Financial Information Systems

This article gave information on when to implement different information systems because of various benefits from planning, report generating, and analysis capabilities. It discussed most systems are built without enough consideration for the individual company’s business process. The article’s suggestion was for end users to be directly involved in the design process with frequent meetings and tests. It eliminates the issue of systems architects getting distracted by the technical elegance of a system at the cost of user-friendliness or functionality. However, this approach slows down normal business by disrupting employees.
I agree with the article that managers need to ensure systems are built with the business benefits as the main goal, but I don’t think that end users need to be actively involved with each step. When a new IS is being designed, managers can call meetings between their employees and their architects to discuss how the IS will need to operate daily. Then the managers can discuss underlying policies and processes that need to be built into different views and transactions. That way the architects have enough information to start working and regular employees are not taken away from their usual jobs any more than is necessary.

https://hbr.org/1976/11/how-effective-managers-use-information-systems

FIS is the most complex and difficult to manage information system used by companies to resolve financial issues faced by the corporate firms.

With the evolution of business trends in the market, FIS is very important for keeping a tab on the financial accounting and daily transactions being maintained. It is also responsible for audits, implementing processes and also to help external elements to evaluate a particular firm.

FIS mostly consists of:

1. Transactions
2. Accounting/Financial Books
3. Reporting/Visualization

With the advancement of technology, i feel there is a strong need for FIS to adapt to the world of Big Data, Cloud, IoT and Artificial Intelligence.

It would be interesting to see if companies adopt the cloud computing approach for storing/computing its valuable financial data or use big data technologies to make better predictions for their regular business.

 

Reference: https://www.techarex.net/blog/accounting-solution/future-challenges-for-accounting-information-systems/

The history of applying Artificial intelligence(AI) to banks goes back to the 50s. The benefits of AI in banking includes enhanced customer personalization, productivity gains, fraud detection, and better customer recommendations. One very exciting example of applying AI to banks is from a start-up company named Finie (for financial genie). They created a voice-powered AI platform to interact with a banking account using natural language queries. Finie can be asked, “How much did I spend on groceries”, instead of providing list of transactions.
Nowadays, AI is increasingly important for financial service firms to be competitive. In the near future, more financial service firms will adopt AI to deliver better experiences, lower costs, reduce risks and increase revenues.

During the most recent World Economic Forum Annual Meeting at Davos, Switzerland, Kaifu Li (an American venture capitalist, technology executive and computer scientist) commented that as the Chinese markets continue to accumulate more data, there will be more opportunities for AI technology, especially when it comes to credit card fraud detection, more and more Chinese banks will adopt AI. Embracing AI to banks is a win-win situation for both banks and tech companies.

 

https://thefinancialbrand.com/63322/artificial-intelligence-ai-banking-big-data/?utm_medium=email&utm_source=fintechweeklycom

Digit is a financial technology startup that uses algorithms to track its users’ income and spending patterns, and helps them save by setting aside small amounts of money. The algorithm analyzes a user’s average, high, and low checking account balance, when he/she is paid, and the pay cycle’s periodicity. After searching for bills due within the next two weeks and analyzing recent spending, it transfers an amount that the customer finds immaterial to a savings account that can be accessed anytime.

Digit is working to develop “the first artificial intelligence-powered financial goal program”, which would optimize saving and help users reach their goals faster. Digit is also working on an algorithm to “move every dollar where it should go, at the right time, to minimize fees [on student loans, credit card accounts, etc.] and maximize gain”.

I think Digit would be popular among those who are bad with saving, but not for those who are good with their finances and would like more control. Digit earns profit from the interest rate received on account assets, so users are not receiving anything above their savings. As a potential user, I would rather find another service that offers a return.

Reference: https://www.bloomberg.com/news/articles/2017-01-10/a-siri-for-your-finances-digit-says-trust-me

The efficiency and security benefits that fintech companies have brought to developed nations have largely bypassed developing nations.  However, fintech players are starting to disrupt the existing financial order in these markets as an increasing number of people own mobile phones.  Since there is less of a digital footprint, the sophisticated algorithms that some fintech companies use to generate personalized offers or risk scores in developed countries aren’t useful.  Thus, in order to succeed in this environment, companies such as SERV’D in India build apps that encourage users to expand their use of technology.  SERV’D helps households and its workers, such as nannies, drivers, and cooks, create simple work contracts and get paid online.  The data that is generated captures the wage and payment info of over 400 million workers who would otherwise have no way of demonstrating their income for loans and other benefits.

Another struggle consumers in developing countries face is the lack of a steady paycheck; many only have temporary jobs, which can be selling produce one month and picking tea the next.  They also have unpredictable expenses which means the standard, rigid insurance premiums in developed countries are not a viable option.  To combat this, companies such as Uber’s Xchange allows drivers to participate in very short-term leasing programs that are a few months long and have a low down payment.  In this sense, Xchange tries to meet consumers’ flexible earnings with flexible financing.  By adapting to developing countries’ infrastructure and integrating financial technology in a way that plays to the lives of the people, these companies can play a crucial role in bringing these countries into the digital space.

 

https://hbr.org/2017/01/fintech-companies-could-give-billions-of-people-more-banking-options

Trading.co.uk is a London-based fintech firm that is launching an app that will monitor comments that Donald Trump makes on his social media accounts. The fintech company uses artificial intelligence to sort through the tweets and messages, alerting traders with the latest information.

This fintech app can be a very useful tool for traders because the United States and our president are very influential in the global market. This is especially true for day traders because they are trading millions of dollars every few seconds or minutes. So even the slightest decline or increase in stock prices and currencies can affect a day traders’ gain or loss. According to the article, a single comment from Trump caused a decline in the value of several billion dollars in pharmaceutical stocks several weeks ago. I think that fintech has revolutionized traditional ways of trading with AI and other forms high tech programs. The app benefits traders around the world as they see information in real time. Also, I think the app has a lot of potential for other applications in tracking and analyzing other powerful figures and companies.

 

Source:

http://www.nytimes.com/reuters/2017/01/19/business/19reuters-global-stocks-trumpometer.html

In China, it is not until late 1970 that people started to use computers. Nowadays,  the continuing development of digital technologies are widely used into many aspects of management.

In accounting, these technologies started from single entry accounting to comprehensive financial accounting, to integrated financial reporting. Accounting information system (AIS) improved decision-making and reduced organizational boundaries. Finance, business, and management functions supported by the Chinese AIS have become fully integrated.

AIS has been moved to complete automation of original vouchers, accounting vouchers, accounting records and statements, and financial reports. Now that enterprise resource planning (ERP) is widely used, processing information from accounting records to statements is fully automated.

Organizations provide financial and accounting information through different channels for users to satisfy specific needs. Appropriate care is needed to ensure that accurate information is delivered while avoiding over disclosure, which might produce unnecessary security risks.

The development of information technologies in China and the broad application of AIS will bring business and accounting closer.  finance and accounting functions will become more closer to data processing department. The demand for book-keeping will be decrased since the implementation of AIS.

Source: http://economia.icaew.com/en/opinion/january-2017/how-it-developments-are-changing-accountancy-in-china

Fraud analytics is an emerging tool as it relates to detecting anomalies and patterns within voluminous amounts of big data. Fraud prevention measures can  be used to look beyond the individual data points in an organization, to the connections that link them. Often these connections go unnoticed until it is too late. The sole objective of fraud analysis is to develop the most precise and valid inferences.The rationale being used here is that unexpected patterns can be symptoms of possible frauds.

Ratio analysis: It involves the calculation of ratios for key numeric fields. Like financial ratios that give indications of the relative health of a company, data analysis ratios point to possible symptoms of fraud. Three commonly employed ratios are: maximum/minimum, Maximum/Second highest and current year to the previous year. Unexplained deviations could be symptoms of fraud

Network analysis:Mapping relationships helps identify potential vulnerabilities within network between entities to identify association networks. As organizations grows, more complex relations get developed within and outside the establishments, which needs to be monitored, for any untoward development of ambiguity other than normal. It could reveal normal and anomalous patterns of interaction within and between people or groups, can expose facilitators of fraud.

 

 

 

The finance market has been disrupted by technology, making way for fintech firms. With automation becoming widespread,  finance and technology are consolidating. This digital disruption will allow banks to boost margins through labor-saving automation. Accenture and McLagan predicts eight of world’s 10 largest investment banks will use blockchain to cut their costs by 30%. However, this threatens the job market and the traditional structure of finance firms. It is predicted that hundred of thousands of jobs will be lost, and jobs will significantly change in duties. Citibank predicted that as many as 1.7 million jobs will be lost as banks become digitized.

These is a ethical dilemma in automating jobs. Automation allow banks to lower margins and make customers better off by allowing banks to provide better financial services. With automation, banks will be able to make instant lending decisions, pre-score customers, and make more accurate predictions on default rates. However, the biggest tradeoff is the loss of jobs through automation. Millions could be out of a job and lack the skill set to keep up with technology. Although mass layoffs can be seen as unethical, banks must cut costs and master technology if they want to survive.

Source: How Finance is Being Taken Over by Tech