Section 3 Book

How has fintech used big data to aid in the loan industry?

Big data allows fintech access to information not typically recorded on a credit score.

Big data allows fintech to access information from further back than seven years, which is the typical limit for a credit bureau.

Big data allows fintech to aggregate information from multiple credit bureaus to create an overall credit score.

Big data allows fintech to quickly calculate up-to-date credit scores based on transactions not yet on credit reports.

Big data allows fintech access to information not typically recorded on a credit score.

Traditional financial institutions relied primarily on credit scores from the credit bureaus to determine loan risks. Fintechs rely on more information that might not be on a credit report.

Which type of financial service has combined artificial intelligence (AI) with fintech to provide value to the consumer?

Wealth management services

Insurance services

Digital wallet services

Point-of-sale (POS) services

Wealth management services

Using AI combined with fintech, previous trading patterns can be analyzed, and potential future trades can be suggested.

Which type of model best benefits from the use of artificial intelligence (AI)?

Business intelligence model

Predictive model

Decision model

Descriptive model

Decision model

This type of model will take inputs from multiple models and variables and combine them for greater prediction accuracy.

What is the accuracy and reliability of an artificial intelligence (AI) system most related to?

The recency of the data to analyze

Having the data all from one coding type

Having the data come from verified sources

The sample size of data to analyze

The sample size of data to analyze

The more observations the AI system has to analyze, the more accurate it can make its predictions.

Which advantage has artificial intelligence (AI) provided to consumer lending fintechs to give them a competitive advantage over traditional lenders?

AI calculates an up-to-date score using real-time data.

AI creates its own credit score using nontraditional sources of information.

AI uses information from many credit bureaus to create an overall credit score.

AI more thoroughly searches previous loan payment history for a borrower.

AI creates its own credit score using nontraditional sources of information.

It can create specific credit scores using information available from nontraditional sources, which are better predictors of repayment.

How has artificial intelligence (AI) aided fintech firms to better utilize KYC (know your customer) techniques?

AI sends information from seemingly authentic sources to the customer’s social media feeds to influence buying behavior.

AI monitors all forms of communication to build a better profile of the customer’s needs and predict behavior.

AI allows customers to continually update their preferences in the company database, yielding better results from advertising.

AI gathers public and private information on each customer from multiple companies to build specialized advertising.

AI monitors all forms of communication to build a better profile of the customer’s needs and predict behavior.

Behavior prediction is the primary benefit for AI, and communication patterns are useful to build customer profiles.

Which of these are complicating factors with the collection of big data? Choose three answers.

Velocity

Verifiability

Viscosity

Variability

Veracity

Vulnerability

Velocity

Variability

Veracity

Which types of publicly available data are fintechs using to aid artificial intelligence (AI) in creating better investment decisions? Choose three answers.

Annual reports

Employee headcounts

Utility bills

Salaries of employees

Cost structure

Legal proceedings

Annual reports

**Annual reports must be disclosed for all publicly traded companies. There is much useful information reported in these.

Utility bills

**Understanding the payments of a company can help in predicting future costs given specific conditions.

Legal proceedings

**It is important to know which types of legal issues a company is facing to better determine the safety of an investment.

The introduction of the first smartphone in 2007 was a milestone event for the advancement of fintech.

What was the advantage of a smartphone over previously available technology?

Customers could log in to the bank's computer system to check account balances and move funds without needing to travel to the physical bank.

Biometrics were introduced, which customers could use to verify their identities, allowing for more secure banking.

The internet was now available in a more versatile form, allowing fintech apps to be accessed in remote locations and with greater mobility.

People now had a means of communication in remote locations, unlike the physical location needed with a landline.

The internet was now available in a more versatile form, allowing fintech apps to be accessed in remote locations and with greater mobility.

The innovative feature of the smartphone was its ability to connect to the internet on the go.

Which advancement in cellphone technology saw the introduction of text services and data transmissions?

3G networks

1G networks

4G networks

2G networks

2G networks

The introduction of data services came with the advent of 2nd generation networks.

Which major advantage was available to smaller fintech developers due to the introduction of the cloud?

The ability for the developer to work with other employees off site

The ability to store large amounts of data

The ability to rent infrastructure rather than own it

The ability to have all programming code be uniform

The ability to rent infrastructure rather than own it

Entrepreneurs could lower the cost of start-ups by not having to invest heavily upfront in technological infrastructure, opening the doors to many more developers.

Which type of cloud service model allows fintech entrepreneurs the use of relevant operating systems and an integrated development environment?

Software as a service (SaaS)

Infrastructure as a service (IaaS)

Development as a service (DaaS)

Platform as a service (PaaS)

Platform as a service (PaaS)

This model allows the entrepreneur access to the development tools needed to create the fintech product.

What is the difference between fintech P2P payments and an automated clearing house (ACH) payment?

A P2P payment needs to connect to a large financial institution server, whereas an ACH payment does not.

An ACH payment is used by banks to send payments to other banks, whereas a P2P payment is used to send money from a customer to a merchant.

An ACH payment is initiated by a merchant, while a P2P payment is initiated by a financial institution.

A P2P payment system is available for API-fication, whereas an ACH payment system is not.

unanswered

An ACH payment is used by banks to send payments to other banks, whereas a P2P payment is used to send money from a customer to a merchant.

The ACH system was developed by the banking industry to allow for payments between the customer bank and the merchant bank, but the transaction must use a bank as the intermediary. Using a P2P system, a bank does not need to be an intermediary, allowing for a direct payment.

Fatima is investigating creating a new fintech app to innovate a process in the financial services industry, but she does not have a lot of programming expertise or time to create the entire product from scratch. Where should Fatima go to see what processes are already available for her to use?

A cloud integration service

An API gateway solution

An API management solution

A cloud technology service

An API gateway solution

This is a place to list APIs that are available for use by product developers.

What are three services and benefits that cloud companies are creating and offering to support fintech start-ups? Choose three answers.

Seed funding services to aid in finding financial backing

Partnering with federal regulators to ensure platform compliance

Establishing dedicated partner enablement programs

Programming courses to teach basic skills to entrepreneurs

Creating certifications and partnership status for complex financial services

Creating cloud locations in entrepreneurial hotspots, like California

Partnering with federal regulators to ensure platform compliance

**Since the cloud is the host platform for many of these companies, compliance with federal regulations is important to them.

Establishing dedicated partner enablement programs

**These programs include sharing information and implementation guides for the financial products.

Creating certifications and partnership status for complex financial services

**These certifications allow fintechs to have a level of credibility when marketing their products to customers and investors.

What are three examples of enabler apps? Choose three answers.

An app that provides insights into a customer's purchasing pattern

An app that allows remote access to the internet

An app that helps onboard a new customer

An app that processes a payment from a credit card

An app that lists the restaurants in a city

An app that identifies the lowest-cost insurance

An app that provides insights into a customer's purchasing pattern

**This type of app can be used in conjunction with a retailer's app to improve sales.

An app that helps onboard a new customer

**New apps can build this program into their products without having to recreate the programming code.

An app that processes a payment from a credit card

New apps can use this subroutine to process payments without having to program it themselves.

What is the internet of things (IoT)?

The collection of sensors communicating over Wi-Fi networks

The physical infrastructure used to maintain the internet

Mobile devices that are internet enabled

The hardware in which the cloud-based systems store data

The collection of sensors communicating over Wi-Fi networks

The sensors can store data and communicate with other sensors and devices to send signals regarding the current status of what it is monitoring.

How are fintechs using the internet of things (IoT) to lower the cost of car insurance?

Extra insurance coverage can be added whenever the traffic is heavy.

Regulators capping the maximum speed of a car can be switched on.

Erratic driving behavior will require safety courses before renewing insurance.

Driver behavior is used to build a customized insurance quote.

Driver behavior is used to build a customized insurance quote.

Customized quotes can save money for the better drivers who are not added to the general pool and reduce operating costs for the insurance companies.

Which statement regarding the use of technology and the internet of things (IoT) to aid fintechs in insurance offerings is correct?

Drones film buildings from above and download the pictures, which are analyzed to determine structural flaws to aid in pricing property insurance.

DNA testing is done, with the results analyzed by technology companies to determine hereditary issues to price health insurance more accurately.

Motion sensors are used to determine the specific actions that led to an injury, reducing the cost of fraudulent workplace injury claims.

Replacement parts in cars are matched to automakers' manufacturing specifications to determine if the right parts were used, reducing insurance costs.

Drones film buildings from above and download the pictures, which are analyzed to determine structural flaws to aid in pricing property insurance.

Which aspect of blockchain uses common algorithms, like practical Byzantine fault tolerance (PBFT) and proof-of-work (PoW), to validate the process?

Digital signature

Distributed ledger

Cryptographic hash

Consensus

Consensus

These algorithms make it possible to determine if all parties agree to the details of a transaction.

What is one of the ways that nations in Third World countries are benefiting from digital currencies such as Bitcoin?

By using Bitcoin to transact purchases and sales across international borders

By using Bitcoin as a storage place for government funds, reducing theft

By using Bitcoin as a national currency, increasing trust in their financial matters

By using Bitcoin to attract investment in their country from outside developers

By using Bitcoin to transact purchases and sales across international borders

Using Bitcoin as the exchange medium allows for greater trust in the value of the transaction.

How has fintech improved the process of donating to charitable causes such as disaster relief?

It allows for direct payments to individuals in need, removing the middleman.

It allows for donations to be made across international boundaries.

It verifies that the payment was received by a valid organization.

It creates an audit trail for income tax deductibility.

It allows for direct payments to individuals in need, removing the middleman.

Using P2P and similar technologies, the donor can be assured that the full amount of the donation goes towards helping individuals in need, rather than having the amount reduced by third-party organizations.

Which three statements demonstrate how an Internet of Things (IoT) device can be used with fintech applications? Choose three answers.

An accelerometer can be used to speed up payments at a checkout.

A smart refrigerator can prepare a shopping list based on which items are about to expire.

A prohibitor can be used to void purchases of certain items.

An altimeter can be used to automatically purchase appropriate clothing.

A tracker can determine if card transactions are occurring in different parts of the world.

A sensor in a car can pay a toll when the car passes a booth.

"A smart refrigerator can prepare a shopping list based on which items are about to expire" is correct. This feature can be adjusted to include only certain categories of purchases and can be turned off if it proves to not be useful.

"A tracker can determine if card transactions are occurring in different parts of the world" is correct. If the same physical card is being used in different parts of the world too closely together, that is an indication that fraud may be involved.

"A sensor in a car can pay a toll when the car passes a booth" is correct. This feature allows for the elimination of toll booth workers and office processors, saving money in the overall system.

Which characteristics have made blockchain popular in fintech applications? Choose three answers.

It is secure.

It is backed by the federal government.

It was created by Apple.

It cannot be duplicated.

It is denominated in Euros, a multinational currency.

It can be distributed globally.

It is secure

It cannot be duplicated.

It can be distributed globally.

Which type of model does artificial intelligence (AI) use in fintech apps to determine if a potential customer will commit to a purchase decision?

Survival model

Linear regression model

Time series model

Discrete choice model

Discrete choice model

Given a specific set of circumstances a binary outcome, "purchase" or "not purchase" will result.

How has artificial intelligence (AI) aided the security of fintech websites and apps?

AI enables the use of speech recognition to add a layer of security.

AI enables the generation of unique passwords to keep sites secure.

AI enables encryption schemes that disguise the data even if it is accessed.

AI enables sites to install impregnable measures to safeguard data

AI enables the use of speech recognition to add a layer of security.

AI aids in learning the speech patterns of a customer and using it as a means of identification.

What is an advantage of using big data over traditional data analysis?

Big data allows for a sample to be analyzed instead of the entire population.

Big data can be used in whole or in smaller subsets.

Big data helps to better understand a person's behavior.

Big data can all be stored in the same location.

Big data helps to better understand a person's behavior.

Rather than just using samples that examine a small piece of decision-making, big data enables a more complete analysis of a person's behavioral patterns.

What is a primary reason fintechs, using big data, have been successful in the competitive loan market?

They have found loan-worthy customers typically ignored by traditional financial institutions.

They are better able to spread the risks of loan defaults around a larger pool, lowering the interest rates.

They have been able to better target market customers who want a loan.

They are more accurate at predicting loan defaults among customers with large asset bases.

They have found loan-worthy customers typically ignored by traditional financial institutions.

By not relying solely on credit scores, fintechs have been able to reach those who do not have a credit history, such as the unbanked, immigrants, and first-time borrowers.

How has the use of artificial intelligence (AI) in fintech improved the marketing strategies of companies?

AI allows for more mass marketing to zip codes and areas where the retailer has had the most success.

AI aids in the development of new products specifically geared toward the target customer's needs.

AI allows fintech to predict the possible next purchase of a consumer and push offers and coupons accordingly.

AI gives marketers more demographic data regarding their target market, aiding in identifying the most profitable sector of consumers.

AI allows fintech to predict the possible next purchase of a consumer and push offers and coupons accordingly.

AI uses smart programming to analyze past behaviors and predict the possible next purchase of the consumer.

A company uses its artificial intelligence (AI) capabilities, combined with fintech, to run multiple simulation scenarios to predict outcomes.

Which type of model is this?

Descriptive model

Business intelligence model

Predictive model

Decision model

Decision model

This type of model will take inputs from multiple models and variables and combine them for greater prediction accuracy.

Which model in machine learning uses experience to determine the relationships between inputs and outputs?

Multilayer perception modeling

Descriptive modeling

Predictive modeling

Neural network modeling

Neural network modeling

This is used when the specific nature of the relationship between variables is unknown, so the machine uses experience to learn about the relationship.

Why are fintechs using AI to monitor the feeds of social media in real-time?

To monitor significant global events and advise investors to initiate action on their portfolios

To more quickly identify when a consumer likes something to better target advertising

To more quickly determine shifts in social trends and advise producers and marketers of potentially successful new products

To gather information on the consumer's friend network and advise when a friend engages in a purchasing transaction

To monitor significant global events and advise investors to initiate action on their portfolios

Markets react quickly to significant global news events, so getting the information more quickly can give an edge to investors.

How are fintech apps using artificial intelligence (AI) to better detect fraudulent financial activities?

AI tracks locations continuously and alerts users when spending occurs elsewhere.

AI uses biometrics for each purchase transaction to verify identity.

AI predicts future purchases and allows only those predicted to occur.

AI systems spot out-of-the-ordinary spending patterns.

AI systems spot out-of-the-ordinary spending patterns.

AI can be trained to determine whether certain purchases are part of an individual's normal spending habits.

How has fintech used artificial intelligence (AI) to better inform lenders when making lending decisions?

It uses nontraditional sources of information to create its own credit score.

It searches previous loan payment history for the borrower more thoroughly.

It updates credit information quickly, allowing for the most up-to-date score.

It uses information from all credit bureaus to create a composite credit score.

It uses nontraditional sources of information to create its own credit score.

It can create specific credit scores using information available from nontraditional sources, which are better predictors of repayment.

Which aspect of artificial intelligence (AI) has been most useful for fintech applications in financial transactions?

Visual perception

Speech recognition

Decision-making

Language translations

Decision-making

AI creates models using past transactions and big data to determine how best to advise financial clients in making decisions.

Which statement regarding the advancement of smartphones and technology is correct?

Development of mobile apps has not kept up with the multiple screen sizes of new mobile devices.

Mobile phone penetration has now reached the point where there are about as many mobile phones as people on Earth.

Since the introduction of the smartphone, data transmission speeds have increased to more than 50 times faster.

The introduction of text capability allowed for greater transmission of data as it operates on a lower bandwidth.

The introduction of text capability allowed for greater transmission of data as it operates on a lower bandwidth.

The lower bandwidth removed the need to navigate multiple interfaces, which sped up the process as well as lowered the cost of data transmission.

The accessibility of fintech apps took a major step forward with the creation of online app marketplaces.

What is a negative aspect of this advancement?

Apps not installed through the specific online marketplace were flagged as “not secure."

Entrepreneurs gave up ownership rights to their apps.

Apps needed to be repurchased for each mobile device being used.

Apps had to have a constantly live interface with the online app marketplace to function.

Apps not installed through the specific online marketplace were flagged as “not secure."

This meant that these apps had limited or no capability to interact with other apps on the device.

Which type of cellular network technology first allowed devices to connect to the internet, advancing the revolution in fintech?

4G networks

2G networks

3G networks

1G networks

3G networks

Access to the internet was brought about by 3G networks, enabling fintech companies to create apps to allow remote access to their services.

1G Voice

2G Text

Which group represents the features that the iPhone was the first to combine into a single device, thereby jumpstarting the fintech revolution?

Running apps on the phone, having a camera built inside, and offering connectivity through a wireless access protocol (WAP)

Making and receiving calls, having a physical Qwerty keyboard, and having a camera built inside

Transmitting information as data streams, having a camera built inside, and having a physical Qwerty keyboard

Making and receiving calls, running apps on the phone, and transmitting information as data streams

Making and receiving calls, running apps on the phone, and transmitting information as data streams

These features were available independently, but the iPhone was the first to package them together into a single device.

How has the use of the cloud allowed fintech start-ups a better chance of success?

Security in the cloud keeps fintechs safe from cyberattacks.

The cloud provides the major marketing functions for fintechs.

Start-ups reduce the risk of overinvesting or underinvesting in infrastructure.

Use of the cloud allows the apps to be found in the same place as other apps.

Start-ups reduce the risk of overinvesting or underinvesting in infrastructure.

Services are typically pay-per-use, so when fintech has low levels of customer use, it has not wasted money on infrastructure. The same is true for high levels of use and being underinvested.

What is described as using a series of existing subroutines, or building blocks, to create a new program around an original idea without having to develop new code for each process?

API-fication

Fluid grid

Responsive web design (RWD)

Payment information service (PIS)

API-fication

This is the use of available (sometimes for payment, sometimes as open-source) processes so as to not have to reprogram each element of the product's code.

What is the major benefit coming from the European Union's regulatory directive, Payment Service Directive 2 (PSD2)?

All financial institutions, including newly developed fintech, must be subject to regulation when transacting business across national borders.

All financial transactions originating from or entering into the EU must be denominated in Euros.

All governments within the EU must allow free movement of money across national boundaries.

All financial enterprises need to make their payment functionality available as an API and available to a third party.

All financial enterprises need to make their payment functionality available as an API and available to a third party.

This aids in the development of fintech and allows for more transferability of financial transactions across different companies and platforms.

What is one way that the internet of things (IoT) is transforming financial products and services?

A computer can be used to log in to a bank account from a remote location.

A sensor embedded in a car will automatically pay for a toll.

A mobile device can be used to remotely pay for a purchase transaction.

A bank account can be linked to a payroll service, enabling an automatic deposit.

A sensor embedded in a car will automatically pay for a toll.

A sensor can store data and connect to the internet, triggering a payment to be made for usage of a toll road.

How can the internet of things (IoT) be used to prevent fraud in financial transactions?

Location sensors can be embedded in physical credit cards to determine if the physical location of the card matches the location of a purchase.

Sensors within cards can stop transactions from going over a predetermined spending limit.

Ink with embedded sensors can be used to print money, better enabling the detection of counterfeiters.

Pens equipped with sensors can determine if handwriting on a check is from the authorized signer.

Location sensors can be embedded in physical credit cards to determine if the physical location of the card matches the location of a purchase.

In this manner, fraudulent transactions can be flagged and investigated, reducing the loss that occurs to merchants and card issuers.

How are fintechs using technology to lower the cost of insurance?

By installing onboard diagnostics in cars to capture event details to lessen fraud

By using cameras to monitor food intake and offer healthy suggestions

By sending drones over insured homes frequently to monitor for fires

By offering discounted health insurance for logging activity on a smartwatch

By installing onboard diagnostics in cars to capture event details to lessen fraud

This reduces inaccurate reporting of accidents and lowers the number of fraudulent payouts, reducing the overall costs of insurance.

Which of these fintech application ideas is actually available right now?

An app which lists the bank account balances of individuals' profiles on dating sites

An app which automatically updates insurance needs when a life event occurs, like a birth, marriage, or death

An app which moves money over to a savings account based on the temperature that day

An app which sends an electric shock to a smartwatch if the wearer exceeds a predetermined spending limit

An app which sends an electric shock to a smartwatch if the wearer exceeds a predetermined spending limit

This app was mentioned in the reading material as an app that is currently being used.

How does blockchain aid financial transactions?

Once a series of transactions are verified, they cannot be modified.

When a subroutine of code has been created for a program, it can be used in other programs, saving time and costs.

It has standardized financial protocols to make transactions more acceptable worldwide.

Digital currencies created with the technology are accepted by most federal governments.

Once a series of transactions are verified, they cannot be modified.

The transactions are bound together to form a block, which cannot be altered or modified.

How are countries in Africa using blockchain technology like Bitcoin to improve their finances?

By adopting Bitcoin as a national currency

By denoting transactions in Bitcoin equivalents to standardize exchange rates

By using Bitcoin as an international currency for trade payments

By mining for Bitcoin to improve their country's financial standing

By using Bitcoin as an international currency for trade payments

As currencies can fluctuate and become unreliable, using Bitcoin adds an element of trust to the transaction.

What is the fintech product that can check on the occurrence of certain conditions without human interaction and then trigger an action based on the circumstances?

A cryptographic transaction

A distributed ledger

A smart contract

A consensus agreement

A smart contract

Rather than having humans verify that an action has taken place or a condition has been met, sensors and other devices verify it and trigger the next action.