Unit 1 - FinTech, RegTech & Blockchain

Question 1

What is ‘FinTech’?

Answer 1

Financial Technology.

This includes both:
- Business-to-Customer (B2C)

• Business-to-Business (B2B)

Question 2

What are examples of B2C propositions?

Answer 2

• Online money transfer and payments
• Insurance (comparison sites and telematics)
• Borrowing (short-term loans)
• Financial planning (online budgeting tools)
• Savings and investments (P2P, online stockbroking, investment advice)

Question 3

What are examples of B2B propositions?

Answer 3

• Enterprise and RegTech (Analytics providers, Blockchain solutions, CRA data and analytics, cybersecurity)
• Small and Medium sized enterprises (FX and B2B payments)
• Corporates (Merchant aquirers and gateways, Fraud detection software, loyalty software, payment software

Question 4

What is ‘RegTech’?

Answer 4

Technology that automates compliance with regulation or identified potential violations of it

Question 5

What are two areas of activity that are crucial to start-ups in FinTech?

Answer 5

1) Analytics
2) Payments

This enables challenger banks to compete with established banks

Question 6

What does McKinsey day are six imperatives for a FinTech start-up?

Answer 6

1) Find opportunities for mass-recruitment of customers
2) Radically reduce costs of servicing customers
3) ID new indicators of credit-worthiness
4) Target specific market segments
5) Co-operate with more established non-FinTech fin services firms
6) Anticipate and digitise responses to regulatory reqmts

Question 7

Why find opportunities for mass-recruitment of customers?

Answer 7

To ensure attract enough customers

Question 8

Why radically reduce costs of servicing customers?

Answer 8

To ensure long-term competative advantage

Question 9

Why ID new indicators of credit-worthiness?

Answer 9

To ensure attract enough customers

Question 10

Why Target specific market segments?

Answer 10

To avoid trying to attract relatively immobile customers of the large established banks

Question 11

Why co-operate with more established non-FinTech fin services firms?

Answer 11

To avoid the cost of re-inventing the wheel

Question 12

Why anticipate and digitise responses to regulatory reqmts?

Answer 12

To avoid being forced out of the market by violating regulation, or paying too much to become compliant late

Question 13

What are six measures to counter FinTech attackers?

Answer 13

1) Make use of not just in-house, but also analytics tied to other large-scale platforms, like Facebook
2) Design customer interface to equal online retail platforms for speed and integration of services
3) Aquire (mimic) marketing skills of online retailing platforms
4) Reduce costs through digitisation - automation and blockchain technologies
5) Tailor services to mobile phone access
6) Streamline org to allow 1-5

Question 14

What does Blockchain do?

Answer 14

Keeps track and prevents alteration of records of a wide range of commercial transactions.

Represents transactional info to many users simultaneously in real-time.

Uses established digital cryptography in novel ways to prevent manipulation of records of transactions.

Question 15

What is ‘Non-mediated Technology’?

Answer 15

Individual users can buy or sell to one another without an institution in the middle.

Question 16

What does ‘Distributed Open Ledger’ mean?

Answer 16

• Distributed: Same ledger held on each of computers of stakeholders in a community
• Open: As available to everyone in community at same tume, it is accessible
• Each entry protected by cryptographic key

Question 17

How are Blockchain transactions validated?

Answer 17

By a miner, a member of ledger-holding community who competes to add new unalterable entry to the distributed ledger, solving cryptography problem and winning the right (for a small fee) to validate the transaction.

Validation chains new transactions to previous ones on distributed ledger.

Question 18

What is a disadvantage of Blockchain?

Answer 18

Not easy to regulate, especially when using digital currencies.

May lie outside jurisdiction of tax collectors and police authorities, so can assist with money laundering and also to collect money from ransomware attacks, or sales of illicit goods.

Question 19

What is ‘Bitcoin’?

Answer 19

Digital currency, convertible into currencies issued by central banks.

As bypass retail banks and their regulation, preferred currency for illegal dealings.

Question 20

Why is Blockchain energy-consuming on a large scale?

Answer 20

Mining operations consume enormous amounts of computing power, translated into huge electricity demands