Month: February 2017

Legal Entity Identifiers (LEI) are unique codes assigned to companies during financial transactions. Similar to blockchain technology, LEIs would allow for greater analysis for historical transactions. These identifiers were first used in 2012 and have reached over 480,000 participants. However, it is important to note that the number of new registrations have dropped exponentially. In 2016, there was a net loss of 12,000 identifiers.  There is no incentive to renew because lapsed identifiers can be reported in financial transactions under current regulations in the EU. And in the US, lawmakers are opposed to making LEIs mandatory in anything other than the swap market.

LEIs have become irrelevant in business because of its loopholes. In an ideal world, companies would use them to maintain financial integrity. I believe that lawmakers should rethink their view on LEIs. After all the financial crises in the last decade, it would make sense to have an extra checks and balances. It works well with swaps. CUSIP numbers allow for secure and legit transactions. This can be easily translated to other markets as well. The idea of LEI sounds good on paper, but will only come to fruition if practiced by all.

 

Link: https://www.finextra.com/newsarticle/30117/global-lei-initiative-struggles-for-momentum

What the Article Says:

1. FinTech’s presence in modern-day society is coming to represent a variety of financial services that we use on a daily basis: mobile payments, money transfers, loans, fundraising, and asset management.

2. FinTech is shaving weeks off of the process of obtaining funds to start up a business. Crowdfunding allows businesses to raise money quickly and cheaply from people all over the world, even if there is no physical interaction. Not only that, people can even accept credit and debit payments through Square and Paypal, making business transactions easier than ever before.

3. FinTech is shaping customers and their expectations. People depend on these relatively recent developments to make purchases and do business. They also expect the same level of service and access from a small firm as a large firm. If a business is unable to keep up with customer expectations and the latest technologies, they will be left behind.

My Thoughts:

I thought this article was a great representation of how FinTech has shaped our lives over the past decade. The author mentioned that the industry has grown from $930 million to $12 billion since 2008, and I’m not surprised to see these numbers. While consumer expectations are increasing and the dependency on these technologies increase, I think the expectations for future developments also increase. It’s a growing industry and I’m interested in seeing which direction the consumers drive it in.

Source: http://www.forbes.com/sites/bernardmarr/2017/02/10/a-complete-beginners-guide-to-fintech-in-2017/#2d53ec597542

http://www.zdnet.com/article/square-launches-its-first-industry-specific-platform-for-retailers/
https://squareup.com/security

On February 8, 2017, Square launched their first industry specific platform for retailers (as noted in the article’s title). Prior to its launch, Square’s capabilities were limited in the sense that its system could not accommodate for growing businesses with a large catalog. The concern with Square’s expansion into the retail space raises the question of if more customers are exchanging their credit card information with this credit card processing service, who’s ultimately responsible for the upkeep and security of such sensitive information?

On Square’s website, the company lists different measures that they take to ensure the safety of their customers and customers’ users. Square provides a B2B service to usually, B2C businesses. This financial device and service has gained the reputation for being easily accessible and user friendly for businesses. However, as a credit card user with small businesses, it somewhat frightens me how easy it could be for small businesses to steal my personal information through the use of a device that looks similarly to Square’s. I think that although credit card processing can be streamlined and be more cost efficient, consumers must be more cautious and wary about where our personal information is going.

BookMyForex is an Indian Fintech company that allows customers to buy foreign currency online at a rate lower than that of the foreign exchange companies, banks, hotels, and airports. Customers can choose among options such as a foreign exchange card, hard currency, traveler’s cheques, or international remittances.

The company compares foreign exchange rates across foreign exchange companies and banks in real time, and it uses an algorithm to determine the best vendor to service a customer’s request. Once a vendor is selected, BookMyForex contacts the customer and fulfills the request within six hours. BookMyForex makes a profit through adding its own margin on top of the exchange rate.

I can see the appeal in simplifying the process of currency exchange. If I’m traveling, I would want the best rates. The current retail currency market has room for expansion; according to a Bloomberg report in 2016, the global currency market has an average daily volume of over $5 trillion. In order to be competitive in the online foreign exchange marketplace, BookMyForex and other similar companies must ensure the lowest rates, system stability, foreign expansion. With the rising use of e-wallets, BookMyForex should consider providing such an option, too.

Reference:  http://www.bloombergquint.com/business/2017/02/11/fintech-tracker-can-bookmyforex-make-money-by-selling-money

A discussed in the previous post, the evolution of machine learning in FinTech, it is time to pin point prospective users to appropriate resources. As discussed before, the application of Machine Learning expands to –

1. Predictive analysis for credit score and bad loans.
2. Support accurate decision making.
3. Information Extraction.
4. Fraud Detection & Identity Management.
5. Building Trading Algorithm
   and many more…

However, for organizations planning to work in the above mentioned areas of expertise (and having no knowledge of how things are done), I feel it is a good idea to seek help (at least in terms of consulting) from businesses who are into this domain.

• Lending Club, Kabbage, LendUp specialize in Predictive analysis for credit scores and bad loans so according to me it is a great go to market option for lending organizations to seek their advice.
• Affirm, ZestFinance, Billguard are into users of data that support decision making. They all consume and analyze vast amounts of data.
• DataMinr, AlphaSense work to achieve real time information discovery and information de-fragmentation respectively.
• Feedzai, Bionym, BioCatch are in different industries but have common interests towards fraud management and they leverage it my natural language processing and machine learning.
• KFC Capital, Binatix are pure finance based firms and use state-of-the-art machine learning algorithms to support their trading algorithms. 

   

  Detailed List at – https://letstalkpayments.com/applications-of-machine-learning-in-fintech/

Chris Myers, the contributor of this article, starts of by saying that he is a believer that the financial technology sector is failing to live up to the hype. He is right in the sense that fintech has not totally disrupted the traditional financial sector as stated in many sources however, I think the point is that fintech is positioned in so many of the areas that financial institutions source their revenue from, that there is potential for them to be legitimately threatened. Myers’ first point is to “Ensure you have the right investors”. Ultimately, because many investors have three to five year investment horizons, some fintech companies feel pressured to do too much in a short period of time which leads to short-sighted mistakes. The problem with this, is that because the Fintech industry is growing so quickly, if a company is not quick enough then it will get left behind. The second point Myers makes is “Stay lean and don’t act like a tech startup”. Fintech companies must not act like startups and make slow changes. Again, this may give competition and the traditional financial corporations to outpace them. Finally, the third point is to “Show respect for the incumbents, but hedge your bets”. Fintech companies may find it hard to partner with traditional financial institutions due to the regulated environment, so they must spread the risk by implementing their technology in other institutions that use their technology, which still allows them to grow.

Article Link : http://www.forbes.com/sites/chrismyers/2017/02/10/3-steps-fintech-companies-need-to-take-in-order-to-survive/2/#38b0c2d37d87

Blockchain technology consists of a network of computers to maintain a collective book keeping via the internet. The advantage of this is this is neither closed nor in control of any single party. It’s public and available in one digital ledger which is fully distributed across the network. Each node in a network owns a full copy of ledger.In blockchain, all transactions are logged including information of time, date, participants and amount of every single transaction. Based on mathematical principles the transactions are verified by bitcoin miners. These are also devised in a way that they agree on the current state of the ledger if anyone tried to tamper with the transaction there will be no consensus and hence will refuse to incorporate the transaction. of open forms a core of Bitcoin. This is how blockchain and bitcoin functions.

Bitcoin is one of the possible technologies for blockchain instead of bitcoin it can be an identity like a digital signature to verify the documents example companies: Onename. The basic unit might also be stocks, bonds, land titles, and frequent flyer miles. ex: NASDAQ, Chain, Openchain .

References:

https://www.quora.com/What-are-non-Bitcoin-applications-of-blockchain-technology

According to Steve Singh, CEO of Concur Technologies, despite cloud computing’s widespread utility and strength in current technologies, we should expect “microservices” as the next big thing. Concur was recently acquired by SAP, a multinational company that produces enterprise software to manage business operations and customer relations. SAP has an extensive list of cloud computing services, so it’s interesting that Singh believes that cloud computing will soon fall second to microservices. Microservices are apps developed in small, separate pieces rather than as one complete program. Singh gave an example of how microservices could benefit users: “When…your producer, sent me an email saying, ‘hey would you like to come on the show’…I said, ‘I’ll be there Thursday.’…it automatically decided that I should book travel for Steve out to New York…I don’t go into Concur. I just go about my normal daily routine and the [apps] start to take actions for me all seamlessly.”

I think that microservices could be helpful in automating processes in our daily lives. However, where does the human preference come in? What if someone joked to a friend through email about traveling, and the service began booking a flight out of state? How does the system know what is legitimate and what isn’t?

Source: http://www.geekwire.com/2017/sap-president-steve-singh-says-cloud-computing-yesterdays-news-microservices-future/

This article talks about the company Xero that is creating security measures for third party apps that use Wells Fargo financial data. For example, the personal finance application Mint requires users to enter their username and password for each account they want to keep track of. Banks in the past such as Chase and Charles Schwab have seen this as a significant security threat even cutting off access to account information via applications like Mint. These banks, including Wells Fargo, are already faced with the security issues of a digital financial future, but companies like Xero are making third party data access more secure. Xero’s solution is to reroute customers to a Wells Fargo controlled logon where they would be able to select the specific account information they want the third party app to have access to. Although this is a viable solution, I question if such a decision will weaken the mobile platform of Wells Fargo as users may be even more inclined to use Mint over the Wells Fargo app. Despite this, I think that Xero’s solution is step in the right direction to enhance financial security for mobile users.
http://www.bizjournals.com.libproxy.scu.edu/sanfrancisco/blog/2016/06/wells-fargo-mint-quicken-wfc-intu.html

SAP adds new functions and features on enterprise information management(EIM) to help users to better manage and control data assets. The new EIM updates the following features:

1. SAP Data Services: It extends the support and connectivity to integrate and load large data and different data types, it can transfer from Google BigQuery to data processing tools such as Hadoop, SAP HANA Vora, SAP IQ, SAP HANA or other cloud based tools. It also connects to Amazon Redshift and optimize data extraction from HIVE table.
2. SAP  Information Steward: An enhanced metadata management capability provide data stewards and it is ealier to search metadata and discovery meaningful data.
3. SAP Data Quality Management microservices: It also provide data cleaning serives and data validation and enrichment for address and geocodes

Reference: http://www.cio.com/article/3163464/it-strategy/sap-adds-new-enterprise-information-management.html