Fintech Law Module A Chapter 2

Question 1

Discuss the development of Fintech

Answer 1

• 2008 financial crisis caused drop in trust of banks due to scandals
• Rapid technology development
• Service expectations from customers

Question 2

Name the 4 key players of fintech

Answer 2

1. Incumbent, well established financial institutions: HSBC & Barclays
2. Big technology companies that are active in the financial services space: Apple & Google
3. Companies that provide infrastructure of technology that facilitates financial service transactions: Mastercard & NASDAQ
4. Disruptors, these are fast moving companies, often start-ups: Stripe & Beterment

Question 3

What are the key products and trends in fintech, name 5?

Answer 3

1. Payments
2. Insurance
3. Investment advise
4. Securities clearance and settlement
5. Alternative Funding platforms

Question 4

What is Artificial intelligence?

Answer 4

Advanced algorithms to derive patterns to predict behavior and prices and in the end to mimic human judgement in automated decisions

Question 5

What are the benefits of AI and name the report where this is described, name 3 benefits.

Answer 5

Joint committee of the European Supervisory Authorities report

1. Tailored products and services
2. Improved fraud analytics
3. Enhanced efficiency of internal organisational procedures

Question 6

What are the risks of AI and name the report where this is described, name 2 risks.

Answer 6

Joint committee of the European Supervisory Authorities report

1. Errors in big data tools
2. The increasing segmentation of customers may influence the access to certain financial services and products

Question 7

What does machine learning bring to the financial services industry and based on which report?

Answer 7

EBA report
Provides the financial sector with new methods of performing statistical analysis and performing tasks, such as credit rating.

Question 8

Name an example of biometrics and name a benefit of the technology and explain why.

Answer 8

Example: fingerprint or face recognition

1. Gives financial institutions independence from passwords & PIN’s, which are more sensitive for attacks and thus is a great security to mobile payment solutions.

Question 9

Describe the risk associated with biometric technology

Answer 9

Breach of biometric information is more serious than a security breach regarding passwords.

Question 10

Describe the term robo-advice and name 1 benefit and 1 risk.

Answer 10

Uses algorithms to automatically perform many of the investment tasks carried out by a human financial advisor.
Benefit: cost-effective
Risk: a poorly designed model can lead to systematic mis-selling

Question 11

Describe 3 benefits of blockchain technology

Answer 11

1. Decentralisation
2. A reliance on economic incentives rather than on a centralised administrator
3. some form of anonymity

Question 12

Describe 7 limitations of blockchain technologie

Answer 12

1. Performance and scalability
2. Privacy and security
3. Interoperability between: 1 different blockchains, 2 applications built on the same blockchain and 3 between blockchain and legacy systems.
4. Theft or loss of private keys
5. Trade-offs relating to the governance of blockchains, for example software updates where there must be consensus amongst the network.
6. For public adoption to happen, blockchain must be fully brought within public policy and legal frameworks.
7. Competition issues

Question 13

Following the IMF paper what is a key regulatory challenge posed by Fintech?

Answer 13

The balance between customer protection and encouraging development of technology.

Question 14

Name 4 regulatory challenges posed by fintech

Answer 14

1. The clarity and consistency of regulatory and legal frameworks
2. The adequacy of existing financial safety nets
3. The threat of money laundering
4. Potential threats of financial integrity