Saturday, 10 June 2017

“FinTech” and Academia: A Crucial Turning Point Moves Ever Closer

Today’s very short post reacts to a recent article in Reuters that discussed how some of the leading business schools across the United States are starting to embrace the demand to provide so-called ‘FinTech’ related course (‘FinTech’ being the amalgamation of Financial Technology, which covers a range of technologies). For this post, we will discuss how that demand is being met in a very varied way in terms of the ideology of FinTech, and also the importance of which ideology is championed by academia with regards to the wider effect of FinTech being used to facilitate predatory finance rather than, say, financial inclusion which is something discussed before here in Financial Regulation Matters; the role of academia, in this sense, is absolutely vital in determining the size of the next financial bubble.

Crudely, ‘FinTech’ can be understood as any technological innovation within the financial sector, which may apply to increasing financial literacy or to facilitating the development of ‘crypto-currencies’ like Bitcoin and everything in between. In terms of the global growth of the sector, it has been noted that the level of funding of FinTech endeavours has been growing steadily, which is seeing major economic players and regulators, like the Commodity Futures Trading Commission, start to actively promote the development of FinTech. It is no wonder then that leading business schools are being forced to address the developing demand for FinTech-related studies. Yet, the reality of the situation is that ‘the burgeoning industry is so diverse that academics said it is difficult to construct a syllabus for financial technology… there are no textbooks and few professors have FinTech expertise’. The diversity within the sector is causing certain Universities to focus upon certain elements, with the Reuters article stating that MIT have a course that focuses on ‘blockchain’ technologies, whilst Stanford University focus on technologies that promote financial inclusion, for example. This sense of novelty that is attached to the study of FinTech has, therefore, dual characteristics – it can be used to promote real societal ‘goods’, but can also be used to syphon talent towards big business for the use of predatory finance.

Though those two extremes are, well, extremes, the choices facing the leading business schools around the world are, arguably, that stark. The growing demand can be educated in a way in which such societally-important endeavours such as the increase in financial inclusion and education, as discussed previously here in Financial Regulation Matters, are prioritised so that such endeavours are deemed central to societal advancement. Yet, there needs to be great vigilance with regards to the other extreme, because ‘big business’ has extensive form when it comes to monopolising talent to be used for profit maximisation, and not societal advancement – the Chinese Central Bank is currently investigating the potential for this within the FinTech arena. Academia, and particularly the field of Economics, came in for great criticism regarding the financial crisis, so it would be wise to temper our faith in the leasing business schools to prioritise societal advancement over profit maximisation but, in reality, there is the opportunity for business schools like Wharton, Stanford, Columbia, and the many other elite schools (in the U.S. alone) to institutionalise certain principles as finance moves forward into the 21st Century. It is hoped that the scorn from the failure to do this last time acts as encouragement for a different approach within leading and influential business schools – the reputation capital gained would far outweigh the short-term monetary reward for doing the opposite. Yet, the largest fear is with regard to predatory finance. The allure of huge remuneration packages that the financial elite can offer graduates can serve to increase predatory finance principles, but that can be counteracted by determining the ideology of FinTech and its potential effects at an earlier stage – in that sense, the responsibility facing the most influential business schools is incredible.

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