FinTech For Dummies

Steven O'Hanlon, president and CEO of Numerix, LLC and was 2016's FinTech Person of the Year.Susanne Chishti is the CEO of FINTECH Circle, the leading global FinTech community focused on FinTech investments and corporate innovation strategies and courses.

• Introduction 1About This Book 1Foolish Assumptions 2Icons Used in This Book 2Beyond the Book 3Where to Go from Here 3Part 1: Getting to Know Fintech 5Chapter 1: Navigating the FinTech Landscape 7What Is FinTech, Anyway? 8Analyzing FinTech’s Dimensions 10Understanding What Has Changed in FinTech 13Highlighting the Size of Global FinTech 15Discovering a Few Important FinTech Terms 18Chapter 2: Understanding What’s Disrupting the Financial Industry (and Why) 21Providing Trust and Value 22Trust 22Value 23Weighing Wall Street against Silicon Valley: Where Disruptors Live 25Examining the Role of BigTech 28BigTech and payment platforms 28BigTech partnership opportunities 29How BigTech can help utilize data 29Barriers to greater BigTech participation 30Understanding Where the Disruptions are Happening 32Banks 33Asset managers 34Insurance 34Regulation and legal work 35Payments 36Looking for the Opportunities 36Partnership opportunities 36Exploiting digitalization with AI 37Enhancing data portability 37Chapter 3: The Role of Regulation in FinTech 39Supervising FinTech 40Understanding that location matters 40Recognizing that more regulations are coming 42Leveling the playing field 42Examining Vendor Risk Issues 44Introducing the Regulators 45The United States of America 45The United Kingdom and Europe 47Investigating Regulatory Changes 51Payment Services Directives 51The General Data Protection Regulation 52Highlighting RegTech Opportunities 55Part 2: Learning the Technology 57Chapter 4: Defining the Tech Underpinning FinTech 59Finding a Fix in FinTech 60What’s the problem? 60Why FinTech now? 61Creating API Strategies 62Understanding the concept 62Looking at API benefits 63Developing an API strategy 64Including REST and RAML 65Trying tips for API success 66Reviewing APIs and security vulnerabilities 66Understanding Event-Driven Software 67Testing and implementation 69Language support 70Building on Agile: Microservices and More 71Waterfall development 71Agile design 73Microservices 74Bundling Efficiencies: Batch Processing 80Improving Data Management 81Distinguishing the types of data 81Validating, enhancing, and cleansing data 83Making enterprise data management more efficient 83Working with CPUs and GPUs 85Comparing CPUs and GPUs 85Planning for success 86Estimating the potential improvement 87Choosing a Programming Language 88Python 89Julia 91R 92Chapter 5: Confronting the Compute Conundrum 93Determining Compute Requirements 93In-memory computing 94Virtualization 95Making Sense of DApps 95Comparing DApps to traditional applications 96Understanding blockchain 99Knowing where to find DApps 100Connecting DApps, Artificial Intelligence, and FinTech 102Looking at permissioned blockchain 103Understanding Quantum Computing 104How quantum computing works 105The drawbacks of quantum computing 106How quantum computing fits into FinTech 107Chapter 6: Calling Up the Cloud 109Getting to Know the Cloud 110Looking at the cloud’s key traits 111Checking out the benefits of the cloud environment 111Introducing types of cloud services 112Choosing between private and public clouds 117Cloud bursting 120Developing an Optimal Cloud Strategy 121Reviewing data security and encryption 121Surveying data states 124Considering cloud scalability 125Understanding cloud-based virtualization 126Using self-service provisioning 127Monitoring performance 128Evaluating potential security risk on the cloud 129Understanding Privacy Compliance and GovernmentRequirements 131Data protection laws 132Data localization laws 132Data sovereignty laws 133Access to information laws 133Seeing How FinTech Helps with Cloud Strategies 133Chapter 7: Understanding Blockchain beyond Bitcoin 135Understanding the Basics of Blockchain 136Mining and consensus 137Smart contracts and DApps 138Blockchain network types 139Discovering How Blockchain Technology Works 140Decentralization 141Security 142Transparency 146Looking at Blockchain’s Role in FinTech 147Chapter 8: Acclimating to the App Mentality 151Introducing Types of FinTech Apps 152Surveying the FinTech App Landscape 153Digital banking 153Wealth management 153Payments and peer-to-peer money transfer 154Lending 154Looking at the Nonretail Side of FinTech Apps 155RegTech 155Capital markets trading 156Building a GUI Framework 157Introducing the GUI 158Getting the GUI right 159Establishing the Requirements Needed in the Development of an App 160Chapter 9: Breaking Down BI Tools 163Taking a Strategic Approach to BI 163Exploring BI Tools 165Online analytical processing 165Querying and reporting 167Data mining 167Data visualization 168Business activity monitoring 169Data warehousing 170Digital dashboards 171Choosing the Right BI Tools for FinTech 172General BI applications 173Niche BI applications 174Chapter 10: Reviewing the Role of Open Source 175Defining Open Source 176The open source community 176Free versus open source 177Looking at Open Source Development Processes 179Beginning a project 179Discussing and documenting 180Perusing the Pros of Open Source 181Reduced cost 182Flexibility 183Freedom 184Development speed 184Considering the Cons of Open Source 186An untraditional support model 186Time and resources for maintenance 187The possibility of uneven documentation 187Security risks 188Sustainability issues 191Licensing issues 191Other concerns to consider 192Evaluating Open Source Solutions 192Developing your own solution 193Finding help for the right open source solution 194Introducing open innovation 196Chapter 11: Grasping Data Management Fundamentals 197Looking at FinTech’s Role in Helping Companies Manage Their Data 198Understanding ETL: Extract, Transform, and Load 199Going over the steps 199Reviewing ETL software requirements 200Managing Market Data 201Cleansing and normalizing market data 202Segmenting and storing market data 203Dealing with Databases 204Data warehouses 204Data lakes 205Maintaining Data Lineage 206Breaking Down Big Data 207Differentiating between Structured and Unstructured Data 208Comparing SQL and NoSQL 209SQL databases 209NoSQL Databases 210Chapter 12: Adapting for Future Technologies 211Harnessing the Power of Artificial Intelligence 211Defining AI 213Breaking down artificial neural networks 214Exploring how AI fits into FinTech 215Leveraging Machine Learning 216Supervised learning 216Reinforcement learning 217Unsupervised learning 217Making the Most of Chat Bots 217Checking Out Alternative Data Sources 218Companies and devices involved in alternative data 219Alternative data in the financial industry 220Sourcing, compliance, and regulation 220Part 3: Working With Fintech Companies 223Chapter 13: Deciding Whether to Build, Buy, or Partner 225Transforming Your Company Digitally 226Exploring Reasons to Build or Buy 228Looking at reasons to build 229Checking out reasons to buy 230Finding the balance between new and legacy software 232Finding a FinTech Partner 234Weighing the pros and cons of partnership 235Researching and scouting potential FinTech partners 236Working with partners on evolving solutions 239Describing the Licensing Models 241Subscription 241Perpetual 242Term 243Source code transactions 243An open source approach 244Chapter 14: Managing Integration with Legacy Systems 247Understanding and Tackling the Challenges of Legacy Infrastructures 248Comparing old and modern systems 248Determining whether a legacy system is too old 249Estimating the cost of doing nothing 250Discovering how FinTech can help 251Planning for success 252Walking through the Technical Steps of Updating a Legacy System 253Noting areas of concern 253Making your plan 253Assembling the team 254Implementing the plan 256Avoiding the pitfalls 257Simplifying Integration with Microservices Architecture 258The benefits of microservices 258Migration strategy options 259Chapter 15: Preparing Your Team for a Successful Project 261Assembling a Transformation Team 262Recruiting the right team members 263Counting on communication 264Shifting the leadership paradigm 264Assigning roles 265Setting Realistic Expectations and Timelines 268Supporting Change Agents 269Retaining Good Employees during Change 272Why employees leave 272Retention strategies that work 273Career paths and organizational change 274Understanding Data-Driven Decision-Making 275Breaking the Silos 277Chapter 16: Investing in FinTech Companies 279Understanding the Players 280Challenging financial institutions 281Offering collaborative solutions to financial institutions 281Navigating the Investor Landscape 282Crowdfunding 282Angel investors 284Venture capital 285Corporate venture capital 286Private equity 287Conducting Due Diligence 288Performing primary research 288Doing secondary research 289Analyzing data 290Evaluating a Company’s Growth Strategies 291Studying the competition 291Listening to customers 292Asking about technology 292Inspiring innovation 292Considering a Company’s Culture 293Chapter 17: Figuring Out the FinTech Endgame 295Bringing the Board Up to Speed on FinTech 296Noting the challenges that financial boards face 297Embracing digital transformation 298Developing digital skills 300Figuring out how to participate 301Looking into the Future of FinTech 303Authentication methods 303Voice technology 304Artificial intelligence 305Identifying Industry-Driven Networks, Accelerators, and Incubators 306The FinTech Innovation Lab 306Startupbootcamp FinTech 306Techstars 307FINTECH Circle 307Level39 308Mulling Over Mergers and Acquisitions 308Consolidation 309Corporate venturing strategies 310Part 4: The Part of Tens 313Chapter 18: Ten Symptoms of Ailing Legacy Technology 315A Band-Aid Overload 315A Lack of Backward Compatibility 316Incompatibility with Other Systems 317Disparate Data 318Spreadsheet Risk 319Latency 321Increasing Demand for Support and Maintenance 322Short-Term Gains and Long-Term Pains 323A Shrinking Talent Pool 323Lost Market Opportunities 323Chapter 19: Ten Questions for Determining Whether to Build or Buy 327Is This Functionality Core to Our Business? 327Is the Application Unique? 328Which Approach is More Cost-Effective? 328Should This Application Be Built? 329What are the Risks of Building versus Buying? 330When Does Open Source Make Sense? 331When Does Building Make Sense? 332How Can We Accelerate a Build? 333When Does Buying Make Sense? 334How Do We Select a Vendor and a Product? 335Chapter 20: Ten Considerations When Using Open Source Technology 337Your Business Model 338Open Source Community Health 338Tech Support 339Security 340Code Audits 341Reliability 342Hidden Costs 343Updates and Upgrades 345Potential Hardware Impact 346Legal Considerations 347Appendix: Building A Fintech Company From the Ground Up 351Index 361