FINTECH SOLUTION (PART 2)

Pertemuan Ke 11 & 12
 Sub - CPMK
• Mahasiswa mampu menunjukan FinTech Solution pada
beberapa sektor industri beserta cara kerjanya (C3, A3)

Materi

1. Ultra-Fast Text Analytics in Trading Strategies

2. Regulated Crowdfunding Ecosystems
3. Remittances - International FX Payments at Low Cost
4. Fintech Solution in Small Business
1. Ultra-Fast Text Analytics in
Trading Strategies
1.1 Twitter Problem
 1.2 Real Time Impact

• News is far more general than an announcement

that simply contains analyses and reports, outlooks
and what‐if scenarios, rather than concrete figures.
– These contribute massively to a market mood, an
overall attitude towards companies, countries,
and branches.
• It is most important to state that not every news
story has the potential to turn markets. But such
stories do exist and have enormous stored potential.
And then, it is a matter of seconds until markets
react.
 1.2 Real Time Impact
(Cont’d)
• Most importantly for traders, experience shows that
the major adjustment to the information released
(and the window for trading profits) lasts about 40
seconds.
• This means traders have less than a minute to read
the news, compare the numbers against their
expectations, decide whether to buy, and trigger a
trading action accordingly (and correctly).
– And still finish second, or third.
 1.3 The News Impact Triangle
• News Agencies
– Such as Dow Jones, Thomson Reuters, and
Bloomberg distribute thousands of news stories
per day, thoroughly researched.
• Social Media
– This reacting faster, but less well researched,
more emotional and emotive, but acting upon
thousands of opinions that may or may not
reflect the market sentiment.
• Stock exchanges and Regulatory Services
– This means that the publication of quarterly
results is likely to be handled outside of stock
trading hours to avoid high volatilities.
 1.3 The News Impact Triangle
(Cont’d)
• News Agencies
– Such as Dow Jones, Thomson Reuters, and
Bloomberg distribute thousands of news stories
per day, thoroughly researched.
• Social Media
– This reacting faster, but less well researched, more
emotional and emotive, but acting upon
thousands of opinions that may or may not reflect
the market sentiment.
• Stock exchanges and Regulatory Services
– This means that the publication of quarterly
results is likely to be handled outside of stock
trading hours to avoid high volatilities.
 1.4 Automatic Text Analysis
Fundamentals
• Finding words, sentences, numbers, named entities,
concepts, and ideas while keeping the context, both
semantically and grammatically, are major topics in
linguistics.
– However, these approaches are all far from being
feasibly executed in real time.
• When analysing financial texts, the financial and
economic perspective requires a focused analysis
that can be executed in milliseconds.
– Thus, any software that hopes to support traders
must enhance the analysis and diminish
execution times.
 1.5 Entity Identification,
Wordings, and Indicators
• First, the named entities and concepts such as
countries, companies, and persons, such as CEOs
and political leaders, need to be categorized.
• Secondly, number identification must be precise;
and any automation must be able to handle
different alphanumerical formats and translate them
into concrete values.
• In the financial context, only concepts that the
trader is interested in need to be found to avoid
information overflow.
– Configuration, selection, and personal interest
and experience are essential.
1.5.1 Example on ATRAP
 1.5.1 Example on ATRAP
(Cont’d)
• With ATRAP, you can have real‐time news trading
software that is capable of these textual analyses and
has immense potential to configure trades after
unstructured text has been analysed.
– To be precise A trader configures that they sell
their IBM shares if their expectations of $25 billion
are not met, and buy shares, if they are.
– Whenever news arrives, ATRAP checks for the facts
and if these conditions are met (either way), it
automatically places an order in the market.
• The analysis performance allows ATRAP to place
orders often ahead of others, and before any
trading halts may occur.
 1.6 Events and
Investment Decisions
• The identification of analyst ratings in texts such as
“Credit Suisse raised Daimler from HOLD to BUY”
can be performed with an automated analysis.
• Credit Suisse is the rating agency, Daimler the rated
company, and the rating event “raised from hold to
buy” indicates a positive development.
• Using this in the private investment sector where no
structural data feeds are available could be
interesting.
 1.7 Sentiments and Opinion Mining
• Emotive news, or polarizing social media coverage can
have an enormous impact on company or asset
perception, both positively and negatively.
– This emotional perspective is often expressed in
analyses, market reports and, increasingly, on social
media channels
• The identification of concepts and entities such as
analysts, companies, or countries in texts has been
discussed before, explaining how concepts can be
identified.
– Linguistic patterns expressing positive or negative
sentiment can then be assigned to the identified
company.
 1.8 Applications for
Automated Text Analysis
• Extracting information from natural and
unstructured text, the compilation of events
described, and the detection of sentiment or
assessment is a fascinating capability that has
enormous implications for workflows and manifold
applications.
• Applications for information deduction and
identification are first and foremost making direct
use of given information as fast as possible – when
trading the news.
– Such a huge knowledge base can then connect
news items, events, results, and numbers.
 1.9 Innovative Technologies
in the Financial Market
• Traders are rarely confronted with both the
possibilities and necessities of news trading
– Instead trading still remains based on
fundamentals or solidly established traditional
models.
• Investors and traders who are aware of the novel
possibilities presented by news trading often already
use the latest technologies and incorporate them
into internal processes.
• However, financial institutions are sometimes not
able to adapt internal processes to incorporate
news‐based trading, with budgetary questions
proven to be a critical and sensitive issue.
2. Regulated Crowdfunding
Ecosystems
 2.1 Crowdfunding
Participants & Responsibility
 2.2 Goal of Crowdfunding
Ecosystems
• The goal of the ecosystem is to help the issuer and
investor come together in the most efficient manner
through the regulated crowdfunding portals.
• Securities Commissions are mandated by their
respective governments to enforce and administer
securities laws and govern the securities industries in
their jurisdictions.
• In the area of regulated crowdfunding, the
Commissions regulate which investors and issuers can
participate, how portal operators conduct business,
and report back to the Securities Commissions.
 2.3 Accredited Investor

• Accredited investors are those investors deemed by

the Securities Commissions to be high net worth
individuals who would not be catastrophically
impacted financially if an investment in a company
seeking funds through regulated crowdfunding
failed.
• These investors are considered to be sophisticated
and able to make appropriate judgements about
their investments.
 2.4 Non-Accredited
Investor
• Non‐accredited investors are the “rest of us”, the
rest of the country’s population that does not meet
the requirements to be registered as an accredited
investor, and have been demanding access to
early‐stage investment opportunities.
• In most countries this type of investor needs to be
of legal age (usually 18 years of age) and will be
given restrictions on the amount they can invest in
one particular issuer (company).
 2.5 Regulated Crowdfunding
Portal

• Regulated crowdfunding portals bring issuers and

investors together.
• To operate a regulated crowdfunding portal in most
countries in the world you need to be a registered
broker/dealer.
– The reason for this requirement is to ensure that
issuers are being vetted properly to protect the
marketplace and investors.
 2.6 Regulated Crowdfunding
Portal Requirement
• The portals are required (depending on the
exemption being used in the private placement) to
do
– investor accreditation
– anti‐money laundering
– suitability checks
• The portals have to be registered with Securities
Commissions and it is often necessary to take
securities and compliance courses to meet
regulatory requirements.
 2.7 Four Key Pillars

• The regulated crowdfunding ecosystem is possible

today because of these four key pillars:
– Technology
– Internet
– Social media
– Progressive governments.
• The nature of these markets and the way business is
done can change rapidly and governments are
responsible for laying a proper foundation on which
businesses and people can grow and conduct their
business
3. Remittances - International
FX Payments at Low Cost
 3.1 Generational Differences

• In a 2001 essay, writer Marc Prensky coined the

terms “digital natives” and “digital immigrants” to
describe generational differences in digital usage.
• Essentially defined, digital immigrants’ lives have
straddled both the pre‐digital and digital eras,
whereas digital natives have only ever known the
latter.
 3.2 Digital Natives vs
Digital Immigrants
Digital Immigrant Digital Natives
An immigrant using a For natives, bank branches
retail banking website to never factored into their
pay a bill is apt to lives, they only know
consciously notice: online banking:
“I’m paying bills online “I’m paying bills (online)”
instead of visiting a
branch”
 3.3 The Power of
Remittances
• The potential social aspect of mobile phone app
transactions can be astounding, especially when it
comes to global remittances.
• Remittance is defined as the “transfer of money by a
foreign worker to an individual in his or her home
country”
• Remittances currently amount to more than $583
billion annually worldwide.
 3.4 Reason of Remittances

• The majority of remittance funds sent home go

towards helping family members with regular
monthly bills, but philanthropic motivations have
recently come to occupy a larger role in the
remittance space.
• Expats are now sending philanthropic remittances as
a way of helping their native countries in times of
need.
– For example when there are disasters in some
country
 3.5 Transfer Fee

• Sending money can be costly. Whether the recipient

is an individual, a family, or a relief organization, the
senders are saddled with the same hefty transaction
fees, which can cost an average of 7.72% of the total
amount sent.
• Technology offers the promise of reduced fees,
placing more funds into the hands of the remitters’
intended targets.
– GoMoney slashing up to 5% from the 7.9% global
average transfer fees, this mobile banking services
can direct some $34 billion back into the pockets
of those people who need it the most.
 3.6 Millenial Outreach
• Companies boasting charitable components are likely
to resonate particularly loudly with millennials, who
champion a robust urge to give back. Smart businesses
are taking notice.
• Take online glasses retailer, Warby Parker. For every
pair of glasses sells, the company sends cash to a
non‐profit partner that helps teach local
entrepreneurs in low‐income countries to start their
own glasses business.
– “Give a man a fish and you feed him for a day;
teach a man to fish and you feed him for a lifetime”
4. Fintech Solution in Small
Business
 4.1 Disruption as a Service

• We may be seeing the emergence of a new trend of

outsourcing disruption, or in modern parlance,
“Disruption as a Service”.
– Acqui‐hire used to be seen as the lowest rung of
the exit ladder for start‐ups.
• Now we are seeing start‐ups set this as their goal,
turning would‐be entrepreneurs into employees.
– The banks are successfully using the FinTech boom
as a recruiting platform
 4.2 Disruption Power
• Power in the market means the control of supply and
distribution of goods or services.
– If you have power, you can dictate price and
access.
• Disruption is the decentralization of this power, and
once supply is democratized, so too is demand
because consumers now have a choice.
• In the case of FinTech it will coincide with a spread of
wealth.
– As more players enter the market, wealth will flow
from the banks to these alternative players.
 4.3 Key of Disruptive
Start-Ups
• Small and medium‐sized enterprises (SMEs) are the
key beneficiaries of disruptive start‐ups because of
this reason:
– Their talent pools are shallower and their needs
less complex than large enterprises, so they rely
on outsourcing expertise.
– They are willing to try new tools that will have a
tangible impact on their business
– They also suits small agile start‐up teams.
 4.4 Financial Advise
Services
• Good financial advice can make or break an SME. A
qualified adviser can fill gaps in knowledge.
– Importantly, they can also identify opportunities,
reducing risk and increasing efficiency.
• FinancialAsk, for instance, makes financial advice
easy to get by offering it through apps and the web,
making quality advice accessible.
– With the right advice, businesses are equipped to
make decisions, but they need tools to track the
implementation.
 4.5 Cash Flow Services

• Cash flow management is a concern for many SMEs.

• Boomeringo is one example of a budgeting and a
cash flow management tool, originally aimed at
consumers and income earners.
• The app connects with banks, credit cards, and loan
accounts and, using algorithms, sorts spending and
cash flow into categories as well as merchants.
– It not only helps with budgeting, but also with bill
payment reminders.
 4.6 Loan Services

• Even if an SME has good cash flow, they may still

need loans for capital or expansion.
• Moula is one example of a data‐driven alternative
lending platform for Australian SMEs, providing quick
and simple funding based on an SME’s transaction
data and corporate profile.
• Its online application process has been designed to
be fast, making it easy for a business to access
funding without the process and paperwork of
traditional banking.
 4.7 Transaction Problem

• Payment for goods and services in a face‐to‐face

transaction is straightforward.
– You make your payment and receive your goods.
• Receiving payment where the customer is remote is
a problem as old as business itself.
– Customers are hesitant to pay before receiving
goods or services and businesses are hesitant to
provide them before they receive payment.
 4.8 Transaction Solution

• As business and technology have evolved, we have

seen the nature of payments change to suit the
context of the transaction.
• As these platforms have built trust, and as online
shopping grows in popularity, we have witnessed the
emergence of payment escrow, where payment is
held until the goods are received.
– It benefits SMEs. If the business is not well known,
they have no reputation and no reason to expect
trust from the customer. The customer is taking a
risk that the business will deliver on the
agreement once payment is made, especially from
overseas.
 Summary

• The potential of automated text analysis in news

trading is immense. Although workflows have to be
adapted and thus bear an inherent risk, this is the
next challenge that needs to be taken on in financial
technologies.
• Regulated crowdfunding uses the four pillars and
brings together all theparticipants to work together
cohesively. For anyone, anywhere in the world,
involved in regulated crowdfunding, these are very
exciting times.
 Summary (Cont’d)

• Young people are likely to outgrow cash. The

practical timetable for this to happen is a judgment
call. But a mobile phone banking app is likely to truly
capture market share, and make banking easier.
• FinTech is giving SMEs the tools they need to have
flexibility of payment so they can get paid and get
back to work. These benefits will then flow on to
consumers, through a smoother, less stressful
transaction, where a better customer experience will
emerge.
TERIMA KASIH