INSEAD Professor Antonio Fatas Talks Fintech and Economics

Professor Antonio Fatas has been teaching at INSEAD for more than 25 years. He is a professor of economics with a PhD from Harvard University. His speciality is around macroeconomic trends such as growth, fiscal, and monetary policy. As a result, one of the areas his research touches upon is fintech.

At the time of publication, INSEAD is the number one business school in the world, according to the FT Global MBA ranking for 2021. And to have a professor of Antonio Fatas’ stature teaching there is a real testament to the quality of education on offer.

In this unique conversation, Professor Fatas discusses a variety of topics ranging from opportunities surrounding financial technology regulations to the importance of asking the right questions. Read on to find out what he had to say.

***

Professor Antonio Fatas (Full Interview)

Q: What made you interested in digital money?

As a macroeconomist, I teach and do research on the effects of monetary policy and the role of central banks. Central banks are at the heart of the creation and management of money, and it was natural to understand better how new technologies could change that role. I was also interested in general in the use of technology, and clearly, the financial sector was one where developments were happening at a fast speed.

Q: Where do you see the most significant opportunities in regards to regulations in the financial sector?

There are plenty of interesting questions when it comes to the need for regulation of new technologies in the financial sector. First, when it comes to the definition of the new assets. What is a currency? What is a security? What counts as a bank deposit? These are fundamental questions that remain unanswered and are causing confusion among investors or savers and uncertainty about those creating new fintech businesses. The other issue that is crucial is that of competition. New technologies can give significant market power to bigtech companies. How do we limit that power? 

Q: What is the number one lesson you always share with your students at INSEAD for their future success?

When it comes to digital money and fintech, I encourage them to look beyond technology. What is the economic logic behind a particular innovation? How does it differ in terms of value from what we already have? I fear that many times we obsess with a particular technology, and we lose sight of the true value and business proposition of an innovation.

Q: Why is it crucial for payments companies to focus on meeting the ESG criteria more than ever? 

ESG criteria are becoming more relevant for all businesses. In the world of payments, the biggest issue is that of cryptocurrencies that rely on technologies that are known to be inefficient and power-hungry. We are all aware of it, and there is a need to change that. As most markets do not properly price the externality associated with the use of energy, it is not clear how this will be fixed unless participants take the initiative to implement these criteria.

Q: Do you see any patterns merging in regards to macroeconomics and fintech?

The biggest success of fintech has been on payments. The way most of us do payments today is very different from a few years ago. Payments are at the core of any transaction, and it makes sense that we see innovations in that area. Because payments are associated with money, there is a lot of talk about central banks creating accounts for all at the central bank (what is called central bank digital currency). This is an interesting area at the intersection of macroeconomics and fintech.

Q: How do you think payment solutions will look in the future?

I think the future is here. In many countries, payments today are fast (immediate) and costless (zero cost in many cases). What we need to resolve is the issue of interoperability. We need to find a solution where payments can go across different networks without incurring delays or costs. This will require regulation. Companies will always have the incentive to keep their networks and ecosystems closed.

***