1.9: FinTech For Consumers

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FinTech Foundations and Overview

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The Hong Kong University of Science and Technology

FinTech Foundations and Overview

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Cours 1 sur 4 dans Specialization FinTech: Finance Industry Transformation and Regulation

Our primary goal is to help you to understand FinTech and to become more confident and persuasive in your ability to analyze and make recommendations to executives within the finance industry regarding how to react to these changes. This FIRST MOOC ON FINTECH IN ASIA-PACIFIC offered by HKUST presents the views of several professors from the top business school in Asia as well as perspectives from industry professionals. HKUST has been ranked for many years as the No.1 EMBA program in the world, as the number one Finance program in Asia, and as the top MBA program in Asia by multiple independent rating and review journals and surveys. This course "FinTech Foundations and Overview" offers the combined strengths of HKUST in Business, Finance, and Technology as one the world's leading academic institutions on an important area of technology and business innovations. For learners from outside Asia, this also gives an insight into changes happening in the most advanced FinTech markets of the world, since Asia leads worldwide in FinTech adoption and creative innovations.

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Introduction to FinTech

In this module (week one), students will gain a multi-dimensional perspective on what FinTech means from the perspective of large firms (and older participants in the industry - e.g. dinosaurs), entrepreneurs, investors, and consumers. Examining what FinTech is, or is not, provides a foundations upon which students can build for better understanding of opportunities and changes.

1.2: FinTech For Dinosaurs (Part 1)8:09

1.3: FinTech For Dinosaurs (Part 2)6:45

1.4: FinTech For Entrepreneurs (Part 1)11:05

1.5: FinTech For Entrepreneurs (Part 2)8:49

1.6: FinTech For Entrepreneurs (Part 3)6:15

1.7: FinTech For Investors (Part 1)7:37

1.8: FinTech For Investors (Part 2)10:04

1.9: FinTech For Consumers10:49

Rencontrer les enseignants

Theodore Henry King CLARK
Associate Professor
Information Systems, Business Statistics and Operations Management Department

Welcome back to our course on FinTech Foundations and Overview

Today in our session

I'm going to talk about FinTech for consumers

And I decided to talk to myself or talk to you as a FinTech consumer

And the reason that I feel like I'm qualified to talk from

a consumer perspective is that I am a dinosaur and a pioneer

I've been around a long time

I've dealt with technology a long time

but I was using

training and buying and selling things on the internet before there was a web

Back when we use Usenet or we used old school technology, I was on the Internet

I was on e-mail and most people didn't have it

and I was a early pioneer

I was using online banking in 1995 with the first Internet bank in the world

And so, I've been doing FinTech kinds of things using e-trade and others for a long time

What do I like about technology and finance?

What drives consumers?

Now, not all consumers are like me

Some are very young people like we have with our discussion of FinTech for investors

But what's really driving this move to technology is convenience?

24/7, any location in the world, anywhere, anytime

anyway, and speed, I want trades fast

I want to be able to do things

I want to be able to use automation

I like tech

I like the capabilities of advanced technology

Now, let me talk for a moment about early tech in FinTech

An early example of technology and convenience was Security First Network Bank

Security First Network Bank was the first what we might call

Direct Bank or branchless bank in the United States

It was a bank that had no branches, had no services

the first Internet-only bank to be approved by the FDIC and insured by the FDIC

They used Internet technology in 1995 to bring out online checking

online accounts, you could access any ATM anywhere in America for free

You could do deposits by mail or wire in

money if you chose to from another bank for free

Bank services were free and very convenient

You could have bill pay for free very conveniently

Now, you may say, "Yeah, so what?"

I have dealt with my bank today

Well, that's interesting and it illustrates an important concept of FinTech

Security First was first to offer branchless banking and

Internet-only banking because they have a low cost structure

they could offer services free that

other banks charge for like checking accounts used to cost money

Security F irst gave them three and that was pretty good

And they offered technology in a time when banks were saying

"I don't think we can do this.

This is not secure."

Security First started as a software company

They started in the encryption and military systems area and that technology people said

"I wonder if there's something in business we could do that needs

secure Unix because we know how to do that," and they came up with banking

And so they launched the world's first Internet bank

Consumers loved it. Within a year

they had customers at every state in America

They were one of the fastest growing branch

One of the fastest growing banks in America, very fast drove

Their stock price exploded

Of course, this was during the dot-com boom or leading up to the dot-com boom

But the price went up and up and up as they kept gaining more and more investors

more and more customers

more and more enthusiasm

Banks started investing in them and saying

"We don't know where this is going,

but this looks exciting.

This is new tech.

This is a new opportunity."

What happened to Security First?

Well, within about three years

they were no longer alone

By 1998, 1999, other banks started coming out with online banking

Now, they had three to four years by themselves to grow fast, to get attention

to get exuberance, and other banks were sitting back and saying

"I wonder if they're going to get hacked.

I wonder if they're going to go under.

I wonder if this is going to melt down.

I wonder if this is going to be a problem."

And Security First proved that they had really good security and they could make

Unix and the Internet a secure banking environment that no one could break into

That was important

Other banks said

"We think we could do that."

And so they got on the tech bandwagon and we saw Bank of America

Citibank, Wells Fargo, US Bank, HSBC

and many other banks opening up Internet banking services

checking accounts online, other services online

That was a problem for Security First because what happened

is that consumers who loved FinTech or they loved their branchless banking

it turns out they would rather have free Internet banking and a branch

then free Internet banking without a branch

It wasn't that they didn't like the branch

It wasn't that they didn't like their bank

They wanted the convenience

They wanted the services

It's not that we want just stock trading online and no one to answer the phone

no customer service, and no place to go into

Security First went from raising

about $10 million early in their history to being worth about five years later

when they were bought out and merged into another company

after the dot-com crash, about $516 million

And that's after the crash and after they have sold other parts of the business

So, this is a success

This is a good firm and it's a good service

Bottom line, what do we want?

We want convenience

We want to be able to trade anywhere

We want to be able to buy and sell things

We want to be able to move money around from one account to another

We want what WeChat can offer in China

or we want what Apple can provide us or what PayPal can provide us

The ability of PayPal came up with lots of ideas for

banking services and the CEO of PayPal said

"We have lots of ideas but it turns out what people wanted was to be able send money from

one person to another via email and they couldn't do that via traditional banking."

So, PayPal came in because banks weren't there

What we want is a convenient attractive services as consumers

and FinTech is fast in

pioneering coming up with new ways of doing business and it opens up new doors

Some people have said nothing is new

I would say some things are very new

Some things are very innovative and very exciting

and there's things that we can do today like crowdfunding

interacting with companies, in ways we never would see before

There are currencies that allow us that proliferation of options to invest

speculate, lose money, make money

That's exciting. That's new

It may also be very risky

There's new opportunities for interacting with services and just aggregating services

I can put an algo trader on my PC and do things as an investor that I never could before

Big banks could do it. I couldn't

And so, as an investor, there's opportunity

As a consumer, this is a proliferation of flexible

convenient, attractive offerings that I could never have without this FinTech revolution

Finally, 10 years ago

the banking services melted down and banks got scared

They were trapped and they started looking inward and being cautious

Ten years ago, Apple brought out the iPhone

In that time, banks have become more inward looking

and tech firms have developed a proliferation of applications

An explosion of applications that mean consumers look to and trust Amazon

Alipay, Tencent, eBay, PayPal

as much or more than they do their banks

In fact, many millennials don't even want to deal with banks

Survey was done with millennials saying as consumers

Which would you prefer?

Would you prefer to go into your bank and sign loan documents?

Or, do you prefer to go to the dentist and have a cavity filled?

And then, the majority of millennials surveyed said

"I'd rather go to the dentist."

This is a problem for them

They like Amazon

They don't like their bank

because Amazon is convenient

Amazon is fast. Amazon as easy

The bank is trouble

And so, that's what we want as consumers

We want easy, fast, convenient

powerful, flexible, adaptable, innovative

That's what we're looking for and that's exciting

And the tech is not new

Many of these techs have been around a while but the applications

those are revolutionary and they're going to change the future of banking. Thank you

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