FINTECH
Author : Mayuri Wankhade
1.Making the world a better place with fintech research.
CALOMIRIS, C. et al (2021) emphasizes that the rise of financial technology (fintech) and its potential to foster financial inclusion for the poor. Fintech involves applying technological innovations to financial services and processes, with global investments reaching $135.7 billion annually. Despite its promise, many people, particularly in developing countries, lack access to basic financial services like payments, savings, credit, and insurance. Fintech is seen as a way to address this issue and achieve poverty reduction goals outlined in the United Nations’ Sustainable Development Goals.
While there is growing research interest in fintech within the Information Systems (IS) community, much of it overlooks the financial inclusion agenda. The article aims to encourage IS scholars to align their research with this agenda by proposing a framework for studying fintech-led financial inclusion. It suggests five areas of research: (a) business strategies, (b) digital artifacts, (c) business environment, (d) micro-foundations, and (e) developmental impacts of fintech on financial inclusion.
Overall, the article emphasizes the need for IS research to actively contribute to efforts aimed at leveraging fintech to improve financial inclusion for the poor.
2. Integrated Fintech Solutions in Learning Environments in the Post-Covid-19 Era
CUMMINGS, B. and ANDRUS, D. (2022) stated that the evolution of a 3-channel fintech infrastructure in a public university using a case study approach complemented by the famous object-based methodology. It presents part of a system codenamed TEERPS, which is an end-to-end application for all academic and administrative workflows including financial transaction handling. The system is observed in a production environment over a period of eight months and the results showed that the integration of multiple payment platforms can promote user confidence when it is backed by an institutional political will.
Resource planning and mobilization, bookkeeping, accounting, and inventory constitute the crux of control and financial management in tertiary institutions. Over the years, the quest for sustainable and client-centric improved service delivery through process reengineering has remained the epi-centre of a paradigm shift in the administration of Tertiary Educational Integrated Fintech Solutions in Learning Environments in the Post-Covid-19 Era. Following the Covid-19 pandemic, TEIs globally are putting up with the challenges and employing various strategies geared toward adapting to the new ‘normal’.
In recent months, developing countries like Nigeria and many other countries in sub-Saharan Africa have witnessed a new trend wherein various information systems tailored towards entrenching convenient boundless education, including administrative services, are evolving rapidly in the ICT ecosystem.
The acceptance of such systems is also growing even across secondary and primary educational institutions. Despite the pandemic, digitization and digitalization have remained tools that promote the quality and reputation of ICT-compliant 21st-century institutions. These modernization strategies contribute to productivity, competition, and development. No doubt, TEIs globally are now rated as “digital-literate” and “digitally-savvy’’.
3. How Fintech Is Enabling More Customized Investing.
DAS, S. R. (2019) states that Fintech is enabling more customized investing, with tech-powered direct indexing giving advisers the ability to offer personalized portfolios more efficiently, effectively, and at scale. This trend is gaining popularity as advisers become more comfortable with using technology. As the list of big-name firms buying up direct indexing platforms grows, industry leaders are betting on broader interest in direct indexing. The influence of aging millennials has driven the appetite for tech-based investment solutions, as they are emerging into their prime earning years and thinking about their future relative to what it may have meant and what the goals and objectives have been for previous generations.
Direct indexing has historically only been available to relatively wealthy clients due to higher trading costs. However, modern methods of digitally trading and record-low trading costs have opened up the ability to use technology to more effectively construct personalized outcomes. When given tools in a custom index platform or a direct index platform, about 80 percent of investors completely customize their strategy.
The secular trend that’s occurring around personalization at scale in fintech and financial planning broadly has opened itself up to the ability to use technology to more effectively construct personalized outcomes. When given these tools in a custom index platform or a direct index platform, about 80 percent of them completely customize their strategy.
In conclusion, fintech is enabling more personalized investing by providing advisers with the ability to offer personalized portfolios more efficiently, effectively, and at scale. As advisers become more comfortable with using technology, the trend is expected to continue growing.
4. How Can FinTech Reduce Corporate Zombification Risk?
FAVA, D. (2024) examines the impact of FinTech on corporate zombification risk, focusing on data from China’s A-share listed companies from 2011 to 2018. The researchers found that for each unit increase in FinTech, the probability of a company becoming a zombie firm decreases by 7.8%. FinTech can also reduce corporate zombification risk by improving the efficiency of bank credit and government subsidies.
The breadth of FinTech coverage and the depth of application can reduce corporate zombification risk, but the degree of digitization fails to play a role. FinTech can not only reduce corporate zombification risk but also inhibit the contagion effect of zombie firms in the industry.
Zombie firms are companies that have lost their economic viability and rely on bank loans and government subsidies to survive. In China, the emergence of zombie firms after 2013 has been a serious problem due to the implementation of large-scale fiscal stimulus from 2008 to 2009.
These firms harm economic growth potential, carry substantial risks of financial distress, and can destroy corporate value. They crowd out bank capital, government subsidies, and labour resources, hindering resource acquisition and investment expansion of non-zombie firms.
China’s path to reducing corporate zombification risk is an important reference for other emerging market countries. The formation of zombie firms in China can be attributed to the country’s imperfect financial system and the destruction of a market mechanism. Reducing information asymmetry between resource providers and enterprises is crucial to mitigating corporate zombification risk.
FinTech can help banks and governments allocate resources more efficiently and avoid corporate zombification risk by mining more comprehensive corporate information.
This paper examines the impact of FinTech on corporate zombification risk based on data from China’s A-share listed companies.
5. Different Financial Paradigms And Technologies
GOZMAN, D.et al (2018) states that the growing field of financial technology (fintech) and the different financial paradigms and technologies that support it. Fintech is primarily a disintermediation force where disruptive technologies are the drivers. This framework discusses 10 primary areas in fintech, including machine learning technology, big data, cloud computing, and cryptographic methods. Fintech refers to various financial technologies used to automate processes in the financial sector, from routine tasks to cognitive decision-making. Various areas of finance are subject to disruption, such as payment systems, contract checking, trading, risk management, quantitative asset management, lending, mobile banking, customer retention, and investment banking.
Annual fintech financing in 2018 was $112 billion, consisting of 2,196 deals, doubling over that of the previous year. Fintech may be characterized by technological change in three broad areas of finance: raising capital, allotting capital, and transferring capital. Fintech is disrupting all three. For example, payment systems efficiently transfer capital. Firms such as Common Bond are using technology to revolutionize how capital is supplied. Additionally, Robo -advising platforms are changing the way capital is allocated.
Fintech applications range from simple automation to complex decision-making, often relying on big data and necessitating investments in cloud infrastructure and analytics. Successful fintech applications display some common characteristics, such as developing models from a theoretical foundation before bringing in data, sharp definition of the problem statement, and a multidisciplinary approach.
Many fintech applications face big data and computational bottlenecks, such as data extraction, integration, correction, quality, and analytics. How well these are handled will determine the success of a fintech venture. Fintech is a rapidly evolving field that is driven by disruptive technologies and the need for businesses to adapt and innovate.
6. Fintech continue to grow despite a worldwide pandemic
JIN, L. et al (2022) emphasizes Financial technology, or fintech, has significantly impacted the way financial services are delivered, with advancements such as crowdfunding and budgeting apps changing the way companies and consumers operate. The COVID-19 pandemic has led to a shift in consumer habits, changing the way certain technologies are used and optimizing others. Blockchain, an information recording system, is currently the most important technology for companies and consumers due to its decentralization and ability to store transactions on multiple devices. This makes it easier to identify hacked or changed information based on discrepancies across devices.
Blockchain is also being utilized in the supply chain to help companies protect their products and build trust with consumers during the pandemic. For example, blockchain allows companies to record every step of the food’s journey from farm to checkout, eliminating the need for human auditing. It is also seen as a tool against COVID, as it allows for easy tracking of food origins, cleanliness, and protective protocols. Online payment technologies have been influenced by the pandemic, with many consumers moving away from in-person transactions to avoid human interaction and relying heavily on e-commerce shopping. Businesses, especially local suppliers, have increased their focus on online sales as safety regulations impact their business models. Online payment solutions companies like PayPal Holdings, Inc. and Stripe are seeing a boom in business, with PayPal reporting an increase of over 21 million new users during their June quarter.
While it is difficult to forecast whether this trend will continue, it is possible that COVID-19 has shifted consumer behaviours for the long-term. As the pandemic continues to impact the financial industry, it is crucial for companies to adapt and optimize their strategies to stay competitive and meet the evolving needs of their customers.
7. Fintech business and firm access to bank loans.
LAGNA, A.et al(2022) emphasizes that Financial technology (Fintech) has experienced explosive growth globally, with China being the largest market in Fintech. The Financial Stability Board (FSB) suggests that Fintech may have significant impacts on financial markets and the supply of financial services. China is now at the forefront and the largest market in Fintech, with well-diversified applications such as supply chain finance.
The academic literature has been fast evolving in two strains of Fintech: one focuses on Fintech itself, such as its connotative attributes and regulation, and the other on regional development and its impacts to the banking sector. Regional Fintech development may induce firms to better commit to R&D and enhance investment efficiency. Adoption of Fintech can significantly improve banks’ credit scoring, lower costs, enhance efficiency, reduce credit risk in bank lending, help banks allocate loans to SMEs, and increase stock informativeness for investment banks. However, there seems to be a lack of in-depth discussion bridging the corporate and banking perspectives.
Firms’ participation in Fintech can also be significantly meaningful towards banks. Banks traditionally provide loans to firms with consideration given to their ownership, accounting information, political connections, and the bank-firm relationship. When firms participate in Fintech, their market position and relationship with banks may be affected. On the one hand, firms’ innovative participation in Fintech would enhance their management of cash flows and cost reduction. On the other hand, firms’ overinvestment may be effectively curbed by Fintech, which may have policy implications for firm investment behaviour and financing activities. Fintech has the potential to positively contribute to firm access to bank loans, particularly among private firms, non-manufacturing firms, and those in regions of better marketisation.
8. The Intersection of Fintech and Behavioural Finance.
NWANKWO, W. et al. (2022) stated that Financial planning is undergoing a significant transformation due to the convergence of fintech and behavioural finance. The financial landscape has evolved from earning, saving, investing, to earning, saving, investing, and feeling. This intersection is reshaping how investors approach the market, and financial planners should be paying attention to this shift.
The COVID-19 pandemic has led to a rise in retail investors, with a record 10 million new brokerage accounts opened in 2020. These investors are still trying to navigate the markets and growing their assets, suggesting that even amid extreme market volatility, everyday people remain interested in participating in the market and using investments to earn extra money and reach their financial goals.
The rise of meme stocks, such as GameStop and AMC, has also contributed to this trend. Excessive enthusiasm from investors has created a sense of FOMO (fear of missing out), which can lead to a lack of understanding and decision-making.
Confirmation bias, where people look for perspectives and information that support their existing beliefs, can be overcome by advisors emphasizing the importance of seeking diverse viewpoints related to market trends and opportunities. Loss aversion, where people are more fearful of potential losses than gains, can cause them to miss out on promising long-term opportunities.
Advisors can help clients cope with loss aversion by reminding them about the importance of taking a long-term view of market performance and reassuring them that short-term market fluctuations shouldn’t distract them from their goals and tactics in their financial plans. Anchoring bias, where individuals rely too much on the first piece of information they receive about a topic or trend when making a decision, can cause them to discount other material that becomes available later. Financial planners should be aware of these biases and work with clients to create a more informed financial plan.
9. Chartering the Fintech Future
WALKER, J . (2020) emphasizes on Finance and Growth in Emerging Markets and the changing nature of the medium of exchange we use over time, with bank regulation sometimes accelerating these changes. The National banking system, founded in 1863, introduced the creation of national banknotes as a uniform medium of exchange, replacing state banknote issuance. However, this led to a diminished importance of banknotes as a medium of exchange. State banks faced a 10% annual tax on any notes they issued, and national banks had to maintain collateral at the Treasury for their outstanding national banknotes equal to 111% of their outstanding notes, and an additional 5% in required government-currency (“greenback”) cash reserves on hand.
Deposits had been growing in importance leading up to the National Banking Act of 1863, but the act accelerated the growth of deposits and became the primary funding vehicle for loans. Banks like Amsterdam’s famous Wissel bank functioned primarily as a clearinghouse for such bills. The history of successful bank chartering informs us that banking has always been defined by the core functions that banks engage in—lending funds or clearing payments, or both.
The specific means banks use to lend or transfer payments changes over time as a function of technological and regulatory changes. In particular, transfers can be made via bills of exchange, banknotes, deposits, credit cards, electronic balance transfers, or exchanges of cryptocurrencies via blockchain. History also teaches us that banks don’t always provide both lending and payments services. Bundling lending and payments services within one intermediary is not always a good idea.
Sometimes changes in banks’ structures and functions are predictable, such as the rise of deposit banking in the mid-19th century United States and the rise of nationwide universal banking in the United States after 1980. The demise of traditional models of banking today has similar elements of predictability based on clear trends driving change.
10. The Innovation Mechanisms of Fintech Start-Ups.
XU, L. et al. (2022) emphasizes on the emergence of financial technology is driven by efforts to deconstruct and reimagine business models embedded within financial services. Entrepreneurial endeavours to this end are diverse, bridging a range of financial services, markets, innovations, industry participants, infrastructures, and technologies. This study aims to improve comprehension of the global fintech landscape by analysing start-ups that participated in SWIFT’s Inno tribe competition. The main findings of this work include the development of fintech clusters to classify core services, business infrastructures, and underlying component technologies, as well as an analysis of how fin-techs synthesize different technologies to restructure flows of financial information through competitive and cooperative mechanisms of disintermediation, extension of access, financialization, hybridization, and personalization.
The research also examines related strategies for value creation connected with the competitive and cooperative mechanisms identified. Collectively, the results offer new insights into the diversity and range of emergent innovations and technologies that Q2 are transforming the financial services industry worldwide. The shifting nature of financial services is driven by the need to deconstruct and reimagine business models embedded within financial services.
The study also includes a discussion of the role of technology ecosystems in the fintech landscape, with the authors focusing on the role of blockchain, fintech, regulation, digital economy in China, and competition in operating systems. The authors have consulted and conducted research for leading ICT companies, engaged with the European Union and the OECD, and are currently completing a doctorate at the Henley Business School, UK, on the new technologies behind the recent rise of high-reliability organizations such as fintech firms.
Conclusion :
These articles cover a broad spectrum of topics within the realm of financial technology (fintech) and its impact on various aspects of finance, education, and corporate dynamics. One key theme across several articles is the potential of fintech to enhance financial inclusion, particularly in developing countries where access to basic financial services remains limited. They emphasize the need for aligning academic studies, particularly within Information Systems (IS), with the goal of leveraging fintech to address poverty and promote economic development.
Additionally, the integration of fintech solutions in educational environments, as highlighted in a case study of a public university, underscores the transformative role of technology in reshaping administrative workflows and adapting to the challenges posed by events like the COVID-19 pandemic.
It delves into specific applications of fintech, such as its role in enabling personalized investing through direct indexing and its potential to mitigate corporate zombification risk by improving efficiency and transparency in financial processes. Discussions also touch upon the broader landscape of fintech innovation, exploring emerging technologies like blockchain and their implications for sectors ranging from payment systems to investment banking. Furthermore, the intersection of fintech with behavioural finance is examined, highlighting how technological advancements are reshaping investor behaviour and financial planning strategies.
Moreover, there’s a focus on the regulatory and structural changes shaping the future of banking, with insights into historical banking evolution and the evolving role of technology in financial services.
Finally, a study analysing fintech start-ups sheds light on the diverse strategies and technologies driving innovation in the financial industry, emphasizing concepts such as disintermediation, access extension, and personalization. Together, these articles provide a comprehensive overview of the multifaceted nature of fintech and its potential to drive transformative change across various sectors of the economy.
REFERENCES:
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