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?
