FinTech Lecture 1 : Overview of FinTech (1)

Slides I used for FinTech - Financial Innovation and the Internet 2023 Fall at Graduate School of Business and Finance, Waseda University on October 6, 2023.

Transcript

1. Financial technology in the living room. Generated by Stable Diffusion XL Beta FinTech — Financial Innovation and the Internet 2023 Fall Lecture 1 : Overview of FinTech (1) Kenji Saito, Graduate School of Business and Finance, Waseda University Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.1/30
2. This class is recorded Using Zoom The recordings could be used for research on (online) learning Transcribed for use and anonymized Will let you know when the necessity arises Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.2/30
3. The lecture slides can be found at : https://speakerdeck.com/ks91 Recording and chat text will be posted at Moodle and Discord Note, however, that chat messages are often unnoticed I have invited you all to the Discord server of the class (continued from the past years) Let me do it again now through Zoom chat Trial automatic transcription for lectures will be posted at Discord Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.3/30
4. Brief(?) Self Introduction Kenji Saito (Google Scholar citations) Professor, Graduate School of Business and Finance, Waseda University Senior Researcher / Lecturer, SFC (Shonan Fujisawa Campus) / KMD (Keio Media Design), Keio University Chief Science Officer, BlockchainHub Inc. Representative Director, Beyond Blockchain Representative Director, Academy Camp (some more non-profits) Bio M.Eng in Computer Science from Cornell University, 1993 Ph.D. in Media and Governance from Keio University, 2006 (on digital currency research) Researcher of P2P (Peer-to-Peer), digital currency, and distributed autonomous society for 23 years at Keio and Waseda universities (started my career at Waseda in 2019) Holding Academy Camp for children in Fukushima with friends since summer 2011 . . . , 2018 Summer “OK Google, Do My Homework!”, 2019 Winter “Automation for Girls”, . . . , VR2021.7 “You Create! Lunar Society”, VR2021.8 “ALL THESE WORLDS ARE YOURS”, VR2021.9 “You Explore! Amazing Modern & Near Future Medicine”, . . . , VR&RPG 2023.5 “Don’t Be So Serious”, 2023 Summer “Hakone Stay-In Trip”, . . . , → Inter-connected in my mind (society hereafter needs to be designed with children) Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.4/30
5. Before I forget . . . Please call me either “Kenji” or “Saito-san” I’m more used to them Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.5/30
6. Books (one example) “NEO in Wonderland — A Tale of Money That Changed Our Future” (2009) Genre : SciFi Monetary Fantasy Digital currency technology that overthrows today’s monetary economy A drama as its consequence NEO : New Economic Order English version is freely available http://grsj.jp/neo.pdf (CC-BY-SA 3.0) Science Fiction Prototyping : a research method (1) Depict future reality with new technology (2) Extract problems and search for paths to solutions Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.6/30
7. Other Classes (in Japanese language) At WBS, Waseda University “Managing NPOs” (in 2019 Fall only) “FinTech – Financial Innovation and the Internet” (in alternate years) “Cybersecurity” (in alternate years) “Blockchain and Decentralized Finance” (seminar) https://speakerdeck.com/ks91 (just slides) At KMD (Graduate School of Media Design), Keio University “Service Design Seminar B - Implementation to Information Environments” (Designing applications of blockchain) (2020 Fall and onward) → Inter-connected in my mind, too (society hereafter needs to be designed . . . how?) Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.7/30
8. Academy Camp, and Future of Learning and Humanity in General As part of my research activities In fact, I will be away on October 27 because I will be presenting at an international conference (JCSG 2023) on certain activities and results from Academy Camp, and will conduct the class on demand only on this day I will talk about how children themselves developed RPGs as serious games (games whose primary purposes are not entertainment) using a large language model (namely GPT-4) Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.8/30
9. In Academy Camp . . . (Do we live in the same era?) In 2018, we held Academy Camp 2018 Summer - “OK Google, Do My Homework!” terms 1 and 2 Children say “OK Google, do my homework” and Google Assistant answers “I do your homework”, generates math drills, answers all questions correctly, and prints the answered sheet Automates not only students but also teachers (provoking a fight against the whole school system) We said “Automate the boring homework with Python” and “That’s not what a human being should be doing” a lot Picture (left) is a university student succeeded in automating math drills (finished last) Begun, the age of automation has Handwritten kanjis and calculations ∈ common future skills From “floor mopping” to “Roomba” From “lighter (person)” to “Alexa, turn on the lights” Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.9/30
10. From “Lighter (person) ” to “Alexa, turn on the lights” 19th - 20th century Social System Social Environment Division of Labor Network of Machines and Algorithms Machines Technology Human Automation System 21st century and onward OK OK (when to) Turn on the light Autonomous and Networked Technology Humanity more like Nature (Meta-Nature) Turn on the light ⇒ For humans, the technological social environment is semantically transforming into something similar to the natural environment The emergence of a future “super-automated distributed social environment” = “extended natural environment” Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.10/30
11. According to the Mild-mannered Mad Scientist From “WIRED” Japanese Ed. Vol.36 Within the next 30 years, machines and algorithms will replace many of the intellectual activities that used to be considered essential to human beings, and with the expansion of automation, we will see the emergence of a new “natural environment” where “a pencil grows on a tree” instead of the old “social environment” where “even a single pencil is produced by a number of people working in a division of labor” We call this “Meta Nature” Meta Nature operates automatically and autonomously, and humans care for it, work with it, get resources from it, and live creatively Money will have no role there It is like a hunter-gatherer society where there is no money Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.11/30
12. Possibly a demonstration Let us see how an automated system tackles problems on its own while heading towards a given goal This is called “A thinking” that will be largely automated in the future You need “X thinking” and to become an “X thinker” Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.12/30
13. Let’s Break into Groups for Discussion First, introduce youselves to others in the group Second, talk about your perceptions of digital transformation (DX) I have just talked about perhaps the most radical form of DX But what have you been hearing or seeing about DX? Feel free to look up on the web Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.13/30
14. DX shifts the perspective from the service provider’s to the user’s Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.14/30
15. Today’s Topics Orientation Objectives, overview and schedule What’s FinTech? Backgrounds and meanings Examples — You will discuss on one Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.15/30
16. Objectives and Goals In this class, FinTech, the fusion of finance and ICT (Information Communication Technology), is explained mainly from the technological viewpoint, and its impact on the society, applications and their governance are considered together with the students This class aims for non-engineers to understand the technological background of FinTech, and to discover their own problems in the social domain related to finance and the management and utilization of assets in a broad sense, and to plan the solutions as applications of the new technology, without being swayed by easy sales talks from the industry You may wonder “would it not be too technical (or technological)?” I don’t think so (← not a reliable source, I know) We talk about technology to the extent that management should also know about it in order to be able to talk to engineers, and I will make an effort to describe the technology in simple bites Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.16/30
17. Schedule (provisional) Lecture 1 10/6 Overview of FinTech (1) • Lecture 2 10/13 Overview of FinTech (2) Lecture 3 10/20 Internet Technology and Governance (1) Lecture 4 10/27 Internet Technology and Governance (2) on-demand Lecture 5 11/10 The World of Apps (1) Lecture 6 11/17 The World of Apps (2) Lecture 7 11/24 Blockchain (1) Lecture 8 12/1 Blockchain (2) Lecture 9 12/8 Smart Contracts (1) Lecture 10 12/15 Smart Contracts (2) Lecture 11 12/22 Smart Contracts (3) Lecture 12 1/12 Cyber-Physical Society and Future of Finance Lecture 13 1/19 FinTech Ideathon Lecture 14 1/26 Presentations and Conclusions Online presence is possible but not recommended for non-online lectures for interactivity reasons Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.17/30
18. Structure of Lectures (2 consecutive lectures on 1 theme) Assignment and Review (20∼30min.) Homework is assigned for each theme At beginning of each theme, reviews some of your reports Q & A (90∼100min.) Explains the theme where students need more explanations Material (slides) will be announced prior to each lecture (a couple of days before) Questions are welcome at any time during the lecture Also some short discussions (and demo) Discussion (60∼80min.) Let’s talk about problems on and surrounding the theme Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.18/30
19. Assignments Submit your reports through Moodle (and Discord if you wish for sharing) No physical paper of any kind ← if you give me one, I will lose it ↑ Hopefully I don’t need to mention this any longer Deadline is not very exactly handled Participation is checked by the reports (and speaking), not by your physical or logical presence in the classroom Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.19/30
20. Evaluation Reports You get points if your reports are picked up for the review Only some of the picked-up reports are actually reviewed in the class A Pile and B Pile, or rather, X Pile and A Pile Active class participation Questions and comments Providing topics Commenting on reports by other students (more easily done on Discord) Overall, performance is evaluated by contributions and reports In addition, (group) work and presentations Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.20/30
21. Lecture Materials Slides There is no textbook In addition to the references listed below, other references will be provided and instructed as needed References (some interesting readings) S. Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System, http://bitcoin.org/bitcoin.pdf (2008). V. Buterin, A Next-Generation Smart Contract and Decentralized Application Platform, https://github.com/ethereum/wiki/wiki/White-Paper (2013-). B. Edgington, Upgrading Ethereum – A technical handbook on Ethereum’s move to proof of stake and beyond https://eth2book.info (2023-) Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.21/30
22. What’s FinTech? Financial Technology (the name doesn’t explain much) What kind of technology? If we don’t ask, then coins, pencils, account books, clay tablets, languages, are all technology “The use of human technology began with making things in nature into simple tools” (automatically translated from Japanese Wikipedia) Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.22/30
23. Industrial Tools, and Media and Governance B. Fuller, “Operating Manual for Spaceship Earth”, 1969 Industrial Tool = “all the tools that cannot be produced by one man person” ⇒ Media (tools/extensions of human) and Governance (cannot be produced by one person) “Language” was the first industrial tool Today, technology is a system of industrial tools So, the language is technology anyways, Meaningful to this class when we think about communication-technology aspect of languages People naturally imagine, when they hear the word “technology”, the latest system of industrial tools of the era they live in Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.23/30
24. Background : Digital Technology Processing power of computers and network is improved, Cost is reduced at the same time ⇒ Time has come where individuals always carry network computers with them A personal network computer = A smartphone Can you imagine lives and work styles 30 years ago? Almost Showa era . . . In a way, it hasn’t changed at all in Japan ;) Superficially, it has changed a lot Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.24/30
25. IDEA of FinTech Financial Inclusion Growing customer base (including those who have not) Financial Democracy Expansion of business entities (with the emergence of non-banks) User Experience (essential in DX) Customers can easily leave if they are not satisfied Architecture as Law There is always an option to break the law, but it is impossible to do what the architecture does not allow As long as you can’t use hacking techniques ← So it is essential for us to know how to hack Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.25/30
26. Business Areas of FinTech Payments e-Money, credit/debit cards, mobile payments, digital currencies Asset Management Automatic asset management, robo-advisor Deposits and Loans P2P lending, pre-paid Financing Crowdfunding, ICO (problematic), STO, COE (Cause-Oriented Economy)(word coined by lecturer) Insurance Use of IoT, smart contracts (automation) Capital Market Securities trading system with LT Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.26/30
27. FinTech Intrinsically “Destroys” It’s possible to maximize profits through an engineering approach under the current rules of financial capitalism (cf. financial engineering) But FinTech is inherently a game-changer, changing rules and creating changes that make traditional financial capitalistic society obsolete Blows the foundation itself New technology allows us to bypass the old ways The impact of this on “the foundation” is immeasurable Ex1 : YouTube, Uber, Airbnb Separation from ownership of broadcasting stations, vehicles or real estates Ex2 : Visa ↔ AMEX brand holder, issuer, acquirer Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.27/30
28. Examples Let’s see if you can come up with examples of FinTech Since it is so commonplace today, there will be an example of something that is not so common as a discussion topic Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.28/30
29. Discussion: Zero money for passengers to pay to travel Let’s say, within a town How do you achieve it? It cannot be done? But this is also an orange juice test https://www.intercom.com/blog/the-orange-juice-test/ Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.29/30
30. See You Next Week! Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.30/30