I have been wondering about the relevance of so many Financial Information Systems, if the world had a more ideal and unified system for money. Would we need such complex software if our coins and cash were simple in the first place? For example, in our daily FIS assignments, we wouldn’t be having the ‘Company code’ related problems during currency conversion if the world shared a common currency!

If ERP systems find it difficult to enable you to have a vendor in Croatia and a plant in Germany and customers in United States, wouldn’t it be far more complex in real life for actual industrial expansion to occur in the countries hosting their native currencies? So I feel that instead of designing solutions on top of complex systems, why not eradicate the root cause and design a permanent solution for an ideal world? Who knows, 10 years down the line the world might just adopt it (advent of the bitcoin is a hint!)

Although printed currency works well in goods exchange in an economy, there is no automatic linkage to guarantee there will be a corresponding increase in real goods to match the increase of the printed cash.Throughout history, majority of economic crises had a monetary cause and were not due to a breakdown of production of real goods. The actual collapse of societies on the other hand is related to the breakdown of the fundamental good creation system. So ideal concept of money should be reflecting the health of industrial systems, but currently it only obscures the real problems.

Ideal money should have stable value over a long time.Hence, gold or silver is not a good substitute. “A possible nonpolitical basis for a value standard that could be used for money would be a good industrial consumption price index(ICPI) statistic. This statistic could be calculated from the international price of commodities such as copper, silver, tungsten, and so forth that are used in industrial activities.” John Nash said in his lecture. I hope we can integrate ICPI to a bitcoin like crypto-currency standard, thus eliminating hard cash. Listing reasons why this would be the advent of the ideal world:

1. The money in an economy will reflect the actual health or it’s capacity to produce goods and services for it’s people.It will ensure a fair flow of prosperity across the world.
2. ‘It is a solution to the Triffin dilemma which is generally about the conflict of economic interests between the short-term domestic and long-term international objectives when a currency used in a country is also a world reserve currency in the meantime.’If we have a unified currency for the world that is decentralised like bitcoin and not governed/policed by few banks, it overcomes this dilemma.
3. No taxes, 3rd party transaction fees, crypto currency cannot be stolen or counterfeited. Clean transactions with no time-related distortions could start an era of free trade and industrial growth.

References:

https://en.wikipedia.org/wiki/Ideal_money

http://www.lietaer.com/2010/09/what-is-the-problem-with-our-current-money-system/

As there has been increasing interest and talk about the realm of fintech, this article broke down what fintech actually econpmasess as of late. The author mentions that fintech is no longer one bucket, but multiple buckets which include things like RegTech, WealthTech, and InsurTech among others. Additionally, fintech has a growing list of subcategories some of which include lending, analytics, cybersecurity, neobanking, payments and roboadvice. To add to this, there are also certain technologies like IoT and AI that are heavily involved within fintech. The author then goes on to create three major market streams which include creating a new financial structure, removing friction from financial markets, and reducing the costs and overcoming bank inefficiencies. In the evolution of fintech, it’s important to note that none of these streams are aimed at replacing banks; those are here to stay.

I found this article quite interesting as fintech is still an emerging field and with this, its definition has changed over time and will continue to do so as more players enter the field with their own new ideas. It will be interesting to see where fintech is in the next five to ten years and what it will exactly encompass compared to today.
https://thenextweb.com/finance/2017/02/21/fintech-is-not-just-fintech-anymore/#.tnw_ZDOUz4QE

Coming days after very scathing allegations about the corporate culture at Uber and the claims of numerous incidents of sexual harassment from a female ex-Uber engineer Square’s CFO speaks out about the “systemic problem” that exists in the tech industry. Square’s CFO Sarah Friar notes that there is a large problem with sexism in not just the tech industry, but also in other industries as well. She noted that at Square to counteract this issue there is a culture of inclusiveness that the company’s employees and its merchants who use their products are a part of. The lack of women in tech and the sexual harassment that happens has been a known issue for quite some time. Sexual harassment is not limited to the tech industry and I agree it is a systemic issue. My mother started her own construction company in the 1980s and faced sexual harassment even as a business owner from other companies’ workers when she first started. It is a problem that will change as more women enter certain fields, but will also require work from everybody to make sure that it does not occur.

Article link: http://www.cnbc.com/2017/02/22/square-cfo-sarah-friar-interview-sexism-in-tech-a-huge-problem.html

False Positive:

Compliance is one area where financial institutions cannot easily cut back on costs. All those operating in financial services are obliged to screen both their clients and individual transactions, to ensure they do not breach regulations. So financial institutions conduct a daily screening of customers and transactions against a long and steadily lengthening list, which is a complex process. The result – perhaps inevitably – is that these daily screenings produce a large number of ‘false positives’, or alarms that flag an issue that must be investigated but prove to be nothing.

A Growing Problem:

The problem of false positives is deepening as the number of obligations grows. For example in case of governmental sanctions, each investigation must address the complexities of who owns what, where they own it and whether it is subject to sanctions, with all banking products subject to a lengthy screening process.

Changing the Relations:

In this way bank customers will find that obtaining products becomes a more time-consuming process: they will have to present their passports more frequently and respond to more questions, to meet the requirements for “Know-Your-Customer” (KYC) identity verification. So the onboarding process is lengthier, costs increase and customers must respond to questions that some will regard as intrusive. The additional requirements also change the nature of bank and customer relationships; previously regarded as opportunities they have come to be seen more as risks.

Conclusion:

As a result of current situation financial institution compliance departments have escaped the general trend for cutbacks and seen staffing levels increase, while their employees have enjoyed improved pay and higher visibility. These departments have also seen greater investment in technology.There still remains much work to be done in compliance and a major percentage of screening work continues to be manual. Risk intelligence will help meet the challenge and bringing previously siloed customer databases together will allow banks to achieve a single overview of risk.

References:

https://www.cognizant.com/whitepapers/OFAC-Name-Matching-and-False-Positive-Reduction-Techniques-codex1016.pdf

http://www.thetaray.com/the-only-thing-worse-than-false-positives-is-no-positives/

https://www.finextra.com/blogposting/11005/anti-money-laundering-from-false-positives-to-real-positive-with-predictive-modelling-and-big-data

 

We always talk about how traditional financial institutions are being disrupted by fin tech, but some smaller scale independent financial advisors are being left behind by the fin tech revolution. Larger firms have the capital and streamlined services to invest in large expensive fin tech products. But independent advisers with less than 200 clients don’t have the ability to purchase such systems, and can’t utilize fin tech to their advantage.

InvestmentLink CTO Wayne Robinson, says that to break into this forgotten market fin tech firms need to develop more customizable software that will give more control to the user. Independent firms have more diverse clients with different needs and therefore need a software that allows them to provide the best practices for their clients. By creating a more often software, the product can become cheaper for these firms and put more advanced fin tech in their reach.

http://www.fintechbusiness.com/industry/643-ifas-being-left-behind-by-fintech-companies

Fintech is a growing industry and investments to grow it even bigger are increasing at a rapid pace. This article talks about how investments in Fintech are growing across the world which could result in a revolutionary 2017. As we know Fintech is a growing and has influenced the investment industry, money transfer, payments, insurance and almost every other banking service. There are Fintech startups across the world that are making banking services simpler for the everyday user. Millennials across the world have become accustomed to services like Venmo, Robinhood and Ant Financial. As Fintech is growing the existing popular Fintech service providers are trying to gain more and more market share of this industry. In the past year Fintech has grown a massive 11% or 17.4 billion dollars of which united states is responsible for 6.7 billion across 650 companies and china is responsible for 7.2 billion across 28 companies. Fintech is helping developing countries across south east Asia to introduce simpler net banking solutions to even the rural areas which were not accessible previously. Investments in these Fintech startups is growing. This shows how Fintech is growing as a industry and companies that are doing well with their security and simplicity of their services are in line to become leaders of this industry.

 

https://www.forbes.com/sites/lawrencewintermeyer/2017/02/17/global-fintech-vc-investment-soars-in-2016/#5bdffa332630

Traditional financial institutions have reached the point in which they are highly regulated. This has come to be not only after scandals that have occurred in the past, but also just due to the fact of how massive the financial entities have become. Fintech has becoming more and more prevalent, and in many areas do the same tasks that traditional financial institutions do to source some of their revenue. However, at this point there are minimal restrictions and regulations on fintech institutions. I think that it is preferable to create policies first to help prevent any unfavorable outcomes that may occur later in the future. An executive arm of Europe launched a task force recently to study how financial technology could transform financial services to eventually regulate virtual currencies, among other things. Although there are benefits to financial technology, there are challenges that it brings and the new task force will present policy suggestions and recommendations in the first half of this year. The task force is made up of a number of individuals from varying backgrounds such as financial and digital services, digital innovation and security, and other backgrounds. Because fintech firms are having access to confidential data, the task force is making sure that their policy will support the opportunities of fintech firms, while making sure to pay attention to any potential risks.

Link to article: https://www.law360.com/articles/862019/new-eu-fintech-task-force-will-outline-policies-by-2017

The fintech sector is using artificial intelligence to better analyze data and enhance user experience. Many firms are integrating AI into its operations. Sentient Technologies uses artificial intelligence to continuously analyze data and improve its investment strategies. Wealthfront, a robo-advisor, uses artificial intelligence capabilities to give customers more customized advice. This includes tracking account activity and understanding and analyzing user spending, investing, and financial decision making. AI is also being used by banking customer service, such as the technology Luvo, which assists service agents find answers to customer inquiries. AI is more than automation, not only does it search through databases, but it also provides human personality and can continuously learn and improve.

I think artificial technology can enhance financial technology in many ways. Often times customers of traditional banking believe technology lacks the personable human interaction they get from a bank, however AI can offer similar services. AI’s ability to learn and adapt to the user will give customers a tailored experience at a fraction of the price they previously paid. However, the largest downside to AI is that it will replace jobs in the workforce. Like many other disruptions, this will cause many job losses so companies can lower overhead and increase profit.

Source: The Age of Artificial Intelligence in Fintech

Although the insurance sector lags behind the banking industry, it has been positioned in a unique way to directly benefit from the blockchain technology. Blockchain can address the key issues faced by most incumbents, for instance poor customer engagement. Listed below are the most promising insurance-related use cases that have benefited from the blockchain technology.

1) Customer engagement: One of the most important hurdle in improving customer engagement through the blockchain technology lies in the area of personal data. The fear of losing one’s personal data as soon as it is handed over to a company is grave. Apparently the blockchain technology can play a huge role in improving customer engagement by offering transparency in claim handling.

2) Emerging Markets: P2P blockchains with smart contracts could be applied to micro-insurances in the emerging markets to offer them at low handling costs, if underwriting and claims handling can be automated.

3) Internet of Things (IoT): In this scenario of IoT, cars, electronic devices or home appliances can have their own insurance policies registered and administered by smart contracts in a blockchain network, automatically detecting damage first and then triggering the repair process, as well as claims and payments.

4) Reduced administrative cost: Blockchain will also help reduce the operations cost through automated verification of the policy holder’s identity, audit-able registration of claims and data from third parties and payouts for claims via a blockchain based payments infrastructure or smart contracts.

In conclusion, although Blockchain is a digitization technology that can be of strategic interest to insurers, the biggest challenge to its implementation is facilitating collaboration between market participants and technology leaders in shaping a regulatory environment.

Reference: http://www.mckinsey.com/~/media/McKinsey/Industries/Financial%20Services/Our%20Insights/Blockchain%20in%20insurance%20opportunity%20or%20threat/Blockchain-in-insurance-opportunity-or-threat.ashx