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With FinTech becoming widespread, it may be hard to integrate all new technologies within a business. What this article, “Three Fintech Trends Worth Adopting” by Mitchell Caplan, does is suggest the top 3 essential financial technologies that will help financial advisors support their existing work and create a better relationship with their clients.

The three technologies suggested by the article include “holistic fintech evolution”, “planning and risk management integration”, and “customer experience priority.” Each of these categories connects to the integration of fintech into financial advisory. The first technology describes a way to see the big picture without using “roboadvisors.” What this article suggests is to use fintech as a way to assist the advisor rather than replacing the advisor with technology. The next fintech mainly connects to retrieving realtime information of “macro risks.” Lastly, the final fintech suggested is “customer experience priority” which advocates an easy interface to ensure transparency from the advisor to the customer.

These three technologies definitely have been on the rise since the development of fintech. It advocates a strong bond between a human advisor and client. With better prediction methods and transparency, it’s much easier to optimize investments which leads to a happy client.

http://www.financial-planning.com/opinion/three-fintech-trends-worth-adopting

Banks are lobbying against the EU legislation, which may cause a power balance shift between European FinTech firms and banks. A Financial Times report discusses PSD2, the second payment-to services directive that intends to improve competition between banks and FinTech by getting banks to allow third parties to access customer data. Banks want more regulation on FinTech and access to customer data, but FinTech believe that having to go through the bank for any customer query will overly slow down transaction lead times.

I believe that security should be prioritized over convenience and instantaneous transactions. As mentioned last week, all of my friends who do not use mobile banking or money transfer apps avoid doing so for security purposes. They likely do not know how the digital money transfer/management works well enough for them to feel safe using these technologies, no matter how convenient they may seem. At the same time, however, I believe there should be a balance between security and response time. If an online transfer is secure but takes longer than traditional banking, which is allegedly safer, I may opt to go to a bank. There should be a reasonable balance between security and speed.

Source: https://www.cryptocoinsnews.com/fintech-firms-big-banks-are-lobbying-to-block-change/

I would like to focus on fin tech that improves the traditional credit card payment process by eliminating the use of physical credit cards. Credit card theft and skimming of PII can be drastically minimized by using Near Field Communication(NFC) technology in your mobile device and converting it into a contact less payment system.

Near-field communication (NFC) is a set of communication protocols that enable two electronic devices, one of which is usually a portable device such as a smartphone, to establish communication by bringing them within 4 cm of each other.It has three modes of communication but the one significant to us is:

• NFC card emulation: This enables the NFC device to behave as a standard Smartcard.

A contact less card requires only close proximity to a reader. Both the reader and the card have antennae, and the two communicate using radio frequencies (RF) over this contact less link.There is no set-up required. The connection is more reliable and does not suffer problems of contact wear, corrosion and dirt experienced by systems using physical connectors.

In Apple Pay, NFC technology is coupled with bio metric security and tokenization to make it the most secure payment transaction possible. Traditionally a card-present transaction is considered more secure than a card-not -present transaction over the web or during in-app payment. Unlike popular belief, research shows that Apple payments (a card-not -present transaction) is more secure than the traditional card-present transactions. This is because of the inherent security that is built into a transaction that can occur only at 3-5 cms distance.

When a card is added Apple Pay, a unique Device Account Number is assigned, encrypted, and securely stored in a dedicated chip in iPhone, iPad, and Apple Watch. These numbers are never stored on Apple servers. And when you make a purchase, the Device Account Number, along with a transaction-specific dynamic security code, is used to process your payment. So your actual credit or debit card numbers are never shared by Apple with merchants or transmitted with payment.It also doesn’t store the details of your transaction behavior. Your most recent purchases are kept in Passbook for your convenience. Apple pay currently has around 12 m patrons.

https://globenewswire.com/news-release/2016/10/25/882686/0/en/IoT-Device-and-Data-Security-Challenges-and-Solutions-Headline-the-Smart-Card-Alliance-2016-Security-of-Things-Conference.html : articles by Prof. Imran Hajimusa

Deutsche Bank has a history of skirting regulations to pad profits and personal bonuses. Wealthy Russians were sent money overseas by through a group of Deutsche Bank executives arranging stock trades that had no purpose other than disguising the fraud. In one case, a supervisor in the Moscow office was paid $3.8 million for “consulting agreements” by one of the companies.

Over $10 billion in laundered money was directed to London and New York form Moscow, and the Deutsche executives didn’t crack down on the schemes despite their opportunities to do so. Despite its history of fraud, Deutsche’s New York bank still has inadequate compliance and monitoring systems.

Deutsche agreed to hire an independent monitor to be approved by the Department of Financial Services. The monitor will review the bank’s relevant compliance system.

Bank of America, UBS, and Morgan Stanley are leading the traditional global wealth-management industry, with each responsible for managing more than $1 trillion in investors’ assets. These firms continue to draw multimillion-dollar clients, however, at the same time, many other leading wealth management firms are working on adopting robo-advisor along with their human financial advisors to help increase value for clients across different wealth spectrum.

Wells Fargo expects to launch its robo-advisors service early 2017, aiming to capitalize on its rich bank resources, intellectual capital and investment unit. Wells Fargo currently has more than 15,000 advisors with $1.4 trillion in client assets. The company believes that their clients are ready for this type of investment choice. Wells Fargo’s approaches to robo-advisors is a tremendous opportunity for the consumer and the financial advisor to utilize the robo-advisor platforms.

In the near future, certain amount of large firms will build their own platform of robo-advisory service, while mid-sized firms might buy independent robo-advisory firms. Smaller firms or start-ups may incorporate a branded industry solution.

 

Source: http://www.investopedia.com/articles/insights/072216/wells-fargo-launch-roboadvisor-2017.asp

 

Payment technological startup, Square, paired with Apple recently to encourage its merchants to accept Apple Pay. Encouraging in this case actually means allowing the merchants to accept Apple Pay for free for each transaction. How Square makes money is through a transaction fee per purchase incurred on the merchant. This fee is quite small and applies to all credit/debit card swipes that occur using their product. Square wants their merchants to accept Apple Pay and encourages them to do so by not charging them a transaction cost. Apple receives more awareness for Apple Pay for free and with the literature and campaigning for Apple Pay that Square is going to provide its merchants, usage for Apple Pay will increase as what happened in Portland, OR earlier. What Square gets out of this is the ability to provide a better service for their merchants and make them more marketable to other small businesses in the now crowded payment hardware business. I believe that Apple actually benefits the most from this partnership. While merchants in plugged-in communities like the Bay Area are more likely to have people use Apple Pay to purchase items, these areas are few and far between. As seen in Portland where a campaign to increase Apple Pay worked quite well, this campaign to encourage people to use Apple Pay will pay off in other parts of the country. Apple will get this usage increase without having to pay a dime, which makes them the big winners of this pair-up.

Article Link: http://www.pymnts.com/apple/2017/square-and-apple-who-is-the-big-winner-of-their-payments-pair-up/

Ever since the creation of Bitcoin in 2008, its underlying technology, blockchain, has been shifting how the world does business. Essentially, blockchain facilitates peer-to-peer transactions without any middleman such as a bank . It also keeps the user’s information anonymous, while validating and keeping a permanent public record of all transactions. The benefits of this are that personal information is secure, while all activity is transparent and incorruptible.

As we’ve seen the use of blockchain technology in real estate, insurance, and money transfers, there is a new growing need for blockchain to serve ERP. ERP software integrates all the different functions in an enterprise together by providing a single version of the truth in real time throughout the organization cutting across departmental boundaries. Blockchain technology is also similar in that it is a real time common database that provides a single version of the truth to all participants.

As we’ve learned in class there is sometimes confusion and lack of trust within the company by departments due to perhaps different formats and processes across departments. Blockchain seems like a neutral solution that everybody in the organization can adopt.

This article highlights one company in particular called Finlync that is developing what it claims to be the “world’s first technology to integrate blockchain into ERP systems like SAP.”

Sources:

• http://www.pymnts.com/news/b2b-payments/2017/finlync-blockchain-erp-data-integration-b2b-payments-automation-document-invoice-management-processing-ar-ap-buyer-supplier-banks/
• http://dontapscott.com/2015/06/blockchain-revolution-the-brilliant-technology-changing-money-business-and-the-world/

 

 

Mobile payments in general are a very tricky business, due to the vast range of payment options and channels available to customers (think Google wallet, Apple pay etc.). And out of all the technologies implemented by these payment applications, NFC (near field communication) gets a notable mention. Apart from creating a fast and convenient payment experience, NFC also lets mobile devices provide a range of services from unlocking car doors to sharing photos with others in close proximity.

Demonstrated by the number of high profile data breaches that have plagued the nation within the last year, payment data security needs to be the key priority to boost consumer adoption. NFC unfortunately serves only as a functional technology, and needs the aid of an additional security layer to deem foolproof. To counteract this issue tokenization has emerged as a new defense against mobile payment fraud. Listed below are a few features offered by tokenization:

1. Flexible Security: Tokens are created for a simple fact that they cannot be used beyond its pre-defined purpose, thus are rendered useless to hackers trying to commit fraud by cloning the magstripe cards. Tokenization has also led to the rise of HCE (host card emulation), HCE is now being used alongside tokenization by banks to create their own payment apps without necessitating access to complex mobile storage and chips.
2. Instant Use: Digitizing the payment cards for mobile wallets is a time consuming process and often involves review and approval process by the bank, which could take anywhere from minutes to days. Usually e-commerce checkouts involve additional steps as compared to a simple user signup process in mobile payments. Having to do both in transactions that are paid using mobile wallets takes a toll on the consumers and eventually affects the adoption of this technology. Tokenization has made it easy so that customers can sign up and be ready to pay within seconds – making it convenient for users.
3. Minimal Pushback: Tokenization typically has no impact on physical NFC payment terminals as well as the processing side of payments. Retailers do not need to invest in new hardware or software and likewise issuers that implement tokenization have zero impact on their existing back-end technology.

In conclusion, it is important to keep in mind that although tokenization solves many security challenges, with the evolution of new fraud techniques securing payments is always going to be a moving target.

Reference: https://thenextweb.com/insider/2015/05/15/why-tokenization-is-the-key-to-mobile-payment-security/

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

https://www.yahoo.com/tech/how-to-send-money-on-snapchat-103138292194.html
http://www.npr.org/sections/alltechconsidered/2017/02/02/512434920/snapchat-all-grown-up-5-things-we-learned-from-snaps-ipo-filing

Snapchat, or Snap, is going public and is estimated to raise at least $3 billion. Snapchat’s popularity is notorious for its functions as a secret social media app. Although Snapchat’s payment partnership with Square, another digital payment service, isn’t new to the app, its data security including its financial services is a huge concern in light of the impending IPO.

Snapchat’s partnership with Square allows Snapchat users to send money using their debit or credit cards. This means that each user shares their financial information with two companies, Snapchat and Square, increasing the risk that personal information could be leaked.

In the Yahoo article, sending money to your friends is as easy as sending a selfie, with a click of a few buttons. Although there is a security feature that allows users to enter their CVV number for each payment, the concern with this transactional system is where personal information will be stored, especially since Snap is moving their storage to Google Cloud.

With the growing popularity of digital payment methods, it’ll be interesting to see how a popular app created with secrecy in mind will either perpetuate or remain stagnant once Snapchat files their IPO.