Our primary goal is to help you to understand FinTech and to become more confident and persuasive in your ability to analyze and make recommendations to executives within the finance industry regarding how to react to these changes. This FIRST MOOC ON FINTECH IN ASIA-PACIFIC offered by HKUST presents the views of several professors from the top business school in Asia as well as perspectives from industry professionals. HKUST has been ranked for many years as the number one EMBA program in the world, as the number one Finance program in Asia, and as the top MBA program in Asia by multiple independent rating and review journals and surveys. This course offers the combined strengths of HKUST in Business, Finance, and Technology as one the world's leading academic institutions on an important area of technology and business innovations. For students from outside Asia, this also gives an insight into changes happening in the most advanced FinTech markets of the world, since Asia leads worldwide in FinTech adoption and creative innovations. This course (FinTech Foundations and Overview) is part of the HKUST FinTech specialization, there will be 3 other courses in the specialization including FinTech Security & Regulation (RegTech), FinTech Risk Management, FinTech Innovative Disruption: Implications for Society.
1.2: FinTech For Dinosaurs (Part 1)
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From the course by The Hong Kong University of Science and Technology
FinTech Foundations and Overview
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The Hong Kong University of Science and Technology
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Course 1 of 4 in the Specialization FinTech: Finance Industry Transformation and Regulation
From the lesson
Introduction to FinTech
In this module (week one), students will gain a multi-dimensional perspective on what FinTech means from the perspective of large firms (and older participants in the industry - e.g. dinosaurs), entrepreneurs, investors, and consumers. Examining what FinTech is, or is not, provides a foundations upon which students can build for better understanding of opportunities and changes.
Meet the Instructors
Theodore Henry King CLARKAssociate Professor
Information Systems, Business Statistics and Operations Management Department
Welcome back to our course on FinTech foundations, an 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.
Think about how Alibaba created a whole new world for
money markets with [INAUDIBLE].
So in the mind of the general public, and
in the mind of the industry, FinTech is very closely associated with China.
And it's very clear that in China, those technology platforms has enabled
the country to leapfrog over a lack of financial development from the incumbent.
Now, it's all about information.
It's all about data, and the business model of a lot of these
platforms is about making money out of data, in other words, data monetization.
At the same time, it's all about analyzing the data.
As I mentioned, we have a lot of information,
but it's an information overload.
It's not vetted, it's not analyzed.
How are we going to deal with that data?
There's also a lot of discussion about the technology platform model,
and particularly when you think of a firm like Apple,
relies a lot on developing an entire ecosystem around it.
Are we talking about the Apple-ization of finance, or
are we looking at a different model to run the industry?
And most importantly, when I think of my students, I think, what about the jobs?
What are the jobs going to be tomorrow,
in an industry that is going through profound changes?
So what's the downside?
The first thing, if you think that, like I do,
with that information and data is the key.
Who owns it?
Is it the person who produces it?
Is it the person who analyzes it?
Is it the person who uses it?
So who owns the data?
Let's look at an example, for example, if you look at stock exchanges, all right?
Stock exchanges get a lot of information from all the transactions that go through
the platform.
Does that information belong to them?
Does it belong to the users?
And what can they do with it?
Can they sell it?
Stock exchanges are now for-profit organizations, and they work for
their shareholders, as opposed to working for their members.
So is this data belonging to them?
Does it belong to the government and the regulators?
Does it belong to the users?
What can they do with it?
Can they charge you for access to your own data?
That data, can it be stolen?
This is not physical, this is something digital.
So if somebody accesses this data, is it stolen?
Or does it still belong to you?
And if it happens, what can you do about it?
Who can you complain to?
Which brings about the problem of regulation,
which has been a very tough problem.
Because regulators operate within national boundaries,
and in the real world, but technology has no borders,
or difficult to put borders in place.
So who is the regulator?
And I think these are big challenges that we're facing today.
Some of the scary stuff to conclude, because I have to present the view of
what I think is the downside, as we are now moving
INto an area of artificial intelligence, deep learning, machine learning.
So again, who owns the data?
What can you do with it?
And when you think that eventually you will have artificial intelligence
problems, artificial intelligence, designing,
artificial intelligence programs, how do we control this?
And also, we have a very positive,
very optimistic outlook on technology from the younger generation.
We don't look so much at the failures.
And hype has come from successes, which are very widely publicized,
as Dr Eberhard Schoneburg said recently.
We don't hear so much about the failures,
maybe we should be looking at them more carefully.
>> Well thank you for sharing these thoughts and ideas.
One of the things that I think about, when I think of dinosaurs, is Jurassic Park.
They're scary, and they're big, and they eat up humans.
So maybe either FinTech firms as dinosaurs are going to eat up all
the little startups, and the big banks are going to dominate,
but the dinosaurs went extinct, they all died.
So are the banks going to die instead, and FinTech firms are going to thrive,
and dinosaurs will be gone?
>> No, no, I don't believe that banks will die, I think they will adapt.
I mean, banks have for centuries.
Some have survived, some have stayed for a couple of centuries.
And they've had to deal with technological inventions before.
So I believe that banks can adapt.
It's of course a matter of the management of the bank, and the culture of the bank,
how- >> But some have died.
>> Yes, of course, but then firms have died before.
And it's nothing.
I mean, I can talk from example of a particular bank that merge with another
bank, it was a clash of culture.
Within six months, the bank was dead.
>> Yeah. >> It has nothing to do with technology,
it was simply a bad bet on a merger
without taking into consideration the culture.
So firms die for all kinds of reasons, generally to do with management.
It can be a wrong bet on the wrong technology, but
it's not specific to banks.
>> Okay, so tech can matter, tech can precipitate problems,
tech can be badly managed, but it's not the only reason that banks may fail,
they may fail- >> Of course.
>> For a variety of reasons.
And sometimes they get bought out, sometimes they merge, sometimes there's
a financial crisis, sometimes they don't get bailed out by the government, and
some banks can win or lose over time.
>> That's right.
>> All right, well thank you very much, I appreciate this discussion on FinTech for
dinosaurs.
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