What Is Fintech?
Fintech, or financial technology, refers to the technological innovation in the design and delivery of financial services and products. Technology in finance continues to evolve; advancements include the use of Big Data, artificial intelligence (AI), and machine learning to evaluate investment opportunities, optimize portfolios, and mitigate risks.
Increasingly focused on customer outcomes, the desired outcome of fintech is the ability to provide tailored, actionable advice to investors with greater ease of access and at lower cost.
Popular careers in fintech include more general technology careers, such as cybersecurity and AI, and those increasingly more pertinent to the asset management industry: blockchain development and quantitative analysis. A fintech career path requires a strong focus on computer science, programming, mathematics, and data science, in addition to a firm understanding of the financial market, including financial instruments and products.
Financial firms and practitioners must position themselves for industry transformation, including leveraging the benefits of both human and artificial intelligence. Recognizing the significant impact of fintech currently and on the future direction of the asset management industry—including trading, private wealth, and quantitative methods—CFA Institute has incorporated fintech topics into the CFA Program curriculum. Topics include AI, machine learning, algorithmic trading, data science, blockchain, and robo-advising
Investment Professional of the Future
This Future of Finance report presents investment professionals with a roadmap to career success, including the types of roles that will come with the rapid growth of fintech in the industry.
How to Get into Fintech
Understand and develop the skills needed
Apply for a job with a financial data provider
Supplement technical skills with knowledge of the finance industry
As a practice, fintech innovations rely on the twin foundations of the data science discipline and finance expertise, such as the fundamental knowledge in investment analysis offered by CFA Program. Although the industry depends on highly specialized roles, such as machine learning and data engineers, domain expertise in finance — supplemented by fintech knowledge — can help practitioners better compete in an evolving industry.
The CFA Program includes fintech topics, and earning the designation demonstrates not only a firm understanding of the finance industry, but also fundamental knowledge of the applications of fintech, including data science, to investment management. With supplementary fintech study and application, CFA charterholders may be well poised pursue a career in fintech with their robust understanding of the finance industry and the connections made through CFA Institute membership.
Fintech and Asset Management
With fintech innovations, firms can better meet customer needs and expectations. With clear benefits, fintech is quickly changing the landscape of investment management. Advancements include the use of robo-advisers, Big Data, AI, and machine learning to evaluate investment opportunities, optimize portfolios, and mitigate risks. In the area of financial recordkeeping, blockchain and distributed ledger technology are creating new ways to record, track, and store transactions for financial assets.
Investors of all ages and from all regions want more technology applied to investing, and trust in technology is generally high. The effective use of technology increases trust in a financial adviser or firm, and new blockchain technology holds the promise of creating more trust in the system.
Fintech Trends in Asset Management
Investment professionals and firms have entered a period of accelerating transformation. From rapidly evolving technology to fundamental demographic shifts, multiple trends are converging to drive significant changes in how people and firms will operate in the finance industry.
Trends in Financial Technology
Artificial Intelligence (AI) in Fintech
AI is having a major impact on the finance industry as part of fintech. AI is being used to analyze investment opportunities, optimize portfolios, and mitigate risks, among many other functions, but the applications go well beyond the investment decision-making process. For example, automated wealth advisers (or “robo-advisers”) may assist investors without the need for a human adviser, or they may be used in combination with a human adviser. The desired outcome is the ability to provide tailored, actionable advice to investors with greater ease of access and at lower cost.
Machine Learning in Finance
Machine learning plays a key role in the expanding use of fintech throughout the finance industry. The general term “machine learning” includes a variety of methods that use advanced techniques to find patterns in extremely large amounts of data. These technologies are able to perform such tasks by “learning” from known examples and applying them to new information without human intervention. A recent survey of CFA Institute members identified machine learning as one of the leading drivers of change that will affect investment professionals.
Blockchain Technology in Finance
Blockchain is a special type of database technology that allows all the participants in a transaction to see the same data at the same time. Blockchain is changing the way business is done in the investment industry and has the potential to boost trust in the system by improving transparency. Crypto assets, a related technology, are issued, transferred, and settled on a blockchain. Speaking at the 2018 CFA Institute Equity Research and Valuation conference, regarding blockchain in financial services, Caitlin Long predicted that “All financial services professionals must develop operational expertise [in blockchain]” within the next few years.
Data Science and Big Data in Finance
The advent of Big Data has been driving significant changes in investment management for several years. The term Big Data refers to alternative data sources that can be analyzed because machine learning, AI, and related technologies now have the ability to evaluate unstructured data (such as text, images, and spoken languages) on a large scale. These applications are giving investment professionals access to a vast amount of public information, much of which was not available to investors before. Increasingly, investment managers are using Big Data in their investment processes to gain insights that can give them an information advantage.
What Does a Data Scientist Do?
Data scientists, who are increasingly present at investment organizations, analyze datasets (many of which are from new or alternative sources), apply coding/programming skills and modern analytical techniques to databases to seek meaningful patterns and insights, and communicate relevant findings. They provide support and advice to relevant teams within the organization (including front office investment teams) and develop tools and dashboards to enhance/enable improvements to the overall investment process.
Why Is CFA Institute Focused on Fintech?
CFA Institute consistently monitors key debates and evolving issues in the investment industry. Fintech, a topic incorporated in the CFA Program curriculum, will inevitably affect the way the industry operates, careers in the investment profession, and investor outcomes. So we’ve taken a proactive approach to thought leadership on this topic. Focusing on opportunities for change, our goal is an investment industry in which investor interests come first, markets function at their best, and economies prosper.
Investment Firm of the Future: Changing Roles, Skills, and Organizational Cultures
This report develops the context and means to address challenges for organizations in the investment industry over the next 5–10 years.
Future State of the Investment Profession: Pursuing Better Outcomes for the End Investor, Industry, and Society
This report focuses on megatrends in finance including fintech, client preferences, macroeconomic conditions, regulatory shifts, and demographic changes.
More from CFA Institute on Fintech
To provide informed perspective about future directions for asset management, CFA Institute monitors trends affecting the investment industry and the outlook for professional investors, studying new data and gathering insights from industry leaders.
Fintech and Regtech in a Nutshell
The regulatory environment is developing in response to fintech startups and will affect the success of those ventures globally.
Fintech in Asia Pacific
AI, cloud computing, Big Data, blockchain, and robo advice will affect the investment and banking sectors in APAC.
Has AI and Machine Learning Adoption Advanced?
This survey and resulting report examines the penetration of machine learning and AI in the financial services industry.
A Framework for Using AI Ethically in Investment Management
Explore tools and scenarios for employing AI ethically - obtaining data, building and training models, and deploying.
Handbook of Artificial Intelligence and Big Data Applications in Investments
This book provides practitioners and policymakers with the tools needed to evaluate and incorporate data science.