Chapter 19 Flashcards
Provide solutions for high frequency trading, copy trading, e-trading and robo advice
- robo advising
- algorithmic trading
- high frequency trading
investment management
______ are online services that use algorithms to automatically perform many investment tasks done by a human financial advisor.
Robo-advisors
- It is an end-to-end process that allows fintechs and other third parties to connect with banks’ systems directly via APIs.
- The process begins with a fintech or other third-party provider paying a fee to access the platform.
banking-as-a-service
The number of bank branches in the U.S. grew steadily from approximately ______ in 1948 to over ______ in 2008.
4,200; 82,400
The iPhone, which was first released in June 2007, is attributed with launching the ____ ___
mobile revolution
an application that runs exactly as programmed without any possibility of downtime, censorship, fraud, or third-party interference.
smart contract
In 1966, the ______ replaced the ______ as the standard for long-distance instantaneous communication of information.
telex network; telegraph
The pullback of banks during the crises was due to increases in ___ ___ and ___ ___, which allowed new fintech players to enter the marketplace.
regulatory burdens; risk aversion
By 2019, global smartphone penetration reached:
66.9 percent
A method of designing a sequence of actions to solve a problem, known as algorithms, which optimize automatically through experience and with limited or no human intervention.
- credit rating (rocket mortgage)
- fraud detection
- forecasting/ stress testing
machine learning
Process that allows fintechs and other third parties to connect with banks’ systems directly via application programming interfaces so that they can build banking offerings on top of the banks’ infrastructure to reach users outside of the banks’ existing footprint.
banking-as-a-service (BaaS)
- Rent a bank
- Bank invests in fintech startups
- Fintech firms sell to banks
- Banks in-house develop fintech solutions (or fintech becomes banks)
Evolution of Fintech
- LendingClub and Prosper’s partnership with WebBank
- Marlette Funding’s partnership with Cross River Bank
Stage 1: “Rent a bank”
- Banks acquire loans originated by LendingClub
- BNP Paribas’ acquisition of french digital bank Compte-Nickel
Stage 2: Banks buy assets from and take equity stake in fintech startups
- Avant and Regions Bank partnership to underwrite unsecured loans
- OnDeck and JPMorgan Chase’s partnership in serving small businesses
Stage 3: Fintech firms providing technology and infrastructure to banks.
- Goldman Sachs launches its in-house online lending arm Marcus
- SoFi acquired Zenbanx and applies for a bank charter
Stage 4: Banks developing in-house fintech arms; Fintech startups apply for a bank charter
A system that provides a user with a network of FI’s data using APIs.
- By opening APIs to sharing, third parties have easier access to financial information for existing bank customers, which allows them to build new apps and services.
Open Banking
Let customer use a bank account or a credit/debit card to pay friends and family from their mobile phones (ex: paypal, venmo, square cash)
P2P payments
is a particular type of DLT that organizes data into batches of transactions which are held together in an append-only data structure.
Blockchain
A digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. (ex: bitcoin, litecoin, ether and XRP)
Cryptocurrencies
A digital system for recording the transaction of assets in which the transactions and their details are recorded in multiple places at the same time.
- have no central data store or administration functionality.
- Ex: blockchain, smart contracts
Distributed Ledger
A way of raising money through the collective effort of family, friends, individual investors, and customers
- ex: GoFundMe
Crowdfunding
The ____ fintech charter would allow a fintech company to become a special-purpose national bank that can pay checks or lend money, but the institution cannot take deposits nor can it use FDIC insurance.
Office of the Comptroller of the Currency (OCC)
—regulations: charters
The world’s strongest set of data protection rules, which enhance how people can access information about them and places limits on what organizations can do with personal data.
General Data Protection Regulation (GDPR)
A European regulation for electronic payment services. It seeks to make payments more secure in Europe, boost innovation, and help banking services adapt to new technologies.
Payment Services Directive 2 (PSD2)
The advantages of the establishment of the NASDAQ
I. It helped reduce the bid-ask spread.
II. It ended fixed securities commissions.
advantages that retail banks maintain over fintechs
- Banks have tens of millions of trusting customers who interact with them daily.
- The cost of capital for banks is close to zero.
- Banks have decades of compliance experience.
- Banks have more experienced legal teams.
