Understanding How Motif Investing Actually Works

ANNE LAWSON | August 6, 2016

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Motif Investing is a new robo-advisor investment opportunity that is popular with traders who are using it. Traders like the appearance of financial products that are unique on the market. They are known “motifs.” These are quite similar to ETFs (exchange traded funds), securities that are trading a commodity, an index or a set of assets. These are traded like stocks. The motifs bring in a low-risk investment that is interesting. Modest Money tells more about motif in this review.

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Financial infrastructure: the FinTech way

Article | February 24, 2020

Financial infrastructure plays a critical role in a country’s economic development and stability. It determines how efficiently financial services can be provided. A high-quality infrastructure lends itself, among other benefits, to lower transactional costs and more accurate risk evaluations, improving lending and access to capital.

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Banking-as-a-Service (BaaS) Empowers Any Brand to Offer Financial Services

Article | May 14, 2021

Digital banking is not new – major banks began to offer internet banking services in the mid-1990s. However, the traditional banking industry is facing significant pressure from rapidly shifting consumer expectations, changing regulations and increasing competition from digital-native disruptors. Younger Gen Z customers are more apt to use alternative transaction methods such as mobile wallets or P2P payments (e.g., PayPal or the Dutch payment app Tikkie), and businesses are beginning to favor real-time digital payments to improve efficiency, reduce cost and better manage their cash flow. Moreover the ongoing global health crisis is accelerating the movement toward real-time contactless digital payments. Fifty-six countries are now live with real-time payments, and six countries more than doubled their volume of real-time payments in the past year. [i] Due to a joint implementation of the major banks led by the Dutch Payments Association (Betaalvereniging Nederland), the Netherlands is a European leader in terms of the adoption of real-time payments. In the midst of this fast-changing landscape, new business models are arising as digital-natives, FinTechs and incumbent banks partner to offer new banking and payment services in the cloud. One example is Dutch Cobase – a subsidiary of ING Group that bundles business accounts – which recently signed a cooperation agreement with the Nordic bank Nordea and the French Crédit Agricole. Amsterdam-based banking platform Five Degrees supplies its technology to banks such as ABN Amro, Van Lanschot and Knab, among others. Collaboration like this is spurring further innovation as these digital ecosystems expand, attracting new participants. But successfully delivering these new digital services requires the direct and secure, low-latency, reliable exchange of data between partners that interconnection can provide. BaaS needs FinTechs AND banks FinTechs born in the cloud have the IT infrastructure, skills and agility to deliver digital banking and payment services on-demand. They can also offer these BaaS capabilities to any brand who wants to embed financial services in their customer experience. Sometimes referred to as “embedded finance,” BaaS enables businesses to create new products and services along the customer journey as the diagram below illustrates. However, FinTechs typically lack the assets and regulatory license to fulfill financial transactions, and that’s where banks come in. To ensure that deposits and money transfers stay safe, banks are heavily regulated and often insured up to a certain dollar amount for each depositor. This combined with a longer history with customers means that banks have an advantage when it comes to perceptions of how safe and secure a financial transaction will be. As a result, there are a few collaboration paths that FinTechs and banks generally pursue to bring BaaS services to the market: The FinTech buys a bank that already has a license such as Jiko purchasing Mid Central National Bank in the U.S. or Raisin GmbH buying MHG-Bank AG in Germany. The FinTech partners with a bank to borrow their license such as Chime partnering with Stride Bank, N.A. and The Bancorp Bank. The FinTech acquires its own license (a lengthy process that could take up to three years) such as Railsbank in the U.K. or Varo Money in the U.S. The bank partners with a FinTech to launch BaaS services such as Deutsche Bank partnering with Traxpay to integrate supply chain financing technologies and solutions within its own offerings. Regulations are shaping the partnering model The regulatory environment may also impact the partnering model. For example, open banking laws in the European Union and the U.K. require banks to open APIs to third-party developers, making it easier for FinTechs to gain access to bank data. Regulations like these are helping to reduce uncertainty for startups and accelerate innovation in the European banking system. Challenger banks such as U.K.-based Revolut have also benefitted from special licenses that allow them to directly accept deposits, process payments or lend. In the U.S., the Durbin Amendment is accelerating partnerships between small-medium banks and FinTechs in a different way. The Amendment, which has been in effect since 2011, aimed to lower prices for consumers by reducing the fees that retail stores pay to banks when customers use debit cards. In reality, banks just responded by increasing the fees that consumers pay to make up the lost revenue. However, the Durbin Amendment exempts financial institutions with less than $10 billion, making them ideal partnering candidates for FinTechs. How BaaS actually works A hybrid digital architecture for BaaS with a mix of on-premises, colocation and public/private cloud elements. In this example, the bank is the license holder partnering with the FinTech BaaS provider to deliver embedded financial services to a Brand (such as a retailer or transportation business). The bank has also partnered with other FinTechs for real-time and cross-border payments, although it handles any card transactions in-house. Interconnection will be critical for ensuring secure, low latency data flows between the partners and digital infrastructure across the regions where the BaaS is offered. Partnerships like these are steadily growing into ecosystems of digital exchange around financial services that include clouds, networks, banks, FinTechs, payment rails, fraud detection and other service providers. By placing their digital infrastructure close to these ecosystems, leveraging an interconnection approach, banks and FinTechs alike can maximize their competitive advantage. Interconnection provides a more scalable, reliable, secure approach to moving data between members of the value chain than the public internet. With an interconnection strategy, banks and FinTechs can deploy a digital core, extend across edge locations and enhance their capabilities through digital exchange to create new BaaS markets for any brand.

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Dangerous Intersection Ahead: Privacy and Banking Fintech

Article | March 9, 2020

Bankers in the fintech space are familiar with the FFIEC’s Guidance recommending multi-factor authentication for certain financial transactions. Multi-factor authentication, at least for “high risk” transactions, requires a combination of something you know, something you have and something you are. This last factor is often referred to as biometric information. While biometric authentication is making great strides around the globe, its adoption in American banking is not yet common and poses its own set of legal issues.

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BITCOIN AND CRYPTO

On Diversity. Learnings from Bitcoin. A Gift Idea

Article | November 24, 2020

On Diversity 1.Diversity is critical. Human life endures and evolves due to the intertwining of different gene pools. Innovation happens with fresh insightful connections between cultures, expertise and backgrounds. Treating people equally and with respect, regardless of race, religion, gender, sexual identity or age, among other differences, is not just ethically and morally correct, but it leads for better outcomes in society and business. In many parts of the world, including the United States, there has been significant improvement in the life of women, minorities and LGBTQ communities if compared to a decade or two decades ago. However, while much progress has been made, there are still significant challenges and obstacles as the #MeToo and Black Lives Matter movements among others clearly illuminate. While all of us whether as individuals, communities or business continue to strive to ensure equal opportunity and a just society, we should not forget three other critical forms of diversity which may not have movements or focus on them, but are critical to truly build on the efforts and movements underway. These are 1) Diversity of Voices, 2) Diversity of Generations and 3) Diversity of Choices. 1. Diversity of Voices A few months ago I wrote a piece called Diverse Faces are not the same as Diverse Voices. Ensuring a diversity of faces is a necessary but insufficient step. Not only do companies need different faces around the table, but they also need diversity in thinking. We need to ensure that every person in a firm and around the table has a voice. Most importantly, it is critical to have voices that can speak truth to power, question the status quo, call out potential issues and be heard without the risk of being punished. If such voices were listened to, many companies, such as Wells Fargo and possibly Boeing, would not have suffered losses of reputation and market valuation. There were people who knew there were issues, but they either kept quiet or were silenced or ignored. For true diversity it is key that people can call out the turd on the table when everyone else is celebrating what looks like a delicious brownie. For years I have studied how to ensure such voices are nurtured and heard. There is a chapter in my book called “The Turd on the Table” which discusses my findings in detail but in the article noted above I summarize some key findings. 2. Diversity of Generations These days in my multi-faceted second career of author, speaker/teacher and advisor, I journey (virtually rather than physically given the times we live in) more broadly across business, academia, politics, art, and science around the world than every before. In just the arena of Business, I can find myself presenting to the Board of a FTSE 100/Fortune 500 company, advising a small start-up and then speaking about my book and sharing career learnings with either youthful students in a BBA or MBA program or more experienced individuals refreshing their expertise or re-thinking their careers while pursuing an Executive MBA. While I share, teach and advise, I also am constantly learning and have come to believe that while many firms having smartly incorporated women and people of color and people with different forms of expertise on to their decision making councils, they remain relatively homogenous with regard to age. Almost everyone is within the same 16 year generation. Established companies tend to have Board members in their 50’s and 60’s , while start-ups skew to the 20’s and 30’s. Established companies have young folks on what they call Challenger Boards presenting to real boards and Challenger companies have the occasional grey haired expert to serve as an advisor. Why should a Fortune 500 Company not have accomplished individuals who are a generation or two younger on the main board? Why do start-ups believe that older people cannot be mentally or technically agile? Regardless of what you may think of two very accomplished individuals in a Nancy Pelosi in her 70’s and an Alexandra Ocasio Cortez in her 30’s, I believe better decisions are made because of their different generational perspectives. This generational divide is not just in Business but in Education, Arts and every where I look. We should ask why ? 3. Diversity of Opinion and Choice. In the recent election in the United States more people (70 Million) voted for Donald Trump than voted for Barack Obama ( 69.5 million) when he won his first landslide victory in 2008. The only person who garnered more votes is President-Elect Biden with 75 million votes and counting. As someone who is friends and/or works with people who voted for each candidate and who respects and continues to respect and admire many of the voters on each side, I worry when some folks on each side paint the other as a caricature. Not everyone who voted for Donald Trump is an anti-mask, gun toting racist, science hating, selfish capitalist nor is everyone who voted for Joe Biden a tree hugging, de-fund the police, pacifist socialist. In this polarized age weaponized by social media and algorithms of enragement it is very easy to paint things in black or white but that is not what humans are. A person in two moods is often more different than two different people. Rather than demonize we should seek to understand and find points of agreement which are many ( most folks on either side would rather live in the US than in other countries, most would hope to have a better world for their children etc.) If people cannot choose and have their own opinions than most other forms of diversity don’t amount to a hill of beans. People and life are complicated. All we know is that we have opinions and belief and choices. And like humans they are incomplete, imperfect, impermanent. 2. Learnings from Bitcoin Five years ago in a blog post i wrote… Bitcoin and Blockchain are likely to revolutionize money. It is likely to become the currency of the Internet since it addresses the lack of trust in financial institutions, speaks to the need of the unbanked and leverages network technology. It’s in the early innings and too much focus on the roller coasting price. With that being said I would recommend everyone buy a bitcoin (its now about 240 dollars as I write this) and begin to understand it. In the US, Coinbase is an ideal wallet. The book to read on this topic is The Age of Cryptocurrency by Vigna and Casey two Wall Street Journal Financial Journalists. As I write this some five years later, a Bitcoin is trading around 16,000 dollars which is a 6400 percent return, magnitudes better than even if you had put the $250 in Netflix which is the best performing FAANG .( Bitcoin along the way soared to 19,891 dollars in December 2017 before crashing to the 3000’s a few months later but never being below 3000 dollars in the last three years.) I am not a financial advisor and make no recommendations ( I made my recommendation 5 years ago, since 250 dollars was not a big amount of money to risk to understand and follow a technology and eco-system that might become big). I do wish to share two learnings from Bitcoin which everybody may want to keep in mind as they make decisions at work on whom they meet and what they pay attention to … The Future Comes from the Slime and not the Heavens: Like Bitcoin, much that of the future comes from places no one is looking. IBM did not take MS-Dos and Microsoft seriously. Microsoft did not understand what Larry Page and Sergey Brin had created in the PageRank algorithm and Google Search. Bezos turned out to be more than a book seller on the Internet. Again and again, Boards and Leaders pay attention to each other, to the famous, to the powerful and to what dominates the news. David will not be found hanging out with the Goliaths. Even today, I find it amazing how incestious and uniform thinking is in so many “councils of the powerful”. The same words…disruption…personalization…platforms…data… All of us trampling on well worn paths of widespread and obvious thinking. Of course we have to work in an an omni-channel, digital first, platform dominated world with personalized data. Everybody better do so to compete and remain relevant. But then what? This is where the ball is. Where is the ball going ? Pay attention to the non-obvious, the small and weird. Take meetings with folks you would not normally do even though they have no rolodexes or fame. Remember that those behind Red Ropes may be roping themselves in rather than roping others out. Experiment quickly with new companies and technologies instead of meeting after meeting which costs more than testing out the new. Do. Do not diddle. Mindset Shifts: There comes a time when there is a mindset shift. When this happens ( it is has happened with Bitcoin, and recently with Tesla when all the "Gods of Finance” pooh poohed what they did not understand and soon will again with the reality of Climate Change and Gene Therapy), major new industries and opportunities are born and major forces of disruption and wealth creation happen. Build a case for why you may be wrong. Build a case for the opposite of what you think is true. Shift your mind before it is shifted. 3. Looking for a Christmas Gift for your friends, your team or your company? As many of you know, and many have been huge supporters of (Thank you!) a book I authored called “Restoring the Soul of Business: Staying Human in the Age of Data” which was published globally early in the year by HarperCollins. The book which has 12 chapters, each of which can be read in any order, provides tangible advice in four areas. 1) How to think about the future, 2) How to manage and adapt to change so it sucks less, 3) How to lead with soul and 4) How to upgrade your mental operating system. The Economist Magazine said…”During the lockdown your columnist has worked his way through four weighty tomes by managers who argue that companies have a broader purpose than simply making a profit. The books were “Trailblazer” by Marc Benioff, “Green Swans” by John Elkington, “Restoring the Soul of Business” by Rishad Tobaccowala and “Share” by Chris Yates and Linda Jingfang Cai. Perhaps the best of the books is Mr Tobaccowala’s. That is because the author, a senior adviser at Publicis Groupe, an advertising and communications firm, has a clear focus: how to ensure you can hire, then inspire, the right workers in the knowledge economy. “Employees who find work meaningful are highly productive, agile and committed,” he writes, adding that talented workers are in a more powerful bargaining position in the current economy. He also argues that companies can be too obsessed with data, and not enough with employee motivation: “The best businesses find ways to marry the math and the magic.”The book is clearly written and full of sensible and practical suggestions. “ The book has also made some Best Business Books of the Year list including form Strategy and Business which wrote “Restoring the Soul of Business, I kept thinking as I read it, is part Ken Auletta (the New Yorker media critic who, as it happens, authored the foreword), part Deepak Chopra. As detailed and all-business as Tobaccowala is, and as soberly and expertly as he makes his case here, it would be unimaginable to ruminate, at book length no less, on a subject like the importance of humanity without sounding at times like something out of the Up with People program. (One chapter is titled “How to Lead with Soul.”) Aside from its numerous how-to lists, the book is filled with helpful case studies of companies that have mastered the fusion of data-based marketing and business management with human relationships. A smart and worldly man, Tobaccowala has produced a deeply informed book about brand marketing, data science, and humanity that is a remarkably lively read. Name another book about business (or any other subject) that in one breath urges the reader to acknowledge “the turd on the table” in the boardroom and references François Truffaut’s The 400 Blows and Joan Didion in the next.” Read the full review here. You can read more about the book including an essay from me on why you should read the book and different purchase options ( audible, kindle, ebook, book and even CD-ROM) everywhere in the world here….https://rishadtobaccowala.com/book And for those who want to get more than 25 books or e-books reach out to me for both bulk pricing and Concierge handling from HarperCollins. If you want to upgrade and inspire your teams $10 to $20 is a great investment as a Christmas present… Regardless, thank you for the 10 minutes every Sunday or whenever you give to reading this newsletter…

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Ecclesiastical Insurance Group

Ecclesiastical provide financial products and insurance solutions for individuals, families, groups and organisations who care about their communities and the environments in which they live and work. We are also a company that donates a significant proportion of our profits to charity.

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