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FinTech Lecture 1 : Overview of FinTech (1)

FinTech Lecture 1 : Overview of FinTech (1)

Slides I used for FinTech - Financial Innovation and the Internet 2023 Fall at Graduate School of Business and Finance, Waseda University on October 6, 2023.

Kenji Saito
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October 03, 2023
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  1. Financial technology in the living room. Generated by Stable Diffusion XL Beta
    FinTech — Financial Innovation and the Internet 2023 Fall
    Lecture 1 : Overview of FinTech (1)
    Kenji Saito, Graduate School of Business and Finance, Waseda University
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.1/30

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  2. This class is recorded
    Using Zoom
    The recordings could be used for research on (online) learning
    Transcribed for use and anonymized
    Will let you know when the necessity arises
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.2/30

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  3. The lecture slides can be found at :
    https://speakerdeck.com/ks91
    Recording and chat text will be posted at Moodle and Discord
    Note, however, that chat messages are often unnoticed
    I have invited you all to the Discord server of the class (continued from the past years)
    Let me do it again now through Zoom chat
    Trial automatic transcription for lectures will be posted at Discord
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.3/30

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  4. Brief(?) Self Introduction
    Kenji Saito (Google Scholar citations)
    Professor, Graduate School of Business and Finance, Waseda University
    Senior Researcher / Lecturer, SFC (Shonan Fujisawa Campus) / KMD (Keio Media Design), Keio University
    Chief Science Officer, BlockchainHub Inc.
    Representative Director, Beyond Blockchain
    Representative Director, Academy Camp (some more non-profits)
    Bio
    M.Eng in Computer Science from Cornell University, 1993
    Ph.D. in Media and Governance from Keio University, 2006 (on digital currency research)
    Researcher of P2P (Peer-to-Peer), digital currency, and distributed autonomous society for
    23 years at Keio and Waseda universities (started my career at Waseda in 2019)
    Holding Academy Camp for children in Fukushima with friends since summer 2011
    . . .
    , 2018 Summer “OK Google, Do My Homework!”, 2019 Winter “Automation for Girls”,
    . . .
    ,
    VR2021.7 “You Create! Lunar Society”, VR2021.8 “ALL THESE WORLDS ARE YOURS”,
    VR2021.9 “You Explore! Amazing Modern & Near Future Medicine”,
    . . .
    ,
    VR&RPG 2023.5 “Don’t Be So Serious”, 2023 Summer “Hakone Stay-In Trip”,
    . . .
    ,
    → Inter-connected in my mind (society hereafter needs to be designed with children)
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.4/30

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  5. Before I forget
    . . .
    Please call me either “Kenji” or “Saito-san”
    I’m more used to them
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.5/30

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  6. Books (one example)
    “NEO in Wonderland — A Tale of Money That Changed
    Our Future” (2009)
    Genre : SciFi Monetary Fantasy
    Digital currency technology that overthrows today’s
    monetary economy
    A drama as its consequence
    NEO : New Economic Order
    English version is freely available
    http://grsj.jp/neo.pdf (CC-BY-SA 3.0)
    Science Fiction Prototyping : a research method
    (1) Depict future reality with new technology
    (2) Extract problems and search for paths to solutions
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.6/30

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  7. Other Classes (in Japanese language)
    At WBS, Waseda University
    “Managing NPOs” (in 2019 Fall only)
    “FinTech – Financial Innovation and the Internet” (in alternate years)
    “Cybersecurity” (in alternate years)
    “Blockchain and Decentralized Finance” (seminar)
    https://speakerdeck.com/ks91 (just slides)
    At KMD (Graduate School of Media Design), Keio University
    “Service Design Seminar B - Implementation to Information Environments”
    (Designing applications of blockchain) (2020 Fall and onward)
    → Inter-connected in my mind, too
    (society hereafter needs to be designed
    . . .
    how?)
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.7/30

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  8. Academy Camp, and Future of Learning and
    Humanity in General
    As part of my research activities
    In fact, I will be away on October 27 because I will be presenting at an
    international conference (JCSG 2023) on certain activities and results from
    Academy Camp, and will conduct the class on demand only on this day
    I will talk about how children themselves developed RPGs as serious games (games whose primary purposes are
    not entertainment) using a large language model (namely GPT-4)
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.8/30

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  9. In Academy Camp
    . . . (Do we live in the same era?)
    In 2018, we held Academy Camp 2018 Summer -
    “OK Google, Do My Homework!” terms 1 and 2
    Children say “OK Google, do my homework” and
    Google Assistant answers “I do your homework”,
    generates math drills, answers all questions
    correctly, and prints the answered sheet
    Automates not only students but also teachers
    (provoking a fight against the whole school system)
    We said “Automate the boring homework with Python” and
    “That’s not what a human being should be doing” a lot
    Picture (left) is a university student succeeded in
    automating math drills (finished last)
    Begun, the age of automation has
    Handwritten kanjis and calculations ∈ common future skills
    From “floor mopping” to “Roomba”
    From “lighter (person)” to “Alexa, turn on the lights”
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.9/30

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  10. From “Lighter (person)
    ” to “Alexa, turn on the lights”
    19th - 20th century
    Social System
    Social Environment
    Division of Labor Network of Machines and Algorithms
    Machines
    Technology
    Human Automation System
    21st century and onward
    OK OK
    (when to)
    Turn on
    the light
    Autonomous and Networked Technology
    Humanity
    more like Nature (Meta-Nature)
    Turn on
    the light
    ⇒ For humans, the technological social environment is semantically transforming into something
    similar to the natural environment
    The emergence of a future “super-automated distributed social environment” = “extended natural environment”
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.10/30

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  11. According to the Mild-mannered Mad Scientist
    From “WIRED” Japanese Ed. Vol.36
    Within the next 30 years, machines and algorithms will
    replace many of the intellectual activities that used to be
    considered essential to human beings, and with the
    expansion of automation, we will see the emergence of a
    new “natural environment” where “a pencil grows on a
    tree” instead of the old “social environment” where “even a
    single pencil is produced by a number of people working in
    a division of labor”
    We call this “Meta Nature”
    Meta Nature operates automatically and autonomously,
    and humans care for it, work with it, get resources from it,
    and live creatively
    Money will have no role there
    It is like a hunter-gatherer society where there is no money
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.11/30

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  12. Possibly a demonstration
    Let us see how an automated system tackles problems on its own while heading
    towards a given goal
    This is called “A thinking” that will be largely automated in the future
    You need “X thinking” and to become an “X thinker”
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.12/30

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  13. Let’s Break into Groups for Discussion
    First, introduce youselves to others in the group
    Second, talk about your perceptions of digital transformation (DX)
    I have just talked about perhaps the most radical form of DX
    But what have you been hearing or seeing about DX?
    Feel free to look up on the web
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.13/30

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  14. DX shifts the perspective from
    the service provider’s to the user’s
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.14/30

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  15. Today’s Topics
    Orientation
    Objectives, overview and schedule
    What’s FinTech?
    Backgrounds and meanings
    Examples — You will discuss on one
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.15/30

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  16. Objectives and Goals
    In this class, FinTech, the fusion of finance and ICT (Information
    Communication Technology), is explained mainly from the technological
    viewpoint, and its impact on the society, applications and their governance are
    considered together with the students
    This class aims for non-engineers to understand the technological background
    of FinTech, and to discover their own problems in the social domain related to
    finance and the management and utilization of assets in a broad sense, and to
    plan the solutions as applications of the new technology, without being swayed
    by easy sales talks from the industry
    You may wonder “would it not be too technical (or technological)?”
    I don’t think so (← not a reliable source, I know)
    We talk about technology to the extent that management should also know about it in order to be able to talk to
    engineers, and I will make an effort to describe the technology in simple bites
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.16/30

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  17. Schedule (provisional)
    Lecture 1 10/6 Overview of FinTech (1) •
    Lecture 2 10/13 Overview of FinTech (2)
    Lecture 3 10/20 Internet Technology and Governance (1)
    Lecture 4 10/27 Internet Technology and Governance (2) on-demand
    Lecture 5 11/10 The World of Apps (1)
    Lecture 6 11/17 The World of Apps (2)
    Lecture 7 11/24 Blockchain (1)
    Lecture 8 12/1 Blockchain (2)
    Lecture 9 12/8 Smart Contracts (1)
    Lecture 10 12/15 Smart Contracts (2)
    Lecture 11 12/22 Smart Contracts (3)
    Lecture 12 1/12 Cyber-Physical Society and Future of Finance
    Lecture 13 1/19 FinTech Ideathon
    Lecture 14 1/26 Presentations and Conclusions
    Online presence is possible but not recommended for non-online lectures for interactivity reasons
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.17/30

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  18. Structure of Lectures (2 consecutive lectures on 1 theme)
    Assignment and Review (20∼30min.)
    Homework is assigned for each theme
    At beginning of each theme, reviews some of your reports
    Q & A (90∼100min.)
    Explains the theme where students need more explanations
    Material (slides) will be announced prior to each lecture (a couple of days before)
    Questions are welcome at any time during the lecture
    Also some short discussions (and demo)
    Discussion (60∼80min.)
    Let’s talk about problems on and surrounding the theme
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.18/30

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  19. Assignments
    Submit your reports through Moodle (and Discord if you wish for sharing)
    No physical paper of any kind ← if you give me one, I will lose it
    ↑ Hopefully I don’t need to mention this any longer
    Deadline is not very exactly handled
    Participation is checked by the reports (and speaking), not by your physical or
    logical presence in the classroom
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.19/30

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  20. Evaluation
    Reports
    You get points if your reports are picked up for the review
    Only some of the picked-up reports are actually reviewed in the class
    A Pile and B Pile, or rather, X Pile and A Pile
    Active class participation
    Questions and comments
    Providing topics
    Commenting on reports by other students (more easily done on Discord)
    Overall, performance is evaluated by contributions and reports
    In addition, (group) work and presentations
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.20/30

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  21. Lecture Materials
    Slides
    There is no textbook
    In addition to the references listed below, other references will be provided and
    instructed as needed
    References (some interesting readings)
    S. Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System,
    http://bitcoin.org/bitcoin.pdf (2008).
    V. Buterin, A Next-Generation Smart Contract and Decentralized Application Platform,
    https://github.com/ethereum/wiki/wiki/White-Paper (2013-).
    B. Edgington, Upgrading Ethereum – A technical handbook on Ethereum’s move to proof of
    stake and beyond
    https://eth2book.info (2023-)
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.21/30

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  22. What’s FinTech?
    Financial Technology (the name doesn’t explain much)
    What kind of technology?
    If we don’t ask, then coins, pencils, account books, clay tablets, languages, are all technology
    “The use of human technology began with making things in nature into simple tools”
    (automatically translated from Japanese Wikipedia)
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.22/30

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  23. Industrial Tools, and Media and Governance
    B. Fuller, “Operating Manual for Spaceship Earth”, 1969
    Industrial Tool = “all the tools that cannot be produced by one man person”
    ⇒ Media (tools/extensions of human) and Governance (cannot be produced by one person)
    “Language” was the first industrial tool
    Today, technology is a system of industrial tools
    So, the language is technology anyways,
    Meaningful to this class when we think about communication-technology
    aspect of languages
    People naturally imagine, when they hear the word “technology”,
    the latest system of industrial tools of the era they live in
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.23/30

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  24. Background : Digital Technology
    Processing power of computers and network is improved,
    Cost is reduced at the same time
    ⇒ Time has come where individuals always carry network computers with them
    A personal network computer = A smartphone
    Can you imagine lives and work styles 30 years ago?
    Almost Showa era
    . . .
    In a way, it hasn’t changed at all in Japan ;)
    Superficially, it has changed a lot
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.24/30

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  25. IDEA of FinTech
    Financial Inclusion
    Growing customer base (including those who have not)
    Financial Democracy
    Expansion of business entities (with the emergence of non-banks)
    User Experience (essential in DX)
    Customers can easily leave if they are not satisfied
    Architecture as Law
    There is always an option to break the law, but it is impossible to do what
    the architecture does not allow
    As long as you can’t use hacking techniques ← So it is essential for us to know how to hack
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.25/30

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  26. Business Areas of FinTech
    Payments
    e-Money, credit/debit cards, mobile payments, digital currencies
    Asset Management
    Automatic asset management, robo-advisor
    Deposits and Loans
    P2P lending, pre-paid
    Financing
    Crowdfunding, ICO (problematic), STO, COE (Cause-Oriented Economy)(word coined by lecturer)
    Insurance
    Use of IoT, smart contracts (automation)
    Capital Market
    Securities trading system with LT
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.26/30

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  27. FinTech Intrinsically “Destroys”
    It’s possible to maximize profits through an engineering approach under the
    current rules of financial capitalism (cf. financial engineering)
    But FinTech is inherently a game-changer, changing rules and creating
    changes that make traditional financial capitalistic society obsolete
    Blows the foundation itself
    New technology allows us to bypass the old ways
    The impact of this on “the foundation” is immeasurable
    Ex1
    : YouTube, Uber, Airbnb
    Separation from ownership of broadcasting stations, vehicles or real estates
    Ex2
    : Visa ↔ AMEX
    brand holder, issuer, acquirer
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.27/30

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  28. Examples
    Let’s see if you can come up with examples of FinTech
    Since it is so commonplace today, there will be an example of something that is
    not so common as a discussion topic
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.28/30

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  29. Discussion:
    Zero money for passengers to pay to travel
    Let’s say, within a town
    How do you achieve it?
    It cannot be done? But this is also an orange juice test
    https://www.intercom.com/blog/the-orange-juice-test/
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.29/30

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  30. See You Next Week!
    Lecture 1 : Overview of FinTech (1) — FinTech — Financial Innovation and the Internet 2023 Fall — 2022-10-06 – p.30/30

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