Financial Information Systems

At the Technology Tools for Today (T3) conference this past week, integration of AI and VR into tech was seen all around and fintech was no exception to integration of this new technology. Fidelity has integrated AI of Alexa from Amazon into their eMoney platform, allowing real time AI answers to financial questions. This was amongst many other AI and VR integrations that fintech is looking to roll out to the general market as soon as possible. I think it is beneficial for fintech to continually remain on the cutting edge of today’s technology, so that they remain up to date with the technologies of the day that are popular and do not get run up by competition that comes in and does a better job of tech integration before they can.
Still, I think the industry should be weary of integrating every little new technology that pops up just to be relevant, because it could mean that a new addition ends up being more novelty than useful and will not provide long-term value as a feature for fintech companies. For example, I can easily see a VR feature of money management being very visual and appealing, but it may not actually add enough functionality to a fintech platform to make it viable to actually add, so companies should keep in mind they are adding novel features that will provide value to their consumers.

Link to article: http://www.investmentnews.com/article/20170217/BLOG09/170219905/financial-technology-companies-embrace-artificial-intelligence-and

While most articles in the class blog deal with Fintech as a disruptive industry for traditional financial institutions, the fintech festivals are common grounds of co-opetition for banks and fin-tech companies.Tech companies also help traditional banks to gear up to take on the new era of competition and integrate latest technology for their efficient running.

Let us discuss the merits and de-merits of few such examples that Microsoft CEO Satya Nadella cited at one such Fintech festival.

1. ‘MetLife is using Microsoft Azure to run complex actuarial simulation models, delivering  insights to decision makers around the globe’

Advantages:

• Complex risk assessment is aggregated in the cloud to complete in much lesser time.
• Faster business decision making process resulting in improved customer experience.
• 45-55 percent savings on infrastructure costs .

Disadvantages:

• Security of customer information is the most major concern when an on-premise data store is moved to a third party cloud computation engine.
• Once computation is moved to a particular cloud offering, the process develops platform dependencies that is hard to integrate with other systems or change in future.
• If there is a contract fallout, customer data can go into vendor lock where the parent company loses flexibility and control over data. This is why banks are reluctant to adopt cloud technology.

---

2. ‘Emirates National Bank of Dubai is reinventing its customer relationship management with Azure Machine Learning and Microsoft Dynamics 365’

Advantages:

• Data mining and prediction helps identify how to spend time with customers, and targeted next-best actions and offers.
• 15-point conversion rate of customers to new services.

Disadvantages:

• Again there is a conflict over online vs on-premise solutions against Microsoft’s cloud-based bundle.Hence your data, algorithms, experiments and results would reside in the cloud. Depending on your data sensitivity, that may be a deal breaker.
• The Microsoft CRM and ERP solutions are in their infancy and there are lots of kinks to iron out.There are better solutions out there for a lesser price point.

---

3. ‘Bank of America Merrill Lynch is working with Microsoft Treasury to use Azure Blockchain as a Service to transform and automate the processes for standby letters of credit’

Advantages:

• Reduces process time from 5-7 days to 5-7 minutes
• Reduces error rate down to zero percent.
• Significantly reduces the cost of process.

Disadvantages:

• Being a new technology there are challenges such as transaction speed, the verification process, and data limits.
• Control, security, and privacy are still cyber security concerns that need to be addressed before entrusting personal data to a blockchain solution.
• High initial capital costs : Blockchain proof of work implementation offer solutions that require significant changes or replacement of existing systems. In order to make the switch, companies must strategize the transition.
  

  ---

  Thus we see the 2 sides of the coin while implementing fin-tech in traditional financial institutions. Financial institutions weigh all the pros and cons before trusting new ideas and technology. Fact that fin-tech is still percolating and accepted into such organisations is proof that widespread acceptance of fin-tech is starting.

REFERENCE:

Microsoft’s Xiaoice chatbot may be coming to English at Tay.ai

 

 

Big changes are in the wind. Oracle is committed to the Cloud solution for all their applications, the acquisition of NetSuite further demonstrates that the cloud is the destination.

Most of the finance teams spend up to 85 percent of their time on collecting and validating data, developing reports, and maintaining and updating spreadsheets, which leaves little time to develop real insight. Oracle ERP Cloud helps modernize and automate finance operations, and you can:

• Confidently expand into new markets with full multi-GAAP, multi-currency, multi-entity support
• Deliver multidimensional reporting from a single source of truth with shared reference data
• Eliminate the complexity of intercompany tax and payment transactions with a centralized architecture
• Comply with local regulations and reporting requirements using built-in, country specific localizations Many Oracle ERP Cloud

Based on my personal experience, SAP is detail oriented while Oracle ERP cloud is much more simplified and visualized. Oracle ERP Cloud provides real-time graphical indicators on dashboards and work areas to help draw users to items that require immediate action. Users can glance at the infotilets in Oracle ERP Cloud for a quick status summary, and then drill down for details about these metrics.

 

Source:

http://www.oracle.com/us/products/applications/enterprise-resource-planning/five-reasons-new-look-erp-cloud-3094646.pdf

If Fintech companies want to produce software for financial industry, they need to produce something that is easily customizable by the technical layman. Because nowadays, most of the Fintech products target at end clients or bigger dealer groups and institutions. For both end clients and groups dealers, they have different needs, which require Fintech software to provide customizations so that financial advisors do not have to spend money on customizations themselves.
According to the article, the trick to providing customized Fintech software is to release products that are targeted towards specific needs and in specific best-practice ways for financial advisors, but still give them the control in how they present themselves to their customers. Therefore, financial advisors can provide the best service to their customers with the help of Fintech software.
I think it is a very reasonable way to design Fintech software for financial institutions, but I feel it might not be as practical as it sounds. Because the economy world keeps changing and it is very likely that after you design a Fintech software with specific needs and launch it for a while, the trend of financial needs changes. When it happens, it would be very costly to financial institutions to change with correspondingly.
http://www.fintechbusiness.com/industry/643-ifas-being-left-behind-by-fintech-companies

One of the main reasons for the 2008 financial crisis was due to banks giving a number of sub-prime loans. Sub-prime lending means giving loans to people who have difficulty in repaying and have a high probability of financial setback. In the current banking system, the banks are not risking their money. The risk is on the depositor and depositors have no information about the risky loans given by their respective banks. A solution to this problem is p2p lending.

P2P lending is a great way of mitigating these risky loans because it is completely up to the individual on how much to lend and assess the risk factor. The problem arises when there is a non-payment. By insuring the lender’s money, people have a new way of investing as well as borrowing money rather than relying on traditional banks.

P2P lending is a space where I feel fin-tech has the potential for huge growth. P2P is a great way of borrowing small loans as well as an additional source of income for lenders Currently, there are a few popular p2p lending services such as Lending club, Prosper, and upstart. In the coming years, I expect a number of p2p lending services with the possibility of having p2p lending apps which make p2p lending as seamless as a p2p transfer. The primary success factors are going to be ease of borrowing money, the interest rate for borrowers/lenders and the risk factor involved.

References :

http://www.forbes.com/sites/oliviergarret/2017/01/29/the-4-best-p2p-lending-platforms-for-investors-in-2017-detailed-analysis/#6c2cccd73856

Documentary called Inside Job —https://www.youtube.com/watch?v=bYm_oEO5iyE

Square’s stock jumped 4.2% in the markets on Friday after Citigroup called Square a “‘disrupter’ that can convert ‘micro’ and small merchants to its payment technology.” This is a huge jump since the stock only increased by 4% last year. The article discusses how Citigroup views Square and how Citigroup has encouraged investors to invest in the company due to its market leader status. For those that do not know, San Francisco-based Square makes credit card readers that plug into mobile phones and tablets. Usually known for sticking to the small business market, it is starting to attract big business clients and has expanded into providing financing and banking loans to small businesses. Analysts estimate that Square’s Q4 revenue to increase by 20%, but I believe this may be a bit of a conservative estimate. I believe that Square will probably be around the 25% increase range as the usage of these mobile card reader products has quickly grown into many businesses around the country and the world.
Article link: http://www.investors.com/news/technology/citigroup-initiates-square-at-buy-ahead-of-earnings/

Austria’s largest regional energy company, Wien Energie, announced to join the industry partners and counterparts to participate in a “blockchain energy trading” pilot. The company will use Interbit platform, a multi-chain remittance distributed-ledger technology based platform provided by Canadian blockchain firm BTL. The new technology could improve both cost and time efficiency in the process of energy trading, by enabling faster and significantly cheaper transfers of funds and assets. With the use of blockchain technology, Wien Energie is expecting a significant cut in energy trading costs. The company’s executive, Peter Gönitzer, also expected that the new technology “could bring rise to entirely new business models”.

Though, the viability of commercial use and strategies of blockchain-based energy trading need further trail and experimental discuss, Wien Energie is confident with the future of blockchain-based energy trading, as one of its peer, Electron (UK),  already demonstrated “significantly faster energy transfers (20x) with notably lowered costs by simulating data from 53 million metering points from 60 energy providers” using its self-developed blockchain platform. Blockchain technology in energy industry will not only bring more opportunities for energy trading, also take us to a far-reaching new age for non-financial related industries. Energy companies should see and take advantage of this opportunity as quickly as possible, hence, to create entry barriers for other competitors in the industry.

Source: https://www.cryptocoinsnews.com/austrias-biggest-utility-company-to-test-blockchain-energy-trading/

The United States has been falling behind the rest of the world, especially Asia in the area of mobile payment technology. The main reason that I believe that the United States is so behind is because every company and retailer wishes to make their own mobile payment application. While some retailers have succeeded better than others, the main issue I see is that because everyone wants their own application, it reduces the effectiveness of mobile payment applications as a whole. By having their own individual application, each retailer will always want to support their own application, however because of this, other generalized applications like Apple Pay and Android Pay are supported less and the growth of the mobile payment application is stunted. Like the saying go, “divided we fall, united we stand”. For example, in China, WeChat has a digital wallet service where uses can pay for goods and services and also sent money to other people on their contacts list. In the United States this would be a total of three or more applications instead of just one.

 

Reference: https://techcrunch.com/2017/01/24/target-will-launch-its-own-mobile-payments-system-this-year/

Recently, Alex Rampell, a general partner in the VC firm, Andreessen Horowitz spoke at Goldman Sachs’s Technology and Internet Conference. He said that in the long term, Amazon could be an industry leader in the payment and services sector. This is because Amazon already has preexisting loyalty and customer data from their Amazon Prime services. With the introduction of music and e-books into its Amazon Prime lineup, Amazon could potentially do the same with banking and payment services. Amazon could achieve this by offering low-debt payments or a no-frills bank (no minimum balance necessary) account to their customers.

Personally, while Amazon could potentially follow the footsteps of Apple (Apple Pay) and Google (Google Wallet) in which a major corporation shakes up the financial industry, I do not believe it would be wise for Amazon to offer low-debt payments or a no-frills account to their customers. What makes Amazon unique is not only  because of its online shopping services, as well as its other Prime offerings, what makes Amazon unique is their R&D in future technologies. With the introduction of Amazon Alexa, the use of voice recognition and Artificial Intelligence to act as a customer’s daily assistant is an idea that can be expanded into Fintech. Recently at CES, Amazon has partnered with many companies to use Alexa as a voice assistant in home security systems, cars, fridges, and much more. As a growing industry leader in digital assistants, coupled with their data on customer’s spending habits, they could potentially create a Fintech solution that helps customers with their spending, and provide even lower offerings to them.

Sources:
http://www.readitquik.com/news/fintech/amazon-to-be-a-fintech-leader/
http://fortune.com/2017/02/14/andreessen-horowitz-fintech-alex-rampell-amazon/

OpenFin is a startup company that helps electronic-trading firms build their desktop applications with an emphasis on integrating and connecting everything. The startup has raised $15 million with renowned backers such as JPMorgan, DRW, as well as Euclid Opportunities. OpenFin has 25 employees in New York and London and they plan to expand to 50 employees by the end of this year. Openfin strives to be like iOS and Andriod in the mobile application industry but in the financial application world. OpenFin’s software helps financial companies create and upgrade trading applications using HTML5. HTML5 is popular on Wall Street because it allows software to run on various types of devices. OpenFin focuses on easily downloaded and updated apps, security, and interoperability.

I think OpenFin has a lot of potential to grow and succeed. OpenFin is capitalizing on software and information system solutions for financial companies which is a very profitable industry since all financial institutions would eventually need or want better, faster, and more information. Financial market changes extremely fast, with stocks, currency, etc. changing within seconds. It is crucial for financial companies to have information and data quickly to provide adequate information for traders and investors.

Source:

https://www.nytimes.com/reuters/2017/02/16/business/16reuters-openfin-investment.html?_r=0

http://www.businessinsider.com/a-bunch-of-wall-street-trading-startups-have-one-connection-on-common-2016-12