fintech
description: technologies used in finance and the industry which produces these technologies
134 results
The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance
by Eswar S. Prasad · 27 Sep 2021 · 661pp · 185,701 words
address the potential benefits and risks of financial innovations, will have a pronounced impact on the risk / benefit balance. Taking Stock of Looming Changes Recent Fintech innovations—including those underpinning cryptocurrencies such as Bitcoin—herald broader access to the financial system, quicker and more easily verifiable settlement of transactions and payments
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the ground to foreign payment providers, with the potential risk shifting beyond national borders and therefore beyond domestic regulatory jurisdictions. Notwithstanding the potential benefits of Fintech-led improvements in payments and other areas, though, there are many unanswered questions about how the new technologies could affect the structure of financial
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particularly challenging as digital versions of such prominent currencies could erode demand for money, either physical or digital, issued by their national central banks. But Fintech also offers these countries some important opportunities. Developing Economies Could Leapfrog The major advanced economies—the United States, Japan, the United Kingdom, and the
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with far wealthier populations, such as the United States, lagging on ease, efficiency, and cost. Several factors make EMEs and developing economies fertile ground for Fintech innovations. First, as these economies become richer, there is enormous latent demand for higher-quality financial services (for example, wealth management, retirement planning) and
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technologies that are powering financial innovations—especially mobile phone–based technologies—are widely available and do not need massive infrastructure investments. The potential benefits of Fintech innovations are also greater in developing and emerging market countries. In many of them, large portions of the population lack access to the formal
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and stock markets, which transformed the process of financial intermediation, fall into this category. The depth of many innovations that characterize the latest wave of Fintech, along with concerns among regulators about the risks of such untested innovations, merits close attention. Not all innovations discussed in this chapter can be
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considered foundational, but collectively, they herald deep changes. The timing of this wave of Fintech might be the result of a fortuitous confluence of factors—a wave of technological advancements, including in mobile and internet-related technologies; laxer financial regulation
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, with even the viability of some current institutions coming into question. Traditional commercial banks, in particular, could face challenges to their business models as Fintech shifts the balance of power between them and newer forms of intermediation by nonbank and even nonfinancial institutions. The looming changes to finance are important
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In each of these areas, new technologies are improving extant business models and sometimes also creating new financial products or ways of doing business. Fintech Intermediation Fintech has helped create alternatives to banks as sources of loans. While many success stories point to how banks could be shunted aside in the process
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of household debt (which includes mortgages, auto loans, and student loans). It is tempting to argue that, by originating more unsecured personal loans, the Fintech sector is hurting household balance sheets and increasing financial risk. For instance, LendingClub has created a special platform, SelectPlus, that allows investors to identify and
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data fed into the programs. Online applications for credit, with automated risk assessments based on machine learning and big data, can in principle help Fintech lenders abjure explicit discrimination resulting from human prejudices. But algorithms that are based on historical data could in practice end up perpetuating longstanding biases in
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an insular part of the financial system, Insurtech has increased competition and at least forced incumbent firms in the industry to up their game. Payment Fintech Payment systems provide essential support for domestic and international commerce. While it seems like a basic and straightforward function, clearing and settlement of payments
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a particular payment? Applying regulations to such matters and reconciling them across countries can be challenging. Thus, compared with its effects on domestic payments, Fintech has even greater potential to resolve such complications and change the landscape of international payments. Ripple Could Cause Waves Ripple is a digital payment-processing
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market-driven approach rather than through government edicts. Developing economies, especially middle-income countries with rapidly expanding middle classes, have taken the lead on some Fintech innovations for a number of reasons. First, by adopting new technologies rather than having to incrementally build on prevailing ones, they can leapfrog advanced
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positive note, some of this growth comes from parts of the economy—poorer households, small businesses—that have been underserved by existing institutions. Thus, Fintech is expanding the market for financial services rather than just snatching market share from banks and other traditional players. In emerging market and developing economies
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with any information demands from the government, it is quite conceivable that these platforms could one day become part of a broader surveillance mechanism. * * * Fintech is here to stay. New financial technologies promise enormous potential benefits but also seem vulnerable to unknown risks. The key challenge is to facilitate innovation
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stability matters for domestic financial stability. So let us zoom out from the national to the global level, turning our attention next to how Fintech innovations and CBDCs could reshape the international monetary system. PART IV Ramifications CHAPTER 8 Consequences for the International Monetary System No one can be certain
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shadow banks and informal financial institutions already have a sizable presence. Even in advanced economies, capital markets are becoming more prominent relative to banks, with Fintech developments giving direct finance (that does not involve intermediaries such as banks) a further boost. With significant changes in financial market architectures and institutions
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confidence in the entire banking system, causing depositors to demand that their funds be returned and precipitating failures of even perfectly sound banks. Apprehension about Fintech’s impact on systemic financial stability stems mainly from innovations that could displace existing financial institutions, lead to concentration of payment systems, and accentuate technological
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many of their loans are denominated in foreign currencies. Blind Spots Financial regulators have experience regulating banks and identifying risks on their balance sheets. With Fintech firms and even regular commercial enterprises playing a larger role in various aspects of financial intermediation, regulators’ blind spots in these areas could affect
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One is the lack of clarity about the domiciles of informal financial institutions and the geographic boundaries of the supervisory authority of national regulators. Even Fintech firms are on paper headquartered in a particular country, but they could easily relocate their headquarters to countries with lax regulation and enforcement (a majority
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could fund the development of those innovations, to strangle nascent ideas in the cradle because they are unsure whether financial regulators will approve their concepts. Fintech regulatory sandboxes provide a way to strike a reasonable balance. They create a controlled environment for experimentation with new financial technologies, products, and services—
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consequences of engaging in the activity in question.” The Monetary Authority of Singapore (MAS) states that its regulatory sandbox enables financial institutions and Fintech firms “to experiment with FinTech solutions in the production environment but within a well-defined space and duration … [with] appropriate safeguards to contain the consequences of failure
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, Kentucky, Nevada, Utah, Vermont, West Virginia, and Wyoming. Meanwhile, in July 2018 the US Treasury Department did formally lay out its blueprint for regulating Fintech. The statement explicitly endorsed regulatory sandboxes, with Secretary of the Treasury Steven Mnuchin adding that “creating a regulatory environment that supports responsible innovation is crucial
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firms” rather than to allow innovators to skirt or petition for exemptions from existing regulations. Do Sandboxes Work? Regulatory sandboxes have the potential to benefit Fintech innovators, regulators, customers, and investors alike. Firms are able to work with regulators while testing their products in a live market. Regulators can take
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and Innovation scheme), which provide other avenues for developing and introducing innovative financial products. As of May 2021, Singapore boasted more than one thousand Fintech firms, with the MAS having engaged directly with many of these firms to clarify regulatory requirements and allowing them to bypass sandbox applications. An alternative
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regulations. A sandbox is therefore not suitable for [a] proposed product, service or solution that is already appropriately addressed under prevailing laws and regulations.” Fintech regulatory sandboxes are, in general, proving to be a constructive solution to the problem of balancing innovation and risk. They also represent an opportunity for
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countries to learn from each other’s experiences, although the evidence so far suggests that country-specific circumstances are crucial in designing and implementing Fintech innovations. Yet the bigger question of whether these innovations lead to marked improvements in financial inclusion and household welfare, especially in low- and middle
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a collective rather than individual approach to these issues might reap some benefits. A coordinated approach among countries in a particular region could help incorporate Fintech into the broader agenda of developing regional financial markets while also advancing a common strategy for promoting innovation without endangering financial stability. For small
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dominated by banks, making it difficult for small and medium-sized enterprises to obtain credit because of collateral constraints and the absence of credit histories. Fintech platforms could help finance entrepreneurial activities, with obvious benefits in providing a boost to economic activity and employment growth. Finally, it is worth closing
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represent will make payment systems more efficient, but decentralized unbacked cryptocurrencies are unlikely to serve as viable long-term stores of value. Freeing Up Finance Fintech is changing the world of finance, providing more direct channels that connect savers and borrowers. Commercial banks are losing many of the advantages they
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“Chinese Online Insurer ZhongAn Raises $1.5bn in IPO,” Financial Times, September 22, 2017, https://www.ft.com/content/424e7b36-9f5d-11e7-9a86-4d5a475ba4c5. Payment Fintech Domestic Retail Payments A basic description of PayPal is available at Julia Kagan, “PayPal,” Investopedia, April 8, 2020, https://www.investopedia.com/terms/p/paypal
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Financial’s Alipay and Tencent’s WeChat Are Rapidly Growing Their Financial Services Ecosystems,” Business Insider, December 18, 2019, https://www.businessinsider.com/china-fintech-alipay-wechat. Alipay’s average transaction amount is high in part because it processes many business-to-business transactions. Alipay user numbers are taken from
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For information on Verdigris, see https://www.verdigrisholdings.com/. Other US Sandboxes The US Treasury statement is posted at “Treasury Releases Report on Nonbank Financials, Fintech, and Innovation,” news release, July 31, 2018, https://home.treasury.gov/news/press-releases/sm447. A comprehensive state-by-state list of sandboxes through
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________. 2018. Central Bank Digital Currencies. Report. Basel, Switzerland: Bank for International Settlements. Croux, Christophe, Julapa Jagtiani, Tarunsai Korivi, and Milos Vulanovic. 2020. “Important Factors Determining Fintech Loan Default: Evidence from the LendingClub Consumer Platform.” Working paper no. 20-15, Federal Reserve Bank of Philadelphia, Philadelphia. Daian, Philip, Steven Goldfeder, Tyler Kell
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“A New Wolf in Town? Pump-and-Dump Manipulation in Cryptocurrency Markets.” Unpublished manuscript, University of Technology, Sydney. Di Maggio, Marco, and Vincent Yao. 2020. “Fintech Borrowers: Lax Screening or Cream-Skimming?” NBER Working Paper No. 28021, National Bureau of Economic Research Cambridge, MA, October. D’Silva, Derryl, Zuzana Fikova, Frank
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Central Bank Digital Currency.” China Economic Journal (forthcoming). Li, Wenhong. 2020. “International Supervision of Crypto-Assets and Establishment of a Long-Term Mechanism to Prevent Fintech-Related Risks.” Working paper 2020-3, China Banking and Insurance Regulatory Commission, Beijing, July. Libra Association Members. 2019. “An Introduction to Libra.” White paper.
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? Financial Intermediation in an Era of Transformational Technology. Geneva Reports on the World Economy 22. London: Center for Economic Policy Research. Philippon, Thomas. 2016. “The Fintech Opportunity.” NBER Working Paper No. 22476, National Bureau of Economic Research, Cambridge, MA, April. Pieters, Gina C. 2017. “Bitcoin Reveals Exchange Rate Manipulation and
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NJ: Princeton University Press. Sahay, Ratna, Ulric Eriksson von Allmen, Amina Lahreche, Purva Khera, Sumiko Ogawa, Majid Bazarbash, and Kimberly Beaton. 2020. “The Promise of Fintech: Financial Inclusion in the Post COVID-19 Era.” International Monetary Fund Policy Paper, June. Schilling, Linda, and Harald Uhlig. 2018. “Some Simple Bitcoin Economics.” NBER
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Working Paper No. 24483, National Bureau of Economic Research, Cambridge, MA, September. Schindler, John. 2017. FinTech and Financial Innovation: Drivers and Depth. Finance and Economics Discussion Series 2017-081. Washington, DC: Board of Governors of the Federal Reserve System. Schnabel, Isabel
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430n government: central banks of (see central banks); cryptocurrencies without backing of, 109; financial intermediaries curtailed by, 76–77; financial market involvement of, 359–360; Fintech risks tempered by, 57, 102–103; paper currency backed by, 4 (see also fiat currencies); regulations of (see regulations); taxation by (see taxes) Greece,
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345, 346, 348; fiat currencies for, 25 technology: blockchain (see blockchain technology); distributed ledger (see distributed ledger technology); environmental effects of, 138–142; financial (see Fintech); historical revolutions of, 61–62; international monetary system effects of, 279–280; network effects of, 21, 64, 102, 311, 335, 354–355; neutrality and interoperability
The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory
by Kariappa Bheemaiah · 26 Feb 2017 · 492pp · 118,882 words
finance. By looking at the Blockchain as a tool that can leverage the advances being made in other disciplines of finance, now popularly cited as Fintech, it allows us to gain a more holistic viewpoint of the role of this technology. Having gained an understanding of how finance is being
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is akin to trying to stop a bleeding artery with a Band-Aid instead of a tourniquet. In the meanwhile, the growing diaspora of FinTech and Blockchain-based solutions offers us a spectrum of possible solutions both at a technical as well as a managerial level. But the solutions provided
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already underway. You may have heard of this fragmentation is less sinister terms… In today’s popular culture it is goes under the aliases of FinTech or Blockchain. Sharding In early 2015, at the World Economic Forum in Davos, the current governor of the Bank of England, Mark Carney, told
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speech, which shed light on his vision of the future and which, coincidently, also touch upon a few topics discussed previously in this book: “FinTech…will change the nature of money, 20 shake the foundations of central banking, and deliver nothing less than a democratic revolution for all who use
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financial services.” “FinTech [has the] potential to deliver a great unbundling of banking into its core functions of settling payments, performing maturity transformation, sharing risk, and allocating capital
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.” The speech goes on to describe five steps that will be put in place simultaneously over the course of the year to enable the FinTech transformation of banking. These steps include the testing of new proofs of concept, the use of a distributed ledger, and the launch of a
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future of finance. It is to show that the fragmentation of banking is already underway in the more subtle and decorous guise of technological change. FinTech is short form for Financial Technology . Over the greater part of the past decade, new technology firms have been able to leverage digital technology
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decade. The result of their flexibility, low costs, and user-focused strategies have resulted in rapid popularity, staggering successes, and immense growth. Globally, investment in FinTech ventures climbed to $22.3 billion in 2015, up from $1.8 billion in 2010 and $12.6 billion in 2014 (Accenture report, 2016).
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way, Asia (notably China) and Europe are increasing VC funding into this space (see figures 2-3 and 2-4). Figure 2-3.Global Fintech financing activity (2008–2014) Image source: “Cutting through the noise around financial technology,” McKinsey (2016). Data source: CB Insights Figure 2-4.Global
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Fintech financing activity (2010–2015) Image source: “Fintech and the evolving landscape: landing points for the industry,” Accenture (2016). Data source: CB Insights The reason for this widespread investment is
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because of the widespread impacts in a variety of financial services. FinTech inventions are affecting services such as lending, payments, asset management, transactions, capital markets, trade finance and even insurance. The Blockchain can also be roped into
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implications, we ought to have a quick revision on the current usages of these technologies. Sidebars 2-2 and 2-3 provide brief notes on FinTech and Blockchain, respectively, and showcase the reason why they are bringing about a revolution in the industry. For those readers looking to gain more
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a list of recommended books worth consideration is provided in the notes section at the end of this chapter. SIDEBAR 2-2: Fintech – A Brief Yet Effervescent History FinTech represents the merging of finance and technology to form advanced solutions in the financial services industry. This phenomenon is nothing new. Since
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the decade seeing the nascence of bitcoin and the entry of startups and non-financial companies, such as Google, into the world of finance. Today, FinTech continues to affect a number of financial services , owing to advances in computing, automation, encryption and, most importantly, customer focus. Having being suffocated by
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the tyranny of a “one size fits all” approach, consumers today pine for personalised experiences which offer security, transparency, and interoperability. FinTech offers a refreshing buffet of options in this respect by mixing and matching technologies to client needs. As a result of this convergence of technology
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Main technologies: Big Data, Biometrics, Digital Wallets, Mobile Apps, NFC, Platforms They key word to be kept in mind with regards to payments and FinTech is “cashless,” which is a subject we discuss in Chapter 3. Over the past five years, mobile devices and connectivity have been leveraged to increase
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2010 flash crash, the 2014 treasury flash crash, and the 2015 ETF flash crash have declined the popularity of HFT. In light of these shortcomings, FinTech firms using algorithmic trading strategies with smarter and faster machines are changing the market structure in terms of volume, liquidity, volatility, and spread of risk
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unemployment 5. Insurance Stance: Customer-facing Main technologies: Biometrics, Big Data, IoT, Sensors, Machine Learning One of the recent sectors to be engulfed by the FinTech wave is the gargantuan insurance sector (Global life insurance premiums: $2.7 trillion, Global non-life insurance premiums: $1.4 trillion, Source: CB Insights,
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. Clients are motivated to form healthy habits as they receive premium discounts as their fitness improves. P2P and micro insurance are also scaling thanks to FinTech. P2P insurance has always existed to a certain extent in the form of mutuals, fraternal benefit societies, reciprocal inter-insurance exchanges, etc.… But new
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same rules can be extended to a range of applications. Investment operations performed on a Blockchain can be automated with Smart Contracts. While today’s FinTech firms have already automated a large part of the operations, the settlement process still takes time, as the transactions need to occur on the
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the financial ecosystem is being transformed and fragmented by actors and technologies that are exogenous to the traditional financial sector. Mark Carney’s statements about FinTech changing the nature of money and central banking thus hold sway as the fragmentation is happening at every level of this sector. Moreover, the fragmentation
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process is occurring at two echelons. While FinTech innovations are more concentrated on providing front end solutions that offer better benchmarks for speed, agility, and user- friendliness, Blockchain and Smart Contracts are bringing
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sector. It is for this reason that when we talk about the Blockchain, it is imperative that we also consider the other side of the FinTech coin. One of the first things I mention to students when giving lectures about the Blockchain is to tell them to “Cool it with
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then be made via the smart contract if all conditions are met. All in all, across the various financial services, the use of Blockchain and FinTech can lead to simplified operational procedures, lesser risk, lower liquidity requirements, fewer intermediaries, higher transparency, better regulatory oversight, and easier multi-stakeholder agreement. In
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market share continues to be broken up. As per a recent PricewaterhouseCoopers report, more than 20% of financial services business will be at risk to FinTechs by 2020. The study also estimates that 28% of the banking and payments sector and 22% of the insurance, wealth management and asset management
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sectors will belong to the FinTech firms by 2020 (PwC, 2016). According to Autonomous Research, online lenders originated $22 billion in U.S. consumer and business loans in 2015. While
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infrastructures that will be more difficult to change and manage. As a result, just as it was mentioned in the evolutionary biology article, banks and FinTech startups are now working together to figure out ways to remain competitive but still (re)gain market share. At the end of 2015, JPM
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are KYC and AML compliance measures to be administered when signing up to online platforms? What kinds of regulations need to be developed to aid FinTech firms to continue growing while giving them the leeway to innovate? How is the production of money going to be affected in the fragmented
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be deployed at multiple levels, based on the sector of financial services. We have already seen how different market sectors are changing with Blockchain and FinTech in the previous chapter. Hence, we will review today’s market structure by focusing on the two primary functions of a market: getting access
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regulation is leading to the sharing of risk exclusively between the client and the financial institution. The reason behind this practice is relatively straightforward. As FinTech firms use technology to create proprietary algorithms and software to address customer needs, the rate at which their offers proliferate the market is outpacing the
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and these firms currently account for 4 in 10 home loans (Koren, 2015). But all that glitters isn’t gold. As most of the new FinTech lending platforms provide smaller amounts of credit (less than $100,000) they are better suited to serving the SME loan market. But as these credit
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is not set in stone. As a result of this oversight, the new lending platforms have begun to participate in riskier business practices. Some Fintech lenders do not even ask for a business plan or future cash projections. All that is required to get a loan of less than a
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institutions would be overkill and would thwart innovation. To a large extent this would be correct. But it must be remembered that as things stand, FinTech firms do not have to adhere to capital requirements. Hence, if the economic conditions were to take a downturn, these firms are ill-suited
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to respond to a cessation of credit supply. As an increasing number of consumers and SMEs turn to FinTech firms for borrowing money, such an occurrence could have disastrous effects for a number of SMEs. And as the current regulation is largely “private”
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providers have direct access to payment networks and hence have to adhere to their regulations (Shafik, 2016). However, this is not the case with FinTech firms who normally use correspondent banks or alternative payment channels. Hence, the question needs to be asked as to whether regulation needs to be passed
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the current European approach of defining harmonized EU-wide standards to combat data privacy breaches. On the other hand young tech-led firms , such as FinTech companies that are still in their infancy, have small side effects and pose less systemic risk. Hence, regulators need to create their smart contracts
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in natural and technological paradigms share five common salient features: Specialisation, Diversity, Ubiquity , Socialization and Complexity . These five features are exhibited by any technology. As FinTech is one of the protagonists in this book and in modern capitalism, let’s analyse the evolution of this technology: Financial technology finds its roots
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central point that holds the entire edifice in place. As the developmental process of computing continues to become increasingly distributed, the future of computing (and Fintech by extension), is bound to increase in complexity. Selection, diversity, incremental variation and temporal progression (Wagner & Rosen, 2014) will be the hallmarks of tomorrow’
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decentralized. An organization may be centralized with various hierarchies. But markets are decentralized and as we have seen in chapter 2 (refer the part on FinTech), and are getting increasingly so. In decentralized markets with multiple agents, trust becomes a key factor as it has a cost associated to it.
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CMO Should Know." Retrieved from https://www.youtube.com/watch?v=p-xxkmvPYck Kendall, J. (2016, June 22). Gates Foundation Presents: Crucial Areas of Fintech Innovation for the Bottom of the Pyramid. Retrieved from Microsoft Research: https://www.youtube.com/watch?v=7R_uFb-X1s8 KPMG. (2016). The Pulse of
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Fintech, Q1 2016 - Global Analysis of Fintech Venture Funding . KPMG. Kupiec, A. M. (2014, August 11). Why the “Living Will” Process Sets Banks Up for Failure . Retrieved from
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J. (2016). Small groups and long memories promote cooperation. Nature , Scientific Reports 6, Article number: 26889, doi: 10.1038/srep26889 . PwC. (2016). Blurred Lines: How FinTech is shaping Financial Services . Pricewaterhouse Cooper. PYMNTS. (2015, August 18). How Earthport And Ripple Are Teaming Up To Make Cross-Border Payments Instant . Retrieved from
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implications of the technology. Useful for students, business persons, and advanced readers. Value Web Chris Skinner General book that offers a holistic view of how FinTech and Blockchain firms are using technology to create a new internet of value. Useful for business persons and students. Blockchain: Blueprint for a New Economy
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CDSs non-financial firms originate, repackage and sell model originate-to-distribute model originate-to-hold model principal component production and exchange sharding Blockchain FinTech transformation global Fintech financing activity private sector skeleton keys AI-led high frequency trading amalgamation Blockchain fragmentation process information asymmetries Kabbage KYC/AML procedures KYC process machine
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private and public utilization scalability TBTF See(Too Big to Fail (TBTF)) television advertisement Financialization SeeFragmentation Financial Stability Oversight Committee (FSOC) Financial system Financial Technology (FinTech) capital markets Carney, Mark CHIPS financial services financing activities histroy insurance sector investment/wealth management lending platforms payments Foreign direct investment (FDI) Fractional Reserve banking
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models economic flexibility EMH and RET financial markets and monetary policy growth of financial products macroeconomic theories non-bank channels securitization trades Sharding Blockchain FinTech transformation global Fintech financing activity private sector ShoCard SIGEmodels SeeSticky Information General Equilibrium (SIGE) models Skill-biased technological change (SBTC) SkuChain Software as a service (SaaS)
Cloudmoney: Cash, Cards, Crypto, and the War for Our Wallets
by Brett Scott · 4 Jul 2022 · 308pp · 85,850 words
the media buzzes with excitable stories about how this or that start-up company offers convenient benefits to people through this or that exciting new fintech app. When, for example, Amazon announces a new partnership with a payments platform, or Citigroup announces a collaboration with Google Pay, it’s presented – and
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, or what I call ‘cloudmoney’. The digitisation of payments enables the digitisation of finance more broadly – a task currently outsourced to the financial technology, or ‘fintech’, industry – which in turn is enabling the full automation of corporate capitalism. We can already see this at work in the operations of corporations like
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be applied to any situation. This blending of finance and tech is also visible in the hybridisation of the two industries in the realm of fintech. It is an industry that exemplifies the ambiguous yet close relationship between the two worlds. Banks had a toxic reputation in the aftermath of the
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start-ups would disrupt finance and produce financial democratisation. Digital tech was presented as a white knight that would kick bad old finance into shape. ‘Fintech’ became a buzzword, attracting both workers from traditional banks who had ideas about how to digitise services, and entrepreneurial technologists who wanted to take on
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finance as outsiders. From the outset, fintech felt drabber than the rest of the technology sector, given that it was attached to the old power of Big Finance, but more colourful than
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non-digital processes – must die. These ideas are presented as a fundamental disruption of finance, but when I take a step back and consider the fintech industry, I see not an attempt to redesign Big Finance, but rather an attempt to automate it. This distinction is seldom made, though. Why is
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to create this global matrix. Take an oligopolistic sector of tech giants, whose platforms are fused into the life of billions, and glue them via fintech infrastructure to an oligopolistic sector of financial giants, whose digital money is fused into the life of billions. Then glue both to everything else (cities
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system, to understand better how it is changing and to describe the erosion of the cash system. I will then delve into the dynamics of fintech, how it tries to ‘re-skin’ the existing financial system, and how that intersects with Silicon Valley. Next I will lead you through the
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world’s greatest concentrations of financial mega-corporations. Level 39 was created by the Canary Wharf Group, which owns the entire district, to grow these fintechs in a Petri dish. There are over a hundred of them in here, most working on some aspect of financial automation, from payments apps and
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faraway clusters of corporations. Level 39 is hosted in the top reaches of one of these towers and, while they may not know it, the fintech-industry employees within have been hired to automate this nerve centre. Money as a nervous system I use the term ‘nerve centre’ deliberately. It is
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2016). Emili – who also founded the website WarOnCash.org – produced a ‘Manifesto for Cashlessness’, and partnered with Money 2020, one of the world’s biggest fintech conferences, to evangelise it. The Penny for London charity campaign was another of these industry-led initiatives. Set up in 2014, it aimed to encourage
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to automate finance in general you need to automate payment systems in particular. Put simply, digital finance does not work with non-digital payments, and fintech developers see cash as a bug standing in the way of their financial automation. The last time I visited Level 39 – the big
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be praised by official institutions – he is adapting to keep up with a rapidly changing world. If you look at all the POS terminals and fintech apps in the context of the global economy, they are like front line agents in a process of global gentrification, paving the way for the
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a moment for a new class of entrepreneur to front-run the banks. While banks had been working with technology for decades, a new buzzword – ‘fintech’ – rose to prominence in the 2000s. It referred to any company that sought to import Silicon Valley-style interfaces into finance, but without being encumbered
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with any legacy business. Fintech teams were small and specialised, and their meetings did not have items like financing Russian gas exploration on the agenda. This is because they were
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not financiers. They were builders of digital ‘store fronts’. For example, the Level 39 fintech accelerator (with which we began Chapter 1) hosted Revolut, a start-up playing on the word ‘revolution’. In reality, however, the original Revolut app was
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establishment of those omnipresent behemoths. Given that Silicon Valley’s systems were in the process of warping the structure of the economy – and accelerating it – fintechs could claim that the lack of apps offering instantaneous access to finance was an injustice. Their ‘revolution’ was to bring the gospel of appification into
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included a panel entitled ‘Will tech take over finance?’ or ‘Do we still need banks?’ Not only were these fintechs supposed to disrupt finance, but they were also supposed to democratise it: fintech would deliver financial access to a wider user base while breaking down the power of the old ruling class
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upon Apple’s IOS operating system strengthen Apple, because in using the small app we end up using their operating system. Similarly, in using small fintech companies we often end up using the same underlying financial ‘operating system’ that is controlled by existing powers. This is because
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gym training apps, but is happy to serve as an environment to host them, so too are banking oligopolies happy to host accounts for niche fintechs. Rather than a bank trying to deal with the admin of tens of thousands of micro-savers, it can give one account to a
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fintech who aggregates those, automating the interactions with an app to make them more profitable before plugging into the underlying core ‘operating system’. This ‘operating system’
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is underpinned – in the final analysis – by states. If fintech is based on automating access to finance, and finance is about contracts for money, and the monetary system is underpinned by national banking oligopolies, it
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means fintech companies often need to partner with banks to have any ability to operate at all. This is why many digital ‘neobanks’ – which in Europe include
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banking licences. Traditional banks start as actual banks and then later develop interfaces to engage the public, but neobanks start as interfaces. Many of these fintechs have about as much chance of disrupting finance as an IOS developer has of disrupting Apple, and they cannot wrench the monetary system away from
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but had a bigger ‘to-do’ list, so were slower. They are still here, big as ever, actively absorbing fintech technology into their own systems by buying them up. They let the fintech sector run the risky experiments – funded by the founders and VCs – and if they are successful, buy them, copy
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operates in an almost permanent state of doublethink, which is why a peculiar atmosphere hangs in the air at Level 39. The aesthetics of fintech accelerators are different to those of traditional banks – with hackathons on the future of money and pitching contests full of the language of disruption – and
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with the big banks – or sell out to them – if that is what it takes to make returns. Over the years both banks and the fintech industry have slowly and quietly acknowledged their symbiosis. After thousands of industry articles and pundit predictions about the imminent destruction of banks, conciliatory pieces about
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how banks and fintechs could ‘work together’ emerged. These articles are always presented as a kind of ‘a-ha’ moment, when the industry thought-leader or analyst realises that
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interplay between words and images, a fusion that was important for the bank, which needs to create elegant text and images for the corporation’s fintech apps. The team members he was addressing were young and had a background in art and design. Their job was to help with the bank
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obsessed with such chatbots. The first I came across was Cleo, which lives within the confines of an iPhone app. I met ‘her’ at a fintech pitching contest where ‘she’ was being demonstrated to venture capitalists, who could watch the system answering queries. Hey Cleo, what’s my balance? Hey Alex
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seeks out only efficiency, speed and scale. The fusion But if the banking sector has imported the shape-shifting techniques of Silicon Valley (via the fintech sector), then it has given Silicon Valley new inroads into finance in the process. By building out their digital capabilities, banks make their systems increasingly
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of hybrids can be dreamed up, like fridges that can buy milk from passing drones. What happened to the bankers? At a ground level, the fintech sector might express itself as a flourishing of apps, chatbots, devices, wearables and biometrics, along with Big Tech integrations, but these all lead to the
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is fanciful – no such bread-making machine exists – but this is one way to capture the idea of how machine-learning systems are ‘trained’. For fintech pioneers who are enthusiastic about this process, it is seen as a strategy for creating financial machines that can extract actionable information out of piles
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time have low default risk.’ That can be tested, and the results fed back over time to refine it. An employee at a fraud-detection fintech start-up told me his company uses over 500 data sources from a phone to assess you. This could include, for example, the speed at
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is to finance the development of small parts of an overall control complex. For ten years I have received daily mailing-list updates about breaking fintech news, seeing stories of thousands of start-up companies passing through my inbox. On a daily basis the evolution of the stories seems imperceptible,
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seeking new markets, and using their power to extract advantages in foreign regions. Similarly, all the innovations described in this book – from digital payments to fintech and AI – are pioneered and pushed forward by powerful financial and technology firms rooted in strong states. American, European and Chinese commercial giants are supported
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about the need to protect the cash system, it was overrun with comments from crypto hopefuls claiming that Bitcoin solved the problem. The banking and fintech sector was trampling unimpeded over the physical cash system, while these rebels placed their hopes in a cyber-token that nobody used for supermarket commerce
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’s most recent project has been to build the new Astana International Financial Centre (AIFC), to serve as a hub for global finance corporations and fintech start-ups. Nazarbayev now serves as AIFC’s chairman, presiding over a governing board that includes financiers from J. P. Morgan, Citigroup and Russia’
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, and starting to call these watered-down systems by the more generic name of ‘distributed ledger technology’ (DLT). This became a buzzword in the mainstream fintech world. We’ve already seen how customer-facing staff are being automated away with apps, and how behind-the-scenes financial professionals are being replaced
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holding people back, and attached that to a message of financial inclusion, claiming that its new system would help the world’s unbanked. Like the fintech sector, it romanticised automation, but simultaneously sought to leech off the edgy pirate aesthetics of the crypto movement by claiming that Libra would be a
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are getting edgy about the growing power of these players and feel pressure to appear to be ‘keeping up’ by matching the actions of the fintech world. Over the last few years the CBDC concept has percolated through the central banking community, and in several countries teams have been set up
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is feasible or desirable. What would be the difference between a CBDC and, say, PayPal, or Venmo, or any other unit moved around using a fintech payments app? With Venmo the unit you are moving is a third-tier corporate chip, but with a Bank of England app you would be
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As I write this in mid-2021, this fusion is more apparent than ever. A global pandemic has raged for a year now, and the fintech sector has weaponised it to demonise cash even further, presenting it as slow and dirty. This has led to large parts of the retail sector
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what is referred to as ‘blockchain technology’ now contains a confusing amalgamation of disparate agendas. Still, interesting hybrids continue to emerge from that meeting. Like fintech promoters, many blockchain innovators are often pro-digital automation and openly anti-cash, but they claim a desire to build a decentralised version of the
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pegged to, the normal monetary system. Stablecoins are now being used to build so-called ‘DeFi’, or ‘decentralised finance’, platforms. Much in the way ordinary fintech companies rely upon digital bank money, DeFi involves setting up smart contract systems that will administer, lend or route digital stablecoins, and thereby replicate – in
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must vigorously assert our right to use cash, and to see that as a political act. The desire to use cash is presented by the fintech industry as a stubborn refusal to move forward with the times, but I prefer to cast it as a stubborn refusal to go with the
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.wsj.com/articles/philadelphia-is-first-u-s-city-to-ban-cashless-stores-11551967201 8. Shedding and Re-skinning Commerzbank has set up its own fintech incubator: See Commerzbank’s description here https://www.commerzbank.de/en/nachhaltigkeit/markt___kunden/mittelstand/main_incubator/main_incubator.html Mel Evans refers to this
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59–63 central banks and, 42–5, 254 crime and, 36, 42–3, 45, 81, 112 crises and, 36, 61 cycle, 63, 68 demonetisations, 43 fintech industry and, 41–2 hoarding, 36 issuance of, 59–63 libertarians and, 215 payments companies and, 39–41 refusal of, 29–30, 40, 41, 43
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8, 17–18, 26–7, 96, 184, 232, 248 financial inclusion, 37, 39, 93–9, 130–32, 167, 238, 262 fingerprints, 150 Fink, Stanley, 38 fintech, 8, 41–2, 140–43 first-world problems, 154 fitness centres, 17 fixed money supplies, 191–3 Floored (2009 film), 158 Florentine Republic (1115–1569
Fixed: Why Personal Finance is Broken and How to Make it Work for Everyone
by John Y. Campbell and Tarun Ramadorai · 25 Jul 2025
to. A more subtle approach to this commitment problem is to use an automatic mechanism that saves steadily without deliberate action. For example, some fintech firms offer to aggregate imperceptible amounts of cash on a frequent basis that then get swept into a savings account. One such UK firm, Moneybox
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line. This is the main source of cheap credit in countries with bank-dependent financial systems, such as many of those in continental Europe. Fintech lenders are increasingly offering such credit lines to US households, but sadly it is again more readily available to wealthy customers than it is to
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they face new misfortunes. There is some promising innovation along this dimension. New types of credit are being offered by financial technology firms. The fintech app Dave.com, for example, offers budgeting tools along with small amounts of affordable short-term credit and information on opportunities to work in the
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to all and the natural first choice for new participants in financial markets. Technology Is Part of the Solution, but Also Part of the Problem Fintech for Good: to Infinity … and Beyond! One seemingly obvious solution to the problems of personal finance is to deploy better technology. The suite of
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of large language models promise to upend service provision in many areas of economic life, and personal finance appears ripe for disruption.1 Financial technology (“fintech” for short) is more easily accessible than ever. The arrival of the Internet began a process of technological connection that started with the personal
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19 pandemic, when space was at a premium). But the benefits of technological innovation in finance go far beyond providing access through ubiquitous handheld devices. Fintech bears such great promise because of the age-old underlying economic problems that it helps to solve. FIGURE 8.1. Mobile phone penetration. Source:
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cases, such as for travel or home insurance, the software can calculate your premium based on the information you have provided. For financial service providers, fintech cuts fixed costs by automating time-consuming bureaucratic processes. In the insurance example, the firm can use artificial intelligence to quickly turn buyers’ conversational responses
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and is reaping the rewards of process simplification and cost reduction with a stock market valuation above a billion dollars.3 A second benefit of fintech is that it enables customization. The same fixed-cost reductions that make standard financial products cheaper also make it possible to tailor financial solutions to
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your deposits, income history, and spending patterns? Many millions of users of Dave.com already benefit from such a service. A third benefit of fintech is that it can streamline the difficult and time-consuming process of searching for and comparing financial products. This can spur beneficial competition between providers
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more advanced economies. As these examples demonstrate, technology is rapidly transforming swaths of our personal financial system. There is tremendous promise in the use of fintech to increase the availability, customize the form, and lower the costs of beneficial financial products for vast numbers of households. We are personally very excited
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innovation, including some that lurk in potentially promising products. Like other beneficial technology that can be harmful if misused, financial technology is “dual-use.” Fintech Risks: Beware of False Prophets It is easy to be seduced by visions of a technological personal finance utopia, but we also need to hold
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While technology can deliver astonishing benefits, it can also be used to amplify the worst features of the existing financial system. A first problem with fintech is that it can be used to target human weaknesses—for example, to encourage gambling, performance chasing, or impulse buying. The case of Robinhood
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by Massachusetts regulators, who cited the company’s “aggressive tactics to attract inexperienced investors, [and] its use of gamification strategies to manipulate customers.”7 Fintech companies understand that people tend to look only at the first one or two links offered by a search or listed on a comparison website
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directs discretionary consumer spending toward the categories that are eligible for BNPL, and fuels higher total retail spending overall.9 A second problem is that fintech companies harvest personal data to make targeted financial product and service offers. While these offers may be customized to meet people’s varied needs,
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by the personal finance system. This practice, sometimes known as “surveillance pricing,” has recently come under scrutiny from the US Federal Trade Commission.10 Fintech firms use privacy policies to explain how they use personal data and to obtain permission for these uses, but consumers pay little attention to these
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delinquency rates extraordinarily low, but one can only imagine the human costs incurred when opting into these contractual relationships.14 A third problem is that fintech can outrun the regulation that has evolved to limit abuses in traditional finance. A leading example, which we discuss below, is decentralized finance (DeFi),
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countries and over 80% of high-income countries now have explicit deposit insurance schemes.17 Deposit insurance is often advertised to prospective users of new fintech services that enable crypto trading, such as Juno and Yotta, to reassure them of the safety of their funds deposited in US dollars. But
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Evolve Bank was interrupted by the failure of a single link in the chain: Synapse, a provider of banking software.18 A fourth problem with fintech, related to the third, is that technology can exacerbate inequality by making it easier for large, sophisticated investors to obtain regulatory benefits intended for
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them to efficiently split larger pots of money into chunks just beneath the coverage ceiling and funnel these chunks to different banks. In this way fintech facilitates a reverse Robin Hood maneuver in which poorer people, as taxpayers, are potentially on the hook to bail out far wealthier investors in
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the event of a bank failure. A fifth problem is that fintech can undermine laws against discrimination in the financial system. Algorithms that allocate credit, for example, may restrict credit to people in certain ethnic categories,
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good principle is that early adoption is generally safer for products that improve simple processes than for products that attempt more complicated optimization. For example, fintech algorithms that speedily allocate credit using similar information to traditional banking systems improve on simple processes and are a good bet, as are asset management
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strategies that encourage frequent comparisons with peers to stimulate additional buying and usage, nontransparent fees, or excessive difficulties in canceling subscriptions, regulators should intervene. Third, fintech utilization of personal data should be carefully scrutinized. Data privacy standards need to be carefully thought through, and an independent privacy regulator may be needed
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, could skeptically assert that automated teller machines (ATMs) were the apex of modern financial innovation.38 The challenge is to realize the benefits of fintech without letting it run out of control. Technology is like a turbocharger that should only be added to a car once the chassis has been
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with such short track records, such credit can tempt people into financial distress when it finances compulsive and unproductive spending. Marco DiMaggio and Vincent Yao, “Fintech borrowers: Lax screening or cream-skimming?,” Review of Financial Studies 34 (2020): 4565–4618. We discuss this issue further in chapter 8. 33. Amir
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use to purchase mutual funds lists funds in order of their performance during the past year. See Claire Yurong Hong, Xiaomeng Lu, and Jun Pan, “FinTech platforms and mutual fund distribution,” Management Science 71 (2025): 488–517. 18. Ulrike Malmendier and Stefan Nagel, “Depression babies: Do macroeconomic experiences affect risk
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://www.cnbc.com/2021/03/31/robinhood-gets-rid-of-confetti-feature-amid-scrutiny-over-gamification.html. 8. Claire Hong, Xiaomeng Lu, and Jun Pan, “FinTech platforms and mutual fund distribution,” Management Science 71 (2025): 488–517. 9. Marco Di Maggio, Emily Williams, and Justin Katz, “Buy now, pay later
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isn’t really a bank and your money disappears?,” New York Times, July 9, 2024, https://www.nytimes.com/2024/07/09/business/synapse-bankruptcy-fintech-fdic-insurance.html. 19. Andreas Fuster, Paul Goldsmith-Pinkham, Tarun Ramadorai, and Ansgar Walther, “Predictably unequal? The effect of machine learning on credit markets,”
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1, 2024, https://www.eia.gov/todayinenergy/detail.php?id=61364. 30. See Sharmista Appaya, Helen Gradstein, and Mahjabeen Haji, “Global experiences from regulatory sandboxes,” Fintech Note, no. 8, World Bank Group, November 13, 2020, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/912001605241080935/global-experiences-from-regulatory-sandboxes. 31
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. See “Fintech Salary Finance secures £300m JP Morgan credit line,” Yahoo! Finance, January 26, 2023, rb.gy/p43u7a; and “FCA reveals the fourth round of successful firms
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buy, 273n2; markups on, 170–171; in starter kit, 259–260; variable, 300n33 Apothecaries’ Act (1815), 228, 312–313n65 artificial intelligence (AI): bias and, 189; fintech and, 180; patents, 301n1 Asimov, Isaac, 184–185 asset accumulation, paying off debt to enable, 268n22 asset allocation: diversification and, 292n13; in retirement accounts, 165
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attachment to physical branches, 275n14 base rate neglect, 43 “Basiskonto,” 236 Bayes, Thomas, 271n16 Bayes’ Theorem, 271n16 Behavioral Insights Team (nudge unit) (UK), 212 bias: fintech and, 189; present, 48–49 biased self-attribution, 45 billionaires, wealth in emerging economies and number of, 267n20 birth rate, funding retirement and declining, 151
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, 90; cost disclosure, 206–207; market power and, 274–275n12; transferred balances, 95, 283n43 credit history, credit cards and, 90 credit lines: emergency, 90; fintech lenders and, 90; in starter kit, 242 creditors, pressure from, 93–94, 95–96 credit registries, 202, 242 credit reports, 242; in United States, 209
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; lack of regulation of, 188–189 crypto intermediaries, high interest rates promised on stablecoins, 88 crypto scams, 188, 303n23 current accounts, 237–238, 241 customization, fintech and, 182–183 cyclically adjusted price-earnings (CAPE) ratio, 135, 135 data privacy, 197 Dave.com, 91, 183 debt: borrowing, 88–93; interest rates
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lack of, 82, 83; need for quick access/liquidity and, 25, 87; prioritizing creation of, 128–129; using tax refunds for, 87, 313n4 emerging economies: fintech and payments systems in, 184; growth of middle class in, 10–11; household balance sheets in, 111; use of regulatory sandboxes in, 195; wealth distribution
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stability in, 10; outrage at, 5–6; scale of problem of, 28–30. See also personal finance system financial vulnerability, 79–85 finfluencers, 226–227 fintech (financial technology): accessibility of, 180–182; algorithmic discrimination and, 189, 197–198; benefits of, 180–184; customization of financial products and, 182–183; decentralized
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credit, loans, and investment opportunities, 71–72, 89, 280–281n15 FTX, 191 future, downweighting against present, 47–49 gambling: acceptance of risk and, 130–131; fintech encouraging, 185 gamification: cryptocurrency and, 197; manipulation of customers with, 185 Garber, Alan, 145 gender gap: in financial literacy, 33, 34–35; multiple-choice tests
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and, 162 Howells, James, 191 Huffman, Felicity, 285n9 Icesave, 87–88 identification (ID) systems, 202–203; digital, 201–202 illusion of control, 45 impulse buying, fintech encouraging, 185–186. See also buy-now-pay-later (BNPL) credit incentives: failure of central planning system to provide, 9–10; finance professionals and sales
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rate in, 288n31. See also Reserve Bank of India Individual Retirement Accounts (IRAs), 158; contribution limits, 297n7 inequality, financial system and, 15–28; exacerbated by fintech, 189; global income distribution, 11–12, 12–13, 15–16; investor accreditation and, 262; mortgage terms and, 15 inflation: effect on real incomes, 82;
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insurance companies, acquisition of personal data, 187 insurance premiums, lapsation and, 54–55, 61, 145–147 Insurance Regulatory and Development Authority (IRDAI), 309n39 interbank payments, fintech and, 184 interest: emergency funds and, 87–88; on transaction accounts, 237–239 interest-only (IO) mortgages, 122–123, 249 interest rate caps, 218 interest
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59–60, 276n19 pay-as-you-go public pensions, 153 payday lenders, 89, 275n15 payment protection insurance (PPI), 4, 63, 148 payments system, 7–8; fintech and, 184; government role in, 202 payouts, insurance and caps on, 141–142 payroll advance schemes, 243 peer effects, 46 Pell Grants, 101, 285n6 Pension
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Fund Regulatory and Development Authority (PFRDA), 309n39 Pension Protection Act (2006), 299n22, 310n44 pension scams, 68, 277n33 Pepys, Samuel, 70, 191, 278n37 performance chasing, fintech and, 185 personal bankruptcy, 96 personal finance system: characterized as “fixed,” 6; government action to support, 179–180; national differences in, 233–234; need to
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rebuild, 6–7; problems of, 10–15. See also starter kit for personal finance personal information: fintech and harvesting of, 186–187, 197; required to receive disclosures, 208–209 “phishing for phools,” 55 Phishing for Phools (Akerlof and Shiller), 274n8 phone bias
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227 prices, failure to shop around and raised, 56–58 prime borrowers, 90, 92, 307n18 privacy, cheaper credit and, 91 privacy paradox, 187 privacy policies, fintech firms and, 186–187 private key, cryptocurrency and, 190–191 prize-linked savings accounts, 223, 240, 241 probability, conditional, 41–42 property taxes, deferred for
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195–199; of deposit insurance, 188–189; fencing off investments from poorer people, 25–26; fragmentation of, 215–216; of home valuation, 249; lack of fintech, 187–189; preventing from going too far, 218–220; of public health, 56 regulatory sandboxes, testing new DeFi products using, 195–196, 304n32 reinforcement learning
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313n4 teaser mortgage rates, 118–119 technology: AI patents, 301n1; connecting lenders with borrowers, 242–243; information, 233; mobile phone penetration, 180, 181. See also fintech (financial technology) temptation, financial decision making and spending, 31, 47–49, 84–86 Tencent, 184 term life insurance, 253 Terra Luna, 281–282n23 Tether (cryptocurrency
The Pay Off: How Changing the Way We Pay Changes Everything
by Gottfried Leibbrandt and Natasha de Teran · 14 Jul 2021 · 326pp · 91,532 words
Pockit accounts was restored within a few days, the glitch highlighted the predicament faced by the unbanked. Much hope is pinned on the ability of FinTechs (start-ups that use technology to provide financial services in an innovative way; see Chapter 18) to bridge the payments divide by ‘banking the unbanked
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have the scale and clout to drive mass adoption. As we’ve seen with Apple Pay and PayPal – and we’ll see again in the FinTech frenzy – their network strength encourages outsiders to innovate through them or to build new ideas around them, which makes them even stronger. Love ’em or
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neat feat that allows it to charge comparatively low fees of around 0.6 per cent, including foreign exchange fees. TransferWise (like many of its FinTech peers in cross-border transfers) isn’t doing anything magical; however, from a standing start in 2011 it reached unicorn status in 2016 and is
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now widely heralded as one of the UK’s greatest FinTechs.5 It is currently valued at several billion dollars. Facing increased pressure from non-bank competitors like TransferWise, banks finally took action to speed up
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payments, we can expect that cross-border payments will be subject to further change. Banks are keen to hold on to this business, while both FinTech and BigTech6 are keen to win it. The regulators and legislators, meanwhile, are hot on the heels of them all. In fact, the cross-border
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to move, although that may change – indeed, further proof that there’s life in Letters of Credit yet can be deduced from the dozens of FinTechs frantically trying to gain fame (and fortune) by dragging them into the digital age. ______________________________________________________________________ 1 This includes domestic correspondent banking, which makes up a third
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. Square is currently valued at close to $100 billion. Square is a prime example of a FinTech. While the application of technology to finance can be dated back as far as finance itself, the term ‘FinTech’ dates only to around 2008. We can debate cause and effect, but excitement about the convergence
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to $1,000 by year-end. Beyond the helpful political tailwinds and huge hype that accompanied the emergence of FinTech, there are real underlying reasons why these companies hold such promise. For one, FinTechs are unencumbered by legacy infrastructures. As a result, they can offer innovative, transparent and inexpensive financial services that
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tackling financial crime. Throw in rules on competition and then multiply by the number of jurisdictions in which a bank operates. Then contrast that with FinTechs, which are able to unbundle parts of banking and enter into some (but not necessarily all) of its businesses – offering payments, say, without deposit-taking
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. All of which allows them to operate with far less regulatory encumbrance. FinTechs are also able to attract talent: newsworthy and nimble, they are unfettered by the red tape and bureaucracy of banks. Where their staff are painted
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, political leaders are anxious to see the next PayPal built in their backyard. They have bent over backwards to attract FinTech business and are quite happy for their regulators to hold FinTechs to lower standards.1 The regulators have meanwhile been keen to encourage competition, hoping that new providers will challenge banks
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on price and service and reach underserved markets, such as the unbanked. The FinTech revolution has largely lived up to its billing thus far, unleashing a wave of innovation in financial services and repairing some of its prevailing shortfalls
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. Fundamentally, financial services are becoming more inclusive; people are better connected, more informed and increasingly empowered. Needless to say, venture capital money has pooled behind FinTech, much of which is backed by the belief that banking in general and payments in particular must be ripe for disruption. Similar to what has
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opportunity for senior management.2 Over the past few years, investors have sunk some $30–40 billion per year into FinTech. Few, if any, parts of the financial sector have been spared FinTech’s attentions, but perhaps none have received quite so much attention as payments. Globally, payment revenues have grown at
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users around the globe. Given the relative disadvantages of the incumbent banks, you might wonder why the FinTechs have not yet put them out of business. The night is still young, of course, but those FinTechs that have tried directly competing with banks – the so-called ‘challenger’ or ‘neo-banks’ – might well
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find it closing in quite soon. For the most part, this type of FinTech offers full payment accounts based on cards. Their offering sounds very similar to pre-paid cards (see Chapter 7), but they typically target existing bank
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-banks have perhaps not been the success that their investors hoped, they have benefited consumers. They may not have the same heady valuations as the FinTech firms that serve, rather than challenge, banks, but they have done everyone a great service by shaking the banks up. If your bank now offers
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and services remotely, then you have this crowd to thank for it. ______________________________________________________________________ 1 Such as letting them use a regulatory sandbox – a framework that allows FinTech start-ups and other innovators to conduct live experiments in a controlled environment under a regulator’s supervision. 2 Kodak was the dominant producer of
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on cards: the rise of the acquirers The neo-banks may not be keeping banks up at night, but there are other stars in the FinTech firmament whose investors have been handsomely rewarded with astonishing valuations. We already saw in Chapter 8 how Visa is now worth more than any bank
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, but if it’s a bit last century to qualify as FinTech proper, consider PayPal. Now valued at close to $275 billion, its price has risen more than fivefold since being spun off by eBay in 2015
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business of card payments. This is not coincidental. As we’ll see, with the exception of the mighty Chinese duo, Alipay and Tenpay, most payment FinTech giants are in the card business. Table 3 shows 2020’s most valuable payment companies. None of them are challenger banks, all of them service
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self-made (paper) billionaires to date.3 There’s also a new breed of acquirers who do what traditional acquirers used to do – but better. FinTech supremos Pieter van der Does and Arnout Schuijff are a case in point. Their latest vehicle is Adyen, Surinamese creole for ‘again’. Adyen’s story
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for $10 billion just a year earlier. At the time of writing, it’s nudging $60 billion. Beware of assuming that acquiring always leads to FinTech gold, however. The infamous Wirecard was also in the acquiring business. Billing itself as ‘beyond payments’, Wirecard is a remarkable example of how
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FinTech euphoria camouflaged gross financial misconduct. When we started writing this book, Wirecard was also worth more than $10 billion; however, that was back when it
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was still Germany’s FinTech posterchild rather than a national embarrassment. The company was founded in 1999, during the so-called dot-com boom, and went public in 2004. In
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visible on its customers’ own sites), however, was the company’s penchant for processing payments for porn and gambling websites, clients typically avoided by most FinTech acquirers. If this didn’t set alarm bells ringing, they should have sounded loudly when allegations began to emerge about the veracity of Wirecard’s
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had filed for insolvency. Leaving behind many unanswered questions about how criminal activity could have reached such scale unnoticed by regulators or investors, Germany’s FinTech posterchild had become Europe’s Enron. ______________________________________________________________________ 1 Some facilitators and aggregators are acquirers in their own right; others rely on official acquirers to connect them
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permission to access your bank data – literally bringing them into your payments conversation.1 If you apply for a loan at another bank or a FinTech, for example, you can allow it to retrieve your recent payment history from your bank. The EU passed similar legislation later the same year, but
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for different reasons: its PSD22 regulation is rumoured to result from the effective lobbying of one specific FinTech. German start-up Sofort – meaning ‘right away’ – is (or was) a so-called ‘screen-scraper’. Screen-scrapers are basically firms with software that can retrieve
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login on behalf of their customers. Sofort cried foul and accused the banks of shutting out competition. PSD2 aimed to level the playing field for FinTechs like Sofort (which by then had been acquired by Klarna). The regulation forced EU banks to enable third-party service providers to initiate payments and
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has to offer. If you were to conclude that everybody should be happy with PSD2 and open banking, you’d be mistaken. For starters, some FinTechs were unhappy. The EU’s new model required the banks’ cooperation whereas previously the scrapers didn’t need any such cooperation – instead they’d relied
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on software. Several FinTechs had invested in that software and feared that PSD2 would do away with their advantage, allowing anybody to do the same. The banks weren’t
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exploit the information they gain. In arguing their case, the banks are quick to point out that they are held to much stricter standards than FinTech and BigTech and they’re right about that – for now, at least. If regulators have championed the appearance of
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FinTechs in particular and the use of technology in general, one of the trickier aspects of their work in recent years relates to how they regulate
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apply to data, marketing and advertising. They also relate to consumer credit, for example, where European banks face strict standards on their lending practices, while FinTech and BigTech don’t – yet. Quite reasonably, German banks have been quick to point out that it would be cheaper for consumers to finance impulse
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per cent or lower. Playing fields have a habit of levelling themselves out, but whether banks will fare much better when that happens is questionable. FinTechs are nimble – and in many cases have deep pockets with which to fight battles. BigTech firms enjoy both those advantages; what’s more, they not
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Tenpay. And the bank-led system isn’t standing still either. Perhaps it’s only in response to the threat of competition from central banks, FinTechs or BigTechs but it’s nonetheless improving and innovating fast. Banks and their infrastructures are increasingly available 24/7, allowing us to make instant account
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what we can do, or perhaps if we want to pay large amounts in cash. In the middle somewhere sit the non-bank providers like FinTechs, which, alongside the banks’ many outsourcers and service providers, are able to operate through lighter-touch regulatory sandboxes and/or face only light-touch regulation
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we learnt about in Chapter 11 – followed in 2016, mandating banks to grant access to third parties, including the new FinTech players that we met in Chapter 18. Now these FinTechs could make payments and check balances on behalf of customers, in direct competition with the banks. It wasn’t just the
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have the skills and scale to fundamentally reshape the landscape in a way that banks can’t. But the assumption that the BigTech forays and FinTech payment valuations rest on is that there is an endgame: that they can provide solutions at scale, across multiple countries/regions and at profitable margins
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by its deputy director, Dong He, sees them as ‘costly and cumbersome . . . opaque and slow’ (www.imf.org/en/News/Articles/2017/11/01/sp103017-fintech-and-cross-border-payments). For Hawala volume estimates, see: http://www.treas.gov/offices/enforcement/key-issues/hawala/; www.un.org/esa/desa/papers/2002
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-border payments, see the work of the FSB. For the full G20 report, see: www.bis.org/cpmi/publ/d193.pdf Chapter 18 Figures on FinTech investment taken from: https://news.crunchbase.com/news/q4-2018-closes-out-a-record-year-for-the-global-vc-market/ Figures in growth of payment
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story on Stripe’s founders, see: www.wired.co.uk/article/stripe-payments-apple-amazon-facebook For more on non-acceptance of some businesses by FinTech acquirers, see: https://stripe.com/blog/why-some-businesses-arent-allowed; https://squareup.com/gb/en/legal/general/ua For more on Klarna, see: www
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_gov_uk_—_May_2020_-.pdf For the story on hedge funds using data from screen scrapers, see: www.politico.com/news/2020/02/07/banks-fintech-startups-clash-over-the-new-oil-your-data-112188 For a scientific article arguing that Big Tech may want to own banking subsidiaries, see: M
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counterfeiting; fraud; money laundering; robbery financial literacy 172 Financial Stability Board (FSB) 135, 268, 269 Financial Times 103, 128, 129, 166–7 FinCEN 253, 255 FinTech 38, 147, 151, 155–9, 162–7, 240 lack of regulation 156, 235–6 First American Bankshare 264 foreign ATM fees 90 foreign exchange 56
Reinventing Capitalism in the Age of Big Data
by Viktor Mayer-Schönberger and Thomas Ramge · 27 Feb 2018 · 267pp · 72,552 words
their business models. And they are going to need to move quickly, as a new breed of data-driven financial technology companies, the so-called fintechs, are embracing data-rich markets and challenge the conventional financial services sector. It is easy to see how banking will be severely affected by the
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can’t (or are not allowed) to peek into traffic anymore, and all the value generated from the data traffic is captured by others. Some fintech start-ups, such as Coconut in the United Kingdom or Holvi in Finland, focus not on lower fees but on innovative additional services. They are
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in the financial services sector, in preparation for a world after money. There is some logic in the fact that banks are providing capital for fintechs, companies that use data technologies to provide financial services, many of which aim to push conventional banks off their pedestals. The banks’ bet is: if
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least own some of the players that take away your business. In 2015 alone, these fintechs attracted investments exceeding $19 billion worldwide. Some pundits have described the frantic activity as a fintech bubble. Although a number of fintechs focus on payment solutions, many of them focus squarely on offering disruptive innovation in two
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, a whole ecosystem of new loan providers has sprung up that not only ingests, but also provides, a lot of information. For example, SoFi, a fintech start-up, which originally focused on student loans, factors many data points into its prediction of creditworthiness, allowing it to offer low interest rates to
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funded more than $16 billion in loans, saving its customers, it says, an estimated $1.45 billion in interest. Another new entrant, Upstart, is a fintech that uses educational data in addition to traditional credit scores to assess credit risk and capture the risky end of the credit market. And
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fintechs such as Avant and ZestFinance (founded by former Google CIO Douglas Merrill) combat payday loan-sharking. By using machine learning and analyzing a huge number
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the payday loan industry. In 2016, Chinese Internet giant Baidu invested in ZestFinance, with the aim of bringing data-rich consumer credit scoring to China. Fintech start-ups also disrupt traditional investment management. For example, Stash has been pushing to break apart the share as the smallest possible unit of investment
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can spend a small amount of money according to a specific investment strategy. It’s a bit like unbundling individual song titles from albums. Many fintech start-ups suggest that they have far superior preference-matching and preference-extraction tools than conventional financial advisers do. Betterment, for example, touts its ability
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, giving its users more choices. It also calculates how much investors pay in fees to those brokers (and how much they could save by switching). Fintechs have given birth to a whole new niche sector of data-rich platforms, such as ZuluTrade and eToro that offer customers a way to select
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decision information of successful traders and take a cut from each trade that “follows” a successful trader’s strategy. Financing and investment come together through fintechs offering peer-to-peer lending. On these platforms consumers lend to consumers (or in the case of platforms like Funding Circle, to small businesses), and
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to provide them with a lot of information in their decision-making and also keep them in the loop later. Much like firms in general, fintechs approach digital technology and data abundance differently. Some, like those offering low-cost money transfers, offer inexpensive versions of existing services; they essentially bet on
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-peer lenders, fall into this category: they pair comprehensive data with user preferences and algorithms to identify the optimal transaction partner. Over the long term, fintechs in this class—and perhaps the banks teaming up with them—aim to position themselves as information intermediaries that have capabilities beyond those of money
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. As they shift the focus from money to rich data, these businesses not only undermine the belief in the power of money and banking; many fintechs also employ markets for tasks that once were the purview of traditional large banks. This only further underscores the general shift in the economy that
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we have asserted throughout this book—from firms to markets. So far, the results from banks joining forces with fintechs have been mixed. In part this is surely because we are still at the beginning of the shift away from money, so there is a
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change themselves to flourish there, whether they are Daimler or Spotify, eBay or Apple, Alibaba or Barclays, established global franchises like McDonald’s, or recent fintech start-ups like Stash, or the little organic bakery across the street. Perhaps in a few decades we’ll call this the Great Adjustment and
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Tapscott and Alex Tapscott, The Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World (New York: Portfolio/Penguin Books, 2016). fintechs attracted investments exceeding $19 billion: Andrew Meola, “The Fintech Report 2016: Financial Industry Trends and Investment,” Business Insider, December 14, 2016, http://www.businessinsider.de/the
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-fintech-report-2016-financial-industry-trends-and-investment-2016-12?r=US&IR=T; KPMG, “The Pulse of Fintech: Global Analysis of Fintech Venture Funding,” November 13, 2016, https://assets.kpmg.com/content/dam/kpmg/xx/pdf/2016
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/11/the-pulse-of-fintech-q3-report.pdf. a fintech bubble: Alessandro Hatami, “After the Fintech Bubble—the Winners and Losers,” BankNXT, February 15, 2016
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, http://banknxt.com/55760/fintech-bubble-winners-and-losers. saving its customers… an estimated $1.45 billion: https://www
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/2016/07/17/baidu-invests-in-zestfinance-to-develop-search-powered-credit-scoring-for-china. total market for peer-to-peer lending in China: “In Fintech China Shows the Way,” Economist, February 25, 2017. A counter example suggests: The following history of investment banking is based on the perceptive Alan D
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, 40 Alation, 70 Alexa, 79, 164 Alexandria library, 21 algorithms, 5, 8–9, 71–77, 81, 82, 84, 136, 210 development process for, 71–72 fintechs and, 153 firms and, 128 lack of diversity in, 12 open, call for, 167 opportunities provided by, 74–75 Alibaba, 2, 75, 163, 196, 215
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Charlotte, Queen, 94 checklists, 100–101 Chichén Itzá, 21 Chile, 175–179 Chilean Production Development Corporation, 175 China, 147, 196 communicative coordination in, 30–32 fintechs in, 151, 152 firms in, 28 labor market of, 184 choice, 6, 207–223 in banking and financial sector, 215–216 in education sector, 214
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–216 payment solutions and, 146–147 regulations affecting, 139–140 traditional role of, 138–139 See also banks Finkel, Eli, 83, 84 Finland, 147, 191 fintechs, 11 banks investing in, 149–156 niche markets targeted by, 147, 152 worldwide investments in, 149 firms, 87–107, 109–131 Amazon as, 88–89
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labor unions, 205 Lake, Katrina, 207–209 Large Hadron Collider, 22, 25 Le Pen, Marine, 186 Lehman Brothers, 155 lending by banks, 150–151 by fintechs, 152–153 Les, Jason, 59–60 liberals, 190 libertarians, 190–191 Libratus (machine learning system), 59–62, 78 Lindblom, Charles, 23, 26 LinkedIn, 202 Linnaeus
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between firms and, 30, 107 concentrated, 161–169, 171, 217 data-rich (see data-rich markets) decentralization in (see decentralization) feedback effects and, 160–175 fintechs and, 153 historical improvements in, 51–52 irrational decision-making in, 42–44 key difference between firms and, 32–33, 90 limitations of, 63 network
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, 71–85, 212 algorithms for (see algorithms) centralized, 74 complexity of task, 43–44 in conventional vs. data-rich markets, 70–71 decentralized, 74, 127 fintechs and, 151–152 firms and, 127–129 nonmarket providers of, 75–76 variety of contexts for, 74–75 Max Planck Institute for Human Development, 105
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Piketty, Thomas, 186 Pinterest, 210 poker, 59–62 populism, 13, 186 post-price retailers, 209 prediction markets, 50–51 preferences complexity of processing, 43–44 fintech extraction of, 151–152 improved means of capturing, 8, 64, 71–72, 76–81 standard language for comparing, 64 See also matching price, 7, 45
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standard operating procedure (SOP), 100–101, 106 start-ups, 141, 146, 199 increased capital available for, 142–143 network effects and, 165–166 See also fintechs Stash, 151, 215 steam engine, 111, 113 steel industry, 161 Stitch Fix, 208–212, 215 stock markets, 146 decreased investment options in, 143 share prices
Buy Now, Pay Later: The Extraordinary Story of Afterpay
by Jonathan Shapiro and James Eyers · 2 Aug 2021 · 444pp · 124,631 words
Australia and overseas, and Afterpay named three big ones. There was Bill Me Later, a business acquired by PayPal in 2008; ten-year-old Swedish fintech Klarna; and Affirm, which did real-time, fixed-term loans at the checkout. Some of the biggest venture funds were playing in the space. Andreessen
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the generous tax breaks afforded to venture capital funds in the form of capital gains tax exemptions and offsets were not available for investing in fintech: the Australian federal government’s ‘Early Stage Venture Capital Limited Partnership’ (ESVCLP) scheme excluded financial services start-ups and lenders. A bet on Afterpay would
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more valuable private business with better prospects. Provided the shareholders and directors agree, it’s possible for a doomed goldminer to transform into a trendy fintech. Winters had called on his client, Rubianna Resources chairman and barrister Philip Crutchfield QC, to provide the necessary boardroom support. Rubianna was a goldminer with
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an air of controversy was low. To test the waters, Beard set up a meeting with a fund manager who had a reputation as a fintech cynic. The manager was rattling off reasons why he would short Afterpay if he had the chance, before Beard interrupted to tell him that David
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amazing to watch retail change.’6 • • • The success of Afterpay’s US launch was turning heads at Klarna, one of the original point-of-sale fintechs seeking to disrupt credit cards. Klarna had been founded five years before Eisen and Molnar met, by Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsson, all
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government was supporting local start-ups and encouraging them to expand offshore, and here was Australia’s largest bank—one that had resisted backing local fintechs with venture capital equity investments, as Westpac, ANZ and NAB had done—investing in one of Afterpay’s and Zip’s biggest global competitors. Not
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. For Afterpay, the timing of Bragg’s inquiry could not have been better. From the outset, the select committee would be pro-fintech, intending to report on ‘the progress of fintech facilitation reform and the benchmarking of comparable global regimes’ and the ‘effectiveness of current initiatives in promoting a positive environment for
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fintech and regtech start-ups’.12 After failing to win pre-selection for the Senate and the lower house before the 2016 federal election—which saw
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, but now he could align himself with Morrison, who as treasurer had given a high priority to developing Australia’s fintech policy. Morrison and members of his staff had privately referred to fintech as their ‘happy place’. It combined technology policy with competition that could exert pressure on the major banks. Bank
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frame the inevitable march of progress for a sceptical electorate. After visiting the United Kingdom in early 2017, Morrison had been influenced by the pro-fintech policies of the UK government under Conservative chancellor of the exchequer George Osborne. At a speech to a high-level conference of G20 leaders in
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January 2017, Morrison said Australia would support fintech to boost banking competition and help facilitate access to new forms of finance. Australia wanted fintechs to ‘grow big, to thrive and deliver benefits for consumers and the economy’, he told heads of
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be improved. Bragg was confident that any recommendations his committee made would be well received by the prime minister, who was keen to safeguard his fintech legacy, and by treasurer Josh Frydenberg. • • • If Afterpay’s June capital raising had proved anything to Australia’s bankers and brokers, it was the money
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analysts, who thought they’d seen it all before, could not look beyond credit loss rates and capital intensity. They’d seen enough lower-case fintech start-ups that had fooled investors into thinking they were cutting-edge, only to be exposed as new twists on centuries-old lending models. But
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30 per cent. Molnar was asked about the rising competition a few months later by New York University professor Scott Galloway. He told him that fintech companies that had started with a traditional finance offering and that made money from revolving credit books that charged customers interest would struggle to win
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findings that large numbers of buy now, pay later customers were going into overdraft could be due to fears they would be cut off from fintech services. ‘It’s critical we look at the whole picture, and account for any negative spill-overs these services might have on other aspects of
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, it provided an insurance policy in case the payments wonks sided against them. The Bragg committee’s interim report—the first attempt to create a fintech plan for Australia—had been blunt in its assessment that regulators were stepping too far into policy-making. Now Treasury was backing that view up
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Afterpay’s back. And the next day, 8 December, that official support was confirmed by the prime minister himself. In a speech to the Singapore Fintech Festival, a large talkfest organised by the Monetary Authority of Singapore, which had hosted 60,000 people the previous year and in 2020 was holding
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Fink and former US treasury secretary Hank Paulson. While Gates and Pichai addressed financial inclusion, Morrison spoke about ‘what I believe is the compelling Australian fintech story’. He referred to the ‘great work’ done by Andrew Bragg and his committee. Morrison had appointed one of his mentors and close advisers, Peter
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Verwer, who was based in Singapore, as special envoy to attract talent to Australia, and had included fintech in his mandate. The prime minister told the audience Australia wanted to attract more ‘highly skilled people to develop and commercialise the next wave of
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cutting-edge innovations’, and fintech entrepreneurs should consider Australia a place to build their businesses. Fintech was still his happy place. Afterpay was specifically mentioned by Morrison in his speech. Buy now, pay later was ‘an
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which Affirm’s unique value proposition disintegrates, becoming a commodity. Banks and other capital providers with low cost of capital deposits build similar products,’ wrote fintech blogger Mario Gabriele. ‘As a result, consumers do not repeat purchases on Affirm, Affirm’s pricing power with merchants erodes, and acquisition costs grow. Affirm
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a tech-enabled personal loans provider.’7 That was the bear case. Wall Street had been fooled before into thinking old-school lenders were newfangled fintechs. Lending Club, a peer-to-peer lender that matched borrowers to individual investors seeking a higher rate of interest, had lost 90 per cent of
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its value as loans went sour and senior management were tripped up in ethical scandals. OnDeck was another fintech flop that had been exposed as an old-world business dressed up for new-economy investors. It had seen its shares surge after a late
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it could oversee the code’s development. AFIA had helped to develop a similar set of principles to govern conduct in the emerging small business fintech lending space, and its ability to build a self-regulation document for buy now, pay later was boosted in November 2019, when it hired a
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Fergie, January 2021. 3 Shaun Drummond, ‘ZipMoney attacks FlexiGroup, GE through $5m backdoor listing’, The Australian Financial Review, 30 June 2015. 4 Shaun Drummond, ‘Afterpay fintech float closes up 25pc’, The Australian Financial Review, 4 May 2016. 5 Vesna Poljak, ‘Why Dean Fergie likes Skydive the Beach, Freelancer, and Afterpay’, The
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May 2019. 6 James Eyers, ‘How the Kardashians helped Nick Molnar launch Afterpay in the US’. 7 Sam Shead, ‘Klarna becomes Europe’s most valuable fintech firm with new $5.5 billion valuation’, Forbes, 6 August 2019. 8 John Hempton, ‘Afterpay, a regulator view’, Bronte Capital, 28 November 2018. 9 Marcus
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helpful articles in The Australian, and to global news publications such as The Wall Street Journal, Bloomberg, The Financial Times and especially Forbes’ coverage of fintech in the United States. We also drew upon specialised retailing publications such as FashionUnited in the United Kingdom. Several books uncovered during our reporting process
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June 2015 John McDuling, ‘Atlassian IPO: Dual class shares and the case for founder control’, The Australian Financial Review, 11 November 2015 Shaun Drummond, ‘Afterpay fintech float closes up 25pc’, The Australian Financial Review, 4 May 2016 Mark Bryant & Wilson Wong, ‘Afterpay Another day, another deal’, Wilson HTM Research, 29 November
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the Kardashians helped Nick Molnar launch Afterpay in the US’, The Australian Financial Review, 31 May 2019 Sam Shead, ‘Klarna becomes Europe’s most valuable fintech firm with new $5.5 billion valuation’, Forbes, 6 August 2019 John Hempton, ‘Afterpay, a regulator view’, Bronte Capital, 28 November 2018 Marcus Padley, ‘Imagine
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The Australian Financial Review Banking & Wealth Summit, transcript, 18 November 2020 Prime Minister of Australia, Speech to the Singapore Fintech Festival, 8 December 2020, <www.pm.gov.au/media/virtual-speech-singapore-fintech-festival> Chapter 16 Lauren Sams, ‘In Vogue’, The Australian Financial Review Magazine, 26 March 2021 Natasha Gillezeau, ‘Afterpay underscores
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, Antonio 244 Morgan Stanley 97, 282 Moriah War Memorial College 4, 5–6, 10, 100, 131, 343 Morrison, Scott 145, 225, 226, 250, 260 pro-fintech position 250, 302–3 Mott, Jonathan 252, 255 Mulcahy, Julian 136, 336 Mumbrella 153 Murdoch, Rupert 126 Musk, Elon 176–8, 309, 311 Myer 44
Sabotage: The Financial System's Nasty Business
by Anastasia Nesvetailova and Ronen Palan · 28 Jan 2020 · 218pp · 62,889 words
those who do not share the general enthusiasm. They cast a weary eye on blockchain and its offspring, as well as on the whole new fintech phenomenon. For a good reason. PART TWO ‘NO CONFLICT, NO INTEREST’ Sabotaging the Clients Finance had become a central, even structural dimension of modern life
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take a look, then, at today’s dazzling new universe of cryptocurrencies that are being mined out of a computer algorithm. Or the industry of fintech. 12 THE CRYPTO Mining the Money ‘I will now buy boots for the missus!’ declares a scruffy but glowing Lyonya Golubkov in the first instalment
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in Russia but everywhere. It is the regulatory niche in which a myriad of new financial instruments and innovations, the so-called financial technology, or fintech for short, is operating. Third, to furnish proof of concept, in 2011 the very same Sergei Mavrovi would launch a new shiny
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fintech version of MMM Global, now a web-based financial network promising 30–75 per cent monthly return at no risk. The network created its own
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is what they were – were left holding exactly what they bought, the virtual mavros. It appears that they will hold those till eternity.2 THE FINTECH SECTOR Fintech is a technology-anchored universe that involves, among other things, cryptocurrencies, blockchain, data mining, peer-to-peer lending, crowdfunding, money transfer services and smart
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innovations extend beyond financial services, where they have facilitated a range of new fundraising and investment opportunities on various platforms in cyberspace. The evolution of fintech has been both rapid and diverse, and it is clear that it can develop in any imaginable and, as yet, unimaginable direction. Broadly
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, fintech is seen as a positive development. Mark Carney, the governor of the Bank of England, recognized fintech’s ‘huge potential for making the financial system more inclusive, efficient, effective and resilient’.3 In March
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2018 the European Commission adopted an action plan on fintech to foster a more competitive and innovative European financial sector.4 The
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Fed is embracing fintech, too, although with some apprehension. So is fintech really one of the greatest sets of innovations in finance, about to democratize the
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strong grip that big money and big banks have on society? Not so, says Izabella Kaminska of the Financial Times, a sceptic. She believes that fintech is nothing but the Eurodollar market 2.0.5 It combines many elements, from encrypted transactions to hidden identities and e-wallets, each of which
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currency, to be called the Libra. If financial innovation normally leads to some sort of sabotage, then fintech is emerging as its Holy Grail. REAL PROBLEMS, REAL SOLUTIONS AND SABOTAGE Many aspects of fintech are designed to respond to real issues. Let us take the case of peer-to-peer lending. Traditionally
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. In a world where anyone can create money, crime groups have an interest in launching their own money transmission services and popularizing them as legitimate ‘fintech’ alternatives. As more and more jobs and services go off the official economic radar into the underground of the ‘gig’ economy, exchanging their skills for
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would apply for a job as a money mule – an activity that helps criminals launder money. To appear alluring, the job ad drew heavily on fintech buzz. Out of 2,000 people presented with the ad, one-third said they would apply for the job; only 15 per cent rightly identified
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technological boom is marked by a good portion of dubious and overtly fraudulent schemes. As with many financial instruments, the problem does not lie with fintech as such, but in the conditions of a rapidly innovating competitive financial environment that is relatively unregulated. Inevitably, such an environment invites the saboteurs. This
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if you are not particularly sympathetic towards the plight of high-net-worth individuals, consider millions of customers of new lending platforms, including in the fintech sector, that promise astronomical returns to their investors, only for the new crypto managers to melt into the ether of the Internet, together with the
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both systemic and systematic. Within that sector the constant fight against competition and for market control means that our financial intermediaries – be they banks, new fintech start-ups or shadow banks – use their size, capital, innovation and command of technology to bypass existing regulations, grow in power and autonomy, undermine competitors
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. Burrough, B., ‘Bringing Down Bear Stearns’, Vanity Fair, 30 June 2008, www.vanityfair.com/news/2008/08/bear_stearns200808-2. Carney, M., ‘The Promise of FinTech – Something New under the Sun?’, speech at the Bank of England, 25 January 2017, www.bankofengland.co.uk/speech/2017/the-promise-of
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-fintech-something-new-under-the-sun. Clifford Chance LLP, ‘Independent Review of the Central Allegation Made by Dr Lawrence Tomlinson in Banks’ Lending Practices: Treatment of
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, www.ft.com/content/60fa7da6-c414-11e7-a1d2-6786f39ef675. Josephson, M., The Robber Barons: The Great American Capitalists 1861–1901, Harcourt Brace, 1962. Kaminska, I., ‘Fintech’s security/access paradox problem’, Financial Times, 3 October 2016, https://ftalphaville.ft.com/2016/10/03/2176471
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a gateway for criminal enterprise’, Financial Times, ‘Alphaville’, 12 January 2018, https://ftalphaville.ft.com/2018/01/12/2197610/fintech-as-a-gateway-for-criminal-enterprise. Katz, L., ‘Criminals may ditch Bitcoin for Litecoin, Dash, study says’, Bloomberg, 8 February 2018, https://www.bloomberg.com/
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.uk/entry/fed-lending-helped-wall-street_n_853884. Newman, D., ‘Exploring 5 trends driving the fintech revolution’, Forbes, 3 July 2018, www.forbes.com/sites/danielnewman/2018/07/03/exploring-5-trends-driving-the-fintech-revolution/#3a83941812c7. Noonan, L., and P. Jenkins, ‘JPMorgan: defying attempts to end “too big to fail
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to disentangle the CDS exposure of Lehman Brothers and many other firms that failed in 2007–9. 32. D. Newman, ‘Exploring 5 Trends Driving the Fintech Revolution’, Forbes, 3 July 2018. PART TWO. ‘NO CONFLICT, NO INTEREST’ Chapter 4. Dead Souls at the Royal Bank of Scotland 1. Letter to Treasury
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not have a law on securities fraud. 2. ‘How MMM Works?’, https://bitcointalk.org/index.php?topic=77276.0. 3. M. Carney, ‘The Promise of FinTech – Something New under the Sun?’, speech at the Bank of England, 25 January 2017, www.bankofengland.co.uk/speech/2017/the-promise-of
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-fintech-something-new-under-the-sun. 4. European Commission, ‘What is Fintech?’, https://ec.europa.eu/info/business-economy-euro/banking-and-finance/fintech_en. 5. Back in the late 1950s the Eurodollar market, a market that emerged
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Chinese peer-to-peer lenders sparks investor flight’, Financial Times, 22 July 2018, www.ft.com/content/75e75628-8b27-11e8-bf9e-8771d5404543. 15. I. Kaminska, ‘Fintech’s security/access paradox problem’, Financial Times, ‘Alphaville’, 3 October 2016, https://ftalphaville.ft.com/2016/10/03/2176471
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/fintechs-securityaccess-paradox-problem/. 16. Until 2013 the so-called Silk Road (DEF) was the primary e-commerce platform on the dark web. After its founder,
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of fraud’, Coin Telegraph, 16 May 2018, https://cointelegraph.com/news/sec-launches-mock-ico-to-show-investors-warning-signs-of-fraud. 27. I. Kaminska, ‘Fintech as a gateway for criminal enterprise’, Financial Times, ‘Alphaville’, 12 January 2018, https://ftalphaville.ft.com/2018/01/12/2197610
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/fintech-as-a-gateway-for-criminal-enterprise. PART FIVE. CONCLUSION Chapter 13. Old News 1. R. McKinnon, Money and Capital in Economic Development, Brookings Institution, 1973.
The Pyramid of Lies: Lex Greensill and the Billion-Dollar Scandal
by Duncan Mavin · 20 Jul 2022 · 345pp · 100,989 words
of a general strategically deploying his army. This time, Lex’s top table was heavily weighted in favour of executives with experience in so-called ‘fintechs’ – financial technology companies that had proliferated across London since the financial crisis. Many of those were Silicon Valley clones, based in cool former warehouses or
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early, the potential pay-off could be huge. It was like winning the lottery a hundred times over. Lex had taken to calling Greensill a fintech too. In reality, it was nothing like that, culturally or in a business sense. In contrast to the uber-casual tech scene, Greensill’s senior
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, it had little in the way of actual new or proprietary technology. But that didn’t really matter. If Lex said the business was a fintech enough times, others would repeat it, and the money flowed in. There was another term frequently applied to Greensill: ‘shadow bank’. In the aftermath of
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Lex twist was to add new technology. In the wake of the financial crisis, there had been an explosion in new financial technology companies, or fintechs. Some of these were in the payments processing space, and included PrimeRevenue, Orbian, Taulia and Demica. Lex was no techie. Instead, he hooked up with
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a series of other aspiring entrepreneurs who carried the bulk of the technology he needed to run the business. And then he liberally applied the fintech tag to Greensill Capital too. To make it all work, Lex created a tangle of special purpose vehicles (SPVs), trusts, offshore companies and subsidiaries that
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corporate debts with insurance, which made it look as safe as putting money in the bank. And Greensill was touting itself as a hot new fintech, when in reality Greensill was a financial intermediary with an appetite for convoluted corporate chicanery. FOUR Mixing Business and Politics Lex Greensill’s rise to
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businesses too. It became a running joke that former CEOs of the biggest banks in the world were no longer playing golf. They were joining fintech company boards. This was the world into which Greensill Capital was born. Lex had his backers – a collection of his former banking bosses and the
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going to get any bigger. There were worries about Greensill’s technology – it wasn’t up to scratch. Lex liked to say Greensill was a fintech. But GA’s team felt a $50–$60 million tech action plan, aided by a top consultant like Bain or Boston Consulting, was needed to
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had caught wind of people mocking the office’s former look and ordered a change. He’d also decided that Greensill’s branding should be fintech, not investment bank, so the medieval armour had to go. My meeting got off to a bad start. The bombastic former journalist James Doran changed
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his life. He donated £2.5 million to Manchester University to support the appointment of a ‘Greensill Chair in FinTech Investment’. The vice chancellor said the donation would help boost the university’s fintech credentials. In a press release, Lex said, ‘We are delighted to be able to give back to an
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loss. These programmes also mostly ran on someone else’s technology. This was one of the biggest misdirections under Greensill. Despite claiming to be a fintech, Lex didn’t really have much in the way of unique technology, and so relied on third parties like Taulia or PrimeRevenue. The
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fintech branding only really came to the forefront after Lex got a big round of funding from General Atlantic. The other big misdirection was that Greensill
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monthly is effectively providing a kind of credit to our employers. We supply our work up front, and the employer pays later. A clutch of fintech believers say that the traditional payroll process is deeply unfair, woefully outdated and ripe for disruption. Instead, businesses like FreeUp aimed to let workers draw
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organizations. They were backed by the venture capital investor Public, which is run by a former Number 10 policy adviser. As well as being a fintech, FreeUp was one of a new breed of so-called ‘GovTech’ firms that were pushing new technologies into the public sector around the world. The
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San Francisco-based platform for supply chain payments run by a Danish tech entrepreneur named Christian Lanng. Tradeshift had been something of a fast-rising fintech star that billed itself as a cloud-based platform for supply chain payments. It had attracted hundreds of millions of dollars in funding and counted
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, ref7, ref8, ref9, ref10 Skilled Persons Reviews ref1, ref2 financial crisis 2008 ref1, ref2, ref3, ref4 aftermath ref1, ref2, ref3 and central banks ref1 and fintechs ref1 tougher regulations following ref1, ref2 Financial News (banking publication) ref1, ref2, ref3, ref4, ref5, ref6 Financial Reporting Council ref1 Financial Times (newspaper) ref1, ref2
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, ref3, ref4, ref5, ref6, ref7 Finews (Swiss news site) ref1 ‘fintechs’ ref1, ref2, ref3, ref4, ref5, ref6 Fitch ref1 ‘flash title’ ref1 Fleetsolve ref1 Food Revolution Group ref1 Forbes (magazine) ref1 Ford ref1 Ford, Bill ref1
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’ pitches ref1 expansion ref1, ref2, ref3, ref4, ref5, ref6, ref7, ref8, ref9 external public relations ref1, ref2 EY investigation into ref1 fault lines ref1 as ‘fintech’ company ref1, ref2 fraud and misconduct allegations ref1 and General Atlantic ref1, ref2, ref3, ref4, ref5, ref6, ref7, ref8, ref9, ref10, ref11, ref12, ref13, ref14
The Great Reversal: How America Gave Up on Free Markets
by Thomas Philippon · 29 Oct 2019 · 401pp · 109,892 words
expensive. Banks generate large spreads on deposits (Drechsler, Savov, and Schnabl, 2017). This might be changing, however, thanks to the entry of financial technology (fintech) players. Fintech includes digital innovations that can disrupt financial services. As usual, innovation is a double-edged sword. Innovations can provide new gateways for entrepreneurship and democratize
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access to financial services, but they also create significant privacy, regulatory, and law-enforcement challenges. Examples of innovations that are central to fintech today include mobile payment systems, crowdfunding, robo-advisors, blockchains, and various applications of artificial intelligence and machine learning. All the large financial firms have jumped
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it will require its asset management analysts to learn to use Python, a powerful and flexible coding language. This is not to say that all fintech ideas are great. There is a lot of hype and buzzword use. “Big” data is just data. “Machine learning” often simply means running a large
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. Of course, 7.1 percent is still expensive. But at least the trend is in the right direction. For fintech to really succeed, however, regulations must be adapted. As in other industries, fintech startups propose disruptive innovations for the provision of specific services. The key advantages of incumbents are their customer base
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choices. In banking, for instance, successive mergers have left many large banks with layers of legacy technologies that are, at best, partly integrated (Kumar, 2016). Fintech startups, by contrast, have a chance to build the right systems from the get-go. Moreover, they share a culture of efficient operational design that
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in the finance industry. Ensuring a level playing field is a traditional goal of regulation. Serge Darolles (2016) discusses this idea in the context of fintech and argues, from a microeconomic perspective, that regulators should indeed ensure a level playing field. This line of argument, however, cannot be readily applied to
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industry has several trillion dollars under management. Thus the challenge for regulators is to look ahead when dealing with fintech. Effective regulation requires them to identify some basic features they would like fintech to have and mandate them as early as possible. I think that is a key lesson for the regulation
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of fintech. I recall a fascinating exchange at a recent conference about blockchains and privacy. There is a tension between the principles of blockchains (such as their
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from the beginning. It would be much more difficult to let it grow and then, ten years later, ask for new features to protect privacy. Fintech is also likely to create new issues of consumer protection. Think of the example of robo-advisors for portfolio management. Robo-advising will certainly create
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new, and what is new is not valuable. There are some reasons to think that this might be changing, in large part thanks to fintech firms. But fintech innovations will not automatically enhance stability or democratize access to financial services. If we want to reap the benefits from better technology in finance
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billion. The move was expected to help Microsoft compete against Amazon Web Services. c Omarova is quoted in Rana Foroohar, “Banks jump on to the fintech bandwagon,” Financial Times, September 16, 2018. d The GDPR requires companies to notify regulators of breaches within seventy-two hours. In the US there is
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that government should impose taxes to correct negative externalities, such as a carbon tax to address the problem of climate change. See also network externality. fintech: Digital innovations in the financial services industry. free entry: The ability of new firms to enter a market and begin producing and selling a product
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. Ederer, and S. Ma (2018). Killer acquisitions. Working paper, August 28. http://dx.doi.org/10.2139/ssrn.3241707. Darolles, S. (2016). The rise of fintechs and their regulation. Financial Stability Review 20, 85–92, Banque de France, April. Davis, S. J. (2017). Regulatory complexity and policy uncertainty: Headwinds of our
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; behavioral differences in, 214–216; financial technology and cost of, 217–218; regulation of, 218–220; lobbying in, 220–222; efficiency of, 290 financial technology (fintech), 217–218, 219–220 FiOS, 6 First Industrial Revolution, 13 Fisher, Edwin R., ix Fisher, Irving, 45, 202 Fisman, Raymond, 199 fixed net asset values
…
taxis, 19 technology: interaction of regulation and, 4; and US per-capita economic growth rate, 15–16; as problem-solver, 277. See also financial technology (fintech); information technologies; internet giants Telecommunications Act (1996), 3 telecommunications industry: deregulation of, 3–4, 30–31, 140–141; lobbying by, 170. See also internet service
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