John Hill speaks with ARYZE about his book Fintech and the Remaking of Financial Institutions, emphasizing the balance between the innovation of startups, the dominance of already existing financial institutions, and the already commonplace presence of fintech technologies
John Hill is a professor of Economics and Finance who is deeply involved in the fintech sector as a consultant, investor, author and educator. When he isn’t spending his spare time swimming with hundreds of schooling sharks in the northern Galapagos Islands, most of his time has been entrenched in working within the financial sector, both as a participant and an educator. He is an expert on the role of fintech within financial institutions and provides insight and analysis on some key questions regarding -coins and digital cash.
Financial institutions have transformed over the years, and as an educator Hill saw the need to update outdated economic education materials to have them include an analysis of the ever-growing role of fintech technologies within the financial sector. He felt it was crucial for students, both those who might work in the financial sector and those who would be consumers of financial products, to understand what fintech has to offer. So he decided to write a book about it himself. Hill describes one of the key takeaways of his book Fintech and the Remaking of Financial Institutions:
It strikes a balance between appreciating the entrepreneurial spirit and innovative value of emerging startups but also understanding some of the shortcomings: the challenges of achieving scale, meeting regulations concerning consumer and investor protections, and aggressive defensive responses by incumbent financial institutions.
Startups and financial institutions don’t have to be mutually exclusive, and can have a mutually beneficial relationship. As Mr. Hill points out, startups demonstrate entrepreneurship and innovation, while financial institutions, in general, represent a stable, trusted entity.
Fintech is not a goal only for futurists, but it is also already heavily intact in current financial institutions. Hill notes that many financial institutions especially those in Western countries already implement financial technology:
As I progressed through a career in financial services, I saw first-hand the increasing importance of technology and innovation. Fintech applications have broken through some of the institutional rigidities of incumbent financial institutions and is accelerating access to financial services to the world’s underbanked populations.
Fintech’s Role in Financial Institutions and an Analysis of Digital Cash
Existing financial institutions have evolved and are progressively implementing financial technologies, as stated by Hill,
JP Morgan and Goldman Sachs now have more software engineers than sales/traders. Each have aggressive fintech programs, both internal and external investments and partnerships. If anything, fintech will have increasing share of budget and share of mind, even at the CEO level. However, there is no doubt that startups will continue to be hotbeds of innovation.
Mr. Hill outlines some of the drawbacks and benefits of -coins like bitcoin, stating that their anonymity has potential to lead to an increase in money laundering, issues with taxation, and illegal trade of drugs or weapons. ARYZE acknowledges this and adheres to strict observance of already in place AML (anti-money laundering) regulations and would work to anticipate and deter other risks that we currently aren’t aware of. Digital cash, when implemented in the right way, has potential to bypass the issues that present themselves through -coins. Hill poses further analysis on digital cash:
On the first issue, “money” in most Western countries is already almost exclusively electronic. Balances are held as electronic entries in banking or brokerage accounts. Transactions are done through the massively scaled debit/credit card systems. Digital cash could be a less expensive, more efficient evolution of these systems.
ARYZE is an ecosystem that bridges the gap between traditional finance and digital currency. It is trusted, inexpensive, and actively seeks to combat money laundering and other illegal activities, and every dollar is securely placed in a full reserve bank. ARYZE would not challenge the existing banking institution because it would always be dependent on it to some extent, so central banks would still have authority to both supervise and enforce rules.
To learn more about John Hill’s insights, check out his books Fintech and the Remaking of Financial Institutions and Environmental, Social, and Governance (ESG) Investing.
For more insights into the future of fintech and the possibilities of digital cash, please visit ARYZE’s blog.