BITS Pilani

presentation
BITS Pilani Sivasubramanian Natarajan
WILP Division
Pilani Campus
 BITS Pilani
Pilani Campus

Introduction to Fintech (Merged -

MBAZG516/PDFTZG516)(S2-24)
Lecture No. 1 / Week 1
Introduction and Course
Objectives
No. Course Objective

CO1 Discuss the overview of the disruption to different financial services by FinTech.

CO2 Discuss the current state of FinTech including funding trends and developments, major players and investors.

CO3 Discuss the key enablers of a digital economy and their underpinning technologies.

CO4 Discuss the role of data science and big data, artificial intelligence and machine
learning in the FinTech space.

CO5 Discuss FinTech innovations and disruptions to the asset services segment, capital markets and investment
management.

CO6 Discuss some of the innovations in the lending and crowdfunding space, the
robo advisory front, wealth technology (WealthTech), and insurance technology (InsurTech).

Textbook(s) T1 Fintech: The New DNA of Financial Services by Pranay Gupta and T. Mandy Tham (De|G Press),
2019.
T2 Fintech Future: The Digital DNA of Finance by Sanjay Phadke (SAGE Publications India Pvt Ltd), First
Edition, 2020.

R1 Future Fintech Framework by Kartik Swaminathan (Notion Press), 2021.

Reference
Book(s) R2 Fintech in India by Dr. Komal Mistry (Phoenix International Publication House), 2023.

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 Structure of the Course
Content Structure
4. Data Science and Big Data
1. An Overview of Fintech 1. Data Science and Big Data
1. The Ecosystem of Financial Services 2. Artificial Intelligence
Intermediaries 3. Machine Learning
2. The Evolution of Financial Services Activities
3. Fintech in the Context of the Digital 5. Disruptions in the Financial Services World
Economy 1. Open Banking: Digital Payments Systems
4. The Landscape of FinTech 2. Disruption in Asset Servicing
3. Disruption in Capital Markets
2. Future Fintech Framework 4. Disruption in Investment Management
1. Key FinTech Themes 5. Online Marketplace Lending
2. FinTech Players - Current and Emerging 6. Lending and Crowdfunding
3. FinTech Digital Lifecycle 7. Robo-Advisory and Multi-Asset Allocation
4. FinTech Logical Architecture 8. WealthTech and InsurTech
5. FinTech API Marketplace 9. Legal Implications of Fintech
6. Emergence of New Roles and Career
Opportunities

3. Enablers of a Digital Economy

1. Digital Identity
2. Cloud Computing
3. Blockchain and Distributed Ledger
Technology 2.0

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 Learning Outcomes

No. Learning Outcome

LO1 To be able to understand the terminology and implications of FinTech.

LO2 To be able to understand the role of key technology enablers of a digital

economy like digital identity, blockchain, distributed ledger technology and
cloud computing.

LO3 To be able to compare and contrast different ML and AI algorithms that

can be used in the FinTech space.

LO4 To be able to understand different business models in FinTech space

across the world.

LO5 To be able to evaluate different FinTech business models in asset services

segment, capital markets and investment management.

LO6 To be able to design a new FinTech model by understanding a business

need.

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 Week 1 Focus

Session Contact Topic Title Study / HW Resource

1 Hours Reference
1 and 2 Introduction to Fintech- T1, Class materials
Overview

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 Introduction - The Fintech Overview
 It is a generally accepted principle, delivering financial
services through technology referred to as FinTech.

 The 'technology' part in Fintech is leveraged for digital

orchestration of,

 BFSI Internal Operations through process automation

 Customer services delivery through digital channels
 Business functions collaboration

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 Fintech and financial services
 The evolution of financial technology, or technology in general has characteristics
as below

 Using technology for automating routine processes

 Availability of data, more freely than before.
 Technology enabled direct connectivity, removing the need for an
intermediary to orchestrate the transaction workflow.

 Few examples of financial system intermediaries are retail bank, Insurance

company, Investment bank and asset management company,
 Corporate and Investment bank and Private bank cater to different categories of
end customers.

 Characteristics of financial system intermediaries

 Exchange of information
 Exchange of capital

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Functions of a bank
 Traditionally banks were created with three main functions, the below three points
are summary headings of banking theories by the same name.
 Financial intermediation - Accept deposits and lend
 Credit creation - Purchase promissory note and assist asset acquisition by individuals
and corporate
 Fractional reserve banking - Generate cash in the economy (Money multiplier), - For
every deposit used for lending deposit a fraction of the deposit with central bank.

 Regulation plays critical part in the shaping of above functions and roles. A financial
institution may adopt technology to optimize its offering, alternatively a technology company
could offer an improved business model. Therefore, technology plays both roles as a
catalyst and as a critical component of the business model.

 It is to be noted, but for the function 'Credit creation' all the other functions are overlapping
with Non-banking financial services company as well. By Regulation only banks are
permitted to create cash / credit for asset Purchase.

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 Impact of Fintech
Fintech’s impact financial services. We will look at impact to the businesses in
financial services, under two headings

a. Technology
b. Trends

 The impact of technology has  The impact of trends have resulted

resulted in in possibilities such as,
 Automation of processes for  New Business Models
efficiency and speed  Transformation of business processes
 Information acquisition cost has  Emergence of fintech as a discipline
become lower
 Production and distribution functions,
with the help of technology has done
away with the need for middlemen

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Impact and possibilities

 Technology and Trends make an impact on existing business

landscape.

 The impact leads to a set of possibilities that evolves.

 Evolution of possibilities leads to widely accepted solutions

that disrupts and challenges the status quo.

Evolution of
Technology Trends Impact Solutions
possibilities

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Nature of disruption
 The disruption manifests itself as new business models or transformation of
existing business processes.

 New Business Models

 Startups produce improved business models delivering utility services and can
disrupt the incumbents.

 Transformation of Business processes

 Incumbent businesses adopts fintech to transform existing processes making

them more efficient.

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 Activities in Fintech (Image
reference)

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 Why fintech activities are key

Fundamental concepts of fintech as a discipline

1. Data Capture
2. Data Analysis
3. Implementing the data-based knowledge.

The above concepts combined with activities of financial

services (Image reference) result in new business models.

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 Evolution of financial services
activities
Evolution of financial services activities leads to business
process transformation. This is what we see in the market
today as a major trend. (Why ? )

The below are example processes, already evolving

 Compliance processes
 Transaction processing
 Insurance calculations
 Investment and Risk management decisions
 Investment solutions
 Financing solutions

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 Case Study - How data insights
gives AirBnB an edge over Uber.
Insights from Jonathan Knee
Note the importance and stress on the point about data generated by technology

Three key structural attributes drive the value of network effects in the digital domain.

1. The first is the minimum market share at which the network can achieve financial breakeven.
2. The second is the nature and durability of the customer relationships spawned by the network.
3. And the third is the extent to which the data generated by the network facilitates product and pricing
optimization.

The structural attributes quoted for 'AirBNB' business, relies heavily on digital mechanism for

1. Acquiring customers
2. Transaction and revenue growth and
3. Data with feedback + insights on consumer behavior.

The above data is utilized for understanding Customer acquisition cost, Customer stickiness,
revenue growth and forecasting. All these metrics are typical of a digital business and is
sought after for valuation of the company.

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 Embracing Disruption
Quote from Jonathan Knee
 With the help of other sources of competitive advantage, network-effects businesses can
deliver remarkable value to users and riches to entrepreneurs and investors.

 On their own, however, network effects in a digital context are a peculiarly fragile barrier to
entry.

 Seen in this light, entrepreneurs and investors should treat the identification of network
effects as the beginning, not the end, of their analysis.

 Meanwhile, platform operators should curb any complacent confidence that they may have
in their destinies as the conquerors of global markets.

 Instead, they should redouble their efforts to establish complementary barriers before
getting displaced by one of what are likely to be many competing platforms

Network Barrier to Disrupted by

Effects entry competitors
Network effects growth model is easier to replicate
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 Embracing Disruption – From the text-book

Companies and their management teams fall into four categories of

progressive phases of evolution, when faced with a disruptive change such
as fintech:
 The Naysayers: who deny any meaningful impact from a new technology or process and worse still
gather facts to disprove its usefulness. This is why startups are difficult and why new technologies tend
to be disruptive rather than augmentative.

 The Charlatans: who publicly say that their firm is using new technologies and techniques, because it’s
seeming like a good marketing pitch, but are doing very little internally to incorporate its usefulness.
This stage is present when a new technology has developed sufficiently to be noticeable but is still
below critical mass or unproven.

 The Early-adopters: who have come to believe that utilizing the new technology is in their interest,
have a business plan and have created internal teams to take advantage of the new paradigm to
augment their existing business model.

 The Believers: If not the start-ups themselves, these are the firms who are convinced of the philosophy
of a new technology and are prepared to reorient their companies for the future along with the
implementation of a new structure.

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