligence outweighs the cost of maintaining certain accounts. In other cases, banks mitigate the problem by charging premium fees to certain types of customers. This issue is not just limited to agents but the company itself.  Here is an excerpt of World Bank survey report.

“A Significant portion of MTOs declared that the MTO principal (28% of the respondents) or its agents (45% of respondents) can no longer access banking services. Of that smaller group of MTO principals without access, 75% are maintaining their presence in the market by using alternative channels to clear and settle the amounts at international level; the other 25% of MTO principal respondents are currently unable to operate regularly through bank channels.”

Derisking Money remittance

Issue is that even though a MSB is 100% compliant, their account could be shut down without any reason. Regulators are well aware of the issues, however, none of them are super interested in solving this issue because there is no incentive. It is a continuos battle between the bank, MSB and regulator with no clear winner.

As per WorldBank recent report, 69% of the MSB are impacted due to recent account closures.

A bill should be passed by the assembly that as long as the business comply with the regulations, banking services shouldn’t be denied because it leads to either shutting down the business or using alternative underground routes such as Hawala. Bank account for a legally operated business should be a RIGHT. As an example; In Canada, even though basic banking services is a right for individual. Unfortunately, same rule doesn’t apply to businesses.

So next time, when some one plan to get into this industry, they should consider banking issue as the biggest hurdle, rather than the UI, logo or branding

2016-03-06T15:46:24+00:00November 24th, 2015|Categories: Fintech, Startups|Comments Off on Biggest challenge for a money remittance company

What is your management style ?

Someone asked me a question about my management style. Let me give a disclose that I have not been very good at it and this is the most difficult task that a founder has to encounter.

Management Style

While I am not pro at it, I thought of asking this question from myself for days and came up with following

Ideal management style is a style in which people don’t have to be managed

Now it goes more about the culture where everyone can think themselves accountable. I am lucky to attend lecture by Brad Hams and the way he explained the subject was great.While I recommend his book a lot, I would rephrase his book title as following

Create a culture of accountability, purpose & profitability & eliminate the entitlement feeling.

 

Any one who can master this won’t have to adapt to any culture.

 

Management Style

2016-03-06T15:46:33+00:00November 5th, 2015|Categories: Life, Startups|5 Comments

Millennial – Generation of two decades

Everyday, we come across the term “Millenials” or “Generation Y”. Companies/Startups are overusing this term to define their customer base. From just the sound of  it, image    portrayed in mind of a Millenial is a teenager who is snap chatting on his new iPhone with music played on his flashy expensive branded headphones.

However, it’s not quite right.

Kid Snapchatting

Any person born between 1980 – 2000 counts towards Millennial. As of today, it’s the generation aged between 15-35. That’s a difference of two decades.

Millenials

I am personally unable to identify anything that is equally appealing to people between 15-35. This  is the most exciting age bracket &  statistics show that people have already experienced 70% of their AHA moments before the age of 35. Once you cross 35, it gets difficult to change your personality, habits or behaviours.This is the reason why it is lucrative to attract this age bracket while one is learning new things and adapting to new habits.Few of the interesting characteristics are

  • Early adopters – They are OK with being the guinea pig
  • Social – They share their lives publically and not much of a private person
  • Adventure – They take more risk and are not in rush to settle down  
  • Informed – They are probably the most informed generation based on the content they consume

These all characteristics make them ideal customers for a new product that might or might not work, however, remember, they range from a high school kid to a mid-level manager, so it’s a broad market size. In US alone, there are expected to be 80 million millennials. If brands are able to capture their minds before 35, chances of upselling them for rest of their life becomes bright.

Millennial generation

 

I am part of Millennial & you?

2016-03-06T15:46:54+00:00October 27th, 2015|Categories: Life, Startups|4 Comments

How to make quick pivotal decisions

 

We have to make trivial decisions on regular basis. Some of those decisions create a deadlock which have impact on other things we do. Everyone advises to go with the instincts and gut feeling but the solutions are so close that it becomes challenging to figure out what do we actually want. As human nature, we like to delay it as much as possible as long as it doesn’t impact the outcome.

When I am in such situation, I use tossing the coin technique. I take out the coin without looking at which side it is tossed with and the moment it’s in the air, I know what I want. I take back the coin without looking at result since I have discovered what decision I am more inclined towards. 

Coin flip decision

Whenever confused between two options, just toss the coin in the air & the moment it’s in the air, you know what do want to do

As soon as the coin gets in the air, it activates the time machine that forces you to figure out your top priorities and based on that, you quickly analyze which option would serve those priorities better. There is absolutely no guarantee that the selection would be right however it will tell you what you want

2016-03-06T15:47:17+00:00October 19th, 2015|Categories: Life, Startups|3 Comments

What advice would I give to myself 10 years ago ?

Life is the name of continual motion. My counter is constantly running and I have no control over it. In fact, none of the billions of people walking this earth right now, have any control over this counter. It keeps running and running until one day when it will abruptly stop. That day, life as I know it, will cease to exist.

I enjoy the great outdoors and feel blessed to be living in Ottawa, one of the most beautiful cities I have ever come across. It has natural sanctuaries to help re-build our lost connection with nature. I often longingly gaze at the river and think about how so many people before me have come and gone, yet the river remains. It is majestic and grand and runs free through the city, as it has for many generations.

Like the river, I often wish to run free, free of any socially constructed financially motivated boundaries to really change the world. Millions amongst us wish to leave a deep, meaningful impact on the world, I too wish to give back what the universe has awarded me with.

Next year will mark the end of the third decade of my life. Three decades have passed in a flash. Imagine if I knew as a teen, what I know now. How would the course of my life be different? How would I have a greater impact on this world, on my world?

Live in the moment

Looking back I feel like one of my biggest mistake has been my inability to be completely in the moment. I have either tried to live in the past or with dreams of a brighter, bigger future, whilst ignoring my current, my present, my now. I have missed many moments in life trying to come to terms with the fact that I can’t be everywhere at the same time, I need to be where I am completely in order to live in the moment.

It’s like trying to make a video of the fireworks in front of you. Why not put the phone away for a few minutes, and live in the moment, let the eyes see the world without the filter of your phone in front. Remember, the fireworks won’t last long, but the memories will last decades. No matter how great your camera is, it is not better than your eyes and cannot remember moments with their feelings, like the mind can. So Next time you are watching the fireworks, live in the moment and create memories.

Fireworks

Life is a counter. At this very moment, you are the youngest you will ever be, so live this unique moment and create memories, not videos.

 

P.S. Nobody likes to watch a video of last year’s fireworks that you made on your phone =)

What advice would you give to yourself 10 years ago?

2016-03-06T15:48:28+00:00October 15th, 2015|Categories: Life|6 Comments

Love vs Lust

Once in a while, we get attracted to different things including cause, person or a vision. It is difficult to differentiate between lust and love at first because they both have the same passion and sentiments. With the passage of time, it becomes difficult to keep the same sentiments over an extended period of time. We all are humans and sentiments make or break us. We have to invest resources such as time, money and emotions for a better future but mostly we are unsure if this is the right use of our time. No one can predict the future accurately however it is fairly easy to assess the present.

Love increases with time and lust decreases with time

This is a good parameter to measure if it’s love or lust. If you are more excited about your product on daily basis then you are heading in the right direction and if it’s the other way around, it’s time to rethink if this is what you want to do in your life. There are rough patches in everything, but during rough patches it should bring you closer to the things you love rather than creating distances.

In tough times, you want to be with your loved one and far from lust

It’s never a good move to follow lust but love. You have to be passionate about what you do, else with the passage of time, you will get drained. If you are getting drained, you are not in due to the passion for some other reason.It’s fine as long as you know that!

 

2016-03-06T15:48:12+00:00September 27th, 2015|Categories: Life, Startups|8 Comments

Increasing profits under limited resources

TL;DR decreasing expenses by even slight margin can increase profits exponentially as opposed to increasing price.

 

At times it gets very expensive or hard to grow due to multiple restrictions. Example could be running a hotel which has limited number of rooms. There are 2 very obvious ways to increase profits

#1 Increase the revenues

#2 Decrease expenses

Mostly people will prefer to go with #1 to grown profits. #1 looks like an easy option where you just increase the rents by 5% and boom, you have grown by 5% but we ignore that there are extra cost associated with this increase & wont result into 5% growth.

Now consider #2, where if you are able to decrease the expenses by just 1% of the total revenue, profits will grow by 10%.

*  Supposing gross margins = 10%

2016-03-06T15:47:39+00:00September 24th, 2015|Categories: Startups|2 Comments