fintech overview

Question 1

What could become unnecessary with fintech?

Answer 1

• Banks
  
  • Stock exchanges
  • Government property registers
  • Accountants and auditors
  • Far fewer layers
• Central banks?

Question 2

describe The flow of funds through the financial system

Answer 2

see L1

Question 3

Who are the lender-savers?

Answer 3

• Individuals / households
  
  • High net worth individuals
  • Large corporations

Question 4

Investing can be?

Answer 4

1) Direct : lender-savers buy securities (bonds, equity) directly from borrower-spender in primary markets.
2) Indirect : lender-savers deposit funds with financial intermediaries ( financial institutions (FI) such as banks, funds, insurances) who buy securities from borrower-spenders in primary markets.

Question 5

what is a Financial market

Answer 5

environment (physical or virtual) where demand and supply of capital meet and trade and the unit of trade is a security (stocks, bonds, ect)
- There are economic agents who save more than they spend - can provide financing to those who need it.
- There are economic agents who spend more than they save - hence they need external financing.

Question 6

Financial markets can be classified according to?

Answer 6

Instruments traded
- Money markets
-Longer-term fixed income capital markets (bond market)
- Equity markets ( common, preferred stocks, ETFs)
- Currencies and commodities
- Derivatives markets (options, futures)
> types of trading:
- Stock market
- Over the counter (OTC) market

Question 7

The pros and cons of FI regulation:

Answer 7

• FIs are heavily regulated to protect society at large from market failures.
  
  • Regulations impose a burden on FIs; before the financial crisis, U.S regulatory changes were deregulatory in nature.
    -Regulators attempt to maximise social welfare while minimising the burden imposed by regulation.

Question 8

what do banks do?

Answer 8

Most focus on payments with low risk high return
Traditional payment processing:
-Payment solutions been viewed as dull and unappealing compared to banks investment banking activities.
- Have become one of the most attractive areas in banking: high margins and stable revenues.

Question 9

What do fintech companies do?

Answer 9

• Make wholesale payments better, easier, faster
  
  • Consumers: >chase pay (pay with phone), > Zelle (real time C2C payments system)
  • 50,000 employees in technology, 2,500 in digital tech
  • AI, big data, machine learning help reduce risk, fraud, upgrade service, improve underwriting, ect.
  • Development of common JPMorgan chase API