Month: January 2017

New software and advances in Near Field Communication technology has changed the way we buy the things we want.  Instead of cash and cards more people are using their smart phones and wearable devices.  Just wave your device in front of the credit card reader and you are on your way.

In 2015 three companies pushed their mobile pay technology and really got the industry moving.  Apple Pay had its first full calendar year in the market place, Samsung launched it’s own mobile pay service, and Google relaunched it’s wallet in the form of Android Pay.

Banks around the world are also joining in.  At the end of 2014 there were only 7 banks that had services supporting mobile pay and now 55 banks around the world have started programs.

In the last year Apple has been able to gain millions of registered users for the Apple Pay service and to add to that success they have launched the Apple Watch.  This wearable device will make it even easier for mobile pay users and is sure to bring more attention to the industry. Last year Apple was able to ship 8.8 million watches and later this year Samsung and Sony will be launching their own wearable devices.

References:

http://www.forbes.com/sites/kevinanderton/2016/04/29/mobile-payment-and-the-future-of-money-infographic/#525f32dd1e30

http://www.businessinsider.com/sc/mastercard-mobile-payments-2015-2

For the past two weeks we have been learning about the structure of a financial information system. I found this article to be interesting because it revolves around the hardware or infrastructure that supports the FIS.

David Weldon the author of the article predict 4 major moves in 2017.

1. More systems are turning to cloud computing rather relying on its own in-house servers. Upgrading the physical hardware every couple of years is an expensive investment and as more companies are offering cloud computing as a service, why not pay them and worry less about maintaining your own system.
2. Vendors are working together to minimize their faults and improve the services offered to their clients.
3. Data efficiency and security are always a main concern for customers.
4. Systems will be able to reach a point where they can make predictions, whether it is a forecast or a recovery time from a downfall.

While the author did point out great topics, I would also like to add one more bullet point to the list. I think the Internet of Things deserves a mention. While the author did briefly touch on IoT, I believe that we will see an increase of IoT products and services this year. This could affect FIS, in which IoT devices will be able to read and analyze data, such as scanning a Goods Receipt document and automatically creating a transaction that will update the Master Data.

Article Link: http://www.information-management.com/news/infrastructure/4-predictions-for-cloud-computing-and-machine-learning-in-2017-10030720-1.html

What the Article Says:

With Donald Trump’s recent election, his proposed changes are expected to have major effects on the financial services industry, especially with regards to financial technology. The types of businesses that are affected in this sector include online marketplace lenders such as bitcoin and blockchain technology, money management applications such as Mint, digital wallets, money transmitters like Venmo, and more.

The majority of the changes are in the area of controls and regulations, with a specific intent of encouraging growth and expanded access to credit through online marketplace lending. The Financial Services Innovation Act, introduced by Patrick McHenry in 2016, hopes to “encourage those with interesting and innovative ideas to come to the regulators to try to ensure a compliant product.” The bill is far from complete and Trump’s administration intends to create “drastic changes in regulatory compliance requirements.

My Thoughts:

With Trump’s new presidency, there has been an overwhelming amount of dissent in his proposed policies. While most did not have definitive terms during his candidacy, his recent election should have sparked the administration to roll out the action plans. Trump seems to have good intentions, but it’s now up to him to determine how to act to get the nation on his side.

Source: http://thehill.com/blogs/pundits-blog/finance/312047-financial-technology-rules-are-set-to-change-in-the-trump-era

The U.S. insurance industry represents the largest in the world, with an annual revenue (think insurance premiums) of more than $1.2 trillion. However, there have been few major technological innovations in this massive industry, making it the perfect target for financial technology startups.

Therefore, the World Economic Forum predicts that the most significant fintech disruption will take place in the insurance sector. While 90% of insurers fear this technological revolution, many insurance companies are beginning to see fintech not as a threat but as an opportunity. Quite a few traditional insurance providers are embracing fintech and incorporating innovative new technologies into their offerings.

Source: http://www.investopedia.com/articles/insurance/121416/could-fintechs-insurance-innovations-disrupt-industry.asp

From the rise of Fintech, we have seen growth of P2P online transactions and banking sectors. There also has been much hype about digital currency and physical banks being replaced. As the years, have progressed the investments also continue to grow.

With the trending tech in the industry, the new startups are moving towards insurance and wealth management which have still been underdeveloped with little innovation. The new and interesting technology in the industry is “Robo Advisors”, which are used to assess a user’s risk profile and match the relevant low-cost investments. The algorithms are designed to optimize the returns and taxes with your investments.

With the Fintech industry growing, so are the technologies. Adding new technologies like AI, makes me wonder what awaits us in the future.

SRC: http://www.forbes.com/sites/nikolaikuznetsov/2016/11/22/the-next-phase-in-fintech/#736e473a4a29

Img Src: http://www.forbes.com/fintech/2016/#164120bc5668

This article mentions a very interesting point regarding the predicted futures of marketplace lenders such as Lending Club, OnDeck. It states “if the funding pressure continues, large banks could end up acquiring the marketplace lenders, or pieces of them.” I share the same opinion and also believe such synergy is the appropriate way this industry should operate. I personally never believe in the success of those marketplace lenders. Even though, they help more people gain access to needed financing more quickly and cheaply compared to traditional banks, they are more prone to adverse selection problem due to less time of doing sufficient due diligence about their borrowers. Consequently, it will lead to increasing defaults and more seriously, bankruptcy of those lenders. The synergy will help combine banks’ extensive expertise of screening and managing loans, and marketplace lenders’ disruptive technology. As a result, it will not only benefit both banks and marketplace lenders but also secure the lending industry.

Source: https://www.nytimes.com/2016/05/10/business/dealbook/as-lending-club-stumbles-its-entire-industry-faces-skepticism.html

The article talks about how FinTech has not been able to create a social website in the vein of Facebook. The author gives some examples of some failed websites, some reasons why social FinTech hasn’t worked, and some thoughts on the future of social FinTech.

I am not surprised that FinTech (as of 2015) hasn’t been able to create a successful social media website. People tend to be very cautious when it comes to their money. As such, I doubt that many people would be willing to trust strangers with financial and monetary advice. When it comes to finance, many people probably put greater trust in experts and established brands, such as Bloomberg and Charles Schwab. In addition, I agree with the author that another reason why FinTech may have trouble catching up with established companies besides expertise is that they have more accurate data. I believe that if a FinTech company were to succeed in going social, it would have to convince experts be a part of the FinTech, and allow customers more open and less expensive access to the same data that companies such as Bloomberg use.

Why Has “Social” Failed In Fintech?

Bitcoin is emerging as a new form of currency exchange and method for people to convert their black money into white. There have been enough bitcoin regulation available in market for now and people are selling and buying them on the web. There are no government regulation related to them and no one to enforce any rules on them. People who bought them long ago can sell them now at the current price making a lot of money in return. This can be evolved as a new form of share exchange market with no set of rules available of how much to sell and at price to buy.This process is creating the irregular form of money which should not be supported in the real world.The inventor of Bitcoin Satoshi Nakamoto has not been found in person yet and certainly nobody knows how much virtual money he had collected and for what type of purpose he is using it for. These type of money can be used for illegal and harmful type of action on international level.Without any International body involvement ,the invest of the money in the bitcoin will be stuck as their are no regulations to convert your virtual money into actual currency.

With virtual currencies becoming more popular, the I.R.S. has started to seek oversight on these transactions in order to ensure that the proper tax regulations are being followed. Companies such as Coinbase have provided users the opportunity to anonymously store and exchange their digital currency. The I.R.S has requested that the company reveal their customers in order to ensure that any capital gains or losses are being reported correctly.

The advancement of digital currencies has finally reached a point where the government has recognized the need to develop a system of greater oversight. Untraceable transactions have provided an opportunity for users to hide capital gains and launder money. In order to prevent financial technologies from creating opportunities for fraud and tax evasion, the industry needs to work with legislatures to establish government oversight that is effective and does not impede the growth of financial technologies.

Reference:

Millions of accounts are made each and every day.  These accounts include social media like Facebook and Twitter, personal financial information like bank accounts and work accounts.  With this many accounts coming at you from every direction, it oftentimes seems like the easy approach to create a universal password for all the accounts.  Yet, if this password were stolen, decoded or just plain guessed; how much damage could a single person be able to inflict if they essentially held your entire life or company’s life in their hands?

This made me wonder what were the common pitfalls in making a password and what steps can be utilized to prevent any of them being stolen in the first place.  Some advice when creating a password includes:

1. Use a different password for each account
2. Use a minimum of 12 characters
3. Replacing I’s with 1’s and a’s with @’s is easily cracked
4. Don’t use personal information such as dog or cats name
5. If possible make a passphrase instead of a password
   1. Example: “goodluckguessingthispassword” instead of “password1234”
6. If you have some variation of these passwords, change it as soon as possible
   1. 123456
   2. password
   3. qwerty
   4. football
   5. baseball
   6. 123456789

Link: https://www.theguardian.com/money/2016/may/21/how-create-perfect-password-hackers-online-accounts-safe

Collinson, Patrick. “How to Create the Perfect Password.” The Guardian. Guardian News and Media, 21 May 2016. Web. 22 Jan. 2017.