Nir Vulkan, Associate Professor of Business Economics at Saïd Business School, University of Oxford, is passionate about supporting the next generation to enter this evolving and exciting world, he takes an approach that is rooted in both academic research and practical experience to offer a holistic learning opportunity for students. And the capital is at the heart of it.
London at the centre of fintech
‘London is a fintech hub,’ he explains. ‘It’s important to actually be there. A big part of fintech is London. City meets technology. It’s not a coincidence – the two physically meet.’
For this reason, students studying on the course industry visit companies and meet with entrepreneurs, the Financial Services Authority, regulators, Innovate Finance (the government think tank started by David Cameron) and investors, to get an overview of the sector and where the opportunities lie.
It’s This approach is important, as many MBA students go on to work in the sector, and it’s the number of students in this area is a number that is only growing. Equal numbers are entering fintech as are entering investment banking, and this new area of the industry continues to develop.
As a relatively new area of business, fintech has its challenges. As a cross section of two industries, and a mixture of technology and banking, it requires knowledge and enthusiasm for both areas. “Good fintech-ers understand both banking and technology,” says Vulkan. “I’ve seen examples of bad fintech and good fintech. Bad fintech is when there’s brilliant technologists with great ideas, but they don’t really have an appreciation of banking and the real issues, or you have banks who don’t understand technology, and they miss it. You really have to have an appreciation of both.”
Learning the practical implications of fintech
Aside from working as a tutor on the MBA course and the school’s online programmes, Vulkan is a researcher and a leading authority on e-commerce, market design and hedge funds. As a researcher he explores ideas and asks questions that he describes as ‘academic,’ but they also have real world application – is it working; is it good; is it efficient?
Practicality is important. The knowledge that is being taught has to be delivered within a standard finance framework. Vulkan gives an example: “The fundamental issue in insurance is that the insurers don’t know the quality or the riskiness of the person they are insuring. This leads to issues such as the raising of premiums or the wrong people taking out insurance. Technology can be used – wearable technology or the box that young drivers have in the car, for example – to communicate that someone has good health, is a good driver etc. These things will come into the credit market in general and have the potential to address fundamental issues. If you can do that, you can create new value.”
De-mystifying jargon to understand the value of trends
Vulkan isn’t fazed by buzzwords and fashionable concepts. “Blockchain is a technology that has huge potential,” he says, “but it needs to mature to be able to handle things at a fast-enough rate.” For example, contactless payments could be better using blockchain, but it’s not fast enough to be currently viable. “Where it can improve things, we will see new companies emerge to use it. On the online programmes, we try to explain what the advantages are but are also realistic about speed of progress.”
Artificial intelligence is another case. “One of the things we try to do on the Oxford Algorithmic Trading Programme is make it less of a buzzword and talk more about the reality.” Algorithmic trading has been happening since the 80s in the hedge fund world. Now we see the rise of roboadvisors, who are bringing a little bit of ‘algo’ trading to the masses. The difference is not in the approach, but the application.
“It’s just a tool available to start ups. If what you’re doing requires algorithmic learning, then you can use it. What we try to do a lot on the programme is demystify it and understand where the value is.’
Technology must be accessible
Vulkan says he doesn’t think that technology is the answer to everything. “The biggest change in regulation has caused the biggest disruption. Technology was always there but it was prohibitively expensive to do things such as set up a website to lend money to each other. That changed in 2007 when the regulator changed its mandate. This was the ‘big bang.’ Suddenly the gateway is open. Other governments have mirrored this, as they saw how it worked in London.”
It doesn’t matter how good the technology is if the landscape it operates in isn’t understood. “What I teach needs to correspond to real issues that people have. If you can address that, if you can use technology to create something better, faster, cheaper, then you have a good business model.”
Fintech might be trendy, but it’s not just a trend. “It’s an important economic phenomenon,” he says. In the same way that commerce was transformed by ecommerce – there was a big boom, but the dust settled, and a few companies emerged that transformed our lives. We will see a similar thing happen around finance. Of course, our studies are rigorous and good quality, but also open and exciting. We want as many people as possible to know about fintech – it’s an exciting thing to be part of.