Month: March 2017

This article discusses the idea that although many banks and financial institutions are looking into technological advances that could help stream line their services, bankers should not be completely worried that their jobs will be taken by artificial intelligence. People believe that artificial intelligence can be used as an encyclopedia in order to compliment the branch bankers. The information is already known by branch bankers will be multiplied with further access to an AI system.  AI can be implemented to automate repetitive tasks, yet many customers continue to seek in person help when  consulting about personal finance needs. Another benefit to AI would be that if they can handle these mundane work, bankers could be tasked to do more of the high service level work.

Overall, I do not fully agree with the point of view this article. While I can see how AI could possibly help branch bankers, I think that technological advances will continue to displace branch workers and others that do similar work. My generation sees less and less of a need to even go into a bank branch which is a trend I think likely will continue. There will continue to be new ways developed that will make their work replaceable.

https://www.americanbanker.com/news/why-branch-bankers-shouldnt-fear-bots

 

Personally, I believe Fintech and banks should be friends but not foes. In some previous blogs, I have already introduced the idea that fintech companies will face great challenge for growth if they do not partner with banks, and banks may actually increase their service and efficiency if they work with fintech companies and adopt new financial technologies. Obviously, a summary report from ABA National Conference for Community Banks further attested to my opinion.

According to the report, bankers were far less optimistic of fintech in 2015 than they are today. Two years ago, bankers saw fintech companies as a potential threat and thought innovative financial technology could lead to a revolution in the banking industry. Today, bankers’ attitudes have changed dramatically and they believe that traditional banks can adapt to financial technology as well as they could to every other banking innovation in the history, such as ATMs. Banks can benefit from financial technologies in a great many ways, such as through automated services.  On the other hand, fintech firms have also found it critical to partner with banks. Fintech firms, in general, lack credibility in customers’ opinion. For example, lenders averse the idea that a lending company should grow fast without being a bank, and therefore lack confidence working with fintech companies.

I believe that in the near future, we will see more and more partnerships between fintech companies and banks, and they will deliver revolutionary technologies that make customers’ banking experience more convenient.

 

Source:https://www.forbes.com/sites/franksorrentino/2017/03/02/fresh-from-aba-2017-community-bankers-are-riding-the-fintech-and-regulation-wave-of-optimism/#4cb25c1fd2bz

The rapidly rising prices of Bitcoin are concerning some into believing there might be a “Bitcoin bubble” that’s about to burst. This theory is grounded in the rising price of Bitcoin over 30% in the past month alone and over 100% in the past year. Recently it crossed the $1,200 mark and this is troubling to some monitoring. This piece takes economic supply and demand pricing strategies and tries to apply a few of the models to Bitcoin. The majority of normal goods, those that are purchased more as income increases, have a downward sloping demand curve and most models suggest that prices will fluctuate until they reach the equilibrium. This article suggests that there’s potential for another model, the “Theory of Reflexivity” whereby the demand for a good increases as prices increase due to other causal relationships such as normal economic booms and busts. These two conflicting models question what is causing the increased prices of Bitcoin. There’s evidence to suggest that the increased awareness is driving up the price but along with this, the quantity of trades haven’t gone up at the same rate. Though the article continues into great detail about many other sides of analysis, I found the economic model perspective the most interesting and defensible. I believe that Bitcoin has potential to be a bubble that bursts but I’m not sure it’s at it’s peak yet.

 

http://www.pbs.org/newshour/making-sense/column-boom-bitcoin-bubble-thats-burst/

The San Francisco/Silicon Valley is considered the hub for technology, but more specifically, the fintech industry. Many of the innovations and different companies that are growing are now spreading toward the Asian Market, as they look to start and grow their fintech industry. Some of the key trends include the amount of people who pay from their phone for purchases and transactions. In fact, China has 50x more people using online apps on their phone than the U.S. Both the banks and the regulators have adapted the block chain technology and digital currencies to improve lending and supervision behind larger transactions. It also slashes remittance fees for lower income families so that they can benefit from fintech as well. This helps shrink the tech gap between the high and low income families. The rise of “sandboxes” (places to test our new fintech in a controlled environment) and better access to credit for small businesses make Asia the most rapidly growth market for fintech. They will actually benefit more than the U.S since there are more people to bring into the market and a wider variety of people can use it as well. Alongside the U.S, Asia will be a huge powerhouse for fintech innovation and wouldn’t be surprised if it passes the U.S as the hub of all fintech.

URL: http://www.frbsf.org/our-district/about/sf-fed-blog/5-fintech-trends-shaping-finance-asia/

The Kingdom of Bahrain is in talks with Singapore’s central bank as the monarchy looks toward nation-wide blockchain adoption.

According to Khalid Al Rumaihi, CEO of the Bahrain EDB, the ability for blockchain to be adopted at a country level “is a huge opportunity for Bahrain to move into the spotlight as a pioneer in this space”.

Tasked with developing the blueprint for economic growth and development, Al Rumaihi sees the entirety of the financial services sector in the midst of “disruption of fintech”, underlining the need for Bahrain to proactively adapt and leap ahead with technologies like blockchain.

Dubai is also moving towards to adopt blockchain widely. The government is willing move to record all of its documents on a blockchain by the year 2020, as a part of its “Dubai Blockchain Strategy”.

Technology companies should grasp the opportunity to work on various other blockchain-based applications, such as in healthcare, cross-border remittance, conflict-free diamond trading and e-voting, to further promote use of blockchain into daily life.

 

Source: https://www.cryptocoinsnews.com/kingdom-bahrain-aims-country-level-blockchain-adoption/

AIG also known as “American International Group” is an insurance company that still exists today.  However from 2001 to 2004, the companies CEO Maurice “Hank” Greenberg was responsible for accounting fraud, stock price manipulation and bid-rigging.  Greenberg inflated profits by replacing loans with overall revenue within the financial statements.  Furthermore, he convinced large traders to manipulate the stock price of AIG.  Despite manipulating roughly 4 billion dollars in revenue, Greenberg simply had the option to step down in 2005 at the age of 80.

After stepping down from AI, Greenberg settled with a few companies in regards to the fraud; however it was only in 2016, that his case was finally brought to court.  In the final settlement both Mr. Greenberg as well as CFO at the time Eliot Spitzer acknowledged their role in illegally approving two transactions that in turn manipulated the stock price of AIG from 2001-2004.  Despite the damages they caused to both pension funds and individual investors, both men were merely forced to give up a combined 9.9 million dollars in which they received as performance bonuses!  Greenberg at age 91 did not get away with his crime; however he will receive no jail time.  Do you believe the punishment fits the crime?

Smith, Randall. “Former A.I.G. Executives Reach Settlement in Accounting Fraud Case.” The New York Times. The New York Times, 10 Feb. 2017. Web. 05 Mar. 2017.

Website: https://www.nytimes.com/2017/02/10/business/dealbook/former-aig-executives-reach-settlement-in-accounting-fraud-case.html?_r=0

 

On March 1st, new regulations set by the New York’s Department of Financial Services, went into place which affected all of New York’s banks. The regulations require that all banks that have over $5million in revenue must establish a cybersecurity program that will be maintained and audited. A list of all regulations that must be implemented in two years include
-Notification of security breach protocols
-Have a CISO responsible fro protecting data
-Have pen testing, risk assessment, and multi factor authentication practices
-developed audit trail capabilities
-Retain all data for 3-5 years

Working at EY I focus on IT Risk assessment, so I highly agree with all the new regulations that are being set forth by the DFS. Since cyber attacks are becoming more prevalent and dangerous, every company, especially financial institutions with so much data on their clients, need to be prepared to deal with these threats. Although the proposed regulations don’t cover everything to make business invulnerable, they create a good baseline for other states to build off of when creating their own cybersecurity regulations for businesses.

http://www.darkreading.com/risk/new-cybersecurity-regulations-begin-today-for-ny-banks/d/d-id/1328295

In 2016, the amount of venture capital funding increased 10% to $23.2 billion, which was largely assisted by investments in China and Japan, reports Fortune.

China is embracing Fintech very quickly during the past few years. China’s Ant Financial Services Group raised $4.5 billion during a fundraising round. Hong Kong-based industry investment firm, Credit China Fintech Holdings Ltd. also announced that it was entering a $30 million agreement with bitcoin and blockchain industry giant BitFury.

Japan in the past year has emerged as a strong market for cryptocurrencies and blockchain technology. The technology adoption, combined with government’s liberal attitude towards Bitcoin and blockchain could give a significant boost to the country’s growing fintech ecosystem. Moreover, the Bank of Japan launched a blockchain test drive at the end of last year to gather more insight into how the technology works. According to governor Haruhiko Kuroda, the new technology could bring significant change and impact to the financial industry.

It’s very exciting to see the adoption of Fintech in Asian countries. From my point of view, there is no doubt that Fintech will play a big role in the financial industry of China. Meanwhile, the development of fintech industry in Japan will be instrumental in improving the Japan’s economy as well.

 

 

 

Source:

http://www.newsbtc.com/2017/03/05/japan-fintech-revenues-2021/

https://www.cryptocoinsnews.com/china-japan-lead-asian-interest-fintech/

 

From research at Stanford University, it was found that Twitter tweets were able to positively reflect the general public’s sentiments towards a given stock. Twitter allows all humans to post short updates within 140 characters. Through machine learning and sentiment analysis, machines are able to instantaneously make assertions about a stock based on public opinion.

Neural networks can be trained with public sentiments along with historical price data to more accurately predict future prices of stock. The paper was able to show a 75% correlation between their predictions and actual stock prices.

Technology is changing the game for the financial services sector. With the increased availability of compute power, it will push the entire world towards trading that is heavily dominated by technology instead of human traders. But, I believe this artificial intelligence needs to be augmented by humans.

Reference: https://pdfs.semanticscholar.org/4ecc/55e1c3ff1cee41f21e5b0a3b22c58d04c9d6.pdf

Within the last few years, development in artificial intelligence has skyrocketed. What society has yet to grasp is the concept that artificial intelligence may one day replace daily jobs that people today possess. Financial technology has started to take root in society’s everyday activities. With the integration of artificial technology, people will need less and less human help and rely more on technology.

However, a question posed by the article includes whether society is willing to integrate this technology into everyday life. The fear of the unknown, of the advancement of technology, and of the replacement of jobs, keep majority of the population at bay. More and more people are starting to accept this change, from managing banking activities through online means. However, the day where banks no longer need human assistance is still far from reach.

Technology is constantly being improved. The replacement of jobs that are traditionally done by humans with technology can pose even greater social problems. While fintech can create new jobs, these jobs require highly trained employees. The gap between skilled and unskilled workers could potentially increase income disparity. In order for artificial intelligence and fintech to successfully be integrated into society, we must first find ways to sooth society’s uneasiness.

https://www.forbes.com/sites/madhvimavadiya/2017/02/27/artificial-intelligence-human-fintech/#1ee4e65046a1