D367 Innovation in Finance - Set 3 - Part 1

Correct Answer: The concept that money received today is worth more than the same amount received in the future

The time value of money (TVM) reflects the concept that money available now is more valuable due to its potential earning capacity.

Correct Answer: A series of equal payments made at regular intervals

An annuity refers to regular payments made over a specified period, such as monthly or annually.

Correct Answer: The use of technology to deliver and improve financial services

Fintech (financial technology) refers to the use of technology, such as software, apps, and data analytics, to deliver, automate, and improve financial services, often making them faster, cheaper, and more accessible.

Correct Answer: A distributed, tamper-resistant digital ledger of transactions

A blockchain is a distributed ledger that records transactions across a network of computers in linked, cryptographically secured blocks, making the records transparent and highly resistant to tampering.

Correct Answer: Self-executing code that automatically enforces contract terms on a blockchain

A smart contract is self-executing code stored on a blockchain that automatically enforces the terms of an agreement when predefined conditions are met, reducing the need for intermediaries.

Correct Answer: An automated platform that provides algorithm-driven investment advice with minimal human intervention

A robo-advisor is a digital platform that uses algorithms to provide automated, low-cost investment management and financial advice, often based on a client's goals and risk tolerance, with little human involvement.

Correct Answer: Connect individual borrowers directly with individual lenders online

P2P lending platforms use technology to connect borrowers directly with individual or institutional lenders online, bypassing traditional banks and often offering competitive rates to both sides.

Correct Answer: A digital or virtual currency secured by cryptography

Cryptocurrency is a digital or virtual currency that uses cryptography for security and typically operates on decentralized blockchain networks, making it difficult to counterfeit or double-spend.

Correct Answer: Collecting small amounts of money from a large number of people, usually online

Crowdfunding raises capital by gathering small contributions from many people, typically through online platforms. It is used to fund startups, projects, and products, often in exchange for rewards or equity.

Correct Answer: An application that stores payment information to enable electronic transactions

A digital wallet is a software application that securely stores users' payment card and account information, enabling electronic and mobile payments without a physical card.

Correct Answer: Near-field communication (NFC)

Near-field communication (NFC) enables short-range wireless data exchange, allowing smartphones and contactless cards to make payments simply by tapping near a compatible payment terminal.

Correct Answer: Using technology to help firms comply with regulations more efficiently

RegTech (regulatory technology) uses technology, such as automation and data analytics, to help financial firms meet compliance and reporting requirements more efficiently and at lower cost.

Correct Answer: Innovate and improve the insurance industry

InsurTech applies technologies like data analytics, AI, and mobile apps to modernize the insurance industry, improving underwriting, pricing, claims processing, and customer experience.

Correct Answer: Application programming interfaces (APIs)

Open banking uses secure application programming interfaces (APIs) that let authorized third-party providers access customers' financial data (with consent), enabling new services and greater competition.

Correct Answer: A digital form of a country's fiat currency issued by its central bank

A CBDC is a digital version of a nation's official currency, issued and backed by its central bank. Unlike decentralized cryptocurrencies, a CBDC is centralized and represents legal tender.

Correct Answer: A cryptocurrency designed to maintain a stable value by pegging to an asset like a currency

A stablecoin is a type of cryptocurrency designed to minimize price volatility by pegging its value to a reference asset, such as a fiat currency or commodity, making it more suitable for payments.

Correct Answer: Provide financial services using blockchain without traditional intermediaries

DeFi uses blockchain and smart contracts to offer financial services, such as lending, borrowing, and trading, directly between participants without traditional intermediaries like banks or brokers.

Correct Answer: By analyzing patterns in transaction data to flag suspicious activity

AI and machine learning analyze large volumes of transaction data to identify unusual patterns and anomalies in real time, helping detect and prevent fraudulent activity more effectively than manual review.

Correct Answer: Verify customer identities and assess risk to prevent illegal activity

KYC processes verify the identity of customers and assess their risk profiles, helping institutions comply with anti-money-laundering regulations and prevent fraud, terrorism financing, and other illegal activity.

Correct Answer: Extract insights from large, complex data sets to improve decisions

Big data analytics processes large and varied data sets to uncover patterns and insights, helping financial firms improve risk assessment, personalize services, detect fraud, and make better data-driven decisions.