Author: neyoung

This article discusses the potential power that FinTech can provide for the global world. Currently, there are about 2b out of the 7b people in the world who are connected to the new digital economy. This has left people out from partaking in the new economy. These technologies are transforming developing countries such as Kenya that has transformed the countries currency to digital format via M-Pesa. It is a huge feat in a country that is so far behind from the rest of the world in other respects.

According to McKinsey, FinTech will help increase global GDP by 6%. FinTech will utilize new technologies such as Machine Learning to help reduce trivial work such as data inputting that will reduce total costs and allow machines to do a majority of the work.

FinTech is starting to impact the world at large. There will be a lot to be seen in from this space within the next 5 years.

Reference: https://www.forbes.com/sites/oracle/2017/03/14/how-fintech-is-powering-the-global-economy/

On Friday, the SEC issued a decision to reject the Winklevoss’ petition to form a Bitcoin ETF. Since the beginning of the year, Bitcoin has remained constant over $1k/coin and in recent weeks hovering around $1.2k/coin. The goal of the ETF was to make access to the new currency in the regular market. Bitcoin brings a potential promise of large returns within a short period of time due to its increasing popularity.

The SEC denied the request due to the lack of regulation and oversight capabilities by an outside body. Bitcoin was mainly created to avoid these types of centralizations. Unless the SEC will update their requirements, it looks unlikely to see a Bitcoin ETF in the near future.

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

From research at Stanford University, it was found that Twitter tweets were able to positively reflect the general public’s sentiments towards a given stock. Twitter allows all humans to post short updates within 140 characters. Through machine learning and sentiment analysis, machines are able to instantaneously make assertions about a stock based on public opinion.

Neural networks can be trained with public sentiments along with historical price data to more accurately predict future prices of stock. The paper was able to show a 75% correlation between their predictions and actual stock prices.

Technology is changing the game for the financial services sector. With the increased availability of compute power, it will push the entire world towards trading that is heavily dominated by technology instead of human traders. But, I believe this artificial intelligence needs to be augmented by humans.

Reference: https://pdfs.semanticscholar.org/4ecc/55e1c3ff1cee41f21e5b0a3b22c58d04c9d6.pdf

The use of FinTech has dramatically changed the culture within China. Chinese consumers are pushing changing habits from traditional retail stores to online shopping as a result of company initiatives. Unlike other parts of the world, China is incredibly progressive in terms of loans. Companies like AliPay are offering loans within seconds through mobile apps and online services. Traditionally, it can take several days to weeks to approve credit loans. This is changing the ways in which Chinese are able to access credit and will let them spend more money within their economy. These types of technologies could be in the beginning of the future for other countries and could push other countries to allow for similar infrastructures.

Reference: www.scmp.com/business/china-business/article/2073798/how-financial-technology-driving-chinese-consumer-spending

According to the firm PitchBook, the total investment in Fintech technologies have increased by 11% (to 17B). This was also the first year that China outpaced the US in investment by over $1b. The UK took 3rd place, most likely due to skepticism of Brexit.

A common theme amongst all investments can be found in artificial intelligence. Specifically, using AI instead of humans to perform stock trades and manage portfolios. Many investors believe that the lack of emotion and implicit bias provide an edge in investment. This technology can also be used to help with regulation to ensure trades are meeting requirements. I believe that AI will help reduce the current overhead brought by human traders.

Fintech continues to be a growing field. It will be interesting to see the movement of AI in FinTech for 2017.

Reference: http://www.forbes.com/sites/lawrencewintermeyer/2017/02/17/global-fintech-vc-investment-soars-in-2016

Wealthfront, a digital wealth management company that utilizes technologies such as artificial intelligence (AI) to make decisions, will continue to invest more in AI to beat the competition. Traditional wealth management firms use human advisors, but Wealthfront believes that humans have implicit biases that do not allow them to always get the best return and charge significantly higher fees from portfolios.

Many people complain that this machine approach is dehumanizing. This announcement came right after Wealthfront’s competitor, Betterment, announced the addition of human advisors to their computer algorithms in hopes of adding a human element to investment.

These new types of wealth management services will give younger generations the ability to make investments at a younger age, thus a larger portfolio size at retirement. Whether machines will dominate the future, it will force management advisors to rethink their approach and pressure higher performance.

Reference: http://fortune.com/2017/02/02/wealthfront-robo-advisor-new-financial-service/

Small businesses are increasingly looking to remove the option of cash in favor debit and credit cards to secure transactions. Many small businesses face difficulties of theft and loss directly correlated to cash. The use of cash has been traditional due to its ease, but 2016 was the first year where credit cards surpassed cash transactions.

Services such as Square and Venmo are making it easier for small businesses to accept card payments and for friends to settle debts. These technologies are removing the need for cash as seen by total sum of card transactions. Other countries are also embracing cashless societies as ways to reduce black market activity and increase tax revenue. Consumers also face losses through ATM fees that reached out $8B last year.

It appears that a cashless system will continue to rise. Consumers realize the convenience factor of credit cards and there will be many tech companies who help with this transition who will make millions in fees.

Source: https://www.wsj.com/articles/why-your-business-should-ditch-cash-1485698400

Blockchain provides a potential solution to providing authenticity amongst transactions and near instantaneous speeds. The implementation through Bitcoin has shown the world the need for technologies that give people control and trust of the transactions around them.

It’s not a surprise that blockchain technology has taken off in the world’s largest country. With a population of over 1.4B people and a growing middle class, China is forced to find ways to streamline transactions and fight against fraud. The large Chinese banks struggle to modernize due to high costs and risks of these new systems. China also faces a huge problem with financial fraud and needs a way to give trust back to the people.

Regulators in China believe that blockchain technology can be a way to jumpstart the traditional banks into a new era. Blockchain can help serve as a digital ledger to track information, loans, and contracts. All of these needs would reduce the human labor required for each transactions and allow for the entire country to audit the transactions. Citizens can hold high level government officials accountable to the finances of the country by having an audit trail that is nearly impossible to manipulate.

Source: http://fortune.com/2017/01/27/china-banking-fraud-blockchain/

Bitcoin has gained traction in the ever increasing global world. The initial reason for Bitcoin was for the implementation of a decentralized currency system as well as the authenticity of the system through blockchain technology. It also allowed for the flexibility of transportation of value across borders.

While this concept of currency seems ideal, there have been some unintended consequences. China has been a notable country for manipulating their currency to gain competitive advantages in trade and labor. However, this has negatively the Chinese people as it reduces the total purchasing power. As a result, China is believed to control over 95% of the total Bitcoin market. This means that Bitcoin is controlled by speculation and price of the yuan. Bitcoin jumped to over $1,000 USD last week and fell sharply after China’s banks pledge to investigate domestic trading of the currency. To wide adoption of a global currency, Bitcoin will need to find a clever way to navigate around this solution.

Reference: WSJ: Chinese Yuan Is Other Side of Bouncing Bitcoin