Defining FinTech: Innovation, Risk, and the Economics of Financial Transformation with Michael Imerman
In this comprehensive conversation, Jonathan Treussard sits down with Michael Imerman—Professor of Finance at UC Irvine and co-author of The Economics of FinTech—to explore what FinTech actually is, how it rose from the ashes of the 2008 financial crisis, and where innovation meets risk in modern financial services. Michael traces the FinTech revolution's 15-year arc from peer-to-peer lending platforms filling credit gaps left by risk-averse banks to AI-powered alternative data models that promise greater inclusion but carry hidden dangers of proxy discrimination.
The conversation unpacks Michael's FinTech ecosystem framework—verticals spanning payments to PropTech and InsureTech, horizontals including risk management and regulation, and emerging technologies from blockchain to quantum computing. He reveals why cryptocurrency is actually a "speculative commodity" (not a currency), explains how innovation cycles follow predictable sequences of hype-crisis-regulation-migration, and shares insights from his time at the San Francisco Federal Reserve's internal FinTech think tank tasked with "looking out the windshield" at emerging risks rather than regulating in the rearview mirror.
Michael discusses the tension between technological solutions and regulatory arbitrage, the dangers of "solutions looking for problems" (particularly in blockchain applications), and why alternative data in lending—while expanding access for immigrants and thin-file borrowers—creates new fairness challenges when magazine subscriptions and Netflix viewing habits become proxies for protected characteristics. He reflects on the six-year journey writing a textbook about a field evolving so rapidly that chapters required 30-50 revisions, and what drives him as a teacher-scholar: preparing students to carry the torch forward rather than teaching by looking backward.
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What We Cover in This Conversation
What is FinTech? Beyond the buzzword: financial technology vs. technology applied to finance
The FinTech revolution: How it rose from the 2008 financial crisis ashes
Innovation cycles: Predictable sequences of hype, crisis, overregulation, and migration
The FinTech ecosystem: Verticals (payments to PropTech), horizontals (risk, regulation), emerging tech (AI, blockchain, quantum)
Crisis of confidence: How incumbent pullback and consumer distrust created perfect storm for disruption
Peer-to-peer lending: Matching savers seeking returns with borrowers banks rejected
Blockchain reality check: Solution looking for a problem or genuine innovation?
Secured lending application: Using distributed ledgers to prevent collateral re-pledging fraud
Crypto assets: Why they're "speculative commodities," not currencies
Alternative data in lending: Expanding access through non-FICO credit decisions
Hidden risks: How magazine subscriptions and streaming habits become proxies for protected characteristics
Regulatory challenges: Looking out the windshield vs. regulating in the rearview mirror
San Francisco Fed experience: Internal FinTech think tank anticipating emerging technology risks
Teaching forward: Why education must prepare students for the future, not the past
Quantum computing: The next quantum leap in financial applications (5-10 year horizon)
Key Takeaways
The FinTech revolution began 15 years ago as technology firms moved into financial services vacated by risk-averse incumbents. Post-2008 financial crisis, traditional banks entered "risk-off mode" with stringent underwriting standards while consumers lost confidence in their brokers and asset managers. Simultaneously, the Fourth Industrial Revolution brought mobile computing, IoT sensors, cloud storage, and big data analytics to maturity. Technology platforms filled the gap with novel business models like peer-to-peer lending, matching investors seeking better returns with borrowers who couldn't access traditional credit—perfect storm of incumbent retreat, consumer distrust, and technological capability.
Innovation cycles follow predictable sequences even when timing remains unpredictable: buildup-peak-crisis-overregulation-migration-repeat. Innovations create excitement and hype until exogenous shocks (macro conditions) combine with endogenous failures (misuse, perverse incentives) to trigger crisis. Regulators respond by overregulating "in the rearview mirror"—addressing the last crisis rather than anticipating the next. Innovation then migrates to new, less-regulated parts of the economy where the cycle repeats. Understanding this pattern helps distinguish genuine transformation from temporary dislocation or regulatory arbitrage.
Blockchain and distributed ledger technology remain largely "solutions looking for problems" despite potential secured lending applications. While crypto assets captured massive attention, they represent a tiny dot in the FinTech ecosystem and function as speculative commodities (not currencies—you can't buy Starbucks with Bitcoin). The technology has genuine potential for applications like secured lending where distributed ledgers prevent collateral re-pledging fraud by creating transparent, centralized databases all parties can verify. But after riding the hype cycle peak during COVID-era NFT and meme coin mania, the sector has entered the "trough of disillusionment" where practitioners question whether blockchain does anything meaningfully different than networks of reconciled spreadsheets.
Alternative data expands financial access for underserved markets but creates hidden proxy discrimination risks regulators struggle to address. FinTech lenders use non-traditional data—magazine subscriptions, payment histories for streaming services, Amazon purchases, Netflix viewing patterns—to evaluate creditworthiness for borrowers with low FICO scores or thin credit files (young people who made one mistake, immigrants starting from scratch). This enables real-time lending decisions and serves previously excluded populations. However, consumer behavior data can become proxies for protected characteristics (race, gender, sexual orientation) even when those variables aren't explicitly in the model. This gray area challenges fairness in lending laws designed for traditional underwriting.
Teaching and research must "look out the windshield" at emerging risks rather than backward at established knowledge. Michael spent six years writing The Economics of FinTech, revising chapters 30-50 times each as the field evolved—unlike static macroeconomics or investment textbooks, FinTech moves too rapidly for traditional academic publishing cycles. His role at the San Francisco Fed's FinTech think tank focused on anticipating risks from emerging technologies applied to banking rather than regulating past crises. Similarly, his teaching mission centers on preparing students to add value from day one in a rapidly transforming industry—passing the torch to create "something new, something better" rather than training them for yesterday's jobs.
Timestamps
00:00 - Introduction: What is FinTech? Financial technology vs. technology firms entering finance
04:00 - The FinTech ecosystem: Verticals, horizontals, and emerging technologies
07:00 - Current frontier: AI applications across financial services; quantum computing on 5-10 year horizon
08:00 - Innovation cycles: Predictable sequences from buildup to crisis to overregulation to migration
10:00 - How FinTech rose from 2008 financial crisis ashes
13:00 - Regulatory arbitrage vs. absolute technological advantage: Why FinTech gained traction
16:00 - Perfect storm: Incumbent retreat, crisis of confidence, and new technology platforms
17:00 - Functional finance: Intermediation between savers and entrepreneurs as core problem
19:00 - Blockchain reality: "Solution looking for a problem" and the crypto asset hype cycle
22:00 - Secured lending application: Preventing collateral re-pledging fraud with distributed ledgers
24:00 - Crypto tokens as unregulated securities; why crypto assets aren't currencies
27:00 - Zooming out: FinTech's scope beyond the crypto "dot" - access, cost reduction, inequality
29:00 - Alternative data in lending: Expanding access to underserved markets
31:00 - Hidden risks: Magazine subscriptions and Netflix as proxies for protected characteristics
33:00 - What gets Michael out of bed: Teaching students and creating bright futures
36:00 - Rapid-fire questions: Opportunity, caffeine, kids' laughter, butterflies
About Michael Imerman
Michael Imerman is Professor of Finance at the Paul Merage School of Business at the University of California, Irvine, where he teaches financial innovation, financial institutions, and FinTech. He co-authored The Economics of FinTech (2025) with Frank Fabozzi after six years of research and 30-50 revisions per chapter to keep pace with the rapidly evolving field. The book develops conceptual frameworks including the FinTech ecosystem and innovation cycles that help practitioners and policymakers understand financial transformation beyond hype.
Michael holds a PhD in Finance and Economics and completed a postdoctoral fellowship in financial data science (high-dimensional statistical inference and learning). He spent six years as a tenure-track professor at Lehigh University before joining UC Irvine. In 2022, he served as a Visiting Scholar at the Federal Reserve Bank of San Francisco's dedicated FinTech group, an internal think tank tasked with anticipating risks from emerging technologies in banking and balancing opportunities against potential dangers.
For 15 years, Michael has maintained a consulting and advisory practice providing executive training to asset managers, banks, insurance companies, and startups on remaining competitive in the FinTech revolution. He describes himself as a "teacher-scholar" whose research is informed by student demands and whose professional mission centers on preparing the next generation to add value from day one. He serves as Editor-in-Chief of a finance journal and wears many hats including husband, father, and basketball coach.
The Economics of FinTech is available on Amazon and Barnes & Noble. Follow Michael on LinkedIn for updates on his research, teaching, and industry work.
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The content of "Treussard Talks" is for informational and educational purposes only and should not be considered financial advice. The views expressed are those of the host and guests and do not necessarily reflect the opinions of Treussard Capital Management or its affiliates. Consult your own financial advisor before making any investment decisions. For full disclosures, visit treussard.com.