FinTech Daily: Morgan Stanley on Roboadvisers and FinTech; Google Ventures Launches First European F
Morgan Stanley on Roboadvisers and FinTech
Global assets managed by robos could reach $13 trillion by 2025 in a best case scenario, according to a group of equity analysts at Morgan Stanley. That's up from $100 billion as of December 2016. But while robo pioneers Betterment, Wealthfront and Nutmeg have been growing at a fast clip, it's actually the legacy firms such as Vanguard and Charles Schwab that will drive growth in the robo-advice space moving forward, according to Morgan Stanley. Schwab already has close to $50 billion in robo assets, up from $4.2 billion in 2014. "[W]e think the incumbents are best positioned to win market share, and we see the fact that ~70% of the companies we interviewed either just launched or are about to launch such offering as a step in such direction," the bank said. That's because legacy firms have their brand names to back them up. A lot of investors, especially high-net-worth investors, are more comfortable giving their money to a well-established Wall Street firm than to a young startup from the Valley. "The case of Vanguard and Schwab has showed that network and brand are key to lower cost of acquisition, and allow for faster expansion," the bank said. But this doesn't mean the bank thinks the end is nigh for all robo-advice fintech firms. They believe a "handful" will survive, but most will have to partner up with other startups or get bought out by incumbent firms. This consolidation is already underway. TIAA, a New York-based financial services firm, bought the business-to-business robo-adviser MyVest in 2016. In the same year, Invesco, a legacy investment management firm, bought Atlanta-based robo-adviser Jemstep.
Google Ventures Launches First European FinTech Investment
Google Ventures, the search giant’s venture capital arm, is making its first fintech investment in Europe, changing tack from the primarily life sciences focus espoused by former founder Bill Maris. The firm, which shut down its European fund after just 18 months and lost several European partners as well as its US founder Mr Maris last year, is investing £20m into London fintech firm CurrencyCloud which allows online companies to take cross-border payments. The five-year-old startup, whose other investors include Japanese e-commerce giant Rakuten and Sapphire Ventures, the investment arm of software company SAP, made $1m in revenues in December, and is growing 60 per cent year on year. It has 200 customers, including the Standard Bank of South Africa, and Travelex, which pay CurrencyCloud a cut of all payments made via its API. So far, it has raised £44 million, and doubled its valuation between its Series C, raised in early 2015, and the latest round. “We have an API that we sell to other payment firms, banks and e-commerce companies, from shipping to electronics, wealth management and travel, allowing them to do international transfers and payments, with built-in compliance,” says chief executive Mike Laven. “GV hadn’t done any other fintech investments in Europe. Google looks at us as a tool that other firms can use to globalise. The investment was all about being developer-led.” GV, which invests roughly $500m in high-growth tech companies globally, was launched in 2009 with a deep tech and biosciences focus. About a third of the fund’s investments are in life sciences companies, according to London-based partner Tom Hulme. However, since new managing partner David Krane took up his role in August last year, the fund seems to be shifting gears, although it says it will continue to invest in life sciences companies. “A core area of investment for us is fintech, reflected in deals like Stripe in November last year, and Align Commerce which was renamed Veem, announced this week,” Mr Hulme said. “London is particularly interesting because there is a huge exit opportunity. We look for capital and potentially exit options, and London has great financiers, customers, and potential acquirers for a business like Currency Cloud in the long run.”
Uber Starts Charging What It Thinks You Are Willing to Pay
Uber drivers have been complaining that the gap between the fare a rider pays and what the driver receives is getting wider. After months of unsatisfying answers, Uber Technologies Inc. is providing an explanation: It’s charging some passengers more because it needs the extra cash. The company detailed for the first time in an interview with Bloomberg a new pricing system that’s been in testing for months in certain cities. On Friday, Uber acknowledged to drivers the discrepancy between their compensation and what riders pay. The new fare system is called “route-based pricing,” and it charges customers based on what it predicts they’re willing to pay. It’s a break from the past, when Uber calculated fares using a combination of mileage, time and multipliers based on geographic demand. Daniel Graf, Uber’s head of product, said the company applies machine-learning techniques to estimate how much groups of customers are willing to shell out for a ride. Uber calculates riders’ propensity for paying a higher price for a particular route at a certain time of day. For instance, someone traveling from a wealthy neighborhood to another tony spot might be asked to pay more than another person heading to a poorer part of town, even if demand, traffic and distance are the same. The change stems from a feature Uber introduced last year called upfront pricing. By guaranteeing customers a certain fare before they book, the company said it provides more transparency. But it hadn’t previously said how Uber was estimating those prices and continued paying drivers using the old model. In an attempt to ease drivers’ concerns, Uber will start reporting the price a passenger pays on each ride, though it will stop breaking out the percentage Uber takes of the fare. The company will also send drivers an updated terms of service agreement reflecting the new fee system. Route-based pricing is currently limited to 14 U.S. cities where Uber offers its carpooling service.
Category: Artificial Intelligence