Deck 18: Fintech Risks

Question 1

China leads other countries in adopting fintech at 69% compared to the US at 33% and Hong Kong and South Korea at 32% respectively.

Answer 1

True

Question 2

Banks that partner with fintech companies can leverage fintech companies' technology while maintaining the bank's reputation to better serve their customers.

Answer 2

True

Question 3

One of the ways the online marketplace lenders have reduced costs is through the streamlining of the traditional loan underwriting process.

Answer 3

True

Question 4

According to McKinsey Panorama, almost 80% of financial institutions have entered into fintech partnerships, however there is a high level of regional variation in fintech partnerships.

Question 5

Small businesses and riskier consumers faced risk adverse banks post the 2008 global financial crisis.

Question 6

Fintech has advantages such as being unburdened by regulators, legacy IT systems, branch networks, and not having the need to protect existing businesses.

Question 7

Peer-to-peer (P2P) lenders emerged prior to the 2008 global financial crisis and focused predominately on inter-bank lending.

Question 8

Macroeconomic conditions, including low interest rate environments put a downward pressure on profits and increased the incentives of FIs to cut costs.

Question 9

Demand for mobile technology is controlled by demographic factors, specifically the baby boomer's generation and adoption of the smart phone.

Question 10

Fintech companies typically have a lower cost because of their capital funding structures.

Question 11

Demand for mobile technology and an explosion in data traffic started largely through the unveiling of the first iPhone in 2007.

Question 12

The BCBS categorizes fintech innovations into four product sectors: credit, deposit, and capital-raising services; payments, clearing, and settlement services; investment management services; and market support services related to innovations and new technologies.

Question 13

The term "narrow banking" refers to when traditional banks would take deposits and hold only safe, liquid assets, leaving the borrowers and savers matching to fintech platforms.

Question 14

Fintech adoption rates, which measures fintech users as a percentage of the digitally active population, is universal across developed countries.

Question 15

The Basel Committee on Banking Supervision (BDBS) was created to identify risks associated with the emergence of fintech as strategic, operational, cyber-risk, and compliance.

Question 16

Retail banks still currently hold a huge advantage: customers, compliance, and capital.

Question 17

The changing supply and demand since 2009 has changed the banking services offerings leading some banks to replace banking services completely.

Question 18

Innovations such as the cryptocurrency Bitcoin in 2009 and Google Wallet in 2011 have aided in the financial and digital disruption that banks have been required to adapt to.

Question 19

The Financial Stability Board (FSB) defines fintech as "technology-enabled innovation in financial services that could result in new business models, applications, processes or products with an associated material effect on the provision of financial services."

Question 20

Millennials are considered digital natives with a high degree of technological fluency, resulting in a strong comfort level spending money digitally and purchasing apps.

Question 21

The largest threat to cryptocurrency investments stem from the danger of the investor losing an entire investment from hackers or the exchange holding the assets going out of business.

Question 22

Protections seen in the stock trading world also exist for cryptocurrencies.

Question 23

Central bank digital currencies (CBDC) refers to a new form of digital central bank money that is distinguishable from reserves or settlement balances traditionally held by commercial banks at central banks.

Question 24

Bitcoin (BTC), Litecoin (LTC), Ether (ETH), and XRP (XRP) are examples of privately issued digital currencies.

Question 25

Ethereum is a crypto-asset network that enables the building of smart contracts to allow for conditions to be set on what happens and when events take place.

Question 26

A mobile wallet is an app on the mobile device that stores payment information from a credit or debit card.

Question 27

A distributed ledger is a database that is independently held and maintained by each participant or node in a large network.

Question 28

Digital ledger technology (DLT) is an electronic ledger or database that records and verifies transactions but is limited only to currency and cannot be adapted to other uses in the financial system.

Question 29

The payments landscape have been transformed by fintech technology that includes card network, merchant acquirers, POS players, digital payment platforms, and person-to-person companies but haven't yet experienced major changes in bill payment and money transfers.

Question 30

Zelle, acquired by PayPal is a popular payment app that allows customers to send cash with same-day transfers to anyone with an account at a participating bank.

Question 31

In late 2017 and early 2018, a dramatic rise and fall of cryptocurrencies took place and is referred to as the 2018 Cryptocurrency Crash.

Question 32

Half a dozen or more of the largest crypto exchanges have failed since the mid-2014 while others have been shut down by authorities.

Question 33

PayPal is the most well-known P2P payment services with 267 million accounts.

Question 34

All crypto-assets or sub-class of crypto-assets are considered cryptocurrencies, a store of value and way to transfer value among users of that currency.

Question 35

Fiat exchanges are more difficult to set up than crypto-to-crypto exchanges due to increased reporting requirements from state and federal agencies.

Question 36

PayPal is the most expensive option for P2P by charging 2.9% fee for money sent from a debit or credit card with a 30 cents surcharge additional,

Question 37

Individuals looking to invest in crypto are able to purchase niche altcoins directly through a digital exchange platform without engaging in a fiat exchange.

Question 38

"Crypto" in cryptocurrencies refers to the complicated cryptography that allows for a digital token to be generated, stored, and transacted securely and anonymously.

Question 39

Peer-to-Peer (P2P) payments or transfers allow customers to use a bank account to pay friends and family from their mobile phone, however currently P2P is not yet linked to credit or debit cards.

Question 40

Distributed ledger technology works alongside centralized entities for record storage.

Question 41

Distributed ledger technology has potential uses in payments, clearing and settlement activities due to potential efficiency gains from the technology.

Question 42

Potential gains through the use of distributed ledger technology include simplifying settlement and reconciliation processes for the actors participating in payment, clearing, a settlement arrangements.

Question 43

Opponents to distributed ledger technology cite increased complexity, reduction in end-to-end processing speed, and lack of efficiency in record-keeping infrastructures.

Question 44

Distributed ledgers are unique in that records are not communicated to other nodes via a central authority, but instead are constructed and held by every node in the network.

Question 45

The inventor of the cryptocurrency Bitcoin is widely known in the cryptocurrency world.

Question 46

Benefits to machine learning algorithms include the identification of patterns that are correlated with other events or patterns that are often not recognizable to human eyes.

Question 47

Distributed ledger technology may not operate with existing processes and infrastructures as well as create ambiguity relating to settlement finality.

Question 48

Artificial intelligence or AI increases the availability of data through recognition of images, processing natural languages, and learning from experience.

Question 49

Distributed ledger technology may pose new risks such as potential uncertainty about operational and security issues arising from the technology.

Question 50

Benefits to smart contracts are they run exactly as programmed without downtime, censorship, fraud, or third-party interference.

Question 51

Industry uses for distributed ledger technology is currently unknown.

Question 52

Smart contracts are made possible through blockchain technology and can enforce a relationship with a cryptographic code.

Question 53

Machine learning is another name for artificial intelligence and focuses on incorporating robots to replace human labor.

Question 54

Algorithm used to optimize automatically through experience and with limited or no human interventions is referred to as machine learning.

Question 55

Upon consensus in the distributed ledger, all nodes maintain their own identical copy of the ledger and transactions.

Question 56

Blockchain organizes data into blocks, chained together in an append-only data structure.

Question 57

There is little risk of distributed ledger disrupting the way stocks are issued and traded.

Question 58

Artificial intelligence and machine learning are appropriate for data analysis and report generation but are not yet ready to use for regulatory compliance, surveillance, data quality assessment, and fraud detection.

Question 59

Bitcoin is the biggest, most widely used, and most developed smart contracts platform in the world.

Question 60

Financial institutions are reluctant to incorporate artificial intelligence and machine learning to access credit quality, price and market insurance contracts, and automate client interaction.

Question 61

Google Pay allows users to

A)make payments through programed credit cards in the smartphone.
B)make payments through an app on their smartphone.
C)make payments through their smartphone that have a built in chip.
D)make payments online with username and password.
E)none of these.

Question 62

In the 1990's, the internet allowed which of the following to occur:

A)Replace the need for phone-drive stock exchanges with online webpages.
B)High frequency stock trades.
C)financial service sectors to flourish.
D)the establishment of NASDAQ.
E)All of the options.

Question 63

AMTD describes the relationship between banks and fintech in all of the following stages besides:

A)Banks utilize Fintech technology and infrastructure.
B)Banks sell assets to Fintech to help Fintech get started.
C)Banks and Fintech partner in a "Rent a Bank" situation.
D)Banks create fintech sectors and Fintech apply for bank charter.
E)All of these are stages that AMTD describes as the relationship between banks and fintech.

Question 64

Crowdfunding is a method of raising money from collective efforts of individual investors and customers and can be launched through social media platforms.

Question 65

Which industry is most likely affected by fintechs:

A)Banking
B)Accounting
C)Brokerage
D)Insurance
E)None of the options.

Question 66

Smartphone subscribers have penetrated the global market at what percentage in 2017?

A)66%
B)73%
C)63%
D)52%
E)48%

Question 67

Online services that use algorithms to automatically perform investment tasks previously done by human financial advisors are referred to as "financial advisor-bots".

Question 68

Payment Services Directive 2 requires the sharing of consumer banking data with third parties when authorized by the customer, meaning it creates access to personal data, whereas the General Data Protection Regulation focuses on protecting the data.

Question 69

The SEC leverages big data to detect possible fraud and misconduct through the use of machine learning to identify patterns in the text of SEC filings.

Question 70

In what ways has Fintech changed the way payments are captured from a peer-to-peer standpoint?

A)Businesses ability to collect from customers.
B)Software to store credit and debit card information.
C)The utilization of software on phones to share money.
D)High speed sharing of funds.
E)All of the options are true.

Question 71

Which two countries lead the growth in fintech adoption?

A)Mexico and India
B)Indonesia and United States
C)China and Australia
D)United States and India
E)China and India

Question 72

What is the bid-ask spread referred to?

A)The difference bond asking and bidding prices.
B)The stock markets valuation of stock.
C)The difference between the stock's bid and asking price.
D)The reduction of the stock's active price.
E)None of the options.

Question 73

Between 2015 to 2018, what percentage did the usage of internet on mobile phones increase?

A)159%
B)89%
C)61%
D)267%
E)338%

Question 74

Which of the following factor has discouraged the need for fintech

A)Purchasing products online.
B)Store fronts.
C)Mobile banking.
D)Lending platforms.
E)Brokers support for buying or selling stock.
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Question 75

What resulted from the 2008 global financial crisis?

A)Increase in regulations.
B)Rise in risk aversion.
C)Banks were reserved to lend money.
D)New lenders entered the market within innovative products.
E)All of the options.

Question 76

What was the first electronic system that provided real time stock quotes?

A)Western Union
B)Quotron
C)Fedwire
D)NASDAQ
E)Telex

Question 77

The largest artificial intelligence deal in history was made in March of 2018 by S&P Global through the acquisition of the fintech firm Kensho, valued at $550 million.

Question 78

The Internet-of-things is slang for mobile devices that can be used in the business setting through applications and web technology.

Question 79

What are the "big C" advantages that retail banks hold over fintech:

A)Customer, compliance, character.
B)Compliance, coin, capital
C)Customer, compliance, capital
D)Capital, customer, cash
E)None of the options.

Question 80

Banks have completed global trade transactions between other banks using blockchain, smart contracts, and the IoT using open account transactions on a private distributed ledger.