AP/ECON 3430 3.0 Monetary Economics I Fall 2016 Topic 10A&B: Fintech Professor Brenda Spotton Visano

Traditional Financial System Functions: transfer purchasing power in and across time; manage risk Structure: financial instruments (products) and services; markets; institutions (intermediaries); publicly or privately owned and operated Regulation: objectives (protect consumers, protect stability; promote competition; promote efficiency) via industry and government oversight and requirements on entry, disclosure, minimum capital, price restrictions, etc.

ACTIVITIES CENTRES OF ACTIVITY CANADIAN FINANCIAL SYSTEM   CENTRES OF ACTIVITY Exchange of Goods or Services for Current Income or Current Consumption Medium of Exchange Cash Chequing Account Balances ACTORS Households Businesses Governments Financial Markets Capital: Equities; Bond Money Mutual Funds Foreign Exchange Derivatives Exchange of Current Income for Future Consumption Savings & Investment Stocks Bonds Guaranteed Investment Certificates  CANADIAN FINANCIAL SYSTEM Financial Institutions (FIs) Banks: Retail, Investment Credit Unions Trust Companies Insurance Companies Pension Funds Central Bank Risk Hedging, Speculation Options Futures Swaps Collateralized Debt Obligations QUESTIONS What are the economic functions of financial instruments and institutions? How should they operate? Why and how should they be regulated?   Regulation & Oversight Bank of Canada Canadian Deposit Insurance Corp Office of Superintendent of FIs Fin Consumer Agency of Canada Provincial Regulators (e.g. FSCO) Financial Industry Associations

Some Fintech Entry Points Payments and infrastructure: Electronic transactions; Crypto-currencies; back office infrastructure Savings and investment: P2P lending and crowd funding Operation and risk management: back office operations Data security and analysis: “Big Data” information Customer interface: Dashboards

How will fintech affect the financial system? Competition: availability of services/products? Cost of financial products and services? Accessibility of basic banking? Consumer protection: Privacy? Quality of information? Resource allocation: allocation of resources in savings and investment? System stability: portfolio risk assessments?

Silicon Valley meets Wall Street Fintech: Silicon Valley Takes On Wall Street (Apr 21, 2015) 0-0:26 and 0:59-1:30 minutes https://www.vlab.org/portfolio-items/fintech/ Moderator: Nick Shalek, Partner, Ribbit Capital Panelists: Baiju Prafulkumar Bhatt, Co-Founder, Robinhood Libor Michalek, CTO Affirm Jillian Manus, General Partner, Structure Capital Jake Fuentes, CEO, Level Money, acquired by Capital One