Author: kmweber

As we wrap up the quarter, looking at what’s ahead in the Fintech industry in 2017 by studying the past couple years of fintech sector growth is important. PwC and UK-based fintech accelerator Startupbootcamp FinTech London studied the growth of the past 2 years in areas such as cloud solutions, crowdfunding, smarter/faster machines, and a cashless world. In their study, they were able to see that cloud solutions, smarter/faster machines – including machine learning, AI, and blockchain technology – and shifting consumer preferences (e.g. customer segmentation and product personalization solutions) all showed increasing growth between 2015 to 2016, suggesting the potential continued growth through 2017. This comes as no surprise considering the increased role that these segments have had on our everyday lives. Investments into “a cashless world” which is comprised of areas such as digital retail payment solutions and emerging payment rails saw a decline over the past 2 years. Again, this should come as no surprise to consumers because we’re not seeing any changes hitting the market. I was surprised however that crowdfunding seemed to have a steady investment growth. I would have expected that the growth would be increasing through 2017 but as the article states, this could be due to “some firmly established players which dominate these areas, [and] newcomers think there are still problems that their larger peers have not effectively addressed”. The maintained growth is because of this.

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

This article explores why digital ledger technology, with its incredible venture capital/investment support, hasn’t quite taken over the way people would have expected it to. Starting with the argument that fintech has been on the rise for the last decade and there isn’t much signs of stopping, the bitcoin idea should be adapted more universally than its current uptake. However with an industry so wrapped up in regulation and compliance, maybe this is a particularly hard sector to venture into. The article argues that though it might be the right time for digital ledger technology, there’s more to the industry than the products being adequate and innovative. The regulations around such technology has to amend along side the innovations. Beyond the regulatory hiccups, there appears to be hesitant uptake because of privacy concerns and information leakage. Though this is a valid concern, will time diminish these concerns or instill greater fear with the constant unveiling of fraudulent cases? I would argue that the boom of investment will be ever slowing because of the growing awareness of how difficult a full and universal implementation of digital ledger technology would be. Until there is a need for the technology, I think it’ll continue to enter the market and gain market share slowly but plateauing until regulatory problems are addressed and fraudulent activity can be avoided.

http://www.coindesk.com/the-trouble-with-fintech-and-why-now-is-the-time-for-dlt/

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/

As we’ve discussed in the beginning of the quarter, Blockchain is a huge innovative technology in the fintech space. It has potential to be one of the most innovative technologies since the development of the internet and it’s potential is rapidly growing. $1.3 billion was invested into the technology in the past three years alone with over 90 companies looking to expand on this innovative ledger space. The intriguing aspect about this space to me is that although it appears in some ways as if this type of technology would aid in the reduction of fraudulent behaviors in banking transactions, it still fosters many opportunities to commit fraud. Through research on the individual and team assignments, it has become clear how evident fraud is in this space. With this, the article points out how regulations have to evolve with the technology. As this sector grows and becomes more widely used, regulations around the use and implementations will also have to grow. Reactive regulations will not be sufficient, governing bodies need to start coming up with regulations soon.

 

http://www.jdsupra.com/legalnews/blockchains-offer-revolutionary-71791/

Most can see the bright potential and future ahead for fintech. However, this article points out how many up-and-coming fintech companies will fail because of the incessant need in today’s industry to say “yes” to customers. Pleasing the customer and giving the best customer experience is at the top of the priority list for many companies. And however good this strategy might be in practice, John Maxfield warns companies of the risk this strategy leaves companies vulnerable to. Specifically, in banking and loans/lending. Studying the history of banking should be a very common practice, especially considering what the economy went through in the past 10 years. However, companies are priding themselves more now than ever (specifically lending firms) on getting customers tens to hundreds of thousands of dollars in loans within just a week or two. Maxfield warns that the lack on in-person experience with the customers is an alarming move for the industry. The amount of money that is being loaned and transferred without the company ever really knowing where it is going is setting companies up for fraudulent behavior. I think Maxfield has a great viewpoint on this topic. Although companies should continue to be innovative and work to improve customer experience, we all need to be cautious of what the realities are for our society.

 

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

Rimon PC, a law firm based out of San Francisco, has hired Marc Kaufman, a former leader of Reed Smith LLP’s Fintech team. This move will aid Rimon PC’s services better by helping protect their clients against intellectual property right theft and asset protection. Though he is an attorney, he has vast experience in the technology and web analytics space. Combining these two skill sets has made him a very sought after lawyer. Although before this class I might not have initially seen the importance of having a specialist in the field, it is quite evident how much fraud is being conducted and having a law firm that can protect your assets against any time of fraud especially in the fintech space is crucial. As more and more companies are moving into this sector, I think the shift in this law firm will be apparent across industries. Any sector will be able to aid from having a fintech specialist to make sure all of their assets are protected especially as everything moves onto the internet.

https://www.law360.com/articles/883238/rimon-snags-ex-reed-smith-fintech-partner-in-dc

Anthony Murgio operated an unlawful internet-based Bitcoin exchange which violated federal anti-money laundering laws and regulations. He and his co-conspirators engaged in substantial efforts to evade detection by operating through a phony front company called “Collectables Club.” Coin.mx, the internet-based bitcoin exchange, was able to open bank accounts through “Collectables Club” and trick financial institutions into believing that the exchanges were a “members-only” association that bought and sold various items. This scheme is just another example of how the changing technologies are opening society and companies up to increasing security issues. Money laundering and other banking regulations loopholes are becoming harder to track and can go on undetected for a very long time until someone gets too greedy or makes an error or even potentially throughout a person’s lifetime.

https://www.justice.gov/usao-sdny/pr/operator-unlawful-bitcoin-exchange-pleads-guilty-multimillion-dollar-money-laundering

Many articles posted recently have noted the promising technological advances that aim to improve fraud detection in banking. However, some of these technologies may have launched too quickly, some should have still been in beta testing. Lansing, Michigan discovered that the automated system used to detect fraudulent unemployment claims has been wrongly accusing citizens. The system accused roughly 40,000 citizens between the years of 2013-2015 of which the state now must sort through individually. Though the system was originally thought to be an efficient solution to fraudulent claims, these faults will come at a great cost to the state. While this isn’t a very common occurrence across FIS systems, I think it is important to consider the rapid growth of the industry and look at some of the systems with a flicker of speculation. Testing of these systems must be robust in order for them to be confidently implemented and successfully executed. Though the testing can be expensive and timely, it could save major disasters such as this one from occurring and it’s far less expensive and timely than the consequences that come from a mistake in the system as large as this one.

http://www.beloitdailynews.com/article/20170128/AP/301289924

Professors at Oakland University in Michigan researched the practices of their AIS program and concluded that the program would better prepare graduates if the accounting aspect was better integrating information systems into it. While reading the research, I noted many parallels between their program and ours. Our AIS program requires students to take accounting classes and MIS classes and similarly to theirs, few accounting classes have information systems rooted at the core. In addition, our MIS program does have a managerial focus which leads us to be less technical than the researchers were hoping for. However, we differ from their programs in that our AIS students are required to take this class, OMIS 150, which satisfies exactly what the professors believe would produce better professionally equipped graduates. After reflection about the different styles of programs, I am in agreement that the integrated approach is much more beneficial to graduates and that more programs should attempt to offer courses of this nature. For example, one of the recommendations was to introduce “how accounting data sits within the overall enterprise database” in principle of accounting courses.

http://digitalcommons.calpoly.edu/cgi/viewcontent.cgi?article=1024&context=acct_fac

The implementation of California’s new Financial Information System, FI$CAL, is experiencing major delays that have pushed back the projected final stage of launch over a year and has already gone $237 million dollars over budget. While originally budgeted at $616 million, the Oracle ERP system is projected to save the state up to $415 million per year. Although state auditor Elaine Howle has been critical in the management of the project, there is no denying that the implementation must be done properly for effective use. The system will be the integral financial tool used throughout the state and therefore state employees working in the system will also need to be well trained in the use of the system. Though I am not denying the right of Howle to question Accenture’s timeline and timeliness, the annual savings of the new system must be kept in mind through the process. Moving forward, it is clear that transparency and the cohesion of contractors and state employees must be improved upon.

Calif. Accounting Software Overhaul Blasted

http://www.sacbee.com/news/politics-government/the-state-worker/article124839264.html