Fintech History and Evolution

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Questions and Answers

What are the three main functions of money?

Centralization, decentralization, and security
Durability, portability, and divisibility
Unit of account, medium of exchange, and store of value (correct)
Uniformity, limited supply, and acceptability

What is the main reason for the shift to alternative, technology-driven payments after the 2008 financial crisis?

The need for a more centralized approach to financial regulation.
The increased popularity of cryptocurrency.
The rise of mobile banking and chatbots.
The growing demand for more efficient and transparent payment systems. (correct)

Which of the following is NOT a key element of a modern payment process?

Issuer
Network
Facilitator (correct)
Merchant

Embedded finance aims to simplify financial services by integrating them into existing platforms.

True (A) Signup and view all the answers

Which of the following best describes a key benefit of Apple Pay?

It provides a more secure and convenient user experience. (B) Signup and view all the answers

What are the two main types of financial planning approaches?

Traditional finance (TradFi) and fintech solutions (A) Signup and view all the answers

What is the primary goal of saving?

To transfer money from your present self to your future self. Signup and view all the answers

Robo-advisors are designed to provide fully automated financial planning with algorithms and minimal human interaction.

True (A) Signup and view all the answers

What is the primary distinction between equity and fixed income investments?

Equity offers ownership in a company, while fixed income represents lending money. (D) Signup and view all the answers

What is the main advantage of using an exchange for buying and selling cryptocurrency?

It facilitates trading between different cryptocurrencies and fiat currencies. (A) Signup and view all the answers

What is the primary goal of blockchain technology?

To provide a secure and transparent digital record of transactions. (D) Signup and view all the answers

What is the primary purpose of 'mining' in blockchain technology?

To verify and add transactions to the blockchain. (B) Signup and view all the answers

What is the main distinction between Proof of Work (PoW) and Proof of Stake (PoS)?

PoW is more energy-intensive, while PoS is more energy-efficient. (B) Signup and view all the answers

What is the primary advantage of using stablecoins?

They provide a stable and predictable value, often pegged to fiat currencies. (D) Signup and view all the answers

What is the primary purpose of liquidity pools in decentralized finance?

To facilitate trading on decentralized exchanges. (D) Signup and view all the answers

What is the primary advantage of using blockchain-based borrowing?

It allows for direct interaction between borrowers and lenders without intermediaries. (D) Signup and view all the answers

What is the primary purpose of a central bank digital currency (CBDC)?

To enhance financial inclusion and improve cross-border payments. (C) Signup and view all the answers

Robo-advisors are designed to replace the services of traditional financial advisors completely.

False (B) Signup and view all the answers

What is the primary advantage of using Python for financial applications?

It offers a simple and intuitive syntax for handling complex financial tasks. (B) Signup and view all the answers

What is the most common reason for the growing concerns regarding the adoption of generative AI in financial services?

AI can be biased and subject to ethical concerns. (A) Signup and view all the answers

The gamification of investing can lead to risky behavior, such as excessive trading and investment in high-risk assets.

True (A) Signup and view all the answers

The adoption of telematics and data from smartphones by insurance companies aims to create more individualized insurance rates based on driving behavior.

True (A) Signup and view all the answers

Tokenizing real-world assets (RWAS) using blockchain technology allows for fractional ownership of assets like real estate and gold.

True (A) Signup and view all the answers

Which of the following is NOT a potential benefit of a central bank digital currency (CBDC)?

It could enhance transaction privacy and security, making it harder for authorities to track financial activity. (B) Signup and view all the answers

The use of social media in financial decision-making can significantly influence investor behavior, potentially leading to both positive and negative outcomes.

True (A) Signup and view all the answers

The use of generative AI in credit risk management can improve efficiency and customer engagement but also introduces challenges related to data quality and governance.

True (A) Signup and view all the answers

What is the definition of "Fintech"?

Fintech refers to the integration of technology into offerings by financial services companies in order to improve their use and delivery to consumers. Signup and view all the answers

Which of the following is NOT a function of money?

Source of power (B) Signup and view all the answers

What were the main limitations of traditional bank-centric payment systems?

Complex processes, high costs, security risks, poor user experience, and biases in credit issuance. Signup and view all the answers

What is the purpose of a blockchain?

To store and process data in a decentralized manner. (D) Signup and view all the answers

Proof of Stake (PoS) is more energy-efficient than Proof of Work (PoW).

True (A) Signup and view all the answers

What are the key advantages of using Python in finance and fintech?

Simplicity, flexibility, and extensive libraries. Signup and view all the answers

Which of the following is NOT a method used to maintain a stable value for stablecoins?

Proof of Work (D) Signup and view all the answers

What does the term 'Fintech' refer to?

Fintech refers to the integration of technology into offerings by financial services companies to improve their use and delivery to consumers. Signup and view all the answers

What were the two major advancements that set the stage for modern finance?

Credit cards (1940s) and electronic transfers (1970s) were the two major advancements. Signup and view all the answers

Which of the following is NOT a key focus area of FinTechs?

Supply chain logistics (D) Signup and view all the answers

What is NOT a characteristic of money?

Unlimited supply (C) Signup and view all the answers

The 2008 financial crisis exposed the efficiency and low risk of traditional financial systems.

False (B) Signup and view all the answers

Which of the following is an example of a technological change in payment systems?

All of the above (D) Signup and view all the answers

What is the primary role of banks in the traditional banking system?

Banks act as intermediaries, providing services like storing funds, maintaining ledgers, and enabling transactions. Signup and view all the answers

Which of the following is NOT a challenge faced by traditional banking systems?

Lack of diversification (A) Signup and view all the answers

What was the 'Post-2008 Shift' in the context of payment systems?

The 'Post-2008 Shift' was a period of exploration for innovative, technology-driven payment solutions inspired by the shortcomings of traditional systems. Signup and view all the answers

What is the purpose of saving?

Saving allows you to transfer money from your present self to your future self, ensuring financial security for unexpected expenses, future goals, and retirement. Signup and view all the answers

Which of the following is NOT a reason for saving?

Investment diversification (D) Signup and view all the answers

Which of the following financial life stages typically involves being a net borrower?

Secondary Education (B) Signup and view all the answers

Savings management involves smoothing consumption between high-earning and low-earning periods.

True (A) Signup and view all the answers

What does 'TradFi' stand for?

TradFi stands for traditional finance. Signup and view all the answers

What is NOT a benefit of using robo-advisors?

Highly personalized financial plans (C) Signup and view all the answers

What is equity?

Equity represents ownership in a company, providing voting rights and potential for dividends or capital gains. Signup and view all the answers

Fixed income investments offer the potential for unlimited upside.

False (B) Signup and view all the answers

Which of the following is NOT a major player in the secondary equity market?

Central banks (C) Signup and view all the answers

What is the primary way that brokers and exchanges earn revenue in the equity market?

Brokers and exchanges earn revenue through commissions, fees, order flows, and data sales. Signup and view all the answers

Robinhood is known for its high commissions and complex trading interface.

False (B) Signup and view all the answers

What is the primary benefit of using digital wallets compared to cash?

Digital wallets offer greater convenience and security compared to cash, allowing for faster, safer, and more efficient payments. Signup and view all the answers

What are the two main ways stablecoins maintain their peg?

Stablecoins maintain their peg through collateralization, where they are backed by reserves of fiat or other assets, and algorithmic mechanisms, which adjust their supply to balance demand and maintain their value. Signup and view all the answers

What is the purpose of vaults in the cryptocurrency market?

Vaults allow users to lock up their cryptocurrency in exchange for rewards, such as interest or yield farming, by providing liquidity to decentralized exchanges. Signup and view all the answers

How does borrowing function on a blockchain?

Blockchain-based borrowing allows users to lend and borrow cryptocurrencies directly through smart contracts without intermediaries, using collateral to secure the loan. Signup and view all the answers

What is a perpetual futures contract?

A perpetual futures contract allows traders to buy or sell a cryptocurrency at a specific price without an expiry date, providing continuous trading opportunities on an underlying asset. Signup and view all the answers

What is the primary purpose of a blockchain?

A blockchain serves as a decentralized, distributed ledger that securely records transactions, ensuring transparency, security, and immutability without the need for a central authority. Signup and view all the answers

Which of the following is NOT a characteristic of a decentralized ledger?

Centralized control over the network (A) Signup and view all the answers

What is the difference between Proof of Work (PoW) and Proof of Stake (PoS) consensus mechanisms?

Proof of Work (PoW) requires miners to solve complex mathematical puzzles that require significant computational power and energy to validate transactions and add blocks to the blockchain. Proof of Stake (PoS) involves validators being selected based on the amount of cryptocurrency they hold and are willing to 'stake' as collateral to validate transactions and create new blocks, making it more energy-efficient than PoW. Signup and view all the answers

Bitcoin is a decentralized digital currency that uses a Proof of Stake (PoS) consensus mechanism.

False (B) Signup and view all the answers

What is the difference between a cryptocurrency exchange and a decentralized exchange?

A cryptocurrency exchange is a centralized platform where users can buy, sell, and trade cryptocurrencies using traditional order books. Decentralized exchanges use automated market maker models and liquidity pools, allowing for peer-to-peer trading without intermediaries. Signup and view all the answers

What is slippage in the context of cryptocurrency trading?

Slippage is the difference between the expected price of a trade and the actual price that is executed, often due to low liquidity or changes in market conditions. Signup and view all the answers

Which of the following is NOT a factor that contributes to the value of a stablecoin?

Market capitalization (C) Signup and view all the answers

What is the purpose of a liquidity pool in the cryptocurrency market?

Liquidity pools provide liquidity for decentralized exchanges by enabling users to trade cryptocurrencies without intermediaries, earning fees or rewards. Signup and view all the answers

Borrowing on a blockchain is similar to traditional borrowing, involving intermediaries like banks.

False (B) Signup and view all the answers

What are the key benefits of Buy Now, Pay Later (BNPL) services?

BNPL services offer flexible payment options for consumers, often with short-term financing and interest-free periods, making online shopping more accessible. Signup and view all the answers

Artificial intelligence (AI) is expected to have a significant impact on the future of education, creating more personalized and effective learning experiences.

True (A) Signup and view all the answers

What is the primary benefit of using blockchain technology in supply chain management?

Blockchain technology improves transparency, security, and efficiency in supply chains by providing a tamper-proof record of transactions and tracking goods across the global network. Signup and view all the answers

Gamification of investing is a positive trend that encourages responsible financial behavior.

False (B) Signup and view all the answers

What are the primary advantages of using generative AI in logistics and delivery?

Generative AI can optimize logistics efficiency by providing personalized recommendations, improving delivery times, and enhancing customer service. Signup and view all the answers

The use of telematics and smartphone data by insurance companies to personalize insurance rates is not controversial.

False (B) Signup and view all the answers

What are the key benefits of tokenizing real-world assets (RWAs)?

Tokenizing RWAs allows for fractional ownership of assets like real estate, gold, and other valuable holdings, making them more accessible and liquid. Signup and view all the answers

What are the potential benefits of a U.S. Central Bank Digital Currency (CBDC)?

A CBDC could improve cross-border payments, increase financial inclusivity, and potentially enhance the stability of the financial system. Signup and view all the answers

JPMorgan Chase's response to the CFPB's probe regarding fraud prevention on the Zelle platform was seen as an example of proactive measures taken by financial institutions.

False (B) Signup and view all the answers

Social media has no influence on stock market trends.

False (B) Signup and view all the answers

How is generative AI being used in credit risk management?

Generative AI is used to streamline credit risk management processes such as underwriting, portfolio monitoring, and customer engagement, but it raises concerns about data quality and governance. Signup and view all the answers

Proof of Stake (PoS) is considered more energy-efficient than Proof of Work (PoW).

True (A) Signup and view all the answers

What are the key benefits of using blockchain technology in the sports betting industry?

Blockchain technology can enhance transparency, security, and user engagement in sports betting by providing a secure and verifiable record of transactions. Signup and view all the answers

Why is Python becoming an increasingly popular language for finance and fintech professionals?

Python's simplicity, flexibility, and extensive libraries make it ideal for handling complex financial tasks like data analysis, risk management, and algorithmic trading. Signup and view all the answers

Flashcards

FinTech

Using technology to improve financial services for consumers.

Finance

Managing, creating, and studying money and investments.