Digital transformation in the financial sector: FOM practical teaching
Guest contribution | Prof. Dr. Nick Dimler | FOM University in Berlin
11.04.2018 | When it comes to the so-called “psychology of investors” and “behavioral finance” or to young, digital FinTechs, no one can pull the wool over the eyes of Prof. Nick Dimler’s students.
Dimler has been teaching general business management studies since late 2016, in particular entrepreneurship and finances, at the FOM Hochschule in Berlin. Developments related to digital transformation in the financial sector have been a fixture of his practice-based approach: “FinTechs” and “Behavioral Finance” are permanent topics in my lectures”, said Dimler.
Alternative financing strategies through FinTechs
“Currently, the digital transformation in the financial sector is passing the German middle class by,” says Nick Dimler. People are too focused on principal banks. The young professor wants to change that. That’s why he informs his students on alternative financing strategies in his teaching and practice, such as FinTechs. These are young, technology-focused companies that offer digital financial services without being banks themselves.
“Many mid-sized companies use very conservative financing, which means they are losing out on the benefits offered by FinTechs” says Prof. Dimler. Dual studies students at the FOM learn not only about the basics but also about new opportunities based on examples.
Prof. Dimler especially appreciates the intensive discussion. “The students bring questions from their everyday work into their courses, and we discuss them thoroughly – a real plus for both sides.”
Research project on FinTechs
In addition, Prof. Dimler is involved as an advisor to HLP Dimler & Karcher in the project “FinTech innovation forum, which was funded by the Federal Ministry of Education and Research and is currently being continued through the “Mid-sized company initiative” project.
“The project is focused on what mid-sized companies can expect from so-called FinTechs,” explains Prof. Dimler. The results will likely be published in 2019.
'Behavioral Finance' – Why we make the decisions we make
‘Behavioral finance’ is another focus of research and teaching, a sub-field of behavioral economics. Its primary focus is on combining the findings of psychology and economics to better explain how investors really react in economic situations, and in particular when making financial decisions.
“From my standpoint, the topic is important because the reigning neoclassical financial markets theory assumes people always make rational decisions,” explains Prof. Dimler.
“In reality, however, we regularly see irrational behavior. People make systematic errors both when they receive and process information.”
The explanatory approaches offered by ‘behavioral finance’ can be used to analyze resulting irrational behavior.
An example for heuristics
Prof. Dimler finds the various heuristics especially interesting, and makes this clear through an example. “Heuristics are ‘rules of thumb’ we all like to use to make decisions. Typically, these function very well. However, they are also highly subject to errors.
For example mental account management: You’ve purchased a movie ticket for 10 EUR and realize you’ve lost it. Would you buy a new ticket to see the movie? And: When you go to buy a movie ticket, you realize you’ve lost 10 EUR on your way to the ticket booth. Would you still buy the ticket? You’ve lost the same amount in both cases. Nevertheless, people view the losses differently,” explains Prof. Dimler. “Experiments on this have shown: While most people would go to the movies in the second situation if they have enough money, most people in the first situation would go home annoyed.”
Understanding the effects of poor decisions through experimentation
In their lectures, Prof. Dimler’s students learn about many different examples of different heuristics.
“We also do experiments so students realize how easily they can deceive themselves and what effects this can have on their financial decisions.
Since ‘behavioral finance’ models do a good job explaining questions on capital market anomalies and speculation bubbles, this also offers an opportunity to reassess questions related to how financial markets are regulated with respect to such aspects”, underscores Prof. Dimler, describing the importance of this approach.
Guest contribution by Prof. Dr. Nick Dimler
FOM University in Berlin | General Business Economics
(esp. Entrepreneurship and Finances)
Prof. Nick Dimler studied Business Administration and Economics at the University of Potsdam, completing his Ph.D. there. He taught as a guest lecturer in China during his doctoral studies.
In 2012, he founded the consulting firm HLP Dimler & Karcher in Berlin with his business partner.
He has been teaching general business administration since 2016, in particular Entrepreneurship and Finances, at the FOM University in Berlin.