Fintech and Shadow Banking Flashcards
what is fintech
technological innovation in the financial sector, such as innovations in retail banking, investment and crypto-currencies.
what key technologies are related with fintech
- AI and Big Data
- Distributed computing and developments in cryptography (digital currencies)
- Mobile access and the internet (digital wallets)
discuss benefits of fintech
- Improve SMEs’ access to finance.
- Reduce inefficiencies in cross-border payments.
- Boost operational effectiveness and efficiency.
- Help developing countries’ strategic priorities.
Over the last years, there has been an increasing role of FinTech non-bank entities which have extended credit or have facilitated credit creation
discuss matching platforms
Peer-to-Peer (P2P) lending: These provide an online marketplace on which borrowers applying for loans are matched with prospective lenders, with the loan contract typically established between the borrower and one or more lenders.
discuss balance sheet lending platforms
These originate and retain loans to borrowers using their own balance sheet assets. In some cases, these entities securitise the loans they have made, either directly or with the help of a bank. Some balance sheet lenders obtain funding from hedge funds or banks.
discuss features of fintech lenders
- Process mortgage applications faster and adjust supply more elastically than others.
- Less likely to serve less creditworthy borrowers.
- Give access to mortgage credit to groups that are traditionally excluded from the mortgage market.
- Non-FinTech shadow banks seem to offer slightly lower interest rates than the FinTech shadow banks.
discuss shadow banking / fintech / securitisation during COVID-19
In early March 2020 the COVID-19 crises led to a run on ‘shadow banks’.
One type of shadow banks that experienced such a run was the prime money market funds (MMFs). Around mid-March, mortgage real investment trusts (mREITs) faced a bank run as well.
