Author: hlandmark

According to Business Insider the 3 fintech segments that grew the most in 2016 included: cloud core processing solutions, artificial intelligence, and product personalization solutions.

The article describes the key reasons behind their success to be “the evolving technology in each of these segments” and consumer willingness to interact with these products. I think these reasons provide good insight into why certain fintech sectors experience so much growth. However, I think as technology becomes more complex and capable we need to keep consumer preferences in focus. If consumers go against a technology, the business will diminish quickly.

Over the past year we have seen the cloud expand quickly, and through many parts of our life. New technology has allowed most businesses to run through cloud servers, allowing different platforms to be more cost efficient. However, I think as this technology gets more appealing businesses need to be wary of the safety of their data. We have seen cloud databases be hackers new challenge of choice. This makes both enterprise and consumer customers nervous to keep important information on cloud databases. If cloud companies can not figure out how to keep their information safe, this sector growth could decline.

As business insider said artificial intelligence has grown over the past year. New technology in this sector has been very prevalent particularly in the consumer goods sector with the release of products like the Amazon Echo. However, I think this fintech sector also needs to be wary of consumer opinions changing about AI. Privacy has become a big worry of people using AI machines, especially those in your home that can record everything you say. Companies who issue AI machines will need to ensure customers this data will not be used against them for growth to continue.

The final fintech sector that has grown because of new technology is product personalization solutions. Much like AI technology consumers enjoy have machines help them on a day to day basis. However, these machines are constantly collecting data about all its users. If consumers become uncomfortable with this fact, then this sector will see growth decline.

Overall I believe these fintech sectors can continue to flourish if they keep balancing consumer privacy and safety with advances in new technology.

http://www.businessinsider.com/these-are-the-fintech-segments-most-likely-to-grow-in-2017-2017-3

On Friday, the SEC denied the Winklevoss Fund as the first registered investment vehicle to make bitcoin investment accessible to everyone. This ETF would have made it so people could invest in bitcoin through all accounts including IRA’s and 401K accounts.

After it was revealed that the Winklevoss Fund would not be SEC approved Fortune reported that bitcoin value fell “18% from nearly $1,300 to $1,060”. It has since rebounded slightly.

According to Fortune, the SEC did not approve the Winklevoss Fund because “the Commission is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest.”.

I think that bitcoin has the necessary protection to protect investors and public interest. Although there is limited regulation I think that blockchain technology would have prevented fraud. The constantly growing database, the blockchain makes bitcoins nearly impossible to manipulate.  Cash on the other hand is much easier to launder because all of the previous transactions do not remain attached to the currency itself. Also, I realize their is currently no regulation surrounding bitcoin. However, I wish the legislature would accept this is the future, and create the legislation. Instead of halting financial technology progress, like they are now.

https://www.forbes.com/sites/laurashin/2017/03/10/sec-rejects-winklevoss-bitcoin-etf-sending-price-tumbling/#166a393f643c

Industry insiders believe that the Winklevoss Trust, the first exchange traded fund that deals with Bitcoin, will become SEC approved on March 11th. The Winklevoss brothers applied for SEC registration four years ago, and now that investors believe it will be approved the value of bitcoin has skyrocketed. So far this year the value of the Bitcoin has increased by 30% due to the likelihood that the Winklevoss Trust will become SEC registered as well as other bitcoin entities.

Powell, governor of the Federal Reserve warns against investing in this surging currency.  He worries about the cybersecurity and privacy risks that are involved in using digital currencies. Powell acknowledges, “there may be important trade-offs between payment and privacy”, and warns users might not want to give up their privacy to the FED who would use that information to track the currency.

I agree with Powell that privacy risks should be a real concern, but I think the bitcoin is protected from cybersecurity attacks. Blockchain, the mechanism that protects bitcoin’s integrity should be a legitimate defense against cyber criminals.

http://www.reuters.com/article/us-bitcoin-value-idUSKBN16A2FG

http://www.reuters.com/article/us-usa-fed-powell-idUSKBN16A23G

Blockchain is “a distributed database, meaning that the storage devices for the database are not all connected to a common processor,” according to Bernard Marr, a writer at Forbes magazine. This database contains a list of transactions, called blocks, that are timestamped and linked to previous blocks, and ensures bitcoins maintain their integrity as a unit of currency. Also, through cryptography, users are only allowed to edit and change their portion of the blockchain. (For more details about blockchain please see my previous post:  https://blogs.scu.edu/finis/2017/02/12/blockchain-and-the-many-uses-of-smart-contracts/)

We all knew blockchain would move into new industries, and this has started in private equity. IBM and Northern Trust’s implementation of block chain is the first commercial deployment of the system. They decided to set up the blockchain to add transparency to the private equity market and to allow auditors and investors to perform due diligence tests more easily.

I think this is a great idea because it protects investors in the private equity market without unnecessary regulations. Those who issue equity can track who is currently holding specific shares. Also, it will be easy to when private equity transactions occur. Overall I think this is a great use of blockchain in a commercial market.

http://www.bankingtech.com/742612/ibm-and-northern-trust-debut-blockchain-for-private-equity/

In this day and age it is not difficult to send payments to friends. Applications like Venmo have made check payments nearly extinct. However, this idea is now reaching a new market, B2B consumers. Symple is a payment processing company that is using its system to help companies track receivables and payables, as well as analyze payment trends.

I thought it was very surprising to learn most small businesses still use checks to make payments, particularly restaurants and bars. However, with Symple users can take a picture of their invoice and send it to Symple who will record the critical details, and then when it comes time to pay users just press a button.

I think platforms such as this one have many benefits for users. Over time this will increase speed and efficiency. Also the data analysis tool will make it easier for the businesses to budget for the future. Finally I think the online nature of these systems will implement controls that will ultimately stop fraud.

There could also be some potential consequences for users. Data security is very important, and new systems like this one might not have the capability to properly protect clients money.

Symple wants to be Venmo for business payments

In the past it was difficult to start a small business. The business would have to go to a bank to get loans or investment. And, if the business wanted to accept credit cards, they would have to contract with a credit provider.

Fintech has solved many of these issues making it easier than ever to be an entrepreneur. First of all, crowd funding services allow small businesses to raise capital without the help of a bank or investor. As Forbes writer Bernard Marr says crowd funding has, “It has democratized the process of finding startup capital and shortened the timeline from perhaps months of meetings to as little as a few weeks”. Also, through companies like Square and PayPal, small businesses everywhere are able to collect payment by debit and credit cards. There are even companies offering mobile technology payment systems to small businesses. Although these companies require a small fee, they are nowhere near the fees traditional credit providers required, and they include less hassle. Finally, Fintech has resolved the problem of international payments. Services like PayPal, automatically convert currencies, and TransferWise allows for larger international money transfers.

I really like the advancements FinTech has made for start-ups. I think by lowering barriers to entry Fintech is creating competition among businesses, which promotes innovation and efficiency.

http://www.forbes.com/sites/bernardmarr/2017/02/10/a-complete-beginners-guide-to-fintech-in-2017/#349284077542

For a long time, online currencies had a major problem. Users could duplicate their files and spend their money twice. However, when bit coin was invented it solved this problem with the blockchain system. Blockchain is “a distributed database, meaning that the storage devices for the database are not all connected to a common processor,” according to Bernard Marr, a writer at Forbes magazine. This database contains a list of transactions, called blocks, that are timestamped and linked to previous blocks, and ensures bitcoins maintain their integrity as a unit of currency. Also, through cryptography, users are only allowed to edit and change their portion of the blockchain.

Although Fintech companies are working to change this, most online money transfers still need to go through a financial institution. Blockchain technology could change this because it is able to record transactions, establish user identity, and establish contracts. Blockchain can be programmed to execute contracts whenever certain pre-coded conditions are met, and users enter their keys. These “smart contracts” could be used for many things including: billing, recording medical information, and controlling intellectual property.

I think these smart contracts will be essential in creating technology that will automatically process basic tasks. This will overall reduce costs, and create more efficiencies in all the industries it is used in. The one issue I see in implementing this is maintaining security of the information on the block chain.

http://www.forbes.com/sites/bernardmarr/2017/01/24/a-complete-beginners-guide-to-blockchain/#401fc15d66a6

Over the past few years, it has become increasingly popular to use your phone to complete payment transactions. This technology is great for consumers because it is fast and sometimes more convenient than having to deal with credit cards or other forms of payments. However, the video I watched this week, “Mobile Payments: The Good, the Bad, and the Confusing”, raised the issue that regulation has not been able to keep up with the trend of mobile payment systems. Therefore, customer’s funds may not be as safe as they appear on mobile platforms. The first unclear rule they bring up is whether banks are allowed to take overdraft fees without warning from an account due to mobile payments, unlike the standardized processes of dealing with overdrafts from debt cards. There is also no clear indication of who should protect data of people using mobile wallets. Finally, mobile wallets do not have the same protection as checking accounts, so money can be stolen more easily.

I think more regulation needs to be made to protect consumer’s money online. I understand that technology moves so fast it is difficult for lawmakers to keep up with changes. However, these are legitimate threats to people, and currently there is not a clear path on how the government is protecting us.

The Office of the Comptroller of the Currency (OCC) recently announced that it will consider FinTech Company applications for a national bank. This decision is very progressive of the OCC, but after considering the cost effective nature of online banking, and its ability to reach consumers at any point in time, the OCC decided this was the best move for customers. If FinTech companies became nationally chartered banks they would have the ability to provide lending, deposit, or payment systems services. State chartered Fintech Banks are also a possibility but would have to be approved by individual states. New regulation will slow the process of these banks becoming established, however, we can expect these institutions in the coming years.

If these banks are established they will create strong competition for existing financial institutions. The author says if these banks are established credit unions could become “uberized”. Credit unions are limited by the amount of customers they can serve, their strict corporate structure, and their restricted lending authority. I would recommend credit unions establish alliances with the Fintech companies before they become strong competitors. This way they would be able to profit off Fintech’s imminent growth.

http://www.natlawreview.com/article/fintech-banks-new-uber

One of our politician’s greatest fears has been inflation, but recently economists are examining the deflationary pressure technology places on assets. According to the author of “Janet Yellen Eats The World”, Faisal Khan, this has been achieved through efficiency and transparency.

Technology companies create products that makes your assets better. However, the more interesting way Khan argues technology promotes efficient is through better asset utilization. Companies like Uber help the average consumer turn their assets into another source of revenue, and puts downward pressure on the price of that asset. In a shared economy there is a decreased the demand for assets, which has caused an overall fall in the price of assets.

Technology also makes prices more transparent. The most typical example of this has been Amazon, and the ease at which consumers can discover prices. But according to Khan, big data solutions have moved into almost every industry. For example, even in the food industry, leaders like Tyson Foods are creating smart farms to stay ahead of their competitors.

This deflationary pressure has caused many questions about monetary policy. Khan argues now the government can raise interest rates or minimum wage with the expectation that the deflationary pressure of technology will fight inflation.

Janet Yellen eats the world