This Inspiration Session featured Bryan Zhang, the Executive Director at Cambridge Centre for Alternative Finance. Bryan spoke about how the new developments in FinTech have made more business models possible. Through the development of FinTech, main sectors of research have been identified, such as digital lending, digital custody, and market provisioning. An analytical framework can provide a method to evaluate the interrelation between actors, activities, and assets. Perhaps the phrase ‘financial dilemma’ is a misnomer when it is actually an ‘ethical challenge’ that can be overcome.
Bryan also discussed the state of FinTech in light of the COVID-19 pandemic. In economies where more people are excluded from banking services, technologies can provide basic financial services to the poor, especially in COVID. Through the first six months of the pandemic, nearly every sector of the FinTech market has undergone growth, except loans.
Next, Bryan discussed AI in FinTech and financial services. AI is perceived as extremely important in terms of strategy and business growth; it is expected to become a major business driver within two years. FinTech companies are much better at efficiently adopting and selling AI-driven financial services than incumbent banks. Early adopters of AI will likely experience far more success than those who are lagging. Most of the AI relevant in FinTech has humans ‘in the loop’ to supervise judgments made. The AI used to support decision-making exacerbates biases in financial services because of how they are coded and supervised. Big Tech has begun to use its AI capabilities and mass amounts of data to offer financial services. One major concern regarding this is ambiguity surrounding data sharing between jurisdictions and entities, which has implications in privacy and personal data.
Bryan also explained blockchain technology and how digital assets such as bitcoin and dogecoin can create ethical challenges regarding energy use, regulatory accountability, and fiscal stability.
Questions from team members:
- Would the trends toward digitalization be reversed once the COVID-19 pandemic is over? (Likely no, FinTech industry is structural rather than cyclical)
- How is the rate of adoption of FinTechs different in countries with developing economies? (Much faster, one FinTech responsible for 5% of Kenya’s GDP)
- How should governments without legacy banking systems balance robust economies with maximizing returns for excluded demographics? (Widening gap in capacity, regulators are lagging behind the innovation)
- From what angle is the best to look at the financial inclusion of developing countries? (Financial education and literacy)
- How can countries that lack regulation gain robust policy like the ‘sandbox’ from countries such as Brazil? (Not every country needs the same regulation, there are better resources such as innovation offices, etc. Each country must choose its path)