FIN42130 Banking& Finance inDigital Age

Academic Year 2023/2024

This module provides an overview of the financial landscape in the digital era, with special emphasis on the role of FinTech (and its close cousins, such as RegTech and SupTech) and how it impacts the financial sector.
The course will start with a review of the emergent new players and services, including digital currencies, blockchains, cryptographic tokens, and related topics in the FinTech domain, perhaps the most significant innovation in the financial world since the advent of double-entry bookkeeping centuries ago.
The course will then take a step back and review how and why the financial sector has evolved the way it has. We will begin with a study of the nature of money and legacy payment and banking systems. We will then study the emergence of stateless, decentralized, cloud-based digital currency systems since 2009, and follow-on investment products, derivatives, and innovations such as initial coin offerings and crowd-funding.
Understanding the historical evolution of the financial sector and the emergent role of FinTech and related developments will require a discussion of the economic functions of markets and financial intermediaries, with an emphasis on their role in the solution of the information processing problem entailed by the allocation of financial resources in the economy. To gain insight on this, the course will provide a review of the traditional theory of financial intermediation and an introduction to modern information economics.
This set of theories and conceptual tools will be applied to understating the role that FinTech and other developments in modern digital finance can play in information processing and in completing financial markets. We will also examine at the same time the challenges they face, conditions for their development, their impact on incumbent financial intermediaries. We will explore threats that blockchain technology poses to incumbent firms and even to central banks and their resulting attempts to co-opt the technology into existing business models. We will survey related issues including hacking, “smart contracts,” governance, investment risk and return, and emerging regulatory approaches to these assets.