In: Finance
1. Why is this fintech revolution happening now, not 50 years ago, not 50 years later?
2. How big data supports Fintech credit scoring? Will that raise any ethical problems? Any law enforcement on that?
3. Comparing the emerging of derivatives innovations decade years ago and Fintech, are there any similarities, dissimilarities? Do you think Fintech will replace derivatives’ role, or it will complete derivatives’ role?
Ans 1. There is no definite answer to why now because revolution is an ongoing process, technological changes rise with the demand for ease of work & feasibility. And currently if one observes the global tendency or inclinination towards fintech is growing day by day.
We see the revolutions in terms of the benefits of block chain technology or algorithm tradings. These are in place to make financial markets more efficient & secure.
Innovative modes such as mobile banking, Wallets, Peer to Peer Lending etc is revolutionary in the sense that it intergrates the market more efficiently making it more affordable & feasible for commoners.
Ans 2. Using Big Data: Big data involves in scoring with the help of lender's internal data i.e. onformation & background information of the lender plus thousand external pieces of data based on location, web search results, behavioural patternn, mobile app data, usage metrics, borrowers payment regime etc. These are used in computing scores that generally helps us in making profitable credit decisions.
Yes, It raises the concern for ethical problem because your privacy is at stake if the data is leaked or hacked. For instance, location data or behavioural data, Account Details, Spending pattern etc, such information in the wrong hands can be used against certain individuals & that might lead to fateful events such as frauds or financial crimes.
GDPR act in European Union i.e. General Data Protection Regulation is one of the examples that mandates the organisations operating under EU's jurisdiction to follow data privacy norms. And if the business organisation fails to do so then they are penalised heavily.
Ans 3. Similarities in a sense that there has been innovative changes in both the worlds. And these changes go hand in hand. I mean derivatives markets walk hand in hand with the technological changes that takes place in terms of fintech.
To give an example, big data or algorithm trading or the Artificial Intellegene is generally helping in the reduction of tedious manual works such as book keeping or manual calculations on returns or predicting market movements.
Whereas now with AI and computing softwares one can easily calculate and wirk on big datas to predict maeket movements or determining profitable market positions to take (Such as going long on contracts or short).
Fintech today has made our job easy in terms of taking robust financial decisions be it derivatives market, equity or commodity.