Alternatively, a macroeconomic perspective might reveal that the entire city is experiencing a recession, leading to a general decrease in consumer spending across the board. In this case, the business owner’s problem isn’t their individual strategy, but a larger economic trend that requires a different approach, like seeking government assistance or preparing for a prolonged downturn.

By exploring both microeconomics and macroeconomics, we can gain a more complete understanding of how our daily lives are shaped by economic forces, from the price of a single cup of coffee to the health of the entire global economy.

Key takeaways

• Microeconomics focuses on individual markets and a ‘bottom-up’ approach, while macroeconomics studies the economy as a whole, using a ‘top-down’ approach.
• Micro- and macroeconomics are interconnected, with actions at the individual level influencing larger economic trends.
• Both fields are important for businesses. Businesses use microeconomic principles to understand consumer behavior and set prices. At the same time, they must consider macroeconomic factors, such as government regulations or economic cycles, when making strategic decisions.

What is microeconomics?

Microeconomics is the study of individual markets, exploring how supply and demand interact to affect prices and the economy via a ‘bottom-up’ approach.¹

This subset of economics aims to discover what factors contribute to peoples’ decisions, and what impact these choices have on the general market as far as price, demand, and supply of goods and services.

Factors like wages, employment, and income are studied in tandem with behavioral trends and corporate policies to identify patterns and predictive indicators. When microeconomists understand decision-making and resource allocation at the individual level, they can help explain what will happen to the economy if certain conditions change.²

Microeconomics aims to answer the following questions:

• How do people and households spend their money?
• What causes people to spend more or less money?
• What is a product worth to consumers?
• How can businesses use resources efficiently?
• What should businesses produce and how much?

Examples of microeconomics in 2025

Some recent examples of microeconomic analysis include:

• AI-driven pricing: Dynamic pricing models already exist, such as surge pricing on ride-sharing apps, but the rise of AI could lead to even more automation. Businesses can use microeconomic principles to optimize their pricing models in real-time, responding to individual market trends or consumer behavior immediately.³ This also poses new questions for microeconomists: How will consumer behavior change in response to AI pricing models?

• The experience economy: People are looking to spend their money on how they spend their time, like travel, outdoor experiences, and food-related experiences. Two-thirds of European consumers say checking off a bucket-list item is a top financial priority in 2025, according to a Mastercard survey.⁴ These changes in demand and priority can affect some basic microeconomic questions: What kinds of products should businesses offer consumers? And how much will consumers pay for them?

What is macroeconomics?

Macroeconomics is the study of holistic economies, exploring how large-scale factors like GDP and policy influence national and global economic trends via a ‘top-down’ approach.

This branch of economics aims to discover what factors contribute to the overall health and performance of an economy. Macroeconomists analyze major economic indicators like national income, interest rates, government spending, and tax policy to predict entire industry or global economic shifts.⁵

Macroeconomics aims to answer the following questions:

• What causes inflation and how can it be controlled?
• Why do recessions occur and how can governments respond?
• What stimulates economic growth at the national level?
• What should the interest rate be?
• How does the balance of trade affect a country’s currency value?

Examples of macroeconomics in 2025

Some recent examples of macroeconomic analysis include:

• Global supply chain resilience: Geopolitical tensions and changing trade dynamics can reshape supply chains, shifting production around the world and making entire industries reevaluate their processes.⁶ This is a study in macroeconomics: How does trade policy affect national economies?

• Sustainable development goals: The UN’s Sustainable Development Goals (SDGs) include massive global endeavors like ending hunger, ensuring clean water, and providing education for all by 2030.⁷ Reaching these SDG targets requires a macroeconomic mindset: How can governments deploy capital to achieve the greatest impact?

Comparing macroeconomics vs. microeconomics

Microeconomics and macroeconomics explore many of the same elements, but from different points of view. The main differences between them are:

• Macroeconomics studies holistic economies and microeconomics studies individual markets.

• Macroeconomics is concerned with the decision-making and policies of governments and global organizations. Microeconomics is concerned with the decision-making of individuals, households, and businesses.

• Macroeconomics studies high-level variables like GDP, inflation, and unemployment. Microeconomics studies lower-level variables such as supply, demand, and price.

How macroeconomics and microeconomics affect each other

Micro- and macroeconomics don’t exist in isolation from one another, but work in tandem to provide a complete understanding of economies at all levels. Choices based on microeconomic factors, whether from individuals or businesses, can impact macroeconomics when scaled up.

Some examples of how micro- and macroeconomics interplay include:⁸

Micro: The COVID-19 pandemic causes consumers to slow spending and save more money. Businesses lay off employees to cut costs and account for slower revenue streams.

Macro: The national unemployment rate rises.

Macro: Tariffs on global goods raise the price of importing manufactured products.

Micro: Businesses raise prices on goods to bridge the gap and consumer demand fluctuates.

How micro- and macroeconomics affect business

• The law of supply and demand
  Businesses use microeconomic principles to better understand the behavioral patterns of their consumers, in order to be successful and generate a profit.⁹
• Decision-making
  Large-scale external factors can be uncontrollable and still play a role in influencing a company’s performance and strategy. From microeconomic factors like a competitor’s choices and industry-specific cost changes, to larger macroeconomic factors like government regulations or climate change are all important to consider.
• Start-ups
  When starting a business, it is important to do extensive research into the industry in which you are interested. Know where customer demand is, to better provide and develop the products and services that would best match the needs of your target market. Investing in this microeconomic research can help you reach a competitive advantage to attract customers.
• Economic cycles
  Macroeconomics is cyclic; just as positive influences and changes promote prosperity, higher demand levels may trigger price increases, which may, in turn, dampen the economy, as households adopt leaner budgets. Then, when supply starts to outweigh demand, prices may go down again, leading to further prosperity, until the next cycle of economic supply and demand.¹⁰
• The cost of goods and services
  Regardless of what a business produces, the goal is usually to keep costs down in order to improve profits. In microeconomic theory, companies run at the highest level of efficiency, with production decisions based on how the maximum output can be achieved with minimal extra costs. So, for example, if production is ramped up, a need for extra labor may arise, resulting in the wage costs increasing, and a potential change in sales prices. In microeconomics, the cost of labor is typically the highest expense of a business.
• Pricing decisions
  In microeconomics, the price where quantity supplied meets the quantity demanded is known as the ‘equilibrium price’. The decided price of the product or service will impact on the number of people willing to buy it. For example, setting a price above the equilibrium doesn’t always mean greater profits, as fewer people may opt to buy your product, therefore, the price of the product should match your target market’s budget.¹¹

In order to make balanced, informed business decisions, it is important to take local and global economic trends into account, as well as relevant data and interactions with your customers. Look for opportunities that arise from economic trends, both on a micro- as well as a macroeconomic level.

Learn more about the effects of individual decision-making and larger economic systems with online economics courses on GetSmarter. Personal finance courses online can also help you understand how your individual choices interact with broader markets.

MIT Sloan School of Management
Economics for Business

THE LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE (LSE)
Economics for Public Policy

THE LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE (LSE)
Health Economics and Policy

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Real Estate Economics and Finance online certificate course

The post Microeconomics vs. macroeconomics: What’s the difference? appeared first on GetSmarter Blog.

In many ways, investing is a trade-off. Investors put money in and ultimately hope to get something of greater value out. The challenge with this is that different investors have different expectations of what they’re going to get out of their investment. So how do you know who’s the right investor for each stage of your new venture? 

Transcript

There are many milestones along the path to success and financing follows these business milestones. From an investor perspective, you can think of the financing of a start-up as a sequence of bets. What you’re doing in the first stage is you’re making a bet that the company is going to make it to the second stage.

You’re basically paying to see the next turn of the card. If it’s no good, the company fails and you don’t commit any more money to it. If, on the other hand, the card is good, meaning the company reaches the next stage, it hits the next milestone, you pay for the next bet.

Finding the right investors

The first challenge is to think about who the investors will be at each stage. So in fact, when you’re staging financing, you’re thinking about who are the right investors at this stage of the company? And so, very often, you find that in these early stages, the pre-seed and seed stages, most of the investors are not professional investors, but angels, so maybe crowdfunding or things like that. And then as we move forward, it becomes more and more professional investors, corporate investors, and so on. All the way to exit.

Old investors versus new investors

The next problem is going to be, if we have old investors and we have new investors, they’re going to have different preferences. So the simple principle that you should keep in mind is that all investors want the highest possible valuation.

They just think like the founder, they want their shares to be priced highly so that they retain more ownership. New investors want low prices because they’re buying in and they want to buy in low. That gets a bit more complicated if there’s an older investor who is also participating in the new round, and then they have some kind of a balancing role.

Valuation isn’t the only thing that investors are going to disagree upon. They might disagree on who should be on the board of directors. Very often the new investors want to add people to the board of directors, but it could get crowded.

The staged financing design process

Now, the questions that investors and entrepreneurs have to ask is, how do you design the stage financing process and specifically how much money do we give to the company now? How far will that money go? The language we often use is what kind of a runway does it give to the company? Meaning how long can the company operate and how many milestones can it achieve with the money that’s given? Sometimes investors want to give a long runway. Sometimes investors give a short runway.

Let’s think about this. From an investor perspective, you might say, well, we don’t want to give too much money, but would you really want to have an arrangement where the entrepreneur has to come back to the investor every month? That wouldn’t work. On the other hand,  the entrepreneur might say, give me enough money until I get cash flow positive so we don’t have to come back at all. But that doesn’t work from the investor perspective because they would be committing a lot of money knowing that the entrepreneur’s going to spend it no matter how successful or unsuccessful the venture is. So we’re going to have to come to some compromise. Now there’s a really interesting trade-off in how much money an investor gives to the company, because it’s a trade-off about what incentives do the entrepreneurs have.

Giving a short leash, giving only a small amount of money, puts a lot of pressure on the entrepreneur. And one investment philosophy is to say, this is great, we know that the investor has to perform. They’re going to be really focused on hitting their milestones. And if they don’t, well, we don’t want to refinance them.

That’s one model. There is a second model though, that says, hang on. If we give the entrepreneurs such a short leash they’re just going to go for the easy achievable milestones and they’re not going to build the most innovative, the most path-breaking company. So we need to actually give them more time to innovate, to take some big risks and to try something new.

The post The Key Challenges of Staged Financing appeared first on GetSmarter Blog.

When it comes to fintech – a blend of ‘finance’ and ‘technology’ – start-ups have forever altered the way we make payments, take out loans and invest our finances.³ And traditional financial institutions have begun to see the value of partnering with these startups in a more synergistic approach to finance and technology, with almost 80% of the world’s financial institutions having entered into fintech partnerships, according to McKinsey Panorama.⁴

Peter Tuvey, co-founder of Fleximize, the UK’s first revenue-based finance provider, says, “Fintech is altering our core understanding of what it means to receive a financial service and disrupting areas once monopolised by financial and banking institutions.”⁵

Technical skills needed to start a career in financial technologies

These advancements in financial technologies have triggered a demand for talent in the fintech industry.. If you wish to start a career in this field, you’ll need strong experience in programming languages⁶ and advanced mathematical or quantitative skills. Add to that analytical and logical thinking skills, plus a grasp of pricing theory and you’ll have a competitive advantage over other candidates.⁷

In banking tech circles, developers are often fluent in more than one programming language, with demand growing for ‘full-stack’ developers who can bring various programming language skills to a business. Human Resources will typically, however, want to see one or two specific skills in order to forward a resume to the hiring manager.

These include:⁸

This sought-after, but rare, language is often found in job descriptions for investment bankers.⁹ Banks such as JP Morgan and the Bank of America want Java developers to help them stay innovative.¹⁰

This language was developed by Microsoft as part of its NET framework and is both an object-oriented and multi-paradigm language that combines the best of C and C++ languages. C# experts are in high demand in the financial services sector.¹¹

This older language is the backbone for many banks’ legacy systems that are still being used today, and demand for this language is growing as older programmers are retiring, and it isn’t common among younger programmers. Plus, high-speed trading and the need to process large volumes of data has made C++ more popular again.¹²

This language is used by programmers to retrieve data from a database for analysis and processing. This multi-purpose language can be used in any of the following roles in fintech: business analyst, data analyst, data engineer, data scientist, software engineer or database administrator.¹³

This skill is highly valued in the financial sector. Many major banks and finance houses, including investment banking and hedge funds, use Python on their platforms that are responsible for their trading, pricing, risk management functions, and interest rate derivatives platforms.¹⁴

Non-technical skills required for a career in fintech

More than technical acumen is required to thrive in a career in fintech. Here are some of the non-technical skills in high demand:

• Communication skills: Regardless of who you work with, be it brokers, traders, business analysts, or fellow technologists, you’ll need to be able to clearly communicate the aspects of your technology project for best results.¹⁵
• Adaptability: Being an expert in your tech skills can often lead to a narrowed focus, instead of embracing creative thinking, which is what fintech startups need. Philip Bourke from Hays, a global recruitment expert, notes: “A fintech company needs someone who wants to think outside the generic IT box; people who can demonstrate adaptability and creativity.”¹⁶
• Problem-solving ability: In the dynamic environment of finance, newer automation technologies will mean less of a focus on task-oriented activities, and a stronger focus on problem solving and finding ways to improve this.¹⁷
• Collaborative skills: With collaboration between fintech startups and legacy financial institutions being the current trend, the ability to collaborate in order to find a common solution, both internally and with external partners, is vital. Anirban Bose, head of Capgemini’s Financial Services Global Strategic Business Unit and Member of the Group Executive Board says, “With more than 75% of fintech firms identifying their primary business objective as collaborating with traditional firms, it is essential that both fintechs and traditional firms transform their business models by collaborating to drive innovation while retaining customer trust.”¹⁸

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FinTech online short course

Fintech industry

The financial technology industry offers a wealth of exciting career opportunities in the financial services sector, including roles such as financial or business analysts, product managers, compliance experts, cybersecurity analysts, and quantitative analysts. Whether you have a background in computer science, finance, data analytics, or other related fields, there are many rewarding fintech careers that can help you realize your potential and make a difference in the industry.

If you’re interested in exploring a fintech career path, the first step is to develop a strong understanding of the industry and the skills that are in demand. With the right mix of technical and non-technical skills, you can position yourself for success in this rapidly growing sector.

Careers in fintech

According to The Economic Times, careers associated with the fintech sector are in great demand and demand often exceeds the current, available qualified applicants.¹⁹

Here are some of the exciting careers that are available in this sector:

1. Blockchain developer

Demand for blockchain talent is soaring, with salaries to back it. According to TechCrunch, the ratio of demand for job openings is 10:1, with 10 representing the positions that need to be filled and one representing the blockchain developer that is applying for the position. Nick Szabo, the developer who coined “smart contracts”, notes that there is a very high “dollar-to-knowledge” ratio in the blockchain space, where capital greatly exceeds talent.²⁰

Upwork, the freelance talent marketplace, saw the demand for blockchain experts climb to the fastest-growing skill out of more than 5,000 skills in terms of freelancer billings – a year-over-year increase of more than 35,000%.²¹

These particular skills are in demand:

• Hyperledger Fabric: This enterprise blockchain framework uses modularity and scalability to support changing business rules.²²
• Ripple: This payment protocol is used for distributed payments, exchanges and remittances.²³
• Solidity: This blockchain platform allows smart contract development on the Ethereum network.²⁴

2. App developers

Mobile application developers continue to be in strong demand. App developers who are fluent in more than one programming language, such as Java, HTML5, Objective-C, C++, C#, Python and Swift, along with UX and UI design skills, enjoy great success in financial sectors.²⁵

3. Financial or business analysts

Financial analysts study financial data to spot trends and make forecasts in order to assist with investment decisions. Similarly, business analysts study business strategy, models, processes and workflows, and IT systems to identify inefficiencies and unearth areas that can be improved in a company’s operations.²⁶

4. Product manager

In the same way that fintech is synonymous with innovation, product managers also need to develop products by combining out-of-the-box thinking with customer empathy and unconventional techniques in order to drive business growth. Innovative growth should also be accessed through product development launches that other firms have adopted, integrating new technology with best practice in fintech products.²⁷

5. Compliance expert

US regulators are focusing more on compliance for technology startups , which is compelling fintech businesses to prioritise this. David Yermack, a finance professor at New York University’s Stern School of Business says, “Fintech companies tend to chase product growth above all else, as is common with many venture-backed businesses. But finance is one of the most heavily regulated parts of the economy, which leaves less room for creative interpretations of the rules – and a career opportunity for legal and compliance experts.”²⁸

6. Cybersecurity analyst

Cybercrime costs financial service organisations an average of $17 million per year,²⁹ including the cost of prevention, which makes the appearance of cybersecurity analysts near the top of the high-demand list understandable. As cyberattacks become more sophisticated, so too the detection, prevention, and elimination of these through effective cybersecurity will become invaluable.³⁰

7. Data scientist

Data science is a multidisciplinary field that uses scientific methods, processes, algorithms, and systems to extract knowledge from data in order to make better decisions. Data scientists working in fintech need to be able to identify patterns and trends in data sets – often very large ones – in order to solve business problems.

Ultimately, data scientists take raw data, clean it, and then analyze it to harvest useful information from it for financial service firms to predict an outcome. Data scientists often come with a talent mix of computer science, math, and statistics skills. Other science qualifications may also enter the field, particularly those with PhDs.³¹

8. Quantitative analyst

Quantitative analysts, or ‘quants’, are maths, computing and finance experts whose quantum computing skills are used to develop the algorithms needed by large investment banks and hedge funds to manage the data-driving trading technology used to trade securities and analyse risk. As big data grows, so will the demand for quantitative analysts, especially in fintech, to come up with business models that will allow trading to be a primarily automated process.³² The Wall Street Journal recently wrote that the quants now run Wall Street, with salaries as high as $500,000 per year.³³

Fintech companies

Fintech companies are currently experiencing strong growth, with the fintech industry expected to be worth $332.5 billion by 2028. This presents a unique opportunity for those looking to enter the field, as there is a growing demand for fintech talent across the globe.

Some of the top fintech companies to watch include Stripe, Square, Wealthfront, Robinhood, Coinbase, and Affirm. These fintech start-ups offer a range of exciting opportunities in areas like engineering, product management, data science, operations, and marketing. Whether you’re interested in joining a fintech start-up or exploring fintech careers at larger companies like Goldman Sachs, JPMorgan Chase or Citigroup, there are many exciting career paths to explore in this rapidly growing industry.

With the vast array of applications and deep penetration of fintech throughout the financial services sector, the potential career opportunities available are exciting for those with the prerequisite technical and non-technical skill set. With these careers being lucrative, and supply and demand still being in favor of the skilled applicant – a career in financial technology is well worth pursuing.

The post Financial Technology (Fintech) Career Path appeared first on GetSmarter Blog.

After successfully completing this highly interactive and supported online learning journey, you’ll walk away with the ability to:

• Illustrate the methodologies used to model trading strategies for different types of financial markets
• Understand the fundamentals of classical and behavioural finance, and how theoretical trading models are applied in practice
• Formulate an opinion of the relationship between emerging technologies and the future of systematic trading
• Assess the efficacy of an algorithmic trading model within a live environment or real-world market circumstance
• Understand the historical and current state of systematic trading and the key challenges and opportunities faced by the industry

Continue reading to find out what past participants of this programme said about their online learning experience:

Stephen Olayiwola
Quant Analyst, Virgin Money

“The six-week programme provided a good flavour of what algorithmic trading constitutes and the content and insights gained particularly from heavy-weight experts provided real value for money. I enjoyed the materials and the interactive discussion board – seeing others perspectives on an eclectic range of topics covered. The programme affords me the base knowledge needed to develop and expand my algo skill set, and I would recommend it to anyone looking to start a career in algo-trading, but has no idea where to begin.”

Cezar Lupusor
Systematic Trader – Freelance

“My passion and eagerness to study finance and trading have been latent for quite a while. My journey of becoming a financial economist began in grammar school in Linz, Upper Austria: I was introduced to some basic concepts of technical analysis and [shown] how to apply them to stock trading during one of our IT lessons – although this was not the main topic of the lesson. However, those concepts attracted my interest, and I went on to study economics at WU Vienna in the year 2003. Economics was pretty analytical in terms of methodology and economic thinking. In fact, I wanted to study more finance than economics, but at that time WU Vienna did not offer a proper finance course.

I continued with economics and was quite confident that the acquired skills were useful for pursuing further studies with a finance focus. However, after I completed my studies at WU Vienna, life did not offer me that much and so I was looking for ways to improve my situation. I decided to study banking and finance at the University of Zurich. I spent one year there, but my happiness was rather limited. That was when I saw an ad on Facebook from Saïd Business School – it was about the online Oxford Algorithmic Trading Programme. I decided to give up my studies in Zurich and enrol. This was the turning point in my life. After completing the programme in January 2019, things became much better. Finally, I managed to get accepted at Bayes Business School in London for the MSc in quantitative finance in 2019. Getting to study in the UK has been the greatest success of my life so far!

After graduation at Bayes Business School, I continued to study for two additional diplomas, one in applied financial trading at the London Academy of Trading and one in Python for algorithmic trading at the University of Applied Sciences Saarland (both online courses). This year, I’ll devote most of my time to applying for jobs in the fields of finance and economics. The Oxford Algorithmic Trading Programme contributed to much personal progress and satisfaction.”

Phil Richardson
Co-Founder, Miura Capital Ltd

“A great programme for those seeking to further their knowledge on the systematic trading industry. The content is clear, well presented, and very professional. Prompt responses to any questions or queries made participation around my job seamless.”

Learn what it takes to create successful algorithmic trading strategies.

Register now to learn with a global network, taught by industry leaders.

The post Oxford Algorithmic Trading Programme Participant Testimonials appeared first on GetSmarter Blog.

Fintech.

Fintech is a broad term that has become associated with the application of technological innovation in the financial services industry.¹ While the march of technology has always had an impact on the financial services – as it has on every industry – fintech is forcing a rapid evolution in the sector, as disruptive innovations like blockchain have forged new paths, changing the future of finance seemingly overnight.

Considering how quickly things are evolving, it’s worth understanding what lays ahead for fintech and the financial industry to better prepare for the future. In particular, two technologies that are grabbing the attention of both the business world and the public at large are artificial intelligence and blockchain.

Artificial Intelligence

Artificial intelligence (AI) refers to the “ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings.”² AI can already be found in a host of everyday applications:³

In terms of the future of finance and financial innovation, AI is establishing its utility in two key areas: customer service and process automation.

Customer service

One of the most innovative aspects of AI is that its technology and automation abilities enable businesses to learn more about their customers, provide customers with improved support and service, and enhance the customer experience in nearly every way.⁴

Fintech companies have developed sophisticated methods of interacting with their customers, without the need for direct human intervention: chatbots. Fast becoming the new normal within the financial services industry, chatbots are replacing traditional in-person customer service support. Examples of how this innovation is already improving the financial services industry include faster response times, more personalized customer service, a reduction in customer service costs, and shorter queues, as well as the fact that customers can enjoy these services from the comfort of their own home.⁵

Process automation

Process automation, which includes robotic process automation (RPA), a popular tool that uses various technologies to automate secretarial tasks, is taking over low-skill manual tasks within the finance industry, while at the same time offering a variety of benefits: Reduced costs, faster processes, reduced manual errors, and greater employee satisfaction.⁶ One of the most significant benefits of process automation within the financial service industry is that it’s reducing the time and manpower required when performing manual processes. Thanks to the innovative range of AI tech solutions, core financial tasks – such as invoicing, data entry and extraction, and expense management – can now be automated.⁷ 

Blockchain

Blockchain, which can be defined as a shared, immutable ledger that securely links blocks of encrypted data transactions in a network, is changing the traditional world of finance.⁸ For starters, conducting financial transactions is fast becoming a purely online experience. As a result, blockchain has become the medium for recording and storing these kinds of secure financial transactions, including that of cryptocurrencies, or digital tokens, such as Bitcoin and Ethereum.⁹

This innovative technology means that blockchain also lends itself to several useful applications in the world of finance:

Investing

When it comes to financial transactions, such as investing, blockchain can offer a number of benefits:¹⁰

1. Improved transparency. Since investment activities are performed on a public ledger, inefficiencies such as fraud can be more easily exposed, leading to reduced risk.
2. Added security. Payments and money transfers made via blockchain are faster and more traceable than in traditional banking.
3. Lower costs. For investors looking to avoid higher fees, blockchain offers access to financial activities, such as investing, at lower costs usually associated with traditional financial services.

Smart contracts

Simply put, a smart contract is a self-executing contract where the terms of the agreement between two (or more) parties are written into code, operating autonomously on a decentralized blockchain network.¹¹

Unlike traditional, and often more complex, contracts, which typically involve paperwork and third-party validation, smart contracts offer a simpler and more streamlined solution. If the conditions embedded or coded in the program underlying the contract are met, then the action (or actions) described in the contract takes place. If the conditions are not met, then no transaction occurs.¹²

Moreover, smart contracts come with several useful benefits:¹³

1. Smart contracts are self-executing, which makes them independent and ultimately tamper-resistant.
2. They can also guarantee greater security as third parties are not involved.
3. They are self-verifying, due to the fact that they automatically source information from external data sources.
4. They offer greater transparency thanks to incorruptible codes in the blockchain network.

While these applications offer the potential for greater efficiency in the marketplace, there is still a long way to go before they become truly ubiquitous, and there will be challenges along the way.

The future of financial innovation

Of course predicting the future is no simple task, but the current state of development in the financial services and fintech industries, when looked at carefully, can provide some answers. While the first requirement of any business is to generate revenue, and to increase the amount of revenue being created over time, there are deeper conclusions to be drawn from what technologies these companies are choosing to use, and how they’re using them.

The business applications of AI and its offspring – chatbots and RPA – as well as blockchain, show that organizations are becoming more and more focused on improving the customer experience with technology.¹⁴

However, as the financial and fintech industries move forward, there are some challengings facing the rise of technologies like AI and blockchain, which must be tackled for the combined success of the organizations which operate in these spheres:

The need for collaboration

While there is no denying that traditional institutions within the finance industry have been slower to adapt to technological innovation, the disruptive force of fintech companies have compelled banks and other financial organizations to try and keep up with new developments, such as AI and machine learning (ML), and seek out opportunities to collaborate.¹⁵

Through collaboration, fintech companies and more established financial institutions will be able to leverage the best of both their offerings. For example, by combining the data and scale of banks with the speed and innovation of fintech, the resulting collaborative financial ecosystem will ultimately benefit both the organizations and their customers.¹⁶

Navigating legislation

As exciting as all these future trends and financial service innovations may be, they do bring with them a number of risks and challenges.¹⁷ Concerns about data protection, privacy, cybersecurity, data management, and even ownership simply cannot be ignored. But luckily the same technologies that are driving financial services innovation, are also offering solutions for companies trying to keep up to date – which is what makes regulation technology (RegTech) and Supervisory technology (SupTech) so important.¹⁸

RegTech is a tech solution designed to help financial institutions manage regulatory compliance, whereas SupTech is responsible for managing risk in the financial system and enforcing regulations. Both these technologies are used to improve efficiency through automation, streamline processes and, more importantly, ensure a degree of oversight when it comes to mitigating risks and ensuring customer protection.¹⁹

When taking into consideration the rise of innovative technologies such as AI and blockchain, as well as their potential to help organizations improve their offerings and profitability, including offering a far superior customer experience, it seems clear that the future of finance looks promising.

Are you prepared for a changing financial services industry?

The post The Future of Finance: A Look at Innovation in the Financial Services Industry appeared first on GetSmarter Blog.

Think critically about any crypto project’s assets and assess its viability by registering for The MIT Media Lab Cryptocurrency course.

They are segregated into four distinctive categories: cryptocurrencies, platform tokens, utility tokens, and transactional tokens. According to Allied Market research, cryptocurrency’s market share was valued at $1.49 billion in 2020. By 2030, this value is projected to reach $4.94 billion, growing at a compound annual growth rate (CAGR) of 12.8% from 2021.²

Due to the vast number of cryptocurrency types, we have ordered this guide according to market capitalization values – as this is generally one of the main ways to rate the value of cryptocurrencies.³

Considering the above, the top 10 cryptocurrencies are currently:

Bitcoin (BTC)⁴

The first major usable cryptocurrency. It has the highest market cap and its coins trade at the highest cost of all cryptocurrencies.

Market worth: $744,586,622,967

• 1MB block size
• Transactions take about 10 minutes to process⁵
• Token limit of 21 million with 83 percent of its tokens already in circulation⁶
• Slow processing speeds
• High energy usage
• High transaction fees
• No-counterparty assets (value determined by market dynamics)⁷
• Decentralized platform
• Concerns about scalability of this platform led to the incorporation of SegWit2x⁸ – this helps make the amount of verifiable data per block smaller and includes signature data as an extended block instead

Ethereum (ETH)⁹

A decentralized, open-source blockchain with smart contract functionality. Ether (ETH or Ξ) is the native cryptocurrency of the platform.

Market worth: $313,588,368,238

• Token limit of 18 million per year
• Currently has over 119.7 million tokens in circulation¹⁰
• Is a decentralized blockchain platform
• Specializes in ’smart contracts’ that facilitate the exchange of value
• Coded programs run without third-party interference
• Users must use tokens to perform actions on the blockchain, this forces them to mainly stick to financial actions
• In February 2022, Wormhole, one of the most popular bridges linking the Ethereum and Solana blockchains, lost about $320 million in an apparent hack¹¹

Tether (USDT)¹²

A blockchain-based cryptocurrency backed by the U.S. dollar, which means actual dollars are in reserves at financial institutions to serve as collateral.

Market worth: $80,050,765,034

• No limit on tokens
• Converts your digital money into traditional money¹³
• Carries counterparty risk, there is a possibility that a party can default on their contractual obligations
• Popular as traders use them as a substitute for U.S. dollars
• Tokens are designed to be stable for volatile cryptocurrency markets
• Highly traded currency
• Low transaction fees¹⁴
• It was recently involved in a controversy, where it was issuing more tether tokens than it has dollars in the bank¹⁵

BNB (BNB)¹⁶

Issued by Binance exchange and the largest cryptocurrency exchange in the world, supporting more than 1.4 million transactions per second.

Market worth: $63,926,241,179

• Launched in July 2017
• Initially based on the Ethereum network but is now the native currency of Binance’s own blockchain (the Binance chain)
• Limited to 200 million BNB tokens¹⁷
• As of September 2021, 168,137,036 are in circulation¹⁸

USD Coin (USDC)¹⁹

A type of cryptocurrency that is referred to as a stablecoin. You can always redeem 1 USD Coin for US$1.00, giving it a stable price.

Market worth: $52,477,290,116

• Eligible customers can earn rewards for every USD Coin they hold
• USD Coin is able to move globally from a client’s crypto wallet to other exchanges, businesses, and people.
• Is regulated by U.S. financial institutions and commonly backed by reserved assets²⁰ (or dollar-dominated assets like Treasury securities)
• USDC generally matches the value of the U.S. dollar, without experiencing the volatility seen in non-stable coins, such as Bitcoin and Ethereum²¹

Ripple (XRP)²²

The native cryptocurrency of XRP Ledger, which is an open-source, public blockchain.

Market worth: $36,052,578,516

• Token limit of 100 billion, with current circulation sitting around 50 billion²³
• No-counterparty assets (value determined by market dynamics)
• Decentralized exchange on the XRP Ledger²⁴
• Can create customizable tokens
• Escrow feature allows a user to set a conditional exchange on the XRP Ledger, until a date or condition is met – the XRP is inaccessible
• High processing capacity
• Extremely fast transaction settlement speed of five seconds²⁵
• Uses less energy than Bitcoin, Ether, or Visa

Terra (LUNA)²⁶

An open source stablecoin network controlled by its stakeholders.

Market worth: $35,671,464,686

• Created by start-up Terraform Labs and its co-founders Do Kwon and Daniel Shin in 2018
• Uses fiat-pegged stablecoins to leverage the benefits of cryptocurrency at the same time as taking advantage of the day-to-day price stability of fiat currencies
• Offers incentives to LUNA holders to swap LUNA and stablecoins at profitable exchange rates at their discretion, ensuring supply always matches demand
• E-commerce platforms from 10 separate countries, with a member base of 45 million²⁷
• Grew over 14,700 percent in 2021²⁸

Cardano (ADA)²⁹

A third-generation, decentralized proof-of-stake (PoS) blockchain platform designed to be a more efficient alternative to proof-of-work (PoW) networks.³⁰

Market worth: $28,666,644,319

• Named after Ada Lovelace, a 19th-century countess and English mathematician who is recognized as the first computer programmer
• Cardano founder Charles Hoskinson was on the team that founded Ethereum with inventor Vitalik Buterin³¹
• More sustainable than cryptocurrencies such as Bitcoin, which makes it more environmentally friendly, faster and more secure³²
• Token maximum of 45 million ADA with a current circulation of about 31 billion³³
• Founded on peer-reviewed research and evidence-based methods³⁴

Solana (SOL)³⁵

A proof-of-stake cryptocurrency with smart contract capabilities, including DeFi dApps and NFTs.

Market worth: $28,478,693,083

• 65,000 transactions a second with near-zero fees
• Claims that fast transaction speeds are achieved by forgoing decentralization
• The current total token supply is 504,095,110 SOL, with a circulating supply of 296,693,628 SOL
• No fixed maximum supply – instead a fixed inflation rate year-on-year is in place³⁶
• Grew by 12,000 percent in 2021 with a market capitalization of over $66 billion
• There are currently 260 million tokens in circulation, with a total of 489 million tokens planned for release into circulation³⁷

Avalanche (AVAX)³⁸

A cryptocurrency and blockchain platform that provides near-instant transaction finality.

Market worth: $20,954,827,433

• Fast, scalable, and able to communicate with other blockchains
• People are assigned blocks to mine based on the number of tokens they hold³⁹
• 270 million tokens are currently in circulation⁴⁰
• A maximum supply of 720 million tokens exist
• In September 2021, Avalanche held a token sale that raised $230 million in funds for development⁴¹
• Operates at an internet-scale owing to its three blockchains working under one layer protocol – this increases the number of transactions exponentially⁴²
• AVAX holders can control the rate of new coin creation by voting to adjust the amount of AVAX that is paid as a reward for adding a new block to the Avalanche blockchain⁴³

The advent of blockchain technologies has led to the age of digital assets and currencies. The different types of cryptocurrencies serve to alleviate the red tape and fees associated with traditional currencies, and with financial innovations becoming more common, these continue to grow in popularity. As these digital assets evolve, the potential of this disruptive technology seems to be limitless. It’s clear that whether traditional monetary systems survive the threat of disruption or not, crypto assets are becoming global fixtures.

If you would like to gain an in-depth understanding of crypto assets and harness the potential they offer, explore the selection of fintech and blockchain courses online.

The post 10 Types of Cryptocurrencies Compared appeared first on GetSmarter Blog.

1. The fintech revolution begins
2. Financial innovations
3. The emergence of modern fintech trends
4. Significant fintech advancements
5. A new era of fintech trends
6. Fintech introduces the world to online banking and trading
7. Fintech innovations in the new millennium
8. Prepare yourself for the financial possibilities of fintech

The fintech revolution begins

The origins of fintech can be traced back to the 1800s:

1860s

Giovanni Caselli developed the pantelegraph in the 1860s – a period now considered the beginning of the history of financial innovation.¹

The pantelegraph was mostly used to verify signatures in banking transactions by sending and receiving transmissions on telegraph cables. This verification process was slow and cumbersome – it took about 108 seconds for a sheet of paper with around 25 written words to transmit.²

1880

By the 1880s in the U.S., consumers and merchants began exchanging goods and services for credit using charge coins and plates.³

Charge coins were metallic tokens that displayed the customer’s identification number and an image associated with the vendor, and were roughly the same size and shape as modern coins. Charge plates were either aluminum or white metal plates embossed with a customer’s name and address on the front and a paperboard insert on the back with the issuer’s name and cardholder’s signature. 

Charge coins were mostly forgotten by 1960, followed by charge plates, which were replaced with modern credit cards. 

Financial innovations 

The 1900s saw more rapid financial innovations than the previous century:

1918-1970

The next early fintech innovation was when the United States Federal Reserve Banks devised a system to move funds electronically. This system was first known as the Federal Reserve Wire Network and is now known as Fedwire.⁴

Connecting all 12 Reserve Banks across the country, the Morse code-based system was used as a real-time gross settlement funds transfer system until the 1970s. During this decade, the process shifted from telegraphy toward telex, and finally to computer operations and proprietary communication networks. Telex was an international network of teleprinters that transferred messages securely from one teleprinter to another.⁵

1919

In what’s arguably the first allusion to fintech and the future of financial services, economist John Maynard Keynes wrote about the link between finance and technology in his book, The Economic Consequences of the Peace.⁶

The emergence of modern fintech trends 

The 1950s saw the emergence of credit cards:

1950

Diner’s Club Inc. invented the first iteration of the modern credit card. Purchasing on credit was a laborious and segmented process before this universal credit card was introduced. Those who were lucky enough to get hold of a Diner’s Club card could dine on credit at a variety of establishments.⁷ Originally, the Diner’s Club had 200 members; within two years, it grew to 42,000 across the U.S. The concept quickly caught on.⁸

1958

Shortly after the Diner’s Club card exploded in popularity, the American Express Company credit card was introduced. This innovation helped American Express to evolve into the largest global payments network.⁹

Significant fintech advancements

Technology advanced quickly in the 1960s, impacting the financial sector in several revolutionary ways: 

1960

Quotron, a Los Angeles-based company, was the first to offer stockbrokers and money managers stock market quotes on an electronic screen instead of on printed ticker tape. By 1986, Quotron was renting 100,000 terminals to the brokerage industry, equal to roughly 60 percent of the 1986 market. This attracted the attention of Citicorp, which acquired Quotron shortly after.¹⁰

The speed and agility accompanying digital recall meant brokers could receive up-to-the-minute prices for securities such as stocks, bonds, and other types of traded investments.

1966

The telex network replaced the telegraph as the standard for long-distance, instantaneous communication of information.¹¹

Any user on a telex exchange could deliver messages to any other user around the world. This flexibility opened the doors for the global communication of financial transactions and information. 

Though telex is still in use today, it’s taken a backseat to email.¹²

1967

North London’s Enfield Town branch of Barclays Bank was the first to have an automated teller machine (ATM) installed. Customers had to insert paper checks issued by a teller or a cashier to facilitate the convenience of receiving money from a machine. These checks were marked with carbon-14 as a security measure to improve machine readability and, for additional protection, a six-digit pin was added. This set a trend for the future of financial services being faster and more convenient.¹³

A new era of fintech trends

Fintech quickly transforms as technology advances.

1971

The establishment of the U.S. National Association of Securities Dealers Automated Quotations, otherwise known as the NASDAQ, further transformed the fintech industry in 1971. As the world’s first electronic stock market, NASDAQ helped reduce the bid-ask spread (the difference between the bidding price and asking price of a stock) and heralded the end of fixed securities commissions. NASDAQ helped modernize the initial public offering (IPO).¹⁴ IPO’s are when a company that is privately owned allows the general public to purchase its shares on a stock exchange.¹⁵

Fintech introduces the world to online banking and trading

Today, we jump on our phones, open an app, and log in to our online banking accounts. Just a few decades ago, the transaction process wasn’t this easy, but things were changing rapidly.

Two great fintech leaps were taken in the 1980s, affecting the wealth management sector. These were electronic trading (e-trading) and online banking. 

1982-1983

E-Trade Financial Corporation, originally founded under the name of TradePlus, became the first online brokerage firm in 1982. Today, E-Trade still serves self-directed investors as a public company¹⁶ and was purchased by Morgan Stanley in 2020.¹⁷

In 1983, customers of the Nottingham Building Society were the first to access online banking provided by the Bank of Scotland¹⁸ – another major step in the evolution of fintech. Online banking was then introduced in the U.S. by Chemical Bank – also in 1983.¹⁹ However, due to a lack of customer draw in the U.S., the idea was canned in 1989.²⁰ Other banks had a similar experience and it wasn’t until much later that online banking was widely adopted.

Because of the success of internet banking in the U.K., the majority of U.S. banks set up their first transactional websites for internet banking in the late 1990s.

Fintech innovations in the new millennium

The turn of the century introduced even more exciting financial technologies: 

2009

Bitcoin was released in 2009.²¹ Bitcoin is considered by investors to be the first type of cryptocurrency, opening the door to an entirely different type of currency trading.²²

2011

Formerly known as Google Wallet, Google Pay Send was developed and released in 2011. It allowed smartphone users with Near-Field Communication (NFC) chips in their devices to make payments through their phones by tapping against a reader at the cash register, rather than using credit cards or cash.²³ Now, Google Pay allows you to pay others, or businesses, and put your credit cards and accounts on your phone, in one easy-to-use app.²⁴

2017

In this year, Alibaba introduced “smile to pay” facial recognition payments at KFCs in China, a service that allowed users to pay for their food by simply smiling at a 3D camera.²⁵

Prepare yourself for the financial possibilities of fintech

The fintech industry has grown in leaps and bounds in recent years and the future holds great promise. One way to stay on the cutting edge of the latest technologies in 2022 and beyond is to learn more about fintech trends and evolutions, such as the future of money, marketplaces, and infrastructure.

Beyond 2020

Looking back to 2018, when just $1.5 billion was invested in blockchain, worldwide investment is expected to be 10 times that amount in 2023, growing to $15.9 billion.²⁶ The adoption of fintech is a testament not only to the willingness of the financial industry to adapt and evolve but also to the speed at which it’s prepared to do so. 

Find out how to step beyond current fintech disruptions and build a career in this exciting field with a six-week FinTech online short course. Guided by faculty from Harvard’s Office of the Vice Provost for Advances in Learning (VPAL), in association with HarvardX, you’ll learn how to successfully tackle transformative initiatives within the financial technology sector. Gain a solid understanding of fintech’s innovation possibilities as you explore highly relevant case studies, and begin to propel your career in finance forward.

Expand your knowledge with an online fintech course

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Financial technology – or fintech – is significantly impacting real estate financing for houses and mortgage lenders. In the USA, the market share of online mortgage lenders has quadrupled over the past six years. In 2016, Quicken Loans launched their fully online lending service that generated an increase in their total loan amounts of 22 percent, and LoanDepot.com’s digital lending platform saw their numbers grow by 40 percent, where Wells Fargo and Bank of America had only 5 percent and 1.72 percent growth respectively.⁵ In fact, in late 2017 and early 2018, Quicken Loans overtook banking triumvirate Wells Fargo, Bank of America and Chase Bank, as the top originator of residential mortgages.⁶ By 2020, the largest mortgage lenders, in order, were: Quicken Loans, United Shore Financial, Freedom Mortgage, Wells Fargo, LoanDepot.com, JPMorgan Chase, Caliber Home Loans, Fairway Independent Mortgage, Bank of America and U.S. Bank. Quicken Loans originated 1.1 million loans, nearly double that of United Shore Financial, with 560,798 loans.⁷

Fintech is growing quickly, with a sharp focus on the banking and financial industry. While we’re exploring fintech and mortgages here, it’s important to keep track of the upcoming trends in fintech innovation across sectors if you want a full overview of how it’s changing the way people approach money. For those interested in leveraging fintech, you can also learn how to fund your own fintech idea on the University of Cape Town (UCT) Fintech: Disruption in Finance online short course.

Why fintech is overtaking traditional mortgage lenders

A technology-based company that tries to improve financial services is considered a ‘fintech’ and typically promises to provide faster, more accurate, safer, and more affordable financial services options than traditional mortgage lenders. It also offers consumers ease of access (such as mobility), increased transparency, and the ability to consolidate and aggregate across many different platforms.

Fintech mortgages are faster than working with traditional mortgage lenders

Compared to traditional mortgage lenders, fintech lenders can reduce the time it takes to close home purchases by around nine days. With regard to refinancing, the difference is an even more enticing 14 days shaved off from the closing process, on average.⁸

Fintech is able to offer more affordable interest rates than traditional mortgage lenders

When looking at personal loans, fintech firms offer lower interest rates than traditional nonbank loans, and similar interest rates to traditional banks. For mortgage loans, interest rates vary by less than a percent between fintech and traditional banks. Overhead costs, as well as operational costs, might be the reason that some fintech interest rates are lower than that of banks.⁹

While interest rates tend to fluctuate, purchasing a home is an investment, and a large one at that. The London School of Economics and Political Science (LSE) Real Estate Economics and Finance online certificate course explores how to evaluate property investment options to make informed decisions.

Fintech mortgages offer more flexible requirements than traditional mortgages

Fintech mortgages come with many benefits. Whether it’s that the company is available 24/7, or that you can apply from your home computer, when you compare mortgage loan provider Rocket Mortgage (RM), for example, with a local bank, the benefits of a fintech company are apparent: ¹⁰

• Both require two or more years of verifiable income history
• Local banks may require good or better credit scores, while RM allows for fair or above-credit scores with a down payment
• Local banks ask for a debt-to-income ratio that’s 40 percent or less, while RM allows 50 percent or less
• Local banks require the home to be a primary residence where the bank serves, while RM allows for single family, multifamily, or other nontraditional mortgage type
• Local banks require borrowers to live somewhat locally, whereas with RM the borrower can live almost anywhere
• Local banks typically require down payments of more than 10 percent, where RM may accept down payments as low as 0 percent

The flexibility of fintech mortgages allows those seeking a mortgage to place some of those funds into investments rather than a down payment. For those already comfortable with fintech and online banking, the next logical step is wealthtech, which helps manage wealth through artificial intelligence and machine learning. Have a look at how wealthtech offers another opportunity to manage finances to learn more.

Fintech mortgage startups are disrupting the industry

More than 66 percent of mortgages in the USA are by fintech and nonbank lenders, with Rocket Mortgage – previously known as Quicken Loans¹¹ – leading the way. This is opening the door for fintech start-ups to disrupt the industry, by making it easier for prospective homeowners to finance their new homes:¹²

• Zillow Group, founded in 2006, has grown to a company with more than $2.7 billion in revenue
• Fiserv, established in 1984, provides technology to the financial industry and has done so before fintech was fintech, providing solutions allowing for loans to be created more quickly
• SS&C Technologies Holdings, founded in 1986, provides end-to-end software, and reported $4.63 billion in revenue in 2019
• Fair Isaac Corporation, otherwise known as FICO, is related to credit ratings and helps lenders determine how individuals compare to other borrowers. FICO reported $1.16 billion in revenue in 2019

While fintech start-ups are disrupting the mortgage industry, fintech is also changing other financial services. The FinTech online short course from Harvard’s Office of the Vice Provost for Advances in Learning (VPAL) explores the current impacts of fintech, and how future financial services will be impacted.

Fintech is being embraced by traditional financiers for financing real estate

Where most banks are still stuck in traditional credit checks, legal work, paperwork, and three-month-long mortgage financing processes, there are financial institutions embracing fintech to finance real estate:

• The Bank of Russia is working on Masterchain, a blockchain platform launched in 2017,¹³ that will be used for digital mortgages¹⁴
• Previously, a Russian-based subsidiary of Raiffeisen Bank International used blockchain for mortgages¹⁵

As other countries adopt fintech and merge it with their traditional mortgage providers, regtech, the regulations of fintech are being explored. Explore the development of regtech to learn more.

Digital lending platforms and the internet are fast becoming an important channels for mortgage providers, with rapid technology innovation leading to greater competition from fintech mortgage start-ups. For financial institutions hoping to compete, a seamless, personalized loan process provided through technology will be to their advantage. A great way to do this is for banks to partner with fintech start-ups for their non-core activities in order to grow their competitive edge and improve their customer proposition, while still focusing on their core activities. This type of partnership is beneficial for fintech start-ups that need access to a larger customer base and a steady financial base.¹⁶

Understand the finance behind real estate

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Real Estate Economics and Finance online certificate course

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Understanding business finance

When it comes to understanding business finance, it’s worth noting right away that the world of modern finance is no longer what it used to be – where the finance department only carries out accountant-based functions. Rather, it has evolved significantly to include a more holistic value-add to businesses. Now, for example, a Chief Financial Officer (CFO) not only focuses on numbers, but also brings meaningful strategy and leadership to a business, thanks to technological advancements in financial automation.² People in business finance also take care of a business’s funding, and the tools and financial analysis used to distribute these financial resources.³ Corporate finance teams identify any potential financial problems the business might encounter, and subsequently prevents them from happening.⁴ Ultimately, the goal of finance in business is to maximize the value of a business through effective financial planning, resource management, and finance growth, while always being mindful of risk and profitability.⁵

With this in mind, a strategic use of financial tools, such as loans and investments, is pivotal to the success of a business.⁶

What activities govern business and finance?

1. Investments and budgeting

Capital budgeting (also known as investment appraisal) is how a business will determine if a project – such as opening a new branch, or investing in new equipment – will increase the value of the company, or be profitable. A project is deemed profitable when the return on investment is greater than the cost of the capital.⁷

In the planning or budgeting phase, corporate finance also needs a clear understanding of the current business finances of the company, where the funding is coming from, and how much the business needs.⁸

2. Capital financing

Growing the business’s finances through capital investments is perhaps one of the most important business activities of a finance team. There are two types of business capital that need financing:⁹

• Fixed capital is used to purchase fixed assets for the business, such as land, buildings, property, and equipment
• Working capital is typically used to procure raw materials and manage fixed expenses such as overheads and wages

Raising business finance is typically done through resources such as shares, debentures, banks, financial institutions, the sale of stock to equity financing, and creditors. Corporate finance also oversees the business’s short-term financial management to ensure sufficient liquidity to carry out the day-to-day operations of the business.

3. Dividends and capital return

How a business structures its capital is vital to optimally increasing the value of the business. A business is determined to be balanced or a risk, based on the ratio between its liability and its equity financing.¹¹

4. Debt Financing

Business debt financing is the process where a business takes out a loan from a lender, and in return, offers the lender an ownership stake in the business. The business then becomes obligated to make payments on the principal amount of the loan, as well as any accrued interest. There are a few reasons why businesses might take on business debt financing:¹²

• To expand their business by investing in new equipment, property, or hiring more employees
• To cover day-to-day expenses when they don’t have enough cash on hand
• To refinance an existing loan with a more favorable interest rate

Career paths in business finance

If you are a business finance specialist, you will typically provide independent financial advice to clients ranging from corporate and financial investors to governments, private companies, and individuals.¹³

1. Private equity

Equity financing or funding is when a company sells shares of ownership (i.e. equity) to investors in order to raise money for its operations. Private equity companies help raise money for businesses that need more capital. Unlike banks that do this by selling shares or company bonds, a private equity company offers finances directly to the business in return for a stake in ownership.¹⁴

Guy Hands, founder and chairman of private equity firm Terra Firma says, “A successful private equity career requires not only mathematical but also interpersonal skills. Numerical ability – the skill to process numbers swiftly and efficiently – is important, but so is relating to people. Businesses ultimately are about individuals and their personalities and to be successful in private equity you need an understanding of the human dimension too.”¹⁵

2. Corporate development

If you have a career in corporate development, you are responsible for facilitating and carrying out mergers, negotiating acquisitions, executing divestitures, and ensuring business capital is being raised in-house.¹⁶

3. Treasury

Treasury is responsible for the business’s capital and manages its liquidity and risk management through forecasting cash flow, managing working capital, and maintaining credit lines.¹⁷

Other duties include investing funds and pension funds, managing customer credit, and implementing regulations that keep control over treasury activities, while reporting back to management on the liquidity and financial status of the business.¹⁸

4. Investment banking

The investment banking career typically begins with an internship, with most beginner investment bankers starting out as financial analysts.¹⁸ Investment bankers help businesses develop strategies to gain access to additional funds. This can be through issuing and selling securities, or by providing critical information about the financial health and status of companies during a merger, an acquisition, and any other financial transaction.¹⁹

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Managerial Finance online certificate course

The above-listed paths in business finance are just a few of the many options you have if you’re interested in a career in finance. The business world is constantly changing and evolving, so it’s important to stay up-to-date on the latest trends and advancements in order to make sound decisions for your business finances. By understanding the basics of finance, you can position yourself as a professional – having the skills needed to work with small businesses and large or private companies alike.

With artificial intelligence and machine learning taking more ground in business finance, the days of corporate finance teams keeping records and balancing the books are numbered.²⁰ Corporate finance is now, more than ever, about helping decision-makers make informed business decisions – whether it’s for managing a small business or a large company. With their access to new software integrations, it’s possible to analyze data patterns, ask the right questions, and communicate key insights about the business’s financials, enabling corporate finance to solve real-world business problems.²¹

The post Understanding The Basics of Business Finance appeared first on GetSmarter Blog.

Financial services have been innovating and evolving for centuries, with technology as a key driver of change.

Fintech, which stands for financial technology,¹ uses innovation to deliver and design financial services. As an emerging industry, it holds a wealth of potential. Today, the fintech industry offers countless opportunities for financial entrepreneurs.

Over the years, fintech has moved from affecting only technology firms and financial products to disrupting retail, online marketplaces, digital marketing, telematics, small and midsize businesses, and more.²

In 2020, the worldwide value of fintech investments was about $105 billion USD.³ These investments are being poured into various areas of the banking and financial industry, whether that’s into personal finance or in an effort to disrupt traditional services.

Although the areas of investment may be different, what has been made abundantly clear through the fintech revolution is that society is not pleased with the existing financial system.

As a financial professional and business decision-maker, you need the skills to understand and respond to an evolving financial services industry. The FinTech online short course from Harvard’s VPAL, in association with HarvardX, prepares you to critically assess the future of FinTech and the technologies that will have a lasting impact. Learn more about the course and meet past students here, many of whom come from industry-leading companies, including Equifax, Alpine Bank, and Visa Inc.

Fintech trends and evolutions can be split into three categories: the future of money, marketplaces, and infrastructure.

The fintech future of money

Have you heard of the concept of ‘invisible banking’? In 2017, Amazon made a plan to launch a cashierless convenience store to the public. Customers were able to go throughout the store, grabbing the items they wanted, and as they exited, they would be automatically charged for their goods. After a 14-month trial, the prototype store ‘Amazon Go’ opened to the public.⁴

Customers simply had to download the Amazon Go app on their phone and scan their unique code to be let inside the store. Through sensors and cameras lining the store’s ceiling, customers are charged on the app for every item they take out of the store. The sensors even keep track of what you put back on the shelves, in case you happen to change your mind. In just a short time, the grab-and-go format has thrived. Now, Amazon is teaming up with Starbucks for Starbucks Pickup, built upon the same premise.⁵

Amazon is just one example of how retail is changing the way we think about money and transactions. Another is digital currencies, such as cryptocurrencies, which have caused major disruption to industries far beyond finance. Compared to this alternative form of money, the current financial model customers use to transfer money is quickly becoming outdated and inefficient.

The uprising of Bitcoin, Ethereum, and mobile payment services like Venmo provides the opportunity to create new global payment networks that are secure, quick, transparent, and easy to use – ultimately providing better service for all. These innovations have begun to lay a new foundation for money and banking.

The fintech future of markets

The fintech revolution has led to an emergence of new marketplaces like financial services for the unbanked. One trend is new payment platforms, specifically relating to mobile banking. This has opened the door for people who previously did not have access to financial services, in emerging markets, in particular.⁶

Fintech and small and medium-sized enterprises (SME)

One of the biggest issues small businesses face is a lack of funding or capital. According to the International Financial Corporation, there is presently a funding gap of more than $5.2 trillion a year for SMEs in emerging markets.⁷

But funding aside, the challenge of inaccessible banking still needs to be addressed. Around the world, there are 1.7 billion people who don’t have access to a bank account.⁸ Fintech is able to bridge this gap.

Fintech and crowdfunding

A second emerging marketplace with the potential to aid SMEs is crowdfunding or peer-to-peer lending. These fintech platforms offer the opportunity to further financial inclusion on a global scale. Crowdfunding can be described as the method of financing (an SME, in this case) by gathering small amounts of donations from a large number of willing individuals or legal entities.

Crowdfunding is interesting in that it bypasses traditional financial third parties by using online web-based platforms to connect the potential SME with the funders – often through the use of their mobile device. The idea of joining people with money to those without money is not new. What differs is the use of fintech to make this process exceptionally easier and accessible to a much larger group of people.

The fintech future of infrastructure

The fintech revolution has radically changed the infrastructure of financial services. This infrastructure can be described as the system enabling transactions and the regulation of these movements. Banks are no longer the only ones in control of the movement of your money. Customers are now demanding that this become their role. Instead of simply maintaining the traditional financial infrastructure, it needs to be overhauled in order to keep up with the rapid changes, opportunities, and challenges brought on by fintech.

Older computing systems that haven’t been updated are specifically an issue for large banks that cannot simply update the infrastructure, but need to replace it, which can become a costly mission. That’s where fintech could help to transform and optimize the future of systems and payments.

How to identify and leverage fintech opportunities

Disruptive technology is, by definition, difficult to predict – it displaces established technology with groundbreaking innovation. But the future of fintech offers many opportunities for businesses, governments, and greater society. As you identify potential fintech opportunities, ask yourself these questions:

• Is there a gap in the market, or does an existing service require improvement to meet an industry need?
• Does the new technology improve its niche in the industry, or does it merely add bells and whistles that consumers and professionals don’t actually want?
• What kind of structural or regulatory changes are needed to support implementation of this fintech?

By asking these three questions, and looking for unique ways to meet an industry need, entrepreneurs and finance professionals can assess trends in their earliest stages, and leverage innovation to augment their own business strategies.

Learn more about fintech innovation and future trends with an online short course.

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FinTech online short course

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