Jean Dermine, Professor of Banking and Finance

Karel Cool, Professor of Strategic Management

Federico Gavazzoni, Assistant Professor of Finance

Massimo Massa, Professor of Finance

MBA 18D
Period 3 | May-June 2018|
Fontainebleau
Seats: 30
Credit: 0.5

Course Purpose

Digital disruption is receiving a large attention around the world. New players, FinTechs, are challenging incumbent financial institutions. It affects numerous dimensions of the financial sector: payments and remittances, crypto-currencies such as bitcoin, trading infrastructure with blockchain decentralized ledgers, robo-advisors and artificial intelligence in asset management and private banking, peer-to-peer lending (P2P), marketplace funding, crowdfunding, ICOs or insurance. Venture capital is investing $ billions in this new ecosystem.

The purpose of the course is twofold

  • To analyse digital disruption in the financial sector and present several dimensions of the FinTech ecosystem: payments, digital currency, P2P and marketplace funding, blockchain, robot-advisors in asset management, insurtech and strategic dimensions of digital disruption. The goal is to develop a framework that helps to think critically about these innovations.
  • To give the opportunity to participants in groups to work on an empirical analysis of a specific case.

Learning Goals

A participant completing this course will be able to:

  • Understand peer-to-peer lending (P2P), marketplace funding as a competitor to traditional bank intermediation
  • Understand cryptocurrencies such as bitcoins and the regulatory challenge
  • Understand the impact of robot-advisors and artificial intelligence in asset management
  • Understand the potential of blockchain technology
  • Evaluate the degree of disruption of FinTechs in banking and insurance and likely responses from incumbent participants.

Who Should Take This Course?

After attending the course, participants could join banks, consulting companies, private equity firms or investment funds that invest in financial institutions, and FinTechs.

Course Overview

A unique structure is adopted for the FinTech elective. As the FinTech world touches on various dimensions, a team of INSEAD Professors will lead specific sessions. They come from Finance and Strategy.
Groups of participants formed at the start of the course will write a report on a specific case/sector. Presentations in class will take place at the end of the course to share knowledge about the innovative FinTech world.

Course Sessions

Session 1: Professor Jean Dermine
Introduction to the FinTech elective. Peer-to-Peer Lending (P2P)
After an Introduction to the course and the organization of group research projects, we discuss peer-to-peer lending and marketplace funding. The potential to disrupt traditional bank intermediation is evaluated.

Readings:

  • Dermine (2017), “Digital Disruption and Bank Lending”- European Economy
  • “The Rise of FinTech in China” (2016) – DBS and EY report
  • Case : “Lending Club” – Stanford School of Business, E-597

Session 2: Professor Federico Gavazzoni
Bitcoins, Money, and Regulation
Putting emphasis on Bitcoin, we introduce the concept of virtual currencies and study their origin, their role in the current market place, and their possible evolution in future years. Bitcoin is a decentralized virtual currency with zero intrinsic value. How does it work?
How different is it from a traditional currency? How similar? We discuss the role of Bitcoin as a store of value, a medium of exchange, and a unit of account, and examine the challenges and opportunities it raises for financial market participants, the regulatory authority, and central banks.

Readings:

Before Bitcoin
From CBC website:
1) Edmonton liquor store asks: Cash, credit or Canadian Tire money? Dec 21, 2006 http://www.cbc.ca/news/canada/edmonton/edmonton-liquor-store-asks-cash-credit-or-canadian-tire-money-1.589005

The rise of Bitcoin
From the Financial Times website:
2) Virtual money, from real central bank mistrust (June 6, 2011 by: Tracy Alloway)
https://ftalphaville.ft.com/2011/06/06/585756/virtual-money-from-real-central-bank-mistrust/

3) A currency trader’s take on Bitcoin (June 27, 2011 by: Tracy Alloway)
https://ftalphaville.ft.com/2011/06/27/602966/a-currency-traders-take-on-bitcoin/

Bitcoin today
From the Time website:
4) Why You Shouldn’t Invest in Bitcoin (Jan 05, 2017 Kerry Close)
http://time.com/money/4623650/bitcoin-invest/

From Market Watch:
5) Should you invest in a bitcoin ETF? (Mar 2, 2017 Jeff Reeves)
http://www.marketwatch.com/story/should-you-invest-in-a-bitcoin-etf-2017-03-01

Session 3: Professor Karel Cool
FinTechs and Digital Disruption
This session explores the challenges and opportunities that incumbents and new entrants face in the insurance industry as a consequence of the emergence of digital business models and online platforms. After providing an overview of the landscape of the “fintech opportunities and threats”, the session focuses on a new case study: Cuvva. The company is a mobile-only intermediary in the UK car insurance market. This fintech is offering a new proposition, called “Cuvva for Sharers” which allows individuals to very quickly get car insurance by the hour when they drive the car of someone else. The startup also pioneers a service, “Cuvva for Owners”, that allows car owners to switch their insurance on and off depending on whether the car is in use. The case chronicles the efforts of founder and CEO Freddy Macnamara on setting up the company and on competition in the very competitive UK car insurance market.

Reading: “Cuvva, Disrupting the Market for Car Insurance”.

  • What is the potential size in the UK of the market opportunity that Cuvva pursues?
  • What is Cuvva’s (potential) competitive advantage as it pursues this opportunity?
  • What are the (strategic) challenges that Cuvva will have to deal with in the coming two years?
  • What questions do you have for CEO Macnamara?

Also, if you have advice, ideas on how Cuvva could strengthen its position, offer new services, please do not hesitate to provide these also.

Sessions 4-5: Professor Massimo Massa
Blockchain and robotadvisory
The purpose of this section is to focus on blockchain and robotadvisory. We start by defining blockchain and defining its main characteristics. Then, we will define its “disruptive role” in general and in the financial industry. We will focus on banking and asset management more specifically. Participants will be required to identify the key issues that different players face in dealing with blockchain. We will then try to focus on how a “new financial industry and banking business model” will deal with it. We will look at bank’s restricted settlement systems and at asset managers’ robot-advisory.
The goal is to develop a framework that helps to think critically about these innovations to lay out how to move forward and cope with them, turning them into opportunities and sources of competitive advantage.

Sessions 6-7: Professor Jean Dermine

Presentation of group reports. The intention is to share information on developments in various sectors of the FinTech world.