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Essential Fintech Reading: Jan 9-15

Bitcoin Pioneer Argues Experiment Has Failed

Bitcoin developer Mike Hearn argues that the currency has failed because the community has failed. "What was meant to be a new, decentralized form of money that lacked 'systemically important institutions' and 'too big to fail' has become something even worse: a system completely controlled by just a handful of people," writes Hearn. Hearn says the network is on the brink of collapse and there's "no longer much reason to think Bitcoin can actually be better than the existing financial system." Writing for CoinDesk, Pete Rizzo covers the firestorm unleashed by Hearn's departure. Hearn, whose contributions to the network included the library BitcoinJ and  peer to peer crowdfunding app Lighthouse, wrote that Bitcoin is struggling to keep up with the transaction load being placed upon it. "Why has the capacity limit not been raised? Because the block chain is controlled by Chinese miners, just two of whom control more than 50% of the hash power," writes Hearn. "At a recent conference over 95% of hashing power was controlled by a handful of guys sitting on a single stage. The miners are not allowing the block chain to grow."

Citigroup Slides Behind Wells Fargo As Nation's Fourth-Largest Lender, Both Guard Against Energy Losses

Wells Fargo has eclipsed Citigroup, finishing 2015 with $1.79 trillion in assets vs Citigroup's $1.73 trillion. "The latest hand-off underscores the difference in their strategies. Wells Fargo Chief Executive Officer John Stumpf has amassed deposits and snapped up assets from other lenders to spur growth. Citigroup CEO Mike Corbat, in contrast, has exited businesses and sold branch networks in some countries to hone the firm’s focus and improve profitability," reports Bloomberg. In the meantime, Reuters reports that both banks are guarding against rising loan losses as oil prices have slipped below $30 a barrel. Citigroup set aside $250 million to cover losses related to its energy portfolio but noted that if the price of oil were to drop to $25 for a sustained period it would need to more than double those provisions. Big banks have insisted that the pain has been limited to the energy sector and there is still robust demand and regular repayment across car loans, mortgages and commercial real estate.

Mobile Banking Visitors Eclipse Branch

In 2015 30 percent of adults used a mobile banking service weekly while only 24 percent visited a physical branch. This is the first time in the history of Javelin's survey that this has been the case. Since 2010, the number of smartphone bankers has doubled and the number of people using a tablet has increased by a factor of ten. However, Wall Street Journal reporter Telis Demos notes that branches will still remain relevant. "With banks facing increasing competition from online-first rivals, branches are one differentiating factor. They can be especially important to certain customers such as small businesses with cash management needs." Deloitte has argued that one of the hazards of increasing mobile banking is fewer direct interactions with customers, who may feel less loyalty.

To What Extent Are Fintech Services Being Adopted?

While the funding and hype has been massive, many are wondering whether fintech services are actually being adopted by the public. Ernst & Young recently launched a Fintech Adoption Index to survey digitally active consumers and monitor their behavior, reports Business Insider. Monitoring consumers across Australia, Canada, Hong Kong, Singapore, the United Kingdom, and the United States, Ernst & Young found that 15.5 percent use some type of fintech service, be it online payments or peer-to-peer lending. This is of course small compared to the penetration in games, social media or messaging. Ernst & Young's Head of Fintech Imran Gulamhuseinwala noted that urban dwellers are much more likely to be using fintech products and that "adoption is highest among younger digitally active consumers and higher income digitally active consumers." The top performing categories were money transfer and payment services, at 17.6 percent adoption, and savings and investment products (peer-to-peer lending, crowdfunding, online investment advice) at 16.7 percent.


Stripe Now Accepting ACH Payments

Online payments startup Stripe announced that it has launched support for ACH payments for all U.S. users. ACH payments on Stripe will cost 0.80%, capped at $5, with no monthly fees or verification fees. Thus, a $100 payment would incur an 80 cent fee and any payment above $625 would cost $5. "This can be especially useful if you routinely charge customers large amounts on a recurring basis," writes engineer Ray Morgan.