I’m not a driven businessman, but a driven artist. I never think about “ money. Beautiful things make money. Lord Acton I am not a businessman, I am an artist. “ Warren Buffett I didn’t want to be a businessman, because all the businessmen “ I knew I didn’t want to be like. Steve Jobs Thank you so much for your help with this book: Sergey Leontiev Jeremy Berger Timur Khamitov Igor Pesin Jim Marous Dmitry Solodkiy Oleg Karaev Vladimir Belyakov and my friends, colleagues, mentors – Chris Skinner, Brett King, Reggy de Feniks, – who inspired me a lot. Illustrations: Eugene Kiselev, Vladimir Belyakov, Oleg Karaev. Typesetting: Nikita Shekhovtsov. Contents 4 Intro: From Book to Bank in 12 Months 17 It’s a Revolution, Not an Evolution 21 Part 1: On the way to the first fintech bank 26 1.1 The main fintech battle is about the land of big data 41 1.2 Money as the new language for communication (not for remittance) 52 1.3 The power of the crowd: fintech bank as a “Tinder for money” 66 1.4 Fintech is about how to earn more rather than to pay less 77 1.5 Insurtech is the new fintech 84 1.6 Neobanks as front-end interfaces for fintech banks 94 1.7 Co-working space as fintech bank's branch 115 Part 2: Building the puzzle of the ecosystem 123 2.1 Open architecture nature of the fintech bank: BaaS as a base 134 2.2 The next: wave of mergers and acquisitions, rather than new startups 141 Part 3: Customers for fintech banks 142 3.1 Why Zuckerberg, Gates and Omidyar invest in fintech for poor? 148 3.2 Fintech banks for “Snapchat generation” 152 3.3 GIG economy is on the rise 173 3.4 Occupy fintech: who and where can build the first fintech bank? 176 3.5 “Dances with drums” by banks 191 3.6 Why you should hire an artist as your next business consultant — the modern CEO should be “Designer in Chief” 196 3.7 Sweden and India as two examples of real fintech hubs 201 3.8 China shows the way 210 P.S. 22 business books that blew my mind 4 Intro: From Book to Bank in 12 Months Intro: From Book to Bank in 12 Months Intro: From Book to Bank in 12 Months 5 Having summarized my limited 5-year ex- perience in fintech and intuitive guess- es on the next industry trends almost a year ago in September of 2017, I presented my first book “The First Fintech Bank’s Arrival.” It was some- what overly ambitious on my part since I’m no writer and I have never viewed myself as one and still don’t (and those who know me personally know that I cannot even string a sen- tence together correctly in English). When people say “the first book” they casually hint at the second and third book. I hope that in my case I will not bore readers anymore and won’t clutter the informa- tion space with new scribble. So I’m a dilettante in everything - I’m always interested in something new, I’m asking an infinite number of ques- tions, and I’m not afraid to share the answers found. I have never laid any claim to any fundamental novelty or significance of my ideas; rather, I share my experience with the hope of saving time and energy of other dilet- tantes like myself. 6 Intro: From Book to Bank in 12 Months Quite to my surprise, the book re- ceived a positive response: more than 11,000 followers on our Face- book page, followed by invitations to present the book at 15 events in across eight countries (Singapore, the Philippines, Portugal, Be- larus, Spain, USA, Dubai, and China), even some fintech experts, bank heads and regulators found it use- ful and recommended it to others to read. Especially flat- tering and humbling were the invitations from two prestigious business schools - INSEAD and Wharton! And I’m very grateful to them all and those who asked me questions personally or online. Many times, I heard the same question: “Why don’t you want to build the bank you wrote about yourself?” The world knows only a handful of coach- es who can play well on the field themselves, so at first, I could not garner enough audacity to change investor shoes into startup sneakers and run out onto the field. One can say that our project was born from the question “What if?” - although at that time it was not yet conceived. In October and November 2017 (a month or two after the book was pub- lished), my colleagues and I were attacked not only by applicants for in- vestments or advisory services representing hundreds (nope, thousands) of newly-born ICO startups, but also by several “happy” dozen of the “lucky” ones who had already successfully “raised millions in investments” through a new way to raise capital (and, unfortunately, often deceiving investors in return), and had faced the problem that their banks do not open ac- counts or freeze and close accounts of their companies. Their common question sounded very stupid to me at that time: “Do you know any bank, anyone, from anywhere, that could open an account for us?” It was late 2017, amidst tons of rapturous articles both about the bright prospects of blockchain technology in general, and the success of specific companies in particular, such a question came up from “the most progressive inno- vators.” At first, I did not take it seriously. I thought that brilliant physicists (i.e. successful newly-born ICO millionaires) might not know how to cook soup (i.e. open a bank account). But the more often I heard this question the more I realized that this was not a joke. Intro: From Book to Bank in 12 Months 7 NYC-based Metropolitan Bank has ceased all cryptocurrency-related international Crypto-related clients wires eective immediately. The bank could not verify the compliance of international wire transfers for cryptocurrency accounts. It “does not accept cryptocurrency-related wire transfers from non-U.S. entities.” Coinbase is among are playing cat and the companies that use Metropolitan for wire transfers, deposits, and its Shift bitcoin debit card. mouse with banks Tether’s primary banks in Taiwan were being blocked by U.S. correspondent banks. Cryptocurrency trader called out National Australia Bank, ANZ, the Commonwealth Bank of Australia and Westpac for freezing customer accounts and transfers to four dierent bitcoin exchanges. An Israeli company has gotten its business rejected by all 11 banks in the country. British banks are shunning companies that handle cryptocurrencies, forcing many to open accounts in other countries. British lenders have distanced themselves from Cryptocurrency companies have traditionally had a hard time engaging with cryptocurrency companies and digital coins in general, because of nding banks to accept them as customers. Almost all crypto- their reputation of being used in illicit activity. related customers aren’t accepted by traditional banks (even by newborn neo or challenger banks). Almost all major banks South Korea banned its traditional banks from dealing in virtual currencies. refuse to accept money after the conversion of the cryptocurrency. Singapore’s Cryptocurrency and Blockchain Industry Association had heard from 10 companies which had encountered problems with their banking If you want to know more - you can download our research here: relationships in Singapore. https://goo.gl/e2p6Pn Finnish company Prasos has had four accounts closed. One of the Nordic region’s Traditional banks keep biggest Bitcoin dealers has one lifeline left. freezing and closing accounts of crypto-related The Thai central bank has prohibited financial institutions in the country from five key cryptocurrency activities. customers Crypto exchanges BTCXIndia and ETHEXIndia have informed their customers via email that they are stopping trading activities, citing the “stress” on their business caused by governmental actions discouraging crypto. I gathered a small team and we spent the autumn of 2017 focusing on the validation of the problem. We asked a lot of large and small, technological- ly advanced and unadvanced banks from different countries whether they opened accounts for this kind of customers (no), and if “not”, then why and under what conditions could they open accounts for them. It would seem that a relatively small number of players have accumulated a total of several billion dollars, which they can not normally put in a bank account and use them for their business development – these potential customers are yours for the taking. But it turned out that even though banks want their billions, they can not accept them. I will not list here all the problems, causes and other obstacles “why not” - if you are interested, I can devote a separate text to all these meetings and insights received. I believe one of the most productive meetings I had was the one with Car- los Torres, CEO of the BBVA banking group, which took place on Novem- ber 1, 2017, in my office. He summarized the essence of the problem very well and, at the same time, the prospects for its solution. I suppose this was the moment when my team and I decided to build such a bank ourselves (since no one else for some reason has done it). That’s how “dilettante for life” turned into a “startup willy-nilly.” Frankly speaking, while we have been dealing with the problem of bank rejection of crypto-related companies, we have found out that a large number of people and businesses were bereft of love (or more precisely, understanding) by banks.