UNSW Business School

Banking, Finance and Technology

Implication of technological advances on current and future state of

financial industry

Trigger disruptive and innovative thinking process

Contemplate, adapt, innovate and shape an increasingly technology

driven world
UNSW Business School
Introduction
This course builds on basic
finance theory and capital
markets knowledge and
complements other finance
theory courses with a unique
technology and innovation
perspective.

Banking

Finance

Technology
Course Structure & Administration

Course Structure

• FinTech
• Introduction to the world of FinTech
• Disruption is opportunity not a threat
• Finance Models and Theories
• Current Banking and Finance Ecosystem
• Structure and context of financial services
• Technology
• Introduction to ascent technologies and tools in FinTech
• Introduction to Machine Learning & AI
• Python
• Opportunities and Applications
• Case Studies
Course Learning Outcomes

Broad Perspective

• Understand global FinTech landscape and describe the role of

banks and financial service providers in shaping and responding
to innovation and disruption

• Describe banking and finance ecosystem and the role of

consumers in shaping up current environment. Link behavioral
finance theories to technological advances in banking.
Course Learning Outcomes

Banking, Finance and Technology

• Think holistically and generate FinTech ideas. Understand the

forces behind technological changes in the industry and apply
disruption methodologies to practical case studies. Disruption is
opportunity not a threat.

• Evaluate FinTech proposals. Recognize what type of innovation

and disruption is value added with a potential to reshape legacy
environment. Appreciate various challenges and complexities in
the process of FinTech innovation.
Course Learning Outcomes

Teamwork

• Pitch FinTech proposal. Gain practical exposure to FinTech style

of presentation to open audience. Posses the ability to critically
discuss and present realistic proposal from idea generation to
implementation.

• Play an integral role as part of a team. Teamwork and small

dedicated teams are an essential component of current
workforce. Understand the concepts of agility & speed.
Course Learning Outcomes

Python

• Gain introductory programming skills in the context of finance

theory and application using Python platform. Appreciate the
possibilities and boundaries of technology.
This Course is NOT About

• Sophisticated coding, computing and programming in Python,

Java, Scala, C++, C# or any other programming language

• Quantitative finance or advanced finance theory

• Venture capital raising

Course Resources

There is no prescribed text for this course, as this is fast moving and ever changing
field up-to-date reading recommendations provided as part of each week’s
session…

Recommended Readings
• McKinsey Global Institute, The Age of Analytics: Competing in a Data-Driven World, December 2016.
• Raschka S., Python Machine Learning, Packt Publishing, 2015.
• Thaler R.H., Advances in Behavioral Finance, Princeton University Press, Vol II.
• Sironi P., FinTech Innovation: From Robo-Advisors to Goal Based Investing and Gamification, Wiley
Finance Series, 2016.
• Selected Research Papers in Technology, Investments and Portfolio Management.

Your Instructor for this Semester

JH
j.hric@unsw.edu.au
 Week 1
Introduction to the World of FinTech
Week 1 Introduction to the World of FinTech
Learning Outcomes

• Discuss FinTech landscape from both fintech service providers

and venture capital perspective
• Explain what financial technology represents and covers
• Understand the evolution of FinTech in terms of banking, finance
and technology
• Discuss Big Data Analytics and relevant impact on finance and
banking
Week 1 Introduction to the World of FinTech
1.1 Landscape

We define FinTech as:

Financial sector innovations involving technology-enabled

business models that can facilitate disintermediation,
revolutionize how existing firms create and deliver products
and services, address privacy, regulatory and law-enforcement
challenges, provide new gateways for entrepreneurship, and
seed opportunities for inclusive growth.
Dhar & Stein, 2017, MIT FinTech Platform and Strategy
Week 1 Introduction to the World of FinTech
Platforms

Introduction of internet allowed for platforms to be formed…

Can you name any FinTech related platforms…?

Week 1 Introduction to the World of FinTech
Platforms

We define Platform as an entity that:

‘‘Facilitates exchange between two or more interdependent

groups, usually consumers and producers, using a combination of
channel access, functionality embedded in an IT system, and
associated key business processes (sometimes augmented with
physical assets).”
Dhar & Stein, 2017, MIT FinTech Platform and Strategy
Week 1 Introduction to the World of FinTech
Platforms
Complete platform contains the following attributes:

• Openness of access
• PayPal provides easy access via API
• AirBnB open access for people to list or find rooms
• Functionality embedded in an IT system
• PayPal provides secured functionality for money transfers
• AirBnB book rooms and make payments
• Implementation of standardized domain-specific business processes
• PayPal processes workflow for clearance and settlement
• AirBnB manages business process with stay and rent
Week 1 Introduction to the World of FinTech
Platforms
FinTech complete platforms examples…
P2P Lending, Electronic Exchanges, Robo-Advisory…

https://www.lendingtree.com/
http://www.liquidnet.com/

https://www.betterment.com/
Week 1 Introduction to the World of FinTech
Platforms
Look at Financial Technology through

PLATFORMS

How to solve problems in banking and finance using technology

platforms

Can we replace bank branches??

Can we understand our customers better??
Can we deliver faster, better, sharper service experience??
Global Landscape: Functional View
What about Australian FinTech Landscape? (KPMG FinTech Report 2017)
What about Australian FinTech Landscape? (KPMG FinTech Report 2017)
$108 MILLION: Australian fintech Airwallex
just closed the second largest funding round
in Australian history
Business Insider Jul 3, 2018
https://www.businessinsider.com.au/airwallex-fintech-series-b-
funding-round-2018-7
Afterpay—The 10x Thesis.
Afterpay has been on an absolute tear over
the past year, up over 200%, hitting all time
highs. Yet, the investment thesis remains
extremely compelling — here’s why it has 10x
potential.
https://medium.com/@tristanhcole/afterpay-the-10x-thesis-
eb275e04a1d
https://www.afterpay.com/en-AU/how-it-works

In case you wondering who are the Top FinTech Companies in Australia

http://www.fintechasia.net/top-fintech-companies-australia/
UNSW Business School
Break

10-Min Break
Week 1 Introduction to the World of FinTech

1.2 Evolution of FinTech

Financial Technology is NOT new, so why so much hype now…?

• “Cheap” electronic database storage

• “Cheap” cloud computing power
• Consumer demand for speed & convenience
• Flattening of asymmetry of information
• Data & Analytics and the raise of the platforms
Week 1 Introduction to the World of FinTech

Three Distinct Periods of the Evolution

Banking, Finance and Technology ALWAYS linked…

1. FinTech 1.0 (1866 to 1967) Analog to Digital

2. FinTech 2.0 (1967 to 2008) Digital Financial Services

3. FinTech 3.0 (2008 to today) FinTech to …TechFin??

Arner D., Barberis J., Buckley R, 2016

Week 1 Introduction to the World of FinTech

FinTech 1.0 (1866 to 1967)

Trade & Commerce as Drivers of Development

• Abacus
• Fiat money was the technology used to transfer value
• Double entry accounting Middle Ages to Renaissance
• Europe late 1600s joint stock companies, insurance and banking
• First World War – telegraph, railroads, canals – financial links across
borders
The inhabitant of London could order by telephone, sipping his
morning tea in bed, the various products of the whole earth,
in such quantity as he might see fit, and reasonably expect
their early delivery upon his door-step; he could at the same
moment and by the same means adventure his wealth in the
natural resources and new enterprises of any quarter of the
world, and share, without exertion or even trouble. J.M.Keynes, 1920
Week 1 Introduction to the World of FinTech

FinTech 1.0 (1866 to 1967)

• Post war – rapid technological advances in communications and

information technology
• IBM code breaking, Financial Calculators Texas Instruments (1967)
• Credit Cards – Dinner’s Club (1950)
• Global telex network up and running (1966)
• Fax machine rolled out by Xerox (1964)

• ATM by Barclays (1967) – Financial Technology! is it? What do you

think?
The most important financial innovation that I have seen the past
20 years is the automatic teller machine, that really helps
people and prevents visits to the bank and it is a real
convenience.
Paul Volker, 2009
Week 1 Introduction to the World of FinTech

FinTech 2.0 (1967 to 2008)

• BACS – Banker’s Automated Clearing Services (UK 1968)

• CHIPS – Clearing House Interbank Payments System (US 1970)
• SWIFT – Society of Worldwide Interbank Telecomm (1973)
• NASDAQ (US 1971)
• Increase of IT spend by Financial Institutions computerized
processing and risk management by mid 1980

• Michael Bloomberg Innovation Market Solutions (IMS 1981) up and

running as Bloomberg Terminals by around 1984 – Financial
Technology! Is it? What you think?
Week 1 Introduction to the World of FinTech

FinTech 2.0 (1967 to 2008)

• Market Crash (1987)
• Increased scrutiny on the use of technology – Algo Trading!!
• Banks embrace full extent of digital industry (by 1998)
• Complex computerized risk management techniques
• Asian and Russian Crises (1997-1998)

• Wells Fargo rolls out online account checking (1995) – Financial

Technology! Is it? What do you think?

• Direct Banks (no physical presence) by (2005)

Week 1 Introduction to the World of FinTech

FinTech 2.0 (1967 to 2008)

• 21st Century Kick off banks and financial institutions increased
spend on IT
➢ Interactions and demands from clients
➢ Regulatory requirements
• Increased provision of financial services by non-bank institutions
• Lax regulatory framework increased risks across global financial
systems

• Heading into the GFC 2008

ANY Effects on Financial Technology??

Week 1 Introduction to the World of FinTech

FinTech 3.0 (2008 to present)

• Global FinTech VC backed equity funding (Q2 2018)
$20.34 BILLION across 383 Deals
Week 1 Introduction to the World of FinTech

FinTech 3.0 (2008 to present)

• Driven by advances in storage and computing capabilities
• Driven by regulatory requirements
• Driven by speed of information and access to data

• What else do you see as the driver ?? Could it be you ??

• Risk Takers – New Start-Ups

• Banks – Accelerator programs, Change Management Programs

or bold acquisitions
 Week 1 Introduction to the World of FinTech

FinTech 3.0 (2008 to present… future as TechFin ??)

All of These are

FinTech Co ??
Alibaba
Amazon
Google??
Week 1 Introduction to the World of FinTech
Week 1 Introduction to the World of FinTech
Week 1 Introduction to the World of FinTech

FinTech 3.0 (2008 to present)

Focus Areas of FinTech Innovation and Disruption
• Lending
• Payments/Billing
• Money Transfers and Remittances
• Capital Markets → Dataminr Last Funding Round
• Insurance
• Wealth Management
• Blockchain and Cryptocurrencies
• RegTech
• Personal Finance
• Mortgage and Real Estate
Week 1 Introduction to the World of FinTech https://www.youtube.com/watch?v=llyTgqgHKEU
UNSW Business School
Break

10-Min Break
Week 1 Introduction to the World of FinTech

1.3 The Age of Analytics

In the Age of Analytics change is the only constant

IT People Business People

Dhar & Stein, 2017, MIT FinTech Platform and

Translators Strategy
Week 1 Introduction to the World of FinTech
Data & Analytics

Data & Analytics been around for ages, right…??

• Volume of available data grown exponentially NOW

• Sophisticated algorithmic solutions being rolled-out NOW
• Computational power and storage improved drastically NOW

Technology Advances & Business Disruptions

Week 1 Introduction to the World of FinTech
Data

So what !?

What does it mean ??

Week 1 Introduction to the World of FinTech
Data
Biggest issues companies face today are organizational – this includes
banks and financial institutions

• Struggle to incorporate data-driven insights into day-to-day processing

• Attracting and retaining the right talent
✓ Data Scientists
✓ Translators
✓ Subject Matter Experts
✓ Digital Designers
✓ Aggregators

Data is critical corporate asset !!!

Week 1 Introduction to the World of FinTech
Data

“Data and analytics are changing the basis of competition. Leading

companies are using their capabilities not only to improve their
core operations but to launch entirely new business models. The
network effects of digital platforms are creating a winner-take-most
dynamic in some markets.”
McKinsey Global Institute, 2016
Week 1 Introduction to the World of FinTech
Massive data integration capabilities can break down organizational silos

“Massive data integration has significant potential for retail banks. It can
enable better cross-selling, the development of personalized products,
dynamic pricing, better risk assessment, and more effective marketing —
and it can help firms achieve more competitive cost structures than many
incumbent institutions.” McKinsey Global Institute, 2016

“Additionally, companies in other sectors can become part of the financial services
ecosystem if they bring in orthogonal data—such as non-financial data that provides a more
comprehensive and detailed view of the customer. These players may have large customer
bases and advanced analytics capabilities created for their core businesses, and they can
use these advantages to make rapid moves across sector boundaries. Alibaba’s creation of
Alipay and Apple’s unveiling of Apple Pay are prime examples of this trend.”
Week 1 Introduction to the World of FinTech
Data & Analytics

Value creation is REAL…

• Machine Learning
• Deep Learning
• Artificial Intelligence
• Blockchain
Week 1 Introduction to the World of FinTech
Data & Analytics

Machine learning is a subset of artificial intelligence in the field of computer science that
often uses statistical techniques to give computers the ability to "learn" (i.e., progressively
improve performance on a specific task) with data, without being explicitly programmed
(Wikipedia)

Deep learning (also known as deep structured learning or hierarchical learning) is part
of a broader family of machine learning methods based on learning data representations,
as opposed to task-specific algorithms. Learning can be supervised, semi-
supervised or unsupervised. Deep learning architectures such as deep neural
networks, deep belief networks and recurrent neural networks have been applied to fields
including computer vision, speech recognition, natural language processing, audio
recognition, social network filtering, machine translation, bioinformatics, drug
design and board game programs, where they have produced results comparable to and in
some cases superior to human experts (Wikipedia)

AI ??
Week 1 Introduction to the World of FinTech
Data & Analytics AI ??
Artificial intelligence (AI), sometimes called machine intelligence,
is intelligence demonstrated by machines, in contrast to the natural
intelligence displayed by humans and other animals. In computer science AI
research is defined as the study of "intelligent agents": any device that perceives its
environment and takes actions that maximize its chance of successfully achieving its
goals.[1] Colloquially, the term "artificial intelligence" is applied when a machine
mimics "cognitive" functions that humans associate with other human minds, such as
"learning" and "problem solving (Wikipedia)
What do you
Think ??
Week 1 Introduction to the World of FinTech
Data & Analytics

A blockchain, originally block chain, is a growing list of records, called blocks, which are
linked using cryptography. Blockchains which are readable by the public are widely used
by cryptocurrencies. Private blockchains have been proposed for business use. Each
block contains a cryptographic hash of the previous block,[6] a timestamp, and transaction
data (generally represented as a merkle tree root hash). By design, a blockchain is
resistant to modification of the data. It is "an open, distributed ledger that can record
transactions between two parties efficiently and in a verifiable and permanent way"
Week 1 Introduction to the World of FinTech
Data & Analytics
Week 1 Introduction to the World of FinTech
Data & Analytics
Week 1 Introduction to the World of FinTech
Data & Analytics

Predictive
Analytics

Forecasting
Personalization

Price & Product

Optimization
Week 1 Introduction to the World of FinTech
Data & Analytics
Look at Financial Technology through

Data & Analytics

How to solve problems in banking and finance using technology data &
analytics

Can we replace bank branches??

Can we understand our customers better??
Can we deliver faster, better, sharper service experience??
Week 1 Introduction to the World of FinTech
Data & Analytics

AI
https://www.youtube.com/watch?v=NKpuX_yzdYs
What is Data Analytics
https://www.youtube.com/watch?v=mm2A5tKVIpg

MIT Intelligence Quest Launch

https://www.youtube.com/watch?v=yrSHC81kqpw

Blockchain Explained
https://www.youtube.com/watch?v=RplnSVTzvnU
Week 1 Introduction to the World of FinTech
Summary and Key Terms
CAN WE USE THIS INFO FOR OUR
Landscape Functional View FINTECH PROPOSAL ??

Category Description

Lending Marketplace lending & alternative underwriting platforms

Blockchain Crypto Companies leveraging blockchain tech for financial services

RegTech Audit, risk and regulatory compliance software

Personal Finance Tools to manage bills and track personal and/or credit accounts

Payments/Billing Payments processing, card developers, subscription billing software

Insurance Companies selling insurance digitally or providing data analytics and software

Capital Markets Sales & trading, analysis, and infrastructure tools for financial institutions

Wealth Management Investment and wealth management platforms and analytical tools

Money Transfer/Remittances International money transfers and tracking software

Mortgage/Real Estate Mortgage lending, digitalization, and financing platforms

Week 1 Introduction to the World of FinTech
Summary and Key Terms
Key Terms
• FinTech
• Platforms Think FinTech Solutions in terms of
• FinTech Evolution
• GFC
• FinTech Functional View • Platforms
• Data
• Analytics
• Machine Learning • Data & Analytics
• Deep Learning
• Artificial Intelligence
• Blockchain
Week 1 Introduction to the World of FinTech
Additional References

https://www.dealstreetasia.com/stories/welab-hong-kong-ipo-101570/
https://www.linkedin.com/pulse/firing-all-cylinders-2017-big-data-landscape-matt-turck
https://www.businessinsider.com.au/airwallex-fintech-series-b-funding-round-2018-7
https://www.bloomberg.com/news/articles/2018-07-12/funding-for-u-s-fintech-startups-rose-40-percent-last-quarter
https://www.cnbc.com/2018/07/17/china-fintechcompanies-offer-enormous-opportunity.html
https://www.smartcompany.com.au/startupsmart/news-analysis/stone-chalk-chief-says-new-innovation-hub-will-unite-sydney-and-
melbourne-against-singapore-and-silicon-valley/#.W0v71O2UpeU.linkedin
https://cryptofundresearch.com/2018-crypto-fund-launches-and-data/
https://www.geekwire.com/2018/integris-raises-10m-help-companies-meet-gdpr-security-compliance-mandates/
https://www.zerohedge.com/news/2018-07-16/cryptocurrencies-blockchain-added-cfa-exam
https://medium.com/@tristanhcole/afterpay-the-10x-thesis-eb275e04a1d
https://www.brookings.edu/blog/order-from-chaos/2018/02/08/whats-happening-with-chinas-fintech-industry/

http://fintechnews.hk/5936/various/top-16-fintech-investors-in-hong-kong-and-mainland-china/