Month: January 2017

MetroMile:
While not exactly a fintech company, almost closer to an insuretech, MetroMile offers car insurance for drivers on a pay per mile system and offers different packages by . This is best for drivers who drive very little because rates start at five cents a mile and a $35 monthly fee.

Stash:
Stash is a portfolio and wealth management app that help users manage their investments and suggest new ones. They allow users to invest with as little as $5 and allocate their money as they wish.

Tilt:
Tilt tries to combine peer-to-peer payments, crowdfunding, and event tickets together in one app. They charges a fee for commerce sales but other transactions are free, much like Venmo. Tilt claims they are the fastest growing app on college campuses, a very coveted market.

What these start-ups all have in common is that they try to disrupt a system already in place. Payments, purchases, and portfolio management are primed to be taken over by tech companies as they try to bring services that seemed more white collar, to the blue collar and younger workers. The insurance industry has been using tech to gather data about drivers, but this is the first time the data is being used by a tech company to offer insurance.

https://www.fastcompany.com/3066666/startup-report/5-fintech-startups-to-watch-in-2017

It hasn’t been long ago since the time when companies actually realized the importance of Data when making decisions. It is rare to image a time when executives from the top management of a company met and did not discuss the company’s finances based on the data. But here lies the problem with this data globally – IT IS INCREASING EXPONENTIALLY. And the systems that we have been using till date to store this data (with no hard feelings) are simply incapable of matching the rate of data generation. And any FinTech is no exception to this.

Sure the Data Warehousing and Business Intelligence is well supported by the age old Relational DataBase Management Systems (RDBMS) but with that came the problem of Data Redundancy and Data Flexibility questions.

I feel that, moving forward, for newly formed organizations or those that plan to expand their reach [and expecting to generate terabytes of data in the future], it is important to consider making changes at the grass-root level for adapting the technology that employs the use of In-Memory-Databases. Sure they come with a price and a good one too but it could certainly be considered as a one-time investment that will bear them an ability to reduce the overall Data Volume without compromising on the performance and great data flexibility.

The automation that tech will bring to finance will help banks be able to reap larger profit margins, thanks to the cost savings of fintech. Many experts feels that digital payments will begin to blur the lines between technology and finance, as companies continue to push the limits of using technology to streamline financial information systems.
One huge benefit of the added technology is the fact that fintech can handle large amounts of data easily, allowing the ability to make credit decisions not only better but more quickly than ever before. A possible concern for people currently in the industry is that employment will most likely decrease in finance/banking due to the bulk of the work being done by technology. Furthermore, the jobs that do exist will be very different than the present, as you will most likely need an MIS background along with accounting/finance in order to be successful.
Last, as many other blog post have discussed, banks Implementing blockchain will allow for a reduction in costs thanks running ledger that is auto generated and keeps all history of digital transactions. Looking into the future, I think while competition will increase initially, long term, there will be consolidation in the industry, because only the companies that master fintech the best will last.

Link to article: https://www.ft.com/content/2f6f5ba4-dc97-11e6-86ac-f253db7791c6

The financial technology sector is a quickly growing and could carry with it ‘systemic risks’ for the banking sector and broader economy. At a recent conference in Germany, the Bank of England’s Governor Mark Carney recognized the efficiency benefits from financial innovation while highlighting the risk it could pose for stable bank funding, credit quality, money laundering, terrorism financing, and data protection.

Carney said in his speech, “The challenge for policymakers is to ensure that fintech develops in a way that maximizes the opportunities and minimizes the the risks for society.” The Financial Stability Board pulls together bank regulators from across the world. The FSB is currently assessing the suitability of existing rules and regulations in regards to financial technology risks. The results of their study will be presented to Group of 20 leaders later this year.

Financial technology has the ability to cause rapid changes in finance with the existence of technologies like mobile phones, the Internet, high speed computing, and machine learning. As most leaders and experts are urging, I too believe the need for proactive regulation is crucial. Any potential risks not proactively managed could spell disasters for today’s interdependent financial system and economy.

http://www.businessinsider.com/mark-carney-on-fintech-and-systematic-risk-2017-1?IR=T&utm_medium=email&utm_source=fintechweeklycom

 

FinTech companies have made it easier for people to commit a fraud in terms of claiming insurance or asking for loans. There are several startups in America that analyze your credit history and your online profile before coming up with an estimate of your credit rating. Accordingly, they provide you with insurance or grant you loans with an appropriate rate of interest. Due to advanced FinTech this can easily be done online. This has made it simpler for hackers to commit fraud by creating false identities or using someone else’s identity to commit an insurance fraud or get a better interest rate on your loans. Some new Fintech firms have come up to tack these situations by “providing help with verifying and triangulating identities with pseudo-PIIs (Personally Identifiable Information) such a phone numbers, email addresses, device id & geolocation, online social identity and credentials.” I believe that as everything is moving online it is getting difficult to keep the financial services secure. Fintech needs to not only work towards innovation but also work towards securing their services online with as much grit.

 

http://lendfoundry.com/3-common-identity-fraud-that-plague-fintech-startups-how-to-avoid-them/

As technology is becoming more prominent and as the fintech industry is booming, bots are digitizing and performing mundane, everyday tasks in the banking industry. This new system is in its experimental phases right now, but will soon be permeating the banking industry.

The banking industry hasn’t been disruptive for a while now and something new is in the air. Although bots are being experimented with in compliance functions for banks, Alan McIntyre, a bank manager at Accenture believes that it will soon become an “indispensable technology”. These bots have possible implications in many departments including Finance and Human Resources.

Although I am all for the advancement of technology in all sectors, there is a human aspect that people fail, or refuse, to see. With the advances of such technologies and how these bots can possibly “fully run these departments”, there will be a huge worker turnover in the banking industry.

The banking industry has stayed relatively constant with its processes these past few years and to completely disregard the working class population when switching to these automated systems is saddening. I recommend a way of keeping employees and implementing these systems. I hope these banks will introduce new learning programs for its employees and invest in their future at the bank. Teach the working populations new techniques and tasks in order to stay current and be an asset in their bank instead of dismissing them when the bots can take over their jobs.

 

Source: https://www.americanbanker.com/news/beyond-robo-compliance-how-bots-will-soon-permeate-banking

When it comes to financial fraud, the Bernie Madoff’s Ponzi scheme takes the cake. Madoff began his scheme in the late 1980’s, by promising incredible returns on money invested.  However instead of investing this money like he said he was, he would deposit it into a bank account.  When clients wanted their money back, he could simply withdraw from this account and pay the investors back with the incredible returns.

Obviously this type of fraud is not sustainable and relies on getting more and more clients, so the money continues to flow in.  The second necessity for his scheme was to convince investors to stay invested rather than take out their money.  He would take a commission for his service and could have constant access to all of the money invested.  Finally when investors wanted too much money out, the whole scheme came crashing down around him since he could not pay.

When it was all said and done, he tricked investors out of nearly 65 billion dollars.  Despite claiming to be the sole perpetrator in the heinous crime that ruined many peoples lives, I don’t think it would be possible for one man to trick so many without help.

 

Link:

http://www.businessinsider.com/how-bernie-madoffs-ponzi-scheme-worked-2014-7

Yang, Stephanie. “5 Years Ago Bernie Madoff Was Sentenced to 150 Years In Prison – Here’s How His Scheme Worked.” Business Insider. Business Insider, 01 July 2014. Web. 29 Jan. 2017.

Technology is constantly evolving, creating future innovations no one could have ever imagined. That being said, security generally does not come as quickly as new inventions. This tension is of prime importance to banks, as security issues and attacks could cause a huge loss of business. Statistically, “63% of senior IT leaders in the financial services sector globally said their company had suffered an attack in the past year…14% they weren’t very confident they could return to business as usual within 48 hours if they suffered another attack” (Weatherhead).

In my opinion, banks need to consider security at the forefront of all new business. The loss of customer trust as the result of attack could be irreparable. Security cannot evolve as fast as new innovations, and while banks should be encouraged to remain inventive to remain competitive, they need professionals monitoring cyber security at all times and to be cautious and thoroughly vet new technology. Customer convenience may have to be sacrificed at times, and it might present an issue to convince stakeholders that security should be prioritized, but it ultimately should be the priority.

Source: http://www.fintechbusiness.com/blogs/610-cyber-security-should-be-a-focus-from-the-start

The latest technology of mobile wallet is slowly gaining people attention. The idea of not carrying wallet and making the payments just by the details of your card is a little scary for people.With the growing attention of Apple pay, people are becoming aware of it’s use and advantages.It is considered to be the safest way of doing payments so far. The Credit card uses the magnetic strips which contains all the information of the card holders in a simplest form written at the magnetic strip without any encryption, anyone can hack that process or the system with card details and use these information for their own benefit. Even with the chip card, all the information is stored in the chip and with the correct resources, it can be hacked. But with Apple Pay it uses the most secure form of payment method. It does not save the details of the card holder. The method comprises of two major elements First is NFC and second is finger touch. The NFC used reduce the distance of the payment to the minimal, that means the application is supposed to be at a distance of 2 to 4 cm for the payment to happen. Secondly Finger touch act like a second layer of security which provides an additional authentication process for initiating the payment. The best part of using Apple wallet is Apple as a company never treat it’s customer as a product so they don’t save or use your personnel information for anything else.

Blockchain provides a potential solution to providing authenticity amongst transactions and near instantaneous speeds. The implementation through Bitcoin has shown the world the need for technologies that give people control and trust of the transactions around them.

It’s not a surprise that blockchain technology has taken off in the world’s largest country. With a population of over 1.4B people and a growing middle class, China is forced to find ways to streamline transactions and fight against fraud. The large Chinese banks struggle to modernize due to high costs and risks of these new systems. China also faces a huge problem with financial fraud and needs a way to give trust back to the people.

Regulators in China believe that blockchain technology can be a way to jumpstart the traditional banks into a new era. Blockchain can help serve as a digital ledger to track information, loans, and contracts. All of these needs would reduce the human labor required for each transactions and allow for the entire country to audit the transactions. Citizens can hold high level government officials accountable to the finances of the country by having an audit trail that is nearly impossible to manipulate.

Source: http://fortune.com/2017/01/27/china-banking-fraud-blockchain/