Welcome back to our course on FinTech Foundations and Overview In this session, we're going to be talking about FinTech for dinosaurs And I'd like to introduce a guest speaker and a person that I'll be talking to about this topic who is Veronique, who is a professor here at UST She's been here more than ten years teaching finance at HKUST Hong Kong University of Science & Technology, and has been working in the finance and banking industry since the early 1980s She gave a presentation here at our university on FinTech for dinosaurs And I found it an interesting point of view, and opportunity for thinking, or setting a foundation of what is FinTech? And why does it matter? And how should banks or big firms think about it? So with that, let me turn the time over to Veronique to share some of your thoughts on this topic of FinTech for dinosaurs >> Hello everybody So I'm going to talk about FinTech from the point of view of a dinosaur because I've been in the industry for over three decades, and I've seen a lot of changes And to me, what we now call FinTech is really nothing new because financial firms have been using technology to improve services as far back as the industry has been around, which is quite a few centuries, actually And if you think about it, Paul Volcker who was a former chairman of the Fed, he was discussing technology And he said, well, as far as I'm concerned, the most important financial innovation is actually the ATM, and ATM is a very powerful innovation I've seen the birth of it Because it gives you access to financial services whenever the banks are closed So from this point of view, it's an amazing transformation that has had a big impact on consumers around the world Now, when I started working, which was back in the early 1980s and at a bank and at the time, was the largest bank in the world in terms of assets What did I have to work with? We had a big mainframe computer It used up the space of a huge room, but it had less computing power than what you have currently in your phone I had a telephone Now, this is not a mobile phone This was a fixed-line phone with a rotary dial, and you picked up and you dialed, and hopefully there was somebody at the end of the line One of the most important things that we use was the Telex Telex machine, think of it as a typewriter with a big roll of paper And it combined the technology of typewriter and the wire Telex was used up until early 2000 to confirm international transactions between banks We obviously used typewriters, and we were very modern because we used electric typewriters And of course, the post office the post office was used to send documents from one party to another So this is what I had to do, what this is, what we had to do within the industry Now, did that make the industry inefficient? No, we did multibillion dollar transactions just like we did today So what has happened over all my 20 odd years in banking? Well, I have witnessed a lot of changes, and the impact of those technological innovation was multidimensional One of the important impacts was how technology made things more efficient To take one example, we started off with typewriters, so those secretaries would take that dictation, and then type the memos, or the letters on a machine together with carbon copies Now, we adapted the Wang machine technology which was one of the very first word processor, and it was a big change for all the secretaries because all of a sudden, it was very easy to make changes to a memo Which meant that the people dictating were taking less care and were more prone to do changes Think about also what the impact is in terms of the jobs because now you can actually type your memo yourself You don't actually need to dictate it to a secretary who would then type it on the typewriter The second and most spectacular impact of technology is how technology changed how fast transactions are processed So when I started, we were using the post office to send documents And then one day, we had a fax machine So the fax machine transformed the speed of transactions, because you can then send information across the world almost instantly So think about the transaction you do Let's say I was in Paris doing a deal somewhere in Indonesia, and I had to send the contract to the lawyers in Indonesia Well, we had to put it in the envelopes and through the post office When it got to Indonesia, the lawyer would open the envelope during office hours then mark up the contract, send it back Think multiple month Fax machine? You put the thing in the machine, it comes out on the other side, and you have an almost instant response Think how fast we have moved But of course today, we're talking even faster because we are talking about systems like high frequency trading Algo trading, where the speed is incomparable In seconds, we do things that would take a year to do The volume of transaction that we can handle, and the speed at which they are processed exceeds everything that we have seen so far The third aspect is information Now, when I was very young, I had to find the information Our regulators struggled to find information If I didn't have the book in the library, where was I going to find the information? Today, my students google everything They have access to all the information they need but they have way too much information And the source of that information is not carefully vetted So we have an overload of information we don't know how to process it, and the perspective is quite different And think about what it means in terms of regulation Our regulators, for most of them, come from a generation like mine or even a generation younger which is still in this mind frame of I need access to more information The reality is that they get tons of information and the challenge is to find which information is relevant which information can be trusted, and what to do with this information So what's going on right now? So we talk a lot about the rise of FinTech, but a lot of people also talk about TechFin So what's the difference? FinTech is basically financial institutions using technology to improve their processes, TechFin is technology institutions providing financial services Think Alibaba, Alipay, Tencent, etc. And of course, when we think of FinTech today even though technology has been used by financial institutions for centuries we associate it mainly with the big giants from China that have totally revolutionized the financial markets in China
