November 10, 2020
On the evening of November 10th, the Graduate Admissions Office of NYU Shanghai and NYU Stern MS programs held an online admissions information session to introduce admissions information and procedures of the two master’s programs: MS in Data Analytics and Business Computing (DABC) & MS in Quantitative Finance (QF). Additionally, we are delighted to invite Professor Yannis Bakos to participate in the webinar.
Professor Bakos is currently an Associate Professor of Information Systems at NYU Stern, teaching Foundations of FinTech for both MS DABC and MS QF. In his talk titled “Fundamentals of FinTech, the Fintech Opportunity”, Professor Bakos explained what FinTech is, why it is important, and the entrepreneurial opportunities that FinTech provides for students.
Five Areas of Disruptions
Professor Bakos shared a thorough explanation of how technology is disrupting the way financial functions perform in five areas. Starting with payments, it is an important trend that Finance is almost fully digitized. Ali pay, Wechat pay, and Apple Pay are all playing a huge role in this transformation. A lot of blockchain and cryptocurrencies are based on systems that support payments. Ripple is a company that focuses on international transfers between banks and financial intermediates. Furthermore, Facebook has announced that if they develop a cryptocurrency called Libra, the whole payment system among individuals, especially in the international context, would be revolutionized.
Technology has also been playing a significant role in Consumer Financial Services. Nowadays, technologies like peer to peer consumer learning act as platforms for markets in order to allow borrowers and lenders to find each other. Case studies like Lending Club will be discussed in the course to study how technologies are used to figure out how to properly price the loans.
Professor Bakos then used the London Stock Exchange as an example to demonstrate how people used to trade stocks before 1986, which meant walking around and looking for people in specific locations where they would trade different stocks. Then, a big development took place in 1986, which was called the Big Bang. People’s trading shifted from communicating face-to-face to using computers via the internet. The stock exchange system gave people the same information as before, but in a much more efficient way. At the time, that was revolutionary, totally transforming the equities and trading. The point is that what FinTech is doing today is taking markets where we don't yet have, and bringing it to this world.
London Stock Exchange Before the 1986 "Big Bang"
The trading was shifted from face-to-face communication to using internet, after the "Big Bang" in 1986
London Stock Exchange nowadays
Regarding asset and wealth management, bankers used to communicate with customers to understand their needs and decide the appropriate way to allocate the investments. Now, this part has moved to systems that are almost entirely online, considering to be a very substantial transformation of the market, again, driven by technology.
Then, in the area of risk and insurance, we went from the traditional way of purchasing policies and filing claims to a model that is much more technology intensive. The idea of reinsurance, which is to insure a risk, whether it was an individual or a company that would like to share the risk to reduce their individual exposure. For the reinsurance market, the technology has actually allowed very rapid settlement of claims both in terms of estimating the damages and eliminating fraud.
Important technologies for financial innovation
Professor Bakos continued to share how technology can create disruptions. He began with information security and authentication, in this case technologies are used to protect, encrypt and authenticate information, since they underlie what we saw in terms of payments and blocks. His course in the program will talk about how Bitcoin types of blockchain operate for 11 years, and how companies can use blockchain technologies to change the market. Based on the discussion, students will learn about analytics as another technology, which uses tremendous amounts of generated data to make appropriate decisions about the services we offer. The course will also touch on machine learning and neural networks, often called Artificial Intelligence, and how they basically transform finance. Finally, he introduced privacy, security and data protection, which are also key components in Fintech applications.
Financial Disruption and Innovation
Throughout the course, Professor Bakos will also cover how significant the financial disruptions will be, which certainly will be in the multiple trillions of dollars. Then, the course will look into innovation. As we can see, technologies can be used in different types of financial startups. Nowadays, Asia is becoming one of the centers to complement Europe and the United States, where a lot of financial innovation is used based on technology.
Dealing with regulators in many different jurisdictions based on which country you are in can be challenging, so the course will wrap up with discussions of regulatory issues. What are the long term impacts of technology against human workers? Are we all going to be like the people that disappeared from the big hangar that UBS was using for trading? Or are we going to be working with technology and creating more value? Foundamentals of FinTech will give you a deeper understanding of these issues that we are facing.