1. Fintech
Chapter 1:
Introduction

2. Fintech and the Remaking of Financial Institutions
This course presents a balanced, unified view of Fintech in the current and future system of money and banking.
Lectures 2-12 provide background understanding of financial products and institutions and related Fintech applications.
Lecture 13 covers startup financing
Lecture 14 focuses on global Fintech developments,
Lecture 15 presents the regulatory environment surrounding Fintech.
For all the positives we can see in Fintech, there are concerns about the negative impact of the industry on social issues of diversity and inclusion, income distribution and unemployment. These issues are discussed in Lecture 16.
Finally, Lecture 17 summarizes the many ways in which the big banks are harnessing new technologies.

3. Total global investment in Fintech companies 2010-2016
Source: Pulse of Fintech Q4'16, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook) February 21, 2017

4. The promise of Fintech companies:
Consumers will get more choice, better-targeted services and better pricing.
Small and medium sized businesses will get access to new credit.
Banks will become more productive, with lower transaction costs, greater capital efficiency and stronger operational resilience.
The financial system itself will become more resilient.
Most fundamentally, financial services will be more inclusive; with people better connected, more informed and increasingly empowered.
Mark Carney, BoE

5. M-Pesa: providing some of the world’s poorest with financial access
Fintech Examples
M-Pesa: providing some of the world’s poorest with financial access
M-Pesa: M= mobile, Pesa= money
Make and receive payments via mobile phone
Over 25 million subscribers
Users have little access otherwise to banking services
First in Kenya in 2007, now in Tanzania, Congo, India, Egypt , etc.
Brings financial services to world’s poorest areas

6. Fintech Examples
Venmo: effortlessly split dinner tabs, buy concert tickets with friends
Transfer payments person to person
Simple mobile app
Owned by PayPal

7. Bitcoin, Ethereum and other cryptocurrencies
Fintech Examples
Bitcoin, Ethereum and other cryptocurrencies
Digital currencies
Decentralized verification network
Anonymous
Over 1,000 different coins, more each day
Low cost transactions
Not subject to central bank inflationary policies
Can be used to circumvent restrictive currency controls

8. Blockchain: a protocol with wide application potential
Fintech Examples
Blockchain: a protocol with wide application potential
Protocol for verifying transactions relying on a decentalized network
Underlies Bitcoin and other digital coins
Special case of “Distributed Ledger Technology”
Wide range of potential use cases for DLT
Potential for lower costs, greater security
Many Proof of Concept projects are underway

9. Square: mobile payments
Fintech Examples
Square: mobile payments
Square Reader device plugs into a standard 3.5 mm phone or tablet jack
Allows mobile device to be used to accept credit/debit card payments
Additional devices and services to support payments
Democratizes payments, allowing small vendors to accept cards

10. Stripe: e-commerce payments
Fintech Examples
Stripe: e-commerce payments
Suite of software and products for on-line business
Simplifies process of setting up e-commerce site
Individuals and small businesses can quickly and easily set up online payments capability

11. Fintech Examples
Lending Club, SoFi, Kiva: Peer to Peer lenders disintermediate the banks
Peer to Peer lenders disintermediate the banks
Lending Club:
Individuals wishing to borrow to pay off credit cards or other purposes fill out online application
Lending Club vets borrowers, assign credit rating
Individual lenders fund loans
Borrowers pay lower than bank rates, Lenders receive higher returns than many other investments
Over $24 Billion funded in 10 years
SoFi
Focuses on P2P Student Loans
Over $100 Billion funded
Kiva
Nonprofit, micro lender to low-income borrowers in 80 countries
$800 Million funded

12. Outline of the Course
Lecture Two: Disruption and Disintermediation in Financial Products and Services: Why Now?
In Lecture two, we’ll discuss the following topics:
Millennials
Technology
Entrepreneurial culture

13. Outline of the Course Millennials:
Millennials constitute the largest population cohort.
Intense utilization of mobile devices
Higher education attainment, lower rates of home ownership and attitudes toward (distrust of) the Big Financial Institutions.

14. Outline of the Course Technology Cloud services Open source software
Artificial intelligence
Mobile devices and apps

15. Outline of the Course Entrepreneurial culture Startup lifestyle
“Gig” economy
Anti-Big Financial Institution, talent availability due to high unemployment post-Global Financial Crisis

16. Outline of the Course
Lecture Three: Money: A Medium of Exchange, Unit of Account and Store of Wealth
History and purposes of money
Growth of Non-cash payments and mobile apps
Cryptocurrencies and blockchain
Fintech Applications:
o Adyen
o Apple Pay
o Square
o Stripe
o Venmo
o Zelle
o Zoop
o Alipay

17. Lecture Four: Financial Institutions
Outline of the Course
Lecture Four: Financial Institutions
Information Asymmetries, Moral Hazard and Adverse Selection
Commercial Banks
Investment Banks
Trading Activities
Asset Securitization
Mergers and Acquisitions
Prime Brokerage
Credits Unions
Central Banks
Insurance Companies, Finance Companies, Hedge Funds, Mutual Funds, ETFs
Historical Innovation in Big Financial Institutions
Fintech Applications: Challenger Banks

18. Lecture Five: Bubbles, Panics, Crashes and Crises
Outline of the Course
Lecture Five: Bubbles, Panics, Crashes and Crises
Overview of crises and panics
Great Depression
Tech Recession
Great Financial Crisis
Fintech Issues

19. Lecture Six: Bank Lending
Outline of the Course
Lecture Six: Bank Lending
Secured vs unsecured loans
LIBOR
Real estate loans
Payday Lending
Credit scores: FICO
Fintech in Lending
Lending Club
o Kabbage
o OnDeck
o Funding Circle
o LendUp
o SoFi
o Kiva

20. Outline of the Course
Lecture Seven: Time Value of Money: Interest, Bonds, Money Market Funds
Interest Rates
Present Value
Yield to Maturity
Types of Credit Market Instruments
Yield Curve
U.S. Obligations
Growth of US debt; ownership; debt/GDP
Fintech Applications

21. Lecture Eight: Equities, Efficient Markets, Exchanges
Outline of the Course
Lecture Eight: Equities, Efficient Markets, Exchanges
Risk, Return and Diversification
Capital Asset Pricing Model
Efficient Market Hypothesis
Random Walk
Equity Indexes
Types of Orders
Equity Trading Venues
Regulation
Fintech in Equities
Blockchain
Robo-advisors: Betterment and Wealthfront

22. Lecture Nine: Foreign Exchange
Outline of the Course
Lecture Nine: Foreign Exchange
Exchange Rate Determination in the Long Run
Exchange Rate Determination in the Short Run
Effects of Relative Interest Rates on Exchange Rate Determination
Currency Futures, Options and Swaps
Fintech Applications:
o Transferwise
o Xoom
o WorldRemit
o SettlePay
o InstaRem
Anti-Money Laundering and Other Concerns

23. Lecture Ten: Forwards, Futures, and Swaps
Outline of the Course
Lecture Ten: Forwards, Futures, and Swaps
Futures Mechanics
Single Stock Futures
Equity Swaps
Total Return Swap
Inflation Swap
Stock Index Futures
Interest Rate Swaps
Interest Rate Futures
Hedging Examples
Fintech Applications:
o Generic categories
o OpenGamma
o Blockchain applications

24. Lecture Eleven: Commodities
Outline of the Course
Lecture Eleven: Commodities
Evolution of Commodity Trading
Central CounterParty
Categories of Commodities
Commodity Forwards, Futures, Swaps and Options
Trading Conventions and Terminology
Participants in Futures Markets
Hedging Example: Farmers and Corn
Hedging Example: Airlines and Jet Fuel
Commodities as an Asset Class
Commodities ETF
Fintech in Commodities:
o Blockchain in Post Trade Processing
o Blockchain in Physical Commodities
o Artificial Intelligence in Energy Data Analysis

25. Lecture Twelve: Options
Outline of the Course
Lecture Twelve: Options
Types of Options
Risks in Trading Options
Basic Option Strategies
Additional Option Strategies
Option Pricing
Theoretical Pricing Models
Fintech Applications in Options
o AI for pricing and trading of options
o Blockchain technology for post trade processing

26. Lecture Thirteen: Startup Financing
Outline of the Course
Lecture Thirteen: Startup Financing
• Credit cards and cash on hand
• Friends and family
• Loans
• Crowd funding
• Angel investors
• Accelerators
• Venture capital
• Initial Public Offerings
• Initial Coin Offerings

27. Lecture Fourteen: Fintech in a Global Setting
Outline of the Course
Lecture Fourteen: Fintech in a Global Setting
Regulatory differences in several countries
Total global Fintech investment
Fintech in U.K.
Fintech in E.U.
Fintech in Germany
Fintech in Canada
Fintech in China
Fintech in Singapore
Fintech in India
Fintech in Africa
Fintech in Brazil

28. Lecture Fifteen: Fintech and Government Regulation
Outline of the Course
Lecture Fifteen: Fintech and Government Regulation
Financial Regulation Background
Significant Legislation Governing US Financial Regulation
Financial Regulators
o Federal Reserve System
o Office of the Controller of the Currency
o Federal Depositors Insurance Corporation
o OFAC and FINCEN

29. Lecture Fifteen: Fintech and Government Regulation (continued)
Outline of the Course
Lecture Fifteen: Fintech and Government Regulation (continued)
Fintech: Several Startups Have Been Found to be in Violation of Regulations
o Lending Robot
o PayPal
o SoFi
o Dwolla
o Sand Hill Exchange
o Zenefits
o Lending Club
o Wrkriot
U.S. Policies to support Fintech startups
U.K. Policies to support Fintech startups
E.U. Support for Fintech
Fintech Applications:
o Regtech: Fintech technologies designed to help with the financial regulatory burden
o OpenGov

30. Outline of the Course
Lecture Sixteen: Social issues: Diversity and Inclusion, Unemployment and Income Distribution.
Under representation of women and minorities in tech companies and in VCs
Loss of jobs due to technology gains
“Winner takes most” model increases skewed income distribution

31. Outline of the Course
Lecture Seventeen: They’re not Dead Yet: How Big Financial Institutions Will Work with Fintech Startups to Define the Market Structure of the Future.
Incubators and Accelerators
Investing in and Partnering with Startups
Card Startup Support Programs
Distributed Ledger Projects
Internal Bank Units
Goldman Sachs: "We are a technology company"
Altering internal banking culture to reflect Millennial sensibilities
For Banks, Disruption has its Risks but also Opportunities