Lecture 1

# Lecture 1
## The Promise of FinTech
### Rajesh Narayanan
### Department of Finance, LSU
### 2021/01/11 (updated: 2021-01-10)

---

# Table of contents

1. [Prologue](#prologue)

2. [FinTech](#FinTech)

3. [Course Overview](#Course Overview)

4. [Course Highlights](#Highlights)

---

# Prologue

---

# Introductions

https://lsu-fintech.github.io/4910

### **Us**
#### Professors:

Rajesh Narayanan, Dimuthu Ratnadiwakara, Raja Velu

#### Teaching Fellow:

Sarp Mertdogan

### **You**

A quick roundtable of names, majors, background, interest in the course.

---

# FinTech

---

# So, What is Fintech?

### Many answers....all probably correct in some aspect

---

# Fin + Tech

## As a buzzword, its new!

### ... but Finance and Technology are not new!

---

# A walk down history

- ### Money in a barter economy
 
--

- ### Checks in a paper money economy
 
--

- ### ATM machines, online banking and trading, wire transfers....
 
--

> ## Financial services industry has **always** been at the forefront of technological innovation, and it has been constantly **disrupted** by new technology

---

# So, what's new this time around?

## Historical trailblazers
- ### central banks and financial institutions

## Current trailblazers
- ### Tech companies

> ## Google, Amazon, Facebook taking on **finance functions** like **payments, lending and investment**
  
---

# Why Tech firms?

- ### Big data boom and unparalleled access to consumer data
 
--

- ### Not subject to regulations like financial institutions

> ### Aggressive in taking risks: **new products, technology and markets**

---

# Fintech Industry Equilibrium

## Traditional banks?

- ### In danger of being technologically leapfrogged!
 
--

> ## New industry equilibrium?
> ### **Banks becoming tech firms** - Acquiring new talent and companies
> ### **Tech firms becoming banks** - Acquiring bank charters

---

# FinTech dynamics

## Traditional banking services:

- ### Payment services - deposit accounts

--
  - ### Lending services - personal/business loans, credit cards
  
--

- ### Capital raising - investment banking (issue stock and bonds)
  
--

- ### Investment advisory - investment/trading/brokerage/settlement

- ### Wealth management - Private banking (bespoke investing)
  
--
  
> ## All involve **moving** or **raising** or **investing** *capital* and *money*

---

# FinTech dynamics - contd.

## Fintechs:

- ### Payments - digital wallets (PayPal, Venmo), Cyptocurrencies 
  
--

- ### Lending - P2P lending (LendingClub, Prosper, Kabbage)
  
--

- ### Capital raising - crowdfunding, ICOs
  
--

- ### Investment - robo-advisors (Wealthfront, Betterment)
  
--

- ### Wealth management - Credit Karma, Mint 
  
--
  
> ## Traditional banks threatened on all fronts **piece** by **piece**

---

# So what is FinTech?

> ##  It is **technological innovations** that improve how *money* and *capital* are **transferred, raised and invested**

---

# What is the promise of FinTech?

> ##  It is the potential to tranform our financial lives in the near future

---

# Course Overview

---

# What is this course about?

## Providing you with the broadest exposure to FinTech, so that you are  well versed in languages of both **finance** and **tech**

---

# Course Objectives

## Finance is changing!

> ### "Silicon valley is coming.  There are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking"
>
> <footer>--- Jamie Dimon, CEO JPMorganChase</footer>

## Prepare you for the change!
 - How is FinTech reconfiguring financial services business models? What are the key disruption points? What determines success in FinTech?
 
 - What are the critical technology strategies and foundational technologies in FinTech?
 
 
---

# Course Organization

## Recall, we defined Fintech as:

### technological innovations that improve how *money* and *capital* are **transferred, raised and invested**

## So, we will explore in depth the technology and business side of innovations in how *money* and *capital* are:

> ### transferred (**PayTech**), raised (**CreditTech**), and invested (**InvestTech**)

---

## But what about Bitcoin?

### We will cover Cryptocurrencies like Bitcoin and Etherum too! 
  - ### Under **CryptoFinance**, as part of **PayTech**

---

# Module 1: PayTech (Capital Transfer)

## We will look at:

- Digital challengers to financial institutions that promise to make paying for things, and getting paid for things, **faster, cheaper and more secure**

- Do *not* rely on **decentralized** technologies like **blockchain**
   - e.g. Digital Wallets (PayPal, Venmo), Apple and Android Pay

Broadly,

> - How do payments traditionally occur? What are the inefficiencies that tech innovations attack?
> - How is the data advantage of new technologies leveraged to build entire payment ecosystems?
> - How are PayTech business built both in markets with and without payment infrastructure

---

# Module 2: CryptoFinance

## We will look at:

- Digital challengers to financial institutions that promise to make paying for things, and getting paid for things, **faster, cheaper and more secure**

- Rely on **decentralized** technologies like **blockchain**
   - e.g. cryptocurrencies like Bitcoin, Ethereum

Broadly,

> - Technical aspectes of blockchain technology that powers cryptocurrencies
> - Inefficiences in transaction processing and the advantages of blockchain's record-keeping technology
> - Cryptocurrencies as a tradeable asset
> - Blockchain as a business (smart contracts)

---

# Module 3: CreditTech (Capital Raising)

## We will look at:

- how FinTech is helping individuals and businesses raise capital more **broadly** and **efficiently**

Broadly,

> - How credit works traditionally, inefficiencies, P2P lending expanding credit access, translating into profitability 
> - How equity capital raising works traditionally, disruption through crowdfunding and ICO 
> - Disruption across the funding spectrum and response by traditional institutions

---

# Module 4: InvestTech (Investing money)

## We will look at:

- how FinTech is fundamentally changing the way we investment money

Broadly,

> - Technologies like ML and AI - stock selection, targeted portfolios 
> - Using big data and unstructured data (mobile sources and social media) to understand consumers and  better plan their investments
> - Business models of robo-advisors that combine ML, AI to deliver customized financial advice at low cost

---
class: inverse, center, middle
name: Highlights

# Course Highlights

https://lsu-fintech.github.io/4910/

---

# Hands on course

| Component                           | Weight |
|:-|-:|
| 2 × case studies/reports/assignments (15% each) | 30% |
| 3 × mini project/presentations (10% each)		| 30% |
| 1 × main project/presentation    				    | 30% |
| Participation                   				    | 10% |

---

# You, at the end of this course

![Awesome!](Images/week1-awesome.jpg)