Fintech and the future of finance | Prof. Arman Eshraghi | TEDxCardiffUniversity

yes hello it's a pleasure to be here so let's talk about financial technology in the next few minutes I'm going to reveal to you some key insights about FinTech and why I believe not just finance professionals but all of us have to care about how the FinTech phenomenon is changing and touching our lives but before that let me let me put a question to you can you raise your hand if you have a mobile phone right now so almost all of you which is not surprising but can you guess what percentage of the world's population in 1990 had mobile phones so the answer to that is less than 1% 0.2% that's a very very low percentage so 2 in every thousand people and of course those were not anything like the smart phones you have it's bulky quite basic items so if a technology can go from zero percent adoption to hundred percent adoption within less than three decades that's a striking example of very fast-paced adoption but if you think this is fast then the adoption of some of the clean tech innovations that I'm going to talk about is significantly faster now when you hear the word thin tech most people think about blockchain and cryptocurrencies which we'll come to but FinTech is not really a new concept even ATM machines at their time were thin tech innovations in the 1960s or debit cards and credit cards but what has made fin tech go so unmask is is just the pace of innovation in this space the rate of innovation and the abundance of new technologies which have sprung up everywhere now what is what is blockchain without going too much into the technology blockchain you can think of it as these spreadsheets or Ledger's which are distributed around the world on built on the Internet so as opposed to the old system where you would have just one copy of a central ledger now you have thousands of these copies of the same ledger and they're all linked together together and constantly synced together which makes it cryptographically very very safe and on this infrastructure you can build anything you can build digital currencies like Kryptos you can build contracts and pretty much anything that's worth making a record for example in the future it would be very likely that when you when you purchase property that record might might just be implemented on the blockchain and people are working towards them so it wouldn't be an exaggeration to call the FinTech phenomenon a FinTech disruption in fact I believe it's the participe example of a disruption it has already touched your lives in so many different ways think about mobile banking that you can do on your phones anywhere in the world and any at any given time think about new forms of insurance that you can purchase and customize again through new innovative platforms think about the world of personal finance well in the old days you would have gone to a financial advisor to get advice and now you have also have the option of getting advice from algorithms and software otherwise known as Robo advisors and the point of quite a range of other areas let's think about payments lending capital markets all of these sub areas of the FinTech landscape or being touched and influenced by by the FinTech innovations so these are some of the companies which are apparently very active in the world of payments and money transfer and while they use different technologies perhaps the common denominator is that they're all very young companies they both they've all been established within the past decade or two and that's that's the that's the disruption so they're all grabbing market share and that's fascinating of course now so it wouldn't be again an exaggeration to think of it as a tsunami or a large wave and if you if you don't know how to ride a wave well better learn to swim right here isn't piers of an important figure in 2018 last year the size of the global investments in in the physics phase was forty billion dollars and that number keeps growing some people argue that forty billion is actually conservative estimates the actual number is probably significantly higher depending on what you would consider FinTech there's another number forty which is also interesting and that's the number of unicorns which are FinTech related globally so what is the unicorn so unicorn is a private company which is worth at least one billion dollars so with that level of market valuation there are forty of them around in fact more than 40 of them around slightly more so that's pretty interesting and a lot of this is happening in different hubs around the world in Wales where we are right now plenty of interesting activity in the physical space is already happening and a newly formed body called FinTech Wales has has come in to shape in order to coordinate this effort but let's pause for a minute and think about how we got here in the first place so I want to invite your attention to think about three snapshots in time in 1999 just before the burst of the dot-com bubble these companies were the four largest companies in the world in terms of market valuation so that's how the stock markets would value them and you can see I've put three of them as logos and one as not a logo so the ones that are in logos are the tech companies right but of course the dot-com bubble burst and then and then the situation changed fast-forward 10 years and you have a slightly different picture so the four largest companies were some energy companies you still have Microsoft err but you also have a finance company ICBC the Chinese bank now fast forward another 10 years to the latest data we have and care to guess what the four largest companies do they are well they're all tech Microsoft Apple Amazon and alphabet which is the parent company of Google so big tech has re-emerged if you think this is just a top four let me let me show you what the top 10 looks like so these are the same four companies now look at the rest of them these are the ten largest companies in terms of market evaluation right now as we speak the ones in red are tech companies the ones in blue or finance companies right so what happens it seems that big tech has reemerged and what's really interesting is that big tech is getting into finance now traditionally big tech companies were reluctant about getting into finance especially after the 2008 crash because the financial services sector was heavily regulated they were not very keen to get into that but more recently the tech sector is also being regulated is being watched closely by the government's as you can see with for example Facebook so so the tech companies are thinking well we are already being regulated or we are going to do regulator so let's diversify our incomes and get into finance as well so that this battle between the red and the blue the big tech and the big finance I think is going to be a very very interesting phenomenon to watch in the next few years which one is going to dominate now as exciting as all these progress is we should also be cautious about the level of over excitement and behind that is also in this market and in this sector and this is important because the hype can cast a shadow on the actual real progress on the legitimate use cases and applications of these technologies but how would you measure the hype it's difficult so you need to have some suggestions and indications I'm going to invite your attention to a number of examples of the hype in the FinTech space these are some cryptocurrencies which have been heavily backed or promoted by celebrities and unfortunately in this case all three of them and more broadly many many others like these have been involved with fraud and wrongdoing and financial regulators have basically issued cease and desist orders against them which just shows in one in one way how how hot this market is and how overhyped and overexcited this market is and of course the celebrities are not helping in this sense this has become such a problem that the United States regulator the SEC did something clever they wanted to educate investors so they created a fake webpage and a fake eye code initial point offering and they included pictures of fake celebrities with endorsements of this so-called cryptocurrency called how is point and and they also put some science into it they included a whitepaper so many people clicked on the link actually and showed interest and then they were forwarded to the real regulatory webpage which basically cautioned them against this so here's another example you may have heard of this a company called Long Island iced tea company which produces I see mostly in America just before the end of 2017 change its name to guess what long blockchain corporation and just because of that corporate name change their share price went up four hundred and thirty percent in in a day in fact in a few hours now that's this there's no rational way to explain this apart from just the over-excitement of the market in fact this company they very transparently said we are thinking about using the blockchain technology there was no fundamental change in their in their mod in their business model it was just an ik declare a ssin or an announcement but that announcement was sufficient to excite the markets to this extent and this is not just happening in the United States unfortunately it's happening around the world for example in the UK a company called online PLC change its name to online blockchain and then the share price went up 400% in China a company called sky people fruit juice change its name to feature printing and then the share price went to 200% so these cosmetic name changes that lead to such exaggerated market reactions can only be an indication of the hype and emotions in the market and remember they're not really these companies were not really changing the business models in any fundamental way they were just announcing that they might get interested now new studies show that these are not exceptions unfortunately this is a pattern speculative mentions of the word blockchain in fine Oh disclosures has been shown to lead to similar market reactions now Shakespeare famous he wrote rose by any other name would smell as sweet so it doesn't matter what you call a rose it is a still beautiful is it still very sweet-smelling but in the world of finance it matters what you name companies and in a in a famous study which was called rose calm by any other name some researchers found that during the dot-com bubble those companies that simply added dot-com to their names again experienced the market by the overvaluation by about seventy five percent and this was just about Association again they were not changing anything fundamentally they were just having Dutch computer links but the story goes beyond that so as you as you may know this is the famous Bitcoin price chart in 2000 at the beginning of 2018 or end of 2017 it reached a price of about twenty thousand dollars and then it crashed now there's every compelling reason to think that this was a classic speculative bubble if you go back sufficiently long in history and you have seen examples of this before we have seen examples of this before and there's a body of academic studies about this for example in the 17th century tulips exotic rare tulips were so overvalued in the Netherlands that you could basically buy houses in the center of Amsterdam by exchanging a few tulips now of course we're not suggesting that bitcoins are like tulips but the underlying excitement and psychological emotions that that form this is speculation are very similar and if you if you read the insights of psychologists basically the idea is that in in these sorts of speculative bubbles what happens initially is a bit of excitement about a new innovation which then leads to euphoric levels of excitement but then inevitably panic sets in and then they crash and what was very interesting is that these emotions many of them are unconscious emotions people like Freud have talked about this so that's why it's very difficult to learn from experience because these emotions are not consciously notions they're actually quite unconscious emotions so all technological innovations can can lead to over excitement with financial innovations but danger is even more so because there's the promise of abundant wealth and that's what we need to be careful about so I want to conclude by reminding you that there have been many examples of innovations in history which have not survived the test of time snow screens for the face family bicycle or a single wheel motorcycle are just three of those examples it's it's extremely important to remain optimistic and excited about the future that FinTech promises us but also just not get overexcited thank you very much [Applause]

Channel: TEDx Talks

Views: 126,756

Rating: 4.787509 out of 5

Keywords: TEDxTalks, English, Technology, Finance

Id: DiWyf_RtIYM

Length: 17min 3sec (1023 seconds)

Published: Fri Dec 06 2019