Entrepreneurs in financial services are helping to create a new middle class in the developing world. At the end of 2016, only half of the world had access to internet. Internet usage in third-world countries is growing tremendously, and those emerging markets hold potential and opportunity for fintech. This is because fintech is a necessity in these countries, compared to first-world countries that have many alternatives. According to McKinsey Global institute, widespread adoption of digital finance could increase the GDPs of all emerging economies by $3.7 trillion by 2025. Fintech can also bring a level of service enjoyed previously by only the wealthy, such as wealth management advisor services as a reduced cost through robo-advisors.

I agree with this article that fintech will help to increase inflow of money into the economy. Through adoption of internet in countries that lack it, this service has a brand new market to service. It is also accessible as long as there is internet, and may be the only option for transferring and maintaining funds in a country. By offering services at a fraction of the cost of traditional banking, it is able to reach to all socioeconomic classes by providing different packages.

Trump has recently revised his controversial travel ban, excluding Iraqis from the embargo. What are the implications from this prevention of entry mean for fintech and its growth? Fintech is blossoming globally, with hubs springing up on every continent. What contributed to its fast-paced growth is the world’s ability to share ideas without any obstacles. This includes investing in developing countries and watching their potential become real. After Trump’s first travel ban, 127 tech companies, including Apple, Facebook, and Google filed orders against the ban based on constitutional reasons. For fintech firms based in Iran, Libya, Somalia, Yemen, Sudan, and Syria, regulation is the biggest obstacle they face. With the fintech talent unable to enter the US, its questionable if US investors can see the potential in these startups from abroad.

Source: The Effect of Travel Bans on Fintech 

More than 54% of millennials make purchases online, and often do not consider the payment platforms that power these transactions. As these marketplace companies become more popular, the more important it is for robust payment solutions. In marketplaces the payment process is more complex, and these complexities are reflected in chargebacks. This occurs when a seller is forced to return funds to the buyer, which can be manipulated by fraudsters. On a global aspect, these marketplace companies also have to deal with varying legislations. Many marketplace companies, such as AirBnB and Uber, use financial technology to provide a secure platform for consumers. Not only do these companies process transactions, they also ensure security and legal compliance.

With the complexities of online transactions, I think it is important that marketplace companies have a reliable platform to provide secure payments. With millions of vendors having to be paired with millions of users, transactions can be vulnerable to attacks on security. It is important to use financial technology that can carryout the general business of the company, and specialize in security online. It is also helpful that financial technology companies know the tax codes and laws of other countries, to ensure marketplace companies are within regulations.

Source: How Fintech is Bridging the Gap With Marketplace Companies

The fintech sector is using artificial intelligence to better analyze data and enhance user experience. Many firms are integrating AI into its operations. Sentient Technologies uses artificial intelligence to continuously analyze data and improve its investment strategies. Wealthfront, a robo-advisor, uses artificial intelligence capabilities to give customers more customized advice. This includes tracking account activity and understanding and analyzing user spending, investing, and financial decision making. AI is also being used by banking customer service, such as the technology Luvo, which assists service agents find answers to customer inquiries. AI is more than automation, not only does it search through databases, but it also provides human personality and can continuously learn and improve.

I think artificial technology can enhance financial technology in many ways. Often times customers of traditional banking believe technology lacks the personable human interaction they get from a bank, however AI can offer similar services. AI’s ability to learn and adapt to the user will give customers a tailored experience at a fraction of the price they previously paid. However, the largest downside to AI is that it will replace jobs in the workforce. Like many other disruptions, this will cause many job losses so companies can lower overhead and increase profit.

Source: The Age of Artificial Intelligence in Fintech

The current regulations regarding various licenses and charters are out-dated and ill-suited for financial technology. The Office of Comptroller of the Currency (OCC) could either hinder or promote the growth of fintech firms. Currently, the OCC supports the traditional financial sector, which promotes stability, security, and safety. For the OCC to boost fintech, it needs to go against the values of traditional finance and tolerate failure. If the OCC grants charters to fintech firms, it needs to get rid of its zero failure goal. Instead, the OCC should focus on requiring companies to have a clear exit strategy in the event of a failure.

I believe that financial technology has shown its potential and that the OCC should update its rules to adapt to fintech firms. With the help of OCC fitech firms can better compete with the traditional financial sector. This is a win-win situation by allowing for more innovation and keeping the market competitive. Failure is prone to happen, but the benefits of a company that can dominate globally outweighs the risks of the few companies that don’t make it. With more risks comes more rewards, so the OCC should expand its policies to charter rising fintech firms.

Source: How Fintech Can Take Off Without Getting Hampered by Regulations

According to the article, many fintech companies are have missed their targets set after elongated fundraising cycles, mounting losses and dropping stock prices. The first reason the article states fintech firms are failing is largely due to the fundamentally strategic contradiction between technology and finance. Fintech firms are pressured by investors to return investments quickly, however the finance sector is slow growing in nature. The second reason is that market realities encourage short-term thinking. Companies abandon long-term investment in innovation for quick growth using traditional sales techniques. Lastly, incumbents in the market are powerful and resistant to change. Financing and banking services are highly regulated and conservative, and do not see fintech companies as a current threat.

Although I agree that fintech firms still have a long way to go before replacing banking and financial services, if they ever do, I still believe they have succeeded in disrupting the market. While they may not replace traditional firms, they have pressured finance and banking companies to be more innovative and offer services incorporating technology to stay competitive. I believe in the future, the blend between finance and technology will be inseparable, so traditional firms will need to adopt and adapt to stay on top.

Source: 3 Reasons Why Fintech is Failing

Fintech has allowed for consumers to take more control over their financial lives.  At its core, Fintech is powered by data about the consumer. This could be data from someone’s bank account information, to data to verifying someone’s identity. Despite the fundamental importance of data, some financial institutions are looking for ways to limit financial data for consumers using third-party applications. This is primarily due to control, security, and competition. Improvement of the data layer has allowed for quicker communication, providing better services to consumers. This desire to disjoin financial institutions and developers of applications will offset this improvement and stall financial advancements.

I believe that it is important for financial institutions to continue to work with third-party applications to keep up with the upward trend of integration of technology in daily lives. Financial institutions do not have justified means to keep financial data to themselves. Although control and security may be an issue, instead of not sharing financial data, institutions should look into providing more secure data transfer. This can include better encryption and more thorough confirmation of consumer logins. As for competition, I believe that if financial institutions do not strengthen their relationship with fintech firms, they will be either replaces by those that will or by new fintech firms that can offer better services.

Source: The Importance of Data Access for Fintech

Human financial advisors usually charge 1 percent of assets per year, regardless of the outcome of the investments. Until robo-advisors, the only other option was to manage accounts independently, which often underperformed the market. Robo-advisors offered a solution by being more efficient than working independently, and by being cheaper than a human advisor. The average rate robo-advisors charge is 0.15 to 0.5 percent a year, a fraction of what human advisors charge. Robo-advisors use computer algorithms from the same historical data human advisors use, and select investments based off the client’s risk profile. Deloitte Consulting predicts that within a decade robo-advisors will be managing $5 to $7 trillion. Asset management firms are creating robo-products to stay competitive.

Although robo-advisors are still making way into the market, I believe that in the near future they will replace human financial advisors. With the advancement of artificial intelligence coupled with more complicated algorithms, robo-advisors will be able to outperform human advisors. I also believe robo-advisors have the advantage of not having financial interests in the client, being able to custom-tailor to each client’s specific needs, and being useful for any time horizon. If asset management firms don’t adapt quickly enough, fintech firms will be taking over the market.

Source: The Rise of the Robo-Advisor

The finance market has been disrupted by technology, making way for fintech firms. With automation becoming widespread,  finance and technology are consolidating. This digital disruption will allow banks to boost margins through labor-saving automation. Accenture and McLagan predicts eight of world’s 10 largest investment banks will use blockchain to cut their costs by 30%. However, this threatens the job market and the traditional structure of finance firms. It is predicted that hundred of thousands of jobs will be lost, and jobs will significantly change in duties. Citibank predicted that as many as 1.7 million jobs will be lost as banks become digitized.

These is a ethical dilemma in automating jobs. Automation allow banks to lower margins and make customers better off by allowing banks to provide better financial services. With automation, banks will be able to make instant lending decisions, pre-score customers, and make more accurate predictions on default rates. However, the biggest tradeoff is the loss of jobs through automation. Millions could be out of a job and lack the skill set to keep up with technology. Although mass layoffs can be seen as unethical, banks must cut costs and master technology if they want to survive.

Source: How Finance is Being Taken Over by Tech

Market penetration of supply-chain management is only at 10% globally according to McKinsey, and only 30% of businesses worldwide have supply-chain financing computing according to Deloitte. Prevalently in the world, there is a lag between payment to buyers from suppliers, which was due to the financial crisis in the 1990s as companies tried to stretch internal resources. Supply-chain management can help improve the cashflow between suppliers and buyers by making payments fast and convenient for buyers.  Fortunately, companies are realizing these benefits, and supply-chain financing is growing. Fintech firms are driving this growth due to the ease of the platforms they offer.

Fintech firms are shortening payments by paying sellers on behalf of buyers. Once a buyer approves of an invoice, it is sent to the fintech lender, who then pays the supplier at the agreed date. The fintech lenders are also able to pay buyers on a earlier date less a discount, which are minute due to low interest rates, short financing periods, and risks only associated with the market. Although banks offer this kind of financing, fintech firms are able to help out smaller businesses, meeting the need of the growing market.

How Fintech Firms are Helping to Revolutionize Supply-Chain Management