Cryptocurrency is only for Geeks !

Thoughts of storing your cryptocurrency wallet is a scary one for the majority. There has been countless stories on how people funds were stolen with no chance to recover. Have you even looked at the process to send bitcoin from one person to another. 

Number of digits that you’ve to write is insane. It’s literally impossible to type them & then only option is to copy/paste. I even still till this date, have to verify couple of times & also sweat till the funds arrive in the right place.

From trading cryptocurrencies, storing or sending funds & understanding the basic concept, we are missing out on a very wide audience due to complexities involved. Not many people go out to make their life miserable in pursuit of a better solution. As many have spoken about similarity between internet & cryptocurrency early days, I’ll recall my experiences here as well. 

I got my first computer on June 9th 1998 which was a Pentium I with MMX technology. I vaguely remember the specs which were a 28.8 kbit/s, 2GB HDD, 4MB graphics card & a nice casing. I remember I had to source & wait for individual items since I was living in Peshawar. 

Most interesting was the idea to get connected to internet. 

Getting an internet connection was fairly straight forward but there wasn’t many free email or website providers. I remember registering a domain in 1998 through network solutions who sent me a bill later. There weren’t too many options when it come to free email & my ISP ( internet service provider) was proud of offering one for a very low monthly fee. 

Here are some interesting things that I can recall

  • Internet was by the hour in addition to monthly subscription fee
  • There was different pricing for off-peak  & peak hours. 
  • I had to pay my landline company every-time I initiated a connection
  • You can’t use the telephone line while you were connected to internet
  • There was a minimum usage once I connected to the internet so even if I logged in for 2 minute, i’ll be charged for 15 min.
  • There was a famous handshake sound produced whenever the connection was being established. I hated it since I didn’t want any one want to know. 
  • I wasn’t sure if I’ll be able to get through since the ISP had a fixed capacity. It wasn’t uncommon to hear  & very frustrating
  • It took 30-60 seconds to connect. Not to mention it took couple of minutes to turn on my computer
  • Internet speed was around 14.4 kbit/s. In comparison today I am using 1gbps internet. 14.4 28.8 kbit/s is 0.0000144 gbps. It took over 90 minutes to download a 10MB file. Today it’s less than a second. 
  • While Internet explorer was the default browser, I preferred netscape navigator. Netscape is considered to be “best tech product of all time”. I’ve gone from Firefox, chrome to Brave now. 
  • There was no wi-fi so no more using the internet in the washroom.

Interestingly there are still couple of million dial-up internet users in North America today.  To be honest, it wasn’t a great experience to use internet at that time, but it grew exponentially because it offered something never before. You can send emails, get updates in real time and do a video conferencing. 

I got introduced to internet when it was already penetrating into house hold however still the experience wasn’t the greatest but the alternatives were even poor. In early 90’s it was super limited to a small group of geeks who had to jump hoops to get anything to work.They were versed with the concepts of TCP/IP, FTP, SMTP, POP3 , HTTP, IMAP etc, but it’s not something that was a barrier for me to enter. 

Internet was written off by many pundits around that time but it has totally redefined how we live our lives. It has removed barriers in building and sharing ideas. It’s very easy to imagine now how you can order a taxi from your phone, but it looked like a fairy tales 2 decades ago. I am confident that blockchain will be able to remove barriers to build innovative financial products for the masses. Technology has direct co-relation with the improvement of human lives & once the impact reaches globally, we’ll live in a much better world.

We’re still in early days of discovering & solving problems for the financial world. Blockchain is an important component of that discovery. It’s an evolution & I am excited to experience it. We’re getting better day by day !

How many of you experienced the dial-up internet. What’s your favourite memory ?

2018-12-29T16:28:42+00:00December 22nd, 2018|

Justifying Microsoft’s biggest bet since inception

Microsoft just announced to acquire LinkedIn for $26 Billion which is almost 50% higher than the public market valuation. For the sake of comparison, Google purchased YouTube for $1.65 billion 10 years ago. Facebook paid $715 million for Instagram in 2012 and $19 billion for WhatsApp two years ago. (more…)

2018-11-23T22:26:55+00:00June 15th, 2016|

Important vs Urgent – Who takes the lead ?

Time is the most limited commodity that any successful person have & time management is one of the most sought after skill for majority of us. Urgent & Important are the two major parameters used in prioritizing where to focus our resources on.

Eisenhower matrix is ever-green cheat sheet for any one looking to help prioritize their day. Biggest issue we struggle with is “urgent” taking priority over “important”.

Eisen Hower Matrix

If you give some one two tasks with following
– Task A is urgent
– Task B is important

99% of the times, they will go with the urgent one. There could be multiple reasons for this behaviors, but following two are the most common one.

– Urgency creates emergency giving you the adrenaline rush for the day
– It is easy to get motivated while accomplishing a task that is time driven because it could be quantified

The most urgent decisions are rarely the most important ones.
– Dwight D Eisenhower

However, while focusing on urgent task, we oversee important tasks requiring our attention. It could be a business goal as well as personal goal. Such as joining a gym, going on a vacation, spending time with your family, calling an old friend or be by yourself. Even in business, we mightn’t have updated our website or done a SWOT analysis or the most important one – sitting down with the team over dinner.

So next time, there is a choice between Urgency or importance, chose wisely!

2016-03-21T16:13:11+00:00March 21st, 2016|

It’s March – but interest rates are stable

Yesterday, FOMC announced that they are not making any changes to the interest rate. Later last year, they made an upward move after almost a decade.

They also changed their stance on frequency of changing the interest rate. Earlier they indicated that they would change interest rate 4 times in 2016, but it was not well received in the market. Now they have backed-off to resonate with their counterparts. While it’s not as exciting, this will bring stability to the economy. Stable interest rates are boring but it is good in the long run. Feds assurity about the stable interest rate will bring confidence to investors so they can plan and forecast better. Low interest rate acts like a catalyst to economy by encouraging people to rotate the money and invest rather than just leaving it in fixed deposit.

The new stanceis similar to what European Central Bank ( ECB) and Bank of Japan are taking to boost their economy. This however would affect the USD strength against other currencies. People will prefer to invest in alternative assets, making USD less in demand as an asset class. There are both pros and cons of weaker currency, but overall there are always advantages for a stable currency. So if you are an importer, you should be unhappy and if you are an exporter you should be happy. Historically, Fed movements can be well predicted in advance, which is a good indication of them being more realistic with the economic condition. In near future, we should be assure that interest rates are going to be stable and FOMC meetings would have no exciting news to share.

2016-03-17T20:02:34+00:00March 17th, 2016|

Three Ways To Stay Current In The Financial Services Industry

The financial services industry is a cutthroat market with razor-thin margins, making it one of the toughest industries in which to generate profit. Yet, for Fintech startups, it is one of the least chartered, most lucrative sectors.

Accenture recently reported that fintech investments grew 201 percent in 2014 compared to the previous year. As a comparison, overall venture capital investments grew only 63 percent in the same period.

There is little doubt that today’s financial systems are inherently complex, outdated and inefficient. The potential to innovate within this sector has never been higher. Because of wide-scale technology adoption, mobility and digital money, banking and financial institutions are facing imminent threat from fintech startups for products such as loans, money transfers and stock trading.

Indeed, customers today have more options with third-party financial service providers when it comes to choosing products. However, running a profitable fintech startup is very challenging.

With higher cost of customer acquisition, most fintech startups are surviving on venture capital funding. Because they are new, Lifetime Value (LTV) is not yet realized. It would be very difficult for a financial institution to survive on a single product, so they must diversify their portfolio of services to maximize LTV.

No one can unequivocally predict the future. However, here three ways to stay current in the financial services industry.

Existing Banks Must Innovate

Banks are not as slow as they are perceived to be. In fact, they are very smart at focusing on revenue-generating sectors and ignoring less-profitable ones, such as money transfers, small loans, etc. While startups in the space are claiming to take over the money-transfer business from banks, this area is purposely ignored by the banks.

As an example, Western Union, a money-transfer company that controls approximately 18 percent of the money-transfer market, had revenues of $5.6 billion last year, while JP Morgan earned $102.1 billion.

Lending, on the other hand, is considered a profitable service, but bank shares within this sector are decreasing. As per a Goldman Sachs estimate, 20 percent of money lending will move to alternative finance companies, costing the banks $12 billion in lost revenue (this is 7 percent of the total profits for the banking sector).

Banking and financial institutions are facing imminent threat from fintech startups.

Banks have the resources to acquire the best talent, infrastructure and whatever it takes to get the job done. However, the scale of business reduces chances of upward mobility. Fortunately the banking sector has an extremely low churn rate when it comes to core products — deposits and lending.

As per a Consumer Intelligence survey report, approximately 3 percent of people change their banks in any given year. Other findings indicate that 57 percent of people have been with their banks for the last 10 years, and 37 percent are trusting their banks even after 20 years.

Banks have the leverage of a huge customer base, experience, licenses and deep pockets. They will try to stay relevant, but if they fail to innovate faster, they could be looking to acquire winners in the niche product markets. In this case, financial companies retain the monopoly.

The Emergence Of Fintech Banks

The biggest challenge for any company is to acquire customers. High acquisition cost can kill any venture. However, once you have acquired a satisfied customer, you can always cross-sell other financial products to maximize ROI. For instance, a lending platform can sell mortgages. Once they are selling mortgages, they can sell insurance and ancillary services, and so on.

Banks initially started with deposits and lending, diversifying their product offerings later on. Most startups are currently focused on a singular niche product to take incumbent market share away from a profitable line of business. Because of the technology-centric nature, they are better at analyzing data and offering better products and a better customer experience.

The key here is to expand horizontally by being equally good at it.

If you are already using a money-transfer company, why not store money with them, as well? Or, if you are a lending platform, why not take customer deposits to strengthen the deposit base? Rather than going through resource-intensive banking licenses, there are many financial institutions open to giving access to their licenses. This will not just be limited to fintech startups, but also social giants like Facebook, WeChat, etc. that are eager to enter the financial space.

In this case, a technology startup can be the bank of future.

3.0 Brokerage Banks

There is no secret sauce to running a financial institution, but the bottom line is always the same: Keep your operations as efficient as possible.

However, it is almost impossible to be good at every product facet. A lending platform might not be able to beat their competition in the money-transfer space, and vice versa. Similarly, the lending company may struggle when it has to issue insurance.

If banks are unable to innovate faster or startups are struggling with distribution, this creates an opportunity for a marketing company to consolidate all the services under their brand name.

There is little doubt that today’s financial systems are inherently complex, outdated and inefficient.

Rather than developing any expertise, they just take the role of an intermediary and route the transactions through the best possible partner. For example, they may direct a money transfer of $150 to Pakistan via one of their partners, whilst they might use another provider for mortgages. It is not an uncommon practice in other industries. However, such an amalgamated model is rarely found in the financial space if you are just a marketing company.

It would not be out of place to say that by 2020 you might be a marketing brand, showcasing and selling repurposed/repackaged products to the consumers — but at the back end, you are neither a technology company nor a bank.

There might not be enough space for multiple players to exist without venture capital in this cutthroat industry. It will be interesting to watch who wants to be the bank of 2020.

But be it a financial, technology or marketing company, the customer will always win.

This article originally appeared in Techcrunch.

 

 

 

2016-03-06T15:45:08+00:00January 27th, 2016|

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|

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|

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|

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|