Fintech requires knowledge in three areas—technology architecture/programming,

mathematical econometrics and the domain knowledge of finance. People who

are intimately familiar with all three aspects are rare, as each requires a lifetime of
study and experience. Yet everyone in the finance or technology industry, or those
aspiring to get into those industries, needs to know fintech to some degree, to be able
to understand this new world. More importantly, almost every human and corporate
entity across the planet has regular transactions of some kind with a financial services
intermediary such as a bank or money agent, and each of us will be impacted
with the advent of fintech. The common man needs to know fintech to some degree,
no matter what discipline he is familiar with.
1) Fintech requires knowledge in three areas—technology including:
A. Architecture/programming, mathematical econometrics and business management
B. Architecture/programming, quantitative finance, and market research
C. Architecture/programming, mathematical econometrics and the domain knowledge of
finance
D. Architecture/programming, data science, and the domain knowledge of finance
Ans: C

I spent the summer of 2017 in Silicon Valley bouncing from one meetup to another,
while my daughter studied genetics at UC Berkeley at the age of 10! Having attended
many of those meetings I firmly believed that the hype being created by the startup
world was the ingredient of the next bubble, similar in structure to the dot com
bubble of 2000, which I witnessed first-hand from Wall Street, as billions of dollars
of capital was lay to waste. Returning to Singapore, I attended the 2017 Singapore
Fintech Festival, which was the largest fintech festival in the world, and attended the
innovation lab crawl of a number of companies. That same month saw the meteoric
rise in the price of bitcoin and other cryptocurrencies, and it was practically impossible to
look anywhere without being confronted by ads from every company trying to
portray how smart they are as they spoke about artificial intelligence and took
photographs with robots. Graphic images of brains everywhere and talk of robots taking
over the world were pervasive. This was absurd—I worked on robotics as an engineer,
managed billions of dollars in neural network algorithms and designed parallel
processing systems myself. I wasn’t convinced that a revolution was about to happen
anytime soon. I was wrong.

As an industry, financial services has facilitated the activities of individuals and

businesses and the society at large for centuries. However, since the global financial
crisis of 2007, it has come under severe criticism in many areas, such as the high
compensation packages it offers to select employees funded by high charges to clients.
Yet despite being a prominent and high cost ecosystem, it has largely managed to
preserve its practices. All that is about to change.
 Part 1: An Overview of Fintech
Chapter 1: Fintech and the Disruption of Financial Services
The financial services industry is comprised of multiple businesses, each of which is
structured either as a division within a large financial firm or an independent standalone
business unit. Regardless of how they are organized none of these business
units produce real assets but rather they act as intermediaries or advisors to market
participants. The financial services industry is basically an industry of middlemen.
Technology as a tool has had three principal impacts on business and industry:
1) The financial services industry is comprised of multiple businesses, each of
which is structured either as a division within …?
A. a large financial firm or an independent standalone business unit.
B. a large financial firm or a small financial institution.
C. a large financial institution or a small bank
D. a large financial intermediary or an independent standalone business unit.
Ans: A
2) Regardless of how financial services companies are organized, none of these
business units produce real assets but rather they act as … to market participants.
A. intermediaries or creditors
B. investors or advisors
C. intermediaries or advisors
D. advisors or intermediaries
Ans: C
3) The financial services industry is basically an industry of middlemen.
Technology as a tool has had three principal impacts on business and industry
which are:
A. lowered the cost of information; made all manufacturing and distribution processes far
more efficient; a
B. allowed the automation of processes; made all manufacturing and distribution
processes far more efficient; lowered the cost of information.
C. allowed the automation of processes; lowered the cost of information acquisition;
lowered the cost of financial transactions
D. lowered the cost of information acquisition; allowed the automation of processes;
4)

– It has allowed the automation of processes, where manual work performed by

humans is replaced by machines or algorithms.
– It has lowered the cost of information acquisition and hence made information
more accessible to everyone. As a result, any business whose main reason for
existence was information asymmetry has faced an existential threat. Examples
of this include brokers and agents of any asset or product.
– It has made all manufacturing and distribution processes far more efficient. As
a result, any middlemen in the chain between the producer to the consumer of a
product or service may find that they are no longer required. An example of this
is in the consumer retail industry, where automation has reduced the number of
agents, wholesale distributors, and salespeople.
----------------
Arguably, given these facts, the financial services industry should have been deeply
impacted a long time ago. However, in a structure where financial services are often
deeply regulated and segregated by countries, a dramatic change has not happened
until now. Since the global financial crisis in 2018, financial regulation across the
world has become more uniform, the financial services industry has become dominated
by global players rather than local players, and cross-border communication
and transactions have been facilitated by the use of technology. The key implication
of all these developments is that the industry today is at the stage where its business
model and processes are about to undergo a profound change with the advent of
fintech, or financial technology, as a discipline.