CryptoCurrency from book quiz 1

Fintech Revolution

Factors: Blockchain, 5G & mobile penetration, IoT, Big Data, Artificial Intelligence, Open Banking/APIs, Decentralized systems

Benefits of Fintech

Inclusion, efficiency, lower costs, faster services, innovation in payments/insurance/investments, equity, reduced intermediaries

Technological Innovations for Fintech

Blockchain (decentralized trust), IoT (data from devices), AI/ML (automation & decisions), 5G (speed/scale), APIs (integration), Big Data

Blockchain

A distributed, immutable digital ledger that records transactions across a peer-to-peer network without a central authority; uses cryptography for security

Disciplines in Fintech Study

Finance, Computer Science, Information Systems, Law/Regulation, Economics, Data Science/AI, Business/Marketing

Internet of Things (IoT)

Network of interconnected devices with sensors that collect and exchange data over the internet

IoT Advantages & Disadvantages

Advantages: Real-time data, automation, efficiency, personalization; Disadvantages: Privacy risks, security vulnerabilities, high implementation cost, interoperability issues

IoT Revolution in Fintech

Enables usage-based insurance, connected devices for fraud detection, smart payments, real-time risk assessment, personalized financial products

RFID in IoT

Radio-Frequency Identification tags allow wireless tracking/identification of objects; foundational for supply chain, asset tracking, contactless payments in IoT ecosystems

Future of Fintech with Billions of Connected Devices

Massive data for hyper-personalized finance, predictive analytics, automated micro-insurance, embedded finance everywhere, privacy/security challenges, new business models

Crowdfunding

Raising small amounts of money from a large number of people, typically via online platforms, to fund a project/business

Three Types of Crowdfunding

Donation-based, Reward-based, Equity-based (investment for shares)

Regulation Crowdfunding (Reg CF)

Allows companies to raise up to certain limits from non-accredited investors via online platforms with SEC oversight

Regulation Crowdfunding vs. Regulation A+

Reg CF: Smaller amounts, more retail investors, simpler; Reg A+: Larger raises (up to $75M), "Mini-IPO", allows broader advertising

Mini-IPO

Regulation A+ offering; allows companies to raise capital publicly with less regulatory burden than full IPO

Testing the Waters

Allows companies to gauge investor interest before full filing/commitment in crowdfunding/Reg A+

2021 Crowdfunding Regulation Changes

Increased investment limits for non-accredited investors, eased advertising rules, helped platforms and access

Blue Sky Laws

State-level securities regulations; apply to crowdfunding offerings unless federally preempted

Liquidity in Crowdfunding

Low compared to stocks/bonds; shares often restricted, no active secondary market initially

Reporting Requirements for Crowdfunding Companies

Annual reports, financial statements (depending on amount raised), ongoing disclosures to investors/SEC

Role of ACH

Electronic network for batch-processing low-value payments (direct deposits, bill pay); governed by NACHA

Entities Responsible for ACH

NACHA (rules/standards), Federal Reserve & The Clearing House (processing)

Wire Transfers vs. SWIFT

Code

Mobile/Digital Wallet Advantages

Convenience, speed, contactless, security features (tokenization), integration with loyalty/rewards

PCI DSS 12 Requirements

Mandatory for card processors; includes firewall, encryption, access control, monitoring, policy (detailed in slides)

Cross-Border Payments Drawbacks

Slow, expensive, opaque, multiple intermediaries; G20 pushes for faster/cheaper standards

Visa Direct / Mastercard Send

Innovations for real-time push payments, improving speed/access in cross-border/retail

SWIFT GPI

Global Payments Innovation; adds tracking, transparency, faster processing to legacy SWIFT

API Benefits

Seamless integration, faster development, open banking, white-label products, innovation

PSD2

EU regulation requiring banks to open APIs; enables third-party providers, competition, better services

BaaS (Banking as a Service)

Banks provide backend via APIs; fintechs offer branded products without charter; benefits both (revenue for banks, speed for fintechs)

QR Codes in Payments

Enable fast, low-cost, contactless transactions; surged post-COVID for hygiene/speed

BNPL (Buy Now Pay Later)

Short-term financing at checkout; impacts bottom line via fees, higher sales conversion; players: Affirm, Klarna, Afterpay

Embedded Finance

Financial services integrated into non-financial platforms (e.g., Shopify loans, Uber wallet); changes revenue models

Insurtech

Use of technology to improve insurance efficiency, products, distribution (e.g., usage-based, peer-to-peer)

Peer-to-Peer Insurance

Model where policyholders pool premiums; reduces conflict of interest, returns unused funds

Usage-Based Insurance

Premiums based on actual behavior/data (telematics, Fitbit); vs. traditional flat rates

Embedded Insurance

Insurance bundled into product/service purchase (e.g., phone protection at checkout)

Turing Test

Test of machine intelligence; whether it can exhibit human-like conversation (Eugene Goostman "won" in 2014)

Artificial Intelligence (AI)

Simulation of human intelligence in machines; includes learning, reasoning, problem-solving

AI Winters

Periods of reduced funding/interest in AI due to overhype vs. results (1970s, late 1980s)

Machine Learning (ML)

Subset of AI where systems learn from data without explicit programming

Deep Learning

Subset of ML using multi-layer neural networks; powers image/speech recognition, GenAI

Supervised vs. Unsupervised Learning

Supervised: Labeled data (classification/regression); Unsupervised: Unlabeled data (clustering, patterns)

Generative AI

AI that creates new content (text/images); e.g., ChatGPT, DALL-E; based on transformers/large parameters

Regtech

Technology to help firms comply with regulations efficiently; uses AI/ML for monitoring, reporting

Howey Test

SEC test for investment contract: (1) investment of money, (2) common enterprise, (3) expectation of profits, (4) from efforts of others

Dodd-Frank Act (2010)

Post-2008 reform; enhanced consumer protection, created CFPB, increased oversight of systemic risk