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Cloud Elements is receiving its second round of venture capitalist financing, led by Harbert Partners. The company builds API integration tools for developers, and the company attempts to tackle the data deluge by building integrated systems directly into a company’s application. They differentiate themselves from competing companies such as SnapLogic and MuleSoft, which have a separate, external integration product aimed at IT.

This relates to our in class discussion on how enterprises must face the issues that arise from sharing data across multiple systems. As opposed to investing in a single system, which is both costly and risky, an enterprise can opt for Cloud Elements’ API integration platform. If developers need to connect multiple financial systems in order to synchronize fiscal data across an organization, they would use the company’s application to create a financial hub. The company wants to expand the number of systems it can connect to, and with an ever expanding amount of data and systems, that number is limitless.

Cloud Elements scores $13 million Series B to advance API integration tools

Cryptocurrency was never intended to be invented. The invention was a digital cash system which is completely decentralized, without a server or central authority similar to a Peer-to-Peer network for file sharing, which led to the emergence of cryptocurrency.

Cryptocurrency can be defined as limited entries in a database no one can change without fulfilling specific conditions. A cryptocurrency has a network of peers which records all transactions. A transaction is complete only when it gets confirmed by miners and it is permanent, forming a part of historical transactions called block chain.

Working of Cryptocurrency

Some of the popular cryptocurrencies are Bitcoin, Ether, Litecoin, Monero, Ripple. Bitcoin is the largest cryptocurrency and often regarded as the first cryptocurrency, even though prior systems existed.

Advantages of Cryptocurrency:

• No central authority, flexibility to make transactions all across the world.
• Almost impossible to manipulate transactions due to the additional layer of security called cryptography.
• All transactions have to be confirmed by miners, and once confirmed they are immutable.
• Personal information is hidden, thereby reducing the possibility of identity theft.
• Minimal processing fees.

Disadvantages

• If the holdings are not backed up, a computer crash can cause loss of cryptocurrency.
• There are constant fluctuations of cryptocurrency value.

 

http://blockgeeks.com/guides/what-is-cryptocurrency/

What Are Bitcoins – Pros & Cons, Investment Opportunities

 

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

I stumbled across an interesting article titled “Beyond Bitcoin: How The Blockchain Could Disrupt Our Financial System” (Forbes/SAP Business Trends, Dan Wellers, SAP, August 11, 2015). Reflecting on how Professor Schermann had included a short discussion on Bitcoins and the Blockchain in our opening lecture, I decided it was worth reviewing. Dan starts out right away in the article dispelling any fears that the Bitcoin would ever replace any of the worlds existing currencies, and then shifts focus to his main topic of discussion – the Blockchain, or the underlying technology of the currency itself. The Blockchain, utilizing cryptography coupled with a distributed management architecture, has the potential to serve as a powerful electronic historical ledger that doesn’t rely on a centralized legacy financial institution. The power lies in decentralization and the incentives involved in verification of transactions. This, combined with current computing technologies, has created a new mechanism to operate more securely in todays and tomorrows increaeingly digital environment. I feel Dan has nailed it, and anyone that is dismissing the Bitcoin, is failing to realize the true economic value – the underlying Blockchain and its potential impact and implications on a larger scale. Stay tuned!

There are so many accounting rules which are becoming easier and accurate to be implemented with Financial systems. The concept of Multi period accounting is one of them. It enables users to create accounting for a single accounting event for more than one GL period. For Example, business cycle of an Insurance premium payment. Normally an insurance premium is paid Annually. A premium paid annually is an advance payment of insurance for 12 months. At the time we pay the premium, the actual expense does not occur, rather it occurs as and when the month for which insurance is paid completes. It is difficult to implement this concept by entries in the manual journal book and keeping track of the full payment done as well reductions done every month as monthly expense. With the help of Financial system and the availability of the automation concepts there are setups with which we can implement these business processes for different type of payments and reduce the effort of recording these reductions every month. In any organization, this concept is common and can be observed and put into actions in tiny things like buying office supplies to bigger things like paying the rent for organization building.

 

These article is about the relationship between traditional banks and Fintech. The article argues that some Fintech companies, have not been able to fully disrupt banking products, but that future companies could use improved technology to give customer better data and more differentiated services.

I agree with the article that Fintech companies have not been fully successful at replacing banks, and that it will not be easy, for a few reasons. First, despite the many customer complaints that banks get, banks still have a reputation for being, “the safe choice,” when it comes to handling people’s money. I also agree that some of the Fintech companies have not made it clear enough why their services are both better and safer than using a similar banking service. Finally, the banking industry has a lot of regulations that Fintech companies may not be able to deal with.

In my opinion, some keys for Fintech companies to disrupt regular banks are providing more accurate data, providing banking services with fewer fees or limits and greater convenience, and the companies have to somehow change the perception of safety and strength that banks have.

 

 

 

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“Why Fintech Has Failed to Supplant Big Banks – So Far”

https://www.entrepreneur.com/article/286633

 

Traditionally, wealth management services such as personal budgeting and portfolio management were only affordable to the wealthy. With the increased development of FinTech, these services are now available to consumers through finance applications and online marketplaces. FinTech companies are providing the average consumer the ability to receive these services at lower costs than from traditional banks.

The increased competition in the financial services sector has forced Banks to rethink their business strategy. Traditionally, banks offer checking accounts to customers at below market value in order to attract customers to their more profitable services such as loans. With FinTech companies providing the same services as banks at a lower cost, banks will need to reevaluate their business strategy and either increase the cost of their base checking accounts or acquire the growing FinTech companies.

From a consumer perspective, FinTech’s disruption to the banking industry could lead to greater costs for holding a checking account. The increased fees could bar lower income families from being able to access a transaction account. Overall, innovation in FinTech is rapidly affecting the finance industry and legislators need to ensure that this disruption does not lead to a detrimental effect on most consumers.

Reference:

http://time.com/3949469/financial-technology-boom/

Within recent years, fintech revolving around mobile devices have gradually become common. Since mobile devices are now widely used, the technology behind paying with a mobile device has been incorporated within each smart phone. In the article, “What is a Mobile Wallet, Origin, and History in Financial Technology?,” by Angela Scott-Briggs, it mentions four different types of mobile payment processing models: mobile-based billing, SMS-based transactions, mobile web payments, and near-field communications (NFC). According to Scott-Briggs, the first introduction of mobile fintech was from Coca-Cola in 1997, where consumers made a transaction through text message. Today, there are multiple ways to use mobile payments.

With seeing how apps today, such as Venmo, are becoming more commonly used, I can predict the rise of mobile wallets and the increasing use in the future. With more people becoming comfortable with using technology to pay, the technology behind mobile payments will be improved. However, the question comes with how mobile payments, in particular, the google wallet and apple pay, will change the way people make transactions. It might take a while for businesses to integrate this feature, but once it is widely available, then the public will be more inclined to use it.

 

Source: http://www.techbullion.com/mobile-wallet-origin-history-financial-technology/

Let us ruminate on how critical financial information systems(FIS) are to a company and how fragile the security systems around it really are. Consider the data breach at Target few Christmases ago in 2013. Around 40 million credit card details were stolen and Target CEO Gregg Steinhafel had to end his 35 year career with the company. It cost the company $252 million in total and after insurance reimbursement, the losses fall to $162 million. For the customers, the possibility of financial losses due to identity theft is still high. Here is a flow table explaining how it occurred (from bloomberg.com):

Like professor explained last class, a good way to fortify your FIS is at the entry point itself. To avoid such hacks we can encrypt critical information before storing in the system. While the rest of the world migrated to chip cards long ago, it’s adoption in the US has been slow and bumpy. Did you know our credit card number and other details are stored in a magnetic strip card without encryption? We still continue to use it in merchant stores and gas stations exposing critical financial information to hackers everyday. On that note, I’d like to start our foray into FIS stating that the system we create is as reliable as the data we feed it and as secure as the measures we take to protect it.

 

Coming into this class, I had heard of financial fraud within organizations, but had never taken the time to read a case study.  After some browsing of the internet, I stumbled upon an article in the Journal of Accounting titled, “Lessons from an $8 million fraud.”  A series of flaws in the company “ING” allowed an individual to personally embezzle 8 million dollars over 5 years.

Nathan Mueller’s ability to log into his coworkers accounts for the sake of being able to complete the work; automatically put the information system at risk.  Combined with the overarching mistake, allowing Nathan to both request and approve checks of up to $250,000 opened the door for large scale financial fraud.

Despite claiming that he knew that he would someday be caught, he continued to embezzle more and more money in an attempt to continue living his newfound luxurious lifestyle.  When it was all said and done, Nathan was sentenced to 97 months in prison.  These facts made me ask myself two questions.  One being, if Nathan could do it all over again, would he do it differently?  The second being was the risk worth the reward?

Nigrini, Mark J., and Nathan J. Mueller. “Lessons from an $8 Million Fraud.” Journal of Accountancy. N.p., 01 Aug. 2014. Web. 15 Jan. 2017.

Website: http://www.journalofaccountancy.com/issues/2014/aug/fraud-20149862.html