ICM314-Digital Banking and Payment Systems

Module Provider: ICMA Centre
Number of credits: 10 [5 ECTS credits]
Level:7
Terms in which taught: Autumn term module
Pre-requisites:
Non-modular pre-requisites:
Co-requisites: ICM332 Financial Markets and Institutions
Modules excluded:
Current from: 2023/4

Module Convenor: Dr Mininder Sethi
Email: m.sethi@icmacentre.ac.uk

Type of module:

Summary module description:

In this module, you will learn about entrepreneurship, intrapreneurship, how technology makes some business models obsolete and introduces new ones, how banking is transitioning toward digital forms of financial intermediation and how payment systems are evolving with the deployment of new technologies. We will explore the role of banks, central banks and money in the economy, how technology is reshaping the role of banks. New business models for banking services will be discussed. We will look at the rise of digital currencies and monetary systems that could be centred around a Central Bank Digital Currency (CBDC). Examples and case studies will be used to illustrate the key aspects of digital banking.

Aims:

The module focuses on (1) entrepreneurship, intrapreneurship, change management and business models and (2) the services financial intermediation provides (3) types of money and central banking (4) new payment systems (5) peer to peer lending, crowdfunding and other forms of disintermediation (6) Tech platforms and banking services (Tencent, Alibaba, Google, Facebook etc.)  (7) new bank start-ups (8) and new banking models, (9) digital currencies including Central Bank Digital Currencies (CBDCs) and (10) digital trading of securities and derivative contracts

Assessable learning outcomes:

By the end of the module it is expected that students will be able to:

• Explain the purpose and benefits of financial intermediation and the role of different financial firms


• Discuss the functions of central banks, the concept of money creation and the new forms of digital money in the economy


• Explain how banking services can be performed by non-banks and tech start-ups and the trend towards the elimination of intermediaries via, for example, blockchain technology and P2P lending


• Compare and contrast new digital banking solutions such as BaaS, BaaP and white label banking with traditional banking.


• Discuss the regulatory and ethical challenges posed by the new digital banking environment


• Discuss the potential for new digital currencies including cryptocurrencies and Central Bank Digital Currencies (CBDCs) and the potential for CBDCs to replace existing currencies.

Additional outcomes:

The module will use in-class case studies to illustrate key aspects of digital banking

Outline content:

1. Why banks exist and what they do 

• Financial intermediation and its benefits


• Maturity transformation, leverage and the fragility of banks 


• Retail and investment banks

2. Central banking, money and digital currencies: 

• Monetary policy, lender of last resort, foreign reserves and bank supervision 


• Theory of money and money creation


• Payment system technologies and infrastructures 

3. Disintermediation:

• Peer to peer lending and crowdfunding 


• Alternative payment and banking services: Big Tech (Amazon, JP Morgan, Alibaba, Ant Financial, Tencent’s Wechat, Apple pay, Facebook) and smaller techs (Stripe, Lending Club, Robinhood)  

4. New digital banking solutions and business models.

• BaaS - Banking as a Service


• BaaP - Banking as a Platform 


• White label banking 


• Digital Currencies and Central Bank Digital Currencies

Global context:

The module explores global trends. International examples are used to illustrate key aspects of digital banking. 

Brief description of teaching and learning methods:

The core theory and concepts will be presented during lectures.

Summative assessment- Examinations:

Summative assessment- Coursework and in-class tests:

Multiple Choice Test (40%) to take place in week 2 of the spring term. This will be 35 questions to be answered in one hour.

Written assignment including essay (60%) to be submitted in week 3 of the spring term, the report question(s) will be issued to students by week 7 of the autumn term. The maximum word count is 3000 words with a page limit of 9 pages.

Formative assessment methods:

Multiple choice quizzes on lecture material which are then covered in seminar and correct answer explained.

Penalties for late submission:

As per University policy

Assessment requirements for a pass:

50% average over project and MCT

Reassessment arrangements:

Project only

Additional Costs (specified where applicable):

Last updated: 30 March 2023