!1 14 April 2019 A New Culture in the World of Financial Technology As financial technology grows in scope and application, the world of finance is getting increasingly automated and impersonal. The market is growing exponentially due to the mobile age defined by apps and the internet. New trends in technological advancement such as online banking, quantum computing, blockchain, social payment transactions, and e-store lending make the industry remote and on the go. This new change has been caused by a plethora of effects, such as a fears of a new generation scarred by a long history of student loans, recession, and credit debt. While this new technology has many benefits for the industry and the consumer, does this change take away from the person to person accountability of the world of finance? Fintech as it’s called is the growing use of technology and mobile use for everyday financial transactions. In the past years, such products have been growing as large banks and venture capital firms alike invest in the future of the market. Fintech is working on making real changes with solutions that can better address consumer needs by offering total accessibility, convenience, and personal products. In this age, the pursuit of pleasing the younger generation of consumers has been the main goal in order to fulfill the needs of clients who are native to the digital culture. Over the next decade, the average consumer in need of financial services will change dramatically as the Baby Boomer generation ages and Generations X and Y assume more significant roles in the global economy. These generations are more adapted to technology and most of their day to day work goes through the cell phone. Mobile apps are critical to success nowadays and they can be found all over the industry. !2 One of the most common forms of financial technology is online banking which works by using online platforms to facilitate transactions and provide financial statements for budgeting and personal finance.Besides beneficial tools such as budgets and financial statements, many online platforms include online bill payment, electronic check cash, and peer transfers. Recently, Goldman Sachs, a private investment banking group, has created a commercial bank using a completely online platform. Marcus, as it’s called, promises extremely lucrative personal savings interest rates at an industry high 2.25%. (Son, “Goldman Sachs Boosts Rates on Marcus Accounts as Banks Fight for Deposits”). Other benefits include no minimum balance and budgeting assistance. This extremely unorthodox approach doesn’t end there though. As a thought leader of the technology market, Apple has partnered with Goldman Sachs and the MasterCard credit platform to release a new credit card with benefits acquired by using its online app. Elizabeth Schulze, another finance corresponded for CNBC, comments on another aspect of Goldman’s role, acquisitions. “Acquisitions or partnerships with fintech start-ups could be "appropriate," pointing to Goldman's acquisition of Clarity Money, a digital personal financial management tool, in April ... Goldman is uniquely positioned to offer innovative technology alongside a strong balance sheet, he added” (Schulze). These startups could benefit from the large amount of capital and innovation from a company the size of Goldman Sachs. Such large capital and resources partnered with large teams of researchers would allow for a deeper look into the needs of the consumer. Similarly to online banking, blockchain is a technology where transactions are protected and processed across a platform of digital records accessed by peers across the network. This technology has been revolutionary in promoting a new type of asset, cryptocurrency. !3 Controversially, cryptocurrency has gained a large following of hopeful investors and analysts. Many accredited investors struggle to advocate for a serious value of cryptocurrency, but this doesn’t stop its form being used in other applications. “Though holders of digital currencies may seize on the news that a major financial institution is issuing its own crypto as bullish for the asset class, retail investors will probably never get to own a JPM Coin. Unlike bitcoin, only big institutional clients of J.P. Morgan that have undergone regulatory checks, like corporations, banks and broker-dealers can use the tokens” (Son, “JP Morgan Rolls out First US Bank-Backed Cryptocurrency to Transform Payments Business”). Unlike the past year where bitcoin was used as an asset investment class trading on an arbitrary market value, J.P Morgan is using blockchain and cryptocurrency as a medium for facilitating fast transactions on a fixed value. While currently only their large corporate clients have access to the system, it is still in early use and has potential to used worldwide. Similar to Goldman Sachs meeting the accessibility needs of the average consumer, JP Morgan is using blockchain in order to cater to the high speed needs of larger clients. Even though these systems come with benefits, there is a legal and political perspective that needs to be addressed. A whole new system for managing transactions, taxes, and payment systems for merchants will be needed. Such legal systems will take money and bureaucratic time in order to set forward, and it will be hard to tell if this system is one that will pay dividends in the future after all the hard work. Computers have already played an instrumental role of finance in the last decade, but their role continues to grow. Two important technologies that will affect the finance world in the upcoming years are Quantum Computing and Artificial Intelligence. Quantum computing, a new system of non-binary computation that is possible of making calculations greater than a !4 traditional computer, brings a variety of new features to the financial industry. Wall Street used to be synonymous with crowded trading floors, loud calling, and paper scattered throughout, but now humans are being replaced with large quantum computing with high frequency trading capabilities, or HTF, a growing transaction type that allows traders to making proxy trades in high volume faster than most people (Sandrini). While quantum computers are controlling the floor, AI is behind the scenes picking stocks and analyzing markets. According to a study performed at the stock exchange in Istanbul, an artificial intelligence program forecasted the accuracy of the stock exchange at 74.81% (Karymshakov). While the average experienced trader can forecast at a current accuracy of 48.57% (Bailey, Et al.). This gap in accuracy is causing many investment firms to ponder whether human analysts should be replaced with more computer programs able to study a vast amount of factors in order to make more money. In the future, as the oracle of AI, Kai-Fu Lee, puts it, “AI will increasingly replace repetitive jobs. Not just for blue-collar work but a lot of white-collar work ... many jobs that seem a little bit complex, chef, waiter, a lot of things will become automated … that's going to displace about 40 percent of the jobs in the world” (Kai- Fu Lee). AI is becoming increasingly intricate and will eventually be able to replace a majority of “complex” jobs through a series of optimization algorithms. Such a major change in the makeup of the workforce would make a more calculated yet less empathetic financial experience, which hurts some of the benefits of better financial gains. One of the most popular fintech trends famous in pop culture and young generations is peer to peer payment apps. Venmo, Cash App, Paypal, Zelle. These are all common apps for exchanging money between friends. In situations where one might forget their wallet, it would be !5 an easy transaction to transfer money from one friend to another as a way of paying back your money. Wells Fargo to promote their payment app, Zelle, had a national pay your friend back day where they opened their app free of fees in order to promote the app and build anticipation for its use. “Venmo is a social media app. It’s for friends to share money with friends, electronically zapping it from one bank account to another. And some regular givers moved their giving from a service with a fee to this free-for-now app ... That’s a 2.9 percent savings on fees that we’re glad to have ... but more important than that are the comments the Venmo givers include with their gifts” (Hays). Hays is commenting on her church’s use of Venmo as a means of connecting people and the large institution. Members of the church can make their donations by sending a payment online through the social app. Along with the financial aspect of the transaction, members can leave quick messages including commonly used emojis to promote a sense of emotional support along with the financial support. Such use of Venmo helps the church by receiving free fee donations, while also helping the parishioners get involved with their donations and church on a personal level. Financial technology makes sure that investing for your future isn’t for the rich anymore. With the adoption of micro stock transactions and mobile trading, anyone who has some extra money can begin investing with access to a plethora of information about investing on the internet. With limited to no fees as well as easy accessibility it is easy join a industry usually afforded to older and richer people. “With the age that we're in right now, mobile users want to look at screens with fewer headlines and fewer numbers … The average age of Robinhood users is 28-41, and most of them use the app to make their first stock purchase” (Quadri). Many millennials are beginning to cut back on their expenditures and work to save some money to !6 break out ever so slightly of the prominent cycles of debt and loan payments. The sleek design of the app is more futuristic yet understandable compared to that of the traditional chart and data filled trading platforms. Similar to the online bank Marcus, mentioned earlier, Robinhood is completely online, with no physical location one can go to make trades or seek financial advice, which caters to an on-the-go fast paced market. Even though finance has gone mobile in order to appease younger generations, brick and mortar institutions have gotten trendier to attract millennials. These youthful generations are looking for new aesthetic away from the fears associated with a recent history of recession and debt. A prime example of this new vibrant finance movement is Capital One. With 20 cafe locations across the US, Capital One is redefining the average trip to the bank and meetings with financial advisors. After opening coffee shop bank hybrids featuring a staff of “ambassadors”, which are basically friendlier rebranded tellers, youth have flocked for a photo and stayed for financial advice. This generation has came from a love for social media and the photogenic era. “Emphasis on leisurely technique heightens the excitement and also the sense of the unattainable by proffering colored photographs of various completed recipes” (McBride 38). In the same way food has become a photogenic experience causing people to flock to the most instagram friendly restaurants, banking locations are pulling on the same effect to get millennials in the door. Social media presence and viral marketing are other tools that banks are using to attract. As Edward Kessler writes in Social Media and the Movement of Ideas, “The less personal nature of online communication, makes it easier for information to be distorted or misinterpreted” (Kessler 30). Social Media use as well as online news platforms associated with financial technology can be used dangerously to spread false claims for a hidden agenda. Especially when it comes to !7 financial advice, investors should be weary when information comes to the internet because some companies promote certain stories or investment options as a way to gain profits. By going in person to see a financial advisor, who is usually paid based on your success, you are more likely to receive accredited advice and personal attention. In its current state, consumers should be cautious with their use of financial technology. The world needs to move forward with its technological advancement, but people should not be so ready to jump all in without first checking the risks. Many people use and benefit from online banking and stock trading, peer payments, and AI daily, and these products and services add a lot of value to the industry. However, because of the high risk of financial services, there should be government regulation to hold online financial platforms accountable for their advising to consumers. However, when properly maintained and monitored, these trendy financial mediums can be helpful in coaching one of the most at risk for debt generations ever. Millennials are in desperate need of financial support and these apps can provide the financial literacy and tips they need. Word Count: 2093 !8 Works Cited Bailey, David H. and Borwein, Jonathan and Salehipour, Amir and López de Prado, Marcos. “Evaluation and Ranking of Market Forecasters” 31 May 2017. Hays, Katie. “When Our Church Went Venmo.” Christian Century Foundation, 5 Dec. 2018. Karymshakov, Kamalbek, and Yzat Abdykaparov. “Forecasting Stock Index Movement with Artificial Neural Networks: The Case of Istanbul Stock Exchange.” Trakya University Journal of Social Science, vol. 14, no. 2, Dec. 2012, pp. 231–241. EBSCOhost, search.ebscohost.com/login. Lee, Kai-Fu. “Facial and Emotional Recognition; How One Man Is Advancing Artificial Intelligence.” CBS News, CBS Interactive, Jan. 2019, www.cbsnews.com/news/60minutes-ai-facial-and-emotional-recognition-how-one-man-is-advancing-artificialintelligence/. Kessler, Edward. “Social Media and the Movement of Ideas.” Directions and Stimulus Materials. 2019. PDF. Manchiraju, Srividya. “World Payments Report 2018.” Capgemini, 2018. Mcbride, Anne e. “Food Porn.” Gastronomica, vol. 10, no. 1, 2010, pp. 38–46. JSTOR, www.jstor.org/stable/10.1525/gfc.2010.10.1.38. Quadri, Nimah. “Is Robinhood a Millennial Obsession?” Yahoo! Finance, Yahoo!, 23 Aug. 2018, finance.yahoo.com/news/robinhood-millennial-obsession-180406875.html. Sandrini, Jerome. “Quantum Computing in Financial Services.” Atos Quantum Computing, May 2018, atos.net/wp-content/uploads/2018/05/Atos-Quantum-FS-white-paper.pdf. !9 Schulze, Elizabeth. “Goldman's Digital Retail Bank Has Won over 100,000 UK Customers with the Promise of Higher Rates.” CNBC, CNBC, 21 Nov. 2018, www.cnbc.com/2018/11/21/ goldman-sachs-marcus-is-shaking-up-retail-banking-in-the-uk-.html. Son, Hugh. “Goldman Sachs Boosts Rates on Marcus Accounts as Banks Fight for Deposits.” CNBC, CNBC, 15 Jan. 2019, www.cnbc.com/2019/01/03/goldman-sachs-boosts-rateson-marcus-accounts-as-banks-fight-for-deposits.html. - - - . “JP Morgan Rolls out First US Bank-Backed Cryptocurrency to Transform Payments Business.” CNBC, CNBC, 15 Feb. 2019, www.cnbc.com/2019/02/13/jp-morgan-isrolling-out-the-first-us-bank-backed-cryptocurrency-to-transform-payments--.html.