Author: nneumann

Given last week’s article about issues with mobile banking security, this week I searched for articles focused on suggestions ways in which this issue can be improved upon. The three recommendations are as follows from one specific article.  

• Multi Factor Authentication: establish connection between user’s ID and their real world identity
  • Fingerprints and facial scanning
• Regulatory Compliance: stay up to date with legal regulations as to avoid excess expenses and to ensure security compliance is met
  • Proper identification of users and incorporating Anti-Money Laundering policies
• End-to-End Encryption: enables better protection of data and system integrity to ensure compliance with industry best practices
  • System integrity and protecting users’ identities from adversaries

Considering all of these security measures include already established technologies, I wonder why mobile banking has not widely adopted these as to prevent the issues presented last week. Of course, mobile banking is a newer concept considering it gained traction and popularity in 2010. It seems that mobile banking has the resources to make more secure applications, but it will continue to take time to implement solutions. Additionally, we may see new mobile security threats in the future which will also affect the security of such applications.  

http://paymentweek.com/2017-3-3-three-ways-to-ensure-mobile-banking-apps-are-safe-and-secure/

A European mobile security company, Pradeo, tested mobile banking applications with startling results. The company found that 50 of the world’s largest 100 banks had completely vulnerable mobile applications. Pradeo used simple techniques and combined techniques to test the applications. All 50 that it studied were found vulnerable. This means that hackers can retrieve account or transaction information and steal passwords among other possibilities. The article goes on to mention that mobile technology is still relatively new as compared to established technology like computers and laptops. With this, security measures are better on the established technologies while mobile security is still evolving.

The most interesting fact from this study is that 71% of people that use mobile banking are confident in its security. Throughout the blog posts, we’ve debated the issue of security in fintech, but what’s more interesting is how people have ‘blind faith’ in these large scale mobile apps. It will be interesting to see how new regulations play a role in security issues. Additionally, I wonder if the publishing of this report will dissuade users from using their mobile banking apps and what that means for the role of fintech in mobile banking. This security issue may cause delays in the integration of fintech and mobile applications.

https://www.cyberscoop.com/testing-pradeo-100-percent-mobile-banking-applications-vulnerable/

http://blog.pradeo.com/banking-applications-vulnerabilities

This articles starts out by showcasing a recent report by Accenture. This report highlights the development various countries can see within their economies with the further development and use of AI. The author then debates the potential effects of AI within fintech. AI is still considered new to fintech thus making Accenture’s findings not directly relatable to fintech. The one aspect that fintech and AI needs to tackle first is customer acceptance. Many of fintech’s products are consumer products, but consumers are still skeptical of AI and therefore uptake on this technology may take more time. Despite this, millennials generally uptake such technology which will help the transition. Additionally, augmented reality is posed to include functionalities to manage financial accounts.

Considering there is already a move to simplified banking, I think that the introduction of AI into fintech will be met with less resistance. Of course this will take an uncertain amount of time, but considering AI engines such as Finie, Amazon Echo, and Google Home, are already integrating new capabilities, this amount of time will be lessened. The one aspect that may be an issue is that of security across these AI engines.

 

https://www.forbes.com/sites/madhvimavadiya/2017/02/27/artificial-intelligence-human-fintech/#70da870346a1

As there has been increasing interest and talk about the realm of fintech, this article broke down what fintech actually econpmasess as of late. The author mentions that fintech is no longer one bucket, but multiple buckets which include things like RegTech, WealthTech, and InsurTech among others. Additionally, fintech has a growing list of subcategories some of which include lending, analytics, cybersecurity, neobanking, payments and roboadvice. To add to this, there are also certain technologies like IoT and AI that are heavily involved within fintech. The author then goes on to create three major market streams which include creating a new financial structure, removing friction from financial markets, and reducing the costs and overcoming bank inefficiencies. In the evolution of fintech, it’s important to note that none of these streams are aimed at replacing banks; those are here to stay.

I found this article quite interesting as fintech is still an emerging field and with this, its definition has changed over time and will continue to do so as more players enter the field with their own new ideas. It will be interesting to see where fintech is in the next five to ten years and what it will exactly encompass compared to today.
https://thenextweb.com/finance/2017/02/21/fintech-is-not-just-fintech-anymore/#.tnw_ZDOUz4QE

There is always a positive and negative side to the rise in certain industries. For fintech, online banks have been created specifically looking to give loans to small businesses. This is largely due to the fact that small business loans are down 60% from 2007 to 2014. Financial institutions have been reluctant to give loans to small businesses since the Great Recession. Only 20% of small business loan applicants are accepted, leaving 80% to find alternative means of financing. As there are no clear regulations on this specific part of fintech yet, it is important that small businesses be extra careful when looking at online lenders. Some aspects to consider include:

• Lack of government protection
• High interest rates
• Transparency in terms and fees
• Taking out multiple loans (loan stacking)

This article pointed out a subset of fintech I had not previously thought about. I agree that no matter what type of loan or where someone finances from, they should be extra careful as to what they are signing up for. I did not realize that the rise of fintech could actually make it easier for such lending practices, but with time there may be more regulations on this practice.        
http://www.usatoday.com/story/money/columnist/abrams/2017/01/25/beware-those-fintech-small-business-loans-can-cost-you-bigtime/96680944/

This article talks about the company Xero that is creating security measures for third party apps that use Wells Fargo financial data. For example, the personal finance application Mint requires users to enter their username and password for each account they want to keep track of. Banks in the past such as Chase and Charles Schwab have seen this as a significant security threat even cutting off access to account information via applications like Mint. These banks, including Wells Fargo, are already faced with the security issues of a digital financial future, but companies like Xero are making third party data access more secure. Xero’s solution is to reroute customers to a Wells Fargo controlled logon where they would be able to select the specific account information they want the third party app to have access to. Although this is a viable solution, I question if such a decision will weaken the mobile platform of Wells Fargo as users may be even more inclined to use Mint over the Wells Fargo app. Despite this, I think that Xero’s solution is step in the right direction to enhance financial security for mobile users.
http://www.bizjournals.com.libproxy.scu.edu/sanfrancisco/blog/2016/06/wells-fargo-mint-quicken-wfc-intu.html

This article brings up the idea that Americans and America in general, are not the greatest at managing money. With the introduction of financial technology, there is a space in which Americans can learn about money management, but most fintech companies focus heavily on payments and lending. This focus exacerbates the issue of poor money management. Additionally, media coverage surrounding fintech is heavily focused on technologies that simply make it easier for people to spend and send money rather than save or invest money.

There are certain companies pushing out applications with a focus on money management, but these are few in comparison to the type of applications mentioned previously. Considering that most Americans spend the same or more than what they make, a focus on financial literacy is important for future financial successes. The article goes on to state that an increase in financial literacy for voters and politicians would enable America to solve its economic issues. Although the sentiment of the article rings true, the statements seems drastic. There is more that can be done (ie. education) to improve financial literacy irrespective of fintech. Such solutions will ultimately aid in this financial literacy issue, not solve it.    

http://www.thinkadvisor.com/2017/01/23/when-it-comes-to-financial-literacy-fintech-is-dro

Artificial intelligence has been introduced into the world of banking via a new application called Finie. This app uses highly specialized AI engines that adapt to and learn from user requests. Users can ask questions like, “Can I afford to buy groceries this week?” or “How much did I spend eating out last year?” This kind of technology is a step above the AI technologies we see in Siri, Echo, and Alexa which are more simply programed to respond to a preset cadence. The article brings up the point of Finie-type technology being integrated with Apple Pay. Although a great thought, I find possible future issues with this type of integration.

• Finie is already integrated into mobile banking applications
  • Apple does not have this technology so it is at a disadvantage to be truly competitive
• Type of regulations that will be put in place as mobile banking is still an emerging market
• Undercutting the number of jobs in banks and for accountants

Despite these issues, the promise of evolving financial applications like Finie, provide for a dynamic marketplace in which consumers have more options in how to manage their finances ultimately pushing for the banking industry to evolve.   

Accenture released a report earlier this week showcasing how investment banks can reduce costs as much as $12billion a year by utilizing blockchain technology. The consulting firm looked at eight banks to determine the feasibility and savings of this technology stating that blockchain will “obviate the need for reconciliation and could prove a helpful resource for auditing.” Some banks have started to implement this technology to run back-office processes, but there is skepticism that banks are simply following the trend of block chain versus thinking of the future feasibility of this technology in banks.

The report also specifically looked to automating finance reporting and creating a distributed ledger. Such topics are significant portions of what our class encompasses. I found the following to be issues of implementing blockchain in banks and other institutions:

• Uncertainty over security  
• Integration issues with systems already in place
• Initial costs to implement such technology are unknown
  • Implementation and integration may outweigh future benefits  
• Legal and regulatory acceptance of blockchain being used in this way
  • It can take years before adoption protocols are put in place and adoption may be low thus creating a divide between those who use blockchain and those that do not

http://www.reuters.com/article/us-banks-blockchain-accenture-idUSKBN1511OU

https://www.accenture.com/us-en/insight-investment-bank-challenges-blockchain-technology

The IRS believes that some US citizens who utilize Bitcoin may be evading taxes. Bitcoin transactions are recorded publicly, but there is no identifying information connected to these transactions making it difficult for the IRS to bring a case against anonymous Bitcoin users. The Treasury Department put the IRS under pressure for its lack of involvement which lead to the IRS investigating Bitcoin records for 2013-2015. The IRS found three potential tax evasion cases leading to a court petition for Bitcoin to provide information on its users.

Bitcoin is facing similar issues that previously established banks have faced in regards to tax evasion. Since services like Bitcoin are out of the scope of traditional regulations set for banks, the government is seeking for regulatory insight into the companies and the people who use such services. This is due to the importance of the government and financial institutions needing to know who exactly is moving money and where.

Such regulations can change the scope and evolution of such fintech companies as well as affect customers’ behaviors when utilizing these services. We may see that with the increased regulations, such institutions become more traditional in structure in order to meet government demands.   

https://www.nytimes.com/2016/12/05/business/dealbook/as-fintech-comes-of-age-government-seeks-an-oversight-role.html