Month: January 2017

In Fintech, firms such as LendingClub and Prosper Marketplace offer peer-to-peer lending services to borrowers and investors. Rather than traditionally loaning money from banks, borrowers are allowed to borrow money from investors. Recently however, local court rulings have made these new business practices difficult. Furthermore, The Office of the Comptroller of the Currency (OCC) released a white paper “proposing that these online lenders become national bank charters”. This allows federal regulations to be put in place to govern these online lenders. Their reasoning is that these Fintech solutions are nothing new, and that technology has always existed in the financial industries.

Interestingly however, is that banks and the government has recognized the potential for these new financial technologies. Goldman Sach’s has recently released their own peer-to-peer lending platform called Marcus, and the U.S. Treasury acknowledges that online lending services could reach $90 billion by 2020. Although using technology in the financial industry is nothing, the future of Fintech in lending is undeniably huge, and the underlying technology will never stop growing.

Source:
https://www.bloomberg.com/gadfly/articles/2017-01-19/newfangled-fintech-meets-oldfangled-financial-regulators

Blockchain, the technology behind bitcoin, has been picked as one of the next technologies that would change the financial sector. Experts have said that in order for it to be used, it would need to be done in phases. I agree that in order for blockchain to become integrated into financial systems, it needs to be integrated slowly. The financial systems have been in place for decades and if blockchain were to change the way the system works too fast, the repercussions would be too great. For example if blockchain was integrated into the system as fast as possible, it would cause a high interest in the technology which would cause an increase in research and development. Now this might not seem that bad, but if the research and development of the technology were to outpace the integration and updating of the financial systems in use then problems would occur in communication and data transfer. Slow and steady is the way to go and it would allow the integration of blockchain into non-essential systems while testing and debug any issues that may appear along the way.

Source: http://blogs.wsj.com/cio/2017/01/20/the-internet-blockchain-and-the-evolution-of-foundational-innovations/

Belgium and London have agreed to set up a “fintech bridge” that will enable cooperation between the two countries in the financial sector. The deal was struck between “B-Hive”, (part government owned platform that was designed to link Belgium’s fintech sector with that of traditional fintech sectors), and Innovate Finance (trade body of Britain’s fintech sector). The announcement comes after Britain’s success signing similar “fintech bridge” deals with Australia, Singapore, and South Korea.

After Britain left the EU, some were worried that startups and other financial firms would leave Britain in order to remain taking advantage of the EU”s passporting system which allowed free trade of goods and services throughout the EU. Belgium’s Finance Minister says that there was no intention to use this bridge as a way to poach employees and companies to relocate to the EU, instead reassuring that London will stay the financial capital of Europe. “Britain’s fintech sector, employed over 60,000 people and generated $8 billion in revenue, according to the Treasury.” This shows a strong sector in Britain that may be resilient to move elsewhere unless economic conditions became extremely favorable.

http://www.nytimes.com/reuters/2017/01/11/business/11reuters-belgium-britain-fintech.html

Accenture released a report earlier this week showcasing how investment banks can reduce costs as much as $12billion a year by utilizing blockchain technology. The consulting firm looked at eight banks to determine the feasibility and savings of this technology stating that blockchain will “obviate the need for reconciliation and could prove a helpful resource for auditing.” Some banks have started to implement this technology to run back-office processes, but there is skepticism that banks are simply following the trend of block chain versus thinking of the future feasibility of this technology in banks.

The report also specifically looked to automating finance reporting and creating a distributed ledger. Such topics are significant portions of what our class encompasses. I found the following to be issues of implementing blockchain in banks and other institutions:

• Uncertainty over security  
• Integration issues with systems already in place
• Initial costs to implement such technology are unknown
  • Implementation and integration may outweigh future benefits  
• Legal and regulatory acceptance of blockchain being used in this way
  • It can take years before adoption protocols are put in place and adoption may be low thus creating a divide between those who use blockchain and those that do not

http://www.reuters.com/article/us-banks-blockchain-accenture-idUSKBN1511OU

https://www.accenture.com/us-en/insight-investment-bank-challenges-blockchain-technology

This article gave information on when to implement different information systems because of various benefits from planning, report generating, and analysis capabilities. It discussed most systems are built without enough consideration for the individual company’s business process. The article’s suggestion was for end users to be directly involved in the design process with frequent meetings and tests. It eliminates the issue of systems architects getting distracted by the technical elegance of a system at the cost of user-friendliness or functionality. However, this approach slows down normal business by disrupting employees.
I agree with the article that managers need to ensure systems are built with the business benefits as the main goal, but I don’t think that end users need to be actively involved with each step. When a new IS is being designed, managers can call meetings between their employees and their architects to discuss how the IS will need to operate daily. Then the managers can discuss underlying policies and processes that need to be built into different views and transactions. That way the architects have enough information to start working and regular employees are not taken away from their usual jobs any more than is necessary.

https://hbr.org/1976/11/how-effective-managers-use-information-systems

FIS is the most complex and difficult to manage information system used by companies to resolve financial issues faced by the corporate firms.

With the evolution of business trends in the market, FIS is very important for keeping a tab on the financial accounting and daily transactions being maintained. It is also responsible for audits, implementing processes and also to help external elements to evaluate a particular firm.

FIS mostly consists of:

1. Transactions
2. Accounting/Financial Books
3. Reporting/Visualization

With the advancement of technology, i feel there is a strong need for FIS to adapt to the world of Big Data, Cloud, IoT and Artificial Intelligence.

It would be interesting to see if companies adopt the cloud computing approach for storing/computing its valuable financial data or use big data technologies to make better predictions for their regular business.

 

Reference: https://www.techarex.net/blog/accounting-solution/future-challenges-for-accounting-information-systems/

The history of applying Artificial intelligence(AI) to banks goes back to the 50s. The benefits of AI in banking includes enhanced customer personalization, productivity gains, fraud detection, and better customer recommendations. One very exciting example of applying AI to banks is from a start-up company named Finie (for financial genie). They created a voice-powered AI platform to interact with a banking account using natural language queries. Finie can be asked, “How much did I spend on groceries”, instead of providing list of transactions.
Nowadays, AI is increasingly important for financial service firms to be competitive. In the near future, more financial service firms will adopt AI to deliver better experiences, lower costs, reduce risks and increase revenues.

During the most recent World Economic Forum Annual Meeting at Davos, Switzerland, Kaifu Li (an American venture capitalist, technology executive and computer scientist) commented that as the Chinese markets continue to accumulate more data, there will be more opportunities for AI technology, especially when it comes to credit card fraud detection, more and more Chinese banks will adopt AI. Embracing AI to banks is a win-win situation for both banks and tech companies.

 

https://thefinancialbrand.com/63322/artificial-intelligence-ai-banking-big-data/?utm_medium=email&utm_source=fintechweeklycom

Digit is a financial technology startup that uses algorithms to track its users’ income and spending patterns, and helps them save by setting aside small amounts of money. The algorithm analyzes a user’s average, high, and low checking account balance, when he/she is paid, and the pay cycle’s periodicity. After searching for bills due within the next two weeks and analyzing recent spending, it transfers an amount that the customer finds immaterial to a savings account that can be accessed anytime.

Digit is working to develop “the first artificial intelligence-powered financial goal program”, which would optimize saving and help users reach their goals faster. Digit is also working on an algorithm to “move every dollar where it should go, at the right time, to minimize fees [on student loans, credit card accounts, etc.] and maximize gain”.

I think Digit would be popular among those who are bad with saving, but not for those who are good with their finances and would like more control. Digit earns profit from the interest rate received on account assets, so users are not receiving anything above their savings. As a potential user, I would rather find another service that offers a return.

Reference: https://www.bloomberg.com/news/articles/2017-01-10/a-siri-for-your-finances-digit-says-trust-me

The efficiency and security benefits that fintech companies have brought to developed nations have largely bypassed developing nations.  However, fintech players are starting to disrupt the existing financial order in these markets as an increasing number of people own mobile phones.  Since there is less of a digital footprint, the sophisticated algorithms that some fintech companies use to generate personalized offers or risk scores in developed countries aren’t useful.  Thus, in order to succeed in this environment, companies such as SERV’D in India build apps that encourage users to expand their use of technology.  SERV’D helps households and its workers, such as nannies, drivers, and cooks, create simple work contracts and get paid online.  The data that is generated captures the wage and payment info of over 400 million workers who would otherwise have no way of demonstrating their income for loans and other benefits.

Another struggle consumers in developing countries face is the lack of a steady paycheck; many only have temporary jobs, which can be selling produce one month and picking tea the next.  They also have unpredictable expenses which means the standard, rigid insurance premiums in developed countries are not a viable option.  To combat this, companies such as Uber’s Xchange allows drivers to participate in very short-term leasing programs that are a few months long and have a low down payment.  In this sense, Xchange tries to meet consumers’ flexible earnings with flexible financing.  By adapting to developing countries’ infrastructure and integrating financial technology in a way that plays to the lives of the people, these companies can play a crucial role in bringing these countries into the digital space.

 

https://hbr.org/2017/01/fintech-companies-could-give-billions-of-people-more-banking-options