Last Friday we noted that large amounts of money are flowing into cryptocurrencies, with rising bitcoin values driving interest in 'altcoins' also. You've heard of IPOs: now hail the ICO or initial coin offering. If you have not been keeping up on the field of late, have a listen to this amusing podcast from the FT's Izabella Kaminska and bitcoin analyst Joshua Unseth as they comment on a variety of initial coin offerings ranging from vaguely promising to frankly ridiculous. In short, reports TechCrunch, "ICOs are the new funding slingshot by which nascent cryptos are flung into the world". But scammers are quickly surfacing. Listen to Kaminska and Unseth pick apart an ICO from Mona.co, which promises a Visa card to buyers which will enable users to spend bitcoin and other cryptocurrencies via the Monaco Visa card. Minor due diligence (ie, Google) shows that the Mona.co CEO closed down his previous company Ensogo in 2016 with losses all around.
On a recent visit to East Africa, Lafferty News noted several locals started shaking their heads when the topic of Kenya's interest rate ceiling came up. In August 2016, President Uhuru Kenyatta pushed through a 14 percent interest rate cap. As a result, one contact told us, loans that banks typically offered with a 24-month term changed into the same amount with a 12-month term to pay back the loan, making the loans completely unaffordable. On top of that, drought forced up the prices of ordinary goods, putting people in a pinch. (The rate cap also applied to credit cards, causing major chaos in an admittedly small credit cards market.) As Bloomberg charts illustrate, the big five Kenyan banks have taken a hit in this environment. "Even after a rally of as much as 35 percent this year for some of the nation's lenders, most Kenyan bank stocks are still down over the past 12 months," said Bloomberg. "Earnings will probably decline by an average 1.6 percent in 2017, and will remain flat for almost three years, Ronak Gadhia, an analyst at Exotix Partners LLP in London, said in a note on May 18, describing the lack of earnings growth as 'unprecedented territory'."
Delivering news on your API count is becoming an early indication of a bank's transition into open banking. Lafferty News has heard banks offer figures ranging as high as 5,000 APIs, so BBVA's announcement at the weekend that it is now offering eight APIs might seem a little low-key. Significantly however, these APIs are commercially available: "By opening commercially our data and services, BBVA is turning 'open banking' — a model that is going to speed up the transformation of the financial industry — into a reality," said Derek White, global head of customer solutions at BBVA. "Not only are we adapting to EU standard PSD2, which aims to boost competition in the industry, but are actually aiming to become the best platform on which to build new digital experiences. This is a customer-led business opportunity."
Worldpay is experimenting with payments in the virtual reality environment, because gaming companies have to make money somewhere and selling stuff in the VR environment is a good way to directly monetise the experience. According to bankingtech.com, "As part of its real ambitions, [Worldpay] has created a proof of concept, with the aim to provide the 'same levels of convenience, and security' that shoppers have in-store and online, without needing to leave the virtual world." This means that, despite the frictionless future of payments, you'll still need to buy stuff in virtual reality using the good old existing payments system. (Incidentally, Lafferty News is not an active user of VR environments but we do regularly see eight-year-old children flailing around while wearing VR headsets at a local electronics store.) However, we do see how this space will influence future environments. A story in yesterday's Sunday Business Post noted that Riot Games runs a big developer operation in Dublin. Riot Games runs League of Legends, the biggest online game in the world, with a reported 100 million people playing every month. Over the years, Riot Games has been entirely acquired by Chinese internet giant Tencent. When Tencent first acquired a share in Riot Games back in 2008, it ran a successful messaging service called QQ. That has now morphed into WeChat and WeChat Pay, one of the fastest growing payment businesses in the world. We invite those of you who play League of Legends to let us know how the payments business of the future works in this alternative universe.
Finally, an FT article over the weekend touches on a recent OECD study that asks some fundamental questions of the universal basic income being pushed hard by Silicon Valley and its ideological supporters. Indeed, right on cue, Mark Zuckerberg has come out in favour of the idea, along the lines of 'we'll have to give people something to spend when robots have taken all of their jobs'. There is, of course, the major question of who is going to pay for this universal basic income. "James Browne and Herwig Immervoll, authors of the report, say that basic incomes at a meaningful level 'would require tax rises as well as reductions in existing benefits and would often not be an effective tool for reducing income poverty'." Not to mention having some actual people still working to pay those rising taxes.
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