D367 Innovation in Finance - Set 3 - Part 2

Correct Answer: Using computer programs to execute trades automatically based on predefined rules

Algorithmic trading uses computer programs to automatically execute trades based on predefined criteria such as price, timing, and volume, enabling fast, high-frequency, and emotion-free trading.

Correct Answer: A digital-only bank that operates without physical branches

A neobank is a fully digital bank that operates online or through mobile apps without physical branches, typically offering lower fees and streamlined services by leveraging technology.

Correct Answer: Fingerprints or facial recognition to verify identity

Biometric authentication verifies identity using unique physical traits such as fingerprints, facial recognition, or iris scans, providing stronger and more convenient security than passwords alone.

Correct Answer: Replacing sensitive card data with a unique non-sensitive token

Tokenization replaces sensitive payment data, such as a card number, with a unique token that has no exploitable value if intercepted, reducing the risk of data breaches during transactions.

Correct Answer: Faster settlement and lower costs by reducing intermediaries

Blockchain can settle cross-border payments faster and at lower cost by reducing the number of intermediaries and reconciliation steps involved in traditional correspondent banking networks.

Correct Answer: Learning patterns from historical data and adjusting over time

Machine learning models learn from historical data, identifying patterns and relationships, and improve their accuracy over time as they are exposed to more data, without being explicitly programmed for every case.

Correct Answer: Scanning a coded image to initiate a digital transaction

QR code payments let a user scan a coded image with a smartphone to quickly transfer payment details and complete a transaction, a widely used contactless method in mobile payments.

Correct Answer: Providing affordable financial services to underserved populations

Financial inclusion aims to give underserved and unbanked populations access to affordable, useful financial services, such as payments, savings, and credit, often through mobile and digital technology.

Correct Answer: Providing scalable computing resources without large on-site infrastructure

Cloud computing offers scalable, on-demand computing power and storage, letting financial firms reduce infrastructure costs, scale quickly, and deploy new services faster, while managing security through the provider.

Correct Answer: Rapid and large price swings that can lead to significant losses

Many cryptocurrencies experience rapid and large price swings, exposing holders to significant potential losses. This volatility makes them risky as investments and less reliable as a medium of exchange.

Correct Answer: Raising capital by selling new digital tokens to investors

An ICO raises capital by selling newly created digital tokens or coins to investors, often to fund a blockchain project. ICOs are less regulated than traditional securities offerings, adding investor risk.

Correct Answer: Convenient access to accounts and transactions anytime, anywhere

Mobile banking apps let consumers check balances, transfer funds, pay bills, and deposit checks anytime and anywhere, providing greater convenience than visiting a physical branch during limited hours.

Correct Answer: Maintains synchronized copies across many participants without a single central authority

Distributed ledger technology maintains synchronized copies of data across many participants in a network, without relying on a single central authority, enhancing transparency and resilience against single points of failure.

Correct Answer: Personal financial management (PFM) apps

Personal financial management apps aggregate a user's financial data to provide personalized budgeting, spending analysis, and savings insights, helping consumers make better financial decisions.

Correct Answer: Protecting sensitive customer data from breaches and cyberattacks

Because fintech firms handle sensitive financial and personal data, protecting that data from breaches, hacking, and cyberattacks is a critical concern, requiring strong encryption, authentication, and monitoring.

Correct Answer: Split a purchase into installment payments, often interest-free if paid on time

Buy now, pay later services let consumers split a purchase into several installments, often interest-free when paid on schedule. They are a fast-growing fintech alternative to traditional credit.

Correct Answer: By providing instant, 24/7 responses to common customer inquiries

AI-powered chatbots handle common customer inquiries instantly and around the clock, improving service availability and freeing human agents to focus on more complex issues, while reducing costs.

Correct Answer: A public blockchain is open to anyone, while a private one restricts participation

A public blockchain is open and permissionless, allowing anyone to participate and validate transactions, whereas a private (permissioned) blockchain restricts access and validation to approved participants.

Correct Answer: Test innovative products in a controlled environment under regulator supervision

A regulatory sandbox lets fintech firms test new products and services with real customers in a controlled environment under regulator supervision, allowing innovation while managing risks and informing future rules.

Correct Answer: New technologies reshaping how financial services are delivered and challenging incumbents

Digital disruption refers to how emerging technologies and new entrants reshape financial services delivery, challenging established institutions and forcing them to innovate or lose market share.