UGA Trotter BUSN 3700 Midterm

What is the primary benefit to a retailer of using "real time payments"

speed of payment

T/F: Open Banking will be a threat to the traditional credit card network providers ( Visa, MC, Discover)

true

In the traditional payments space, TSys and First Data are examples of

Merchant Service Providers

Payment capabilities from applications like Venmo or Facebook are called

Social Payments

Before 1972 traditional banking paper remittance took the shape of the following

Personal check, Money order, Draft, Cashiers check

T/F: An ACH transaction is faster than a wire transfer

false

What are the 5 functions of the credit card value chain?

1) processors

2) card networks

3) ACH providers

4) Gateways

5) MCP's

In the world of mPOS - this form of mobile payment uses NFC ( near field communication)

mobile proximity payment

In the world of crowdsourcing - these are the four primary forms

1) donation

2) reward

3) lending

4) equity

T/F: Crowd investing is only available for those with $100,000 of liquid assets

False

The Four Core Services of a Traditional Retail Bank

1) Saving

2) Payments

3) Investing

4) Lending

Fintech Companies typically fall into which three categories

1) Complementor

2) Catalyst

3) Competitor

Ally Bank which has no physical branches, best fits which new FinTech banking model?

challenger bank

Different from retail banks, corporate (business) also offer these services

Treasury, Co Real Estate, Trade Financing, Employer Services

PayPal's decision to offer short term loans for members is an example of their move into business banking via

Short Term Working Capital

In Peer to Peer Lending - the borrower is creating a loan directly with the

P2P Platform Company

four core services of traditional retail/commercial banking

1) savings

2) payment/transaction processing

3) investing

4) lending

Examples of processing services

money transfer, bank transfers, hand delivery, mail, post offices, stored value cards

check cards or ATM/Debit Cards

bank cards that allow for the payment of goods and services to be subtracted directly from a bank deposit account

Stored Value Cards

Bank cards with preset, limited value.

Used to pay for goods and services.

Alternative to cash.

electronic bank services

direct deposit, transfers between accounts, transfers to a third party, online banking, bank by phone, ATM

Electronic Fund Transfer Act

protects consumers against unauthorized electronic fund transactions including debit and credit card purchases, ATM withdrawals, and automatic bank account withdrawals

Check 21

a federal law that helps banks handle more checks electronically and that makes check processing faster and more

efficient.

Application Programming Interface (API)

A set of software routines that allows one software system to work with another.

complementor

can be used by a customer WITH a mainstream financial service and cannot be used by itself

ex: paypal, apple pay

catalyst

help financial services firms compete in fintech markets

ex: fiserv

competitor

vie for the same business of financial service firms

ex: chime

neo banks

a company that provides an upgraded and updated version of a traditional bank, without holding a banking license

ex: chime

challenger banks

a bank that competes with national banks while operating with no physical branches

ex: ally

i-banks

offers some services similar to a traditional bank however principle source of revenue is earned through data monetization

ex: secco

five core services of traditional corporate/business banking

1) lending / credit

2) treasury / cash management

3) commercial real-estate

4) trade financing

5) employer services

treasury - cash management

management of:

- enterprise cash

- working capital

- cash budget

typical consumer loans

mortgage, student loans, auto, small business loans

Traditional Remittance Delivery Methods

money order/cashier check, personal check, drafts

ACH - Automated clearing house

ACH transfer is an electronic, bank-to-bank transfer processed by the Automated Clearing House network.

Types of ACH transfers

external funds transfers, person-to-person payments, bill payments, and direct deposits from employers and government benefit programs

wire transfer

Wire transfer, bank transfer or credit transfer, is a method of electronic funds transfer directly from one person or entity to another

the world of payments

- card networks

- ISOs/MSPs

- Issuers

- Acquirers/Processors

- Gateways

acquirers/processors

- enables merchants to accept card payments

- authorization, settlement, and dispute management

wells fargo, fiserv

card networks

- facilitates transactions between merchants and card issuers

- controls "swipe fees" to accept a card

visa, discover

Issuers

- issue cards to consumers, set terms, pay fees to merchants

- collects cardholder payments and customer service

capital one, bank of America

Gateways

a merchant service provided by an e-commerce application service provider that authorizes credit card or direct payments processing for e-business, online retailers, bricks and clicks, or traditional brick and mortar

paypal, amazon pay

ISOs/MSPs

merchant account service providers that allow you to take payments from your customers

paywire, merchant one

new methods in payments

mobile, social (P2P), Nano payments

social payments

a person connects with "friends" through the service and can easily select a person, type in an amount, and either pay or charge that person accordingly

B2B payments have 3 elements

1) How paid?

2) when paid?

3) who pays?

credit card transaction processing value chain

1) swipe card

2) acquiring bank processes transaction

3) card network facilitates transaction

4) issuing bank pays acquiring bank using the card scheme network

5) acquiring bank confirms payment

6) merchant provides purchased goods

digital wallet

electronic devices that allow an individual to make e-commerce transactions

apple wallet, google pay, paypal, venmo

Near Field Communication (NFC)

is a short-range wireless connectivity standard that uses magnetic field induction to enable communication between devices when they're touched together, or brought within a few centimeters of each other

mobile payments

1) mobile point of sale (POS)

2) remote mobile payments

3) mobile proximity payments

mobile point of sale (POS)

this type of mobile transaction occurs when a merchant business (seller) uses a mobile device in place of a fixed POS terminal.

remote mobile payments

is any transaction conducted by using a mobile device to connect to a website or an app and to make a purchase.

shopping on Amazon, paying for streamed content

mobile proximity payments

type of mobile transaction involves a consumer using their mobile device at a POS in lieu of cards, cash, or checks. This type of transaction can be achieved using Near Field Communication (NFC) technology, allowing the phone to emit a signal that is natively readable from an NFC-enabled terminal such as Apple Pay or Google Pay.

buy now pay later

klarna, presto

FICO credit score

a credit score method that reflects your credit risk based on a snapshot of your credit report at a particular point in time

crowdfunding

the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.

Types of Crowdfunding

1) charity donation

2) reward

3) lending

4) equity

charity donation crowdfunding

ex: fundly, supportful

reward crowdfunding

ex: kickstarter

Lending Crowdfunding

ex: lending club

Equity Crowdfunding

a form of crowdfunding that gives investors the opportunity to become shareholders in a company

ex: AngelList

how crowdfunding platforms make money

- platform fees

- all or nothing campaigns (5%)

- keep what you raise campaigns (8-10% if the goal is not met)

- low goal high volume vs. high goal low volume

JOBS act

to ease burden of some federal regulations and allow individuals to invest in startups through relaxed roles and for some initial public offerings. Allows companies to advertise/share publicly that they are seeking investments.

Croudsourcing

ex: Wikipedia, American idol, Youtube, Lays chip competition

wealth management advisor

a type of financial advisor who utilizes the spectrum of financial disciplines available to manage an affluent client's wealth for one set fee.

about understanding a client's goals and risk tolerance

robo-advisors

Online wealth management services that provide automated, algorithm based portfolio management advice without the use human financial planners. these specialty firms are also registered investment advisors.

Fintech Ecosystem

remitants (payments)

ACH, wire transfers - real time payments