Author: aliao

This article recaps some of the trends that the writer noticed from the recent Mobile World Congress. As this is the final blog post, I thought it would be interesting to see how Fintech trends have changed since I started looking at them 10 weeks ago. In addition, having read mixed things over the past quarter over how much/little Fintech has disrupted the traditional financial industries, I went into this article hoping to get a better sense of how much optimism/pessimism people have in Fintech.

While the article doesn’t reveal anything too shocking, it does confirm that Fintech has had a significant enough of an impact to at least get people in banking/finance worlds to alter their mindsets. The findings confirm  what I read at the start of the quarter, that the short term trend points towards increased partnerships between Fintech and established companies. While I do not believe that Fintech and traditional financial players will ever become complete allies (they are ultimately competitors),  I can see a stable environment of competitive cooperation. I am a little surprised that banks are still interested in blockchain, though. The banking industry, in my opinion, is rather risk averse, and likes to have control. Meanwhile, blockchain is harder to control (as can be seen in the wild swings in Bitcoin’s valuation), and is designed to decrease the control that banks have through decentralization. It will be interesting to see if these seemingly contrasting industries will be able to cooperate in the future.

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http://www.businessinsider.com/heres-everything-we-learned-about-the-future-of-fintech-at-mobile-world-congress-2017-3

 

 

This article talks about the reaction that some in the bitcoin (crypto currency can be seen as a type of Fintech) community are having  to some of blockchain’s struggles. Interestingly, one source of these troubles has been Bitcoin’s success in recent years. As Bitocoin gains in more values, more people have been trying to make Bitcoin transactions. This has caused the blockchain to become jammed, as the miners have been unable to keep up with the speed and quantity of new transactions. As such, there seems to be a split between those who want to remove the cap on the amount of data that can be in the blockchain and those who don’t.

For me, the most surprising thing about the conflict is not that it is happening, but that it has taken so long to happen. It seemed inevitable that something would happen to allow big buyers to gain an unfair advantage in the Bitcoin system by becoming an overly large buyer. In addition, I am not surprised that a completely decentralized system would struggle to respond to sudden growth. I also think that Bitcoin being split up into essentially two forms of Bitcoin would drastically hurt Bitcoin, if for no other reason that it would make Bitcoin even more confusing to outsiders than it already is.

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https://www.bloomberg.com/news/articles/2017-03-13/bitcoin-miners-signal-revolt-in-push-to-fix-sluggish-blockchain

This article talks about the relationship between FinTech and the banking industry in 2017. The writer argues that while many FinTech companies initially were all about disrupting the banking industry (which was slow, aging, and not customer friendly), many FinTech companies have now changed to working with banks in a mutually beneficial relationship.

In my opinion, this article doesn’t say anything too new, but it does demonstrate how both the upstart, faster moving industry (FinTech) and the established by slow moving industry (banking) have had to adjust to one another in order for both industries to evolve. Two of the common reasons given why FinTech hasn’t toppled the banking industries has been lack of credibility and inexperience dealing with complicated regulations. It makes sense that by partnering with banking companies, FinTech companies can either learn how to deal with the regulations or simply let their banking partners  take responsibility for them. In addition, partnering with banks gives FinTech companies more money without having to ask VC’s, and gives them higher brand recognition and trust (the article is correct when it says that people are more risk averse when it comes to money as opposed to things such as ride sharing). One potential downside for FinTech companies working with banks is that they might lose name recognition. For example, a product from a FinTech company that has partnered with JP Morgan Chase might be considered by the public has a Chase product, and the original FinTech company might not get the credit it deserves. On the other hand, traditional banks don’t have much to lose from a big picture perspective in partnering with FinTech. These partnerships allow banks to save money, come up with faster solutions, but the downside could be that people could lose their jobs as a result of being essentially replaced by the FinTech solutions.

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https://www.forbes.com/sites/forbesfinancecouncil/2017/02/13/is-2017-the-year-bank-fintech-partnerships-hit-productmarket-fit/2/#326c9f35112d

In this article, the author argues that U.S. regulation laws have help slow down FinTech growth in the United States, while such investment has grown in Europe and in Asia.

First, I feel that the article’s headline is a bit misleading. Just based on the headline, one might think that FinTech in the US was being actively crushed by a plethora of oppressive government regulations. However, the article, if anything, argues that the problem isn’t with the number of regulations, or even what the regulations are, but that the speed of the FinTech industry has trouble working with the inconsistent, slow, and currently confused regulation agencies. The writer does not name specific regulations that he feels are hurting FinTech, only mentioning stuff like, “policies and taxes,” which honestly, is not terribly useful for the reader.

The writer does seem to imply that one solution for the U.S. is to pass sweeping federal rules to encourage FinTech growth (like in Europe), instead of letting each state come up with it’s own rules. As far as the confusion factor, while the writer does not explicitly accuse the Trump administration for sabotaging efforts to grow FinTech, it does seem clear that he is frustrated by Trump’s inability to give a straight answer and general avoidance of the topic.

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US regulatory environment threatens the rise of fintech

This is a blog post about what the writer sees as a problem for some FinTech companies (especially ZestFinance) when it comes to a lack of caution when it comes to lending money. The writer argues that the main issues with these companies has been an over willingness to lend to anyone, and overconfidence in the power of technology and algorithms to make lending decisions.

 

It feels like the implied argument that the writer is making is that it is up to FinTech lending companies to slow down and adapt more of the norms and standards of the banking industry. While I understand the logic of this idea, it does seem to go against the very point of FinTech. FinTech, by it’s very nature, is suppose to be able to move faster and be able to take more risks than the status quo.

However, I do agree that since these lending FinTech companies are dealing with other people’s money, it would be smart of them to be smarter about who they give loans to. As the article points out, an over willingness to give loans to just anybody contributed to the 2008 economic meltdown. It is true that just because you can give someone a loan, doesn’t mean that you should. It may seem altruistic to give someone who was denied by a bank a loan, but this could do more harm to the recipient of the loan. One point that I more or less agree with is that FinTech companies do need to be careful about depending too much on algorithms when determining who to give a loan to. Ideally, there should be a way to use technology and still provide a human perspective with expertise to make a smarter decision.

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https://www.fool.com/investing/2017/02/08/lessons-for-fintech-from-the-history-of-banking.aspx

These two articles talk about a recent partnership/promotion between Square Reader and Apple Pay. The articles go over what the promotion is, reasons for it, and why it may make sense for both companies.

Last week, I talked about how the retail industry hasn’t fully embraced mobile payments. Here, we have two companies working together to possibly change that trend. It is mentioned that Square merchants can educate and expand the use of Apple Pay (and by extension, mobile payments in general), which could allow Square to gain a greater foothold in a market that it helped grow. The partnership indicates that Square has some confidence in the potential growth of mobile payments systems, and that they are willing to take a likely short term monetary loss (from increased costs and loss of swipe fees) for future gains. It is also interesting that Square might be disrupting itself, since it’s core business relates to physical cards, and not mobile payments.

I think on paper, the deal makes sense, but it does carry some risk on Square’s part (not as much on Apple’s part). The merchants affected by the promotion might be too small to make a difference, and for a company that already has a cost problem, increasing costs with the new readers might not be the best idea.

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Square And Apple: Who Is The Big Winner Of Their Payments Pair-Up?

http://www.businessinsider.com/heres-how-free-apple-pay-could-help-grow-square-2017-2

This article talks about how despite the push of mobile payments from banking and technology companies, many retailers have been slower to adopt this FinTech.

In my experiences and opinion, the article is accurate about the primary reasons why this is the case. I haven’t seen many people use mobile payments in stores, and  when it comes to credit cards, my experiences tell me that people don’t like change. For example, when cards started having security chips, I saw many consumers initially express annoyance with them, even though the chips were beneficial. Why? Because people weren’t used to them, and made people break their established ways. In addition, even though mobile payments are supposed to be safer, major security breaches in technology (Target, Yahoo, etc.) seem to get more attention from the media than card fraud. Because of this, many people might still think that putting credit card info on phones is unsafe. I think another reason for the struggle for acceptance is that too many stores may be developing their own system. It may be hard to convince consumers that they need to download Apple Pay and Starbucks payment and Wal-Mart payment and CVS payment and so forth when they can just use a single physical card for all these stores.

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http://digiday.com/brands/retailers-struggling-adopt-mobile-payments/

This article talks about the recent rise and potential of FinTech in Mexico. The writer gives some factors as to why FinTech has taken off, why it could continue to rise, and some potential obstacles.

I found this article to be fairly interesting, and told me a lot of things that I didn’t know where happening in Mexico. For example, I was not aware just how much the Mexican government had invested in technology and infrastructure. I was also not aware that Mexico had been able to attract so many entrepreneurs who have Silicon Valley experience. Based on the article, it seems like the main factor for the rush of FinTech investment in Mexico is the combination  untapped number of potential customers. In places like the U.S., new FinTech companies have a lot of competition from existing FinTech and traditional financial companies. In Mexico, it seems that the market hasn’t been saturated yet, so it makes sense that investors would be so willing to try to move into the market. In addition, it makes sense that many investors would try to use Mexico as a test market for the rest of Latin America.

 

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The rise and rise of Mexican fintech

The article talks about how FinTech has not been able to create a social website in the vein of Facebook. The author gives some examples of some failed websites, some reasons why social FinTech hasn’t worked, and some thoughts on the future of social FinTech.

I am not surprised that FinTech (as of 2015) hasn’t been able to create a successful social media website. People tend to be very cautious when it comes to their money. As such, I doubt that many people would be willing to trust strangers with financial and monetary advice. When it comes to finance, many people probably put greater trust in experts and established brands, such as Bloomberg and Charles Schwab. In addition, I agree with the author that another reason why FinTech may have trouble catching up with established companies besides expertise is that they have more accurate data. I believe that if a FinTech company were to succeed in going social, it would have to convince experts be a part of the FinTech, and allow customers more open and less expensive access to the same data that companies such as Bloomberg use.

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Why Has “Social” Failed In Fintech?

 

These article is about the relationship between traditional banks and Fintech. The article argues that some Fintech companies, have not been able to fully disrupt banking products, but that future companies could use improved technology to give customer better data and more differentiated services.

I agree with the article that Fintech companies have not been fully successful at replacing banks, and that it will not be easy, for a few reasons. First, despite the many customer complaints that banks get, banks still have a reputation for being, “the safe choice,” when it comes to handling people’s money. I also agree that some of the Fintech companies have not made it clear enough why their services are both better and safer than using a similar banking service. Finally, the banking industry has a lot of regulations that Fintech companies may not be able to deal with.

In my opinion, some keys for Fintech companies to disrupt regular banks are providing more accurate data, providing banking services with fewer fees or limits and greater convenience, and the companies have to somehow change the perception of safety and strength that banks have.

 

 

 

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“Why Fintech Has Failed to Supplant Big Banks – So Far”

https://www.entrepreneur.com/article/286633