From Hong Kong and Beijing to London, accomplished financiers are abandoning lucrative careers to plunge into the murky world of ICOs, a way to amass quick money by selling digital tokens to investors sans banks or regulators.
Fintech analyst and research firm Autonomous NEXT has published a new report on the state of blockchain-based initial coin offerings (ICOs). Released today and entitled "Token Mania," the 70-page publication takes a unique look at the regulatory and operational challenges the novel fundraising model, which is fast becoming the main capital driver in the sector, poses for business and investors.
Autonomous Research, a global research firm focused on financial services, announced today at the Money 20/20 Europe conference the release of a publication giving strategic guidelines for financial incumbents, B2C and B2B startups, and high-technology companies competing in the Fintech economy. Key themes are banks-as-a-platform, Fintech startup funding and feasibility, and the "attention economy" in which Google, Apple, Facebook and Amazon compete.
Lex Sokolin, director of fintech strategy at Autonomous, a research firm, argues that music—one of the first industries to be attacked by digital revolutionaries—was fairly easily disrupted. Retailing was a little harder, but customers got used to not handling books, cameras and clothes before buying. Finance and health care, he says, are much more difficult. People are rarely inspired by financial products, says Mr Sokolin, which makes it costly to build a brand. It is easier to team up with those who already have the customers.
Betterment is also moving up the competition chain because of the venture capital funds it has raised and the expectations that come with it for profitability and a public offering, says Lex Sokolin, director of fintech strategy at Autonomous Research. "By going upstream to the mass affluent market, the firm competes with Vanguard, Schwab and Personal Capital, but also has the opportunity to get to profitability that much faster," Sokolin says. "Similarly, a higher basis points cost for the service puts human hours back into the equation. This will make revenue numbers appear higher, which has a direct impact on valuation. And once a private valuation for a startup approaches a billion, exit opportunities start looking more scarce and the public markets come calling."
But as these founders say, AUM is to some extent beside the point. Micro-investing services like Stash and WiseBanyan want to be valued as technology companies, not financial companies, says Lex Sokolin, director of fintech strategy for Autonomous Research. "The attention of that [younger] demographic is more valuable than the assets that they bring to the table," he says. (The average age for both Stash and WiseBanyan hovers at around 29.) "In the tech economy, in the attention economy, you’re fighting for people’s loyalty rather than their wallet." Companies like Stash and WiseBanyan are growing fast. Will their success be their own undoing?
"We are coming up on a very different age for equity research," said Lex Sokolin, global director of fintech strategy at Autonomous Research.Investors now see research as a product that must stand on its own rather than a freebie offered as part of a broader relationship with an investment bank, Sokolin said. Technology can improve the quality and distribution of research, he said.
Technology, information, data and analysis are merging with the human mind. The separation between work and leisure has faded. Teenagers are forced to manage their social lives like PR people in multinational companies managing a global brand. The Attention Economy demands our focus, trading influence and meaning for cash. But we are full – there is no more room in our lives for more media.
The success of SigFig and FutureAdvisor is confusing to some in the industry, notes Lex Sokolin, Autonomous Research's global director of fintech research. "Neither of them started as adviser-focused businesses, or had that architecture, so many of us are left scratching our heads why the largest institutions have picked them," he says. Among wirehouses, Sokolin notes, SigFig and FutureAdvisor have a strong lead because they are well-capitalized and know how to do an enterprise deployment. "There is space for others, like a surprising entry from Addepar or one of the independent-focused firms. But they will need to show both capital and resources to compete," he says.
To keep up and connect with so many clients, tech firms are using "chatbots." These are artificially intelligent communication programs, similar to Apple's Siri but confined to a chat window. The large high-tech firms are developing core platforms that help programmers build chatbots and plug them into new apps. There are now more chatbots built on Facebook's platform than there are Facebook employees. Expect to see a lot more texting, business to human.