FinTech FNCE 385
What is a solution to the wealth management problem?
"Robo Advisors" - Doesn't pick stocks, it combines efficient funds. - Inexpensive and works for even small accounts
What's the SME financing gap?
1. 70% don't use formal lending 2. SME credit gap estimated at 1.5T globally 3. Restricted access to finance is the #1 constraint to growth
Example solutions for the transfers problem?
1. Aggregate individual transfers 2. Cancel out transfers w/ P2P payments 3. Create alternative and cheaper rails like Blockchain
2009 - present in fintech is driven by what?
1. Size, profitability, lack of efficiency of financial sector 2. Tech enables change 3. Financial crisis and regulatory response 4. Demographic shift
What's the technological history of tech in finance?
1918 - Fedwire Funds 1950 - Modern day credit cards 1960 - Quotron systems 1967 - ATMs 1970 - First interbank payment system "Chips" established 1971 - Nasdaq 1981 - First online banking 1982 - Etrade is first online broker 1987 - Black Monday Crash 1993 - fintech becomes a term 2009 - Bitcoin is released
Consumer finance has approximately how much revenue per sector?
2.1 trillion in total. 872 billion in lending. 697 in insurance. 300 in payments. 189 in personal finance. 90 billion in wealth management
How large is the transfers across boarders business?
5-10T a year
What's the percentage of adults in the world without financial services?
80 % have mobile phones.
What did the financial crisis and regulatory response do to the industry?
Added business limits (trading) and compliance requirements / costs - Damaged banks reputations and public's trust in them
What is invoice financing?
Allowing businesses with AR to sell their receivables (Factoring) ex is Fundbox
What's new with fintech?
For the first time, innovation is coming from outside the financial services industry (lending, payments, investing)
What are the barriers to Health insurtech?
Heavy regulations, capital intensity
What were the large verticals of Fintech?
Lending, Investment, Transfers/payments, Insurance, Underbanked
3 Modules of the course?
Lending, clearing, trading
McKinsey and Accenture cite what as the stakes of Fintech?
Mck - 10-40% of revenues by 2025 Accenture - 35% by 2020
What is Market Place Lending?
Online data-driven platforms that use capital to lend out directly or indirectly to individual and small business
Merchant and E-commerce financing examples?
Payment processors like PayPal and Square. Merchants offering working capital for businesses on the platform like Amazon, eBay, etc.
New business models in the Insurtech realm?
Peer-Peer, Transparency, new products (cyber attack insurance)
What's the rationale for creating market place lending?
Rate arbitrage, convenience, underbanked markets
What is the "Key" of what Fintech does?
Removes Frictions
What are the typical lending segments?
Revolving consumer credit, small business loans, student loans, mortgages (Mortgages the largest immediately addressable opportunity, but SME largest segment of loans outstanding)
What are products offered by SME lending?
Short-term unsecured loans, revolving lines of credit
Big Data, Machine learning and AI do what for financial services?
make business predictions better and cheaper
Definition of bitcoin?
A new electronic cash system that is fully Peer to peer with no third party
SME marketplace lending has what funding sources?
Balance sheet lenders (Kabbage), Direct Model (Lending Club), Hybrid Model (OnDeck)
What are some examples of new technologies in Fintech?
Big Data, Machine Learning, AI Blockchain and distributed ledgers Mobile devices and IOT API
Blockchain and distributed ledgers do what for Financial services?
Decentralize commerce and control
Two types of crowd funding?
Donation / reward based, and Equity based
Mobile devices and IOT do what for the industr?
Integrate the physical and digital worlds
What are the growth drivers for lending?
Interest rate environment close to zero, Banks diminishing risk appetite, low consumer default rates, Regulatory arbitrage (governance based on classification and not services) Availability of information Demographic shifts
What's the problem with wealth management that needs to be solved?
It's expensive (1-3% in annual fees), requires large balances, subject to conflicts of interest and complexity
What's the "Jobs Act"
Jumpstart our business startups act. Increased the threshold before a company must register w/ SEC. Exceptions for investments made by non-accredited investors. Allowed to raise up to 1MM in 12 months.
What is the underbanked segment?
Those who have bank accounts but mainly rely on non-bank solutions for basic financial needs
API does what for the industry?
Turn banks into "pipes"
What are examples of the frictions in Fintech?
Unit processing cost, Asymmetric information, Agency conflicts, Trust, search costs, Latency
Definition of Fintech?
Use of technology and analytics, often through new business models, to lower frictions in financial services
