How Revolut, Goldman and Google are the same; UBS sells SmartWealth robo to SigFig; A utopia that buys its own Sovereignty -- via Autonomous ?NEXT

Hi fellow futurists -- our top 3 thoughts for this week are:

1. ONLINE BANK: How Revolut, Goldman and Google are doing the same thing
2. ROBO ADVISOR: UBS sells SmartWealth robo to its SigFig robo tech provider
3. CRYPTO: A utopia that can buy its own Sovereignty 

Analysis of these items is below, and this week’s artist is Le Corbusier.

ONLINE BANK: How Revolut, Goldman and Google are doing the same thing.  

While we are fretting about whether tech companies will enter finance, whether Fintech startups can compete with incumbents, or if their business models make sense, these things are just happening. Ideas get recycled, regurgitated and presented as new again. This is the good messy stuff of creative destruction. The first data point is Revolut’s recently launched premium Metal card (an actual 18g metal card!), which provides 1% cash back on purchases outside of Europe, flight and bag delay insurance, and a dedicated concierge. Cash back is a novelty for a UK provider, and the offer has already made quite the splash with the global Instagram Millennial crowd. The rewards card gives Revolut a subscription revenue stream while being cheaper than comparable products, and creates the impression of exclusivity. The best part -- the first heavy metal card was released by Western Union in 1914, and later by JP Morgan and American Express. Long live innovation!

 Speaking of premium banking services offered to the masses, Goldman Sachs is neck deep in the consumer banking opportunity. In the US, the investment firm has a $20 billion deposit online bank and digital lender Marcus (i.e., a Lending Club). It was just reported that Goldman is opening the same platform to its UK employees, in advance of opening a neobank across the pond. One way to analyze this is to see the millions of users for Revolut, Monzo, Tandem and Starling as a sign of market demand. Barclays, Lloyds, HSBC and the like have left their flank wide open for new names, given a stodgy brand and ongoing customer frustration. Another is to think about the cyclicality of Goldman’s business. Interest rates have nowhere to go but up, while equity markets are at historic highs. Goldman’s investment businesses are equities correlated, so perhaps they see the cycle turning.

 The third leg of this stool is Google. The advertising firm (we jest) is rebranding its Indian app from Tez into GooglePay, which is to become the umbrella app for Google’s financial services in the country. More than 50 million Indian citizens of over 300,000 villages use the app for payments already, amounting to $30 billion in annual transactions for Venmo-like use cases. Google is now partnering with HDFC, ICICI, Kotak Mahindra. and Federal Bank to offer consumer digital loans within the app interface, underwritten in a few seconds. Sounds like Goldman, like Lending Club, like Revolut, like AmEx, like Western Union to us. The sincerest form of flattery.

Source: UK Card Association (Western Union), Forbes (Revolut), India Times (Google), Reuters (Goldman Neobank)

ROBO ADVISOR: UBS sells SmartWealth robo to its SigFig robo tech provider

This is an oddball, but first some context. UBS has two distinct businesses in Europe and North America. In Europe, they are a high end private bank that manages money for the extremely wealthy, in a market that can charge up to 200 or 300 basis points (i.e., 2-3%) per year. Roboadvice in Europe has not matured yet, despite the efforts of Scalable Capital and Nutmeg, which we believe are due to cultural factors that promote neobanks as the Fitnech app of choice. This means wealth management margins are not a melting ice cube yet. In the States, UBS is a tweener – not as big as Merrill, Smith Barney or LPL (15,000+ advisors), but not quite a lean boutique. Further, American wealth management in general costs about 80 to 150 basis points, with barely 50 bps for roboadvice. This implies that outsourcing roboadvisor technology is the right answer if you are subscale, or are not a technology power house.

Over the last several years, the firm has had a two pronged approach to digital wealth. In the US, they invested in SigFig and private labeled its third party tech. This implies dozens, if not hundreds, of implementation headcount from the startup to be dedicated to its gigantic client. In the UK, UBS built out a separate and unrelated service called SmartWealth. It was expensive for clients, simple by US robo advice standards, but integrated into the UBS stack. The item that hit the news is that this service is now being shut down, and the tech is being sold into SigFig. Here’s why we think this isn’t just a raw fail.

Having two approaches to deploying roboadvice across the organization is likely a logistical nightmare. You wind up with different data architecture, user experience, investment choices and pricing. Coordinating between an external vendor in which you have an interest, and a home-grown application (which is likely a lighter offering), is tough because they are competitors for the same management attention and customer business. The combination is a win-win, in that it allows SigFig to enter Europe, while letting UBS have a cohesive internal offering with a single counterparty responsible for tech delivery. End of the day, they should have just either gone all proprietary or all outsourced. Better late than never.

Sources: Reuters (SmartWealth), Company Websites

CRYPTO: A utopia that can buy its own Sovereignty 

Power. Sovereignty. Utopia. A recent piece from Daily Fintech points us to Sol, the Puerto Rico crypto billionaires experiment; Bitcointopia, an experimental city in Nevada; and Varyon, an artificial island off the coast of French Polynesia. These attempts at a new world are ostensibly about cryptocurency adoption, but their precedents trace to the DNA of humanity itself. A utopia (or dystopia for that matter) is a dream of the world defined by its impossibility. It may be a guiding light, or it may be a warning, but it is not reality. To carve out a utopian experiment has immediate connotations – cult-like, counter culture, na?ve. See the utopias of Russian architects in the clutches of the Soviet Union, building cities on paper that could never be, or today’s techno retreat of Burning Man, where billionaires recreate Mad Max landscapes to feel human outside their corporate castles.

For most of human history, the frontier was a real place. It was the place where water dripped off the world into oblivion, the place where the pantheon of Gods looked down on mankind, a land unconquered by ships and swords. As humanity lifted the fog across the globe, the physical frontier disappeared. Sure, hard military power still applies in redefining borders between neighbors. But there is no more room left for Manifest Destiny, other than in our imagination. From this mental frame, we bring forth economic and technological frontiers, conquering not the Earth, but ourselves. But let’s not be fooled. Sovereignty, that embodiment of lethal force in the hands of the law, may have maxed out across the geography. But control of sovereignty can still be bought. After all, we are human, and our power comes from belief in the source of that power. Economic and technological conquering results in the re-shaping of sovereignty. Facebook’s 2+ billion users are larger than any country on the planet. Does it’s soft power echo across governments? You bet it does. Tech giants spend millions per year in lobbying, driving their desires into the body politic.

At the heart of every tech company with aspiration to go public is a utopia waiting to be unleashed. Uninspired by the political realm, we burn our hearts into capitalism. And these are beautiful creations. But once they taste power over people, once billionaires hold monopolies (e.g., from Bezos to Bitmain), utopias start wanting an army and a police. Small sovereigns and peripheries of large ones give first, yielding their regulatory apparatus to help perpetuate the new paradigm. Want to launch a crypto investment vehicle wrapped in a legal veneer that purports to be of equal stature to European (Malta), American (Puerto Rico) or British (Gibraltar) law? Or maybe build a new bank under custom-made Lithuanian regulation? But it won’t be enough for Crypto, which is not merely information flow, but information married with money. Crypto will buy its way into being a sovereign, if it can’t persuade the incumbent ones to let it be.

Source: Daily Fintech (Crypto utopias), Utopias (Sol, Bitcointopia, Varyon), Lithuania (Fintech bank), Palace of the Soviets

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