E17: Fintech, AI, and the Future of Finance | Kwamie Dunbar, Interim Dean, The WPI Business School

Kwamie Dunbar: A majority of the individuals working on the New York Stock Exchange, they're technologists, and that is key for our students to see. 

Shawn Needham: Technology has reshaped every aspect of our lives and every industry, including finance, and if you've ever deposited a check on your phone or sent money via Venmo, you've used a financial technology or FinTech product.

Hi, I'm Shawn Needham from WPIs Marketing Communications Division. Welcome to the WPI Podcast. Today I'm here at the WPI Global Lab in the innovation studio on campus, and I'm joined by Professor of Finance and newly named interim dean of the WPI Business School, Kwamie Dunbar.

Interim Dean Dunbar joined WPI in 2022 bringing academic and industry experience from roles at Simmons University, sacred Heart University, and major firms like GE Asset Management and MasterCard. His research focuses on blockchain, financial technologies and digital transformation supported by advanced degrees in economics, finance, and applied mathematics.

Kwamie, welcome to The WPI Podcast. Thank you for being here today. First of all, congratulations on being named Interim Dean of the WPI Business School. 

Kwamie Dunbar: Thank you for having me this afternoon, Shawn. It's a pleasure being here. Now, the business school is at an inflection point. We are looking to identify how we can innovate what we do.

Technologies in general are revolutionizing the way businesses operate today. The business model, as we know it is changing and it's changing fast. Now. FinTech, as we're gonna be talking about today, is a use case of technology in a traditional pillar of business where technology infuses with finance has brought about FinTech.

Right, which is revolutionizing the entire financial services industry in a similar manner. The other pillars of business, which includes marketing, accounting, operations, they're all going through similar changes with technology. So, for me and for the business school, that point where we think, what's the next step?

We're experts in STEM engineering and. The tools that are used by these areas, right? 

Shawn Needham: Absolutely. And The WPI Business School has been at the forefront of offering education and programs at the intersection of business and technology. But things have continued, to your point, to change at an ever-quickening pace.

And we're not even where we were a year ago, five years ago. So, this is an ideal time for the business school to be helping people prepare for the future, and in many cases, jobs in business and finance that may not even exist yet. 

Kwamie Dunbar: Yes, that is correct. And that's our job. Yeah. Part of our job is to identify and understand business, understand where technology will be taking businesses in the future.

For instance, take accounting as a profession. I believe in the months and years ahead. The accounting profession is gonna be changed. It's going to be changed significantly because auditing, which is a significant component of accounting, most of this will be automated using blockchain technology. Right?

Shawn Needham: That's right. And incredibly important. And before we dive into FinTech. I do think it's worth noting that business and technology have been integral really since WPIs start, and regardless of your major at WPI, whether it's data science or robotics engineering, at some point. Business will be a part of that.

It, it's a part of everything, every aspect of what we do and what our students and graduates do. 

Kwamie Dunbar: You're so right, Shawn. The strength that WP i's business school bring to higher ed, given our project-based learning, given our expertise in science and technology. Is what is needed today. 

Shawn Needham: I was just watching this new show on FX called Adults and one of the main characters gets a job at a FinTech firm and he tells all his friends, and he is like, I got a FinTech job. I don't really know what FinTech is, but I got a job. You know? So, I think even having, uh, that example shows that this is something that's quickly permeating our everyday life and language. At the most basic level, what is FinTech and who uses it? 

Kwamie Dunbar: So FinTech, what we have is an integration of different technologies within finance to help to drive efficiency, to make finance more responsive to some of the things that modern day business would like to achieve.

Now. FinTech has its origins back in the 1960s with the introduction of the ATM, so you could do basic transactions. Now, FinTech came to the forefront in 2008, during the 2008 financial crisis where a number of individuals felt that banks became too big to fail, and there were issue with the traditional banking system, so FinTech firms emerged as entities that were much more nimble using technologies that allowed them to be more efficient as these technologies started getting pulled into finance.

We found that FinTech started to emerge in payment systems such as using Venmo to make payments, cash app, you know, different credit products that were all online started to emerge and mushroom in many different areas. 

Shawn Needham: Taking it a step further, you mentioned blockchain, which is something that, a lot of people have heard that term, a lot of people added to their LinkedIn. Uh, that was a trend that started five, seven years ago. Everybody seemed to have blockchain in in their LinkedIn, um, and of course cryptocurrency. How, how do you explain these two somewhat nebulous topics to students? 

Kwamie Dunbar: So. I'm happy that you connected both blockchain and cryptocurrencies because cryptocurrencies, they've become a use case of blockchain technology.

Now, in its simplest form, a blockchain technology operates similar to your checkbook ledger where transactions are recorded and they're transcribed right in real time with. A, a great level of security built around the transactions. Prior to the introduction of cryptocurrencies, blockchain technologies were around for a number of years, but there was no true test, a.

Or case in which it was being used until Bitcoin came into operation. So, with Bitcoin and the usage of blockchain technology to operate this currency, individuals were able to see how blockchain work. It also opened the door for businesses, especially banks, to see how they could actually use this technology in their day-to-day operations.

Using it in a manner that is secure, using it in a manner that it's devoid of direct human intervention. And so this is how I explain it to our students. 

Shawn Needham: It's great to have those technologies in a way sort of secure and regulate themselves. But what are some of the potential security concerns that people that are managing those technologies need to be conscious of?

Kwamie Dunbar: The current setup in any currency or using blockchain, it requires giving access to different individuals so I can make different groups have different accesses to different areas within the block. It limits individuals having complete access to all that is within that blockchain environment. So, we may have some individuals who are able to see some transaction or specific transaction and, and, or we may have individuals who are able to see other transactions or other side of the, the ledger individuals wanting to make a change May.

Requires several other groups to be involved in making that change that is needed in a prior transaction. So, it's not easy for one person to go in and maliciously make a change to the blockchain without others Seeing it in a real time and being able to recognize that may be an intrusion on the platform.

Shawn Needham: Well, I think that that is probably the clearest and most helpful explanation that I've received for blockchain, cryptocurrency and, and how those technologies are able to be made secure. So, thank you, Kwame. Importantly, it's worth noting that WPI was the first university in the US to offer FinTech degrees at every level of study from bachelor of Science, master of science, graduate certificate and PhD, which we are very proud of. One really cool thing that students have the chance to do at WPI is take a very special field trip to the New York Stock Exchange. Tell us about that. 

Kwamie Dunbar: Yes, so we take our students each year around February to the New York Stock Exchange.

Now this is tied into our training and preparation of our talent because students participate in what's called a student led investment fund, in which our students are actively managing monies for the university, which gives them a front seat view of what it is to invest money. Now as part of their training, we also take them down to the New York Stock Exchange.

And the reason for that is twofold. One is that students get a chance to see how money is created, and they see this on the New York Stock Exchange because as finance is being driven on the stock exchange, this is what is used to fuel the productive sector, provide the cash that is needed. To fund operations in the productive sector.

But most importantly, you know, it gives our students a chance to see technology at work because one may be surprised. The New York Stock Exchange, it drives finance, but a majority of the individuals working on the New York Stock Exchange, they're technologists. And that is key for our students to see. So, while they understand that finance is taking place, about 80% of who [are] there are heavily involved in technology.

And our students, they relate to that because they can talk the technology, and they can talk the financing that they see happening there as they listen and participate in the conversations on the stock exchange. 

Shawn Needham: Let's talk a little bit about FinTech and artificial intelligence. The phrase that is on the minds of everyone.

Again, a concept, a technology that. Really has been around in some form for decades, but only more recently has really entered the zeitgeist where we're all talking about generative ai. But in terms of artificial intelligence and FinTech, what are some of the ways that those two technologies disciplines have crossover?

Kwamie Dunbar: That's a great question. AI as a tool has been growing rapidly in its use in FinTech now, to be clear. In finance, one of our key concerns is predictability. And when I say predictability, we're talking about accuracy. Being able to accurately forecast, you know, know that it's definitely gonna rain within the next five seconds, right?

Um, if it was finance, you know, when we talk about rain, so here. AI is being used to help us in the decision-making process, helping us as we look to make decisions, how accurate we can look and predict. Now, one of the issues in finance has been the area of, um, human emotions. Well, the AI removes. Most of that, so I may hold an asset and the asset is, is underwater.

So, I buy a stock, the price is down, I buy a second stock, the price is up, and I sell the stock that the price is up to cash out and make a profit. And the stock that is down, I'm holding onto it with the hope that it's gonna come back. Well, in a number of cases it doesn't come back. Now the AI would tell us to get out of this because it recognizes that this stop may not come back, and that's how the AI is helpful right now.

AI has helped us to improve tools such as credit scoring. It has helped us in fraud detection, in robo-advising, and in algorithmic trading. Now, one of the things that you notice in all these areas that they need. Some level of accuracy. They need some level of predictability to help, right? Improve their performance.

And that's where AI has come in because it can read through tons or volumes of data pretty quickly and pick up or identify patterns that it can use to help to make better decisions. 

Shawn Needham: Absolutely. Credit scoring is something that we're all very familiar with. It's great to hear that there are new technologies that allow the credit bureaus to get a better sense of one's.

Credit worthiness. Yeah. That could help them determine somebody's credit risk. Interesting how I just saw that Fannie Mae, Freddie Mac are now gonna be accepting Vantage score. Yes. Um, that's interesting. That's a pretty big change. So could you talk to me a little bit about how FinTech and AI are helping, in some ways level the playing field for people that want to make a large purchase and, and need to borrow money 

Kwamie Dunbar: Prior to a number of these FinTech tools that we have today, there was a large cross section of individuals who were underbanked, right, and that percentage, um, is up to somewhere 20, 30% or underbanked. You may have heard about products such as buy now, pay later. Affirm, these are FinTech products. Now, I was pleasantly surprised, um, a couple days ago, um, the number of individuals were using buy now, pay later is up to 90 million consumers.

Which is pretty large and buy now, pay later information was never part of the regular or traditional credit bureaus. They're now gonna be included in credit bureau scoring.

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Shawn Needham: In our, our final segment, let's talk about what might some of the future trends in FinTech be. 

Kwamie Dunbar: In the future, I think there's gonna be a big push on decentralized finance. Now, decentralized finance, as the name suggests, it's financial operations outside of the traditional financial system. You may have heard recently a lot of talks about stable coins and stable coins are working to bridge the decentralized financial sector with the centralized financial sector, so individuals holding.

Cryptocurrencies, they're able to convert those into stable coins and then of course make investment in the traditional financial sector. But the name Stable suggests these currencies. They're backed by traditional financial products such as high-quality corporate bonds or US treasury products or US dollars that, that back these products to make them stable.

So, you have various stable coins in which of course, you could transfer your cryptos, as I mentioned earlier, into one of these stable coins, that it should be equivalent to a US dollar. And then you could then use that stable coin to invest. And because it's stable, it's not volatile like Bitcoin, you are then able to convert it back into your respective currencies much later.

So, we expect that. These currencies. We'll be playing a greater role in the future. This is important because one of the things that it'll do, it'll open up cross-border payments and more cross-border transactions. Universal money. Universal money. You know, it's fascinating. We're getting towards, so that is one of the things that we're keeping our eyes on.

Banks are actively getting involved into it. Um, they're actually making moves to create their own products. JP Morgan is well ahead. Goldman Sachs is actually piloting products that they're looking to put out in this area. Now, I will also mention, um, the tokenization of equities is another big area that is emerging.

Robinhood, the retail equity investment firm is piloting the creation of tokenized equity products where they would be able to trade these, you know, put these on a blockchain and allow it to be traded. So that's a whole new area that is opening up in FinTech that we should see emerging in the years ahead.

Shawn Needham: It's very exciting. Thank you for that peek into to what, what is coming in terms of finance? Could you talk a little bit as we begin to wrap up about what are some of the opportunities and jobs that graduates can pursue? 

Kwamie Dunbar: Yeah. In today's job market, there's a need for PhDs who understand FinTech PhDs that have done a deep dive in understanding the role of ai, how AI will be revolutionizing the financial industry now at the undergraduate and master's level.

We see companies today, um, who are developing a number of these products. I mentioned earlier that Robinhood is looking to do tokenization of equity products. They're looking for that next set of graduates that understand these tools, understand these products, who can come and join their teams working to develop these products today.

Now, in some regions, you know, they're working on what is called Central Bank Digital currencies, or C BDCs. These are. Equivalent to stable coins that are issued by a central bank. So, the need for this kind of talent is pretty broad and it's widespread. Here in the state are the commonwealth of mass. So with WP i's strength in engineering and STEM and math and data science and business.

We are there at the forefront with our students that we're developing for these jobs, and we believe that our students will be quickly snatched up as we produce this talent. And that's the reason why WPI was the first to develop these programs because we're listening to businesses. We were hearing what industrial was saying that they needed and that's why we moved in this direction.

Shawn Needham: And we are well positioned indeed and uh, professor. Now interim Dean Kwame Dunbar of the WPI Business School. Thank you so much for stopping by today and talking to us about FinTech AI and the future. And the future is certainly bright for the WPI Business School, WPI as a whole. There's so much we could talk about.

There will need to be a part two, but please listen to part one first. Kwamie, thank you again very much. We appreciate it. 

Kwamie Dunbar: Thank you. My pleasure. 

Shawn Needham: This has been The WPI Podcast. You can hear more episodes of this podcast and others like it at wpi.edu/listen. There you can also find audio versions of stories about our students, faculty and staff.

Please follow this podcast and check out the latest WPI News on Spotify, Apple Podcasts, Apple Music, or YouTube podcasts. You can also ask Alexa to open W-P-I. This podcast was produced at the WPI Global Lab in the Innovation studio. I had engineering support today from Varun Bot and Astor Detweiler.

Special thanks also to Rachel Tatarek, Jillian Ferguson, and Lindsey Bohigian. Tune in next time for another episode of The WPI Podcast. I'm Shawn Needham. Thank you for listening.