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. The FinTech specialization will be launched in Fall 2018, stay tuned!
1.6: FinTech For Entrepreneurs (Part 3)
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From the course by The Hong Kong University of Science and Technology
FinTech Foundations and Overview
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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 fundamentals and overview.
In this session, we're going to talk about FinTech from the perspective of investors,
or what does FinTech mean for investors?
And to help with that discussion, I have a young person with me today,
a Millennial, Joshua, who is a FinTech investor.
And he's excited about some aspects of FinTech, and
some of the things that are going on at technology.
And he's going to share some of his views on what does FineTech mean from
an investor and young persons perspective today.
So go ahead Joshua, tell us what you think about this.
>> All right, well, in the past,
I think most people, when they talk with their friends about their
investment portfolio, things such as properties, stocks, bonds, would come up.
And something that I've started to notice in the last couple months,
especially hhas been that people started
to talk about their cryptocurrency as a form of investment.
A lot of them are starting to do day trading, some of them are holding for
a bit longer periods of time. >> But
are young people really talking about stocks and bonds, and then property,
and portfolio, and retirement accounts? >> Some people.
>> Are they just excited about BitCoin?
>> A lot of people are very excited about
BitCoin and cryptocurrency, in general.
It seems like a lot of people in the past,
stocks didn't excite them.
Maybe it was too slow or maybe it was too foreign, or it wasn't new.
So when cryptocurrency came around, especially BitCoin,
there was a sparkle in the eyes of a lot of young people.
And that like, whenever they talked about it, whenever they heard about it,
like there was some passion that was, that you never really
got from traditional investments. >> I remember that same passion,
about 20 years ago, in the dot-com boom.
And people were so excited because e-commerce was going to change the world
and it would change everything.
And this is the future, and it's going to go up, and up, and up.
>> Yep.
>> And it was wonderful, and
a lot of people got into day trading, they bought stocks, and they got excited.
>> Yeah.
>> Isn't that what we're seeing now?
>> That could be a repeat.
A lot of the people that are invested in cryptocurrency, some of them can't barely,
legally drive, so I mean, a lot of them weren't around for the dot-com.
>> For the dot-com.
>> Yeah, so-
>> Okay, so [CROSSTALK] The HYIP and
the crash. >> Yeah, so to a lot of them,
it seems like their parents or their grandparents telling them,
like beware of, this happened before,
this craze has happened before, so you've gotta be careful about it.
So that has happened, but- >> [CROSSTALK] That I'm a dinosaur.
I've been around a long time. >> Right.
>> Long before
the e-commerce dot-com boom.
And when I was a young man, it was all about real estate.
>> Yes.
>> And real estate was going to go up, and
up, and up, and
they said, you'll never lose money on real estate, it always goes up.
It only goes one way, and you'll get rich and you could buy zero money down and
leverage, and do wonderful things, and of course, we've had
several real estate crashes since then. >> Yeah,
in 2008, that was- >> But that's just a recent one,
we've had crashes in the late 1980s and
prior to that, we had a real estate meltdown and crash.
So we've been through some of these crises, booms and busts,
bubbles and crashes. >> Yeah, it's something that happens in
the crypto world as well. >> Okay.
>> Except we tend to see these cycles
happen at a much, much quicker rate.
We see the gains are amplified, we see the losses are amplified.
If you're- >> I thought dot-com was fast,
this sucker is really fast. >> I mean, if a stock gains 20% in a year,
you're pretty ecstatic about that. >> Right.
>> But if a crypto moves 20% a day,
you're just like, that's every other Tuesday, right?
So, >> Yeah.
>> I mean,
that's something that really appeals to the younger generation,
I think, is that, we grew up with things, had our fingertips,
like some people refer to us as the microwave generation.
Things have to be immediate, quick.
So when people look at cryptos and then they see things happening really quickly,
that I think, excites the core of what Millennials [CROSSTALK]
>> Nothing else, it's fun,
>> Yeah.
>> Or interesting.
>> At the bare minimum, there's a lot of,
I mean, it's kind of like, it's basically the stock market on drugs.
It's like super quick, super fast,
super intense, >> [LAUGH]
>> So,
>> And this might
make, >> Yeah.
>> Bankers feel a little
uncomfortable, >> Yeah.
>> Investments on drugs.
>> Yeah.
>> Maybe not the analogy that your banker
wants to hear you talk about when you're going to apply for a loan.
>> [LAUGH] Probably, yeah.
>> Okay, so
young people are liking crypto.
Why do they, why are they so excited about this?
>> Well, there's a couple reasons.
The first is that, I mean, this is the generation that grew up with an iPad.
This is the generation that grew up with a computer in their home, right?
[CROSSTALK] >> Forget this sometimes, that we've only
had an iPhone or an iPad for ten years. >> Yes, and
so their whole lives have, they've grown up with tech.
And crypto is fundamentally, it's a tech, right?
So a lot of, if you're naturally interested in technology,
you're probably going to check out crypto at the very least.
>> But what about other kinds of FinTech?
It's not all about crypto, there's a lot of other FinTech businesses.
>> Right.
I think that, if we're talking about investments, this is the hyper investment.
This is, especially as a young person in their 20s or
30s, in general, they're less risk-averse.
It's like, if you go and
invest your whole life savings in BitCoin when you're 20, that's fine.
You go bust, so what, right?
But you can't do that when you're 60, right?
So in general, because people are way less risk-averse when they're
young. >> Right.
>> So we tend to see
the average age [INAUDIBLE] >> What do you think young people think
about things like crowdfunding or crowdsourcing,
putting financial services all online.
How do you feel about this?
Is this exciting as an investor,
or opportunity? >> I think, this is just a natural thing
that has happened, like having your banking on your phone.
It's like I could pay for my dinner with my phone?
Well, [CROSSTALK] >> Why wouldn't I do that?
>> Why wouldn't I be able to,
I mean, I have- >> Yeah, of course.
>> A computer in my phone, right?
>> Yeah.
>> So I mean, a lot of,
I would say a lot of those FinTech developments in the last ten years, a lot
of it is just natural to, [CROSSTALK] >> So
just feel comfortable to invest in tech. >> Yeah, it feels very comfortable to
invest in tech in general. >> Okay, so
things are moving fast, we got fast profits, fast losses.
The industry is transforming. >> Yeah.
>> How do young people or
investors that are excited about FinTech and crypto,
feel about traditional banks? >> I would say a lot of them.
I know a lot of people that have crypto and they don't have stocks.
Now, that sounds completely bizarre to somebody a bit older.
They're like, why wouldn't you, [CROSSTALK]
>> Diversify or
dabble with the traditional investment before you move onto
this crazy investment. >> So your dad might say that?
>> Yes, my dad would definitely say that.
>> Okay.
>> So I mean, I think a lot of, yeah,
it just comes down to people who are, they grew up with this,
they grew up with tech, so they're more likely to dabble with that.
Then a lot of times, when we talk about- >> Is it the fast scare them?
>> I think, that's part of the excitement.
A lot of it, I mean, [CROSSTALK] >> Yeah,
better to live fast. >> Yeah, exactly.
So that enthusiasm. >> Yeah.
>> So how do you win with FinTech?
How do you win with crypto?
How do you win with these new technological capabilities?
>> If you're going to do crypto investing,
a lot of it is identifying short and long-term volume.
So in terms of, you want to look for
companies that are already generating revenue using blockchain technology,
in addition to developing technology that could generate other revenues.
>> Generating revenue,
are they generating revenue just from selling cryptocurrencies?
Or are they generating revenue by doing something with blockchain that is
more than just a cryptocurrency? >> There's a lot of different ways for
a company to raise money.
They could sell their utility tokens, that's one way.
Another way that we've seen in the last quarter is companies are starting to try
to sell security tokens, so- >> Okay.
>> A lot of the times, people are just,
companies are finding different ways to raise money.
And an interesting example that I've seen recently is a company, so
let's say we have Kickstarter, so- >> Mm-hm.
>> An evolution of Kickstarter is,
there's a new coin. >> Okay.
>> Basically,
>> So we've got a crypto Kickstarter.
>> Yeah,
we've got an evolution of Kickstarter here.
So basically, you would pledge your money,
and if the pledge amount was reached,
if they raised enough funds, then the token would execute the contract.
If it didn't, then they would come back to you.
So that's a small example of a company using blockchain to
advance a current trend. >> I don't want to be
too skeptical here, but one of the things that comes to mind is that, it seems like
everybody's coming out with an ICO. >> Yeah.
>> Everybody's launching
their cryptocurrency.
I mean- >> Mm-hm.
>> Recently,
the government of Turkey decided they were going to launch a cryptocurrency.
I mean, it's kind of like, wait a minute, I thought the idea of BitCoin
being valuable was that you wanted to get rid of the government role and
the tendency to inflate a currency called a fiat currency, a traditional currency.
And BitCoin is wonderful because it's limited, when a government is issuing it,
I don't know that I trust that government with their crypto any more than I do with
their paper. >> Right,
there's been a lot of issues with ICOs in general, in terms of fraud or
just their not issuing the tokens, they're just not doing what they say on
their web [CROSSTALK] >> The government's maybe the best of
the bunch, but lots of fraud, yeah. >> In theory,
the government should be the ones that are protecting people.
And a lot of governments have taken steps to
regulate- >> Okay.
>> Or restrict the ICOs.
We've seen, for example, in China- >> But many people liking Bitcoin don't
like governments. >> Yeah, in general, a lot of people one
of the flags that they always carry is that,
there's a reason why this exists, is because governments,
banks, and regulations are a hindrance to the free market.
And they corrupt politicians and stuff like that,
so there's a lot of [CROSSTALK] >> Which is kind of a social theme
combined with an investor theme. >> Definitely a social theme to this,
to the whole development for sure. >> Okay, so it is interesting,
I was curoius to look and
see that there's more than a thousand coins of various types.
It seems like a lot of the money is in the top five or
so. >> Yeah,
there's a large amount of money in cryptocurrency right now.
And there's just a thousand coins that you can see a coin market cap.
But in reality, there are thousands more of that, they don't even put there,
but they exist as well.
So there's, I mean, if you want, you could credit coin today, so yeah.
>> What would you say if I said,
I think there's a lot of reasons to be bullish about blockchain and
skeptical about BitCoin or any other particular
implementation of the digital currency? >> Well,
in terms of crypto, I guess by nature, it can be very volatile.
And so that's not necessarily a bad thing, I mean,
in terms of investment. >> Yeah,
you've said it's kind of exciting. >> You have to,
there has to be some amount of volatility in the market to make money, right?
And, >> I'm not sure Warren Buffet would agree.
>> [LAUGH]
>> I mean, he tends to buy things for
the long term, >> For sure.
>> And he's done pretty well.
So it's an alternative viewpoint that volatility is not something Warren is
interested in.
He's investing in the long-term. >> I would say to that, that you can make
money by, like in a bull market, in a bear market, you can make money.
But it's the pigs that get slaughtered.
It's the people that are standing there doing nothing,
that typically get slaughtered. >> But isn't Warren Buffet standing,
doing nothing?
I mean, he buys a company.
He holds it.
He's held it for 20, 30 years.
He doesn't sell, he doesn't buy very often.
He's sitting on a lot of cash.
Isn't Warren Buffet a pig? >> I would say, a lot of the, in terms of,
they're basically, there's different ways of doing analysis here.
In terms of fundamental analysis, a lot of which is what he typically does, right?
In terms of fundamental analysis, a lot of these coins have little to no value and
a lot of them are going to be dead soon.
But there are a lot, there's a lot of fundamental technology behind them
that I believe, will change the world and if you get in on the ground floor,
there's a lot of upside, potential upside.
Obviously, there's a lot of risk as well, but that's so be it, that's part of life.
Can't, no risk, no reward, right?
So, >> This is helpful and thank you for
sharing your views on this.
Let me summarize something about crypto.
We are going to come back to crypto currencies, blockchain, BitCoin, etc.
Let me say, this is that, there are some intriguing
aspects of this world of finance, this world of ICOs.
I can understand why people are skeptical.
I can understand why people are enthusiastic.
There are reasons for both points of view, and
there are reasons to be optimistic about the future of BitCoin,
about the future of Etherium, about the future of some currencies.
There's also good reasons to be scared, and
good reasons to be cautious, because some of these things are frauds.
And some of them are overhyped and overvalued, just like,
I mentioned the dot-com boom bust, well, Amazon is worth more now than it
was at the peak of the boom. >> I hope so, there we go.
>> So, I mean,
it doesn't mean just because things are overvalued and
then undervalued, that they aren't worth something.
So this may be a long-term value proposition,
much the way that we are still using gold. >> Yep.
>> And we've been using gold for
a long time as a store value. >> I think you could sum it up as cautious
optimism.
That, this is something that's emerging and very new,
and we could see the potential of it, but there are a lot of risks in this field.
So we're cautiously optimistic. >> One last question,
some people have said that BitCoin, >> Yep.
>> Is Millennials digital gold
of the new era?
Do you buy into that? >> In terms of
as a storage value, like- >> Yeah,
kind of, I mean- >> I would say that, some people,
I would say that most people are buying it for the long-term.
Either if they're day trading it or
they're holding it for like, a long period of time, not really to,
in a traditional sense of gold, that they're more
concerned with the profits at the end. >> They're both concerned with the upside,
not with the inflation. >> Yes.
I would say it's not really as an inflation
hedge. >> Okay.
>> I'd say, most people that are involved
are holding it for five years, hoping it goes to the moon, or
they're doing some sort of day trading. >> So they're not holding it, hoping that
it will retain its value like maybe, gold. >> Yeah, I would say,
>> They're saying,
we think there's huge upside here, >> Yes, I'd say a lot of people are,
>> A great deal of enthusiasm,
as well as potentially fear. >> Yeah,
I think a lot of people try to get in on the ground floor, or the first floor and
ride the elevator up, so. >> Well, thank you very much for
sharing your views with us and for being part of our discussion today.
>> Yep, thanks for having me.
>> Okay, thank you.
>> All right, thank you.
[MUSIC]
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