Trends:
- AI
- Open banking
- Blockchain
Intermediates Money and Risk
Data
- Investing, Market Making, Marketing, Risk Management & Underwriting
Funding & Risk Management
- Balance Sheet & Capital
- Marketplace & Securitizations
- Derivatives, Guarantees & Reinsurance
Risks
- Credit; Funding; Liquidity; Market (Basis, Price, Rate, Spread, Volatility)
- Model; Operational; Reputational / Compliance
- Accidents; Health; Life Events; Natural Disasters; Weather
User Experience & User Interface
FinTech - Finance’s Fertile Ground
• Digitalization of Money, Securities and Credit• Vast and Expanding Amounts of Customer Data• Rapid Expansion of Computational & Analytical Power• Reliance on Multiple Systems of Ledgers• Wide Public Acceptance of New Tech• Legacy Customer Interface and Processing Systems• Infrastructure Systems’ Costs and Counterparty Risks• Economic Rents and Centralized Concentrated Risks
FinTech – Disruptive Potential
• AI for Managing Risks & Targeting Products• Updated Customer User Interface and Robo Advice• Greater Financial Inclusion & Tailored Services• ‘Internet of Value’: Movement of Value & Micro Payments• Streamlined Accounting, Clearing, Compliance & Processing Systems• Some Revenue Models shift to Data in exchange for Free Services• Efficiencies & Tighter Margins in Financial Sector
AI and Machine Learning - Finance
• Asset Management• Call Centers, Chatbots, Robo-Advising & Virtual Assistants• Credit (& Insurance) Allocation, Extension, Pricing & Scoring• Fraud Detection & Prevention• Regulatory – Anti Money Laundering, Anti Manipulation• Risk Management & Underwriting• Robotic Process Automation• Trading
Open API & Open Banking
• Open Application Program Interfaces (Open API) allow outside Developers access to and an ability to Integrate Permissioned Customer Data into Third Party Applications• Open Banking initiatives facilitate or mandate Open API for Non-banks to Share Permissioned Bank Customer Data• Policy Trade-offs of Promoting Competition & Innovation, Limiting Cybersecurity Risks, and Maintaining Privacy & Consumer Protections• EU Payment System Directive (PSD2), UK Open Banking Initiative, etc.• Plus Screen Scraping, Reverse Engineering & Robotic Process Automation
Blockchain Tech Potential Uses
• Speculative Investing• Crowdfunding through Initial Coin Offerings• Tokens for Exchanges, Gaming, Gambling, DeFi & File Sharing• Tokenized Fiat (Stable Value Coins), Securities & Assets• Payment Systems• Trade Finance & Supply Chain Management• Clearing, Settlement & Processing• Central Bank Digital Currencies & Payment Initiatives• Digital ID & MIT Diploma• Medical Records, Property Records, Internet of Things, Voting …
FinTech – The Actors
• Big Finance: Like Fortresses w/ Moats, Towers & Sovereign Affiliations• Towers: 1) Payments, 2) Balance Sheets, 3) Data, 4) Corporate Structure• Big Tech DNA Loop (BIS): 1) Data, 2) Networks, 3) Activities• Start-ups: 1) Disruptive Innovators, 2) Flexibility, 3) Asymmetric Risk Takers• Official Sector: Goals: 1) Innovation, 2) Inclusion, 3) Financial Stability, 4) Investor & Consumer Protection & 5) Guarding against Illicit Activities
Study Questions:
- What are the major technological trends materially influencing the provision of financial services?
- How is the competitive landscape shaping adoption of these new technologies around the globe?
- How are FinTech start-ups and Big Tech firms competing and cooperating with incumbents from big finance? How has Big Finance reacted?
- What do you wish to achieve in this Fintech course?
