Peter Gomber, Robert J. Kauffman, Chris Parker, Bruce W. Weber
The financial services industry has been experiencing the recent emergence of new technology innovations and process disruptions. The industry overall, and many fintech start-ups are looking for new pathways to successful business models, the creation of enhanced customer experience, and approaches that result in services transformation. Industry and academic observers believe this to be more of a revolution than a set of less influential changes, with financial services as a whole due for major improvements in efficiency, customer centricity, and informedness. The long-standing dominance of leading firms that are not able to figure out how to effectively hook up with the âFintech Revolutionâ is at stake. We present a new fintech innovation mapping approach that enables the assessment of the extent to which there are changes and transformations in four areas of financial services. We discuss: operations management in financial services and the changes occurring; technology innovations that have begun to leverage the execution and stakeholder value associated with payments, cryptocurrencies, blockchain, and cross-border payments; multiple innovations that have affected lending and deposit services, peer-to-peer (P2P) lending, and social media use; issues with respect to investments, financial markets, trading, risk management, robo-advisory and services influenced by blockchain and fintech innovations.
The fintech revolution, crowdfunding, and blockchain-based funding have dramatically reduced borrowing and lending transaction costs. Many have argued that ultimately this would lead to the complete disintermediation of financing for start-ups and SMEs. However, persistent asymmetric information and moral hazard problems have led to the creation of a new class of intermediaries that play a vital role in these new innovative financing methods. The authors review the new ecosystem built around initial coin offerings (ICOs), and in particular study the role of the ICO aggregators, and listing and rating portals. Using their hand-constructed database of all ICOs from inception in 2013 to September 2017, the authors find robust statistical confirmation that extensive coverage of a particular fundraising campaign in the ICO aggregatorsâ lists is associated with more successful token sales. However, ratings data seem and appear to vary considerably across different ratings websites and appears to be of mediocre quality. Investors should therefore treat such ratings with caution. <b>TOPICS:</b>Currency, information providers/credit ratings, risk management
Block chain, the technology behind Bit coin, promises to be nothing less than Internet 2.0. The financial services industry, in particular, is preparing for the disruption block chain/distributed ledger technology promises to cause. In the current business environment, the majority of startups and small businesses have to look for alternative sources of funding given that âgoing publicâ is increasingly expensive. The crowd funding space has seen tremendous growth as an alternative way to raise capital by businesses. However, these crowd funded shares cannot be traded for 7 - 10 years on average on any given platform in the current market scenario. To build a trading platform on the block chain which completely P2P, immutable, fully transparent and low cost is presents some key design issues. In particular, the issue of liquidity - and price discovery - on the block chain continues to be a puzzle. At the same time, the proposition of removing middlemen from equities trading is a very attractive one, streamlining the process of capital formation with higher market efficiency. The current paper addresses the following key questions: How can a DLT (Distributed Ledger Technology) trading platform ensure adequate liquidity? What would be the process of price discovery? While some recent studies hail block chain technology as a boom for market liquidity, it is not immediately clear what the impact of P2P trading would be on the prices of various stocks. There are no âsolutionsâ just yet. At the same time, the lack of regulation around trading on the block chain creates an environment of uncertainty for all players. In particular, the implementation of such a platform can revolutionize capital formation and build robust markets in both developing and developed countries where crowd funding has proven to be a successful model. While my research is targeted at solving a very specific pain point for both researchers and companies working on distributed ledger technology, ultimately, it would be a significant step forward towards on boarding underserved communities across the world who don't have access to financial services.
On February 6, 2017, the Bangko Sentral ng Pilipinas (âBSPâ) issued the Guidelines for Virtual Currency Exchanges (BSP Circular No. 944, or âCircularâ), providing the rules and regulations governing operations of Virtual Currency (âVCâ) Exchanges in the Philippines. The Circular is incorporated as Section 4512N of the Manual of Regulations for Non-Bank Financial Institutions (âMORNBFIâ). This article provides an overview of the Circular.
Smart Sukuk structure is one of the most recent and significant structures for future sukuk
issuances. In the era of crowed funding and Financial Technology Enhancement, the Smart
Sukuk seems to be the future of Islamic fundraising for infrastructure and Business
developments. The equity wise Mudarabah contract of the Islamic Finance has proved to be
one of the most feasible contracts to govern the smart sukuk issuances. The conventional
Mudarabah Sukuk structure represents projects or business activities managed based on
Mudarabah contract. However, the unique features of smart sukuk and the proposed
Mudarabah smart contract is that, it has given rooms for more players to participate in sukuk
issuances, where as the conventional sukuk issuances has technically allowed mostly the
participations of big players such as government agencies, banks and large companies among
others. The revolutionary smart sukuk uses the block chain technology to boost the efficiency
and makes the process more transparent and reduces the issuance cost to secure the
involvements of small and medium enterprises SMEs, associations and social impact projects
owners to participate in the sukuk issuances. The paper studied the structure of the
conventional Mudarabah sukuk and proposed the newly smart Sukuk with its unique and
innovative features structured under the concept of Mudarabah smart contract.
In this study, we consider a decentralized agricultural supply chain consisting of a capital-constrained smallholder farmer and an intermediary platform. The smallholder farmer sells the agricultural products through the intermediary platform but lacks the financial resources for production. In addition to the traditional solution of bank financing (provided by a bank) as a source of finance for the capital-constrained farmer to ensure the sustainable production of the agricultural goods, the intermediary platform can also provide loans directly to the smallholder farmer (known as direct financing) or serve as a guarantor if the capital-constrained farmer has insufficient creditworthiness to obtain bank loans (known as guarantor financing). The farmer can thus obtain a loan through three methods: bank financing, guarantor financing, and direct financing. We find that the smallholder farmer produces the most under direct financing and the least under bank financing, and that the intermediary platform prefers direct financing over guarantor financing in a weak sense. Specifically, when the farmerâs production cost is low, the intermediary platform prefers financing the farmer directly; when the cost is in an intermediate range, the platform prefers either direct or guarantor financing; and when the cost is high, it is in the best interest of the intermediary platform to encourage the farmer to raise funds from the banking market. We also assess the best financing format for profitability of the smallholder farmer and the sustainability of the whole supply chain, and find that the farmer prefers bank financing while the preference of the supply chain as a whole depends on the cost. Interestingly, under both guarantor financing and direct financing, the smallholder farmerâs level of production can be higher than that under a centralized chain (where the farmer and the intermediary platform belong to the same entity) regardless of whether the chain encounters financial constraints. Moreover, the decentralized supply chain can be coordinated under direct financing when the farmerâs production cost is relatively low.
This article considers Bitcoin as a system of exchange, and the block chain technology it is built on, in the context of supporting developing nations. If integrated correctly Bitcoin could have far reaching applications, from tackling corruption to empowering women. This article found Bitcoin to be a feasible option, with support from real world applications and global endorsement from users. The discussion is then applied in the context of corruption as it puts forward this emerging technology as an alternative to traditional centralised fiscal systems. The article posits that public libraries could be potential facilitators and a crucial component of this integration.
Five billion people in the world do not have the kind of ledgers that provide the documented information that allows them to transfer, partition, and aggregate assets and talents in such a way that they can be scaled up, secure investment, guarantee credit, certify reputation, and capture abstract surplus value. The difficulty that most people have in making combinations is a major cause of global inequality and unnecessary poverty.
This book documents the effectiveness of decentralization on health and education service delivery in India. The core objective of this book has been to broaden the focus of decentralization away from the restricted debates within the public finance principles of fund function and functionaries. This book broadened the boundary by focusing on the impact of decentralization on public service delivery for two key services, viz. education and health. In a way this book is an attempt to examine the link between decentralization and human development. A study of this category is rare even across countries. The analysis of this book is carried out by distilling the existing studies in this area and the analysis of public finance data at three levels of governments in India. We have also used household survey statistics of consumption expenditure in understanding the utilization or incidence of the public spending on health and education in a decentralized governance system of India. While comparing across states, it is clear that local democracy and institutions of decentralization differ widely across states. The analysis of intergovernmental transfers with a focus on third tier has revealed that multiplicity of channels of fiscal transfers has complicated the transfer system and the untied nature of funds to local level is not adequate enough for local governments to undertake spatially required public spending programme. The commissioning of State Finance Commissions (SFC) though had put an end to the adhocism and arbitrariness in the fiscal transfers to the local bodies in a technical sense, the functioning of SFC and their recommendations in terms of quantum and criteria of devolution is still in a state of flux across most states. The book highlighted that the âdecentralizationâ would be effective only when the principles of public finance are harmonized with the principles of accountability in the design of the decentralization strategy itself. The book further highlighted that increasing participation of the users (âvoiceâ) and enhancing monitoring by the community or the user group at the service provider level (âclient powerâ) are the two core ingredients of improvement in service delivery with decentralization.
Over the past few years, ... From Google Wallet to Bitcoin, all these technology-enabled financial innovations have been a âwake-up callâ to address the regulatory aspects of a new âeraâ of financial services and market players. The FinTech sector comprises a very heterogeneous group of providers of technology-driven financial innovations. Some of them open up new markets in the financial industry; others offer new solutions to replace or augment products or services already offered by banks, asset managers or insurance companies. More changes are underway with the rapid growth of agile innovative players boasting new business models, user-friendly consumer interfaces, peer-to-peer services or advanced automated tools.
A new wave of technological innovations, often called âfintech,â is accelerating change in the financial sector. What impact might fintech have on financial services, and how should regulation respond? This paper sets out an economic framework for thinking through the channels by which fintech might provide solutions that respond to consumer needs for trust, security, privacy, and better services, change the competitive landscape, and affect regulation. It combines a broad discussion of trends across financial services with a focus on cross-border payments and especially the impact of distributed ledger technology. Overall, the paper finds that boundaries among different types of service providers are blurring; barriers to entry are changing; and improvements in cross-border payments are likely. It argues that regulatory authorities need to balance carefully efficiency and stability trade-offs in the face of rapid changes, and ensure that trust is maintained in an evolving financial system. It also highlights the importance of international cooperation.
Dong He, Ross Leckow, V. Haksar, Tommaso Mancini-Griffoli ¡ 9 authors
A new wave of technological innovations, often called âfintech,â is accelerating change in the financial sector. What impact might fintech have on financial services, and how should regulation respond? This paper sets out an economic framework for thinking through the channels by which fintech might provide solutions that respond to consumer needs for trust, security, privacy, and better services, change the competitive landscape, and affect regulation. It combines a broad discussion of trends across financial services with a focus on cross-border payments and especially the impact of distributed ledger technology. Overall, the paper finds that boundaries among different types of service providers are blurring; barriers to entry are changing; and improvements in cross-border payments are likely. It argues that regulatory authorities need to balance carefully efficiency and stability trade-offs in the face of rapid changes, and ensure that trust is maintained in an evolving financial system. It also highlights the importance of international cooperation.
Fintech is a term given to financial technology in the digital age. At its core sit the twin concepts of blockchain and distributed ledgers. These technology solutions bring with them the promise of faster, cheaper, more secure and transparent financial transactions over the internet. In a more widely used context, Fintech is conceived and even defined as enabling disruptive innovation in financial markets and financial services. This briefing explains what Fintech is and investigates whether the promise of Fintech is hype or reality. It also highlights the resultant policy implications that are generated by the phenomena and what issues lawmakers should be cognisant of.
Equity crowdfunding via the Internet is a new channel of raising money for startups. It features low barriers to entry, low cost, and high speed, and thus encourages innovation. In recent years, equity crowdfunding in China has experienced some developments. However, some problems remain unsolved in practice. Blockchain is a decentralized and distributed ledger technology to ensure data security, transparency, and integrity. Because it cannot be tampered with or forged, the technology is deemed to have great potential in the finance industry. This study examines current problems in the practice of equity crowdfunding in China. Based on the analysis of the characteristics of blockchain technology, this study further explores its practical applications in equity crowdfunding. 1) Blockchain technology may be a secure, efficient, low-cost solution for the registration of stocks and shares of a firm financed by crowdfunding; 2) Blockchain technology simplifies the transaction and transfer of crowdfunding equities, and thus facilitates their circulation; 3) Blockchain technology enables peer to peer transactions between investors and entrepreneurs, and solves the problems of regulatory compliance and security of fund management; Blockchain technology can be used to develop a voting system for crowdfunders, which enables them to be involved in corporate governance. This helps protect the rights and interests of small investors; 5) Blockchain technology helps regulators know about market conditions, and supports regulatory activities such as managing investors and fighting money laundering.
A research report submitted
In partial fulfilment of the degree:
Master of Commerce in Accounting
University of the Witwatersrand
School of Accountancy
2015
Abstract We show how decentralized individual investments can efficiently allocate capital to innovating firms via equity crowdfunding. We develop a model where consumers have privately known consumption preferences and may act as investors. Consumers identify worthwhile investments based on their own preferences and invest in firms whose product they like. In the presence of aggregate demand uncertainty, an efficient capital allocation is achieved if all groups of consumers have enough liquidity to invest. If some groups of consumers cannot invest, capital flows reflect preferences of liquid investors but not future demand. Comparing with traditional financing forms, crowdfunding in the absence of liquidity constraints can be superior unless traditional financiers are fully competitive and perfectly informed.
This study investigates how decentralized finance adoption reshaped banking intermediation structures across emerging digital economies during the foundational digital finance expansion period between 2005 and 2014 by evaluating the conditional role of financial technology environments in accelerating institutional financial transformation. Using a balanced panel dataset of 1,760 institutional year observations constructed from harmonized global digital finance repositories, the study applies fixed effects panel regression, interaction-based moderation estimation, heteroskedasticity robust clustered inference, and multidimensional composite index modeling to estimate the structural relationship between decentralized finance adoption and banking disintermediation. The findings reveal that decentralized finance adoption exerted a strong positive and statistically significant effect on banking disintermediation, with blockchain technology integration and digital financial accessibility producing the largest structural effects on non-bank financial participation and intermediary transaction displacement. The results further demonstrate that supportive financial technology environments amplified decentralized finance driven transformation through enhanced digital infrastructure readiness, cybersecurity preparedness, and institutional adaptability. Interaction estimates remained robust across alternative specifications, lagged estimations, and sensitivity diagnostics, confirming stable ecosystem conditioning effects across heterogeneous institutional environments. The study extends financial innovation and institutional transformation theories by integrating utilization, infrastructure, accessibility, and governance systems within a unified decentralized finance architecture. The findings provide globally relevant policy guidance for regulators and digital finance institutions seeking to balance financial innovation, inclusion, and banking system stability within emerging digital economies.