Disruptions in Technology and Finance

Professors Estrada and Káganer address alumni in Miami

10/11/2011

The rise of social networks poses new challenges and opportunities for banks and other financial services institutions. Despite signs that customers would welcome incorporation of social channels into their banking experience, most banks have been slow to embrace social media.

This week in Miami, Javier Estrada, IESE Professor of Financial Management and Evgeny Káganer, IESE Professor of Information Systems, discussed the effects of social networks on financial services at a Continuous Education session. The event was attended by around 90 alumni and guests.

The professors noted that growth in peer-to-peer lending suggests that social technologies have the potential to disrupt financial services at the business model level. In the first part of the session, they provided examples of the rise of "social" in the financial sector and identified its positive and negative implications for customers, investors, and institutions.

They later discussed a disruption in the financial industry that is altering the way investors invest: Exchange Traded Funds, or ETFs for short.

These financial instruments, whose popularity has been exploding, can be hugely beneficial by lowering the cost of investing and broadening the scope of investable assets. At the same time, they can be subtly dangerous by giving investors the incentive to overtrade, which the evidence clearly shows to be detrimental to investors' returns, the professors said.