16 - Fintech

the combination of innovation and digitalization within the financial sector
- connection of modern technologies with financial services instustries

- posing a threat to already existing banks and FI by challenging the way financial services are offered
+ raising new opportunities, new products, new markets, process improvement

- 2008 financial crisis caused banks to lend less
- macroeconomic conditions - low interest rate

- increasing prevalence of mobile technology
- demographics of millenials entering labor force

- unregulated
- not protecting existing business
- innovation mindset
- agility
- consumer centric perspective

- highly standardized
- low cost
- lower risk of financial products
- technology oriented consumer behavior

- Customers - have millions of loyal customers interacting with them everyday
- Compliance - decades of compliance experience and legal team
- Capital - cost of capital close to 0

- the fintechs can leverage on the banks reputation
- the banks can leverage on the fintech companies technology infrastructure

- providing complementart services to banks (potential for partnership)
- providing services traditionally covered by banks (are competitors)

horizontal, vertical, concentric and conglomerate

meaning they apply diversification into completely different activities with new technology and oriented towards the market
- fintechs are a new digital way of delivering services --> could impact diversification
- fintech could decrease cost of services by exploiting cross business cost economies

end to end process allowing fintechs and other parties to connect with banks systems directly via API so they can build banking offerings on top of banks infrastructure
- fintechs can exploit the data base of banks to reach new customers

system that provides user with network of FI data using API allowing them to build new apps and services based on customers data

1. mobile wallets
2. peer 2 peer
3. digital currencies

apps that store payment information from credit or debit cards
- apple pay

allow customers to use a bank account or card to pay friends from their phones
- venmo

combine new payment systems with new currencies that are not issued by central bank
- cryptocurrencies
- central bank digital currencies

1. value transfer networks
2. business 2 business payments
3. foreign exchange wholesale
4. digital exchange platforms

corporate customers need for modernization in payments, turns fintechs attention to wholesale payment innovation

- square and handshake partnerships

- ensures the blockchain ecosystem remains stable

a digital system for recording the transfer of assets in which the transaction and their details are recorded in multiple places at the same time
- no central data store
- updated individually by each participant
- every participant on network processes every transaction, comes to its own conclusion and votes on the conclusion to make sure majority reaches same conclusion
- once there is consensus the distributed ledger is updated, all nodes maintain own identical copy