Is re-regulation, not deregulation the answer to the financial world’s continuing woes?

The amount of financial regulation in the world continues to increase, creating an ever-growing burden on banks and other financial institutions. Banks only have themselves to blame, goes the pervading view, creating exploitative situations such as sub-prime mortgages and credit swaps, thus collapsing the bond of trust they maintained with their customers.

But the reality is that we all suffer under the cosh of increased bureaucracy and cost, with no real benefit other than (we hope) reducing the risk to ourselves of being exploited, or indeed, of the 2008 financial crisis from happening again. In part the collapse of global finance was caused through direct exploitation, but a bigger crime was how financial organisations demonstrated their institutional incompetence.

They had one job — to support and protect the dollars and cents of their customers — but organisations from Lehman Brothers to RBS showed not only their ineffectiveness against corrupted behaviours, but also their poor grasp of shared risk. Above all, and even with the caveats of how complex the situation became, our smart-suited financiers proved themselves to be really crap at maths.

The result was the undermining of global confidence. “2008 saw the collapse of trust and legitimacy,” said Anne Leslie-Bini of consulting firm BearingPoint, at a recent analyst event in Paris. “Governments, central banks and trusted financial intermediaries found themselves brutally exposed, meaning the public lost faith in the very institutions that are meant to represent, protect and further their interests.”

We are still dealing with the consequences, one being more power in the hands of the regulators — whose systems were also proved to be ineffective, but who no doubt feel the are doing the right thing by creating more. The result is a continued flood of regulations — nearly ten times as many publications being released per year compared to pre-1994 levels. “There is no end in sight,” continued Anne.

Of course regulators will have the best intentions, but the effect is to stymie financial institutions without necessarily dealing with the potential for rogue trading, product mis-selling or other, yet to emerge financial malpractice or imploding bubble. It reinforces the notion that working within a regulation is by definition ethical — the “I did nothing wrong” school of thought.

At the same time however, we are not seeing any regrowth of trust. Precisely the opposite could be said to be true, in this environment of fake news and political spin. We live in a context of post-truth where nobody knows who to trust, which can be exploited by both the untrustworthy and those looking to gain from promoting distrust. Such a situation ultimately serves nobody.

We are neither willing nor likely to go back to that rose-tinted world where the default behaviour was blind trust in our institutions and elders, as computers and the economics of big business have put paid to that. All the same we need a rethink in how we develop and deliver regulation, one which aligns with how the world is today rather than trying to follow a historical, institution-based model.

According to Anne Leslie-Bini, this is the opportunity presented by regulatory technology (RegTech) — we can fight like with like, creating regulations according to the same principles as the technologies used by institutions. So for example, rather than expecting banks to produce monthly reports, access to banking data should be available in real-time, via APIs.

Such ideas can be taken much further, however. If we are in the platform economy for example, regulation can, and should be built into the platform. Just as “Data should come out of the pipe clean,” as Cisco’s Charlie Giancarlo once pointed out, so should it be expected that the virtual money coursing around our networks is correctly sourced and with traceable provenance (using Blockchain, for example).

Thinking beyond technology, a third pillar is to consider how business practice is changing and to expect regulation to follow suit. So, if agility, scalability, co-creation and customer experience are key levers for driving business value, so should we expect agile, scalable regulation and so on. Co-creation of regulations is a model already tested and being proven by regulators and financial organisations in Austria.

Such thinking is a long way from the expectation of sheep-like compliance with laws conjured up by some inaccessible people in a distant corner of the globe. “As long as we are operating in a system where we have to constrain behaviours that act contrary to the common good, regulation will always be playing catch-up.,” says Anne.

The future is not about de-regulation but re-regulation, delivering models that enable our very necessary institutions to fit how the world works today. Regulation should not be based on building ever-higher walls around our financial institutions but aimed towards striking a balance, to deliver the right levels of protection for citizens and businesses within a framework of ethics that increases, rather than undermines trust.

[Disclaimer: BearingPoint is a client]

The Gift Card Sector Comes of Age. Part 5 of 5: Disruption – The Slow Rise of Pre-paid Cards as a Financial Force

In this five part series, we have referred to gift cards and pre-paid cards interchangeably when traditionally there have been key differences – most notably that gift cards are generally one-time use, have no/few fees, and are not re-chargeable. But this reference was deliberate as emerging gift card solutions are empowering retailers to compete at the pre-paid card level. Which in turn enables retailers (many of whom already offer financial services) to become even more bank-like, but at lower cost and a more holistic view of the lifetime customer.
In this last post, we will look at two of the companies contributing to this shake-up – an emerging start-up featured as one of the 2015 Money20/20 Launchpad companies – Slide – and an established and rapidly growing alt fin services provider Cards.com.
Gift/Pre-paid Cards Will Permanently Replace Some Bank Accounts.
As previously discussed in this series, for Millennials and those entering the U.S. financial system for the first time, there is no really compelling reason to have a bank account. Even with rising interest rates, the return on holding your money in a bank is magnitudes lower than any number of alternative investment vehicles. Particularly for younger consumers who have low/no savings and high debt, using financial services that are low cost in absolute terms – not relatively speaking –are a priority. Dwolla and other low cost non-bank alternatives will likely see a spike in users in the coming years, particularly in the advent of a recession.
Slide: Gift Card Management for Consumers, A Platform for Retailers
Into this environment where many can “take or leave” the bank, there are increasingly viable, highly usable and even fun alternatives. Seed-funded Slide made its fintech industry debut at last year’s Money 20/20 conference, debuting at the show a suite of mobile gift card management features that presents the consumer user with the ability to manage their gift cards all in a single wallet app. As compelling from the retailer’s perspective, the company enables the consumer to buy – and reload – their gift cards in a theoretically infinite number of designs, adding a level of engagement with the brand not available on typical gift card sites, which tend to present brands in a mass market, commoditizing the value of the gift card itself and burying the brand in a sea of logos. The company’s plans include adding the ability to instantly trade and transfer gift cards, placing the start-up in the realm of P2P payments.
What’s interesting about Slide are its initial users, who are not so much the typical tech early adopter, but who are more representative of the general population, such as mothers. According to Slide co-founder and CEO Mike Morris (formerly with American Express), “Slide users come from pretty much every corner/pocket across the country who share such common pain as managing their gift cards.”
Retailers, some of whom have previously declined to have their gift cards sold online, are signing up with Slide. Morris observes that “The e-gift card industry is growing by 44% year-over-year, and merchants seem to be waking up to the fact that their gift card programs are generally underutilized and can be leveraged to engage and delight customers in new ways through digital experiences.”
Card.com: Branchless Bank with $450 Million in Deposits – and Counting
Last fall, CARD.COM announced $9 million in growth funding to expand its mobile tech offering and to move from word of mouth to marketing-driven customer acquisition. With over $450 million in deposits to date, CARD.com has clearly made in-roads into its goal of becoming a leading non-bank financial institution.
While CARD.com has no branches, 85% of their customers use their mobile app monthly, compared to the banking industry average of 30%. The remaining percentage use the service via the company’s website. Significantly, as a SaaS (software-as-a-service), the company can scale up quickly to meet demand. Where it has run into some issues, and where it plans to invest significantly, is in the area of real-time customer service. New service introductions can also be introduced relatively quickly as compared to the banks, with CARD.com set to launch sub accounts (for spouses, teens, domestic helpers, etc.). Much like Slide, CARD.com is seeing significantly traction amongst moms. And compared to non-card focused branchless banks GreenDot and NetSpend, CARD.com reports that over 85% of their deposits are direct deposits of paychecks (as compared to a 30-40% range) – and their number of deposits is significantly larger, despite having only launched three years ago. As a point of comparison — the mobile banking sector today represents only 2 million accounts out of a total 14 million (inclusive of those doing mobile banking via branched banks) according to the Digital Bank Report. CARD.com in comparison has more than 600,000 accounts.
The main driver behind this success? Customized cards and attention to serving the customer, even if that customer is unbanked. The service offers “Fair, Fashionable and Fun online prepaid card solutions” and treats its customer “as an individual who is cool like James Dean, sultry like Bettie Page or a cat-lover with a heart of gold. CARD.com lets you represent the things you care about, with awesome perks along the way.” Clearly not your average bank.
Going into 2016, the remaining stigmas against gift cards will be further chipped away as the sector matures beyond paycheck deposits and retail goods. In October 2015, Stockpile.com raised $15 million in a Series A round from superstar VC Sequoia Capital and rockstar actor Ashton Kutcher, amongst others. The service will enables consumers to buy company stock via gift cards at retail locations, helping to democratize and demystify investments (not good news for the few remaining retail Wall Street brokers).
Suffice it to say, gift cards are at the least hot. And on a relatively slow but steady trek towards true consumer financial revolution.
 

The Gift Card Sector Comes of Age. Part 4 of 5: Sector Outlook – Gift Cards as Alternative Banking

In part 3 of this gift card series, we looked at the business drivers behind increased consumer adoption. In this post we will further examine one of these drivers – the bundling of bank-like services into the pre-paid card relationship as an emerging consumer financial paradigm. This courting of the un-banked and under-banked by retailers and other non-bank entities represents an arguably permanent shift away from the traditional retail bank as consumers’ primary financial resource.
In the past, the “un-banked” and “underbanked” have referred to new country arrivals and those otherwise disadvantaged in the U.S. financial system – minors too young to have a checking account, young adults with no credit history, people unable to maintain the minimum balance requirements for a checking account, and so on. People alternatively have treated this issue as a problem for charity, or as a way to take further advantage of a group with few financial choices (i.e. predatory financial services — payday lenders and other consumer “subprime” credit providers with double-digit interest rates, low limits and high fees). But as bank fees rise (without the needed longer bank branch hours and other services/features needed by many people – underbanked or no), alternative banking is becoming a smart choice for the informed consumer across demographic and economic segments.
In this environment of disillusionment with the banking system (alt financial services users say that there are issues with the lack of “service,” “trust,” and “respect” from traditional institutions), more people are turning to alternative financial service products – and the market for these services is growing. A 2011 Federal Deposit Insurance Corporation (FDIC) survey revealed that 25% of all U.S. households used an alternative financial product between June 2010 and June 2011. The study also found that non-bank transaction services (i.e. non-bank money orders, check cashing and remittances), were used by 39% of U.S. households.
Fast forward to 2015, and the percentage of alternative financial service users amongst the low and middle classes has grown to 39%. While new payment models have been introduced to serve the involuntarily underbanked, companies like PayNearMe, which enables users to pay for goods and services online and in-store with a card backed by cash paid to a physical outlet – have experienced issues with a fractured market for its services as well as logistical, even store security issues when dealing with larger cash transactions. As such, those solutions that court consumers who are voluntarily opting out of the bank and credit card system – such as bitcoin and other cryptocurrency exchange services and emerging high-service, high usability gift and other pre-paid card products are gaining ground as they begin to capture multiple segments of the diverse un—and under-banked market.
Interestingly as banks move towards pushing the consumer into a self-serve model via ATM’s, email inquiries and fees for in-bank visits, pre-paid card issuers are increasing the levels of service that have traditionally been out of reach to the under-banked and other users of pre-paid value vehicles. As such, being a pre-paid cardholder – particularly at the platinum levels – is an attractive alt fin consumer choice. At the least, pre-paid cards can be seen as a way to augment a bank account.
Millennials: The First Wave for Alt Finance
More importantly, choosing to be un-banked is now a viable financial lifestyle choice. Whether as a result of people’s disillusionment with traditional banks, a desire to share less personal information with institutions, or because XXX, people who are able to participate in the larger banked population are choosing to instead to become at least partially unbanked, with their financial assets divided across multiple financial accounts. As significant, some users are skipping the banks altogether for more lucrative products like loans and going directly to alt finance specialty services such as SoFi, a lender focused on the millennial market.
Increasingly post-Millennials are choosing to eschew traditional banks altogether with the rise of alternatives such as Robinhood. And while the Millennials do have bank accounts with the majors, their money and perhaps more importantly, their transactions, are split amongst several institutions — as a hedge against another financial crisis, if unconsciously. While Millennials need – and value – financial advisement as much as other segments, they are getting their information from like-minded peer sources versus a bank expert – and they are likely to get their advice from multiple sources as well.
But several trends indicate that the ranks of the underbanked are growing as the un-banked and underbanked are presented with ever more “banking-like” options and with the emergence of innovative new offerings that provide consumers with options that the banks have been slow to offer, or which have previously only been available to those with stellar credit and/or large deposit accounts. In comparison with fee-laden bank accounts, pre-paid cards are highly attractive. American Express offers:

  • No credit check
  • No minimum balance
  • No hidden fees
  • Value-add services such as online bill pay, tools to manage your money
  • Cash-back on premier tier (with minimum loads)
  • Free direct deposit
  • Large scale cash re-load networks (45,000+) and ATM access
  • Subaccounts
  • Mobile capabilities
  • Connected to your checking/savings account

In addition, the American Express-Walmart Bluebird offers:

  • Dedicated customer service
  • Check-writing
  • Transfer funds between Bluebird and checking/savings accounts

While the pre-paid business currently represents a relatively small 2% of the business, it may figure importantly as American Express struggles to keep its high net worth customers, and in the wake of such losses at the Costco co-brand account. The pre-paid business is experiencing triple year-over-year growth as a result of these attractive features, though in the scope of AmEx’s overall business, pre-paid is not contributing significantly to the company’s profitablity.
But that’s not the point. AmEx is developing consumer relationships — building brand, goodwill and a customer pipeline for higher margin products. In this manner, American Express is able to tap into consumer segments that had previously been unable to them, and to potentially retain the customer relationship if and when a pre-paid card user is able to, or decides to become banked.
In the final part of this five-part series on gift cards, we will look at two companies in particular – one a recently launched start-up and the other an established and fast-growing force in the pre-paid cards business – that are focusing on usability and merchant/brand relationships to capitalize on the rising use of stored value cards as non-bank financial account vehicles.

Bank POV: An Interview with U.S. Bank CIO Dominic Venturo

At the Plug and Play Retail and FinTech Expo on October 22nd, I had the opportunity to interview Dominic Venturo, CIO of U.S. Bank, on his views of the future of fintech and the role of the traditional bank in the new age cloud and increasingly mobile-first landscape. While its invigorating to cover the fintech newcos, they hardly have the monopoly on innovation. And, in the words of the legendary and enduring Grandmaster Flash, “You have to know where you came from to understand where you are going.” Partnering with the banking establishment can provide insight (and resources) that may save newcos time and iterations later.
Why choose to spotlight U.S. Bank? First, it has what Venturo calls a “wide lens” or breadth of business in that it runs a large payments business, is both an issuer and an acquirer, and also has a large retail bank. But mostly I find the U.S.’s fifth largest commercial bank interesting in that it makes innovation a core component of its culture. Aside from the sending of a C-level executive to speak at an accelerator/incubator micro-conference despite not having a venture wing, the company strives to support and to work with innovative partners including start-ups. States Andy Cecere, chief operating officer for U.S. Bancorp, “Innovation is part of our culture and it is how we view the development of new products and services. By anticipating what our customers will want or need in the future, we can better prepare our customers and company for whatever is ahead, capturing opportunities and avoiding pitfalls along the way.” Recent examples of innovation from U.S. Bank include advances in mobile payments, voice biometrics, tokenization and integrated mobile and web commerce solutions.
But what I really like about U.S. Bank is that it is willing to be a banking industry contrarian — and successfully so. One notable example is that while the majority of banks have cut back on small business lending (sub $1 million) over the past few years, U.S. Bank has increased its commitment to SMBs. In its fiscal year ended September 30th, the bank stepped up the overall dollar value of its SMB lending by 15.4% over 2014, while spreading its lending over an 18% greater number of loan recipients. The bank lent $776 million via 3977 loans in its fiscal year 2015 — a modest size loan average of $195,122 per business. Yet U.S. Bank reported an overall full year record performance in 2014 with net income of $5.85 billion.
But back to my interview with Dominic Venturo. Pardon the video quality — impromptu interviews necessitate the occasional shaky frame whilst one adjusts her grip on the cell phone… Thankfully the post-production team has added a little more pizzazz by posting each of my questions on-screen prior to Dominic’s answer.

Some interesting takeaways:

  • It’s not so much the cloud now, it’s mobile.
  • He sees the greatest fintech innovation happening in the minutiae of the payment life cycle — making in-app payments seamless, simplifying mobile payments.
  • Passwords are going away for both internal use as well as consumer multi-factor authentication, with mobile phone-based biometrics being an area that U.S. Bank is focused on.
  • Hardward tokens are not necessarily making a full-out comeback (for authentication) but there is a marked increase in their use — U.S. Bank uses them internally.

 

Millennial MBAs, NextGen FinTech & the Rise of the Micro Conference

Continuing the millennial and fintech discussion, I recently attended the country’s largest (business) student run digital media conference, the Berkeley HaaS School of Business’ PLAY — a show curated by high achiever millennials, in which SoFi and PayPal were major sponsors, where some 20% of the agenda was focused on financial services disruption, and 25% of the exhibiting, pre-funded start-ups proposed some kind of re-invention of personal finance.
My learnings:

  • In an unstructured analysis by Foundation Capital, roughly 3500 fintech start-ups have received funding in the past 10 years, with some 60-70% started in the past 4. This indicates that many new fincos are just now coming out of their incubation and beta periods.
  • To be perfectly clear, SoFi aspires to do away with your old school banking relationships (if you’re a millennial). SoFi’s narrow target allows the company to rely less on lead generation vehicles – a cost and competitive advantage.
  • As a whole, SMB lending is in trouble, and that’s exactly where nextgen fincos are finding opportunity.
  • Lending Tree portfolio extends to medical and educational loans though SMB lending is still its core. The company has loaned $13 billion so far, with $9 billion in just the past year.
  • Credit Karma claims 45 million members – representing a quarter of all US residents who have a credit score. As a partner to lenders, the company is currently focused on facilitating the student and SMB loan process, but counts as well amongst its customers a broad base including top 10% earning individuals such as consultants, lawyers and bankers.
  • The bulk of finco competition resides on the supply front, with many companies competing for traffic and attention – this situation likely to force many companies to focus on a specific niche, and to become brands and product lines within larger well-resourced entities.
  • Lending Club on average reduces the debt load for SMBs and consumers by 7% versus their old loans.
  • Banks for the most part are embracing the fintech newcos (know they enemy), but not so much Sallie Mae which is finally seeing a threat to its student loan monopoly.
  • That said, SoFi has originated $6 billion in student loans so far in 2015, tiny in relation to the $1.4 trillion market.
  • Fintech newcos are developing their own models of risk, with a focus on cash flow and income versus credit score benchmarking. SoFi no longer uses FICO scores as a “blunt instrument.”
  • That said, most established newcos are not using un-tested “wacky” data like social media profiling either – primarily to adhere to regulations and best practices such as Fair Lending rules.
  • FDIC reports show that there’s been a rise in bigger loans above $1 million – up 55% — while small loans (i.e. for SMBs) are down 24%. So the customer base for alternative lenders is growing, with “even young white guy business owners” having trouble getting SMB loans via traditional outlets today and seeking other means of financing versus a past demographic of primarily black and Latino business owners from the inner city and other less affluent geographies.
  • Mobile usability still has a long way to go in fintech, with only a small handful of newcos allowing for account opening via mobile.

My take:

  • Contrary to some naysayers who believe that we are about to hit a fintech bubble, we are not yet at the peak of the next gen finco wave as companies who have been in stealth mode the past 1-2 years are now emerging, with the strongest finding their product-market fit in the coming year.
  • Niche in fintech is big business. Whether it’s taking SoFi’s stance of focusing exclusively on millennials, or addressing a single sector area such as auto loans, consumer acceptance of handling their finances online and via mobile has reached enough critical mass to support these niches.
  • FICO score will be largely irrelevant in next 5 years. While the company has remained under the radar with the Consumer Financial Board, which is too busy attacking the banks to yet look at the underlying flawed foundation/credit bureau underpinnings of people’s financial lives, the fintech newcos are heeding consumers’ pain and addressing it appropriately with their own measures and credit risk models.
  • The success that alt lenders have with SMBs will continue to accelerate as new small business owners discover the advantages of going with non-traditional lenders and the word spreads organically throughout local business communities. As some of these businesses grow into small franchises over the next decade, they will continue to be proponents and users of crowdfunding and alternative lending as their loan size needs increase and in some cases, become permanently disenfranchised from traditional lenders.
  • Mobile is still greenfield for fintech. The companies that figure this out will rule in the next 5 years, regardless of their position today.

While small compared to more formal tech industry events, the PLAY conference is representative of a new wave of bringing tech to a wider audience in the spirit of Dreamforce (i.e. providing substantive sessions and/or high profile speakers at low cost/free tickets) and content curation in which students or “non-experts” are developing independent voices and running their own home grown events versus passive attendance at more established/massive industry events. Panels and speakers tend to be less scripted, if at all, engendering honest and meaningful discussion. While not entirely free from “pay for play,” these under the radar “micro conferences” are at the least refreshing and gaining mindshare as they literally allow everyone to be in the same room, and can be highly insightful when attendees’ and presenters’ guards are down. We’ll be covering more of these organic, niche events in the coming year.

Fighting for Their Financial Freedom: Millennials Reinventing FinTech

One of the more enlightening sessions at this year’s Money 20/20 payment industry conference (9,000+ attendees) featured new findings from a Foundation Capital survey on Millennials and Financial Services. The survey found that U.S. Millennials as a generalized group (those born between 1984 to 1997) are financially stuck – they have bank accounts, but are swimming in student debt and thus have no money to spend on investments and the extras after food and rent. Not surprisingly, most Millennials do not believe that what savings they have – mandatory Social Security contributions – will actually materialize for them in retirement.
And as indicated by such emerging social constructs as the post-college group house, Millennials are essentially stuck in the bottom tiers of the needs pyramid — not only can’t they save for big purchases, but they are also postponing milestone life events such as getting a place of one’s own, marriage and family.
Ergo you could say that millennials – even more so than the capitalist generation before them (i.e. the wolves of Wall Street) – are obsessed with money. And how it holds them back.
At the same time, Millennials are very facile with their mobile financial apps and rely heavily on them for financial information, services and purchase decisioning. They may have big brand bank accounts, but to them the brick and mortar branch, the ATM, even physical money– are becoming less relevant.
All the above lays the groundwork for continued massive disruption in financial services as Millennials fixate and act on their [lack of] money obsession and the status quo education and financial systems that have literally left them living in their parents’ basements.
And thus driven by the financially disenfranchised (but still optimistic) Millennials, a new FinTech Renaissance is emerging. From alternative methods of lending like SoFi ($1 billion capital raised in Sept. 2015 to help consumers refinance their student loans) to services focused on helping consumers to understand and take control of their credit scores (Credit Karma raised $175 million in June 2015), to bitcoin and other cryptocurrency technology that represent a new payment rail and partial replacement for fiat ($1 billion+ investment in 2015 with blockchain development companies like Chain raising $30 million), Millennials are taking down – or at least making less relevant — the traditional financial power structure one sector at a time.
Over the course of the next year, we’ll take a look at some of the emerging financial services disruptors and trends coming out of Y-Combinator and other incubators and launchpads such as Draper FinTech Connection and Plug and Play’s Fintech Accelerator.

Barclays to allow mobile payments based on Twitter handles

The British bank Barclays has announced a new twist on its Pingit mobile payments app – users will be able to transfer money to one another using their Twitter handles.

Pingit, which has been around for a few years now, has so far used phone numbers as the main identifiers for its users, who do not need to be [company]Barclays[/company] customers (though they do need a U.K. bank account and phone number) and don’t need to pay any transaction fees. As of 10 March, iOS and Android users will be able to associate their [company]Twitter[/company] handles with their Pingit accounts in the same way.

“Adding the ability to pay people or a small business using just a Twitter handle brings together a social and digital experience to create a new step forward for mobile payments in the UK,” Pingit chief Darren Foulds said in a statement.

That said, this approach – where Twitter IDs are used from within the Pingit app — is only one of several ways in which banks are enabling mobile payments using elements of Twitter. Last year France’s Groupe BPCE launched a service whereby people can actually send payments through public Twitter itself, with tweets containing special phrasing that triggers a form of verification on the recipient’s smartphone.

In January, Indian bank ICICI also launched a Twitter-based money transfer service, which involves sending a direct message to the bank’s Twitter account, containing the recipient’s Twitter handle and the amount to be transferred.

As social media gets quantified, more people use Twitter to trade

Professional investors known as quants use hard facts about companies —  share price, EBITDA, and so on — to inform the algorithms that carry out their automated trading strategies. But softer sources of information such as reports and rumors have long proved much harder to quantify.

Now, however, a major change is underway thanks to custom financial applications that treat social media discussions as data, and turn it into hard stats.

“The clear trend we’re seeing is the quantification of qualitative aspects of the world,” Claudio Storelli, who overseas Bloomberg’s app portal, told me last week in New York where he led a presentation on technical analysis applications.

He pointed in particular to Twitter, which throws off millions of data points (“inputs for black box consumption” in Storelli’s words), that can provide big clues about stock movements. Here is a screenshot showing Twitter sentiment about Apple, as parsed by an app called iSense:

Bloomberg isense app

The result is that computer-based trading tools are using social media signals not only to react to market events, but to predict them as well.

While Bloomberg has hosted such sentiment analysis tools for some time, Storelli said their use is more prevalent than ever. And this is converging with another trend in big-league investing: applications that let traders who lack a background in math or coding deploy technical analysis or academic theories that have traditionally been the purview of quants.

“Our mission is to eliminate the coding barrier,” he said, saying new applications now allow anyone with a basic knowledge of markets and statistics to apply complex technical theories to real-time events.

One example he cited is an application that lets traders integrate the theories of Tom Demark, who is known for using esoteric mathematical models to predict market timing, into run-of-the-mill financial charts.

Together, the two trends Storelli cited — applications integrating technical analysis and the use of social media sentiment — reflect more widespread access to opposite ends of a spectrum of expertise. On one hand, traders can deploy the knowledge of elite experts while, on the other hand, they can act on the collective hunches of millions of average people on social media.

In practice, of course, these approaches are still far beyond the reach of average investors, in no small part due to Bloomberg’s hefty price tag. But they may also appear to be laying the groundwork for democratizing the tools that supply inside insight into financial markets.

To learn more about how tools powered by big data are changing finance and other industries, join us at Gigaom’s Structure Data event in New York City on March 18.

iSense screenshot

TransferWise raises $58M in Andreessen Horowitz-led Series C

London-based online currency transfer outfit TransferWise has raised a $58 million Series C round that was led by Andreessen Horowitz. This follows a $25 million Series B round just seven months ago, which included Virgin chief Richard Branson and original backer Peter Thiel (who are also in the current round, along with Index Ventures, IA Ventures and Seedcamp.) Like CurrencyFair over in Ireland, TransferWise uses cash reserves in various countries to bypass the banks and offer conversion rates that are far cheaper than those offered by traditional banks and remittance services. According to the Financial Times, Andreessen Horowitz won a competitive bidding process to invest in TransferWise, which is now valued at “close to $1 billion”.