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Introduction to FinTech

Published on October 29, 2018   13 min
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Hello there. My name is Markos Zachariadis, and I'm an Associate Professor at Warwick Business School, and a FinTech research fellow at the University of Cambridge. In this brief introductory lecture, I'm going to try and talk about what is FinTech and what is driving the current FinTech boom we've all been experiencing in the last 4 to 5 years, particularly in the UK, but also in the European Union, Asia, and the United States.
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As an academic for over a decade now, I have been studying the role and impact of technology and recent innovation in the financial services sector. Some of the recent questions we have been addressing at the university have been: what are the origins of payment infrastructures and how the unique features or the various technologies at use contribute to the transformation of the financial services sector?
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In addition, we have been exploring some of the economic phenomena and innovation theories that can help us understand better the growth, functions, and benefits that these financial technologies and platforms offer. A big part of our studies has also to do with the contingencies and the context within which these technologies exist. This is quite an important factor that has often been neglected when trying to understand and predict the impact of newly introduced innovations. For example, the same technology can thrive in the retail sector, but have little effect in the financial services industry, or even within finance, this same technology can be of great importance for payments, but do nothing to change financial market operations. One last point, from our multiple case studies in finance, technology itself- it's rarely the only reason for change; there are almost always complimentary factors that affect how any technological innovation will be used and accelerate or even delay its impact on the various use cases. A good framework to think about change in the finance industry is to consider the most important forces that result to change. From recent studies, we have identified four broader groups. First, supply and demand of services; second, changing regulation; third, organizational and market structure; and fourth, technological innovation. Each of these forces can have an influence on the others, and it's usually their combination that may lead to disruption in the sector. We have many cases from prior studies in financial services that testified to this. For example, in the mid 19th century, even though the telegraph spurred the creation of nationally integrated commodity in equity markets in the United States of America, US capital trading centers were still cut off from London, which was then the world's largest finances center. It was the demand for further expansion and inspired people like the Canadian investor, Frederick Gisborne, to push further with technological innovations and eventually fund the Trans-Atlantic Cable project. Similarly, the electronization of the London Stock Exchange during the 1980s was mostly driven by regulatory interventions and pressure to change the market structure rather than the technology itself. The mobilization of US securities around the same time was done due to the back office paper crunch and new regulation, which was introduced to relieve the backlog by using new organizational structure and database innovation. Finally, the introduction of the SWIFT Network in the 1970s, was mainly driven by the need to replace non-standardized telex messages, but also to deal with increasing demand in global trade. In fact, the technology used for the first SWIFT Networks was nowhere near the latest technological advances of the day, but served the community well for a number of years before upgrading to newer telecommunication protocols.