Welcome back to our course on FinTech Foundations and Overview
We've been talking about what is FinTech
And we heard from a professor of finance who has many years working in the industry
that finance and technology are married
and there's nothing new about finance and technology being tightly integrated
Today, we have another guest speaker who's an entrepreneur in a FinTech startup company
And he's going to talk about why FinTech is new or what's different
So, how would you respond to the question
is there anything new in FinTech?
>>Well in the past
obviously IT serve a major role in any banking
from remittance of funds within
the bankers community and also you could see that ATM's or use of ATM's
and for a lot of the back-end systems
>>Which Paul Volcker said was the best FinTech technology ever developed, is an ATM
>>Yes that was in the 70s or the 80s, right
>>Okay, so ancient history
Ancient is boring
>>It's past
>>Okay, it's past, alright
>>But the thing about it, in those days
all these systems are closed systems, is proprietary systems
Now, if you want to have your credit risk
the bank would have the proprietary database
because you bank with the banks, right?
So, I mean your credit card records
your mortgage records, every details and all those information
they are all with the banks
And there's no way, it's not easy for any individual obtain those records
and then be able to transfer your data to somebody else
>>But kind of they're open in the sense I can use my ATM card at
many ATMs for many banks and they
interchange with each other and to transact with each other
So, something's open
>>In terms of cash
yes because they recognize cash is your property
But in terms of data that you deposit in the bank
well, how will I be able to retrieve it?
>>The data is closed
>>Exactly. Now, you know that in the past years where a lot of
the governments around the world because of data privacy ordinance
>>Right
>>What happens is if I consider that as my personal data
I'll be able to obtain it from the government
Government is a data holder
They are not the data owner of my data
>>Okay
>>Right, that's always been recognized
But in terms of financial data
in the past is still been closed
I cannot, for example, let's say
I cannot just instruct my bank
can you transfer all my credit card transaction, history
my personal profile, my mortgage records to another financial institution
>>Has that changed?
>>So now therefore, it's changed
especially you see the policy in UK with an open banking API
>>Okay
>>That's changed
>>Is it just the UK or is it other countries as well
>>I think UK is taking the lead
and other countries are following
You see Hong Kong, Singapore
Recently, in Hong Kong
the Hong Kong Monetary Authority they issue a consultancy paper
They asked people, what is your input towards this feedback, smart banking
>>US, do we have these rules?
>>Yes. US similar
Some rules, okay
Now, you've see in the, for example
let's say in trading
you see a lot of the stock exchange around the world
Already 10, 20 years ago
they opened up their APIs
So basically, for example, like in my company
my startup in Hong Kong Science and Technology Park
our computer software could actually have
the direct connection to the exchange without through any banks or brokers
So, as long as I could comply
>>And to do that, you used to have to be a member of the exchange
>>Yes, exactly. Now, I just have to comply with the requirements
>>Okay, so it's much easier to get into the data to get into the back-end?
>>Right, exactly. Now, in the old days
if I'm a really really smart trader
I do a very good record, right?
I cannot come up and start up my business
I can't because the whole infrastructure
is being proprietary and controlled by the banks
So, basically the gateway
>>So, it was a club that was closed?
>>Yes. It's a gateway that they blocked it
>>Right
>>So, I cannot go through the walls of that
>>But now you can?
>>Exactly I can. So, as long as I got a IT guy
who could work out all of these compliance with whatever the extremes require
I could even do colocation of my server
right at the exchange data warehouse, data center
>>So, would you say new regulations and
new government constraints have opened up barriers to entry?
>>Yes, definitely
>>So, it's easier to get in?
>>Easier to get in. So therefore
I no longer need to depend on the traditional banking infrastructure to
be able to access to the financial market today, at least in trading
>>That's a radical idea
You mean the government is the good guy?
>>I think government is neutral
I think they have to because I mean it's the competition part
It's the fairness in the market
>>Okay
>>I think they are looking at a much bigger perspective in terms of the-
>>And so, if we didn't have any regulations at all
we'd still have closed proprietary systems
>>Well, that's what they're concerned about
>>Okay
>>I think the regulations is to ensure that there's a standard
there's regulation, there's compliance
there's governance in terms of doing that
>>So, regulation would be
good or too much regulation in the wrong way, can stifle innovation
>>Right. I think the regulation is just outdated
In the past, the regulation was good because you can't let
everybody to just tap and connect to any exchange system, right?
You're concerned about a lot of cyber security issues
like DDOS attack, hackings and all of that
>>But I'm hearing that regulation can open up things
as well as close them down
>>To some degree. There are certain regulations
at the present moment, are looking at high frequency trading, for example
>>Right
>>They find it, one day I opened it up
It's like I build an highway, an information superhighway
So, if people are doing something that is kind of unfair to other road user on that road
then obviously government can step in, right?
So, exactly to make sure that is a level playing field for everyone
So, not only the bankers are in control of it because the market do belong to people
isn't it? At the end of the day
>>So, do you like a level playing field?
>>Yes, I prefer that
and also that's why globally-
>>Some people say they don't because they'd rather have a competitive advantage
>>Obviously, when something is opened up
there will be somebody gain and somebody lose something
>>Right
>>And how you are going to balance it
>>So, to some extent
when you benefited from the old world and the old rules
you don't really like the new rules
>>That's true
>>But if you are able to get into the business now and you couldn't before
you say this is great
>>Right this is great. And also
I think it's the concept that your data
do you really want you to have the control
the actual usage of that
and then you could, if you have that knowledge and skill, right?
I mean, will you be able to
trade in the market directly instead of through a middleman, right?
It's in the old days like travel agencies
>>So, I'm hearing you say that regulation, open APIs
new good government encouragement to
collaborate cooperate is opening up opportunities for entrepreneurs
Is there anything tech to FinTech or is it just RegTech or regulation
reregulation of finances or just deregulation
Where's the tech in FinTech?
>>I think regulation is very important
Firstly, I mean all in past years in our history of banking
the reason why we trust the government
we trust the banks and all these is because it's a highly regulated industry
>>I got to be honest
I don't always trust the government
I'm an American, I've seen government go wrong
>>Right. Now, if you buy that concept then obviously
you buy the new open concept now
So basically, it's like
>>Less regulation
>>Exactly, I mean basically we trust each other. It's like the-
>>No, I don't trust each other either
I don't trust anybody
>>But that's the open and checks and balanced system, right?
>>Right
>>When you say trust everybody
is we have checks and balance
Different people would have their own self interest
But hopefully, when everybody are in a level playing field
in a fair playing field
then there are checks and balance so that we can find an equilibrium point
>>Now, if you can give me access to information and that's more shared
then we have what Ronald Reagan would have described with Gorbachev is, trust but verify
>>you verify your authenticate you ensure that piece of data
I mean is it accurate is it authenticated >> Does it work, does it do what I think
>>let's say for example if I transfer
ten dollars to you I mean could that be double spending
I mean is it actually the $10 belonged to me
in terms of that particular way
because in the cyber world a lot of the the issues that
technically it got to be resolved
in the old days the technology is really
not up to dare to resolve it until like the
distributed ledger technology
the blockchain technology that is available
and also crypto is available to prove
that with open algorithm anybody will be
able to crack it so if you crack it the
algorithm you know could be basically
removed and it's open to - it's not like
in the old days, it’s a black box right? >> Certainly
Blockchain has been proven by Bitcoin to
be viable to be not easy to hack >> Right
>>and so we have seen a lot of >> Right
technologies come into play with FinTech
>> with startups that might not have >> Right
seen the light of day in traditional
finance firms >> yeah I mean I mean even
today we ask ourselves, right? The banking
industry, is it really the
data industry a little data business
just think of it, right? Once my physical
it's a piece of paper of so call
you know the American notes as in 'god we trust'
right so it's for that dollar to be
deposit in the bank once it's in the banking system
all these transfers are data transfer
right, isn't it, think about it and also all
these trading open, high, low, close
all this data and then what time I enter
into the market how I wire money into
my account in order to trade, how much I
could got stocks, all these are on
a computer system on the database right so
so it is really a data business at the
end of the day so what they are
providing it's is it's it's just like
a cloud computing service of all these
financial data being sitting in
an institute >> now okay but FinTech has been
like this as a data service for decades
okay you know going back to the 1950s
we've had technology data service
banking all integrated together
What's new now?
