Carlson Executive Education Blog

How to prepare for a brave new world of financial services: Meet Fintech

Posted by Eric Zheng on Nov 1, 2017 10:42:11 AM

Eric Zheng, Professor, Information Systems and Finance at the University of Texas at Dallas 


People-to-people is long gone. People-to-machine is yesterday’s news. We are entering a world in which business is conducted primarily between machines. 

It’s happened before

No, it’s not a science fiction movie–it’s our current and growing reality, thanks to Fintech (financial technology), a catchall term that refers to the influx of technology tools, platforms, and ecosystems that make financial services more accessible, efficient, and affordable. 

Fintech is rapidly changing how financial information is disseminated, processed, and analyzed. If you’re skeptical about its power for creative disruption, think back to the way Napster and then iTunes revolutionized the music industry or the way the digital camera completely changed the camera industry. Now it’s Fintech’s turn to upend to the status quo in the world of finance.

phone interface.jpg

It’s happening now

We’re already seeing examples of this on Wall Street, which has been shedding jobs such as banking, asset management, sales and trading. The only growing sector in the finance industry is technology- and data analytics-related jobs.

If you’ve used Apple Pay, you’re accessing Fintech. If you’ve been intrigued by news stories about cryptocurrencies such as Bitcoin, you’ve seen Fintech in action. Maybe you’ve even used the services of a robo-advisor for wealth management through a company like Wealthfront. If so, you have Fintech to thank. 

Outperforming and revolutionizing

Machine learning and artificial intelligence are poised to make a significant impact on trading traditions. AIEQ (AI Powered Equity ETF), an actively managed security that seeks to use artificial intelligence to beat the market, debuted in October 2017. During its first week, it was up by more than 1%, beating most of the best-performing traders. 

Another example is the use of Blockchain to enable trustless financial activities, using pre-set protocols and algorithms to empower smart contracts that can self-execute. Look forward by just a few years, and services such as accounting, auditing and legal counsel may be replaced by machines. The acceptance of Blockchain is increasing. According to IBM, 91% of banks are already investing in Blockchain solutions to shorten cycles and reduce cost for transactions such as money wire, remittance, and clearing.

Getting on the right side of the digital divide

Patrick Harker, president of the Federal Reserve Bank of Philadelphia, recently made an inspiring speech in which he envisioned how finance sectors may be innovated under Fintech. The digital divide in the financial service industry is already forming as Fintech reshapes and redefines the finance industry. The widespread application of artificial intelligence and algorithms mean that automation will change just about every job. Humans may become bystanders in services such as trading, risk assessment, and asset management. 

Start learning now: Fintech course is February 19 to 22

The skillsets needed in this brave new world will be different, so it’s time to retrain and retool ourselves to be able to embrace them. My upcoming four-day course Fintech - Innovation Transforming an Industry will help attendees understand the advances and transformative power of Fintech. It will cover cutting-edge Fintech topics such as seeking smart alpha, algorithm trading, high-frequency trading, machine learning and artificial intelligence for financial analytics, crowdfunding and crowd-investing, social trading, Blockchain, and other emerging Fintech topics. 

This is the first time this class is being offered through Carlson School of Management Executive Education, and I anticipate that we’ll be filling up quickly with financial service market leaders who are interested in keeping abreast of the latest developments. I hope to see you in class this February!