Author: ajotal

Since the financial crisis, there has been a financial technology resurgence in emerging markets. Increasing mobile phone use across the globe allowed for a 700 million increase in number of people holding bank or financial service accounts between 2011 and 2014. With more globalization and free movement of people across borders, we also note the increased capital mobility in the economy because of such inclusive financial technology. Mobile financial services users are increasing and with it comes the increased mobility of capital that will lead to positive effects for the economy. Initially you can note that more people will be able to partake in the using of money which is an automatic economic boost. In addition, certain fiscal and monetary policy is more effective with greater amounts of capital mobility. For these reasons and more, financial technology that is increasing financial inclusion has enormous upside and should be further supported globally.

http://digiday.com/marketing/ask-vc-mobile-phones-giving-millions-access-financial-services/

A Chinese Fintech startup, Mioying, is launching a new operating system that offers a more efficient and streamlined platform for wealth management processes and analytics. The system allows wealth management managers to utilize end to end portfolio data and analytics, making their previously tedious responsibility of manual analytics and Excel manipulation a worry of the past. One of Mioying’s motivations for this innovation stems from their desire for Hong Kong to remain a competitive financial hub relative to the rest of the world. In the past decade, Hong Kong’s wealth management sector has not seen any new financial technology until this innovative new system was launched.

The startup’s motivation behind this Fintech innovation points towards a larger theme of global competition in markets and how fintech will be the fuel for growth in the future. Increased use of Fintech is already proving its value in reducing inefficiency in multiple regards. Futher innovation and implementation of Fintech will definetely boost economic performance while creating stronger and more competitive local and global markets.

http://www.marketwired.com/press-release/mioying-technology-shakes-up-hong-kongs-financial-sector-with-hardcore-fintech-os-2201679.htm

The New York Department of Financial Institutions set into practice new cybersecurity regulations centered around protecting consumers and the financial services industry on a larger scale. The purpose of the regulation is to proactively mitigate risk associated with the growth of the Fintech industry partially by pushing covered entities to keep up with technological changes and advancements. The regulation changes call for higher quality assurance and governance, risk based minimum standards for technology, systems testing, adverse event response planning, and higher levels of accountability and transparency with regulators. The regulation took effect on March 1st, 2017 and generally requires all covered entities to comply within 180 days. Some provisions will be allowed different compliance periods depending on the degree of change required. Chief Information Officers will be required to more frequently and transparently share risk assessments of their information systems based on the Department of Financial Institutions’ standards.

The nature of changes and practices suggested by the new law is a positive sign towards much needed regulation in the financial services and financial technology industry. These changes are structurally very important for the future well being of major industries and consumer information security.

http://www.mondaq.com/unitedstates/x/573552/Financial+Services/New+York+Department+Of+Financial+Services+Promulgates+FirstInTheNation+State+Cybersecurity+Regulation

A major upside and positive characteristic of Fintech is it’s ability to create degrees of financial inclusion in countries and regions where financial infrastructure is a major weakness. Like other countries, Indonesia recognizes the value of the Fintech industry and has seen a 78% increase in the number of financial technology companies it hosts. However, the hope of financial inclusion is being hindered by factors of financial fragmentation. A combination of too many new consumer Fintech products and poor rhetorical standings between regulatory bodies has caused issues for the country’s government. In Indonesia, cooperation between the Financial Services Association and the Communications and Information Ministry has been troublesome. Indonesia’s lack of ability to set forth effective regulation for the Fintech industry sprouts from the lack synergy between the regulators. The Financial Information Service System is in development and hopes to solve some of these issues. The regulatory settings need to promote inclusion for non-bank Fintechs which will allow for further financial consumer inclusion across the country as well.

http://www.thejakartapost.com/news/2017/02/07/fintech-talk-fintech-in-indonesia-between-fragmentation-and-financial-inclusion.html

Falling under the philosophy of ‘If it’s not broken, don’t fix it’, the way payroll functions today is based on outdated conventions and processes. Payroll is currently managed by firms on an individual and monthly basis. This encompasses the traditional payroll system seen throughout most of corporate America. Teams at SAP have thought about this issue and have blueprinted potential future functions and practices regarding payroll. Of these blueprints, a particular innovation revolves around a new notion of self-service payroll. Instead of a company’s payroll department facilitating a single monthly pay run, the system can be reinvented to allow individual employees to decide when and how much of their pay they demand.

I think such a change has the potential to cause major disruptions in the industry and economy as a whole. I say this because a self-service pay roll system could change consumer behavior based on their more flexible purchasing power and demand for money. This could increase economic activity but is accompanied by the risk of more irrational money management decisions. If such an idea can overcome the hurdles of existing regulations and policy, it may become an integral part of worker compensation management in the future.

http://diginomica.com/2017/02/02/digital-payroll-futures-thoughts-sap-others/

The Swiss Federal Council is aiming to make regulatory changes to create a more prominent fintech market. With new financial technology  such as bitcoin becoming more valuable and relevant, the goal is to create a more welcoming environment for startups. The undecided regulatory amendments would be aimed at Switzerland’s domestic financial industry to account for fintech. The proposition is to have different regulations for “firms that accept less than 1 million Swiss francs in deposits”. This would create a “regulatory sandbox” that allows startups to experiment with new technology.

I think this will be a re-occurring trend in many different countries as fintech continues to disrupt norms and processes in the world of finance. Most developed and developing nations understand the strategic necessity of changing regulations to increase efficiency as the market structure changes. More importantly, a lack of proactive and effective regulations would pose a major security risk related to the leaking of confidential information. Paying close attention to these regulations is a smart and beneficial decision that will better Switzerland in the future.

http://www.coindesk.com/switzerland-attract-more-blockchain-startups/?utm_medium=email&utm_source=fintechweeklycom

Changes in regulatory landscape is often considered one of the biggest obstacles to fintech industry growth. This is because the fintech industry is rooted in innovation. Innovation that utilizes technologies and processes that are new relative to outdated regulations for older practices.

More so than certain regulations being an issues, the issue lies in ambiguity and confusion of how to regulate. This includes the difficulty of deciding which regulatory bodies should govern, and further, which specific rules and regulations. This is especially an issue because many current rules and regulations are from before mobile phones, E-commerce, and the Internet. In addition, small teams on fintech companies have the challenge of defining complex and broad regulatory models.

A combination of these challenges will push back on fintech growth but with increasing amounts of investment in the industry, the matter while gain more attention and focus. Along with recognizing the financial and efficiency opportunities that fintech provides, many are realizing that the face off between private innovation and regulatory policy will rage on. I believe regulatory bodies will feel the push to improve regulations in order to gain maximum benefits from the innovative industry.

http://blogs.wsj.com/riskandcompliance/2015/11/24/where-fin-tech-is-struggling-with-regulation/

The financial technology sector is a quickly growing and could carry with it ‘systemic risks’ for the banking sector and broader economy. At a recent conference in Germany, the Bank of England’s Governor Mark Carney recognized the efficiency benefits from financial innovation while highlighting the risk it could pose for stable bank funding, credit quality, money laundering, terrorism financing, and data protection.

Carney said in his speech, “The challenge for policymakers is to ensure that fintech develops in a way that maximizes the opportunities and minimizes the the risks for society.” The Financial Stability Board pulls together bank regulators from across the world. The FSB is currently assessing the suitability of existing rules and regulations in regards to financial technology risks. The results of their study will be presented to Group of 20 leaders later this year.

Financial technology has the ability to cause rapid changes in finance with the existence of technologies like mobile phones, the Internet, high speed computing, and machine learning. As most leaders and experts are urging, I too believe the need for proactive regulation is crucial. Any potential risks not proactively managed could spell disasters for today’s interdependent financial system and economy.

http://www.businessinsider.com/mark-carney-on-fintech-and-systematic-risk-2017-1?IR=T&utm_medium=email&utm_source=fintechweeklycom

 

Analysts from Citigroup released a report titled “Digital Disruption” which highlights the growing pressures on employment in the financial and banking industry caused by growing Fintech startups. The report offered data that suggests employment at American banks would drop to 1.8 million by 2025 compared with 2015’s American banking employment total of 2.6 million people. The percentage of people working for European banks who are predicted to lose their jobs is even higher. In addition to new regulations and market volatility, Fintech startups are blamed for this because of their aim to innovate many different parts of the financial industry.

The concern over a large reduction in the number of people employed by banks is valid but I believe the severity is not as high as what is being presented. The general purpose of Fintech’s is to create more efficiency, inclusion, and easy to use financial services and tools for consumers and businesses. Increases of employment in Fintech roles and an overall increase in economic efficiency and output caused by Fintech innovation will help offset jobs that may be lost in the banking industry.

 

https://www.nytimes.com/2016/03/31/business/dealbook/fintech-start-up-boom-said-to-threaten-bank-jobs.html?_r=

Finance is said to be, “ultimately the business of collecting, storing, processing, and trading in information, unbounded by geography.” Periods of exponential growth in finance are commonly due to advances in the use of technology within the sector. With increasing reliance on financial technology in today’s world, the International Monetary Fund published an article highlighting the broad impact, financial inclusion, and technological risk associated with advances in financial technology.

Financial technology is moving forward in ways that effect both consumers and firms. One of the most notable outcomes from the intersection of technology and finance is the increased quantity of people around the world who have access to financial services. The increased ability for companies to process transactions and the increased ability for consumers to use financial services is helping increase economic efficiency. While this is a positive effect, the increased use of technology that manages valuable private information comes with increased security risks. Increased dependence on financial information needs to come with increased emphasis placed on information security. Breaches in security will be disastrous for users and economic prosperity. Financial technology advancements will be most impactful if the need to mitigate information security risk remains a top priority.

http://www.imf.org/external/pubs/ft/fandd/2016/09/narain.htm