Introductions and demonstrations of the Cambridge Centre for Alternative Finance’s suite of digital fintech tools on the newly launched integrated platform
The Cambridge Centre for Alternative Finance (CCAF) recently hosted a live event to publicly launch its new CCAF.io platform. Watch the recording of the launch event to find out more about the CCAF’s suite of digital tools providing interactive fintech market data and visualisations to inform decision-making by regulators, policymakers, firms and other stakeholders worldwide.
Herman Smit: Good morning, good afternoon and good evening. My name is Herman Smith and i’m the associate director for data and analytics at the Cambridge Centre for Alternative Finance.
Herman Smit: And I have the privilege to welcome you, along with our event host TechNation to the official launch of the CCAF’s new integrated platform and suite of digital tools posted on the CCAF.io.
Herman Smit: Before we get started, I will provide a brief overview of the proceedings for the next hour. Following this introduction, the executive director and co founder of the CCAF, Bryan Zheng Zhang.
Herman Smit: will provide opening remarks, this will be followed by opening remarks by Ron Bohlander the head of financial services at the UK Foreign Commonwealth and development office.
Herman Smit: Following the opening remarks our digital tools, benchmark and digital asset leads will present the Cambridge Fintech Ecosystem Atlas, the Cambridge Alternative Finance Benchmarks and Cambridge Bitcoin Electricity Consumption Index.
Herman Smit: As we present the data and features of these tools, please drop your questions into the chat as our research teams will respond to your questions in the chat and i’ll select three of these questions for verbal response.
Herman Smit: At the end of the presentations.
Herman Smit: The presentations, questions and answers will be followed by discussion panel that will feature global increase of finance experts from the World Economic Forum, Invesco TechNation and the University of Agder.
Herman Smit: This conversation will benefit from the unique vantage points and rich experience of each of these panelists in supporting green, sustainable and inclusive fintech.
Herman Smit: And positioning the role of public data such as CCAF.io in supporting this work. Without further delay i’ll hand over to Bryan Zhang, executive director of the CCAF to provide the introductory remarks.
Bryan Zheng Zhang: Thank you very much Herman. Over the last seven years the CCAF has researched the development of online alternative finance, tracking its ebbs and flows over time and space.
Bryan Zheng Zhang: The CCAF team with the generous support of hundreds of research partners around the world.
Bryan Zheng Zhang: has been able to survey thousands of fintech firms, collect vast amount of empirical data and produce some of the most cited publications documenting and analyzing the ever changing landscape of digital financial services.
Bryan Zheng Zhang: Right now, if you go to our publication page, you can download nearly 50 reports covering a wide spectrum of topics, industry verticals and regulatory issues.
Bryan Zheng Zhang: From crowdfunding, marketplace lending, to regtech, cryptoassets, enterprise blockchain and regulatory innovation and hopefully benefit from our independent analysis and academic insights.
Bryan Zheng Zhang: Public reports such as those will always be a cornerstone of the Centre’s work.
Bryan Zheng Zhang: However, given our mission is to create and transfer knowledge addressing emerging gaps in the financial sector that supports evidence based decision making.
Bryan Zheng Zhang: We always think about how can we disseminate knowledge and more effectively, how can we engage with our audience and key stakeholders more deeply and meaningfully.
Bryan Zheng Zhang: Ultimately, how can we create more impact and effect evidence based changes that will help digital financial services, become more scalable, inclusive and sustainable.
Bryan Zheng Zhang: Today with the launch of the CCAF.io, we are taking an important step to make our research output more accessible digestible and impactful in the form of digital tools.
Bryan Zheng Zhang: Digital tools such as the Atlas, the Benchmark and CBECI that will enable individuals and institutions.
Bryan Zheng Zhang: Academic researchers, market practitioners, as well as regulators and policymakers to access, visualize, compare and analyze the data in an interactive and meaningful way.
Bryan Zheng Zhang: Of course, these digital tools are still in beta version, and we very much welcome your feedback, guidance and contributions.
Bryan Zheng Zhang: As the global fintech ecosystem continues to grow, we intend to work with all of you to create more digital tools and enable the CCAF.io to become a digital, knowledge platform.
Bryan Zheng Zhang: that leverages the power of data to help stakeholders navigate digital transformation in financial services.
Bryan Zheng Zhang: on behalf of the CCAF, I would like to thank the UK Foreign, Commonwealth & Development Office for it’s a foundational funding through the CAFCN Programme.
Bryan Zheng Zhang: As well as the support of Invesco and the Asian Development Bank Institute, which made the creation of CCAF.io possible.
Bryan Zheng Zhang: we’re also extremely grateful for all our partners and academic collaborators and especially to the thousands of fintech firms who have graciously supported our research for many years.
Bryan Zheng Zhang: The launch today is also a testament to all the hard work, creativity and ingenuity of the CCAF team we’re so proud of you, and very thankful.
Bryan Zheng Zhang: Finally, my thanks to the Co host of the launch event TechNation for giving us an opportunity to explore how data driven public good digital tools can help further digital financial inclusion. On that note i’ll pass the virtual mic back to Herman. Thank you very much.
Herman Smit: Thank you, Bryan for those introductory remarks and.
Herman Smit: The context to this event. I’d like to invite Ron Bohlander from the UK Foreign Commonwealth and Development Office to provide his introductory remarks.
Ron Bohlander: Thank you so much Herman and thanks for having me and thanks for the kind introduction So yes, I am Ron, I am the head of the financial services team here at the UK’s Foreign, Commonwealth and Development Office or FCDO for short.
Ron Bohlander: And the UK Government through the FCDO is very pleased to partner with the CCAF to support their expert work on developing enabling regulations for financial innovation and fintech.
Ron Bohlander: Through my own engagement and that of my team and the wider UK diplomatic and development network we know only too well the opportunities and the challenges that come with the rapid digitization of financial markets.
Ron Bohlander: This is particularly true for many emerging and developing markets where the development of fintech has has often been uneven.
Ron Bohlander: So the message we hear time and time again from partners across the emerging the developing world that there’s a lack of expertise, capacity, market information and evidence to take informed and effective regulatory decisions.
Ron Bohlander: Already cash and resource strapped regulators in the developing world, cannot be expected to suddenly build this kind of expertise and knowledge from scratch.
Ron Bohlander: and frankly neither do they need to if we can facilitate this kind of knowledge exchange with best practices across jurisdictions.
Ron Bohlander: And we continue to see examples where, in the absence of such capacity, regulators simply default to a risk off preferred approach.
Ron Bohlander: That only further reinforces the status quo that prevents us from realizing full potential of fintech and support a financial inclusion objectives.
Ron Bohlander: As such, we strongly welcome the public launch of the CCAF.io platform and the digital tools that come with it, which I hope will make a strong contribution towards closing the capacity and information gap, that i’ve alluded to.
Ron Bohlander: We firmly believe that better information, combined with targeted technical assistance can facilitate the kind of fintech market development that would we would like to see to drive positive outcomes on financial inclusion, economic growth and, ultimately, contribute to.
Ron Bohlander: The elimination of poverty. That’s all, that’s enough for me, I look forward to the presentations and the panel discussion that will follow and want to finish by thanking all of you again for joining us here today back to you Herman.
Herman Smit: Thank you so much Ron for those introductory remarks and also the context in which.
Herman Smit: The FCDO sees this initiative and supports it and positions it particularly in its development and humanitarian efforts.
Herman Smit: We would like to invite Anton Dek, the CCAF’s digital tools leads to start the launch of the CCAF.io.
Herman Smit: By presenting the Cambridge Fintech Ecosystem Atlas, if you have any questions for Anton or the presenters that follow him, please drop these into the chat. Over to you Anton.
Anton Dek: Okay, thanks Herman.
Anton Dek: So what is the Cambridge Fintech Ecosystem Atlas? Firstly it’s a global relational database of fintech organizations classified by market segments, activities and geography.
Anton Dek: But at the same time the Atlas system is an insight tool that enables cross sectional data analysis, using a set of filters and visualization types.
Anton Dek: Before we dive into more detail, let me walk you through the history and rationale for the project creation.
Anton Dek: It started as a database of cryptoasset entities as there were little to no databases, back in the day.
Anton Dek: Since that time, we have been focusing not only on success stories, but also on recording pivots and failures.
Anton Dek: The project then evolved to broader alternative finance with inclusion of.
Anton Dek: Digital lending and crowdfunding verticals. Eventually we ended up with a global fintech ecosystem atlas featuring market segments like digital banks, wealth management, insuretech and regtech.
Anton Dek: Today, atlas aims to inform policymakers about the state of the evolving fintech ecosystem in their regions or relevant market segments.
Anton Dek: Besides that atlas is also a public good and available to researchers investors and the public in general.
Anton Dek: We developed this tool for our internal use at first to understand how the fintech ecosystem is evolving. We then invested to make this available to the public and to expand its uses beyond those of academic and public policy research. Now this database is not only ours, but also yours.
Anton Dek: The longer term ambition is for the Atlas to become a common reference point and collaborative database for researchers, consumers and industry participants.
Anton Dek: And to support the decision making of policymakers and investors as it relates to fintech.
Anton Dek: The Atlas has over 2800 entities with more than 70,000 data points about them and a set of constantly evolving tools to analyze and visualize data.
Anton Dek: To demonstrate how this comes together as a collaborative decision making tool i’d like to focus on six things that you can do with Atlas today.
Anton Dek: let’s explore these user stories in detail, so the first one, the first thing that we can do, you can navigate the fintech ecosystem by browsing through the three level taxonomy ground.
Anton Dek: Currently fintechs have been classified into 14 market segments that are on your screens that taxonomy tree then branches out to 64 sub segments, which in turn branch out to 117 activities.
Anton Dek: As the fintech market evolves new activities emerge and existing activities mature this taxonomy is updated.
Anton Dek: In addition to market segments, the following data cuts are available: countries and regions, ownership type – whether this private to public.
Anton Dek: Operating status – active or not, and specific focus tags, such as cryptoasset-related entities or inclusive fintech. These data classifications and navigation options enable users to monitor the growth of specific market segments or the growth of fintech markets.
Anton Dek: that operate in selected geographies.
Anton Dek: The next thing you can do is locate fintech companies by activities in its specific region. Let’s say you now want to find a list of digital banks that operate in the United Kingdom.
Anton Dek: and then let’s say you want to have a closer look at Revolut.
Anton Dek: Here it is.
Anton Dek: Please note the submit changes button in the company information card, on the right, you’re invited to become an atlas co-creator either by contributing your suggestions and edits to these companies.
Anton Dek: The Atlas features more than 2800 fintechs across 110 countries. To get this data we merged CCAF’s internal data with publicly available third-party databases, including Crunchbase, LinkedIN, Opencorporate, web archive multiple national.
Anton Dek: Business registers, as well as our resource of self reported data from the company websites and news outlets.
Anton Dek: This enables us to provide company level data such as services offered, social activity, and website links, number of employees, operational, legal headquarters and countries serviced.
Anton Dek: company level data allows users to appreciate, not only the number of fintechs in each sector or country but also their relative size.
Anton Dek: So, moving on to the next thing you can also search for a specific entity by name, since you are on the company page.
Anton Dek: you can visualize the evolution of companies service offerings.
Anton Dek: As firms expand their service offering this is captured in the Atlas, you can see this evolution it’s quite often that the companies start from something small, some niche, and then they add more and more services.
Anton Dek: This data enables investors and fintech market participants to better appreciate how service offerings evolve and how it compares to similar firms.
Anton Dek: To enable data applications beyond our tools we allow users to download data directly from the Atlas.
Anton Dek: We follow open access principle and most of the data we have in Atlas is available in the form of a table. Users can select from 12 data columns and download data on all these different fintechs.
Anton Dek: Another way to approach Atlas data is a fintech map allowing you to find fintech entities that operate in specific markets.
Anton Dek: When it comes to geographical filters, we keep track of three aspects: operational headquarter.
Anton Dek: which is where the company predominantly operates from, country of incorporation and countries where services are provided.
Anton Dek: This data enables investors and fintech market participants to monitor the global expansion efforts of specific firms. It also allows us to see changes in popularity of specific geographies as operational or legal headquarters.
Anton Dek: And the last feature i’m going to talk about today is the contribute one, this feature we designed with you in mind. We encourage you to submit changes to existing organizations or contribute new ones.
Anton Dek: We have opportunities for deeper collaboration for industry associations, including co branded pages, acknowledgments and ad-hoc research on your specific area of interest.
Anton Dek: If you’re an independent researcher or industry association and you have questions or you want to join forces in mapping the fintech ecosystem, please drop us a line at [email protected] Thanks for coming today and see you among our Atlas contributors.
Herman Smit: Thank you Anton.
Herman Smit: Next up.
Herman Smit: Tania Ziegler head of global finance benchmark who’ll present the Cambridge Alternative Finance Benchmarks tool.
Herman Smit: If you have any questions, please remember to drop them into chat.
Tania Ziegler: Thank you so much, Herman and Thank you everyone for for joining us today.
Tania Ziegler: So, since 2013 the Cambridge Centre for Alternative Finance, together with a global and regional network of research partners has tracked the development of.
Tania Ziegler: The online alternative finance industry with a particular emphasis on digital lending and digital capital raising activities.
Tania Ziegler: The creation of a readily comparable time series dataset on a global level has allowed researchers, policymakers, regulators.
Tania Ziegler: And and a variety of other interested stakeholders to understand how this ecosystem has emerged, grown and certainly evolved over time.
Tania Ziegler: This time series data has been collected narrowly on online alternative finance models, as they relate to digital lending and digital capital raising.
Tania Ziegler: So to contextualize what we’re looking at, specifically in the next few slides.
Tania Ziegler: we’re looking at you know online alternative finance, that is, including digital finance activities that have emerged outside of the incumbent banking system.
Tania Ziegler: and traditional capital markets, in particular the online alternative finance ecosystem comprises of various lending, investment and non investment models.
Tania Ziegler: That enable individuals, businesses or other entities to raise funds via a digital marketplace.
Tania Ziegler: As this ecosystem has evolved clear model types have emerged and become more delineated and more sophisticated and so over the last six years.
Tania Ziegler: Our research has allowed for us to adopt a you know, a taxonomy of 16 different model types for market segments, that we are broadly looking at as debt equity or non investment.
Tania Ziegler: So when we started this data collection, we would have published standalone annual reports that either were a country or regional focus the data collection that we’re going to be looking at today.
Tania Ziegler: is based upon an annual survey that includes both a qualitative and quantitative track.
Tania Ziegler: The data is collected directly from a diversity of lending and capital raising fintech platforms more commonly known as crowdfunding or peer to peer lending firms.
Tania Ziegler: From over 180 countries or jurisdictions and on any given year we’re receiving data submissions from approximately 12,000 plus firms.
Tania Ziegler: Worldwide, increasingly, we also see platforms or or fintech firms that are operating in multiple markets segments or multiple jurisdictions as well.
Tania Ziegler: um the survey that we use to collect this data typically remains in field for around four to six months.
Tania Ziegler: And our research team then works closely with a network of around 100 different research dissemination partners, these would typically include trade bodies.
Tania Ziegler: or other research institutions to help us ensure that we have both repeat study participants and to allow for new fintechs to be invited to the study and identified by activating multiple outreach channels.
Tania Ziegler: This has allowed us to ensure a large year on year repeat panel and for us to continually identify new fintech platforms that are emerging within the existing segments that we were already covering.
Tania Ziegler: Or, to help us classify new models, as they evolve within the market.
Tania Ziegler: So in this way, we want to make sure that what we achieve is a substantive repeat panel of respondents identify new entrants and ensure maximum coverage, and so the digital interface.
Tania Ziegler: That we’re going to be previewing together accumulates this near decade of global time series data in a format that will allow other researchers or interested parties to review aggregated lending and capital raising.
Tania Ziegler: transaction value data at a market segment, by country, by region, by income level and, as this tool evolves will have other additional interfaces and other additional options come on, so if we go to the next slide.
Tania Ziegler: So now we’re going to preview how you can use this interface, the first thing we’re going to be able to do is look at the aggregate transaction value data on a year by year basis and, as you can see.
Tania Ziegler: As the recording plays it’s going to go across. An important metric which we look at often in our analysis is also that per capita values.
Tania Ziegler: And so, while the total transaction value allows for us to evaluate the largess.
Tania Ziegler: of fintech in any given country by reviewing at a per capita level, we can adjust for country size and conduct further analysis.
Tania Ziegler: On the relative development and impact that a market is having within each country. Specifically, we can now assess the relative penetration of fintech activities in a given country, and so, to this end.
Tania Ziegler: When we readjust, we can see how certain countries are punching well above their weight relative to their total volume.
Tania Ziegler: we’re also going to be able to look at AltFin values at a market segment level so as we see here.
Tania Ziegler: We have the ability to select across a number of different model types in this case we’re focusing in on the debt market.
Tania Ziegler: And what we’re looking at are on balance sheet activities and peer to peer lending activities and then this way I can hone in specifically to a type of a market segment that i’m interested in reviewing.
Tania Ziegler: I can go even a step further and select specific sub segments, and in this case, what our preview is showing.
Tania Ziegler: Is a filter down even further to the specific business lending space and, finally, I can even go as far as a specific region while still keeping all of my filters enabled.
Tania Ziegler: And what’s great about this is that you can continuously look at the different ways that you might want to look at a specific country, a specific model segment, so on and so forth.
Tania Ziegler: If we go to the next slide into the country comparison elements.
Tania Ziegler: What we can do is now consider a comparative perspective, we can look we’ve also now enabled this so that you can have a country level dynamic reviewing country against country.
Tania Ziegler: or region against region so in the first instance in this preview we’ve selected the United Kingdom certainly as one of the largest fintech hubs with a relatively mature fintech market and the longer.
Tania Ziegler: Historic data set for us, we then are comparing it to Brazil, and you know in 2020 and not sure if you saw on the previous slide, but this has emerged as the third largest AltFin contributor for that year.
Tania Ziegler: And so now, we can see how the annual transaction values change, year by year, and can be compared to one another.
Tania Ziegler: If we go now into the regional level, which, through screen will show us in just a moment.
Tania Ziegler: um we’ve selected in this case Europe to be juxtaposed against Latin America and the Caribbean.
Tania Ziegler: What we can see the different growth trends across the years for both regions comparable to what we have just done with the countries.
Tania Ziegler: Now i’m going to select MENA the Middle East and North Africa, where what we have observed, is a nascent yet very quickly growing fintech ecosystem.
Tania Ziegler: When we adjust our visualization selecting the log scale option we can now account for size and provide a much clearer image that accounts for those substantive differences.
Tania Ziegler: In the size of those two regions so it’s so far more clear actually what is changing and how MENA is growing against the other region.
Tania Ziegler: If we then go to our final option here our map option in our next slide.
Tania Ziegler: Now we can be in a map view, and this is a beautiful representation of how the financial technology ecosystem and, in particular those transaction values are changing across the world.
Tania Ziegler: Against the time series data that we have certainly when we start at the beginning of the screen with 2011 this was the beginning of our journey as a Centre and with respect to.
Tania Ziegler: The data that we were collecting then and what you’ll notice that it starts very much with the United Kingdom that hub.
Tania Ziegler: As the years go on, you see how the map changes grows and what we can really tell here is a digital lending and digital capital raising is a truly global phenomena.
Tania Ziegler: And this interactive map allows for us to visualize just how quickly fintech is reaching.
Tania Ziegler: A diversity of countries and scaling globally and certainly changing even within one country or another, so as you go and play with these different tools.
Tania Ziegler: look up different countries, look up different years, play with all of the different.
Tania Ziegler: segments, either in lending or in capital raising and if you have any questions comments or, if you think that your platform should be included in this data and you don’t think they are please feel free to come back to us and submit, and thank you very much for your attention.
Herman Smit: Thank you Tania.
Herman Smit: Next I’ll invite Michel, our digital assets lead to present the Cambridge Bitcoin Electricity Consumption Index (CBECI).
Michel Rauchs: Thank you very much Herman, and so the environmental effects of bitcoin and essentially for that matter, really cryptoassets more broadly.
Michel Rauchs: has always been a very contentious and much debated issue, and so, for a long time we had no compelling data that was available.
Michel Rauchs: So in 2019 we filled this gap with the CBECI tool, and so our aim with this really as an independent, not for profit research institute is to bring more balance to the debate but providing open access data sets and credibly neutral insights.
Michel Rauchs: So, who has been using our tool and data so actually a variety of stakeholders each with different purposes, so, on the one hand we have the media uses our data to keep the general public informed.
Michel Rauchs: We do have market participants who use our data to assess their carbon footprint, in order to inform thir offsetting strategies and we also have regulators and policymakers are using our data to inform potential policy decisions, so what can you do with a tool.
Michel Rauchs: Well, first let me answer the question how much electricity are Bitcoin miners actually using So there is an estimate of the current power demand from the bitcoin mining network.
Michel Rauchs: Which is updated on a daily basis, and we also do provide an annualized estimate to facilitate comparisons, but more on that later.
Michel Rauchs: Now the tool is also interactive so you can play around with the charts so here, for example, you can see the monthly cumulative footprint or totals.
Michel Rauchs: You can adjust a chart sizes and periods and also very importantly, you can download all the underlying data sets as a csv file.
Michel Rauchs: Now it’s easy to forget, really that those numbers like any other estimates are actually based on the model and that model has specific assumptions and so, therefore, we give users, the option to actually play around with the critical parameter.
Michel Rauchs: In this case, the average electricity costs in order to see how the model really reacts.
Michel Rauchs: Now relating to those numbers can be hard So what exactly does 100 terawatt hours per year mean.
Michel Rauchs: So to that end, we do provide a broad range of different types of comparisons, in order to help users put figures into perspective, but also let them make up their mind about whether this is a lot or not.
Michel Rauchs: However, electricity consumption really is not sufficient to determine the environmental footprint so for this, we really need to understand where miners are actually located in order to see what energy sources, they are using.
Michel Rauchs: That generate that electricity, so we developed the second component, the mining map which you can see here which tracks, the geolocation and distribution of mining activities across the world.
Michel Rauchs: So this is done in monthly intervals from September 2019 onwards, and it is regularly updated as well.
Michel Rauchs: But why is this continuous location data important well this chart here of the mining breakdown by Chinese provinces actually shows why.
Michel Rauchs: So without data set, we were able to empirically record the season of migrations that happened within China for long time.
Michel Rauchs: Where miners would essentially move machines between different regions during the year in order to benefit from attractive electricity rates and so during the dry season.
Michel Rauchs: That was mainly in Xinjiang, which is a province that is primarily coal powered whereas during the wet season when rising water levels.
Michel Rauchs: are caused due to monsoon rains that was primarily in abundance hydro or using abundance hydro power in the province of Sichuan
Michel Rauchs: Now, why is this important well because it materially really impacts and changes the environmental profile of bitcoin mining as a whole.
Michel Rauchs: Particularly if you consider that China used to be responsible for up to two thirds of global mining at some point.
Michel Rauchs: And so, just to see the effect so let’s assume that all bitcoin mining were just exclusively running on hydro power.
Michel Rauchs: Well then, that would lead to about 2.8 million metric tons of CO2 equivalent in yearly emissions.
Michel Rauchs: However, if we assume that all was exclusively powered just by coal that would amount to about 96 million metric tons of CO2 equivalent, in yearly emissions and that’s 34 times more so quite an order of magnitude.
Michel Rauchs: Now CBECI is also an educational resource, so there are many misunderstandings misconceptions given the complex nature, really of the topic.
Michel Rauchs: Including really about bitcoin itself, and so we have therefore developed a quite extensive faq section and that explains in hopefully relatively simple layman’s terms.
Michel Rauchs: key concepts about bitcoin, about how mining works, and what the environmental effects are based on the data and insights that we currently have.
Michel Rauchs: So, with all that said what’s on the short term roadmap? Well let’s actually go back full circle, so the key initial goal with this project has always been to assess the carbon footprints of bitcoin as a network, and that is generally measured by greenhouse gas emissions.
Michel Rauchs: So we do have the first two components ready now so an electricity estimate, as well as the.
Michel Rauchs: geolocation mining data and so there’s one missing piece, which is the local power mix and the corresponding emission intensity of that mix.
Michel Rauchs: Now, if you combine all those data sets together, we do have a proper greenhouse gas emissions model which we expect to be launching in early q1 next year.
Michel Rauchs: But then there’s also a longer term roadmap, so we will soon be launching the digital assets program, which is a multi year and multi stakeholder research initiative that’s really centered around three broad streams or thematic areas, which you can see here.
Michel Rauchs: And each of those thematic areas will be creating their own tools over time and those tools will be, of course, hosted on the CCAF.io platform as complimentary projects.
Michel Rauchs: So if you have any questions, please do post them in chat you can send them by mail email as well the team and I will be happy to respond, thank you very much.
Herman Smit: Thank you, Michel. I’ll invite Anton and Tania to join us just for a brief response to three questions. Michel, starting with you, why does the model cover bitcoin and not other cryptoassets do you consider extending into other assets.
Michel Rauchs: Well that’s a good question, so we have to start somewhere, of course, bitcoin is the first cryptocurrency it’s the largest and it’s actually by far the largest footprint so.
Michel Rauchs: In terms of choosing which one it was pretty clear.
Michel Rauchs: Now there’s also Ethereum which we’re considering to also include in the near future, but, that being said, Ethereum wants to transition to a less energy intensive consensus process, in which case the analysis would be super fruitless, so we have to watch that and see how it evolves.
Herman Smit: Thank you Michel.
Herman Smit: Tania, how can Benchmarks help us understand how fintech is contributing to SME finance.
Tania Ziegler: that’s a great question and actually that’s going to be another layer that we add in to this to this digital tool.
Tania Ziegler: In the last several years what we’ve really seen as a huge plethora of businesses, SMEs, entrepreneurs that are turning to.
Tania Ziegler: That are turning to financial technology, as you know, a port a first call for their financing needs.
Tania Ziegler: To that, and what we saw in 2020, for example, was that the the growth of fintech that was directed towards SME finance had basically doubled from the previous year and accounted for for almost sort of you know just shy of half of the the entire.
Tania Ziegler: value, so what we’re going to be doing in the in the coming months as we continue to develop this is to is to actually show how some of these different market segments.
Tania Ziegler: are focusing on that SME space and certainly what what I suspect will see is that there will be more and more SMEs and entrepreneurs and businesses looking to digital lending and digital capital raising.
Tania Ziegler: As a clear solution for them, for their financing needs certainly that’s been the case during COVID and we suspect that’s going to continue in a strong way after as well.
Herman Smit: Thank you so much Tania. Anton, how is Atlas different from other fintech databases?
Anton Dek: Okay, good question. We keep asking that ourselves, so first of all, I would say that the key target audiences are different and lead to results and strategy and other things, for example, there are a lot of.
Anton Dek: Databases focused around investments.
Anton Dek: But we focus rather on development Community and policymakers.
Anton Dek: and others is also public good, open source.
Anton Dek: Other thing that they would say that that unlike other databases, we don’t rely on automatic data collection, we have it, as a first step, but then the information goes to the research tool for verification. Atlas also covers the historical aspect. It shows us.
Anton Dek: It slows us down because we need to research one entity, not just once but every year of its existence, often go into web archives and news articles.
Anton Dek: But we believe it is essential to see the evolution of service offerings and also to keep track of pivots and failures.
Anton Dek: So I will say these three things one is like verification by researching then historical aspect and key audiences.
Herman Smit: Thank you so much Anton. Tanya and Michel for taking the time to present these tools that you have worked so hard on both in terms of data collection and developing.
Herman Smit: I look.
Herman Smit: forward to working with you as we evolve these out and look forward to the various collaborations that we can have the people on this call, but also others who work with us on this exciting initiative in future.
Herman Smit: For those who have additional questions for Anton, Tania and Michel, please feel free to drop it into the chat and the.
Herman Smit: presenters as well as their research teams are standing by to respond to those questions.
Herman Smit: We’ll now move over to the panel part of this conversation and invite our expert panelists to join us into the discussion on the role of public data to enable green, sustainable and inclusive fintech.
Herman Smit: On the panel today, we will have Drew Propson, the head of technology and innovation and financial services at the World Economic Forum Hello drew you can just.
Herman Smit: greet the audience.
Drew Propson: Hi everyone thanks so much for having me pleasure to be here.
Herman Smit: Next, we have Ravi Shukla.
Herman Smit: head of Fintech Delivery Panel and Insuretech Board at TechNation.
Herman Smit: Hello Ravi.
Ravi Shukla: Hi Herman thanks for having me.
Herman Smit: Pleasure.
Herman Smit: Next, we have Nicolas Steiner director of strategy and innovation EMEA & APAC.
Herman Smit: At Invesco Hello Nicolas.
Nicolas Steiner: hi everyone pleasure to be here.
Herman Smit: Professor Rotem Shneor from the University of Agder business and law. Hello Rotem.
Rotem Shneor: Hello everybody great to be here yet again a great initiative from the CCAF.
Herman Smit: Thank you, Rotem.
Herman Smit: Each of these panelists brings with them a rich set of experience on financial innovation and how public data can advance the contribution of financial innovation towards.
Herman Smit: Financial inclusion and sustainability goals. My first question will go to Drew the World Economic Forum has been a research partner to the CCAF on a number of global studies and we thank you for your partnership.
Herman Smit: The most recent being the COVID-19 research that looked at fintech performance and their needs and that data has really been a fundamental piece of how we build out the Atlas and understand the.
Herman Smit: evolution of the fintech industry and their needs. Why is financial inclusion an increasingly important objective for the Forum and its members?
Drew Propson: Thanks Herman yeah I really like this question because for for those that might not be that familiar with the World Economic Forum really it’s the question and the answer really cuts to the core of our mission right so.
Drew Propson: We are really.
Drew Propson: As an institution committed to improving the state of the world, of course, financial inclusion is a big a big part of that.
Drew Propson: So my role heading up tech and innovation and financial services means that I sit within our finance financial monetary systems platform.
Drew Propson: And if we look at the mission of the Platform itself what we really aim to do is is to think through what it is that we need to have in place to have.
Drew Propson: A well functioning efficient, effective, stable and inclusive financial system.
Drew Propson: And in doing that, then we map out some of the challenges that we see toward that as well, and one of the the biggest pieces that comes up, then of course is inclusion, this inclusive piece.
Drew Propson: What I particularly like in working with our partners on when we approach certain global challenges, we always look for multi stakeholder approach right.
Drew Propson: recognizing that to have some sort of sustainable solution, we really need to be working with public sector, private sector, civil society, academia.
Drew Propson: and bringing all of the ecosystem actors to the table to be coming together on solutions.
Drew Propson: And what I will say that is particularly great to see on inclusion is that over the years we originally maybe i’d say seven years or so, when we first started to dive into it.
Drew Propson: What we saw is it was kind of seen as almost a charity case right like of course it’s important to have everybody in the formal financial.
Drew Propson: system, where possible, but you know what what sort of money, do we need to be throwing at this problem, and I would say now it’s much less of a charity case and.
Drew Propson: Definitely thought of as core to business models, be it if you’re an incumbent and you’re trying to reach out to new customers, or if you’re a fintech and that’s maybe you know your core.
Drew Propson: reason for building your business is to be accessing additional or offering better and more affordable products and services to people who have been underserved or unserved before.
Drew Propson: So for us it’s definitely a growing priority in that we just see instead of it being sort of one side project, we see that, for our partners on the public and the private sector side.
Drew Propson: That is just really of great interest to them from a business standpoint, as well as, of course, just looking at how we can have a better functioning financial system at the global level.
Herman Smit: Thank you Drew, my second question is to Nicolas, Invesco has been a long standing supporter of the CCAF’s research into alternative finance, can you provide an overview of the importance of financial innovation at Invesco and the role of inclusive fintech in this activity?
Nicolas Steiner: Okay, so let’s step back when when I joined Invesco in early 2018 the impact of fintech in the asset management industry was.
Nicolas Steiner: Still kind of abstract and not really taken seriously.
Nicolas Steiner: So therefore we firstly focused the kind of innovation activities at ensuring to not see technology as a way to serve classic financial value chain only.
Nicolas Steiner: but more as something driving and shaping the future for business models. so you know, then then fintech company expanded from classic innovations such as providing a better user experience to.
Nicolas Steiner: Innovation focusing at core financial services and this accelerated even more when the crypto driven Community started to shape new type of financial product and services and became more widely known.
Nicolas Steiner: So therefore you know the financial innovation element.
Nicolas Steiner: became key at invesco and, on top of engaging with fintech ecosystem, we we kind of pushed the company to work closer with regulators, as the evolution of regulatory frameworks, provide the kind of tempo or speed of change.
Nicolas Steiner: For regulated services, so we currently you know have innovation activities split between incremental innovation as a response to internal.
Nicolas Steiner: requirements.
Nicolas Steiner: product development, such as the development of our own ESG rating tools currently used across the company and a focus on digital asset and asset tokenization.
Nicolas Steiner: And, in this context, the role of inclusive fintech providing that say conceptually the universal access to.
Nicolas Steiner: Financial Services means for us to anticipate how we can leverage emerging emerging technology to build products, easily accessible and attractive for new type of audience.
Nicolas Steiner: and as banking the unbanked or under banked is the tagline of many new banks, which is likely.
Nicolas Steiner: And they are likely to do this more successfully than traditional finance, we are more looking at partnering with companies providing distribution channels with a relevant product for them.
Nicolas Steiner: And i’m going to filter it by adding that we have usually anticipated the rise of crypto finance to be shaping financial inclusion into something very different than just equipping everyone with a classic bank account on a mobile APP.
Herman Smit: Thank you Nicolas for that context and also how Invesco sees digital asset and crypto assets evolving.
Herman Smit: The financial inclusion conversation.
Herman Smit: Next week we’ll go to our event cohosts TechNation and Ravi, can you tell us a bit more about TechNation’s fintech delivery panel and financial inclusion campaign – what have been the outcomes of this event so far.
Ravi Shukla: Sure yep so firstly thank you so much for the opportunity to speak here on financial inclusion and a big congratulations to the CCAF on the launch of these amazing fintech tools.
Ravi Shukla: And so the fintech delivery panel was established to strengthen the UK position as a leader in the future of financial services.
Ravi Shukla: were supported by Treasury and powered by TechNation and the panel works together to strengthen collaboration across the UK fintech ecosystem, help fintechs achieve scale.
Ravi Shukla: but also to create an innovative environment, to the benefit of end.
Ravi Shukla: Consumers and the panel does this by bringing together stakeholders from across the ecosystem, including banks, Insureechs.
Ravi Shukla: fintechs, investors, regulator, academia and other policymakers and it’s a really great group of people who voluntarily drive positive changes across the UK fintech industry.
Ravi Shukla: We have our particular work streams that we focus on including the partnerships work stream where we’ve launched a fintech pledge financial inclusion and diversity and lots more.
Ravi Shukla: And in terms of our financial inclusion campaign here in the UK the Kalifa review really highlights the untapped potential of how fintech could do more.
Ravi Shukla: To support financial exclusion, but there weren’t so many clear steps, and so this was an area that our Members were very passionate about, what could we do an industry post COVID to help with the road to recovery, we have a tremendous industry here in the UK.
Ravi Shukla: But how can we make sure the right solutions are helping the right people.
Ravi Shukla: And so we created the Finclusion 2021 campaign to create a platform to bring these different purposeful people from across the industry from.
Ravi Shukla:big financial services, fintech, the third sector and create a platform where we could showcase how fintech could really help tackle financial exclusion.
Ravi Shukla: and highlight some of the best practices across the industry to encourage others to do more.
Ravi Shukla: And so, when we started this process we identified financial exclusion is a huge issue there’s so many different verticals and we really wanted to know how can we tackle, we could simply tackle one Program.
Ravi Shukla: But what we did we did a mapping exercise of looking how fintech could support this and we identified areas such as how can we better identify vulnerable customers, how could we make increased accessibility.
Ravi Shukla: How could we help individual people managed to help or income shocks which could happen to any one of us, as well as areas such as ensuring we have access to affordable credit or insurance and make.
Ravi Shukla: People financially resilience and these are all areas which I think fintech can play a really big role.
Ravi Shukla: And I think one thing we want to do is really embed these best practices into new products and so some good examples of how fintech is doing this with.
Ravi Shukla: I thought it has the we have ftp member Monzo who have been recently, promoting the gambling block.
Ravi Shukla: which enables customers to self block payments to gambling companies and since that’s been introduced some of that some of these customers have reduced.
Ravi Shukla: deposits by 50%. Another really good example is their shared with us feature which enables customers to disclose.
Ravi Shukla: Through their APP if they’re going through difficult problems without actually being having consequences some very simple measures, but really.
Ravi Shukla: practices that other companies can adopt and really help us ensure we’re providing the duty of care to customers.
Ravi Shukla: And so really over the last month we’ve had lots and lots of activity from different companies which have had socially purposed hackathons, product launches, Roundtable discussions and lots more which i’d encourage everyone to check out on the TechNation Finclusion website.
Herman Smit: Thank you so much, Ravi and thanks for this opportunity to be part of the Finclusion 2021 event.
Herman Smit: Fintech is increasingly global, understanding the role of players in different ecosystems in different geographies across different verticals.
Herman Smit: And it allows us to learn from each other, and also to advance the innovation and applications for our innovations within the areas of.
Herman Smit: Financial inclusion sustainable, green, but also other duty of care of customers, which you’ve just mentioned in quite a number of examples and next i’d like to go to Rotem.
Herman Smit: you’ve played an instrumental part in collecting the benchmark data, which is part of the Benchmark tool. Behind the numbers, has alternative finance contributed to financial inclusion.
Rotem Shneor: So the simple answer is yes, but like in every other.
Rotem Shneor: difficult question, I mean the reality is that the volumes have reached more than hundred billion dollars, and it means that some of it has replaced.
Rotem Shneor: Other existing channels, but a large portion of this have served previously underserved or untapped potential, so this is not.
Rotem Shneor: A quick fix or a huge revelation but the more gradual and long term perspective needs to be looked into this.
Rotem Shneor: We see this, both in the developed and in the emerging slash developing countries. In the developed world, we see the more than half of the volumes go to SMEs.
Rotem Shneor: Which means that more entrepreneurs and small businesses can receive funding sometimes a better rate and conditions than would have otherwise been available to them, if at all.
Rotem Shneor: This is especially relevant for women, who have endured the level of structural disadvantage based on historical trajectories and developments.
Rotem Shneor: But this is improving regardless, and of course online solutions, help to speed up and scale this process, this is also true for consumer credit.
Rotem Shneor: Without arguing whether consumer credit is good or bad, we do see that in certain environments where consumer credit is limited by a traditional channels alternative finance becomes an important player and though you know, the first evidence from COVID this shown that this has been.
Rotem Shneor: Limiting this trajectory, and this will also increase as regulatory harmonization takes hold, as we see in Europe, which will allow greater scale of operations.
Rotem Shneor: For platforms that otherwise operate on very small and thin margins better facilitating investment flows within.
Rotem Shneor: Europe and across countries and, most importantly, to countries with smaller domestic capital markets that couldn’t have served local entrepreneurs and small businesses.
Rotem Shneor: Based on the existing resources. In the emerging and developing countries, despite the great potential we see constant though slower adoption.
Rotem Shneor: On the one hand, the use of mobile payments and the dispersion provides good starting conditions, however, barriers to social trust and regulation to operate in such innovative models locally in these countries remain a challenge.
Rotem Shneor: Nevertheless, some markets do shine bright in terms of volumes and we do see this making an important impact, for example, Indonesia with volumes of 1.4 billion Ghana, with more than 500 million at.
Rotem Shneor: Columbia 340 million Zambia 170 million, so of course this reaches new segments and untapped markets and strengthens existing markets in parallel.
Herman Smit: Thank you Rotem, and thank you for taking us behind those.
Herman Smit: Numbers highlighting countries where we’ve seen successes but also being clear that there’s been some obstacles.
Herman Smit: Drew, I’d like to return to you you’ve said financial inclusion has gone mainstream with forum members, what do you think are the main obstacles to inclusive fintechs within these markets.
Drew Propson: yeah it’s interesting, I would say, because most fintechs tend to will that are involved in the provision of financial services, so maybe not so much on those that are on the back end so REGtech, etc.
Drew Propson: But those that are more consumer facing I would say the the inclusive fintechs and fintechs are sort of one in the same right, we really do see this inclusive, it is core to almost all fintechs that we we speak with.
Drew Propson: In terms of challenges, I think you know this has already been highlighted, but.
Drew Propson: The uncertain regulatory environment is the one that comes up very frequently, and of course these differences can be seen across regions, and you know.
Drew Propson: It can be quite different, depending upon where one is looking to operate, but, of course, as these fintechs are looking to scale and expand beyond borders.
Drew Propson: This becomes a problem for most if not all right, so this regulatory uncertainty is certainly an issue.
Drew Propson: We also see depending upon the environment again really is very young, it can be very precarious in terms of funding, so you might have great seed funding, but then being able to continue on.
Drew Propson: Related to that then just the entrepreneurial support that one needs are not as, of course, really high.
Drew Propson: With entrepreneurs, not just with fintechs with any new company it’s a lot of work it’s really hard so making sure that one has the support network that’s needed to be able to continue to.
Drew Propson: grow and develop I think you know, one of the items that gets a lot of attention but it’s never enough attention is the cyber security angle, we of course see more and more cyber attacks and.
Drew Propson: There are with additional fintechs of course there’s more areas to enter into this networked financial system and if you’re a cyber criminal you’re probably not going to go to your largest bank that has the greatest cybersecurity support you’re going to go to one of these more.
Drew Propson: newer companies that maybe don’t have the full resources being on the talent side or the financial side to be able to fully build out your cyber security.
Drew Propson: efforts, and so in that instance I would say it’s you know finding the capacity to make sure that you’re hiring the right talent, but then also just having the support network again to make sure that you’re taking the appropriate steps at often the lowest cost possible.
Drew Propson: And then, lastly, I will just say that I think one of the the biggest challenges for those fintechs that are really looking to reach the last mile and I certainly applaud them, we need more of these, because this is.
Drew Propson: This is what is the most difficult part of inclusion from here on out is really reaching those that we still haven’t been able to.
Drew Propson: Give affordable products and services to in terms of you know, maybe just don’t have the access if you’re looking at smallholder farmers, for example.
Drew Propson: You know where is that we don’t have the infrastructure that we need, and I think here, this is the biggest obstacle for those that really want to have a large scale impact.
Drew Propson: On those that are extremely hard to reach you know, making sure that you’re developing those partnerships to get that infrastructure built so that is definitely going to be a public private cooperation.
Drew Propson: endeavor and just making sure that your digital tools are going to work because you have the appropriate stable infrastructure that’s needed for for them to be fully functional.
Herman Smit: Thank you Drew, I think there’s a number of really important obstacles that you’ve mentioned there and, obviously, on the other side of obstacles is opportunity for Public Private collaboration in order to resolve that and also roles for incumbents and financial innovation.
Herman Smit: Technology startups to work together there as well, and Nicolas over to you, my question is when looking at Michel’s presentation, where we see.
Herman Smit: financial innovation can often have unexpected implications for firms’ ESG obligations, particularly they’re looking at the carbon emissions and electricity load of bitcoin.
Herman Smit: I know Invesco has been doing some work in measuring its ESG contribution, can you tell us a little bit about that and the potential trade off between innovation and meeting ESG targets.
Nicolas Steiner: Okay, well you know globally let’s say as a response to the financial industry, focusing on ESG asset delivering you know stable return and so on.
Nicolas Steiner: We developed, as I mentioned earlier, we developed our own ESG rating tools, based on smart analytic coupled with some machine learning services, and this is, you know this is used widely across the whole company by now.
Nicolas Steiner: As of two days, a challenge we face to improve our product is correlated to market limitation, such as you know, the ESG screening.
Nicolas Steiner: Because it is hard to access verified data showing the right level of transparency.
Nicolas Steiner: Due to lack of disclosure from certain third parties, and this issue, so the approach we take in order to tackle this is to.
Nicolas Steiner: Just simply to monitor the emerging technology adoptions by fintech ecosystem, to keep the lead on the way we built our ESG products and sustainable product development.
Nicolas Steiner: And in regard of the data access issue I mentioned early.
Nicolas Steiner: we just finished by adding that we know we see the financial industry likely moving toward an upgraded data architecture, providing a transparent and more secure way to tap into this market data.
Nicolas Steiner: And, and you know this will likely be formed with let’s say a system designed to provide a valuable and verified data source across the whole industry.
Herman Smit: Thank you so much Nicolas and Rotem what shapes knowledge gaps in alternative finance over the years and how is the global benchmark responded to this.
Nicolas Steiner: Yes.
Rotem Shneor: it’s basically a balancing act.
Rotem Shneor: Between the needs that surface from our dialogues with the different stakeholders and the ability and the willingness of these businesses to provide this information.
Rotem Shneor: We attend industry events we work closely with industry associations and we have constant dialogue with authorities through the CCAF events, the training and the invited seminars this helps us keep us updated about what concerns the stakeholders and what are they interested in and.
Rotem Shneor: Also, in a way, helps us be better knowledgeable about what motivates survey distribution and responses.
Rotem Shneor: But anyway, we need to make it simple and concrete and ask firms, a few types of questions.
Rotem Shneor: facts and figures, modes of operation and subjective assessments of their environmental conditions. There’s a huge demand for this, and the only complaints we get about the reports is what where they’re not done earlier.
Rotem Shneor: But but that’s just the dynamics of this type of ambitious data collection.
Rotem Shneor: In any case, in these figures, they really shaped stakeholders.
Rotem Shneor: Strategies it informs the internal industry discussions, a member of the regional crowdfunding association I know we did we refer to this and look into this.
Rotem Shneor: Company strategizing government policy formulation and we’ve been presenting this data to various authorities of government in many countries.
Rotem Shneor: And, and you know this facts express the urgency and importance of developing a responsible alternative finance market by exposing both the good and the not so good developments.
Rotem Shneor: It highlights of the current dynamics and risks, as well as the future developments in terms of r&d focus and regulatory amendments.
Rotem Shneor: This also helps framing the discussion between and across stakeholders and particularly between industry and regulators.
Rotem Shneor: And finally, I think it’s worth mentioning that you know this academic link to everything that we do here, because it helps ensure a good standard of reporting.
Rotem Shneor: As well as creating opportunities for deeper research beyond simple descriptives but actually into association between the facts that we find and then also in combination with data that is collected elsewhere.
Rotem Shneor: This helps us to explain and identify trends at the macro level that are more difficult to observe at the micro level of the company, and this is very important for governments for industry associations and for international organizations, that try to address challenges.
Herman Smit: Thank you so much Rotem.
Herman Smit: We have run out of time, so I think we’ll just do one last.
Herman Smit: Question, particularly because I really enjoyed the conversation about trade offs and looking around the different trade offs which we face in managing.
Herman Smit: inclusive financial innovation with that of green or operational challenges the other of course with financial stability and financial crime Robbie you have recently launched the fan crime initiative, and can you take us through the trade offs in inclusive city versus financial crime.
Ravi Shukla: Sure yeah, so I think this was a really good outcome of the Finclusion campaigns were specific to the FinCrime Community and there was.
Ravi Shukla: There is, we found that there’s a real the trade off you mentioned, especially with.
Ravi Shukla: AML and CFT checks is that we need very strong checks to happen to ensure finished financial stability, but equally we need to get the balance right between, we need to put as much emphasis, we do into identifying threats as to.
Ravi Shukla: Equal steps into how we analyze the social cost of the exclusion and being mindful that by.
Ravi Shukla: Having these checks are we also excluding and so we’ve created the FinCrime principles of inclusion.
Ravi Shukla: Which has practical considerations that those working in anti FinCrime can can use to stop people being excluded.
Ravi Shukla: And i’d encourage everyone in the industry to maybe check it out, and we are open to feedback on that, and please do get in contact if you’d like to find out a bit more.
Herman Smit: Thank you so much, and i’d like to thank all of the panelists for your time.
Herman Smit: The remaining questions and your responses and particularly the importance of having public data which can bring different stakeholders together to come up with solutions, whether they’re public private.
Herman Smit: In the forums setting whether its financial crime principles or whether they are.
Herman Smit: To measure an ESG and obligations or that requires a data infrastructure, which is common.
Herman Smit: To the different decision makers to bring them around table, so thank you for your contribution to this compensation your contribution to the building of this digital access and raising awareness of it.
Herman Smit: Thank you, and it also like to thank everyone who participated in the event from the presenters to the fintechs and fintech associations who have joined this conversation.
Herman Smit: Without you this work is not possible without the time that you have dedicated in responding to our request, our surveys and thank you for that, thank you for your tireless contribution, and thank you for continuing to walk this journey with us thank you and goodbye to.