CourseCode: FB 402
CourseName: Financial Information System
Assignment on: The Development of IT in Economic Growth
Submitted To
Jewel Kumar Roy
Assistant Professor
Department of Finance and Banking
J.K.K.N.I.U.
Submitted By
Rafi Afnan
ID: 16132604
Departmentof Finance & Banking
J.K.K.N.I.U.
Date of Submission: 23/6/2019

Fintech: A Revolution in the Financial Systems
For decades, banks and insurers have employed the same relatively static, highly profitable
business models. But today they find themselves confronted on all sides by innovators seeking to
disrupt their businesses. Crowdfunding, peer-to-peer lenders, mobile payments, bitcoin, robo -
advisers – there seems to be no end to the diversity, or to the sky-high valuations, of these
“fintech” innovators. Yet, some might note that they have heard this tune before. The direct
banks and “digi-cash” of the 90s captured the imagination of journalists and investors in a
similar fashion, but ultimately had little impact. In fact, the financial services industry has been
remarkably impervious to past assaults by innovators, partially due to the importance that scale,
trust and regulatory know-how have traditionally played in this space. However, as they say in
investing, “past performance is not an indicator of future success” and the same may be true for
banks’ and insurers’ record of besting innovators. A new World Economic Forum report takes
a look into what the future holds for the industry. It draws on over 100 interviews with industry
experts and a series of workshops that put strategy officers from global financial institutions in
the same room as high-flying fintech innovators to discuss the issue. Their findings suggest this
round of innovation just might make the big names in financial services rethink their business
models insome financial ways.

Characteristics of the Innovators in the 21st Century
Here are five characteristics of innovators to suggest this time might really be different when it
comes to disruptive innovation in financial services of this century:
1. They’re deploying highly focused products and services
Past innovators often tried to replicate the whole bank, resulting in business models that either
appealed only to the most tech-savvy or price-conscious customers. Today’s innovators are
aggressively targeting the intersection between areas of high frustration for customers and high
profitability for incumbents, allowing them to “skim the cream” by chipping away at
incumbents’ most valuable products. It is hard to think of a better example of this than
remittance – banks have traditionally charged very high fees for cross-border money transfers
and offered a poor customer experience, with transfers often taking up to three days to arrive at
their destination. UK-based company Transferwise is challenging this process using an
innovative network of bank accounts and a user-friendly web interface to make international
transfers faster, easier and much cheaper. Thanks to this business model, the company now
oversees over £500 million of transfers a month and has recently expanded into the US.
2. They are automating and commoditizing high-margin processes
Innovators are also using their technical skills to automate manual processes that are currently
very resource intensive for established players. This allows them to offer services to whole new
groups of customers that were once reserved for the elite. “Robo-advisers”
like Wealthfront, FutureAdvisor and Nutmeg have automated a full suite of wealth management
services including asset allocation, investment advice and even complicated tax minimization
strategies, all offered to customers via an online portal. While customers must forego the in-
person attention of a dedicated adviser, they receive many of the services they would offer at a
fraction of the cost and without needing to have the $100,000 in investible assets typically
required. As a result, a whole new class of younger, less wealthy individuals are receiving advice
and support in their efforts to save, and it remains unclear if they will ever have the desire to
switch to a traditional wealth adviser, even as their savings grow to the point where they become
eligible for one.
3. They are using data strategically
Customer data has always been a central decision-making factor for financial institutions –
bankers make lending decisions based on your credit score while insurers might look at your
driving record or require a health check before issuing a policy. But as people and their devices
become more interconnected, new streams of granular, real-time data are emerging, and with
them innovators who use that data to support financial decision-making. Friendly Score, for
example, conducts in-depth analyses of people’s social networking patterns to provide an
additional layer of data for lenders trying to analyze the credit-worthiness of a borrower. Does
your small business get lots of customer likes and respond promptly to complaints? If so, you

might be a good risk. Are all of your social connections drinking buddies “checking in” at the
same bar? Well that might count against your borrowing prospects.
Meanwhile, a new breed of insurance company is identifying ways to generate streams of data
that help them make better pricing decisions and encourage their policy-holders to make smart
decisions. Oscar, a US-based health insurer provides its clients with a wearable fitness tracker
free of charge. This lets Oscar see which policy-holders prefer the couch to the gym and enables
them to provide monetary incentives (like premium rebates) to encourage customers to hit the
treadmill. As the sophistication of these analytic models and wearable devices improves, we will
likely see more and more financial services companies working to nudge their customers towards
better behavior and more prudent risk management.
4. They are platform based and capital light
Companies like Uber and Airbnb have shown that marketplace companies, which connect buyers
and sellers, are able to grow revenues exponentially while keeping costs more or less flat. This
strategy has not gone unnoticed by innovators in financial services. Lending Club and Prosper,
the two leading US marketplace lenders, saw their total originations of consumer credit in the US
grow from $871 million in 2012 to $2.4 billion in 2013. Lending Club alone issued $3.5 billion
in loans in 2014. While this is only a fraction of total US consumer debt, which stood at $3.2
trillion in 2013, the growth of these platforms is impressive. Analysts at Foundation Capital
predict that marketplace lenders will issue $1 trillion in consumer credit, globally, by 2025. Even
more impressive, they have done so without putting any of their own capital at risk. Instead, they
have provided a place where borrowers looking to get a better rate can meet with lenders (both
individuals and a range of institutions such as hedge funds) who are eager to invest their money.
Crowdfunding platforms have achieved something similar, becoming an important source of
funding for many seed-stage businesses. These platforms connect individuals looking to make
small investments in start-ups with an array of potential investment targets, and allow the
“wisdom of the crowd” to decide which companies will and will not be funded.
5. They are collaborating with incumbents
This one might seem strange. After all, disruptors are supposed to devour the old economy, not
work with it. But this is an oversimplified view. Smart investors have realized that they can
employ bifurcated strategies to compete with incumbents in the arenas of their choosing while
piggy-backing on their scale and infrastructure where they are unable to compete. For their part,
incumbents are realizing that collaborating with new entrants can help them get a new
perspective on their industry, better understand their strategic advantages, and even externalize
aspects of their research and development. As a result, we’re seeing a growing number of
collaborations between innovators and incumbents. ApplePay, the most lauded financial
innovation of the past year, doesn’t attempt to disrupt payment networks like Visa and
MasterCard, but instead works with them. Meanwhile, regional banks, like Union Bank in
California, are forming strategic partnerships with marketplace lenders, providing referrals for
customers they are unable to lend to. This helps them meet their customers’ needs while avoiding
the risk that they will leave for another full-service financial institution.

Clearly, there is more to this story than simple disruption. How it will play out is still to be seen,
although we can safely say that innovators will force incumbents to change, which should
ultimately benefit the consumer. But it doesn’t necessarily mean that the brand names we know
will be disappearing any time soon – particularly those who learn to play with the new kids on
the block.
Technology Trends to Watch in 2019
The intelligent digital mesh is going to include interconnected humans, robots, devices, content,
and services all driven by digital transformation. Disruptive technology trends are going to
propel the future where technology innovation leaders must evolve and change at the same pace
of the trends they must embrace. Or, they could be left behind and suffer a slowly mass
extinction.
Perhaps the obvious technology to watch closely in 2019 before we can move on to anything else
will be 5G. 5G is a necessary technology. Without 5G technology, none of the technologies
mentioned below would be possible. Autonomous vehicles, drones, the Internet of Things, and
supercomputers could not be possible without 5G networks. 5G technology is going to improve
processing speeds by more than 10 times in 2019. This is the technology that can make possible,
for instance, the much expected remote surgery in rural areas. Artificial Intelligence surgery
might sound too futuristic to some. However, robot surgeons powered by AI are bringing new
innovations and accuracy to the operating room.
1. Machine Learning will advance Artificial Intelligence (AI)
Artificial Intelligence (AI) innovations will continue to bring scientific breakthroughs, in part,
thanks to the vast amounts of data that new technologies have been collecting and is now
available. In 2019, Machine Learning and Artificial Intelligence will be embedded in the
business platform creating and enabling smart business operations. In the Artificial Intelligence
space, China is going to leave the U.S. behind, emerging as a leader in AI developments and
applications. Advances in Machine Learning technology and algorithm training will result in
new and more advanced AI. Autonomous vehicles and robotics are the two industries that will
see the most rapid developments during 2019. In 2019, there is going to be a convergence of
Artificial Intelligence, Machine Learning, and Deep Learning in business applications. As AI
and learning technologies get to work together in order to reach better results, AI will have
greater accuracy at all levels.
2. Quantum Computing (Supercomputing)
Quantum Computing, still an emerging technology, is one of the most fascinating things
researchers, organizations, and governments have been working on in this century so far. The
race toward building the first fully-functional, fully-working quantum computer (also called
supercomputer) is on. With its impressive computational power quantum computers will most
like be a cloud service in the near future rather than on premise machines. IBM is already
offering cloud-based quantum computing services. The first quantum computer is going to have
a significant advantage over the others. In 2019, the competence to achieve supercomputer
supremacy will intensify. As a consequence, the last mile in the race will remain mostly
secretive, for obvious reasons.

3. Augmented Reality (AR) and Virtual Reality (VR)
Advances in Augmented Reality (AR), Virtual Reality (VR), and Mixed Reality (MR), all of
which can be summarized in R+, will continue to be at the forefront of attention during 2019
with some fascinating new practical applications for industries. R+, which once was only found
in video gaming has been quickly advancing to become a useful tool in industries such as
engineering design, manufacturing, healthcare, space exploration, and many others. In 2019,
Virtual Reality is going to open up to innovative industrial applications that will change how
people work and collaborate across geographies. Augmented Reality has been rising in the
Virtual Reality's shadow for the past year. But in 2019, AR is set to grow exponentially.
4. Global Internet of Things (IoT) security breach
Hackers never sleep. Everyone in the cybersecurity industry knows that. As long as you connect
something to the Internet it immediately becomes vulnerable. In the past years, we have seen
how hackers have turned to unsecure Internet of Things (IoT) devices to create an extensive
botnet which then they could use to push enough traffic to take down Dyn, the DNS provider. As
a way to refresh your memory, here is how the DDoS attack using IoT devices happened in
2016. A quick look at the news tells us that not much has been learned. However, the great
number of security breaches occurred during 2018 should serve as an alert of what can happen at
a global scale in 2019 if organizations don't take the necessary precautions. Analyst firm Gartner
forecasts that 20.4 billion connected things will be in use worldwide by 2020. And with the rise
of autonomous things --I will call this the Internet of Autonomous Things (IoAT) there is a good
chance that many of these things will show a certain level of weak security. In 2019, it will be
paramount for IoT manufacturers and all of their supply chain to dramatically increase the
security in all the products that come out to market. It can be a connected refrigerator, a robot, a
drone, a vehicle, or a health tracker. Manufacturers must implement a level of security that keeps
hackers at bay. Otherwise, there is a good chance we are going to witness a global IoT security
breach in 2019.
5. Blockchain technology
In 2019, for the delight of organizations, Blockchain is going to bring the first enterprise
applications in active use. The most innovative corporations will start using Blockchain as a way
to improve collaboration. Blockchain in 2019 comes out cryptocurrency transaction and becomes
an integral part of the business platform. Blockchain enables transactional transparency across a
variety of business functions. In 2019, Blockchain will be present in many industries at the core
of business innovation.
U.S. Financial SystemOutlook (2009-Present)
One decade after the global financial crisis, the banking industry looks to be on firmer ground.
Assets at U.S. banks reached nearly $17 trillion at the end of 2018 and return on equity for the
industry is at a post-crisis high. Meanwhile, European banks have struggled with structural
deficiencies, overcapacity, and low or negative interest rates. Chinese banks, in contrast, have
experienced spectacular growth in recent years.
Though these developments are reassuring, there are signs that challenges could lie ahead,
particularly from a deceleration of real GDP growth in the U.S. Deloitte economists predict a 25
percent probability of a recession in the U.S. in late 2019 or early 2020. In preparation, banking
executives may want to consider making adjustments in several areas—regulatory compliance,

technology, risk management, and customer experience—according to Deloitte’s 2019 Banking
and Capital Markets Outlook.
Regulation
For global banks, divergence in regulatory standards remains a fact. In Europe, the General Data
Protection Regulation will continue to reshape privacy and data ownership policies, and Brexit
uncertainties continue to weigh on planning considerations. In Asia Pacific, conduct and culture
are likely to remain high on the agenda in 2019 as regulators take a closer look at foreign
investment as well as recovery and resolution planning.
In the U.S., the pace of new regulations has slowed under the current administration, though it’s
possible the role of state regulators may grow in prominence. As for the implications of tax
reform, banks will likely have to revisit decision criteria—some of which may be decades old—
about capital investment policies and intracompany cash flow management. Executives may
want to look beyond the direct effects of these policies to examine second- and third-order
implications, including the way they might relate to human capital or research and development.
The bottom line is 2019 presents an opportunity for banks to align regulatory requirements with
their business strategies. Executives may want to take the time to make compliance
modernization a priority.
Technology
Though the benefits of emerging technology have never been greater, the hodgepodge of legacy
systems, platforms, software, and tools remains a key challenge for banks. Banks' success
in digital transformation will ultimately depend on how strategy, technology, and operations
work together across domains. To achieve this “symphonic enterprise,” where different
technologies and solutions seamlessly mesh to create maximum value, organizations may want
to give precedence to excelling at data management, modernizing core infrastructure, embracing
AI, and migrating to the public cloud.
A key step along any digital transformation path will be to get a better handle on data to extract
the greatest value from technology investments. Banks can accelerate cloud adoption for data
management, system modernization, and AI-powered analytics. Concentration risk from
migrating systems to a single provider and security concerns are important factors to keep in
mind, however.
Risk Management
As digital transformation and externalization gain ground, banks appear to be entering a new
stage of risk management. Though banks have made advances in how they assess and mitigate
risk across the enterprise, the current systems may not be equipped to manage emerging areas
such as algorithmic risk. Accordingly, banking executives may want to proactively embrace risk
management as a first line of defense.
As digitization, automation, and externalization also move forward, the ability of banks to
understand their ecosystem while assessing and mitigating risks is key to success. To meet this
challenge, banks will want to address emerging areas, such as those from AI and algorithms, at
the design stage and infuse a strategic mindset throughout the risk management function for early
threat identification.

Digital Transformation
Digital transformations will not be just internal. Consumers’ experiences in other industries—
particularly those with large, developed digital presences—are upping the ante for banks. Indeed,
even as consumers show general overall satisfaction with their banks, they do not show the
affinity for banks that they show for their favorite brands. While a positive economic outlook and
future interest rate hikes are likely to lift margins for U.S. banks, rising competitive pressures—
including the broader reach of fintechs—may require a sustained focus on enhancing the
customer experience via digital transformation. Using new technologies, retail banks have an
opportunity to create fluid, cross-channel experiences that blend elements of both the digital and
physical worlds.
The $80 Trillion World Economy in One Chart

Impact of Technology on the Performance of Commercial Banks in Bangladesh in the Last
10 Years
Among the financial service industry, the banking sector was one of the first to embrace rapid
globalization and benefit significantly from IT development. Recently the private banks of
Bangladesh are trying to imitate the banking structure of developed countries. There are 30
commercial banks listed in Dhaka Stock Exchange. The research is based on the data that was
available in the annual report and websites of those banks. The study of the impact of technology
on the performance of commercial banks in Bangladesh will provide us about the positive and
negative impact of technology to the earnings of banking sector. Recently automation has
become a trend for commercial banks of Bangladesh, at least it have to be automated at head-
office level. The study includes ATM number, online branch number, mobile banking and online
banking percentage. From the analysis, we can see that Basic Earning Power of commercial
banks is declining from 2010. ATM number is growing rapidly than automating branch services.
Mobile banking is a recent topic in our country, and it has positive impact on return. In the
earlier period, adoption of technology was not essential to sustain in the market. But now-a-days,
analysis shows that technologically advanced banks get higher return compare to others. The
empirical model for the panel data analysis is fixed effect and random effect model. To
determine which model is giving best result for the study, Hausman test has been done. In the
panel data analysis, random effect model has given a good result than fixed effect model. Where
we can see that, customers are more concerned about ATM number and online banking.
Bangladesh’s economic freedom score is 55.6, making its economy the 121st freest in the 2019
Index. Its overall score has increased by 0.5 point, with higher scores on factors including
property rights and government integrity countering declines in investment freedom and fiscal
health. Bangladesh is ranked 27th among 43 countries in the Asia–Pacific region, and its overall
score is below the regional and world averages.
Robust economic growth of approximately 6 percent annually for two decades has been driven
by a rapid increase in private consumption and fixed investment. Nevertheless, Bangladesh still
grapples with poor infrastructure, endemic corruption, insufficient power supplies, and slow
implementation of economic reforms. The fragile rule of law continues to undermine economic
development. Corruption and weak enforcement of property rights force workers and small
businesses into the informal economy. Entrepreneurial activity is also hampered by an uncertain
regulatory environment.
Fintech May Boost Financial Inclusion: Bangladesh Bank
Financial technology, popularly known as fintech, may facilitate financial inclusion in
Bangladesh by offering new platforms for savings and borrowings such as agent banking,
according to the central bank. Fintech paves the way for payment system development which can
contribute to develop a more integrated, efficient and less frictional financial system. The fintech
ecosystem of Bangladesh has demonstrated gradual evolution in the last couple of years, mainly
based on payment and clearing systems whereas other areas of fintech are yet to be developed.

At present, most fintech activities in the country are led by banks with support from broad-based
national payment systems. The systems include Bangladesh Automated Cheque Processing
Systems (BACPS), the Bangladesh Electronic Funds Transfer Network (BEFTN), the Real Time
Gross Settlement (RTGS) and the National Payment Switch Bangladesh (NPSB). These
platforms allow banks to operate internet and mobile banking and automated teller machine
(ATM) services. Agent banking is the latest addition in fintech by which banks are authorized to
perform financial intermediation. There also exist some companies that act as payment service
provider and payment service operator for e-commerce. In 2017-18, the total amount of
transaction through all the systems accounted for 180 percent of GDP, of which the BACPS and
the RTGS processed the major share of the payments. The BEFTN, the NPSB and the MFS
collectively facilitated 12.7 percent of the total electronic payments. The BB said payment
mechanisms may be exposed to cyber security and operational risks. Money supply might be
influenced due to increase in velocity of money resulting from high usage of fintech such as
ATMs and point of sales (POS) machines. Extensive use of fintech such as credit cards for
purchasing foreign goods and services might cause leakage of foreign currency from the country.
Apart from the payment system, which might be susceptible to cyber security and other
operational risks, the systemic risk from other channels of fintech is still considerably low.
However, as sporadic events of domestic frauds and forgery may undermine the public
confidence on financial system, it is imperative for financial and payment service providers to
take prompt remedial measures against the incidences as well as to avoid their recurrence.
Private companies are at the center point of view. As 2019 in Bangladesh-
 There has been significant increase of new startup and founders joining the space which
was not seen in the past. It is not limited to first time entrepreneur only, but people with
professional work experience taking risk to join the startup life. A recent study by Light
Castle Partners (LCP) identified top 3 sectors where startups are currently working now:
e-commerce, tech and impact businesses.
 Have played one of the major stakeholder as they built the Infrastructure investment in
3G that practically jump started the internet enabled businesses in Bangladesh. Local
private device suppliers played the second biggest role in bringing the smart phone prices
down locally manufacturing them. Last year 3 major telcos either started an accelerator
program or sponsored one to promote digital business in Bangladesh such as
Grameenphone Accelerator which provided access to deal flow.
 We have few local angel investors who provides seed funding, however their numbers are
very limited with a deal size below US$50,000. However there are larger financial
institutions that have invested across various range. Few of the venture capital and private
equity companies who are currently working in Bangladesh are: Fenox Ventures, IPE
capital, BD Venture Limited, Aviskar, DEFTA Partners, Innotech Corporation,
Bangladesh Venture Capital, Razor Capital, 500 startups, Segnel Ventures, IMJ Ventures,
Mind Initiative, Brummer & Partners, Princestreet, Osiris Group VIPB, IFC etc. A recent
study by Light Castle Partners (LCP) identified preferred sectors by investors are MFS
(83%), Health Tech (67%) and C2C Commerce (50%). Few of the local startup that
recently got fund are listed below to our best knowledge- , GObd, PayWell, Priyo.com,

Solaric, SureCash, Styleline, Direct Fresh, AjkerDeal, Eshosikhi, Pathao, Bagdoom,
Sheba, BPCL, Brian Station, Studio 71, Smart Compare, Light Castle Partners, Magnito
Digital, Doctorola.
 The startup ecosystem originally started in 2013 with main advocates being Startup
Dhaka also known as SD Asia, Team Engine, Hub Dhaka, EMK Center, Better Stories,
Preneur Lab etc. Most these companies are involved in mentoring, coaching and
accelerator program which help startup develop their business to next stage.
Thank You