Module 7_ FinTech Innovations Frameworks.pdf

A Presentation on the Key role of USSD Technology on Financial Technology

1. Module Seven
Fintech Innovation Frameworks

2. Today’s Agenda
●Case studies( local and
international )
●A Framework for FinTech
Innovation: Introduction
●First Principles Thinking
●Applying First Principles to
Financial Services
●First Principles Case
Study: M-Pesa
●Design Sprint: Overview
●Application of Design
Sprint

3. Case studies (Local and International)
1.1.1 Background
Kenya has long been a pioneer in mobile
technology, with the first African country to have
a mobile phone network.
1.1.2 The rise of mobile banking
M-Pesa allowed people to deposit and withdraw
money, pay bills and purchase goods without
having to carry cash.
The service was a huge success, in part
because it was backed by the Kenyan
government, which helped to ensure its
legitimacy.

4. Benefits
• Increased access to financial services
• Increased financial inclusion
• Increased financial literacy

Challenges
• Security and privacy
• Limited functionality
• Infrastructure
Benefits and Challenges of Mobile banking

5. Case study 2
The rise of Bitcoin
Bitcoin is a digital currency that is not regulated by
any government or financial institution.
Background
Bitcoin was created in 2009 by a mysterious person
or group of people known as Satoshi Nakamoto.
The features of Bitcoin
One of the key features of Bitcoin is that it is not
regulated by any government or financial institution.
The rise of Bitcoin
Bitcoin has experienced a surge in popularity in
recent years

6. Benefits
• Increased privacy
• Increased security
• Increased flexibility

Challenges
• Volatility
• Limited functionality
• Lack of regulation
Benefits and Challenges of Bitcoin

7. A Framework for Fintech Innovation
Introduction
-The financial sector is a critical part of the global economy, and its stability and
efficiency are essential for economic growth. Challenges include:
●Slow growth
●Low interest rates
●Increasing regulation
-Transformation with new technologies and business models emerging in areas
such as payments, lending, and investment.
-Benefiting from the rapid growth of digital technologies enabling them to
provide financial services through new channels, such as mobile phones and
the Internet.
-Innovative services such as mobile payments, peer-to-peer lending, and
robo-advisors.
-Opportunities for traditional banks.

8. Components of Fintech regulation
framework


-This section lays out a framework for
FinTech regulation, with a focus on the
United States.
-The framework has four key components:
1. The FinTech Sandbox
2. The FinTech Charter
3. The FinTech Regulator
4. The FinTech Framework

9. The Fintech Sandbox
-The FinTech Sandbox is a safe space for FinTech companies to experiment with
new products and services.
-The FinTech Sandbox is based on the principle of regulatory forbearance.
Forbearance is the practice of regulators allowing companies to experiment with
new products and services without fear of regulatory penalties.
-It is also important because it allows regulators to assess the risks associated with
new products and services.
-It is open to all FinTech companies, regardless of size or stage of development.

10. The Fintech Charter
-The FinTech Charter is a special charter for FinTech companies that outlines the
regulatory expectations for these companies.
-The FinTech Charter is important because it provides a clear framework for
FinTech companies.
-It allows regulators to assess risks associated with new products and services.
-It is voluntary and companies can choose to abide by it or not.
-However, companies that choose to abide by the FinTech Charter will enjoy a
number of benefits, including:1. Reduced regulatory uncertainty 2. Reduced
regulatory burden
-The FinTech Charter is based on the principle of self-regulation.
-It is important because it allows companies to develop their own regulations.
-It is open to all FinTech companies, regardless of size or stage of development.

11. The Fintech Regulator
-The FinTech Regulator is a new regulator specifically tasked with overseeing FinTech.
It is based on the principle of proportionality. Proportionality is the principle that
regulators should regulate companies in a way that is proportional to the risk they
pose to the financial system.
-The FinTech Regulator is important because it allows regulators to focus on the
companies that pose the greatest risk to the financial system.
-It is a new regulator specifically tasked with overseeing FinTech. It is a place where
regulators can develop a better understanding of the risks associated with FinTech.
-The FinTech Regulator is based on the principle of transparency. Transparency is the
principle that regulators should be open and transparent with the public.
-It is based on the principle of risk-based regulation. Risk-based regulation is the
principle that regulators should regulate companies based on the risk they pose to the
financial system.

12. The Fintech Framework
-The FinTech Framework is a set of principles and regulations that guide the
FinTech Sandbox and the FinTech Charter.
-The FinTech Framework is based on the principle of risk-based regulation.
Risk-based regulation is the principle that regulators should regulate companies
based on the risk they pose to the financial system.
-The FinTech Framework is important because it allows regulators to focus on the
companies that pose the greatest risk to the financial system.
-This allows regulators to develop regulations that are tailored to the specific
needs of these companies. The FinTech Framework is also important because it
allows regulators to develop a better understanding of the risks associated with
FinTech.

13. First Principles Thinking
-First principles thinking is a way of
looking at things that is very
different from the way most
people think.
●Step 1 - Identify the problem
●Step 2 - Develop a
hypothesis to explain the
problem
●Step 3 - Test the hypothesis
●Step 4 - Analyze the results
of the test
●Step 5 - Draw conclusions
from the results of the test

14. -The first principles of finance are to understand the time value of money, risk
and return, and the use of leverage. Applying these concepts to the financial
services industry, we can see that one of the most important considerations is
the rate of return that can be earned on an investment.
What to consider in financial services
●Identify opportunities where the rate of return is higher than the rate of
return available from other investments.
●Risk
●The use of leverage
-By understanding the time value of money, risk and return, and the use of
leverage, investors can make more informed decisions when investing in the
financial services industry.
Applying First Principles to Financial Services

15. ●Step 1 - Identify the goals of the
financial system
●Step 2 - Identify the constraints on the
financial system
●Step 3 - Identify the components of
the financial system
●Step 4 - Identify the interactions
between the components of the
financial system.
●Step 5 - Identify the principles that
guide the interactions between the
components of the financial system
Steps of Applying First Principles to Financial Services

16. -The main functions of the financial sector are to allocate capital, manage risk,
and provide financial services.
●Allocating Capital
●Managing Risk
●Providing Financial Services
What are some of the first principles of financial services?
-To provide valuable products and services to customers in a way that is
safe and efficient
-People should be rewarded in proportion to their contribution
-A business should manage its finances in a way that maximizes
shareholder value.
Functions of the Financial Sector

17. -Financial services companies can maximize shareholder value by:
●Investing in products and services that offer the highest returns
●Investing in new technologies and innovative products that will help them
stay ahead of the competition.
●Financial services companies should also be efficient in their operations,
so they can keep costs low and maximize profits.
-The following are three first principles that can be applied to the financial
services industry:
1. Customer focus
2. Efficiency and effectiveness
3. Integrity and trust
Cont… Functions of the Financial Sector

18. -M-Pesa is a mobile phone-based money transfer, financing, and microfinancing service,
launched in 2007 in Kenya by Vodafone for Safaricom, the largest mobile network
operator in the country. M-Pesa allows users to deposit, withdraw, and transfer money
through a mobile phone, without the need for a bank account.
First Principles case study: M-Pesa
Why M-Pesa has been successful
-Ability to address the needs of the
"unbanked" population
-The fact that mobile phone penetration
is high in Kenya, with over 60% of the
population owning a mobile phone.
-Convenient way to transfer money and
affordability.
-Safety

19. -M-Pesa is a good example of a company that uses first principles thinking.
-By thinking about the problem of money transfer in a very basic way, Vodafone was able to
create a solution that was very convenient and affordable for users.
Cont… First Principles case study: M-Pesa
-M-Pesa is based on the first principle that:
●Money is an idea.
●Money should be easy to use.
Basics of transferring money from your M-Pesa
account to another person's M-Pesa account,
●The mobile phone numbers of the two
accounts you want to transfer money
between.
●The amount of money you want to
transfer.
●The M-Pesa transfer fees for the
transaction.

20. Cont… First Principles case study: M-Pesa
-Assuming you have all of this
information, here's how you would
transfer money from your M-Pesa
account to another person's M-Pesa
account:
1. Go to the M-Pesa menu and select
"Send Money".
2. Enter the mobile phone number of the
person you want to send money to.
3. Enter the amount of money you want
to send.
4. Enter the transfer fees.
5. Click on "Send Money".

21. -A design sprint is a time-boxed, five-day process
for designing and testing a product or service.
-It is meant for answering critical business
questions through design, prototyping, and user
testing.
-A design sprint is a five-day process for solving a
problem and designing a solution.
Day 1: Understanding the problem
Day 2: Sketching solutions
Day 3: Choosing a solution
Day 4: Building a prototype
Day 5: Testing the prototype
Design Sprint: Overview

22. 1. Product Development
2. Business Model Innovation
3. Marketing
4. Customer Research
-Some specific applications of design sprints include:
●Developing a new product or service
●Designing a new website or app Improving
customer experience
●Creating a marketing campaign
●Developing a new business model
●Resolving a business challenge
Application of Design Sprint

23. The End