Category: Uncategorized

Google Hands Free is a payment technology that authorizes the transaction or enables your shopping payment method just by saying “I’ll pay with Google” to cashier. The app allowed user to enter their payment and photo information, and then uses the combination of Wi-Fi, Bluetooth and location services to verify if your phone was in the store. When paying cashier would be presented with a photo that the user has set up in an app to confirm the transaction.

Despite Google’s best intention to provide seamless shopping, it never scaled up beyond the South Bay area.   But the cool thing to note here with this kind of payment technology is that, how these technologies are trying to remove some pain points around the shopping by streamlining the purchasing process. But while Google plans for truly seamless shopping experience seem to be on hold for now, others in the tech industry are getting started with Amazon’s cashier-less Amazon Go grocery store- which functions similar to hands-free principles like Google’s app.

Although Hands Free app is shutting down, it could be the genesis of novel payment technologies like Facial recognition-based shopping that’s done completely by computer-controlled systems. With all these interesting payment tech coming to market, we have to stay tuned to witness the revolution in the payment industry.

Source: http://www.theverge.com/2017/2/2/14483758/google-hands-free-payment-app-shut-down-android-pay

This article discusses fintech’s impact on small business loans. Lenders using fintech have faster ways of assessing a business’s credit worthiness by using digitized information such as a small business’ QuickBooks account. Thus, small businesses are more likely to receive a loan and receive it quicker than using a traditional bank. Fintech lenders can also offer smaller loans because they don’t have the same entrenched costs as banks. It is also easier to find customers with the rise of online brokers or lending platforms.

However, these lenders make the loans profitable by charging high interest rates, usually over 50% APR. Experts at Harvard Business School are pushing for current lending regulations to be extended to fintech-based lending institutions and brokers. Enforcing the same regulations would require disclosing fees and interest rates. This may make these loans less attractive. If lenders have to lower their interest rates significantly, they lose the ability to offer small loans. While I can see the desire to keep small loans available, transparency in the process will be more beneficial in the long run. Borrowers will budget more efficiently if they have accurate fees calculated. They are less likely to default if they know what they’re agreeing to in advance. Having regulations extended ensures that small businesses and lenders are on the same page.

http://www.usatoday.com/story/money/columnist/abrams/2016/11/30/fintech-fast-cash-small-business-loans/94628352/

Fintech is revolutionizing the traditional businesses. Lets, look at lending which was traditionally done by banks and financial institutions, the Lending club which has become the change of face in the industry. The way it operates is enabled borrowers to create unsecured personal loans between $1,000 and $40,000.  Investors can search and browse the loan listings on Lending Club website and select loans that they want to invest in based on the information supplied by the borrower, amount of loan, loan grade, and loan purpose. Investors make money from interest. Lending Club makes money by charging borrowers an origination fee and investors a service fee.

My view about this it is a welcome move as people are getting an alternative source of funds for their needs. When we look at the three companies business models Amazon, Uber, and Lending club all three are just acting as intermediaries. They just provide a system where supply meets demand. Having said that it could not replace traditional banking system as it provides a safe ecosystem for a multitude of services like home loan, a business loan which can’t be provided by P to P lending.

 

References: http://www.businessinsider.com/the-us-fintech-regulation-report-2017-2

https://en.wikipedia.org/wiki/Lending_Club

Mark Carney, the governor of the Bank of England, warns that Fintech’s market risks would evolve as the sector continues to develop. Carney believes that while new Fintech could reduce costs, improve capital efficiency, and create new economic functions, these changes could impact credit quality, macrocosmic dynamics, and market functioning. Therefore, it is up to the regulators to make sure that Fintech maximizes opportunities and minimizes risks to society.

Carney also warned about the potential dangers of increased reliance on peer-to-peer lending. Since peer-to-peer lending has yet been tested by a downturn, its stability and the lenders’ tolerance to losses are still unclear. Currently, Fintech is a rather uncharted territory; it might generate systemic risks due to its interconnectedness and complexity, or it might reduce systemic risks by introducing a more diverse and resilient system. Policymakers need to be ready to address vulnerabilities as they appear.

I think the complexity of the current regulatory system can be a hindrance for the development of Fintech policies and Fintech companies themselves. While Fintech companies are attempting to blindly meet compliance, the lack of coherent policies not only makes it difficult to plan, but also wastes resources that can be better utilized elsewhere.

Reference: http://bridgingandcommercial.co.uk/article-desc-11491_

The People’s Bank of China has completed a trial run for its iteration of digital currency. Different banks in China participated in transactions involving the currency. They are a world leader in testing and implementing this technology. After ironing out a few kinks, the People’s bank plans to have a country-wide rollout. It will be a legal tender and backed by the government. Since, the digital currency will be floating in the money market, the bank will closely monitor it to avoid inflation.

I believe this is a good thing for fintech. Physical monies have been becoming irrelevant since the credit card. We deposit our physical money into banks and are able to have a digital representation of it on our devices. This digital currency will implement aspects of blockchain technology. Banks will be able to see the transaction history and detect fraudulent activity. They will also be able to account for all digital currency in the market when determining cash levels.

Look out in the next few years for banks adopting a similar currency. It will move finance into a new era.

At this point, Fintech is past its infancy and inception. More and more money is being invested in it, and it is at the point where the potential in which it can disrupt the financial services industry is apparent. What Fintech is allowing companies on the supply side to do, is act in new ways to serve their needs by meeting value chains with better quality, speeds, and prices. On the consumer side, there is increased transparency, consumer engagement, and ways in which consumers behave which all change the dynamics of how consumers’ needs should be met. Since Fintech is largely geared towards accessibility and ease for consumers, the reasons why consumers adopt Fintech solutions is very interesting.

Unsurprisingly, the ease of setting up an account is the biggest reason why consumers adopt Fintech. Instead of having to stand in a line and fill out paperwork, an account is often just requires and email and identification. From there, Fintech also offers better rates and fees. Not included on the above graphic, are other reasons why Fintech is succeeding.
What else is interesting is how global banks view fintechs, despite always hearing how Fintech is disrupting the financial services industry. In North America, 20% of banks in the study view Fintechs as competition and a threat. 31% of banks view them as possible collaborators.

Linked Article: http://www.cio.com/article/3148756/leadership-management/the-fintech-effect-and-the-disruption-of-financial-services.html

When fraud is perpetrated by employees with access to internal systems, there are several relatively easy things you can do to spot the fraud:

1. For starters, check the accounts payable system to see if there are any vendors without an address on file. If there are vendors without addresses, there is a possibility that accounts payable clerks are routing those checks to themselves.
2. Also, analyze the activity of vendors in your system. A large company may have 50,000 vendors on file that it has done business with, but may only have done business with 10,000 of them in the last few years. Those unused vendor files are ripe for abuse by malicious employees, who may by cutting checks for bogus work, and then funneling that money to themselves.
3. Take a close look at the names of the vendors on file. Malicious employees who are committing AP-related fraud may modify the names of existing vendors or create fictitious companies out of whole cloth. They may add their own initials to the front of company names, use anagrams, or use with silly names like Mick E. Mouse.
4. Cross referencing employee addresses with vendor locations routinely turns up some employees with their hands in the cookie jar. This can be done very quickly by simply matching address numbers and ZIP codes.
5. In years past, fraudsters would perpetrate their theft using post office boxes, which are guaranteed anonymity by the US Postal Service. This is one of the reasons that many companies now require actual addresses to be on file. You can flush out the little rascals by cross-checking the physical addresses of the UPS Stores and other similar stores with employee and vendor addresses.
6. In some cases, it may be useful to use visual tools to analyze street addresses in more details.
7. Many businesses close on the weekends, so if checks are routinely issued on Saturday or Sunday, that would be a giant red flag of fraud.
8. Fraud fighters can use Benford’s Law (also called the First-Digit Law) to identify suspicious patterns in checks. If the company requires a senior manager to sign off on checks over $25,000, and there is a big disproportionate increase in the number of checks written just below that number, that would be a strong indicator of fraud.

Reference:

Eight Ways Analytics Powers Fraud Detection

 

Automated Robot Advisories:

Robo Advisors [e.g. Betterment, Wealthfront]: One-to-one communication between financial advisor and client was the defining feature of the relationship in the traditional wealth management and investment advisory. With lower fees, Robo Advisors use automation to select investments that meet client’s’ risk tolerance and growth goals. For less complex portfolios, algorithms can determine the appropriate level of risk in bringing investment services to an underserved market.

Robo Advisory companies globally are focusing on broadening the scope of robo advisory beyond simple portfolio rebalancing. As this area matures and diversifies into more sophisticated portfolio construction and other offerings, investment is expected to grow significantly. In the future, we will likely see a broadening focus of digital advice including a much more holistic view of the clients’ assets, income and liabilities; not just the assets under management for that given platform.

Robo Advisors are also expected to address investor behavioural issues by fostering adherence to sensible investment plan appropriate to one’s circumstances rather than chasing the last ‘hot’ sector.

While one of the leaders in the space is Betterment, a New York–based firm, Wealthfront is another firm that has more than $1 Bn under management under its proprietary algorithms. Old established players Vanguard and Charles Schwab launched Robo Advisers and now have more than $20 Bn under management. Other firms engaged in automated advisory services include Mint‐Bills, WiseBanyan, Bloom, FutureAdvisor, Personal Capital, and Motif Investing.

References:

https://www.accenture.com/_acnmedia/PDF-2/Accenture-Wealth-Management-Rise-of-Robo-Advice.pdf

https://fundersclub.com/blog/2016/11/30/your-money-in-20-years/

 

Over the past several weeks, an uncertainty has existed in the United States, and even the world, as to how the new US President – Donald Trump, will affect the tech industry and Silicon Valley. In a recent Newsweek article (Maney, 2017), Kevin Maney keyed in on five major sectors targeted by the Trump Campaign rhetoric, that if followed through on by the new administration, could stifle growth and innovation. The  areas discussed included “Humle the Technology Industry”, “Dismiss Alternative Energy”, “Derail Health Care”, “Ignore Russian Hacking”, and “Shift resources from Cities to small Towns and Rural areas”.

I see the next four years in two views. The first will be in alignment with the negative actions described by Maney as to the effects of Trump’s promised policies, but I also envision a second outlook, not mentioned by Maney. This overlooked  observation would include an uprising, powered by immigrants and the same technology that Trump’s action is predicted to suppress, that would overcome his actions, and in the end, keep the Valley on track producing some of the most innovative tech companies in the world.

 Maney, K. (2017, January 27). DIGITAL DIVID AND CONQUER- Trump has a brilliant plan to turn Silicon Valley into a desert. Newsweek, pp. 46-47.

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