Faculty at Penn’s Wharton School join finance professor and host Itay Goldstein for a special podcast series titled “The Future of Finance.” In this four-part series, Goldstein and guests discuss the research and predictions that are shaping the future of finance.
In “The Future of Banking,” Goldstein is joined by Hyun Song Shin, economic adviser and head of research at the Bank for International Settlements, and Loretta Mester, former President and CEO of the Federal Reserve Bank of Cleveland. Together, they explore the 2023 banking crisis, focusing on the collapse of Credit Suisse, Silicon Valley Bank, and other small to mid-level banks, while analyzing regulatory gaps and future protections for the banking system.
“You need a healthy banking system for two reasons,” says Mester. “One, you want monetary policy, whatever you take on the policy front, to transmit through the broader economy when the financial markets aren’t working. When they’re disrupted, monetary policy won’t transmit. But also, we wanted the banks to remain healthy and not pull back on all the credit extension, because they were actually helping to support the economy as well.”
In episode two, “New Phenomena in Behavioral and Social Investing,” Goldstein and Bloomberg columnist Matt Levine examine the GameStop and AMC meme stock sagas and the powerful influence of social media on market events. The discussion highlights the role of behavioral finance in shaping investor actions and how social trends can disrupt financial markets on a global scale.
“GameStop being a stock that moved like a coordinated social movement for a few months was really interesting—[that] brought it to closer to the financial mainstream,” says Levine. “That’s also true in a less silly but more important way of Bitcoin, right? When you talk about how you value Bitcoin, any legitimate and real effort to value it is going to be based on its social adoption. If people buy it, then it’s worth a lot of money. And if no one believes in it, then it’s not worth a lot of money.”
“That is the core of what happened in GameStop, where GameStop was also a company. But the real meme-driven stuff was about its popularity in a social investing universe. I think that Bitcoin is the clearer illustration of how strange this is, and how enduring it is. Bitcoin has had a five-figure valuation for years now. Its social adoption is enough to drive the value in a way that it wasn’t really for the long term for GameStop.”
“The Regulatory Challenges of AI in Finance” considers how AI is reshaping finance and what regulatory responses are needed to ensure financial stability. Goldstein is joined by Tobias Adrian, financial counselor and director of the International Monetary Fund, to explore the regulatory challenges posed by the rapid adoption of artificial intelligence in finance. The conversation delves into the emerging risks AI introduces to the financial sector, the steps regulatory bodies are taking to mitigate these risks, and the balance between innovation and stability in global financial markets.
“When you think about a risk manager in a financial firm, you would certainly have some concerns about accountability and decision-making accuracy, right? In traditional automated trading, you can go through the code, and you understand how the code works,” says Adrian. “In generative AI, you can’t trace back the code to decisions [that] are being taken. [However], if the model generates code, then that you can check. So, it is a bit of a complex undertaking. The lack of explainability, the magnitude of unpredictability and this lack of accountability in decision-making are certainly issues.”
And in “The Future of Financial Technology,” Fintech leaders discuss the rapid changes in financial technology, decentralized finance, the impact of blockchain, and what lies ahead for digital currencies. Alesia Haas, CFO of Coinbase, and Michelle Lai, board member of Electric Coin Co., examine the transformative role of technology in finance, from blockchain innovations to the future of digital currencies, and provide insights into how Fintech is set to evolve in the coming years.
“We’ve moved from the internet standpoint; we were online, and now we’re moving on chain. This is really the next generation of the internet. We’re going to be rebuilding transactions, as well as a lot of just social applications, on these new rails,” says Haas.
“I do think that we are going to see crypto blockchains transform the way we transact. It’s going to bring value and data closer together into transactions, and that will then underpin all of the financial transactions. My belief is that we are going to see this happen behind the scenes in many ways, and so I think we’ll get to a place where everyone is transacting on crypto rails, and they don’t even know that they’re doing it.”
For a full list of episodes, visit “The Future of Finance” series page.
