Fintech

Synapse’s collapse is another warning about unregulated financial technology

Published

9 months ago

25 July, 2024

FinCrypto Staff

Synapse's collapse is another warning about unregulated financial technology

The opinions expressed by contributors are their own and do not represent the views of The Hill

by Thomas P. Vartanian, Opinion Contributor 7/25/24 12:00 PM ET

U.S. financial disasters often stem from overheated markets becoming too enamored with shiny new financial instruments. Report of June 6 from the bankruptcy trustee of financial technology company Synapse tells just such a story and should be seen as a warning about future financial crises caused by enthusiasm for all things tech.

Synapse launched in 2014 as a technology brokerage firm, connecting emerging fintech companies with the online products they need to offer customers the ability to buy cryptocurrency, budget, save, invest, manage money, and make payments online through slick apps. Synapse has opened 100,000 demand deposit accounts with four FDIC-insured banks, with end-user balances of 265 million dollars.

Those “depositors” of course wanted their money back when Synapse filed for bankruptcy in May, assuming it was FDIC insured. But according to the trustee’s report, about 85 million dollars disappeared somewhere in the fintech and banking ledgers. Echoing the criticisms we have heard all too often about FTX Record Keepingat least one banking partner he told the trustee that “Synapse’s proprietary accounting system is difficult to interpret without the expertise of people familiar with the system.”

Fintech and cryptocurrency advocates have been arguing for years that unregulated technology platforms can do what traditional banks and investment firms can do more efficiently and just as safely. At the same time, we’ve been told that we don’t need to worry about those developing markets because the people who put their money in them know they can lose it, and if they do, it won’t impact the rest of us or the stability of broader financial markets. Recent events and the collapse of Synapse underscore the fallacy of such reassurances and the importance of modernized oversight.

Unregulated fintech companies and cryptocurrencies have reached critical mass and become credible, if not sought-after, participants in traditional financial markets. While numbers vary, fintech companies have now been valued at more than 1 trillion dollars. There is another one 2.5 trillion dollars in cryptocurrencies represented by 10,000 different coinsas well as about 1.3 trillion dollars in synthetic cryptocurrency securities and derivatives sold by Wall Street. Blackrock and Grayscale have accumulated $42 billion under management in their Bitcoin Spot ETFs only in the six months following the The Securities and Exchange Commission approved them.

Assuming a conservative $1.5 trillion in leveraged and margin buying in these markets, the cryptocurrency industry has become a $5 trillion megastructure, with estimates that it could reach 10 trillion dollars by 2026. That would make the cryptocurrency industry about 80 percent the size of the direct mortgage market in America. Unlike cryptocurrencies, however, every mortgage loan has a home backing it.

As fintechs and cryptocurrencies have become anchored in traditional financial markets and have exploited the safety and security that comes with them, the government should have reevaluated how to manage the new and growing amounts of financial risk they are creating. But these things have not happened and are not happening today.

There is nothing wrong with the worship of technology and all the great things it can do. What fintechs and cryptocurrencies do and how they do it is not the real problem. It is the lack of oversight and lack of any control over their executives that is planting the seeds of the next disaster. FTX Sam Bankman-Fritto It has taught Congress and regulators that they shouldn’t be surprised to find shoddy business practices and executives of questionable ability or character at companies that have virtually unlimited access to clients’ funds and no one to monitor what they do.

Unfortunately, it was difficult to argue that the lesson was taken seriously.

Synapse was a relatively small company, but a larger collapse of the fintech or cryptocurrency sector could have a disastrous impact on traditional financial markets, given the inevitable connection and integration between traditional markets and fintech. recently highlighted from Acting Comptroller of the Currency. As the non-traditional financial services industry grows in size without real oversight, the next FTX, Binance, or Synapse could be the trigger that causes a financial wave.

The ambitious goal of financial stability that Congress embraced after 2008 is totally unattainable unless all types of non-banks that solicit and accept public money are regulated more like banks. It makes no sense to over-regulate and control the people who own and operate banks but allow a parallel group of people and entities that now make up 60 percent of the financial services market to compete and capitalize on consumer trust in financial institutions, while largely avoiding the regulatory sphere that creates that trust. I can think of no better recipe for preparing for the next financial crisis than to continue on our current course.

Thomas P. Vartanian is executive director of the Financial Technology & Cybersecurity Center and the author of “200 Years of American Financial Panics” (2021) and “The Unhackable Internet” (2023).

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Fintech

Lloyds and Nationwide invest in Scottish fintech AI Aveni

Published

9 months ago

29 July, 2024

FinCrypto Staff

Lloyds and Nationwide invest in Scottish AI fintech Aveni

Lloyds Banking Group and Nationwide have joined an £11m Series A funding round in Scottish artificial intelligence fintech Aveni.

The investment is led by Puma Private Equity with additional participation from Par Equity.

Aveni creates AI products specifically designed to streamline workflows in the financial services industry by analyzing documents and meetings across a range of operational functions, with a focus on financial advisory services and consumer compliance.

The cash injection will help fund the development of a new product, FinLLM, a large-scale language model created specifically for the financial sector in partnership with Lloyds and Nationwide.

Joseph Twigg, CEO of Aveni, explains: “The financial services industry doesn’t need AI models that can quote Shakespeare, it needs AI models that offer transparency, trust and, most importantly, fairness. The way to achieve this is to develop small, highly tuned language models, trained on financial services data, vetted by financial services experts for specific financial services use cases.

“FinLLM’s goal is to set a new standard for the controlled, responsible and ethical adoption of generative AI, outperforming all other generic models in our selected financial services use cases.”

Robin Scher, head of fintech investment at Lloyds Banking Group, says the development programme offers a “massive opportunity” for the financial services industry by streamlining operations and improving customer experience.

“We look forward to supporting Aveni’s growth as we invest in their vision of developing FinLLM together with partners. Our collaboration aims to establish Aveni as a forerunner in AI adoption in the industry, while maintaining a focus on responsible use and customer centricity,” he said.

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Fintech

Fairexpay: Risk consultancy White Matter Advisory acquires 90% stake in fintech Fairexpay

Published

9 months ago

29 July, 2024

FinCrypto Staff

Treasury Risk Consulting Firm White Matter Alert On Monday he announced the acquisition of a 90% stake in the fintech startup Fair payment for an undisclosed amount. The acquisition will help White Matter Advisory expand its portfolio in the area of cross-border remittance and fundraising services, a statement said. White Matter Advisory, which operates under the name SaveDesk (White Matter Advisory India Pvt Ltd), is engaged in the treasury risk advisory business. It oversees funds under management (FUM) totaling $8 billion, offering advisory services to a wide range of clients.

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White Matter Advisory, based in Bangalore, helps companies navigate the complexities of treasury and risk management.

Fairexpay, authorised by the Reserve Bank of India (RBI) under Cohort 2 of the Liberalised Remittance Scheme (LRS) Regulatory Sandbox, boasts features such as best-in-class exchange rates, 24-hour processing times and full security compliance.

“With this acquisition, White Matter Advisory will leverage Fairexpay’s advanced technology platform and regulatory approvals to enhance its services to its clients,” the release reads.

The integration of Fairexpay’s capabilities should provide White Matter Advisory with a competitive advantage in the cross-border remittance and fundraising market, he added.

The release also states that by integrating Fairexpay’s advanced technology, White Matter Advisory aims to offer seamless and convenient cross-border payment solutions, providing customers with secure options for international money transfers.

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Fintech

Rakuten Delays FinTech Business Reorganization to 2025

Published

9 months ago

29 July, 2024

FinCrypto Staff

Rakuten (Japan:4755) has released an update.

Rakuten Group, Inc. and Rakuten Bank, Ltd. announced a delay in the reorganization of Rakuten’s FinTech Business, moving the target date from October 2024 to January 2025. The delay is to allow for a more comprehensive review, taking into account regulatory, shareholder interests and the group’s optimal structure for growth. There are no anticipated changes to Rakuten Bank’s reorganization objectives, structure or listing status outside of the revised timeline.

For more insights on JP:4755 stock, check out TipRanks Stock Analysis Page.

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Fintech

White Matter Advisory Acquires 90% Stake in Fintech Startup Fairexpay

Published

9 months ago

29 July, 2024

FinCrypto Staff

White Matter Advisory Acquires 90% Stake in Fintech Startup Fairexpay

You are reading Entrepreneur India, an international franchise of Entrepreneur Media.

White Matter Advisory, which operates under the name SaveDesk in India, has announced that it is acquiring a 90% stake in fintech startup Fairexpay for an undisclosed amount.

This strategic move aims to strengthen White Matter Advisory’s portfolio in cross-border remittance and fundraising services.

By integrating Fairexpay’s advanced technology, White Matter Advisory aims to offer seamless and convenient cross-border payment solutions, providing customers with secure options for international money transfers.

White Matter Advisory, known for its treasury risk advisory services, manages funds under management (FUM) totaling USD 8 billion.

Founded by Bhaskar Saravana, Saurabh Jain, Kranthi Reddy and Piuesh Daga, White Matter Advisory helps companies effectively manage the complexities of treasury and risk management.

The SaveDesk platform offering includes a SaaS-based FX market data platform with real-time feeds for over 100 currencies, bank cost optimization services, customized treasury risk management solutions, and compliance guidance for the Foreign Exchange Management Act (FEMA) and other trade regulations.

Fairexpay is a global aggregation platform offering competitive currency exchange rates from numerous exchange partners worldwide. Catering to both private and corporate customers, Fairexpay provides seamless money transfer solutions for education, travel and immigration, as well as simplifying cross-border payments via API and white-label solutions for businesses. Key features include competitive currency exchange rates, 24-hour processing times, extensive currency coverage of over 30 currencies in more than 200 countries, and secure, RBI-compliant transactions.

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