Fintech - Elsevier | An Information Analytics Business



Course Title: HONR 370L 200 Fall 2017 Instructor: Prof John Hill Contact: John.hill@marist.eduSyllabusFintechBackgroundThe entrepreneurial startup community is aggressively developing new "Fintech" applications which are dramatically changing the way financial services and products are delivered, especially to Millennials. There are now more than 200 Fintech companies valued at over $1 billion each, the so-called "Unicorns," and global investors pour tens of billions of dollars more into new startups each year. There are stories about new financial applications in the press every day. Some commentators foresee a revolution in finance, where there will be no need for brick and mortar branches, investment counsellors, or even physical money itself. The reality is likely to be a more gradual adoption and integration of innovative technology and mobile applications into the existing financial system. The big financial institutions are not going to go away. They will adopt new technology in three different ways: by partnering with startups, by acquiring some of them and also by internal development. This is not to say that there won't be successful, enduring disruptive startups. After all, two of the pioneering disruptive Fintech companies are PayPal, which disrupted the payments system, and ICE, which disrupted exchange markets. But the vision of startups turning big financial institutions into zombie shells is not credible. Unfortunately, much of the Fintech literature is just too promotional of this outlook.This course will provide students with exposure to new Fintech services within a critical context and framework analyzing traditional money, banking and financial markets combined with interdisciplinary content from Computer Science and Entrepreneurship.Objectives of this Course:-To engage the student in observation, analysis and critical reflection of economic processes, institutions and innovations, using assigned readings, current events, current press and periodicals, other references, cases and class discussions.-To master key concepts in financial products and services and the regulation thereof.-To provide a foundation in the structure and functioning of financial institutions.-To gain a basic knowledge of current and prospective technology as it relates to financial products and services-To master key concepts in the financing of startups: angel investing, venture capital, initial public offerings; and to gain perspective on potentially negative distribution effects of this structure.-To improve research, writing, discussion and presentation skills.-To improve knowledge of current and future issues in cutting edge developments in banking, financial markets and entrepreneurial fields.Upon completion of this course, the student will have an understanding of:1) The range of financial services and products in the marketplace2) New services and products, often mobile and disruptive3) The importance of the dominant role of Millennials and their unique preferences4) Technology, as it relates to new Fintech5) Regulation of financial markets, with relevance to new Fintech6) How new startups are financed7) Social and distributional issues around new Fintech8) Possible future developments.PrerequisitesPrinciples of MicroeconomicsPrinciples of MacroeconomicsRequirementsThere will be a Mid Term and a Final Exam, each worth 20%, or a total of 40% of the course grade. There will be two required papers each worth 20%. The remaining 20% will be based on class participation and short assignments.The purpose of the exams is to test for comprehension of the course material.The purpose of the class discussions and written projects and cases is to challenge students to a higher level of learning, integration, and application of course material.Expectations: Students are responsible for timely completion of reading assignments prior to each class. Written assignments will be the original work of the individual student. Students must indicate where any and all materials are taken from other sources (footnotes, bibliography). Use reputable and authoritative sources. Students will be expected to contribute to class discussions. Responses to questions and careful contributions to the class are part of the benefit of small classes and the in-person campus experience. Each student is expected to contribute to class discussion every class, as part of the learning experience for all students.During exams, students will utilize only their own studying and understanding, and will not bring in outside materials in any form, or draw inappropriately upon the work of other students.Class Lecture ScheduleThe assigned readings below refer to the following texts:Fintech and the Remaking of Financial Institutionsby John Hill Elsevier (2018)Economics of Money, Banking, and Financial Markets, 11th Edition?by?Frederic S. Mishkin?(Author) Prentice Hall; 11th edition (2016)The FINTECH BookSusanne Chishti and Janos BarberisWiley, 2016The References at the end of each Chapter in Fintech and the Remaking of Financial Institutions contain additional readings which may also be assigned.Given the dynamic nature of Fintech, there are many blogs with interesting comments. A few that are regularly insightful are written by:Brad FeldMatt LevineChris SkinnerFred WilsonThere will also be frequent additional assigned readings from other sources.Lecture One: Introduction and Course Outline.Introduction and overviewClass introductionsClass scheduleReview requirements and expectationsSummary of Class Lectures and TimelineDisruption and disintermediation in financial services and products is occurring at a rapid pace. What is happening and why is it happening at this time?This Lecture contains an overview of factors responsible for disruption at the current time, as well as a brief summary of some Fintech products.Factors responsible for disruption occurring now:Millennials: how Millennials are different from previous generations. They constitute the largest population cohort. Their intense utilization of mobile devices extends to their experience of a new generation of disruptive financial services and products. Millennials are also different from previous generations in terms of higher education attainment, lower rates of home ownership and attitudes toward (distrust of the Big Financial Institutions.Technology: Technology developments have been crucial to the development of new Fintech: cloud services, open source software, artificial intelligence, mobile devices and appsEntrepreneurial lifestyle: “Gig” economy, social factors, the startup lifestyle, etc.Financing availability: Angel investors, the availability of Venture Capital and other sources of funding have provided the resources for entrepreneurial success.Summary of some Fintech productsMobile paymentsCrowd fundingBlockchain and bitcoinThis Lecture concludes with a roadmap for the rest of the course.Hill Ch 1.Mishkin: Ch 1, 2Chishti pp 6-12, 66-68 Lecture Two: Disruption and Disintermediation in Financial Products and Services: Why Now?Detailed discussion of the following topics:Millennials: how Millennials are different from previous generations and that they constitute the largest population cohort. Their intense utilization of mobile devices extends to their experience of a new generation of disruptive financial services and products. Millennials are also different from previous generations in terms of higher education attainment, lower rates of home ownership and attitudes toward (distrust of) the Big Financial Institutions.Technology: Technology developments have been crucial to the development of new Fintech: cloud services, open source software, artificial intelligence, mobile devices and appsEntrepreneurial culture: Startup lifestyle, “Gig” economy, anti-bank, talent availability due to high unemployment post-Global Financial Crisis, social factors, etc.Financing availability: Angel investors, the availability of Venture Capital and other sources of funding have provided the resources for entrepreneurial success.Hill Ch. 2Chishti pp 22- 24, 95-105, 212-17,Lecture Three: Money: A Medium of Exchange, Unit of Account and Store of WealthHistory and purposes of moneyGrowth of Non-cash payments and mobileCryptocurrencies and blockchainFintech: Apple PayFintech: Square and StripeFintech: MpesaFintech: Bitcoin and BlockchainHill Ch. 3Mishkin Ch 3Chishti pp 92-94, 120 -122,125-127, 131-133Lecture Four: Financial InstitutionsCommercial BanksInvestment BanksBrokersInsuranceThrifts (nonbank depositary institutions including credit unions and savings institutions.Central BanksFintech: Challenger BanksHill Ch. 4Mishkin CH 8,9,11, 13Lecture Five: Financial CrisesHaving a perspective of historical market crashes and other crises is important to having an understanding of concerns of investors and current and future regulations.Overview of crises and panicsGreat depression1999-2000 tech recessionGlobal Financial CrisisHill Ch. 5Mishkin CH 12Lecture Six: Bank LendingCommercial LendingMortgagesStudent LoansPayday LendingLoansOriginationSyndicationSecuritizationMarketsCommercialMortgagePayDayRevolversProductsFixed/FloatingFintech: Lending ClubFintech: SoFiFintech: LendUpFintech: KivaHill Ch. 6Lecture Seven: Time Value of Money: Interest, Bonds, Money Market FundsProvide background and framework for understanding current and future new products and services in fixed income, equities and foreign exchange markets.InterestPresent ValueBondsCorporate, IG, HYSovereignUS Growth of US debt; ownership; debt/GDPFintechHill Ch. 7Mishkin Chs 4,5,6Lecture Eight: Equities/Efficient Markets/ExchangesIPOVenues: electronification/market makersCAPMEfficient marketsRandom WalkHFTMutual FundsETFsAdvisors vs Passive IndexesFintech: Robo AdvisorsHill Ch. 8Mishkin CH 7Lecture Nine: FX, NDFFXFinTechExchanges: ICE/MarketAxxess/Sand Hill ExchangeHill Ch. 9Mishkin CH 17Lecture Ten: Forwards, Futures, Options, Over the Counter Derivatives IRS and CDSForwardsFuturesVenuesFintech ApplicationsHill Ch. 10Lecture Eleven: CommoditiesEvolution of Commodity Trading Commodity Forwards, Futures, Swaps and Options Trading Conventions and Terminology Participants in Futures Markets Hedging ExamplesCommodities as an Asset Class Fintech in CommoditiesHill Ch. 11Chishti pp 128-130Lecture Twelve: Interest rate Swaps, Credit Default SwapsOptionsPricing: Black Sholes, otherIRSCDSHill Ch. 12Mishkin Ch Web Chapter 4Lecture Thirteen: Startup FinancingSources of financingCredit cardsLoansFriends and familyAngel investorsIncubatorsVCsPublic marketsFintech: crowd fundingHill Ch. 13Chishti pp 117-119,138-140, 144-146Lecture Fourteen: Fintech in a Global SettingUKEUAsiaHill Ch. 14Chishti42-58, 69-83Lecture Fifteen: How Will Regulation Adapt to New FinTech?Review existing financial regulation, analyze how it has been applied to new Fintech and discuss how it might evolve in the future.Financial Regulation Background Significant Legislation Governing US Financial Regulation Financial RegulatorsSeveral Startups Have Been Found to be in Violation of RegulationsU.S. Policies to support Fintech startupsU.K. Policies to support Fintech startups E.U. Support for FintechFintech ApplicationsHill Ch. 15Mishkin CH 10Lecture Sixteen: Social issues: Income distribution, diversity and inclusiveness Under representation of women and minorities in tech companies and in VCsLoss of jobs due to technology gains“Winner takes most” model increases skewed income distributionHill Ch. 16Lecture Seventeen: The Future Millennial Bank- Your Parents' Bank Integrates with the DisruptersReview actions taken by big financial institutions to participate in Fintech: internal developments, acquisitions and partnerships and other investments.Incubators and AcceleratorsInvesting in and Partnering with Startups Card Startup Support ProgramsDistributed Ledger ProjectsInternal Bank UnitsGoldman Sachs: "We are a technology company" Altering internal banking culture to reflect Millennial sensibilitiesFor Banks, Disruption has its Risks but also OpportunitiesHill Ch. 17Two papers will be assigned:Paper one on one of the following topics: a Fintech company; one aspect of technology such as cloud computing, big data, etc. as relevant for Fintech product or servicePaper two on a topic relevant to Fintech such as social implications: inclusiveness, income disparity; jobs, etc.; Technology; development in other countries; future developments; financingPapers should be 5 pages in length, double spaced 12-point font. Spell checked, and grammar checked. Submit into iLearn in Word doc or similar format (NOT pdf!) All references properly cited.Grading: Letter grades will be based on the following scheme: 94 - 100 A 87 - 89 B+ 76 - 79 C+ 64 - 67 D+ 90 - 93 A- 83 - 86 B 70 - 75 C 60 - 63 D 80 - 82 B- 67 - 69 C- 00 - 59 FAttendance and Class Participation: Students are expected to come to every class, to be prepared, and to contribute in a positive manner to the intellectual growth of the class. To gain marks for participation you must answer questions, ask relevant questions and be ready to discuss topical issues. Any absence from class on your part must be followed by a communication explaining your absence. Absences due to team travel will be excused upon prior notification. You are responsible for keeping abreast of all material discussed in class, and for the timely submission of assignments. Class Discussion This class is designed to be largely student-driven; the role of the Professor shall predominantly be to introduce topics, pose questions, and steer discussion. Consequently, the richness of the learning experience will be determined by the degree to which you as a student respond to the questions posed, engage with other students, offer your insights and perspectives, and provide feedback on presentations. It is taken as a given that you will have read the assigned readings in advance of class. Please note that if there is material that is unclear to you, please ask questions. If you don’t understand, chances are that others won’t, either. You may gain participation points by asking intelligent questions. Exams: There will be two exams during the semester, held during class. The last exam will be held during Finals Week. Classroom Rules I treat my students as adults, and expect the class to act professionally. Specifically, ? Students should arrive punctually ? Students should be prepared for class and have the assigned reading completed ? Conducting telephone calls, text messaging, Facebooking, and Tweeting, etc. are prohibited in class. Academic Integrity Statement“This College is a learning community dedicated tohelping students develop the intellect, character, and skillsrequired for enlightened, ethical, and productive lives in theglobal community of the 21st century. Students are expectedto pursue excellence in their education while being honestabout their work and fair to other members of the learningcommunity. All work presented to instructors for evaluationmust reflect their own ideas and effort, and must properlyacknowledge any contributions of others. Students shouldexpect this honesty and fairness in others as well. As membersof the learning community, all students should adhereto the highest principles of academic integrity.” ................
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