Author: ayfurtado

We have heard a lot of the positives of cryptocurrencies that operate on a blockchain network such as Bitcoin. Recently, the U.S. Securities and Exchange Commission on Friday denied a request to list an exchange traded fund built to track bitcoin. If accepted, this would have been the first digital currency fund in the U.S. Investors have been trying for more than three years to convince the SEC to allow a Bitcoin ETF to be on the market. Because of the rejection of the ETF, the digital currency’s price plunged as much as 18 percent following the decision. Investors speculated that if there was an ETF holding, the digital currency would get more individuals to buy the asset. Part of the reason why the ETF was denied was because the commission believed that bitcoin is unregulated and it is relatively in its early stages of development. In addition, there is question on if the regulators would be able to price and trade the fund effectively. This is interesting that even though bitcoin is on a blockchain network, ensuring that it is not able to be hacked, the SEC rejected the application. It is possible that soon in the future, Bitcoin will apply again and have its own ETF.

Article: http://www.cnbc.com/2017/03/10/us-sec-rejects-application-to-list-bitcoin-etf.html

Financial technology is not only making processes quicker in developed countries such as the U.S. however, it also benefits underdeveloped countries like Rwanda and India. In Rwanda specifically, the article states that they have one of the fastest-growing economies in sub-Sahara Africa. In combination to its policies which support businesses and financial technology, business is more fluid than it has ever been. In this type of environment, it is very clear as to how financial technology aides and expedites financial processes. With the financial technology, individuals do not have to walk somewhere to perform financial transactions. Apparently Rwanda’s goal is to be a cashless economy. This is possibly the direction that many other countries will head into in the future, not just businesses but also consumers. In addition, India is moving to be a cashless economy, but their reason is to fight corruption, fraud, and illegal cash holdings. Their Prime Minister stated that debit and credit cards, ATM machines, and POS systems would be irrelevant by 2020. Instead, their apps called Bhim would be used to transfer money between users. This app would be linked to the Aadhar app, which is a unique identification program to incorporate thumbprints.

Link: http://www.newtimes.co.rw/section/article/2017-02-07/207756/

There is a lot of buzz about how FinTech technology is already transforming areas like the traditional banking industry, with even more potential to grow. However, FinTech technology also has a lot of applications in less developed areas where there may be less access to banks and other financial institutions, like what is available in the United States. 80% of adults in Africa do not have access to banking services, leaving the majority of the continent unbanked. This type of aspect to Fintech in developing countries is very beneficial, as waiting for traditional banking infrastructure to become widely available would take longer than the more accessible route of adopting Fintech solutions. Specifically in Africa, this opportunity not only gives individuals access to bank accounts, but implements banking infrastructure and services for a market that would otherwise not be able to interact with a bank. One of Kenya’s prominent Fintech uses is a mobile wallet called the M-Pesa. Over 50% of adults in Kenya own this type of account, and surprisingly the transaction volume on the system is roughly equivalent to up to 50% of Kenya’s GDP. One recent issue that is now being fixed is being able to use these money between multiple platforms and across countries with cooperation and interoperability agreements.

Link to article: http://www.iafrikan.com/2017/02/10/fintech-in-afrika-is-much-more-than-just-mobile-money-and-remittances/

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

Like the traditional financial banking industry, the insurance industry has not seemed to have changed much over the years. However, InsurTech is trying to revamp the industry from innovations in tech that will allow them to provide value added processes for customers. Efficiency is one area that can be improved to help engage the customer. Anywhere from claims to policy management, a seamless experience can be provided for the customer. Insurers have historically dealt with a lot of data that has to be recorded and analyzed to draw conclusions from. Automation and artificial intelligence will allow insurance carriers to have the tools to make better and quicker decisions. In terms of a distributed ledger technology, insurers are looking into this area which may allow for automation in claims. Ultimately, technology that has helped make other industries more efficient with machine learning, language processing, and better data management is allowing insurance to improve. In addition, InsurTech companies will be able to segment the market to offer niche products. Interestingly, Slice launched an insurance product for users of AirBnbB, the homesharing service. Whether a new insurance companies dominate the market in the future, or current insurance companies implement new technology into their business, I believe this will be very useful and efficient for customers.

Article link : https://knect365.com/fintech/article/f8b29a6f-09ef-4e31-ad67-a9c049c00cae/making-insurance-great-again-reasons-to-be-excited-about-insurtech-in-2017

Chris Myers, the contributor of this article, starts of by saying that he is a believer that the financial technology sector is failing to live up to the hype. He is right in the sense that fintech has not totally disrupted the traditional financial sector as stated in many sources however, I think the point is that fintech is positioned in so many of the areas that financial institutions source their revenue from, that there is potential for them to be legitimately threatened. Myers’ first point is to “Ensure you have the right investors”. Ultimately, because many investors have three to five year investment horizons, some fintech companies feel pressured to do too much in a short period of time which leads to short-sighted mistakes. The problem with this, is that because the Fintech industry is growing so quickly, if a company is not quick enough then it will get left behind. The second point Myers makes is “Stay lean and don’t act like a tech startup”. Fintech companies must not act like startups and make slow changes. Again, this may give competition and the traditional financial corporations to outpace them. Finally, the third point is to “Show respect for the incumbents, but hedge your bets”. Fintech companies may find it hard to partner with traditional financial institutions due to the regulated environment, so they must spread the risk by implementing their technology in other institutions that use their technology, which still allows them to grow.

Article Link : http://www.forbes.com/sites/chrismyers/2017/02/10/3-steps-fintech-companies-need-to-take-in-order-to-survive/2/#38b0c2d37d87

At this point, Fintech is past its infancy and inception. More and more money is being invested in it, and it is at the point where the potential in which it can disrupt the financial services industry is apparent. What Fintech is allowing companies on the supply side to do, is act in new ways to serve their needs by meeting value chains with better quality, speeds, and prices. On the consumer side, there is increased transparency, consumer engagement, and ways in which consumers behave which all change the dynamics of how consumers’ needs should be met. Since Fintech is largely geared towards accessibility and ease for consumers, the reasons why consumers adopt Fintech solutions is very interesting.

Unsurprisingly, the ease of setting up an account is the biggest reason why consumers adopt Fintech. Instead of having to stand in a line and fill out paperwork, an account is often just requires and email and identification. From there, Fintech also offers better rates and fees. Not included on the above graphic, are other reasons why Fintech is succeeding.
What else is interesting is how global banks view fintechs, despite always hearing how Fintech is disrupting the financial services industry. In North America, 20% of banks in the study view Fintechs as competition and a threat. 31% of banks view them as possible collaborators.

Linked Article: http://www.cio.com/article/3148756/leadership-management/the-fintech-effect-and-the-disruption-of-financial-services.html

There are a number of advances in certain technologies that can be implemented within fintech to change the financial services industry. Artificial intelligence, being one of them, can be applied to financial institutions to help automate certain tasks. Once this technology is fully optimized for the business, it will be very beneficial in terms of the efficiency of the business operations. However, there is the downside with the jobs that it has the potential to offset. AI can also be used in financial advising for areas like investing and wealth management. Machine learning will be able to use algorithms and find patterns that can assist financial advisers to make decisions. There is a lot of data in the markets, and AI will be able to sort through it and analyze it more efficiently than humans. I feel that AI should only go as far as providing information to humans, who are ultimately the ones who make the decision.
Another piece of technology that will obviously continue develop and grow is mobile payments. One of the more recent advances is host card emulation, where payment information is stored and transmitted through the cloud. With these new types of payments, biometrics will eventually be used to identify who is making the transaction. Biometrics that can be used are fingerprints, facial recognition, and iris scanning.

Article: http://www.biztechmagazine.com/article/2017/01/what-s-ahead-fintech-2017

Citigroup has recently been focused on figuring out how to counter the challenges that the fintech companies are bringing, as these new startups are penetrating almost all of the functions that traditional financial banks offer. This is an important step to combat their threatened business, and Citigroup is taking a smart approach when dealing with the tech startups. CEO of Citigroup, Stephen Bird, decided to create an elite group within Citi of about 40 employees from varying backgrounds. Their purpose is to work on projects in a rapid manner. In 4th quarter of 2016, they were able to release a new version of their mobile banking app, after only 10 months of development. Historically, this project would have taken years to complete. Because financial institutions offer so many services, it may be hard to understand how fintech startups can disrupt almost all the aspects of their business. This graphic shows which areas are being affected by fintech companies.

One way that Citi is evolving to keep up with fintech competitors is by having their new mobile app have open architecture, allowing customers to have access to the best functions of the fintech apps. Interestingly, Citigroup may be most vulnerable to fintech companies, as 51% of their revenue come from consumer banking. Their analysts view this area as the most vulnerable. This may be a reason that is spurring Citigroup to adapt to their new challenges.

Article Link: http://fortune.com/citigroup-fintech/

The evolution and revamping of the banking industry has been growing rapidly with fintech, as venture capital in this sector was up to $12 billion from $4 billion the year before for the years 2014 and 2013, respectively. The reason for this high growth seems to be due to fintech’s ability offer similar services as traditional banks while relying on a peer-to-peer platform grounded on specialized software. Lower costs and easier access, allow users to get loans, send cash overseas, and manage their wealth. In addition, a changing landscape with the relevance of new technologies such as smartphones and cheap data processing are allowing fintech companies to have a median to access such a large market and subsequently, disrupt it. The millennial generation will also force traditional banks to change their business model, as they are accustomed to web-based technology and are trusting of the new financial innovations. The three equal parts to which banks make money through interest (both borrowing and saving), charging for making payments, and a collection of fees (overdrafts, brokering investments, etc.) are all challenged by fintech companies. Even though fintech’s top companies handle billions in trade where traditional banks handle trillions, fintech has a lot of room to grow. There was a point where banks used to view fintech companies as unable to penetrate they market, but now there is cause for concern with their business model being threatened.

Link to article:
http://www.economist.com/news/special-report/21650290-financial-technology-will-make-banks-more-vulnerable-and-less-profitable-it