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How developers are helping traditional banks modernise

Bitcoin and blockchain tend to grab headlines in the world of banking. Cryptocurrency is the poster child of “disruptive technology” in the traditionally slow-moving finance industry. But, there are other areas where developers and software engineers must update business-as-usual in banking in order to survive.

According to one survey, 80% of bankers agreed that their institution “needs to complete an assessment over the next three years, but only 15% expected that to lead to a modernisation effort.” Security threats, the demand for mobile banking, and outdated core banking systems are all driving banks to consider massive overhauls to their IT systems. These are the biggest modernisation challenges facing financial institutions – areas where developers and remote software teams can play a significant role in keeping banks competitive.

Making updates to “legacy structures”

In the same survey, 60% of bankers reported that at least one of their major technology challenges is directly tied to aging core systems. “Maintaining legacy systems accounts for 78% of a bank’s IT budget, and 70% of bankers feel their core processes cannot quickly adapt to change,” reports Ripple.

Over time, banks have resisted major changes to their core banking system, the backend system responsible for processing transactions, updates to accounts, and maintaining other financial records. Core banking systems are in charge of processing deposits, loans, and posting credits, as well as updating other reporting and ledger tools.

As consumer-driven capabilities like mobile deposit and peer-to-peer transfer have grown, these core banking systems have had ad hoc updates – but no complete transformation. Core deposit systems were built in the 1970s, written in “old, inflexible programming languages” like Cobalt and PL/I. Oracle’s analysis also found that these “decades-old legacy core systems are inflexible, and each time a bank wants to launch a new product, they must ‘hard-code’ the system, which can take 12 months or more.”

There’s no simple solution to updating a bank’s core system: it’s a massive technological undertaking, but one that banks must invest in to serve its customers well. Engineers can help banks develop an agile, consumer-centric approach to core banking. There are multiple approaches to solving the problem of archaic core systems, and software teams can phase in iterative changes that evolve a bank’s core infrastructure without too much service interruption.

Modernising Fraud Protection

Fraud prevention remains one of the most difficult technological challenges facing banks as cybercriminals get more sophisticated in targeting consumers. To illustrate the challenge banks face in keeping consumer account information safe, Kasperky Lab hacked a “large, publicly-traded financial company in less than 15 minutes.”

The traditional approaches many banks have taken do not work. Authentication requirements and verification processes fail to prevent fraud and provide a negative customer experience. Instead, writes one security expert, “banks should focus on creating better systems and techniques to collect and analyse internal and external data, develop more meaningful algorithms and profiles, execute penetration testing against current strategies, detect changes in transaction patterns and develop more effective solutions.”

To protect consumers from malware and fraud attacks, banks must shift from a reactive to a preventative operations approach. Developers can help banks prepare by modernising the systems that store user data, moving information onto an encrypted cloud. IBM’s AI tool, for example, is said to offer a faster analysis of advanced persistent threats and attacks. Developers must integrate the latest technology into banks’ security systems to modernise.

Digital account opening

Developers will play a critical role in helping traditional banks keep up with the demands of customers on-the-go. Digital account opening is one process where developers and software engineers can have an immediate impact.

Digital account opening (DAO) is the process of opening a bank account without ever stepping foot inside a bank. DAO involves taking the following steps:

  • Collect a customer’s personal identification information
  • Evaluate and approve (or reject) a customer from a risk/fraud perspective
  • Verify the customer’s identity
  • Accept funds digitally and immediately, either through a debit/credit card or with mobile deposit
  • Sync with the core banking system

Many banks are capable of letting customers open an account online through a web browser. Yet, mobile-optimised account opening is an area where the industry has lagged behind. There are some very good reasons why this process is so difficult. Application fraud and strict anti-money laundering laws make it difficult for banks to meet regulatory requirements. An, there are significant security risks: in 2018, banks faced a more than $31 billion in global fraud loss.

But developers who help banks modernise to provide DAO will have an immediate financial impact. One report found that 69% of those surveyed wish to perform all their banking through online and mobile channels. BAI found that around 75% of millennials and more than 65% of Gen Xers prefer to use a digital channel to open a deposit account. The core consumer of the future will expect to be able to open an account, take out personal loans, and transfer funds from any device at any moment. Developers must find a way to build the infrastructure to allow banks to offer DAO.

This article was originally published at https://www.indexcode.io/

Disruptive trading app set to raise over $200 MILLION

United States-based stock and crypto trading app Robinhood is set to raise at least $200 million in a new funding round, Bloomberg reported on May 24.

Per the report, an unspecified source familiar with the matter told the outlet about the company’s plans to raise further funding. Moreover, Bloomberg reports that the round would increase the firm’s value to between $7 billion and $8 billion, but that the details could change.

Other people familiar with the matter also told Bloomberg that the new funds come from existing investors, all of whom asked not to be identified and to keep the details private. While the funding talks are reportedly ongoing, a further funding round could increase the company’s worth to $10 billion, but the numbers are subject to change until the deal is closed.

Robinhood, which allows for zero-fee stock trading, first introduced bitcoin (BTC) and ether (ETH) trading in January last year.

As Cointelegraph reported earlier this week, Robinhood has officially launched its crypto trading app in New York following the acquisition of a BitLicense by the New York State Department of Financial Services in January 2019.

Also during this week, the new April 2019 Exchange Review from crypto data provider Cryptocompare revealed that centralised cryptocurrency exchanges saw a major uptick in trade volume this April.

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Cryptocurrency in 2019: Things to Expect

Cryptocurrencies continue to surprise us with their behavior through the years. Amidst all the instability and unpredictability in terms of performance, trading, litigation, regulation, and taxation, miners and investors brave the odds and explore what these cryptocurrencies have to offer. Pessimists and optimists alike have much to say about the future of cryptocurrencies like bitcoin – such as bitcoin’s supposed nearing end because of the consistent drop in bitcoin price after reaching its peak. But it’s more viable to focus on observable trends in order to have an idea on what to expect as far as these cryptocurrencies are concerned. Here are some of them.

The Market

The word “bubble” is thrown around in the finance world, and if you’re wondering what it means, it is simply the cycle created by the fast escalation of asset prices followed by a contraction. The bubble deflates when investors cease to buy at elevated prices and massive sell-offs occur. As for bitcoin, yes it is a bubble, and it indeed popped. The market is expected to calm down a bit after the Crypto bubble and cryptocurrency trading will remain profitable.

Cryptocurrency as Payment

Retailers are starting to accept cryptocurrency as payment. At this point in time, including cryptocurrency in the list of payment methods can potentially boost income, in the same way that establishments that accept credit cards do have a wider reach than those who do not. Now you can book flights, purchase household goods, get web domains, buy computer products, and so much more with bitcoin. As of December 2018, more travel services, web services, food, and general merchandise have started to accept bitcoin payments. Those with a Microsoft account, for example, have the “Redeem Bitcoin” option upon checkout and can add up to $100 at a time via Bitpay.

Cybersecurity

In the recent years, crypto traders and holders have seen security threats such as phishing and mining malware. Cryptocurrencies, in theory, are secure; however, we expect that new crypto exchanges and platforms will bring about new cybersecurity threats and challenges.

Blockchain

The blockchain industry has always been associated with cryptocurrency, and in 2019, it is expected to work on its image as an industry that has a lot more to offer. If the industry wants to operate on a larger scale, it needs to be communicated that the blockchain technology has a lot of uses that are unrelated to cryptocurrency.

Taxation and Regulation

2019 is set to be the year of more widespread, formal, and international crypto regulation. In cryptocurrency news this year, Malta became the first country to have a clear regulatory framework for cryptocurrencies. Countries such as Russia and India have also begun to draft national legislation for cryptocurrencies; and we expect other countries to follow suit – giving way for cryptocurrency to become more legitimate. Preventing money laundering, fraud, and terrorist funding is a prime motivation in putting these regulations in place. If cryptocurrencies are safely policed, more and more people will be confident to use and adopt them.

Contact us at Hogan Injury for expert legal advice.

None of the content on https://www.hoganinjury.com/ is legal advice nor is it a replacement for advice from a certified lawyer. Please consult a legal professional for further information.

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Bitcoin and Cryptocurrency Litigation

Bitcoin and other cryptocurrencies are gaining more attention as days pass. Aside from the advantages that cryptocurrencies have like anonymity and easy international transactions, people are enticed by the fact that it can become a good investment. Apart from trading bitcoins for cash, you can also use bitcoins to buy gift cards, book flights, and hotels, buy furniture, or even buy real estate properties. Bitcoin purchases are not taxed at the moment since there is no way for third parties to identify, track, or intercept transactions that use bitcoins. Transaction fees are considerably lower as well compared to credit card transactions or services like Paypal.

Although there are many advantages in using bitcoin or other cryptocurrencies, just like any other investments, you should always be careful with your transactions. Since cryptocurrency is not regulated, many unscrupulous people have taken advantage of this and incidents of fraudulent cryptocurrencies, and other types of scam related to cryptocurrency have happened. One example of this is Prodeum, a cryptocurrency start-up that scammed its investors in just one weekend.

Because of these scams, law firms have now been involved in helping the victims. Cryptocurrency litigation has now become something that some lawyers specialize in. There are a lot of factors to consider when a cryptocurrency dispute arises. Aside from fraudulent Initial Coin Offering (ICO), lawyers could get involved if the cryptocurrency was used to launder money or hide assets; they could also get involved when there is an issue with the company, commercial, or intellectual property laws being violated in relation to cryptocurrency.

Here are some things that you can do as a cryptocurrency user to avoid being scammed:

  1. Research. – Just like with any other investments that you will make, research is essential. When investing in an ICO, make sure to read and dissect their white papers to ensure that you’re working with reliable people. Take time to research the people behind the ICO, their whole team, board members, and other investors. It’s vital for you to learn as much as you can about the company before investing so that there will be no unpleasant surprises.
  2. Be vigilant. – Cryptocurrency is still primarily bought and sold at exchanges. Because cryptocurrency is something new and the fuss around it is its value, many people get scammed by the promise of unrealistic prices. If an exchange promises incredible discounts or offers that seem too good to be true, it probably is. Another thing that you can do to avoid bitcoin exchange scams is to check the exchange’s URL. If a website’s address starts with HTTPS instead of just HTTP, that means that the traffic is encrypted and therefore has more protection.
  3. Only use trusted sources. – Hardware wallet is a physical device that stores your private keys. Hardware wallets offer more protection from hacking since there is no way for hackers to access them when you’re not online. However, hackers have now found a way around that. Some hackers sell hardware wallets that have a backdoor for them to access all your cryptocurrency and the best way to avoid this is only to accept hardware wallets from trusted sources.

In need of expert legal advice? Contact us at Hogan Injury.

None of the content on https://www.hoganinjury.com/ is legal advice nor is it a replacement for advice from a certified lawyer. Please consult a legal professional for further information.

BC PHOTO

Blockchain technology will revolutionise these 5 industries

You’ve probably heard about blockchain technology through cryptocurrency, but did you know that blockchain technology is expected to revolutionise industries like real estate, transportation and even social justice?

Blockchain technology may have been made for bitcoin, but its potential to make transactions more secure is one of the most exciting possibilities for using this powerful technology. Innovation is most commonly known as the underlying algorithm of cryptocurrency. One day, businesses in every industry may use blockchain to record and verify every transaction. The decentralised characteristic of the utility makes it an appealing business resource, and enterprises covet the transparency and finality the digital recordkeeping application.

Blockchain Can Increase Trust & Accountability

Privacy issues are a concern for every American. With most businesses in the United States keeping their records and transactions mostly online, Americans have begun to become jaded as data breaches hit the news. While blockchain technology can’t prevent all data theft and cybercrime, it could help make transactions more secure, improving trust in businesses’ ability to protect consumer data. With cybercrime on the rise, the technology has arrived just in time. The first applications that will give way to blockchain are the most insecure transaction methods. From all of the disruption I’ve seen already in various industries, I believe that blockchain technology is a viable resource for any industry or field that conducts transactions.

Here are the five industries, institutions and fields that will experience the most exciting disruption due to blockchain technology in the near future.

The Finance Industry

Governments and large corporations are researching blockchain technology closely to unearth ways to utilise the resource. The finance industry is investigating blockchain intensely since fraud is a huge problem for banks and other financial organisations. Finance executives believe that the technology is a potentially ideal solution for security when transferring money from one account to another—always the most vulnerable point in any transaction. Blockchain may disrupt not only the field of digital security but also that of logistics and other fields across many industries. Cryptocurrency has also made its way into the crowdfunding and investment markets and led to the birth of crypto exchanges such as Okcoin, Poloniex and ShapeShift. This shift has not only opened up a number of new opportunities for individuals to invest, but also has created new job opportunities such as a crypto-investment banker. Although new, projections say that this position can expect to make as much as traditional investment bankers who have a median salary of approximately $81,339.

Another new feature brought on by blockchain tech is that investors can now buy into initial coin offerings (ICOs) in the same way that they buy into initial public offerings (IPOs). This is reshaping the investment world by eliminating geographical boundaries and speeding up the investment transaction process.

Social Justice

Enterprises and agencies could potentially use blockchain technology to securely record and verify inventories, monitor resources and redistribute assets. Via these means, the technology can pave the way toward a sharing economy. Inequality, income disparities and consistent income are serious problems in modern capitalist societies around the globe, and new technologies threaten to enhance these problems. Blockchain is a resource that can empower a sharing economy, and it can potentially accelerate the process of ensuring full inclusion in economic prosperity, rather than contribute to conditions that promote inequality and conflicts.

American Energy Grids

Energy grids in the United States are deteriorating and outdated. Today’s energy networks are vulnerable to elements such as natural disasters and climate changes. Many researchers are working on solutions to replace the outmoded system, and some believe that blockchain will provide the answer.

In Brooklyn, New York and other municipalities, participants in an energy experiment collect power using solar panels and exchange it using computerised “smart contracts.” The participants also install smart power meters as a part of the project. They use blockchain to secure and verify all transactions sans utility companies or any other third-party, saving on costs and increasing efficiency.

Blockchain technology could also help to fend off attacks from more than just Mother Nature. In 2018, information came to light that Russian hackers were able to gain access to United States electric grids, giving them the ability to cut off and control power. With our massive dependency on electricity, potential attacks could cause mayhem and economic damage. More secure networks, like those offered by the blockchain, could reduce the likelihood that hackers would be able to gain access to American energy grids.

The Real Estate Field

The real estate industry exemplifies the disruptive potential of blockchain technology. The transfer of real property is a complicated and extensive process, but blockchain technology can potentially allow property buyers and sellers to transfer property rights instantaneously. Sellers could use the technology to securely transfer titles and deeds to new owners, and buyers could pay for the transactions via cryptocurrency. Stakeholders could also use blockchain to send property information to the appropriate government agencies.

Closing costs are a big expense for homeowners and buyers alike. While blockchain technology won’t cut out commissions and related expenses, a simpler buying process could potentially reduce the cost and hassle of buying a home, making it more realistic for young people to get into the real estate market.

The Transportation Industry

Researchers imagine a future where blockchain and the Internet of Things (IoT) combine to make smart cities a reality. Municipalities could connect sensors for street signs, traffic lights, vehicles and other items to the IoT, enabling the rerouting of traffic for maximum efficiency. Scientists hope that by using blockchain in this manner they can reduce commute times, traffic congestion and vehicle emissions. The blockchain technology can also provide potential conveniences such as vehicle parking and be charging location and payment; traffic ticket payment; and accident and maintenance monitoring services.

Final Thoughts

Analysts forecast that bitcoin will achieve a total value of $1.2 trillion towards the end of 2018. However, forward-thinking individuals see the value of blockchain beyond its original application for digital currency transactions. Bitcoin took off rapidly as more people brought into the idea of a currency that’s free of government or institutional regulation and valued based on quantifiable, although highly complex, supply and demand. While the excitement about bitcoin is tempering, there’s great interest in its underlying blockchain technology. It’s hard to not see the value in cutting out middlemen, increasing security and saving precious time and expenses.

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Market Watch: Bitcoin has fallen to its lowest point since November

On Friday the price of Bitcoin fell to $5,791, the lowest since last November, and while it recovered in Tokyo, the fall has led to a flurry of speculation that it will be wiped out. We cannot know, but since it is the largest of the cryptocurrencies, and other smaller examples are apparently now worthless, the possibility is clearly there. But of course, that may prove wrong – there may be some value after all.

What can we sensibly say?

First some thoughts about money in general; next some about this particular so-called “currency”; and then some about the consequences of a total collapse, or a recovery.

Cryptocurrencies are quite new but the history of money is very old. People have used something as money for at least 20,000 years. Paper money is only a few hundred years old in Europe but was used a couple of thousand years ago by the Chinese. The classic functions of money are threefold: they are a medium of exchange, a unit of account and a store of value. The second is simply something we can price things in, thereby measuring comparative values, and the first and third are obvious.

On this tally, none of the cyber currencies stack up. They have a marginal use as a medium of exchange because some people will accept them in exchange for goods and services, but they are too volatile to be useful as a unit of account or store of value. Indeed in most transactions, they don’t really serve as mediums of exchange because they have to be switched into real money first. They are, however, an asset class like gold, fine wines or classic cars.

That leads to the next question, and maybe soon very relevant question: what happens now to their value?

With regular currencies there is an issuing body that will in extremis stand behind them: usually a national government. Ultimately the backing is the taxing power of the state. Sometimes that taxing power is inadequate to support the currency, or the central bank issues too much of it. The most recent example of this is Venezuela right now. The Bolivar has lost 99 per cent of its value against the dollar this year (Bitcoin has lost 58 per cent), and if I have got my decimal point in the right place the current rate is more than 100,000 Bolivars to the dollar. So it is in effect worthless. The poor country (which given its oil revenues should be the richest in Latin America) is running on barter and dollars. Currency reform is promised for August, and we’ll see.

So what is behind Bitcoin? Well, it is not clear that there is anything there at all. It may be that the holders of Bitcoin will collectively support it, in that they will accept it in return for goods and services. That would allow it to continue. But if they collectively try to bunk out, there would be a Bolivar situation.

Might there be collective support? The trouble is that we don’t know who owns the Bitcoin. A huge amount of energy has gone into uncovering ownership but apart from a few high-profile holders such as the Winklevoss twins in America, the names remain concealed. By looking at IP addresses, it is clear that ownership is very concentrated. According to BitInfoChart, 87 per cent of all coins issues are held by 0.5 per cent of holders. But the big holders don’t seem very active, for many of them don’t seem to have sold any at all.

Anecdotal evidence suggests that the larger holders in the developed world fall into five groups. There are some tech-savvy people who got in very early and saw cryptocurrencies almost as a game. They are probably still holding onto all or most of their stock. Second, there are people around the world who have suddenly come into money – oil workers in Kazakhstan – and want to pop it into a variety of different investments. Third, there are computer students, who literally bought the hype and put cash into a few Bitcoin while there were still affordable. Four, there are general investors, many of whom who got suckered in last autumn and are sitting on big losses. And finally there are the illegal or tax-avoiding holders who want an asset that is under the radar.

The intriguing question is this: who, among these groups, really needs to sell? We have seen a collapse of the currency, but from a very high level. Many holders, probably most, will be still on a profit. So the question will be whether enough of them decide that they do want the deposit for a house or whatever else.

But this is in the West. Most of the trading in Bitcoin is now in Asia, with much of that in China. It may be that this is more trading than holding, or it may be that investors in the developed world have indeed been gradually unloading their stock and this is being picked up by Chinese investors. It may be that as and when the final collapse comes, the run will start in Asia. We simply don’t know.

What we do know is that cybercurrencies are much frowned upon by the financial establishment in the West. There are a few supporters but not many. On Friday Mohamed El-Erian, chief economic advisor at Allianz, said Bitcoin would be a buy if the price falls below $5,000. The most scathing and detailed commentary came last week from the Bank for International Settlements (BIS). It said there were three problems: scalability, stability and trust.

On scalability it pointed out that these currencies were now using enough electric power to run Switzerland. It follows that if they were to grow further there would not be enough power in the world to drive them. Stability, well – we have seen what has happened. And trust? The BIS thinks that the decentralised nature of cryptocurrencies is a weakness rather than a strength.

We will know the answer pretty soon. My instinct is that these cryptocurrencies will disappear in a puff of smoke. I just hope too many people are not too damaged when it happens.