Financial Information Systems

This time of the year, we all have this question in our minds: which service to use to file our tax returns. Let’s look at one of the upcoming unicorns in the valley which made filing tax return a hassle free and super quick process. Its as simple as ordering food from your mobile phone.

Credit Karma is a free credit and financial management platform for US consumers available on the web and major mobile platforms. Founded in 2007, it provides free weekly updated credit scores and credit reports from national credit bureaus like TransUnion and Equifax, alongside daily credit monitoring from TransUnion.^

It also has a credit score simulator which helps us to understand the effect of our future transactions on our credit score.They also send credit alerts incase of any suspicious activity. We can also track credit card, loan balances, debt repayment, amortisation etc through its Yodlee service which is personal financial tracker which can be customised. They run analytics on your credit profile and make recommendations to help you save money.

So the question is how they are being able to provide all the services for free of charge. According to their business model, they generate revenue through targeted advertisements for financial product offerings. They are also paid by the lenders for making a successful recommendation.

Having personally used CreditKarma to file my tax returns this year, I would definitely recommend this software to anyone who wishes to avoid cumbersome process. Their portal is nicely designed and the tax return interface is very user friendly. The whole process can be completed in few steps.

Source:
https://www.creditkarma.com/faq/howitworks/
^https://en.wikipedia.org/wiki/Credit_Karma

This article recaps some of the trends that the writer noticed from the recent Mobile World Congress. As this is the final blog post, I thought it would be interesting to see how Fintech trends have changed since I started looking at them 10 weeks ago. In addition, having read mixed things over the past quarter over how much/little Fintech has disrupted the traditional financial industries, I went into this article hoping to get a better sense of how much optimism/pessimism people have in Fintech.

While the article doesn’t reveal anything too shocking, it does confirm that Fintech has had a significant enough of an impact to at least get people in banking/finance worlds to alter their mindsets. The findings confirm  what I read at the start of the quarter, that the short term trend points towards increased partnerships between Fintech and established companies. While I do not believe that Fintech and traditional financial players will ever become complete allies (they are ultimately competitors),  I can see a stable environment of competitive cooperation. I am a little surprised that banks are still interested in blockchain, though. The banking industry, in my opinion, is rather risk averse, and likes to have control. Meanwhile, blockchain is harder to control (as can be seen in the wild swings in Bitcoin’s valuation), and is designed to decrease the control that banks have through decentralization. It will be interesting to see if these seemingly contrasting industries will be able to cooperate in the future.

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http://www.businessinsider.com/heres-everything-we-learned-about-the-future-of-fintech-at-mobile-world-congress-2017-3

 

 

Every income is taxable unless specifically exempted. As per the Tax rule, anyone who will be earning income with the exchange of Bitcoin, that income will be included in their taxable income.This will be included in their Self-employment tax. These type of tax rule shave made the income of bitcoin designated as the possession of valuable good like gold or land. To execute these phenomena every transaction of the bitcoin will be linked to some or the other local fiat currency, so if the bitcoin is exchanged the transaction value is recorded in USD to mark the current value for tax reporting. transaction carried by any individual will be paying the tax in their respective country in their currency. The USD is only to track the global value of the transaction. IRS will also allow you to file capital losses worth $3000 per year. Every country has different set of rules on Bitcoin but no one has completely defined it in a way that user can benefit and understand. I’m just glad to read about this that at least everything is been tracked by the government and is filed for individuals. This makes money laundering and unsafe usage of bitcoin very hard.

Reference:

https://bitcoinmagazine.com/articles/tax-day-is-coming-a-primer-on-bitcoin-and-taxes-1459786613/

FactSet has recently purchased BISAM Technologies for $205.2 million from Aquiline Capital Partners and company insiders.  FactSet is mostly known for portfolio and risk analytics and client reporting which will go well with BISAM’s performance measurement support.  BISAM has more than 160 employees worldwide, and they provide portfolio and attribution, multi-asset risk, GIPS composites management and reporting.  Officials say, “Many of the world’s largest asset managers use BISAM’s software to evaluate and enhance their investment strategies and better serve their clients.”  While this was a good addition to FactSet, they still had to borrow $575 million “under a new resolving credit facility to fund the transaction and repay existing debt”.  FactSet was founded in 1978 and they currently offer analytics, services, content, and technology to over 66,000 end-users.  They are listed on the New York Stock Exchange and the NASDAQ Stock Market under the symbol ‘FDS’.  FactSet has a market capitalization of $7.12 billion and is located in 43 locations with more than 8,500 individuals.

One of the interesting elements about Fintech is the growth of it it part of the world that is governed under Sharia law. Financials in these parts of the world are incredibly unique and must be catered to culturally appropriate regulations.

An aspect about this that makes finance harder in countries governed by Sharia law is the concept of interest. In nations governed under Islamic principles, the concept of interest is seen as favoring the lender and exploitive. Furthermore, the overall premise of lending must be to promote the principles established under Islam, rather than create wealth for an individual or organization.

Another important aspect of finance in countries governed under Islamic law is that the lending institution must also share in the risk of the financial instruments it creates. This governs the type of instruments that a bank can invest in with the money of others and its own and is aimed at creating a more equitable lending environment that protects the people.

Enter Malaysia. The majority muslim country recently announced that it will be providing “incentives” to companies willing to develop and test fintech products in the domestic market. Due to the fact that opportunities of profit from interest alone is far more difficult in a country governed under Sharia law, these countries have seen slower growth in the fast-growing fintech market. This offering may be an incredibly valuable proposition for an entrepreneur with a global mindset aimed at offering some of the benefits of fintech to different cultures across the globe. Malaysia is also a powerhouse country in a the fast growing ASEAN region of the globe and could provide unique opportunities for regional market entry.

 

Source: https://www.cryptocoinsnews.com/malaysia-woos-fintech-devs-shariah-compliant-islamic-finance/

Recently, application based banks are becoming more and more popular. This extends not just to North America, but to Asia as well. I mention Asia, because Asia is becoming one of the most prevalent forces in the FinTech industry. As I mentioned in one of my previous blog posts, in 2016 the biggest deals in FinTech investment wise were centered in Asia. Between 2011 and 2014 the number of users on mobile based banks, almost doubled and the slope of the trajectory continues to become steeper as these companies gain more and more money from investments. With FinTech developments in banking, we can see there is a shift to focus on the needs of the consumer, rather than the consumer focusing on the banks. As efforts are made to improve security, the accessibility and features that such apps provide, can perhaps even vault them to the popularity of the big banks in the future. This is true especially as many of these companies grow their consumer base, and begin to make a name for themselves. A McKinsey study also showed that in Asia people checked their banking information more from their mobile devices than using cash machines or visiting banks by a large amount. It will be interesting to see if these trends continue, or if big banks find ways to push back on an international level.

 

http://www.atimes.com/financial-technology-making-app-based-banks-future/

The fintech discussion in developed countries like America and nations throughout Europe are focused on how to reboot the antiquated banking system.  These economies have layers of new technological upgrades and recovery plans coming out every year since the 1960’s.  The fintech in these economies is approached in three ways:

1. Broaden the financial offer to those who have been underserved or unserved in these markets.
2. Remove the inefficiencies inside banks, such as the cost overheads of the client on-boarding processes.
3. Remove the friction in the customer journey by making things far easier.

However, the focus always comes back to the incumbent’s existing way of doing things. This results into simply improving existing technology.

Fintech in China and India is demonstrating characteristics of growth economies.  These nations are starting their fintech journey without much there in terms of existing platforms.  The growth economies unencumbered vision allow them to go global without shackles.  I believe the emerging markets will continue to be where the most fintech companies come out.

https://thenextweb.com/business/2017/03/20/global-economies-upside-three-worlds-fintech/#.tnw_yzEc3It9

 

According to the article, fintech industry is reaching maturity as there are fewer new startups and it has observed a steady development from 2015 to 2016. It is not surprising that 3 segments that have had largest growth from 2015 to 2016 are cloud and core processing solutions; artificial intelligence, machine learning, blockchain technology; and customer segmentation and product personalization solutions. Their strong growth is thanks to the evolving technologies and customer willingness to adopt new offerings. Three segments that saw a declining trend are retail payment solutions; robot advisor so-called empowered investors; and emerging payments because firms in these areas have established strong positions and entry barriers.

It is predicted that we will see a lot of partnerships between startups which have been disrupting decades-old practices and traditional, larger players who have been rigorously developing their own innovations to adapt with those game-changing technologies. I believe that the convergences rather than fierce competitions will be beneficial for not only both parties but also consumers as they can offer more handy services at cheaper costs and become more profitable.

Source:
http://www.businessinsider.com/these-are-the-fintech-segments-most-likely-to-grow-in-2017-2017-3

Amazon Go is a concept created by Amazon.com with the idea that consumers can go shopping with no lines and no checkouts. Shoppers scan their Amazon app upon entering the store and then they can just grab what they want and leave and the items will be automatically charged to their Amazon accounts. The idea is to create a seamless and quick shopping experience.

However, the actual payment process is an interesting roadblock for Amazon. There are many alternative forms of mobile payments such as Apple Pay, Google Pay, and Samsung Pay. Amazon Go store requires the consumer to use an Amazon app and account to process the transaction. Consumers can’t use any other payment methods. This may deter consumers going to a store like Amazon Go with such limited payment options. But either way, we are seeing that currency is slowly but surely transitioning from paper money to mobile payment.

Back in 2004, a European retailer, Metro Group was the first to implement a form a self-checkout with RFID technology, which Amazon Go is using as well. So the technology isn’t anything new and it is just a matter of how well Amazon Go can execute their vision.

Source:

https://www.amazon.com/b?node=16008589011

The exponential growth in the number of mobile users has also made online banking the preferred choice for bank customers. But with that, also arises the increasing risk of fraudulent attacks and money laundering instances with numbers suggesting that as many as one in four customers fell prey to financial fraud in 2016.

To counter this, security giant Kaspersky recently launched their Fraud Prevention Cloud which incorporates advanced technologies such as Biometrics and Behavioral Analysis models built into the system and an ability to handle big data in the cloud. The information collected by the application integrates with the Enterprise Fraud Management System and enables fraud detection in real time even before the transaction is completed. The approach is based on Humachine Intelligence  – a combination of Big Data and threat research analysis embedded with machine learning algorithms and lots of security expertise.

It uses the concept of Risk Based Authentication (ABA) and assesses the risk before a user gets logged onto a digital channel and provides decision to back end system to allow further access or not. Overall, the Kaspersky Fraud Prevention Cloud acts not only during the login process, but also during the whole session thereby helping the company to minimize risks and avoid losses during an attack. Could this be the most sophisticated system for Fraud Management? We’ll see !

Link – http://www.deccanchronicle.com/technology/in-other-news/150317/kaspersky-anti-fraud-cloud-enables-machine-learning-for-multi-channel-protection.html