Fintech: A Growing Presence in MBA Curricula

As technology continues to create disruption and innovation in the financial industry, an increasing number of MBA programs are adding fintech (financial technology) to their curricula. NYU Stern announced a new fintech specialization in June, while UC Berkeley-Haas and MIT Sloan have been offering fintech courses since 2015.

What is fintech? Why is it important? How are business schools incorporating it into their curricula? For answers to these questions, TopMBA.com spoke to professors involved in the fintech curricula at NYU Stern, Berkeley-Haas and MIT Sloan.

What is fintech?

“FinTech is the disruption of the financial services industry by information technology,” states NYU Stern finance professor, David Yermack. These innovations often come about as a result of disintermediation, in other words, the removal of middlemen. While internet technology has brought more attention to the field, it is not an entirely new concept. One early fintech innovation is the ATM machine – something which has been around since the late 1960s.

There are four main areas of finance in which we now see fintech being applied, according to UC Berkeley-Haas associate professor of finance, Adair Morse – payment, credit, equity and crowdfunding.

When it comes to payments, Morse feels that the idea of credit and consumption is collapsing since it is now possible for online retailers to use their own payment systems and offer lines to credit to consumers. No one knows how this will play out or who captures the system so, in what is now an area of rapid change, payments are one particularly important area to watch.

One of the biggest changes Morse sees in the credit space is the formation of consumer and smaller-sized lending companies, such as Lending Club, OnDeck, Prosper Marketplace and SoFi.

One of the big disruptors in the equity space, meanwhile, is the fact that individuals can now invest their money in startups (due to initiatives such as the US Jumpstart Our Business Startups (JOBS) Act. Another change related to the equity space has been the creation of robo-advisory platforms, an alternative to traditional financial advisors which provides algorithm-based financial advice using minimal human intervention.

The last area in which we see fintech applications is, of course, crowdfunding with its reward-based and/or donation-based crowd platforms, such as Kickstarter and Kiva.

Why are MBA programs adding fintech to the curriculum?

NYU Stern, which announced a new fintech specialization in late June, added it to the curriculum because of the rapid growth to this sector in recent years. “There is great demand in finance organizations to hire students who have analytical skills based in the information technology area,” states Yermack.

Over at Haas, Adair Morse gives similar reasons for including fintech in the curriculum. “MBA programs are responding to innovation. The banking industry, the investment industry, the credit industry, the payment industry – all these industries are transforming with technology and big data.”

Morse feels that students want to get into fintech because it is a new field full of opportunities and because there are potentially large returns for getting in early. “We have a lot of students that are interested in careers in fintech. They come to Haas because we are located in the center of the world for fintech – the (San Francisco) Bay area.”

MIT Sloan is also seeing student demand in this area – the school’s fintech classes were created because, “there was a huge interest from the student side,” states Antoinette Schoar, a professor of entrepreneurship and finance at MIT Sloan and co-leader of the school’s course on fintech ventures that was launched at the end of last year.

In this case, demand was evident from the number of Sloan students going on to launch fintech startups, as well as those taking internships at fintech companies. But, there’s another reason why Sloan began offering fintech in the MBA curriculum: “Those who want to be in a true fintech venture as well as those who want to be in more traditional finance roles should be interested in how those roles are changing,” Schoar reasons. It is student interest coupled with the growing importance of the topic that convinced Sloan faculty that fintech offers its students interesting lessons and potential career opportunities.

NYU Stern’s new fintech specialization

The newest development to fintech’s inclusion in MBA curricula is in NYU Stern’s new specialization, which is designed to, “prepare students for future jobs in fintech as the finance industry faces one of the most significant disruptions in its history,” according to a press release for the school. The program is designed for students who want to work in the startup space as well as those who want to work at traditional finance companies. “Many of the existing banks and insurance companies are making major efforts to build fintech capabilities, and will be recruiting alongside entrepreneurial startup companies,” states Yermack.

NYU Stern plans to use interdisciplinary courses to equip students with the skills they need to work in fintech, covering areas such as big data and risk management. Stern will also offer classes which, “help students understand the evolution of the fintech area,” including the technological changes driving the industry and the different strategies being used by companies to adapt to these changes. The specialization has no required courses beyond Stern’s standard set of mandatory first-year classes, which are the same regardless of specialization.

The new courses have been designed with input from those in the industry, including faculty, alumni and members of New York’s finance and IT communities. For example, Yermack says that Stern has a number of adjunct faculty members who work in fintech. Stern will also have a fintech executive in residence starting this fall.

When it comes to the specialization’s interdisciplinary nature, Yermack says that, “the curriculum is split almost 50-50 between finance and IT components.” However, both components are interdisciplinary – while the finance classes cover, “significant amounts of material,” related to IT topics, according to Yermack, including computing and cryptography, the IT courses incorporate financial techniques, such as risk management, credit scoring and asset allocation.

Fintech at UC Berkeley-Haas

UC Berkeley-Haas includes fintech material in several courses in order to provide structure in its coverage of the subject's different aspects. “Fintech is a broad word and we want to cover the different angles of fintech instead of treating it as one thing,” states Morse.

Still, Haas has been offering an, appropriately titled, ‘Fintech’ class as part of its MBA program since last year and Morse describes this as a, “deep course that is very much about preparing students to think at the cutting edge of where the future is within the payment industry, robo-advising and other aspects of fintech.” The course also seeks to prepare students for fintech careers by teaching them, "how to position themselves to be entrepreneurs or to jump in as managers at pre-existing fintech startup companies.” This course also covers the lending side of fintech, including credit profiling as well as online loan platforms, such as the aforementioned Lending Club.

For MBAs who are particularly interested in startup ideas or angel investing, Morse teaches a ‘New Venture Finance’ class in which a whole module is devoted to fintech, including its place in the startup landscape and crowdfunding. Haas MBAs can also take courses that are cross-listed with the school’s Masters in Financial Engineering (MFE) program. One new MFE course that is available to MBA students, ‘Financial Innovation in a Global Marketplace’, is geared toward the asset management and banking aspects of fintech.

Outside of class, the research initiative CrowdBerkeley (a joint collaboration between Haas and UC Berkeley’s Fung Institute for Engineering Leadership) hosts five to six teach-ins a year where industry specialists come to campus. These specialists answer questions and help students position themselves in terms of their future careers. In addition, Haas hosts a crowdfunding symposium each year. Morse says that these types of activities help faculty members to teach students to be cutting-edge thinkers in the fintech space. “We care very much about positioning our students as thought leaders in this new area,” states Morse.

Several fintech startups have already emerged from the Haas MBA program, including peer-to-peer loan company WeFinance, the money transfer service Xendit, and the mortgage-document management service, Lendsnap. In addition, Morse says that a number of students are teaming up with specialists in blockchain programming to look for innovations using the blockchain ledger, (through which bitcoin is derived).

MIT Sloan's Fintech ventures collaboration 

MIT Sloan’s seven-week ‘Fintech Ventures’ course is a collaboration between Sloan, MIT’s department of electrical engineering and computer science (EECS) and Harvard Law School. Schoar says that around 50% of its students come from Sloan, while 25% are from each of MIT’s EECS and Harvard Law. The goal of the class is for students to form interdisciplinary teams between the different schools in order to work on projects in which they can convert ideas into reality.

This fintech course is designed to give students a holistic view of the industry. Indeed, Schoar says that Sloan included Harvard Law School and its students in the course in order to, “draw upon the knowledge of law school students who work on financial regulation, because these fintech ideas and changes that are coming up will often have a regulatory angle immediately.”  

Course content at MIT Sloan covers payment systems, new technologies like blockchain, peer-to-peer lending, algorithmic financial advice and how fintech is disrupting insurance markets. Each class features a guest expert who is either a fintech investor or entrepreneur in order to share their knowledge of a particular subfield. For example, the crowdfunding unit included a speaker who was one of the early investors in AngelList while its module on credit saw students hear from the CFO of student loan company, CommonBond.

Schoar feels that the course’s level of interdisciplinary collaboration provides an opportunity for students to learn about many different aspects of fintech and financial markets: “Because they come from very different backgrounds that are complementary and sometimes synergistic, students can learn a lot from each other,” states Schoar who also says that she has also learned a lot from the students in her class.

One example of a product built during last year’s fintech class at Sloan is a financial literacy app. The engineering students built a prototype which they then demonstrated to the rest of the class. “It’s really exciting when you see something real being built as part of the class. It’s not just something abstract; there’s a product that’s being developed while you’re thinking about ideas,” states Schoar.

While the course attracts MBAs who want to work in the traditional finance space, it draws a slightly larger fraction of MBAs who are looking to start their own company. Schoar says that several of the student teams that came out of the Fintech Ventures class are now setting up their own firms, including one that just closed its first round of VC (venture capital) funding and a few others that are currently in the fundraising process.