Week 11 - Fintech & Disruption Flashcards
Define FinTech
FinTech is disruptive technology used in financial services: makes certain jobs obsolete but creates demand for other jobs
What are the implications of the three factors determining social outcomes?
Give an Example
- Economics
- Technology
- Politics
Implications:
Each factor cannot solely determine social outcomes. Changes in one factor are offset by changes in the other two.
Example:
Innovation of AI increases the productivity of workers (Technology). However, governments limits its potential (policy), price of the software may change as a result (Economics)
What did Joseph Schumpeter say, and what are the implications?
“Capitalism is subject to a perennial gale of creative disruption.”
Implications:
Capitalism encourages the introduction of disruptive technology by nature to defeat competition
What are the three stages of technology uptake? How is this represented in graph form and what are the implications?
Three stages:
1. Slow growth by early adopters
2. Exponential growth
3. Flattening of growth in demand
S shaped graph
innovators => early adopters => Exponential growth => Late majority => laggers
Implications:
Hard to predict the shape and size of S-Curve
Often takes longer than expected
What do well functioning markets facilitate?
- Storage of exchange and value
- Inter-temporal matching of consumption and productivity
- Efficient risk sharing
- Separation of ownership & management
What are the principle tasks of financial work?
- Matching savers and spenders
- Analysis (Risk, Expected R, etc.)
- Design, advising and selling investment products
- monitoring and enforcing contractual obligations
The financial industry is often referred to as middlemen. What are the roles of the “middlemen” ?
Middlemen act as:
1. Bridge - Provide access across a barrier
2. Certifier - Guarantee quality
3. Enforcer - Monitor and enforce contractual obligations
4. Risk Bearers
5. Concierge - Provide Information
6. Insulator - Taking the heat
How does AI fit into the “Middleman” role?
It cannot fulfil all categories
Where did FinTech begin?
Sumer (Iraq)
Stone inscriptions used to account for stock in trading
What is the significance of the Datini Firm
Datini Firm were the creators of double entry accounting in 1383
What are the importance of sea containers?
FinTech that boosted the efficiency of global trade more than all trader agreements combined in the last 50 years
What are the attributes of ideal record-keeping?
What is the trilemma?
Give an Example.
Attributes:
1. Accuracy
2. Cost-efficient
3. Decentralised
The trilemma states that only two attributes can be achieved simultaneously
Example:
Bitcoin - provides accuracy and decentralisation but is not cost-efficient
Explain Blockchain technology. What are its key characteristics?
Block chain technology is a digital record of transactions stored in sequential “blocks” that cannot be corrupted without changing all prior blocks.
Key characteristics:
Records are available to everyone
Nearly impossible to corrupt
Define “Discontinuous Innovation Strategy”
What are the problems associated with the strategy?
Discontinuous Innovation Strategy is the strategy a company issues in reaction to the introduction of disruptive technology.
The problems in developing a strategy:
- Genuine Uncertainty
- Product Cannibalism
- Shifts in customer base
- Margin Erosion
What are the organisational problems related to discontinuous innovation?
Time Horizon + incentives
Fear of cannibalization
Overload of work to implement
Competency traps
