Month: March 2017

Blockchain has opened up various opportunities for upcoming technologies. As per global business point, it is taking down walls and going to create smooth business transactions. On this concept, IBM introduced it’s own IBM blockchain. They want to create a permission network among people with identities who wants to use block chain as open source, open standard, and open governance globally without the need of Cryptocurrencies.They want to replace the use normal currency for various type industries with their blockchain, Especially while implementing their trade. They have started promoting also their Blockchain among various industries like finance, Insurance, and retail. Up till now the blockchain has not been governed or regulated by a big technology player. The fear of this happening is related to the price definition of the blockchain. As no Currency is linked with it and no government regulation, I feel IBM, If became the player in the market will be able to regulate the price and customer on its own basis. As Blockchain is still considered a new concept Government regulation and rules should be applied before it becomes too much technology driven.

References :

http://www.ibm.com/blockchain/what-is-blockchain.html

A spokesperson from Morningstar described it as follows: “Fintech companies are businesses that leverage new technology to create new and better financial services for both consumers and business. It includes companies of all kinds that may operate in personal financial management, insurance, payment, asset management, etc.”

Fintech is a result of the demographic shift in population where people are looking for easy access, efficiency, convenience, and speed.  In this day in age, people want to be able to do everything on their mobile devices in a matter of seconds.

Fintech companies are disrupting the traditional business models with innovative ideas.  The integration of finance and technology helps employees effectively manage their financial lives when and where they like.

Fintech can help cut costs for companies in the retirement and financial wellness space and improve benefit plan effectiveness. Ultimately, Fintech makes life easier for both the employer and its employees and individuals.

http://www.huffingtonpost.com/entry/what-is-fintech_us_58a20d80e4b0cd37efcfebaa

 

A European mobile security company, Pradeo, tested mobile banking applications with startling results. The company found that 50 of the world’s largest 100 banks had completely vulnerable mobile applications. Pradeo used simple techniques and combined techniques to test the applications. All 50 that it studied were found vulnerable. This means that hackers can retrieve account or transaction information and steal passwords among other possibilities. The article goes on to mention that mobile technology is still relatively new as compared to established technology like computers and laptops. With this, security measures are better on the established technologies while mobile security is still evolving.

The most interesting fact from this study is that 71% of people that use mobile banking are confident in its security. Throughout the blog posts, we’ve debated the issue of security in fintech, but what’s more interesting is how people have ‘blind faith’ in these large scale mobile apps. It will be interesting to see how new regulations play a role in security issues. Additionally, I wonder if the publishing of this report will dissuade users from using their mobile banking apps and what that means for the role of fintech in mobile banking. This security issue may cause delays in the integration of fintech and mobile applications.

https://www.cyberscoop.com/testing-pradeo-100-percent-mobile-banking-applications-vulnerable/

http://blog.pradeo.com/banking-applications-vulnerabilities

We know that Financial Services institutions invest heavily to develop information systems for risk measurement, especially in recent years. At the rate at which our technologies are developing, it might be less expensive for financial firms to assemble this risk information about its users. After all, Google and Facebook combined knows most of what there is to know about you!

Currently the financial information system is ruled by the CIA rule:

● Confidentiality
○ Prevent unauthorized disclosure of information (read access limitations)
● Integrity
○ Prevent unauthorized modification of information (write access limitations) for the data and the FIS.
● Availability
○Make sure Information available when needed by preventing DoS (Denial of Service) attacks.

After going through the various risk measurement methodologies, I am beginning to wonder if the whole structure of Financing industry going to change when it becomes less costly to assemble risk information. Will it affect capital budgeting and even incentive compensation in banks? I feel like the organizational structure of these banks will change to a more decentralized form, than the stringent central approval regime that is in place now. Reason I think so is because there will be (and currently is) increased flow of risk information outside the firm. A few years down the line information about each person will become more transparent, which might lead to relaxation to many of the strict rules and governing policies that are present now.

Reference:

http://www.bis.org/publ/ecsc07f.pdf

https://www.odu.edu/ts/security/risk-assessment/information-systems-risks

Earlier this week, Amazon Web Services (AWS), a cloud-computing service provider, suffered a major outage that affected much of the Internet. Although many Internet-wide outages are caused by malicious intent, this event was caused by a typo. Since so many web services are reliant on AWS, this outage has reignited the debate surrounding internet dependencies and security. FinTech is highly integrated with Internet access, so insufficient security/backup providers are also an issue.

A study in the first quarter of 2016 found that there have been 40% more attacks targeting financial institutions. A Deloitte study also found that many members of management at various firms are concerned with IT security. However, talent in this field is still lacking and is difficult to attract and attain; there is often only one person responsible for cybersecurity at an entire firm.

Since FinTech clearly has a technology component, I believe FinTechs should be aware of the impact cybersecurity (and lack thereof) has on their entire businesses. While there are many FinTech products/services that serve the average consumer, many are not trusted because of the lack of apparent security. This leaves room for growth as they continue to improve not only existing offerings but the security of these services.

Source: http://www.valuewalk.com/2017/03/fintech-cyber-security-risks/

What the Article Says:

While America is a leading country in FinTech, many others are still in the phases of entering this market. Iran has recently formed a FinTech Association when the idea was sparked by the Central Bank of Iran. The article states that the association is “set to bring industry players under a single roof, mainly to find a solution to their problems and boost innovators’ relations with regulatory bodies.”

The article lists out a few concerns that exist with this development. First, there is a huge potential for controversies to arise, such as Uber and Lyft issues which existed in the U.S. In addition, they want to ensure that there is a healthy environment for innovators and FinTech firms.

 

My Thoughts:

I think this article presented the general idea of Iran creating a FinTech Association very well. However, I also believe that it left out many details about what initiatives it plans to take, and what the Associations guiding principles and goals are. I am interested in seeing how the association develops and compares to those in the U.S., and if there is any global interaction.

 

Source: https://financialtribune.com/articles/economy-business-and-markets/60869/iran-s-fintech-association-launched

In today’s world, there are many hackers trying to produce malware and steal from large companies and corporations.  With that said, the banking industry is one of the main targets for hackers because of the large amount of money they can make if successful.  While banks are currently being attacked over the web, a recent report by the Internet Registry SIDN discovered that only 6% of online banking websites were using Domain Name System Security Extensions, which is significantly behind other industries.  In addition to this, another study found that only five out of eleven leading high street banks had adopted a two-step authentication to protect customers when they logged into their accounts, despite having the technology to do so.  Banks are constantly releasing statements stating that security is their top priority, but experts feel they are not doing enough, as 755 million pounds were stolen in 2015 alone–a jump of 26% from the previous year.  This number accounts for all types of financial fraud including online attacks with malware and data hacks, deception scams, and impersonation fraud.  The number of people using online banking has escalated tremendously, but the cybersecurity has not followed suit.  For many people, password verifications, authentication processes, and alerts are a major nuisance, but without these forms of online security protocol, peoples’ bank accounts and information are easily available for hackers.  The main problem, however, lies with the fact that even multi-layer security protocols can be hacked by the best hackers.

 

http://www.bankingtech.com/749122/are-banks-taking-security-seriously-enough/?utm_medium=email&utm_source=fintechweeklycom

This week’s piece by Chris DeRose on the future of Blockchain (DeRose, 2017), as it applies to the Finance sector, paints a dark picture with respect to where it’s headed. DeRose feels that the aggressive growth business models of Silicon Valley startups combined with the slow risk adverse stalwarts of the Financial Institution market are just not made for each other. He feels the venture capitalist (VC’s) will eventually abandon these companies as they fail to produce in the normal profit horizon for these startups. His reasoning points to the fact that the Blockchain buzz, after originally starting its run in 2015, fizzled out, but now in 2017 is trying a makeover with the ‘DLT’ (Distributed Ledger Technology) moniker, but the underlying technology in this space just lacks value.

I’m not blind to the reality of the divergent business models, but instead am looking at the big players that are experimenting with the technology – the IBM’s, Oracles, Big 4 Consulting Firms, Microsoft, and see a different angle over the long-term. Maybe it’s not necessarily going to take off in the Finance sector, but it’s the other applications for Blockchain that I think will advance – namely Health, Consumer, and government. Once these big players, using their deep R&D budgets, can agree on standards, I think we’ll see a turnaround, and the VC’s will come running back to get behind the startups. Stay tuned.

 DeRose, C. (2017, March 5). The Trouble With Fintech (Or Why “Now’ is the Time for DLT). Retrieved from www.coindesk.com: http://www.coindesk.com/the-trouble-with-fintech-and-why-now-is-the-time-for-dlt/

Mobile banking can be defined as using “a mobile phone to access your bank or credit union account. This can be done either by accessing your bank or credit union’s web page through the web browser on your mobile phone, via text messaging, or by using an app downloaded to your mobile phone.”

The main impediments to the adoption of mobile financial services cited by some consumers continue to be a preference for other methods of banking and making payments as well as concerns about security. Most consumers with bank accounts reported using a mix of online and offline channels to interact with their financial institution. For those who have adopted mobile banking, use of the mobile channel appears to complement their use of other banking channels. The security and privacy of personal information remain common concerns for mobile phone users, and many smartphone users reported taking steps to guard against possible risks.

The feature of mobile financial services is keep developing to meet customer’s demand. Nowadays, we can even deposit checks by scanning it via banking app on phone, check which category do we spend money at, instantly transfer money. Fintech do change our daily life and bring our convenience.

Source:

https://www.federalreserve.gov/econresdata/consumers-and-mobile-financial-services-report-201603.pdf

With smartphones seeing improvements every year, mobile payments increasingly offer a convenient and secure way for smartphone users to make payments. Simply take out your phone and scan it at a compatible terminal, and within a few seconds you’re done. And let’s be honest, we were probably using our smartphones while we were waiting in line anyways.

However, there are several different mobile payment solutions on the market today. Android Pay and Apple Pay aside, there are “mobile wallets” such as PayPal and the new Rambus Unified Payment Platform, and more proprietary or brand-specific solutions such as Starbucks’ mobile app and McDonald’s’ upcoming mobile app. In fact, a report shows that PayPal’s and Starbucks’ apps are the most used mobile payment apps.

In an ideal world, you would be able to make payments at any major retail store or restaurant from a single application, for example, Android Pay over NFC. The consumer would be able to store all their credit cards and rewards programs on a single, secure app and make payments at any NFC-compatible terminal. In reality, the non-standardization of mobile payment solutions means that consumers have to load multiple apps onto their phones, making mobile payments overall less convenient. Additionally, doing so may be less secure if you have to store credit card information across multiple apps with questionable security. As an example, having to wait for the Starbucks app to load when I’m waiting for my tasteless caffeine boost is less than ideal, and I do question having my credit card information not being stored behind a virtual number like it is in Android Pay. Making a general standard for all mobile payments to adhere to and allowing consumers to pay and earn rewards all from a single, convenient, and secure app.

That being said, standardizing the whole mobile payments industry is probably not the easiest thing in the world, as illustrated by XKCD:

 

 

 

 

 

 

Sources:

https://www.mobilepaymentstoday.com/news/paypal-starbucks-top-consumers-mobile-payments-preferences-study-says/

https://www.mobilepaymentstoday.com/news/mcdonalds-gets-in-the-game-with-mobile-order-and-pay/

http://www.pymnts.com/news/mobile-payments/2017/rambus-launches-unified-payment-platform/

https://xkcd.com/927/