Financial Information Systems

Honda introduced the first demonstration of in-vehicle payment for parking and fuel. The payment process is partnered with Visa checkout. The companies are working with Gilbarco Veeder-Root(a fuel pump manufacturer) and IPS Group ( a parking products provider) to install beacons that will communicate with Honda via Bluetooth to complete payment through Visa Checkout.

In my option, it is not an innovative way for payment. First, it has limitation of the place of use. In-car payment is only limited to car-related places, such as gas station and parking lot, and it may be extended to drive-through restaurants. It has narrow customers relatives to other mobile payments. Furthermore, with the current mobile payment, people have already used mobile payment for parking or drive-through. Customers already are used to this methods of payment. It is very hard to switch to another method of payment. This idea will not give Honda too much advantage over other manufactures. The idea of moving from mobile to car payment is not really innovative.

Reference: https://www.mobilepaymentstoday.com/blogs/are-in-car-payments-innovative/

With the Fintech industry grossing over $8 Billion globally. It is interesting to note that venture capital has had more impact in Asia than in the US in the recent years and the reason is policy. The US has many innovative fintech startups that are very interesting to potential investors, however, the political hoops created, seem a little too much for the investors to get behind and so they have been investing in Asia more so than America or Europe.

America’s legal system can be a pain to many foreigners. It not just about what rules, but whose rules. There are federal and state laws and understanding what each state entails can be a daunting task. And another issue is that the government does not make a substantial effort to better communicate and integrate with the innovative fields.

The government has tried to address this with the Financial Service Innovation Act of 2016. However, the traditional financial institutions are notorious for their influence over government policies in the financial sector and this is not a good outlook for Fintech.

The frustrating issue is that people in high positions tend to look out for their best interest and do not see the bigger picture of advancing and moving forward and many times that means change and leaving “traditional” ways of doing things behind. I’m looking forward to the bright future of Fintech, but it seems, others are looking to line their pockets.

 

Source: https://techcrunch.com/2017/02/16/us-regulatory-environment-threatens-the-rise-of-fintech/

China’s Fintech market booms as mobile payments in China rise. In 2015, WeChat Pay announced that it was accepting bitcoin for its concierge services. At the beginning of the year, Starbucks revealed that it would also start accepting WeChat Pay at its China stores.

As a person who come from China, I can see how China dominates the mobile payment market. The credit card use in China is smaller comparing that in the U.S. because China’s credit card security system is not as well-developed as the U.S. Most people complete mobile payments through third party such as Alipay and Wechat Pay – the two companies that operated by Ant Financial and dominated the market. Recent research found that Alipay received the biggest investment in 2016 at $4.5 billion as FinTech funding increased in China. Research from iResearch in China has found that Chinese third-party mobile payments more than tripled in 2016 to $5.5 trillion.

There are good opportunities for Fintech companies targeting at China’s mobile payment markets, providing the best technology and collaborating with the Chinese firms. However, the policy in China tends to protect and benefit local Fintech firms and will be very hard for the U.S. companies to compete with the local firms.

 

https://www.cryptocoinsnews.com/research-china-fintech-booms-mobile-payments-outpace-us-50x/

PayPal has agreed to acquire the Toronto-based bill payment firm TIO Networks, a major player in the North American bill pay market, for $233 million. Currently, the bill pay market has $3.9 trillion transactions each year, according to data from ACI Worldwide. TIO will help PayPal grow its market share in the bill pay market.

TIO can also help PayPal gain access to a new segment of customers who do not have affordable access to traditional financial services. These “underserved” customers are living paycheck-to-paycheck and many do not have bank accounts. The acquisition will allow PayPal access to customers who currently pay their bills at unmanned kiosks, and allow customers to pay bills in a simpler, faster, and more affordable manner. Although no specifics on integration plans have been provided, PayPal has been working on bringing cash transactions to PayPal digital accounts (PayPal Cash), which makes it more convent to covert cash into digital payments.

While I think that it is a great idea to help the “underserved” community and make bill pay more convenient and affordable, I am reluctant to believe that this community has the financial and technological resources to use this future product.

Reference: https://techcrunch.com/2017/02/14/paypal-buys-tio-networks-for-233-million/

Reference: http://www.businessinsider.com/paypal-acquires-tio-in-bill-pay-push-2017-2

Workday Enterprise Strategy VP Mark Nittler explains the limitations of current financial technology.  The fintech that was originally made to automate transactions and financial accounting is now preventing finance departments from realizing its ultimate goal, to be a better business partner.  He views today’s financial function as having three areas of responsibility: Transaction processing and accounting, business partnership, and compliance and control. Finance leaders face frustration as their teams have little time to nurture the partnerships their companies truly need since they focus on the other areas.

In this data-driven age, finance is being asked to provide the broader company with contextual information that can actively influence decision-making and the current technology is not able to do this, so it’s seemingly hopeless.  That is, unless you throw money at Workday, and Nittler would really like to let you know that it enables business agility by combining planning, transaction processing, governance, accounting, reporting, and analytics into a single, easy-to-manage system. Promotional rhetoric aside, I do see the value in this new approach into the digital transformation of fintech is advantageous.  Companies that can quickly bring together actionable information about their money and people in a system that can evolve as their business changes are sure to have a competitive advantage.

http://www.forbes.com/sites/workday/2017/02/13/back-to-the-future-building-financial-transformations-missing-link/#6873ee602974

Recent data form KPMG has shown that the total amount invested and number of deals in America fintech companies has dropped significantly whereas in Asia there is continual growth in fintech investments.  The third quarter of 2016 was the second time this year where North America fintech companies attracted less venture capital funding than Asian firms.  A big reason for the the American fintech hubs ranking very low in terms of “policy” is because they are subject to regulation at the state level.  Investors are worried about the persistent confusion regarding the regulations and the uncertainty that is evolving with them.   Some of the speculation is around the question of whether the Fintech firms should be regulated as financial companies or IT service platforms. With the new administration in office, there is a lot of speculation about the administration’s economic plans, which is likely to slow investment in the sector. I believe the lack of clarity with regard to Fintech regulation among both the State and Federal Government will have some negative effects on the growth of Fintech.  With that being said, I think the importance of Fintech will continue to make it a growing market in the U.S.

 

US regulatory environment threatens the rise of fintech

I thought this was an interesting article as it talks about how bank tellers may become obsolete and replaced by technology. The amount of bank branches is decreasing in the US from 99,540 in 2009 to 91,861 in the third quarter of 2016. Bank of America has opened three small banks that do not have any employees, but instead they have ATMs and video conferencing to help customers with their banking problems. People can now use video conferencing solutions in order to determine how they should go about particular banking issues like a loan, mortgage, or even planning for retirement. Not just bank branches, but the entire financial sector are being strongly affected by the technology movement.

I would not be surprised to see extreme layoffs in bank branches in the next 5-10 years as I think technology can accomplish much of what they do. Why have those people sit around all day waiting for customers when you could rather have them advising people from all over the country. I think the banking industry will be disrupted by technology and the fintech that comes with it. Bigger banks must accept that my generation does not like cash, prefers online banking, and needs to have services on demand.

 

 

 

https://www.washingtonpost.com/business/economy/bank-tellers-are-the-next-blacksmiths/2017/02/08/fdf78618-ee1c-11e6-9662-6eedf1627882_story.html?utm_medium=email&utm_source=fintechweeklycom&utm_term=.b9570445edfa

 

Enron started as a pipeline business in 1985.  However over time, Enron decided to move into electricity and natural gas in the beginning of the 1990’s.  The issue with moving into a new sector of business is that debt can accumulate very fast.

Forbes even named Enron, “America’s Most Innovative Company” for 6 straight years prior to its sudden collapse in 2001.  Enron’s collapse was a result of manipulating the balance sheet in an attempt to keep the stock price rising.  Enron kept large portions of their debt off of the balance sheet to keep the stock price rising by keeping investors optimistic.  Furthermore, Enron inflated their earnings by hundreds of millions of dollars.

However; this financial fraud caused Enron’s stock price to plummet from 84 dollars in the beginning of 2001 into 0 by the end of the year. In total 74 billion dollars were lost, including many people’s retirement accounts.  At the time of Enron’s bankruptcy they were 38 billion dollars in debt.  If it weren’t for internal whistle blower Sherron Watkins, this stock could have maintained its fraudulent activity and been an even bigger disaster.  Both the CEO and former CEO were sentences to 26 years in prison.  How do you believe such a big company can not only get away with this scale of fraud but also be named “America’s Most Innovative Company” without proper do-diligence by Forbes?

 

DiLallo, Matthew. “Enron Scandal: A Devastating Reminder of the Dangers of Debt.” The Motley Fool. The Motley Fool, 21 June 2015. Web. 17 Feb. 2017.

Website: https://www.fool.com/investing/general/2015/06/21/enron-scandal-a-devastating-reminder-of-the-danger.aspx

 

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/