In the fast-paced and dynamic world of today, if something has remained conservative in approach and yet remained in tune with the disruptions happening all around us – it is Finance! According to Investopedia, “Finance is the science that describes the management, creation and study of money, banking, credit, investments, assets and liabilities. Finance consists of financial systems, which include the public finance, corporate finance and personal finance, and the study of finance and financial instruments, which can relate to countless assets and liabilities.”
Money, the core constituent of Finance, whether in physical form or its new crypto avatars, viz., Bitcoin, Ethereum or XRP still rules the World! The World is divided between haves and have-nots; i.e., those who have money and those who have not! Of course, the worth of the money that we possess, often called wealth has been a subject matter of debate. While on one hand, we have the words of rationalist writer Ayn Rand: Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver and on the other hand, we have the showman businessman P.T. Barnum who says that Money is a terrible master but an excellent servant. Truly speaking, as a finance educationist, my belief is in the following saying: The best thing money can buy is financial freedom!
Let me delve into this concept of financial freedom, a bit. Recently, I came across an article by Matthew Kent, Editor of MoneyBrain, The Paperless Journal and The Pen and the Sword. It has been an eye-opener. According to him, Money can buy lots of things, but the greatest thing it can buy is freedom. Most people today spend their lives in what can only be called financial slavery: The bank owns their house! The dealership owns their car! The credit card companies and student loan providers own a sizable chunk of their future income! Their boss owns every hour between 9 am and 5 pm five days a week!
Perhaps the most clever and insightful observation of the futility of the rat race comes from Pulitzer Prize winner and acclaimed journalist and columnist Ellen Goodman: Normal is getting dressed in clothes that you buy for work, driving through traffic in a car that you are still paying for, in order to get to a job that you need so you can pay for the clothes, car and the house that you leave empty all day in order to afford to live in it. Is this all life has to offer? There has to be something better out there. Hence, Matthew poses the questions: What if we owned all our possessions free and clear? What if we had enough money coming in from outside our job thereby making it – a choice and not an encumbrance! What if we had enough money coming in to not need to work at all? In the online world, this is called FI (Financial Independence) or FIRE (Financial Independence, Retire Early)! Being a finance executive, professional or advisor should make us a core practitioner of this thought process more than the others!
After the global financial crisis of 2008 and the followed-up recession, how we managed our finances became quite important. The 2008 sub-prime crisis occurred due to the special financial instruments – a result of financial engineering and the process of securitization, which few could understand! In the year 2015, with the crash in commodity prices, especially oil, countries like Saudi Arabia, Kuwait, Venezuela, etc. stared at declining oil revenues. In order to maintain their living standards, they started planning how to conserve their dwindling foreign exchange reserves and looked out for newer avenues for raising Finances. This included a look at tourism and opening up of their conservative societies (particularly, the gulf countries) like never before!
Again, in 2015, the World saw negative interest rates for the first time in Asia, starting from Japan and across Europe! This unconventional monetary policy tool was used by Sweden’s Central Bank in July 2009 for the first time. It means that for keeping money with the bank, don’t expect to receive any interest; in fact, in reverse, one needs to pay the bank for the same. And the borrowers receive interest for taking loans!
The current pandemic – the SARS-CoV-2– has shaken the very foundations of how we bank and deal in money. While India ushered in the digital finance era in November 2016 by the demonetization process and pushed its citizens into the folds of digital payment and wallet companies, the real push to these came from the 2020 pandemic. The simultaneous push of “The India Stack” from the government enabled this to the next level. For the uninitiated, India Stack is the government of India’s initiative towards creating a unified software platform to bring India’s population into the digital age. It incorporates payments, smartphones, APIs, platforms and government-funded and innovated technology. As per its website (www.indiastack.org) “India Stack is a set of APIs that allows governments, businesses, startups and developers to utilize a unique digital Infrastructure to solve India’s hard problems towards presence-less, paperless, and cashless service delivery“.
Since such markers are widely being adopted to enable cashless payment, the issue arises of fraudulent use of biometrics. Whereas one can change a PIN that has been disclosed, one can’t change one’s fingerprints. The other layers are the Paper-less Layer, which enables personal records to be associated with one’s online identity; the Cash-less Layer, a single interface to all national banks and online wallets; and the Consent Layer, which aims to maintain security and control of personal data.
While the above changes are a microcosm of the disruptions happening vis-à-vis the field of finance, all this calls for an understanding of Finance as an enabler, creator and conserver of money and fortune! This also makes it interesting to study and becomes an in-evitable mind-opener for the students of finance. This challenge has been adequately met by the highly learned finance and accounting faculty of the flagship MBA program at Alliance School of Business at Alliance University and its constituent higher educational institute – Alliance Ascent College!
Initiatives were taken way back in July 2019 to have a re-look and modernize the finance stream offerings with an additional vigor which has been the hallmark of the continuous curriculum development and updation process at Alliance University since its inception. Currently, the focus has been to make it in tune with the current requirements of Fintech (Financial Technologies), Digital Finance, Artificial Intelligence, Machine Learning, Data science and Analytics inputs into the existing rigorous financial specialization subjects. Being present in the Indian software and digital capital of Bangalore has been an enabler for this fast-paced journey of modernization to be amongst the leading offeror of contemporary finance subjects @ Circa 2021! An MBA Degree from this prestigious and top-notch B-School with maximum placements is surely a value-for-money proposition!
To end this article, let me recall the words of the American Author and Novelist Christopher Rice. According to him: Every day is a bank account, and time is our currency. No one is rich, no one is poor, and we have each got 24 hours only! Hence, how we spend this time, whether pursuing interests which are beneficial and near to our heart and mind or wasting in irrational and useless work will decide our future! According to one of the greatest thinkers and philosophers of all times, Benjamin Franklin: An investment in knowledge pays the best interest! Hence, let me wish the readers of this article – the best of knowledge and awareness!
Written By:
Dr. Kapil Arora
Professor & Area Chair – Finance
Alliance School of Business