Financial Information Systems

FinTech companies have made it easier for people to commit a fraud in terms of claiming insurance or asking for loans. There are several startups in America that analyze your credit history and your online profile before coming up with an estimate of your credit rating. Accordingly, they provide you with insurance or grant you loans with an appropriate rate of interest. Due to advanced FinTech this can easily be done online. This has made it simpler for hackers to commit fraud by creating false identities or using someone else’s identity to commit an insurance fraud or get a better interest rate on your loans. Some new Fintech firms have come up to tack these situations by “providing help with verifying and triangulating identities with pseudo-PIIs (Personally Identifiable Information) such a phone numbers, email addresses, device id & geolocation, online social identity and credentials.” I believe that as everything is moving online it is getting difficult to keep the financial services secure. Fintech needs to not only work towards innovation but also work towards securing their services online with as much grit.

 

http://lendfoundry.com/3-common-identity-fraud-that-plague-fintech-startups-how-to-avoid-them/

As technology is becoming more prominent and as the fintech industry is booming, bots are digitizing and performing mundane, everyday tasks in the banking industry. This new system is in its experimental phases right now, but will soon be permeating the banking industry.

The banking industry hasn’t been disruptive for a while now and something new is in the air. Although bots are being experimented with in compliance functions for banks, Alan McIntyre, a bank manager at Accenture believes that it will soon become an “indispensable technology”. These bots have possible implications in many departments including Finance and Human Resources.

Although I am all for the advancement of technology in all sectors, there is a human aspect that people fail, or refuse, to see. With the advances of such technologies and how these bots can possibly “fully run these departments”, there will be a huge worker turnover in the banking industry.

The banking industry has stayed relatively constant with its processes these past few years and to completely disregard the working class population when switching to these automated systems is saddening. I recommend a way of keeping employees and implementing these systems. I hope these banks will introduce new learning programs for its employees and invest in their future at the bank. Teach the working populations new techniques and tasks in order to stay current and be an asset in their bank instead of dismissing them when the bots can take over their jobs.

 

Source: https://www.americanbanker.com/news/beyond-robo-compliance-how-bots-will-soon-permeate-banking

When it comes to financial fraud, the Bernie Madoff’s Ponzi scheme takes the cake. Madoff began his scheme in the late 1980’s, by promising incredible returns on money invested.  However instead of investing this money like he said he was, he would deposit it into a bank account.  When clients wanted their money back, he could simply withdraw from this account and pay the investors back with the incredible returns.

Obviously this type of fraud is not sustainable and relies on getting more and more clients, so the money continues to flow in.  The second necessity for his scheme was to convince investors to stay invested rather than take out their money.  He would take a commission for his service and could have constant access to all of the money invested.  Finally when investors wanted too much money out, the whole scheme came crashing down around him since he could not pay.

When it was all said and done, he tricked investors out of nearly 65 billion dollars.  Despite claiming to be the sole perpetrator in the heinous crime that ruined many peoples lives, I don’t think it would be possible for one man to trick so many without help.

 

Link:

http://www.businessinsider.com/how-bernie-madoffs-ponzi-scheme-worked-2014-7

Yang, Stephanie. “5 Years Ago Bernie Madoff Was Sentenced to 150 Years In Prison – Here’s How His Scheme Worked.” Business Insider. Business Insider, 01 July 2014. Web. 29 Jan. 2017.

Technology is constantly evolving, creating future innovations no one could have ever imagined. That being said, security generally does not come as quickly as new inventions. This tension is of prime importance to banks, as security issues and attacks could cause a huge loss of business. Statistically, “63% of senior IT leaders in the financial services sector globally said their company had suffered an attack in the past year…14% they weren’t very confident they could return to business as usual within 48 hours if they suffered another attack” (Weatherhead).

In my opinion, banks need to consider security at the forefront of all new business. The loss of customer trust as the result of attack could be irreparable. Security cannot evolve as fast as new innovations, and while banks should be encouraged to remain inventive to remain competitive, they need professionals monitoring cyber security at all times and to be cautious and thoroughly vet new technology. Customer convenience may have to be sacrificed at times, and it might present an issue to convince stakeholders that security should be prioritized, but it ultimately should be the priority.

Source: http://www.fintechbusiness.com/blogs/610-cyber-security-should-be-a-focus-from-the-start

The latest technology of mobile wallet is slowly gaining people attention. The idea of not carrying wallet and making the payments just by the details of your card is a little scary for people.With the growing attention of Apple pay, people are becoming aware of it’s use and advantages.It is considered to be the safest way of doing payments so far. The Credit card uses the magnetic strips which contains all the information of the card holders in a simplest form written at the magnetic strip without any encryption, anyone can hack that process or the system with card details and use these information for their own benefit. Even with the chip card, all the information is stored in the chip and with the correct resources, it can be hacked. But with Apple Pay it uses the most secure form of payment method. It does not save the details of the card holder. The method comprises of two major elements First is NFC and second is finger touch. The NFC used reduce the distance of the payment to the minimal, that means the application is supposed to be at a distance of 2 to 4 cm for the payment to happen. Secondly Finger touch act like a second layer of security which provides an additional authentication process for initiating the payment. The best part of using Apple wallet is Apple as a company never treat it’s customer as a product so they don’t save or use your personnel information for anything else.

Blockchain provides a potential solution to providing authenticity amongst transactions and near instantaneous speeds. The implementation through Bitcoin has shown the world the need for technologies that give people control and trust of the transactions around them.

It’s not a surprise that blockchain technology has taken off in the world’s largest country. With a population of over 1.4B people and a growing middle class, China is forced to find ways to streamline transactions and fight against fraud. The large Chinese banks struggle to modernize due to high costs and risks of these new systems. China also faces a huge problem with financial fraud and needs a way to give trust back to the people.

Regulators in China believe that blockchain technology can be a way to jumpstart the traditional banks into a new era. Blockchain can help serve as a digital ledger to track information, loans, and contracts. All of these needs would reduce the human labor required for each transactions and allow for the entire country to audit the transactions. Citizens can hold high level government officials accountable to the finances of the country by having an audit trail that is nearly impossible to manipulate.

Source: http://fortune.com/2017/01/27/china-banking-fraud-blockchain/

Within recent years, FinTech has brought to the public a way to donate and fundraise for any cause, ranging from charities to startups. In London, five students have found a way to integrate a new system into an existing one – from integrating a “digital charity box” called “iRoundUp” into an established online payment system “ParentPay.”

By giving access to the public a way to give to good causes without barriers, such as distance, it gives more incentive for the masses to be inclined to help. It also reaches a larger audience, increasing the donating potential that these charities can reach. Since it was an existing platform, the users are already familiar with the interface. By adding in a new option, it gives the users an easy and hassle free way of donating to a good cause.

With the development of technology, this notion of online giving has been widespread across the online community. This gives a new push towards the future of money, where all transactions – from buying, selling, or donating – will be transferred online. By slowly integrating new technologies, such as “iRoundUp” to a larger platform, users can be exposed to the fast changes of technology.

http://techcitynews.com/press_release/no-electronic-loose-change-innovative-fintech-charity-payment-scheme-launched-today-across-6000-uk-schools/

 

Ford Motor Credit has partnered with SF fintech startup AutoFi to launch a new platform on the Ford dealerships website for purchasing and financing cars, accessible from anywhere and on any device. Providing digital financing options is appealing to customers since it allows them to secure a loan online without having to go to the showroom. As of now, the only in-store location is in Ohio, however the platform will soon be rolling out to all national Ford and Lincoln dealerships.

Personally, I think this is a great strategic move on Ford’s part and I believe many others in the automobile industry will follow in their footsteps. They were smart to act on the data they had collected from a survey conducted by Harris Poll that showed 83% of Americans said that they would like to spend as little time as possible at the dealership when shopping for a vehicle. Not surprisingly, the respondents also said they would like to touch and feel a car before purchasing it. Thus, this new platform caters towards both of these survey results since it speeds up and simplifies the buying process using technology, while also offering it in-stores so that customers can still have the opportunity to see the car in person before purchasing it. As customer expectations are evolving, as seen from the survey, Ford’s decision to adopt AutoFi’s technology will be a game changer for both consumers and car dealers.

Source: http://www.altfi.com/article/2602_fintech_car_finance_firm_strikes_deal_with_ford

http://www.marketwatch.com/story/ford-teams-with-startup-for-online-car-shopping-2017-01-23

While artificial intelligence (AI) has been adopted by non-financial institutions for many years, most financial institutions are just at the early stage to employ the technology due to the following reasons:
– Lack of knowledge about the technology
– Lack of clarity of business goals: how much the existing infrastructure needs to be changed to adopt new technology and whether benefits outweigh costs
– Shortage of talents to analyze big data and provide meaningful insights
– Data governance is not well established
– Data is distributed in isolation
– Concern with regulated compliance as “Bankers won’t want to answer extra questions later like, ‘Why did you use this type of solution here?’”
Though we see many hurdles preventing financial services from quickly adopting the technology, there are many increasingly important benefits AI will bring such as efficient fraud detection and cost reduction. As a result, in the near future, AI is expected to be a must-have weapon to compete in the market. Financial institutions need to put more efforts into catching up with the technology by working with regulators to ensure they are comfortable and acquiring talents. Certainly, AI will reduce human work a lot but it cannot completely replace human as hackers are oftentimes smarter than machine and we need people to detect things machine miss or fix things machine wrongly recognize.

Source:
1. https://thefinancialbrand.com/63322/artificial-intelligence-ai-banking-big-data-analytics/
2. https://www.americanbanker.com/news/how-paypal-is-taking-a-chance-on-ai-to-fight-fraud

Millennials nowadays account for more than a quarter of the total population of the U.S. and are forecasted to become the highest-earning generation by 2025. According to ETA’s Transactions Trends survey, more than half of millennials have used online payment services such as Venmo or PayPal to transfer and receive funds. However, cashless and online banking expose millennials to some hidden risks. Certain risks include bank overdraft fees, and digital theft that relates to fingerprint ID or Apple Pay.

Several new fintech companies and innovative banks are designing services to keep millennials’ finances more secure in the new digital landscape. Robo-advisors, such as Mint send notifications to help users keep track of their spending. Budgeting tools like Fudget and Goodbudget allow users to keep track of exactly how much they are spending on hidden fees like subscriptions. Innovative banks such as N26, Tandem and atom are offering a wider range of loans, accounts and overdraft policies to suit users’ spending habits. Some payment gateways like Stripe, Braintree and Google Pay are also available, which provide millennials with safe and convenience ways to the online payment process.

Source: http://www.ibtimes.com/millennials-money-how-fintech-will-help-lower-risks-cashless-society-opinion-2479617?utm_medium=email&utm_source=fintechweeklycom