Another day, another industry being turned on its head by technology. This time, it’s the financial services industry and the disruption of it has even the most elite business schools scrambling to get their fintech acts together.
David Yermack, chairman of the finance department and academic director of the fintech MBA specialization at NYU’s Stern School of Business, doesn’t sugarcoat it in the least — he’s worried and doing everything he can to get his faculty to grasp the magnitude of what’s happening — the merger between finance and information technology.
The industry most threatened by fintech, he says, is business education. “It’s made our curriculum irrelevant in pretty short order,” Yermack acknowledges.
The problem, as Yermack sees it, is a dramatic shift being seen in the finance industry whereby technology is rapidly wiping out old school finance jobs such as stock brokers, market traders, analysts, and portfolio managers. What’s the need for a team of credit analysts if there’s software that can get the job done? Same for asset management now being fulfilled by robo investing and machines replacing portfolio analyses. The list goes on.
What’s left is a high demand for a new generation of workers with a new set of skills never before taught in business schools.
“Finance is very rapidly becoming an IT business,” says Yermack. “Finance and information technology have pretty much merged and we need to do that in the university.”
The school says the proof is in their careers office. “At our career office, the people coming to hire our students are changing,” Yermack explains. “It used to be big banks now it’s people like Amazon. That’s really the best signal for us; to see who’s interviewing us in the career office. Banks have stopped hiring for the traditional roles. They only want people with tech backgrounds. This is a real big problem for business schools.”
FINTECH: ‘IT’S LIKE THE E-ZPASS OF FINANCE’
Fintech is not easily defined. Cryptocurrencies, digital payments, blockchain, robo-investing. It all falls under one gigantic umbrella.
Steven Raymar, the area chair for the finance and business economics department at Fordham University’s Gabelli School of Business tells Poets&Quants for Undergrads that, in short, fintech has to do with the application of new digital technologies to old financial needs. It also involves coming up with new financial needs and applications for those needs.
Stern’s Yermack adds to it. “It’s a collection of fields that includes artificial intelligence, data science, and finance,” he says. “It looks at the ways these things complement and reinforce each other and enable entirely new business models to take root. Cryptocurrencies probably most well known, but certainly not the most important. There’s asset management, robo-investing, machines replacing portfolio analysis, and credit analysis being done by software instead of a team of experts.”
Stern’s Kathleen DeRose, associate finance professor and leader of Stern’s undergraduate fintech initiatives offers up a fun analogy. “It’s like the E-ZPass of finance,” she explains. “Whereas we used to do everything through a toll booth, we’re now doing it with codes and APIs and networks.”
To this end, DeRose says the finance field is experiencing a disruption comparable to what many other industries already have. “There are other industries that have gone through similar change,” she continues. “Newspapers, television, bookstores. Now the same thing is happening to finance. Big platforms in finance are starting to emerge now. The result is that people need a much different skill set.”
But the question many business schools are scurrying to figure out is who’s going to teach these new skills?
A DEFICIT IN FINTECH FACULTY
“A real problem for us, and every business school, is a shortage of qualified faculty,” Yermack admits. “We would introduce these courses even faster if we had people capable. Younger faculty are very open to the idea and have some familiarity with using these technologies from their personal lives. Younger people, in general, are always more open to new things and the use of new technologies. But there’s a real paradigm shift in our field. Older faculty teach stuff no one wants to learn about and they’re not going to reinvent themselves as fintech specialists overnight.”
Shimon Kogan, a visiting professor currently teaching Wharton’s sole fintech course for undergrads, agrees.
“Teaching fintech is a challenge because this is an evolving field,” Kogan says. “That requires hefty investment to bring yourself up to speed on what’s going on and a continuous update on the materials. I’ve invested a lot in creating the course. Last year to this year i’ve pretty much changed 80% of my material because it changes so quickly or there’s a better way of explaining something.”
But for Kogan, this translates into another major problem business schools have with teaching fintech: ambiguity. “FinTech is such a broad term,” he says. “People in different schools have different ways of approaching it. For me, it’s about key technologies, but for a lot of other schools, they approach it from more of an entrepreneurship angle. Both are fintech, but the content and the angle are very different.”