The Future of Finance
eBook - ePub

The Future of Finance

The Impact of FinTech, AI, and Crypto on Financial Services

Henri Arslanian, Fabrice Fischer

Share book
  1. English
  2. ePUB (mobile friendly)
  3. Available on iOS & Android
eBook - ePub

The Future of Finance

The Impact of FinTech, AI, and Crypto on Financial Services

Henri Arslanian, Fabrice Fischer

Book details
Book preview
Table of contents

About This Book

This book, written jointly by an engineer and artificialintelligence expert along with a lawyer and banker, is a glimpse on what the future of the financial serviceswill look like and the impact it will have on society.

The first half of the book provides a detailed yet easyto understand educational and technical overviewof FinTech, artificial intelligence and cryptocurrenciesincluding the existing industry pain points and thenew technological enablers.

The second half provides a practical, concise andengaging overview of their latest trends and their impacton the future of the financial services industryincluding numerous use cases and practical examples.

The book is a must read for any professional currentlyworking in finance, any student studying the topicor anyone curious on how the future of finance willlook like.

Frequently asked questions

How do I cancel my subscription?
Simply head over to the account section in settings and click on “Cancel Subscription” - it’s as simple as that. After you cancel, your membership will stay active for the remainder of the time you’ve paid for. Learn more here.
Can/how do I download books?
At the moment all of our mobile-responsive ePub books are available to download via the app. Most of our PDFs are also available to download and we're working on making the final remaining ones downloadable now. Learn more here.
What is the difference between the pricing plans?
Both plans give you full access to the library and all of Perlego’s features. The only differences are the price and subscription period: With the annual plan you’ll save around 30% compared to 12 months on the monthly plan.
What is Perlego?
We are an online textbook subscription service, where you can get access to an entire online library for less than the price of a single book per month. With over 1 million books across 1000+ topics, we’ve got you covered! Learn more here.
Do you support text-to-speech?
Look out for the read-aloud symbol on your next book to see if you can listen to it. The read-aloud tool reads text aloud for you, highlighting the text as it is being read. You can pause it, speed it up and slow it down. Learn more here.
Is The Future of Finance an online PDF/ePUB?
Yes, you can access The Future of Finance by Henri Arslanian, Fabrice Fischer in PDF and/or ePUB format, as well as other popular books in Business & Finance. We have over one million books available in our catalogue for you to explore.



Part I

The Fundamentals of Fintech, Crypto, and AI
Financial services and the technological context in which it operates are changing rapidly, so rapidly that it can be difficult to track the emergence of new business models, the entry of new competitors, and applications of new technologies to the business of financial services. In this section, we will seek to provide a foundational understanding of the most important forces currently transforming the operational structure, competitive dynamics, and regulatory treatment of the financial system.
The content that follows is divided into four subsections. First, we provide a high-level survey of the changing technological landscape, considering the impact of exponential improvements in computing power, storage, and connectivity on the dynamics of the business sector. From there, we will explore the fundamentals of fintech, considering the landscape of new fintech competitors, the response of incumbent financial institutions, and the potential for entry by large technology companies into the financial ecosystem. In our third subsection, we will dive into the world of crypto-assets, exploring the workings, history, and proliferation of these new instruments and establishing a taxonomy for organizing their many variants. Finally, in our fourth subsection, we will explore the emerging technology of artificial intelligence, first providing a high-level overview of its definition and workings, before exploring the ways this technology is being applied to within the financial ecosystem.

The Fundamentals of a Rapidly Changing Technological Landscape

To understand how new technologies and their applications are changing the future of financial services, it is imperative that we understand the foundations of how technology itself is evolving. In the following two chapters, we will first explore the relationship between the exponential increase of computational power, new networks of connectivity, and the rise of the data economy before considering the advent of new human-to-machine interfaces and their implications for our interactions with digital technologies. This background will help set the scene for this book and help us better understand the changes that will affect the financial services industry in the future.
© The Author(s) 2019
H. Arslanian, F. FischerThe Future of Finance
Begin Abstract

1. The Digital Triumvirate of Computation, Data, and Connectivity

Henri Arslanian1 and Fabrice Fischer2
University of Hong Kong, Hong Kong, Hong Kong
Blu ltd, Hong Kong, Hong Kong
Henri Arslanian (Corresponding author)
Fabrice Fischer
End Abstract
The past 50 years have seen rapid technological change that has fundamentally shifted the boundaries of human possibility, enabling radical improvements in productivity, new scientific advances, and the advent of both new communities and new divisions within society. These changes have forced a rapid transformation of both the operational structure and the core tenets of competitiveness for every industry, creating a host of new challenges and opportunities for businesses, their customers, and the policymakers responsible for governing them.
The following chapter will consider the rapid increase in the capacity and accessibility of computational power, data, and networks of digital connectivity, as well as the implications of the confluence of these three forces.

1.1 Increasing Computational Power

In 1965, Intel co-founder Gordon E. Moore made a radical prediction. He argued that the number of transistors in an integrated circuit would double every two years. These circuits are crucial to any electronic device; made of a network of transistors and other components, they perform the complex calculations that keep a device running and completing tasks. As the number of transistors on every integrated circuit goes up, computing power increases in step.
Moore’s prediction proved correct and forms the basis for what is now called Moore’s law in his honor. This increase in computational power has been the primary driver of the rapid advancement in technology that we have seen over the past 50 years. At the same time, the cost of computational power has fallen spectacularly: between 1980 and 2010, the number of transactions per second purchasable for a single US dollar has increased 10 millionfold.1
The result is a world in which the average person has in their pocket a device whose computational power is millions of times more powerful than the combined computing power used by NASA to complete the Apollo 11 mission to the Moon.2 In fact, it is the reason that almost every device used in your life today, from your toaster to your electric toothbrush, likely contains several microchips.
But Moore’s law cannot persist forever. There are fundamental physical limits to how small a transistor can be and we are already pushing those boundaries. For example, Intel’s advanced ‘Skylake’ transistor is only 100 atoms across. Pushing up against these boundaries increases both the cost and the complexity of the development of new chips, suggesting that sooner or later new approaches will need to be found if computational power is to continue increasing exponentially.3
One frontier of exploration that has captured the attention and imagination of many is an entirely different approach to computing called quantum computing that relies on insights from a complex branch of physics called quantum mechanics. A quantum computer would radically shift the boundaries of what a machine can do, potentially allowing us to encrypt data with near-perfect security as well as predict changes to complex systems such as the climate.4

Box 1.1 What Is Quantum Computing?

Experimentation in the field of quantum computing seeks to deliver new computational capabilities by harnessing the complex, and often counterintuitive world of properties of subatomic particles, through a branch of physics called ‘quantum mechanics’. These subatomic particles don’t behave in the same way as physical objects in our daily activities, which have well-defined positions and characteristics. Instead, subatomic particles exhibit a property called ‘super-position’ where they can effectively exist in multiple places at the same time.
This property turns out to be important for computing. Traditional computers, from the most basic calculator to the most powerful supercomputer, all perform calculations using something called ‘binary code’ where all data is encoded as a series of ones or zeros called bits. A quantum computer also uses ones and zeros, but through ‘super-position’, a quantum bit, or qubit, can in some sense be one and zero at the same time.5
If that doesn’t make any sense, don’t worry. Physicist Richard Feynman, who won a Nobel prize for his contributions to the field, once quipped that ‘nobody understands quantum mechanics’.6 What matters is that a quantum computer would enable us to quickly solve problems that are extremely difficult for conventional computing systems.
For example, take the classic challenge of the ‘traveling salesperson problem’ where a sales agent who needs to visit a dozen cities on a trip wishes to chart the most efficient route. Because of the enormous number of permutations of possible trips, this turns out to be an extremely difficult problem to solve for conventional computers and proves impossible to fully optimize at the level of a shipping company like FedEx. However, using a quantum computing system, such calculations could be completed much more quickly.7
A range of potential applications for quantum computing exists in financial services, most notably the optimizing of large investment portfolios and the identification of arbitrage opportunities. They may also be able to accelerate the process of deep learning in financial services and more broadly.8
However, these new...

Table of contents