Fintech Archives - Random.Musings

How can we navigate a low-interest environment?

September 16, 2020 No Comments

The Federal Reserve recently indicated that they will be keeping rates near zero at least until 2022 to help the US economy recover from the Coronavirus economic shock. Along with maintaining the pace of quantitative easing the Fed is doing through the increase in Treasury and mortgage-backed securities. The Federal Reserve balance sheet is at US$7.1 trillion for the week 8th June 2020, increased by US$3 trillion in the last 3 months.

While this situation isn’t unique only to the US, government across the globe have adopted aggressive stimulus plan to cushion the economic shock caused by the Coronavirus. So how would such actions affect the general population?

At a basic economic level, the interest rate set on savings account deposits is determined by the relationship between how much banks value receiving extra deposits and how much savers value the services of a savings account. Those valuations are manipulated by how governments and central banks target interest rates in the economy.

So for the average citizens whose, a large portion of their financial assets are kept with the banks, earning minimal interests over a long period of time will put themselves in a precarious position whereby their asset value will decrease over time due to inflation.

So what shall we do in a low-interest rate environment?

Cryptocurrency, Fintech, Regulation

How blockchain can prevent Fraud through the decentralization of information

February 20, 2019 No Comments

Greed is the excessive desire for more than is needed or deserved — not for the greater good but for one’s selfish interest, and at the detriment of others and society at large.

Bad actors with the intention of committing fraud to one’s selfish interest will design an elaborated scheme to have full opacity within the organization.

In private companies, full internal controls are very often not in place which might be due to the nature of the industry where the company needs to be nimble.

This gives rise to opportunities for bad actors to plot fraudulent schemes at the expense of the company.

As actions are not verified, third parties and information are not readily available due to the nature of the system, where only decision makers hold all the information.

This creates an obvious point of failure, with severe information gaps between employees of an organization, resulting in the lack of transparency, therefore, allowing fraudulent activities occurring.

Cryptocurrency, Fintech, Regulation

The Economics of Blockchain

October 27, 2017 No Comments

Blockchain was first introduced in October 2008 through the white paper released by Satoshi Nakamoto describing how a virtual currency (Bitcoin) could potentially work. Blockchain by design is a decentralized technology, where information held on its network reconciled to the database regularly. The blockchain database isn’t stored in any single location instead, it is spread across nodes on the blockchain network. Similar to a peer to peer network, transactions are broadcast, database hosted by a network of computers accessible to the public with no centralized storage, making it impossible for hackers to manipulate. Blockchain technology is unique in the way that it brings together existing technology of peer to peer network, cryptography, along with game theory (providing rewards through competition) to establish a secure medium where functions can take place without a centralized entity.

Fintech

We are pursuing cashless in the wrong direction!

October 8, 2017 No Comments

Human civilizations have endured multiple evolutions over thousands of years, empires were built and crumbled along the way, but the presence of trade existed in one form or another. Bartering, the very fundamental of trade which brought about development and prosperity to mankind was cashless, as goods were exchanged and not bought.

Fast forward today, bartering takes on a different form where goods were paid for with money, a universal medium of financial exchange. As we moved from traditional bartering to precious metals than to banknotes and now towards digital payments, our medium of financial exchange is evolving to facilitate the shift in our environment and the advancement of technology.

The pursuit of a cashless society has been ongoing for several years, with technology companies introducing cutting age devices which allow for digital payment with the attempt of replacing money, financial institutions going digital and government initiatives to encourage citizens to adopt digital payments as part of a holistic movement towards a cashless society. One may wonder, what defines a cashless society and what impact it’ll have to our society?

In today’s term, a cashless society is described as an economic state whereby financial transactions are not conducted with money in physical form (banknotes or coins) but rather through the transfer of digital information. Advocates saw the potential in digital transactions as it allows for quicker transactions regardless of location and not limited by time which empowers individuals with access to financial services. This prompted small businesses and basic trades to occur in developing areas where banking infrastructures and robust regulations were lacking. Digital payments allow for full traceability of transactions, pointing tax regulators in the right direction to crackdown on tax evasion, security forces to track terrorism funding, money laundering, corruption, and many other financial crimes(although there are ways around it through the dark web, and cryptocurrencies-Monero). Going cashless also helps in reducing cost towards maintaining the circulation of paper currency and allowing the government to have better control over the flow of money when in times of crisis intervening to implement damage control initiatives.

The macro benefits of a cashless society are obvious, however does going cashless on a micro level truly benefit end users?