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I sat in on an MBA finance class at a leading business school recently. The professor, who was explaining the intricacies of asset management and just-in-time manufacturing, was magnetic. The students were intelligent and full of enthusiasm. I thoroughly enjoyed myself and came away elated at my new-found understanding of lean strategies.
I am not alone in my appreciation of high-quality financial education, as the Financial Times 2018 global alumni survey proves. Every year, we ask graduates from the global top 100 MBA courses which subjects they thought their business school taught well and which they taught badly.
This year, and for the umpteenth year running, finance came top. But languishing in 16th place out of 18 subjects was fintech.
This struck me as puzzling. There is no better financial education than that offered by leading business schools. Without an understanding of basic concepts and techniques, such as discounted cash flow or how to price an asset, any new technology to improve how money operates is without foundation.
All fintech is doing is changing the way in which financial services are delivered. It is not a transformation of the underlying principles of finance — it is focused solely on the operational implementation of it. As one dean put it to me recently, fintech is really just about writing apps. So why, with a handful of exceptions, are business schools great at teaching finance, but dismal at fintech?
According to our anonymised alumni survey, it is because many schools are not teaching it at all. “I would have appreciated courses around technology and finance,” wrote one, wistfully. Some other schools were teaching it, but clearly not well. “We did fintech case studies, but I did not leave the programme with a firm grasp of it,” wrote another.
This matters because fintech is no longer an upstart movement. A 2015 Goldman Sachs report estimated that $4.7tn of financial services revenues was at risk of displacement from fintech groups. As my colleague Jonathan Moules has reported, talented MBA graduates are clamouring to work in fintech — either in start-ups or new “intrapreneurship” jobs created by established banks and professional services firms.
One reason business schools may be behind is the sheer breadth of the term “fintech”, as Matt Rhodes-Kropf, visiting associate professor in the finance department at MIT Sloan, told to me. His school, along with Fuqua and NYU Stern School of Business, was among a handful that our surveyed alumni told us were teaching fintech well.
“Saying you are an expert on fintech is like saying you are an expert on the whole world,” says Prof Rhodes-Kropf. “Blockchain, for example, could be about cryptocurrencies, or it could be about asset management, or warehouse management — there’s no way you can keep up with everything.” And, of course, qualified faculty are scarce in any fast-developing field.
He is right. But surely keeping up with a fast-changing world and luring expert faculty are two things that business schools usually excel at. Might there be a more prosaic reason for their sluggishness?
David Yermack, professor of finance and business transformation at NYU Stern, suspects the real problem is that most business schools don’t understand fintech, so many simply steer clear of it. But as far as the students on his bitcoin and cryptocurrencies course are concerned, “fintech is finance — and the old finance will be replaced”.
NYU Stern, he says, was in the right place to develop expertise — close to a culture of fintech entrepreneurship around Union Square and, what he calls, the “legacy banks” of Wall Street that were looking for qualified staff for their new blockchain applications. His course was a gamble: three years ago it started with 30 students; this year 100 are enrolled. Next year, between 200 and 300 will take it.
Prof Rhodes-Kropf at MIT Sloan tells a similar story: his class started three years ago. Students have to apply to get in, and numbers are restricted to 40. This, he says, is because the class is collaborative — students form teams to try to launch a new fintech business. But a further 10 to 15 turn up to every class just to sit in. Prof Yermack has just been presented with a student petition asking him to teach at night.
Students’ appetite for a fintech education is insatiable. Ultimately, business schools will be forced by demand to teach the new, ever-changing and difficult technology of finance and at a similar standard to which they teach the principles of finance.
“Sure, we’re trying to hit a moving target,” says Prof Yermack. “But then, that’s our job.”
Helen Barrett is Work & Careers editor