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Overview of FinTech (1), Lecture 1 of FinTech

Kenji Saito
September 27, 2019

Overview of FinTech (1), Lecture 1 of FinTech

Slides I used at FinTech - Financial Innovation and the Internet, Graduate School of Business and Finance, Waseda University, on September 27, 2019.

Kenji Saito

September 27, 2019
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  1. Manifesto of Futurism. Lecture 1 : Overview of FinTech (1)

    FinTech — Financial Innovation and the Internet 2019 Fall Kenji Saito Professor, Graduate School of Business and Finance, Waseda University [email protected] Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.1/22
  2. The lecture slides can be found at : https://speakerdeck.com/ks91 Lecture

    1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.2/22
  3. Brief Self Introduction Kenji Saito (Google Scholar citations) Professor, Graduate

    School of Business and Finance, Waseda University Senior Researcher / Lecturer, SFC (Shonan Fujisawa Campus), Keio University Chief Science Officer, BlockchainHub Inc. Representative Director, Beyond Blockchain Representative Director, Academy Camp 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) and digital currency for 19 years at Keio University (Just started my career at Waseda this month) Holding Academy Camp for children in Fukushima with friends since summer 2011 Last year at SFC, Academy Camp 2018 Summer - “OK Google, Do My Homework!” This year at SFC and in Yokohama, Academy Camp 2019 Summer - “REINVENT THE WORLD” → 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 2019 Fall — 2019-09-27 – p.3/22
  4. In Academy Camp . . . (Do we live in

    the same era?) Last summer, we did Academy Camp 2018 Summer - “OK Google, Do My Homework!” term 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” Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.4/22
  5. Other Classes (in Japanese language) At WBS, Waseda University “Managing

    Nonprofits” “Blockchain and Decentralized Finance” (seminar) https://speakerdeck.com/ks91 (just slides) At SFC, Keio University “Beyond Blockchain Basics/Advanced”(2019 Spring/Fall) http://gc.sfc.keio.ac.jp/cgi/class/class_top.cgi?2019_44979 (Basics)(with video) http://gc.sfc.keio.ac.jp/cgi/class/class_top.cgi?2019_44980 (Advanced)(with video) → 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 2019 Fall — 2019-09-27 – p.5/22
  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) Depicts future reality with new technology (2) Extracts problems and search for a path Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.6/22
  7. Today’s Topics Orientation Objectives, overview and schedule What’s FinTech? Backgrounds

    and meanings Examples Information innovation and society (perhaps next week) Towards future history of finance Discussion : Does FinTech free people? (perhaps next week) Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.7/22
  8. 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 Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.8/22
  9. Schedule (provisional) Lecture 1 9 /27 Overview of FinTech (1)

    • Lecture 2 10/ 4 Overview of FinTech (2) Lecture 3 10/11 Internet Technology and Governance (1) Lecture 4 10/18 Internet Technology and Governance (2) Lecture 5 10/25 The World of Apps (1) Lecture 6 11/ 8 The World of Apps (2) Lecture 7 11/15 Blockchain (1) Lecture 8 11/22 Blockchain (2) Lecture 9 11/29 Other Ledger Technology and Applications (1) Lecture 10 12/ 6 Other Ledger Technology and Applications (2) Lecture 11 12/13 Cyber-Physical Society and Future of Finance (1) Lecture 12 12/20 Cyber-Physical Society and Future of Finance (2) Lecture 13 1 /10 FinTech Ideathon (1) Lecture 14 1 /17 FinTech Ideathon (2) Lecture 15 1 /24 Presentations and Conclusions Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.9/22
  10. Structure of Lectures (2 consecutive lectures on 1 theme) Assignment

    and Review (10∼20min.) Homework is assigned for each theme At beginning of each theme, reviews some of your reports Lecture (90∼100min.) Explains the theme Questions are welcome at any time during the lecture Also some short discussions 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 2019 Fall — 2019-09-27 – p.10/22
  11. Assignments Submit your reports through Course N@vi No physical paper

    of any kind ← if you give me one, I will lose it Deadline is not very exactly handled Participation is checked by the reports (and speaking), not by your physical presence in the classroom Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.11/22
  12. 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 Active class participation Questions and comments Providing topics Commenting on reports by other students 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 2019 Fall — 2019-09-27 – p.12/22
  13. 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 (2014-). Libra Association, Libra White Paper, https://libra.org/en-US/white-paper/?noredirect=en-US (2019-). Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.13/22
  14. What’s FinTech? Financial Technology (the name doesn’t explain much) What

    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 2019 Fall — 2019-09-27 – p.14/22
  15. 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 2019 Fall — 2019-09-27 – p.15/22
  16. 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? 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 2019 Fall — 2019-09-27 – p.16/22
  17. 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 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 Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.17/22
  18. 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 2019 Fall — 2019-09-27 – p.18/22
  19. 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 2019 Fall — 2019-09-27 – p.19/22
  20. Examples What can we learn from “developed countries”? Lecture 1

    : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.20/22
  21. Alibaba Group and Yahoo! JAPAN Group China’s largest e-commerce service

    (with 500 million buyers) ⇔ “Problem solving engine” to solve all problems in Japan using the Internet Alipay (ࢧ෇ๅ) (Payment platform) Payment by mobile phones using QR code Large amount of accumulated funds (more than 10 trillion yen) → Asset management service to deposit in MMF (༨ֹๅ) ⇔ PayPay Zhima Credit (ࣳຑ৴༻) Analyze 500 million people’s data to quantify credit scores Quality of service you receive depends on your score ⇔ Yahoo! Score Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.21/22
  22. See You Next Week! Lecture 1 : Overview of FinTech

    (1) — FinTech — Financial Innovation and the Internet 2019 Fall — 2019-09-27 – p.22/22