FinTech

Name 3 reasons Fintech is controversial as far as ESR.

1. Bitcoin's environmental impact because of its intentionally resource-intensive design 2. data regulations 3. consumer spending

How can FinTechs improve payment systems?

1. Simplifying the system by getting rid of intermediaries. 2. Making the system less vulnerable to fraud. 3. Pleasing the end-user

What's the current focus of RegTech firms?

Developing understanding of engagement between businesses and the regulator to align solutions with regulatory and risk management frameworks

What is the current focus of financial institutions?

Development of RegTech strategy and road map, considering long and short term application

One characteristic of a blockchain database

It is a decentralised and therefore, has no master.

What is a bitcoin?

It is a decentralized unit of exchange. The smallest unit is called a "satoshi" or 1 hundred millionth (0.00000001). Need a wallet with a 256-bit hexadecimal private key to transact through a 3rd party software or its own ATM

What is currency?

It is a fiat (backed by the power of the sovereign government) to make credible transactions for goods and services. Driven by common beliefs of individual users.

What is Crowdfunding?

It is a method of raising capital through the collective effort of friends, family, customers and individual investors.

What's the current focus of professional services firms?

Working across the ecosystem to understand requirements, needs and solutions

What is machine learning?

a computer system is fed large amounts of data, which it then uses to learn how to carry out a specific task, such as understanding speech or captioning a photograph.

What are the components of payment systems in open loop systems?

end-user-> bank->Bank Transfer System -> Bank -> end user

What is micro-insurance?

Insurance targeted to low-income, low net-worth population who would otherwise have limited access to insurance. Pay insurance for specific perils proportional to the likelihood and cost of the risk.

What is counter party risk?

Borrowing illegal money OR not getting you your money back (it's a two-way risk)

What are some of the risks with ICOs?

1 bubbles and disclosure, 2 information asymmetry, 3 most ICOs are unregulated.

Explain basis points (bps)

1% = 100 bps AND 140 bps = 1.4%

What are some of the characteristics of CRE Tech (commercial real estate tech)?

1) It goes beyond just apps and algorithms (includes IoT) 2) It's more data-driven than residential RealTech Example of CRETech is Cadre

What are the advantages of blockchain for settlement and clearing?

1) drastically reduced transaction cost 2) near instant settlement and clearing 3) easier risk management 4) increased transparency

How does stock exchange with blockchain differ from the traditional kind?

1) more "centralization" 2) the back-office stuff is removed (no more t+2 Extra: it does however require a lot of hurdles and efforts to get there

Who is a part of the RegTech ecosystem?

1) regulators 2) RegTech firms 3) financial institutions 4) professional services

What are 3 purposes of digital signatures?

1. Authentication. Proof of message sent from sender to receiver 2. Non-repudiation. Sender can't deny the message was sent 3. Integrity. Message was not altered in transit

List and briefly explain 3 main classifications of insurtech.

1. Carriers (Full-stack insurers): platforms that underwrite policies, assume the risk, and manage the process from beginning to end (ie. Sure) 2. Distributors (Agents): platforms that act on behalf of the carrier, essentially acting as an extension of an incumbent carrier (ie. Coverfox) 3. Enablers (Brokers): platforms that provide customers with a variety of policies offered by both incumbent carriers and insurgent InsurTech platforms (ie. PremFina)

What are some of the use cases of AI in FinTech?

1. Data-driven management decisions lead to a different kind of management. 2. When machines analyse data and come up with recommended results, it can help leaders and their subordinates take better decisions. 3. Lower cost.

What are 3 advantages of Banks?

1. Federally insured 2. Regulated 3. Infrastructure

What are 2 problems with relying on fiat money?

1. Inflation 2. Unstable currency

What are 3 accelerators of the FinTech Industry?

1. Loss of consumer trust in financial institutions 2. Free software, cloud computing, connectivity 3. Generation change - Millennials

What are the 4 categories of cryptocurrency?

1. Medium of exchange 2. contractual right 3. security 4. symbolic

Name 3 new investment products due to FinTech.

1. Optimizing retirement plans 2. Social impact investment 3. Micro-investing

What are the 6 "flavors" of FinTech?

1. P2P lenders (ie. LendingClub) 2. Crowdfunding 3. Blockchain & Bitcoin 4. Robo-advising 5. Mobile payments 6. Insurance

What are the 3 levels of FinTech?

1. Payment system 2. Improve efficiencies of existing services/products 3. "Deep FinTech" - new financial product

What 3 reasons for using cryptocurrency?

1. Privacy 2. Centralized institutions have a lot of power 3. Distrust centralized intermediaries

Give some examples of wealthtech services

1. Robo-advising 2. Micro-investment 3. Digital brokers 4. Investment tools 5. Portfolio management

What are some general use cases for AI in FinTech?

1. analyze data and make recommendations 2. collect and analyze evidence and data 3. learn and monitor behavioral patterns to spot fraud attempts 4.

How can AI be used when it comes to insurance?

1. automate underwriting 2. make better decisions for customers 3. detect risks to take preventative measures

Why do FinTechs fail (8)?

1. ignore economic cycles 2. payments is easy 3. compete on cost 4. assuming that the growth is the same as a typical startup 5. overlooking compliance 6. overlooking legal 7. choosing the wrong strategic investors 8. underfunding

Name 3 reasons Fintech is praised as far as ESR.

1. increased accessibility and inclusivity 2. economic growth in emerging markets 3. microinsurance

What causes this growing investment in wealthtech?

1. massive demographic shifts and preferences 2. Competitive forces threatening profits w/ tech reducing costs 3. Markets and economy conditions increased investor sentiment and willingness to spend

What are some problems that decentralized currency must solve?

1. must establish ownership rights 2. must maintain a secure and accurate ledger 3. must maintain trading in currency 4. must have governing rules for the supply of currency

What are two characteristics of hash codes?

1. no matter what the size of the original file, a hash function will always generate a code of the same length. 2. any change to the original input will generate a new hash e.g. if someone decided to delete just one comma, it would show up, because the hash would change.

What is the difference between a defined benefit (DB) plan and a ? defined contribution (DC) plan?

1. pension plan where one knows exactly what they'll get back. Employee risks insolvency, employer risks bank sheet. 2. pension plan where one one knows exactly what they'll put in, ie. 401k.

How does Robo-advising help the following: 1. Mutual Funds, 2. ETFs, 3. TDFs

1. reduce costs and transaction fees by eliminating investment managers 2. optimize the fund and reduce transaction costs and other fees. 3. Customized portfolios to reflect lifecycle towards retirement.

What are TDFs (target date funds)?

A lifecycle investment program where you input a retirement year and target fund, and then the robo-advisor manages your investments that will reflect your risk.

What does the cap rate represent?

A low cap rate implies lower risk and a high cap rate plies higher risk

What does regulatory sandbox mean?

A mechanism for developing regulation that keeps up with the fast pace of innovation. It allows small scale live testing of innovations within a controlled environment

What does the spread refer to?

The difference between two prices, rates or yields. (the easiest benchmark is to look at a given return compared to the local government bond)

What is the difference between ACH and Wire transfers?

ACH are not very lucrative for banks, Wire Transfers are very lucrative for banks fx because of cross-boarder transactions.

What does passporting mean?

Allows a company to "passport" its business to another country without applying separate license in that country

What is a mutual fund?

An investment program funded by shareholders that trades in diversified holdings and is professionally managed.

How can AI be used in Fraud Detection?

Analytics tool collect evidence and analyse data necessary for conviction. AI tools then learn and monitor user's behavioral patterns to identify warning signs of fraud attempts. Application: insurance, securities trading, banking.

What is InsurTech?

Any financial services provided using technology to revolutionize the insurance industry and how insurers do business.

What is a robo-advisor?

App that takes the place of a human financial advisor. Can aggregate your accounts, present your financial situation, facilitate transfers, and in general handle the logistics of your finances

What are the two ways you can use a credit card?

Card present and Card not present.

What is the payment instrument distribution?

Cash: Predominately used by low-income consumers. Debit cards: Predominantly used by low-income and middle-income consumers. Credit cards: Predominantly used by higher-income consumers.

Give an example of restrictive regulation

China banning cryptocurrency

Explain what had lead to the RegTech "momentum"

Complex regulatory change, increasing compliance cost and rising personal liability

What is the tests called that blockchains has set up to build trust?

Consensus models

What is an advantage for FinTech?

Do not have legacy systems that traditional services need to maintain which reduces the costs for financial services

What are the 4 types of Crowdfunding?

Donation-based, rewards-based, equity-based and peer-to-peer lending.

What's the current focus of a regulator?

Encouraging dialogue and collecting market views

What are the components in payment systems within a closed loop system?

End-user-> closed loop system -> end-user (Basically without intermediaries).

Please provide an example of what a professional services firm do

Examples include: Consultants, Lawyers, advertising firms. Basically, they can be any organization or profession that offers customized, knowledge-based services to clients

What is the difference between FinTech and TechFin?

FinTech is a financial service company using technology (LendingClub), while TechFin is a tech company providing some financial services (Apple)

What is WealthTech?

Financial services that use digital solutions to transform the investment and asset management industry

What is a Hash code?

Hash codes keep records safe. They are created by a math function that takes digital information and generates a string of letters and numbers from it.

What are smart contracts?

Help exchange money, property, or shares, in a transparent, conflict-free way while avoiding the services of a middleman. Computer programs that automatically implement the terms of an agreement between parties. (Car lease: recurring 'auto payment' example). There is no human decision which increases speed+minimizes the number of mistakes=cost savings

What's a HENRY?

High Earners Not Rich Yet

Based on what kind of data do banks decide who to lend to?

Historical and future data.

How does bitcoin solve the issue of double-spending?

Incentivize "miners" and paid to maintain a public ledger

What is an ICO?

Initial Coin offering: A way for entrepreneurs to go around VCs and raise money from people.

What does T+2 mean?

It will take 2 days to settle the payment (has to go through a lot of intermediaries)

Why is blockchain an innovation?

It's ledger is distributed, verified, immutable, and secure makes it innovative

How do banks make money?

Lending money, holding money, trading money and moving money.

What are ETFs (exchange traded funds)?

Like mutual funds, ETFs are collections of stocks that are traded on securities exchanges, but they are traded more like individual stocks.

How do you make a ledger tamper-proof?

Make it easy to detect attempts by making the ledger recursive

Explain passive regulation

National regulators don't play an active role in trying to make fintech companies succeed

What is the definition of Proof of Stake?

Participants buy tokes which allow them to join the network. The more tokes they have, the more the can mine.

Explain fintech bridges

Partnerships between countries (cooperation agreement, that makes it easier for fintech's in both countries in regards to regulation/compliance) Example: UK & Australia

Why do we need regulation for fintech?

Privacy, data security, cyber security, tax evasion, consumer protection etc.

Explain what realtech is

RealTech, short for Real Estate Technology, refers to technologies that impact the built environment and the real estate sector, either through business model innovation or product innovation, affecting the way we live and work.

Explain active regulation

Regulators are working closely with startups to understand fintech developments and upcoming obstacles

What are some of the regulation determinants?

Size, customer type, product offerings, company domicile, transaction location etc.

What do "miners" do?

Solve math problems (verify transactions) and keep the ledger honest and in return get paid to Bitcoin

How does a deal get recorded in blockchain?

Step 1: A trade is recorded. Step 2: The record is checked by the network. Step 3: The records that are accepted by the network are added to a block. Step 4: The block is added to a blockchain. The hash codes connect the blocks together

How do you file for an IPO?

Step 1: Engage an underwriter (investment banks), Step 2: Submit a draft registration statement to the SEC. Step 3: Submit finished registration statement called s1. Step 4: Go on the roadshow to pitch institutional investors. Step 5: Set the price and place the shares.

The three steps when someone enters into a smart contract.

Step 1: an option contact between parties is written as code into the blockchain. The individuals involved are anonymous, but the contact is the public ledger. Step 2: a triggering event like an expiration date is hit and the contract executes itself according to the coded terms. Step 3: Regulators can use blockchain to understand the activity in the market while maintaining the privacy of individuals.

What is a hash function?

Takes an input of (virtually) any size and returns an output of a fixed size. A type of cryptography.

What does it mean if someone says, they'll settle on T+0 rather than T+2?

That they take on the risk that would otherwise have been on the buyer's side

What is RegTech?

The application of technology to regulation to facilitate the delivery of regulatory requirements and by regulators to enhance regulation. Also how fintech sounds assist regulations

What is a cap rate (capitalization rate)?

The rate of cash flows coming from a property scaled by the value of the price of the property

What is the definition of Proof of work?

To add a block to the chain, nodes must demonstrate that they have done work by solving an increasingly difficult computational puzzle.

What is remittance?

Transfer of money often by a foreign worker to an individual in their home country.

What is one problem without a centralised control of a network?

Trust, everyone can basically get in.

Explain micro-investing.

an application that allows users to regularly save small sums of money. remove traditional barriers to investing, such as brokerage account minimums, to encourage people to invest even if they have limited incomes and assets

What is a Payment?

payment is the transfer of one form of goods, services or financial assets in acceptable proportions that have been previously agreed upon by all parties involved.

Benefits of microinsurance.

►Financial protection through risk pooling ►Insureds can assume more risk ►Can target specific at-risk populations ►Can complement social welfare programs, bolster other microfinance initiatives

What are the primary goals for robo-advisors?

►Nice to see all your assets at once, move money around freely, invest with just a click or two ►Crucial to save intelligently for retirement ►Propose an investment plan, help you stick to it ►Show you the range of outcomes you can expect