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History of Payment Methods

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FinTech: Foundations, Payments, and Regulations

Université de Pennsylvanie

4.7 (275 notes) | 3.8K étudiants inscrits

Cours 1 de 4 dans Fintech: Foundations & Applications of Financial Technology Spécialisation

In this course, you’ll learn the key components of modern-day investment strategies which utilize fintech. Professors Natasha Sarin and Chris Geczy of the Wharton School have designed this course to help you understand the complex structure of payment methods and financial regulations, so you can determine how fintech plays a role in the future of investing. Through analysis of robo-advising and changing demographic forces, you’ll learn how basic elements of trust underlie complex choice architecture in investments and impact investing. You’ll also explore payment methodologies and how fintech is emerging as an entrepreneurial solution to both investments and payment systems. By the end of this course, you’ll be able to identify different financial technologies, and understand the dynamic between the innovations and regulations, and employ best practices in developing a fintech strategy for yourself or your business. No prerequisites are required for this course, although a basic understanding of credit cards and other payment methods is helpful.

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4.7 (275 notes)

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AA

Jun 30, 2019

My first course in Coursera and it did not disappoint! I recommend this FinTech course to anybody seek a quick yet detailed introduction to the world of FinTech! Thank you

CF

Jul 08, 2019

clear and concise teachings lead to a quick understanding of the material presented. video length was great; never too long. visuals were easy to understand and interpret.

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Module 3: Payments

In this module, you’ll be introduced to the foundations of payment methods, and focus more closely on the history and regulation of payments. You’ll begin by examining the history and current global trends in payment methods by analyzing UnionPay. Then you’ll look at the evolution of credit cards, the two-sided payment markets, and the inherent issues of the credit card payment system. You’ll learn key aspects behind complex payment processes, the regulation behind payment methods, and promising solutions from fintech for concerns in the credit card market. By the end of this module, you’ll have a richer understanding of the growth of payment systems and their regulations, and of the impact of fintech in the future of payment systems.

Professor Sarin Introduction0:29

History of Payment Methods4:36

Current Global Trends in Payment Methods6:51

Two-Sided Payment Markets10:24

Complexity of Payment Process6:01

Cost Burden for Merchants5:36

Who Pays for Credit Card Reward6:29

Introduction to Regulation11:14

US Credit Regulation11:37

International Credit Regulation3:15

Future of Payment Networks4:52

Enseigné par

Christopher Geczy
Adjunct Professor of Finance
Natasha Sarin
Assistant Professor of Law

Transcription

In this module, we'll be talking a lot about how we pay for and transact for the goods that we purchase. So I'm going to start by telling you a little bit about the history of payment methods, and then talk to you a little bit about the inherently two-sided nature of this market and why that makes it quite unique relative to normal sort of goods transaction purchases that we do. I'm going to talk a little bit about the growth of the credit card industry in particular, and problems that have emerged in this industry, and the way that regulation has tried to solve these problems, and perhaps the way that financial technology can solve these problems in the future. Just to start in sort of level the playing field for us a little bit, what is and how historically have we transacted for goods? This is a question that has been with us since the beginning of time, and it takes us back to long, long ago when we used to barter or exchange actual goods with one another. The issue with this bartering in this slide I present to you there are bartering horses for shells for example, is that there are no real common standard of value. Your livestock might be really valuable to you but less valuable to the person you're transacting with. So whose valuation should govern in that particular exchange is a difficult question. It's also quite inefficient as a means of exchange every time you want to exchange your livestock for some shells, you have to carry these goods around with you to transact. So understanding that this is quite inefficient means of transacting, we kind of innovated, and the first series of innovations had to do with using rare metals or coins in order to be a store of value for exchanging and transacting. This also pose some issues from the perspective of those in engaged in these exchanges. One issue is that there's inherently fluctuation in the value of the metals like gold, the silver that you're using because it depends on how much gold and silver you have and your ability to make those resources into these coins. It's also deeply burdensome to weigh and carry around every day, imagine that we only transacted with quarters. This would be deeply inefficient for all of us and quite cumbersome, and quarters are much lighter than the metals that we were using in these means of exchange. So we got to using paper money as a means of exchange. This comes to us from China where merchants invented the first paper money, and by the 19th century paper money was very common in Europe. This while a significant advancement that got rid of some of the inefficiencies of for example having to carry around metals with you, or being concerned about the fact that there are fluctuations in these values depending on the resources that you have available, is still not a perfect payment structure by any means because there are real concerns about theft and the ease of theft when you're transacting with paper currency, and also a forgery that counterfeit notes are going to emerge and people are going to be able to transact with them. They kind of more modern innovation we still obviously have paper money, but in the early 1950s, we introduced the first credit cards as a means of transacting. This had a lot of advantages from the perspective of the consumer who's able to now transact with a single payment instrument that they have in their wallet, rather than a host of paper bills or a lot of coins that they're carrying around with them. So there's certainly efficiency gains for consumers. There are problems as well for the perspective of both consumers and merchants. From the consumer perspective you worry about things like credit card fraud which has emerged as a leading concern. From the merchant perspective, the nature of these markets which we're going to spend some time talking about in this lecture, resulted in a few large card networks having considerable control over this market, and that creates some problems that regulation is trying to address. From the merchant perspective, the main problem is that the fees for processing these transactions tend to be very large. This is a concern both for antitrust regulation but also a concern for financial innovation going forward.

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