The Bankwatch

Tracking the consumer evolution of financial services

Ant Financial IPO

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Ray Dalio makes the point in todays FT that the West is blind to the rise of China and probably missed out on opportunities.

For as long as I can remember, people have said that China cannot succeed. Communism doesn’t work. Authoritarianism doesn’t work. The Chinese aren’t creative. They have a big problem with bad debts and property speculation. Yet every day we see China succeeding in exceptional ways.

Basically Ray makes the point that while we predict failure and worry about risks, China succeeds in exceptional ways.

Facts on China

The IPO paperwork registered in Hong Kong and just approved by China contains some fascinating insights. It is clear that China is a green field of consumer opportunity.

A second takeaway from the IPO is the creative simplify Ant brings to flow access to gigantic array of services.

Here are some elected screenshots from the IPO. There are some stunning statistics here which scream opportunity.

Ant is a complicated and large set of companies:

Payemts are at the centre of what Ant does:

Our Mission, Vision and Values

Ant’s origins date to 2004 when Alipay was created in the nascent days of e-commerce to solve the trust issue between buyers and sellers in online transactions. Our innovative payment solution bridged the trust gap, facilitated online transactions and underpinned the development of e-commerce in China.

Win-Win Partnership with Financial Institutions

We are a technology services company. We provide the platform and tools to allow partner financial institutions to serve underserved consumers and small businesses with inclusive financial services and empower them to better manage risk, efficiently handle underwriting and distribute their products. Our complementary partnership with financial institutions creates a sustainable win-win relationship based on trust.

In credit, we leverage our intelligent decisioning systems to originate loans which are then primarily underwritten by financial institutions. For these financial institutions, our technology and customer insights allow them to cost-effectively grow their loan book, while our dynamic risk management solutions maximise the efficiency and effectiveness of onboarding, underwriting and monitoring. Our approach is not to use our balance sheet or provide guarantees.

In investments, we operate the largest investment platform by AUM in China for consumers to shop for investment products, providing unparalleled reach to partner asset managers. This platform substantially lowers the cost of investment product distribution and ensures a superior user experience. Investment managers also value our AI capabilities on the platform, providing intelligent matching of investment products against investor’s risk tolerance, for it is critical to ensure product suitability and sustainable industry growth. We benefit from the product manufacturing capabilities of the investment companies who can provide a range of accessible products to our users, thereby strengthening users’ engagement on our Alipay app.

In insurance, we believe the industry is ripe for radical expansion in product offerings, because any activity with risk can be insured if sufficient data is available. Insurance companies benefit from our reach, unrivalled customer insights and product innovation capabilities, which have led to the creation of many scenario-based insurance products. We benefit from the underwriting capabilities of the insurance companies and the ability to work together in the development of innovative new products.

Market size – China

Market composition cash, credit – Asian and western peers

Breadth of Ant services

One simple app screen – online banking designers take careful note

Simplicity in Innovation- QR codes

Written by Colin Henderson

October 23, 2020 at 15:16

Posted in Uncategorized

Congress Report on Digital Competition [Facebook, Amazon, Apple, Google]

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2020-Judicial subcommittee on competition in digital markets

The report is over 400 pages so I have not had a chance to digest yet.

As a user who is immersed in the Apple ecosystem however, I can see it is an interesting insight from an industry perspective.

Written by Colin Henderson

October 8, 2020 at 10:46

Posted in Uncategorized

Germany wrestles with the covid (passport) certificate question

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From German Ethics Council – German only for now.

The German Ethics Council Yesterday issued a 55-page report on the justifiability of “risk-free certificates” that would allow those who are immune to coronavirus to move around more freely.

In view of the many uncertainties that still exist regarding immunity against the novel coronavirus, the German Ethics Council does not recommend the use of immunity certificates at this time. Commercially available tests to detect immunity against SARS-CoV-2 should be more strictly regulated, considering doubts around their reliability and the resulting potential dangers.

The results of the deliberations of the 24 person council are contained in the referenced report but German language only for now.

This. kind of thing would have direct Work from home/ office implications. It also raises some very pointed questions on the nature of enforcement. Is this criminal, civil or some third security vector. Who enforces and what are their powers?

Courtesy of the good people at the Monocle Minute.

Written by Colin Henderson

September 23, 2020 at 08:06

Posted in Uncategorized

Nikola founder steps down fuelling the Reports of Fraud

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The scale of fraud nowadays takes the requirement for Banking due diligence on prospective customers to sensational heights. There has been these gigantic frauds:

  • Wirecard
  • Luckin Coffee
  • Older ones: Enron, Cendant, and WorldCom

Over the last 10 days Nikola, a one time potential competitor to Tesla has been sidelined by reports from Hindenberg Research:

Last week, we issued a report that presented extensive evidence of a litany of material false statements made by Nikola’s Founder and Executive Chairman, Trevor Milton.

We included 53 questions at the end of our report that we believe shareholders deserve answers to. The company promised a full point-by-point rebuttal, but then only responded to 10 of our questions.

Of those 10 responses, the company debunked nothing. Instead it either confirmed or sidestepped virtually everything we wrote about, and in some cases raised new unanswered questions.

Nikola Failed to Address 43 of our 53 Questions. Of Those It Touched On, It Largely Confirmed Our Findings or Raised New Questions

Nikola Admitted That Its Deceptive “Nikola One in Motion” Video Was, In Fact, Video of The Semi-Truck Simply Rolling Down A Hill.

The Company Says It Never Claimed the Truck Was Powering Itself, Despite Deceptive Editing and Claims That it Had “1,000 HP” With “Sports Performance”

In our report, we explained how the company released a video called “Nikola One in Motion”, which made it seem that its Nikola One semi-truck was traveling under its own power at a high rate of speed. Angles in the video were edited to make it appear as though the semi was moving on a roadway that was flat, or even uphill.

A key part of this fight centred on whether an electric truck moved downhill under its own power or was freewheeling. By Nikola own admission it turns out the answer is freewheeling.

What ??

Relevance to Bankwatch:

Due diligence has moved beyond documentary analysis. Hands and feet on the ground are required much as occurred within the mortgage industry. (Think faked employment. Confirmation, or cash down payment holdings)

Words on a document can be faked.

I am seeing bankers behind the wheel of an 18 wheeler pressing the brake and accelerator.

Written by Colin Henderson

September 21, 2020 at 12:03

Posted in Uncategorized

Is the post Pandemic property shift to suburban a sign of systemic change?

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London UK: Prices and sales have fallen in the London financial district and bankers and lawyers are staying away (FT)

Ontario Canada; More first-time home buyers and minorities have also been looking to the suburbs for affordability, he added. (Real Estate Monitor)

— —

Something is happening to urban environments. I can see it with my own eyes as someone who lives in a downtown driven by Financial Services.

Recent press is beginning to observe a significant shift to suburban homes. Here are some thoughts, observations and questions.

A typical food court downtown would have 25 – 40 storefronts. The current average is about 5 storefronts and even those are part of larger conglomerates. The small independents are gone.

Out on Yonge, King and other usually busy downtown streets and while the most recent rules for restaurants and pubs permit on premise customers, there are few customers.

I have not been on the subway since pre March but reports indicate low ridership of 60% with a gradual increase evident.

At face value the shift is driven by:

  • millennials have built home equity
  • millennials are moving to family mode and the associated trappings of a large home, garden and all that comes with it
  • work from home is now semi permanent with most banks indicating 2021 as the earliest for any change in that approach given maintenance of productivity and potential for future real estate cost reduction
  • significant increase in rental vacancy rates from 1% to 7% + in July 2020 as younger renters move away from downtown


Commercial landlords have a great deal to lose. At a minimum the rental /location profile could display dramatics change as tenants adapt to the new normal, and this in turn would drive changes to rent that could be sustained depending upon vacancy rates, retail business volumes and retail profitability.

These factors would all accumulate to provide for a supportable profile of rents that commercial landlords can charge.

Challenges and open questions

  • in the absence of financial services, who would purchase or rent the office towers
  • what discounts could landlords afford to offer financial services rather than see buildings go vacant
  • financial services are locked into leases that will constrain their actions but this could be adjustments to the pace of change rather than curtailment of the change
  • are we in fact seeing a blip in activity and shifts
  • changes driven by generational shifts tend to be permanent and this would suggest a return to 100% of pre-pandemic is highly unlikely

Headwinds to full return for urban to pre pandemic levels

The generational shifts evident with millennials could well be the defining shift, with the pandemic accelerating that shift.

The outlier is the strategic direction from Banks. Toronto like many downtowns in 2019 was driven by Financial services. Were those financial services companies decide to approach resourcing and logistics differently with a permanent shift from or back to urban this would change everything.

All in all it seems clear a return to100% of pre-pandemic is unlikely. Thus a negative economic impact can be expected and banks can expect some difficult planning decisions.

Written by Colin Henderson

September 16, 2020 at 12:22

Posted in Uncategorized

Battery Day – who would have thought !

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With that cryptic tweet, Musk lays the door wide open for Battery day on Sep 22nd. We think about Tesla making electric cars. More and more it looks like a power company that manufactures cars and trucks, from a platform that fulfils the sustainability requirements of ESG investment criteria.

More to come. Here are some quick soundbites.

When I look at and the detail in the Powerwall section that covers features exited in a data centre, we see:

  • back up
  • redundancy when the grid is down
  • recharge with clean energy when linked to solar
  • Uninterruptible Power Supply: appliances running without interruption

Tesla is evaluated as part of the auto sector.

  • One million mile battery: the Tesla 2019 Impact Report, released in early June, certainly reinforced that impression when it emphasized the environmental advantages of a “future Tesla vehicle with a million mile battery.
  • public grid; Tesla goes further with two-way connectivity to the national power grid
  • high tech: was computers – now batteries – Tesla Gigafactory

In reality Tesla sits in the clean energy sector, or even may be defining a sector that we have not yet seen, based on the ties to the power grid, self dependence during emergencies and the satisfaction in being self sufficient in the area of power which has been a Government utility offerring for many years,

There are similar traits to Apple with the knowledge of front to back manufacturing under Tesla specifications.

All this to say the hype for Sep 22nd will make it an interesting day.

Written by Colin Henderson

September 15, 2020 at 15:54

Posted in Uncategorized

Why do third world countries own payment modernisation – Softbank takes the challenge on

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This is a backgrounder on payments in China.

First Africa (M-Pesa), now China (WeChar, and AliPay). While the west juggles with multi million dollar upgrades, China eliminates can and credit cards by replacing with a QR code on a piece of paper or a phone screen.

This has become a central topic because of Softbanks investment in the technology coupled with Japans crazy infatuation with cash.

With his reputation on the line, Japan’s most controversial tech investor needs a win with the PayPay app []

At a glance, PayPay is the kind of mobile wallet commonly seen across Asia. Users download the app, link their bank account and top up money to their PayPay account. They can make payments either by scanning a QR code at a shop or having a clerk scan the app’s unique bar code.

This update from the Nikkei Asian Review is fascinating and scary at the same time. For further explanation on how it works, because this is not obvious to us westerners.

how do mobile payments in China work? []

Also, mobile payments have been so successful in China because they are fast and straightforward. And this speed is possible thanks to the QR codes. In China QR Codes are everywhere; even street musicians have a QR Code to collect money.

There are two ways to pay via QR Codes in China: The customer scans the seller’s QR code, which is very often printed and visible at the checkout, on restaurant tables and even on products in some stores. The customer then chooses the amount and can send the money directly to the seller.

The customer shows the QR code displayed on his smartphone, and the seller scans it. This method is even simpler and faster because the customer has nothing to do; it is up to the seller to select the amount that will then be deducted from his mobile wallet.

China has therefore quickly adopted mobile payment, and this is mainly because it is very easy for sellers. Unlike Apple Pay, where sellers have to buy technology to receive a payment, in China, a simple piece of paper printed with the QR code is enough.

Written by Colin Henderson

September 11, 2020 at 13:26

Posted in Uncategorized

Bank of Canada maintains interest rate, and quantitative easing

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Bank of Canada leaves rates unchanged however there is a nuance in the release that opens the door for change based on the faster than expected economic recovery. Note final paragraph in the release (emphasis mine).

Bank of Canada maintains commitment to current level of policy rate, continues program of quantitative easing


Media Relations


Ottawa, Ontario

September 9, 2020

The Bank of Canada today maintained its target for the overnight rate at the effective lower bound of ¼ percent. The Bank Rate is correspondingly ½ percent and the deposit rate is ¼ percent. The Bank is also continuing its quantitative easing (QE) program, with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds.

Both the global and Canadian economies are evolving broadly in line with the scenario in the July Monetary Policy Report (MPR), with activity bouncing back as countries lift containment measures. The Bank continues to expect this strong reopening phase to be followed by a protracted and uneven recuperation phase, which will be heavily reliant on policy support. The pace of the recovery remains highly dependent on the path of the COVID-19 pandemic and the evolution of social distancing measures required to contain its spread.

The rebound in the United States has been stronger than expected, while economic performance among emerging markets has been more mixed. Global financial conditions have remained accommodative. Although prices for some commodities have firmed, oil prices remain weak.

In Canada, real GDP fell by 11.5 percent (39 percent annualized) in the second quarter, resulting in a decline of just over 13 percent in the first half of the year, largely in line with the Bank’s July MPR central scenario. All components of aggregate demand weakened, as expected.

As the economy reopens, the bounce-back in activity in the third quarter looks to be faster than anticipated in July. Economic activity has been supported by government programs to replace incomes and subsidize wages. Core funding markets are functioning well, and this has led to a decline in the use of the Bank’s short-term liquidity programs. Monetary policy is working to support household spending and business investment by making borrowing more affordable.

Household spending rebounded sharply over the summer, with stronger-than-expected goods consumption and housing activity largely reflecting pent-up demand. There has also been a large but uneven rebound in employment. Exports are recovering in response to strengthening foreign demand, but are still well below pre-pandemic levels. Business confidence and investment remain subdued. While recent data during the reopening phase is encouraging, the Bank continues to expect the recuperation phase to be slow and choppy as the economy copes with ongoing uncertainty and structural challenges.

CPI inflation is close to zero, with downward pressure from energy prices and travel services, and is expected to remain well below target in the near term. Measures of core inflation are between 1.3 percent and 1.9 percent, reflecting the large degree of economic slack, with the core measure most influenced by services prices showing the weakest growth.

As the economy moves from reopening to recuperation, it will continue to require extraordinary monetary policy support. The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved. To reinforce this commitment and keep interest rates low across the yield curve, the Bank is continuing its large-scale asset purchase program at the current pace. This QE program will continue until the recovery is well underway and will be calibrated to provide the monetary policy stimulus needed to support the recovery and achieve the inflation objective.

Written by Colin Henderson

September 9, 2020 at 10:09

Posted in Uncategorized

Amazon draw a line in the sand on post-pandemic “Work from Home”

Amazon Bets on Office-Based Work With Expansion in Major Cities

The e-commerce giant says it is adding 3,500 employees in six major cities, including 2,000 jobs in New York City

The Wall St Journal has an exclusive piece on Amazon investment in downtown work. This in contrast to the general sense that Information Worker activity is moving away from downtown offices to home which could be suburbs or anywhere at all.

They are adding 3,500 corporate jobs across the US.

Amazon is preparing to add 3,500 corporate jobs across hubs in New York, Phoenix, San Diego, Denver, Detroit and Dallas, the company said Tuesday. The plans include 2,000 jobs at the historic building in Manhattan that once housed the Lord & Taylor flagship department store. Amazon purchased the Fifth Avenue building from work-sharing company WeWork, a subsidiary of We Co., for more than $1 billion, people familiar with the matter said.

The connection to Canada with the inclusion of the WeWork building in New York is interesting. The Canada Minister of Finance resigned last night in connection with a scandal whereby he and his family had a trip to South America paid for by WeWork. None of us in Canada knew WeWork had a billion dollar building in NY. But that is another story and for another day.

Relevance to Bankwatch:

The message here is no surprise in that we really do not know what post Pandemic Work looks like. In fact will there ever be a post-Pandemic world. A more and more likely post world will see a more restrictive world full of personal health risk that is managed differently by different jurisdictions and countries.

There will be constant surprises as companies with cash seek to optimise their future in a world where old growth vectors are no longer available. Consumer growth driving sales of consumer growth will certainly flatten.

Purchase of basics such as groceries, health consumables, education, communication and supporting technology will look for better less touch methods.


My quick speculation for this post would see these examples:

  • Amazon – shopping logistics; back to the original post book Amazon vision of a virtual mall
  • Apple – technology that offers a seamless gateway to the basics noted above while maintaining secure privacy of wallet and communication
  • Shopify – the shopping, payment connection
  • edge outlier suppliers such as Fastly, a cloud provider that is carving out a niche in that fuzziest of spaces
  • Microsoft – less clear for me. Probably education, and enterprise Cloud. In Europe everyone uses Google or Open Office.
  • Google and FaceBook– I have been an advertising hater since forever. I am not speculating on Google or FaceBook. I have no strong sense of future success for those two companies. They are behemoths and will have impact but not in their current form (imho)
  • AI – critical for each space and for us all. It is unclear how this will shape up;
    • Proprietary AI,
    • Shared AI,
    • Enterprise AI,
    • Personal AI,
    • all of those and more … we do know it will be key and especially when it transcends algorithm basis and becomes truly self learning.
  • </speculation>

Written by Colin Henderson

August 27, 2020 at 19:27

Posted in Uncategorized

US Fed and Government out of sync on policy news item Kathy Lien

Today, we saw the Federal Reserve “front-run” Wednesday’s FOMC announcement by extending its $2-trillion+ lending programs another three months to the end of the year. According to the central bank, it was necessary to “provide certainty that the facilities will continue to be available to help the economy recover.” But, in reality, it is worried about the economy and feels more companies will need to tap this lifeline. These actions send a strong signal to investors that come tomorrow, we’ll get a more cautious tone from the Fed. We are not looking for any monetary policy changes, but with extra unemployment benefits expiring and COVID-19 cases rising, the central bank will be forced to look past the improvements in the economy since June.

The table below shows broad-based improvements in the U.S. economy since the last Fed meeting. Had virus cases stabilized with no significant upticks over the past month, the Fed would be talking about the improving recovery and how the worst is over. Unfortunately, that’s not the case right now and instead, the two greatest threats to the U.S. economy are things the Federal Reserve has no control over – the rapid spread of coronavirus in the U.S. and the government’s fiscal response.

A few weeks ago, Chairman Jerome Powell warned law-makers not to become complacent as the U.S. economy remains extraordinarily uncertain. Since then, the outlook worsened, extra unemployment benefits expired and the packages that Congress are discussing could fail to impress. For all these reasons, we expect nothing but ongoing dovishness from the Fed along with a pledge to keep monetary policy accommodative for the foreseeable future. Last month, they said rates will remain at zero through 2022.

The U.S. dollar has fallen extensively ahead of the rate decision. Treasury yields also moved sharply lower, which tells us that investors are positioning for dovishness. How the greenback trades tomorrow will depend on Powell’s tone. Back in June, he said a second-half recovery is likely, but with virus cases rising rapidly, his outlook will certainly change. Considering that the market expects cautiousness, we may not see a big dollar move post FOMC – unless the central bank mentions that negative rates are back on the table, which could unleash a fresh round of U.S. dollar selling.

Written by Colin Henderson

July 28, 2020 at 13:35

Posted in Uncategorized

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