DITF402 - FinTech Payments and Regulations - Missing Some Units

DITF402: FinTech Payments and Regulations Manipal University Jaipur (MUJ)
Units 1 to 8 and Unit 12 only , rest of

the files are not there in LMS
MASTER OF BUSINESS ADMINISTRATION

SEMESTER 4
DITF402
FINTECH PAYMENTS AND
REGULATIONS
Unit 1: Over-View of FinTech 1

Unit 1
Over-View of FinTech
Table of Contents
SL Topic Fig No / SAQ / Page No

No Table / Activity
Graph
1 Introduction
3-4
1.1 Learning Objective
2 What is the FinTech Industry? 5-6
3 History of FinTech 1 7-8
4 Why FinTech is Important? 9
5 Why has FinTech becomes popular Now? 10
6 Scope of FinTech 11-12
7 Regulation of FinTech 12-13
8 The Financial Crisis, Regulation, and Trust 14
9 From Customers to users of Financial Services 15-16
10 Summary 16
11 Terminal Questions 17
12 Answers to Sub-Divided Questions 17-18
13 Answers to Terminal Questions 19-20
14 Glossary 21-22
15 Case Study 23-24
16 Suggested Books and References 25

1. INTRODUCTION
The world of finance has come a long way since the days of bartering and trading goods. With
the rapid advancement of technology, finance has evolved into what we now call FinTech.
Fintech or financial technology refers to the integration of technology into financial services,
creating a seamless and innovative experience for users.
The concept of fintech has been around for quite some time, dating back to the 1950s with
the introduction of credit cards. However, it was not until early 2000 that fintech truly
started to take shape with the emergence of online banking and mobile payments. The
growth of fintech has only accelerated since then, with new technologies and innovations
constantly being introduced.
One of the biggest drivers of fintech growth has been the rise of the Internet. The Internet
has made it possible to connect people and businesses from all over the world, creating a
truly global marketplace. This has led to the development of new financial products and
services, search as peer-to-peer lending and crowdfunding.
Another factor that has contributed to the growth of fintech is the increase in Mobile
technology. With the widespread adoption of smartphones, mobile banking, and payment
apps have become more prevalent. These app provides users with the convenience of being
able to manage their finances on-the-go, from anywhere in the world. The Fintech ecosystem
is made up of a wide range of players, including startups, traditional financial institutions,
and technology companies. Each of these players has a unique role to play in the fintech
space.
Startups are often the driving force behind the innovations in the fintech space. These
companies are typically more agile and able to move quickly to bring new products and
services to the market. However, startups often face challenges in terms of funding and
regulatory compliance. Traditional financial institutions, such as banks and insurance
companies, are also major players in the fintech ecosystem. These institutions have the
advantage of a long history in the financial industry, as well as established customer bases.
However, they may struggle to keep up with the pace of innovation in the fintech space.
Finally, technology companies such as Apple and Google are also key players in the fintech

space. These companies often have vast resources and expertise in areas such as data
analytics and artificial intelligence, which can be leveraged to create innovative financial
products.
Several factors have contributed to the rapid growth of fintech over the past decade. One of
the biggest drivers has been the demand for greater convenience and accessibility in
financial services. Consumers are increasingly looking for a way to manage their finances on
the go, without the need for inter -person visits to the bank or financial advisor. Another
factor driving the growth of fintech is the desire for greater transparency and control over
personal finances. Since the rise of mobile banking and personal finance apps, the
consumer is now easily monitoring their spending, tracking day investments, and accessing
a wide range of financial products and services.
Finally, the growth of fintech can be attributed to the rise of big data and artificial
intelligence. These technologies have made it possible to analyse vast amounts of financial
data in real-time, providing insights that were previously impossible to obtain. This has led
to the development of new financial products and services, such as robo-advisors and
personalised insurance policies.
In conclusion, the fintech revolution is here to stay. With the evolution of financial
technologies, the fintech landscape has become increasingly complex, with a wide range of
players and driving forces behind its growth. Understanding this landscape is key to
navigating the interaction of finance and technology in the 21st century.
1.1 Learning Objective:

❖ Understanding the meaning, need, scope of FinTech.
❖ Comprehending the new financial terms developed in FinTech era like peer-to-peer
lending, crowdfunding, e-aggregator etc.
❖ Analysing the factors that contributed to the growth of FinTech.
❖ Working on redefined meaning of financial services based on robo-advising, ML, AI, IoTs.
❖ Studying the impact of FinTech on marketing approach of financial services, which shifted
from mass marketing, and economies of scale to tailor-made, customized products.

2. OVER-VIEW OF FINTECH INDUSTRY

Information Technology (IT) is one of the most influential developments affecting the global
financial sector soon. Innovations related to payments, lending, asset management, and
insurance pose a challenge to the business models and strategies of financial institutions.
However, these also bring opportunities for both the incumbent market participants and
newcomers. Also, innovation can create new risks for individual financial institutions,
consumers of financial services, as well as the financial system. FinTech which is also called
as digital innovations, has emerged as a potentially transformative force in the financial
markets. A couple of decades ago, people had to visit a bank or financial company to apply
for a mortgage, small business loan, or simply transfer funds from one bank to another.
Today, FinTech has made it possible to invest, borrow, save, and transfer funds through
online and mobile services without even stepping foot inside a bank. Though traditional
institutions are slow to adopt FinTech solutions, both start-ups and established companies
are betting on digitized financial services.
The Financial Technology or FinTech industry, refers to the group of companies that are
introducing innovation into financial services using modern technologies. Some FinTech
firms compete directly with banks, while others have partnered with them or supply them
with goods or services. It is clear that FinTech firms are enhancing the financial service
industry by bringing new ideas, enabling quick delivery, and fostering competition.
Financial technology integrates various types of financial services into the day- to - day lives
of customers. Millennials, as well as the generations coming up behind them, are used to
technology and want to manage their money in an easy and quickly , instead of walking to
physical branches to perform transactions and other operations.
FinTech is redefining financial services in the 21st century. Originally, the term applied to
the technology used in the backend of established trade and consumer financial institutions.
It has expanded to include various innovations in technology, including cryptocurrencies,
machine learning, robo-advising and the Internet of Things.
Financial Technology (better known as FinTech) is used to describe new technology that
seeks to improve and automate the delivery and use of financial services. At its core, FinTech

is utilized to help companies, business owners and consumers better manage their financial
operations, processes, and lives. It is composed of specialized software and algorithms that
are used on computers and smartphones. FinTech, the word, is a shortened combination of
“financial technology”.
FinTech is a broad term that requires definition and currently, regulators are working on
bringing out a common definition. According to the Financial Stability Board (FSB), of the
Bank for International Settlements (BIS), “FinTech is technologically enabled financial
innovation that could result in new business models, applications, processes, or products
with an associated material effect on the financial markets and institutions and the provision
of financial services”. This definition aims at encompassing the wide variety of innovations
in financial services enabled by technologies, regardless of the type, size, and regulatory
status of the innovative firm. The broadness of the FSB definition is useful when accessing
and anticipating the rapid development of the financial system and financial institutions, and
the associated risk and opportunities. Fintech is a broad term used to describe emerging
technological innovations in the financial services sector, with- ever increasing reliance on
information technology. Starting as a term referring to the back-end technology used by
large financial institutions, it has expanded to include technological innovation in the
financial sector, including innovations in financial literacy and education, retail, banking,
investments, etc.

3. HISTORY OF FINTECH
FinTech has been around much longer than most people think. While the latest iteration of
FinTech allows us to pay for a cup of coffee with a mobile app, the history of financial
technology can be traced back to the earliest credit cards that were adopted by the public in
the late 1950s. In 1998, PayPal was founded, representing one of the first FinTech companies
to operate primarily on the internet- a breakthrough that has been further revolutionized by
mobile technology, social media, and data encryption. Paytm was the first step toward the
digitalization of financial services in India. Founded in 2010 by Vijay Shekhar Sharma, it was
the first fintech startup in India to earn the title of “unicorn” in 2015. Credit Cards generally
represent the first FinTech products available to the public, in that they eliminated the need
for consumers to carry physical currency in their day-to-day lives. From there, FinTech
evolved to include bank mainframes and online stock trading services. This FinTech
Revolution has led to the mobile payment apps, blockchain networks, and social media-
housed payment options we regularly use today. After the credit card, financial technology
evolved and introduced several major milestones to the mass market such as ATMs,
electronic stock exchanges, bank mainframe computers, and online stock exchanges. Each
new piece of technology advanced the financial infrastructure that most people used every
day. Presently FinTech solutions are challenging the traditional financial infrastructure, as
more services transition to a new technological paradigm, such as using a payment app on a
mobile wallet instead of carrying physical credit cards in a physical wallet. FinTech has
revolutionized many different markets, most notably the banking, trading, insurance, and
risk management industries.
FinTech companies, which include start-ups, technology companies, and established

financial institutions, utilize emerging technologies such as big data, artificial intelligence,
and blockchain which are computing to make financial services more accessible and more
efficient.
During the 50 years of FinTech developments, innovators have created sophisticated

treasury management, risk management, data analysis tools, and trade processing for
financial service firms and institutional banks.

Currently FinTech is digitalizing retail financial services through robo-advisors for

retirement and wealth planning, crowdfunding platforms, payment apps, and mobile wallets,
etc. A robo-advisor is a digital platform services that provides automated, algorithm-driven
financial planning and investment services with little to no human supervision. Fintech
provides access to alternative and private investment opportunities, as well as online
lending platforms.
However, even though FinTech is flourishing, banks have not been greatly affected. The main
reason for this, the Fintech and banks complements each other. Banks have realised that
technology is a strategic asset and that needs to be taken seriously.
SELF-ASSESSMENT QUESTIONS – 1
Q1. Why PayPal considered to be revolution in FinTech field?

Q2. What are the products of FinTech Revolution?
Q3. What are the factors led to the growth of FinTech?
Q4. What do you mean by FinTech?

4. WHY FINTECH IS IMPORTANT?

Money makes the world go round, and financial services regulate how fast it spins. The
disruption caused by Fintech drives the financial industry to be smarter and more agile and
allows it to deal with important problems in the world. For example, automated investment
paves the way for all social classes to invest and see returns on their money. It also allows
people in developing countries to transact, even if they don't have a bank account. Yet, the
fintech industry has a lot of room for growth and improvement, and financial infrastructures
should be revised for the benefit of consumers.
Better risk assessment procedures may be created with the aid of fintech innovators. For
instance, employing more than 1500 data points, Ondeck and Kabbage use information to
evaluate the success of small enterprises. Avant uses machine learning to insure customers.
In order to finance startups, Kickstarter taps into public knowledge. As a result, more clients
will have access to loan services. To make finance safer after the 2008 financial crisis,
authorities have strictly enforced adherence to bank regulations. By bringing regulation
technology and advanced crime detection algorithms, fintech may assist regulators in
securing financial transactions and improving customer service.
Cost Effective
Higher Security
Upgraded Payment Systems
Speed and Convinence
Transparency
Why FinTech is important in Business World?

5. WHY FINTECH BECOMES POPULAR NOW?

The fintech sector received a huge influx of funds in 2014. The start-ups that received
funding are hungry and ambitious and want to disrupt the banking sector. Several factors
have contributed to the fact that fintech is flourishing now. One of these is that fintech
promises healthy returns on investments and growth opportunities, even though the
business models are not yet fully understood. For example, nobody knows whether peer-to-
peer financing is a model that can be sustained in the long term.
Additionally, new technologies have been emerging in several industries that can also be
applied to financial services. These include blockchain technology, advanced machine
learning software, micro-sized card readers and chips, and powerful servers capable of
performing intelligent analytics. Social networks and micro-marketing have also broken
down the barriers to entering the industry, as some FinTech can achieve very low acquisition
costs, as little as 1% of the costs of national and community banks. Customer expectations
also drive this increased interest in this industry. Previous generations failed to experience
a respect based, personalized, and one-to-one relationship with their bank. However,
millennials demand it. With advanced personalization and Internet technologies, they can
access the kind of banking relationships that they have come to expect. The use of data
provides the potential for financial services companies to know and treat their customers
better.
Finally, regulation changes have also helped FinTech. Generally, regulations can hinder the
influx of capital and growth. They can slow things down because there are there to protect
and control the public. However, many regulations have recognized the value of technology
and have provided innovative sandboxes or flexed the rules of small players. The lack of
regulation for some segments, such as peer-to-peer lending, has helped new companies to
grow at a fast pace.

6. SCOPE OF FINTECH
Financial Services, including banking services, are at the threshold of a revolutionary change
driven by technological and digital innovations. A rapidly growing number of financial
entities and technology firms are experimenting with technological and financial solutions
which either modify the way financial intermediation takes place or lead to
disintermediation. Fintech innovations have the potential to deliver a range of benefits, in
particular efficiency improvements and cost reductions. Technological developments are
also fundamentally changing the way people access financial services and increasing
financial inclusion.
Financially innovations like derivatives have become a focal point for a lot of attention, and
some jurisdictions have decided to take a more active approach in facilitating this
innovation. For this purpose, they have taken a variety of regulatory and supervisory
initiatives such as regulatory sandboxes, innovation hubs, innovation incubators or
accelerators etc.
Technological start-ups are emerging to challenge traditional banking. Some of the major
FinTech products and services currently used in the marketplace are peer-to-peer (P2P)
lending platforms, crowdfunding, block chain technology, distributed ledgers technology,
etc. These FinTech products are currently used in international finance, which bring together
the lenders and borrowers, seekers, and providers of information, with or without a nodal
intermediary agency.
FinTech are becoming popular both with the users of banking services and investment funds,
which see them as the future of the financial sector. Even retail groups and telecom operators
are looking for ways to offer financial services via their existing networks.
This upsurge of activities raises questions over what kind of financial landscape will emerge
in the wake of the digital transformation. Financial institutions and markets are seeking to
increase their knowledge concerning technological innovations, both through partnerships
with tech companies and by investing in or acquiring such companies. Nonetheless, there are
wide differences in the preparedness of the market participants for these changes in
practice. Some of the major Fintech products and services currently used in market are peer-

to-peer (P2P) lending platforms, crowdfunding, blockchain technology, distributed Ledger

technology, big data, smart contracts, robo-advisor, e-aggregators etc. These Fintech
products are currently used in international finance, which bring together the lenders and
borrowers, seekers, and providers of information, with or without a nodal intermediation
agency.
Fintech is attracting interest both from users of banking services and investment funds,
which see them as the future of the financial sector. Even retail groups and telecom operators
are looking for ways to offer financial services via their existing networks. This flurry of
activities raises questions over what kind of financial landscape will emerge in the wake of
the digital transformation.
7. REGULATION OF FINTECH
Finance is seen as one of the industry’s most vulnerable to disruption by software because
financial services, much like publishing, are made of information rather than concrete goods.
Blockchains have the potential to reduce the cost of transacting in a financial system. While
finance has been shielded by regulation until now, and weathered the dot com boom without
major upheaval, a new wave of startups is increasingly “disaggregating” global banks.
Financial services are among the most heavily regulated sectors in the world. Not
surprisingly, regulation has emerged as the number one concern among governments as
Fintech companies take off. As technology is integrated into financial services processes,
regulatory problems for such companies have multiplied. In such instances, the problems
are a function of technology. In others, they are a reflection of the tech industry’s impatience
to disrupt finance.
Regulation is also a problem in the emerging world of cryptocurrencies. Initial coin offerings
(ICOs) are a new form of fundraising that allows startups to raise capital directly from lay
investors. In most countries, they are unregulated, and they become fertile ground for scams
and fraud. Regulatory uncertainty for ICOs has also allowed entrepreneurs to slip security
tokens disguised as utility token past the SEC to avoid fees and compliance cost. Because of
the diversity of offerings in Fintech and the disparate industries it touches, it is difficult to
formulate a single and comprehensive approach to these problems. For the most part, the

government has used existing regulations and, in some cases, customized them to regulate
FinTech. In response, the International Monetary Fund (IMF) and the World Bank jointly
presented the Bali Fintech agenda on October 11th, 2018, which consists of 12 policy
elements acting as a guideline for various governments and central banking institutions to
adopt and deploy “rapid advances in financial technology”.
Data security is another issue regulators are concerned about because of the threat of
hacking as well as the need to protect sensitive consumer and corporate financial data.
Leading global fintech companies are proactively turning to cloud technology to meet
increasingly stringent compliance regulations. To sum up, FinTech, or financial technology,
is the term used to describe any technology that delivers financial services through software,
such as online banking, mobile payment, or even cryptocurrency. Fintech is a broad category
that encompasses many different technologies, but the primary objectives are to change the
way consumers and businesses access their finances and compete with traditional financial
services. Up until now, financial services institutions offered a variety of services under a
single umbrella. The scope of these services encompassed a broad range from traditional
banking activities to mortgage and trading services. In its most basic form, Fintech
unbundles these services into individual offerings. The combination of streamlined offerings
with technology enables fintech companies to be more efficient and cut down the costs
associated with each transaction. New technologies, like machine learning and artificial
intelligence, predictive behavioural analytics, and data-driven marketing, will take the
guesswork and habit out of financial decisions. Learning apps will not only learn the habits
of users, often hidden to themselves, but will engage users in learning games to make their
automatic, unconscious spending and saving decisions better. Fintech is also a keen adaptor
of automated customer service technology, utilizing chatbots and artificial intelligence
interfaces to assist customers with basic tasks and also keep down staffing costs. Fintech is
also being leveraged to fight fraud by leveraging information about payment history to flag
transactions that are outside the norm.

8. THE FINANCIAL CRISIS, REGULATION, AND TRUST

The 2008 financial and economic crisis triggered a series of major upheavals in the financial
services sector. The first was the realization that the activities of the major financial
institutions can generate systematic risk. This led to the development of different measures
designed to quantify that risk. The Regulation gives directions and forces actions to mitigate
them. In particular, the notion of a financial entity’s contribution to systematic risk led to the
definition of systematically important financial institutions (SIFIs). The Basel Committee on
Banking Supervision (BCBS) increased the bank’s regulatory reserve requirement to take
account of individual contribution to global risk. Similarly, regulators asked many companies
to verify and improve their solvency. This regulatory tightening placed a dual burden on
financial institutions: directly, by forcing them to set aside greater reserves and therefore
scale back their activities and, indirectly, in that the public opinion considered them the male
culprits behind the financial crisis. As the global economy emerged from the crisis, it became
clear that many customers, especially the younger generations, the so-called millennials, had
lost faith in traditional financial services. From their point of view, financial institutions were
the root cause of the financial and economic crisis. To make matters worse, those agents had
only managed to avoid bankruptcy thanks to continuing massive injections or support of
public money. If the banks themselves were incapable of managing the risks they took, why
should anyone take their advice or trust them with their savings? Old and new generations
of customers are willing to turn their backs on the traditional players. They are keen to see
new companies emerge that played no part in the recent crisis and could offer innovative
solutions to financial services.

9. FROM CUSTOMERS TO USERS OF FINANCIAL SERVICES

As well as taking a dimmer view of financial services, younger generations have developed
very different consumer habits from their elders. They have grown up used to having access
to personalised solutions, tailored to their needs. This is in stark contrast with the mass
marketing approach of the banks and other traditional financial institutions. The
conventional model of the customer is somebody who consumes whatever is offer. The new
customer is more and more the “user” of the financial services of his choice. The old
customers were passive. They were satisfied with choosing from a finite selection of
products or pre-defined services. Today, customers are active. They expect to receive
solutions, customized to their personal needs. The example of asset management is a case in
point. A banking network offers the same savings products to a maximum number of
customers to generate economies of scale. The user-customer expects a flexible solution that
can be adapted to his/her individual needs and investment objectives. Matching products
and services to the expectations of the user require close mass interaction. This is only
possible via a digitalized platform. From the outset, many Fintech companies have targeted
younger generations that are used to digital, interactive, and customized solutions. This
strategy is not without risks. On average, younger generations own fewer assets than the rest
of the population. The gap is particularly wide with concerning oldest generations who tend
to have substantial financial wealth and capability of savings. To be economically viable,
Fintech companies quickly need to attract a large quantity of assets. There are two pivotal
factors for this: the number of customers and the average amount of assets per customer.
Even if they attract large number of young customers, Fintech initiatives will still struggle to
reach a profit as long as the younger generations wealth remains low. It is possible that
Fintech companies have time to grow in parallel with younger generation assets, and
eventually become profitable. There is no guarantee that they will be able to retain these
customers. As younger generations age, they will face increasingly complex savings
challenges. Solutions such as robo-advisor currently offer only basic solutions that are not
always suited to these demands. Robo-advisors are ideal for customers with few assets who
mainly want to avoid high bank charges, while traditional institutions are aimed towards
customers that tend to have more assets and require much greater expertise. Fintech
companies will struggle to make money if they lose their customers as soon as they become

profitable. Conversely, if the traditional players are to attract profitable customers, they will
have to evolve and offer the same or higher levels of interactivity and profitability as their
fintech rivals. Today’s fintech solutions such as robo-advisors are just one example of the
way incumbent companies are innovating to transform their customer relationships and
offer new approaches in financial services. For the time being, private banking customers
receive this type of service. However, due to financial measures, a greater variety of clients
will be able to access this sort of service in the near future. This is the only way for industry
titans to survive the shift from consumer to user.
10. SUMMARY
FinTech or Financial Technology or Digital Innovation is the application of technology in
financial services to bring innovative products which should reach everyone customized to
their requirement using advanced technologies like artificial intelligence, blockchain
technology, big data, Internet of Things etc. Factors like credit cards, the internet, and
electronic stock exchange. Mobile technology gave the required tools and environment for
the development of FinTech across the world. Since the financial crisis of 2008, regulators
have enforced strict compliance with bank regulators to make finance safer. In the more
regulated financial world products like regulatory sandboxes, innovation hubs, innovation
incubators, and accelerator are being developed over Fintech products and services
currently used in the market are peer-to- peer (P2P) lending platforms, crowdfunding,
blockchain technology, distributed Ledger technology, big data, smart contracts, robo
advisor, and, e-aggregators, etc. FinTech is redefining financial services making them more
accessible and more efficient. FinTech is not only attracted by Banks and other financial
services, even retail groups and telecom operators are looking for ways to offer financial
services via their existing networks. The new development in FinTech offers digital,
interactive, customized solutions for the younger generations. More and more innovations
in FinTech are yet to come.

11. TERMINAL QUESTIONS

Q1. Explain how the marketing of financial services shifted from mass marketing, economies
of scale to tailor-made, customized services?
Q2. Explain how the financial crisis of 2008 reshaped the emergence of FinTech?
Q3. Explain how FinTech is bringing revolution in Financial services Industry?
Q4. What do you mean by peer-to-peer lending?
Q5. What do you mean by Crowdfunding?
12. ANSWERS TO SUB-DIVIDED QUESTIONS

Answer 1= PayPal is the highest valued digital payments platform in the world. It enables
global commerce across multiple platforms and devices, bringing new buying opportunities
to consumers and businesses across the globe. Established in 1998, PayPal's mission is to
democratise financial services and empower people and businesses to join and exchange
value for better experiences. The company allows individuals and merchants to get paid in
more than 25 currencies in over 200 countries. It also has a wide range of services and
products to make the process of payments easier, including online invoicing, credit card
acceptance, and buy now pay later options, to name a few.
Answer 2-Credit Cards, ATMs, PayPal, Paytm, electronic stock exchanges, bank mainframe
computers, and online stock exchanges. Each new piece of technology advanced the financial
infrastructure that most people used every day, but rarely had to think about.
Answer3=The following are the factors that led to the growth of FinTech
1. Internet 2. Mobile phone Technology 3. Start-ups
4. desire for greater transparency and control over personal finances
5. rise of big data and artificial intelligence
The Internet has made it possible to connect people and businesses from all over the world,
creating a truly global marketplace. This has led to the development of new financial
products and services, search as peer-to-peer lending and crowdfunding.

Another factor that has contributed to the growth of fintech is the increase in Mobile
technology. With the widespread adoption of smartphones, mobile banking and payment
apps have become more prevalent. These app provides users with the convenience of being
able to manage their finances on-the-go, from anywhere in the world.
Startups are often the driving force behind the new innovations in the fintech space. These
companies are typically more agile and able to move quickly to bring new products and
services to the market. However, startups often face challenge in terms of funding and
regulatory compliance.
Answer 4= Fintech or financial technology refers to the integration of technology into

financial services, creating seamless an innovative experience for users. The Financial
Technology or FinTech, industry, refers to the group of companies that are introducing
innovation into financial services using modern technologies. Some FinTech firms compete
directly with banks, whilst others have partnered with them or supply them with goods or
services. It refers to the technological start-ups that are emerging to challenge traditional
banking and financial players and covers an array of services, from crowd funding platforms
and mobile payment solutions to online portfolio management tools and international
money transfers. FinTech has made it possible to invest, borrow, save and transfer funds
through online and mobile services without even stepping foot inside a bank.

13. ANSWERS TO TERMINAL QUESTIONS

Ans1= Today’s younger generation grown up used to having access to personalised
solutions, tailored to their needs. This is in stark contract with mass marketing approach of
the banks and other traditional financial institutions. The conventional model of customer is
somebody who consumes whatever is the offer. The new customer is more and more the
“user” of financial services of his choice. The old customers were passive. They were satisfied
with choosing from a finite selection of products or pre-defined services. Today, customers
are active. They expect to receive solutions, customized to their personal needs. The example
of asset management is the case in point. A banking network offers the same savings
products to a maximum number of customers in order to generate economies of scale. The
user-customer expects a flexible solution that can be adapted to his/her individual needs
and investment objectives. Matching products and services to the expectations of the user
require close mass interaction. This is only possible via a digitalised platform. From the
outset, many Fintech companies have targeted younger generations that are used to digital,
interactive, customised solutions. This strategy is not without risks. On an average, younger
generations own fewer assets than the rest of the population. The gap is particularly wide
with respect to the oldest generations who tend to have substantial financial wealth and
capability of savings. In order to be economically viable, Fintech companies quickly need to
attract large quantities of assets.
Ans2= An after effect of financial crisis, 2008 was the emergence of technology startups in
the financial domain that started with the premise of operating with complete trust and
transparency. These companies that started disrupting the financial services business
domains were primarily technology companies and were therefore being collectively
referred as FinTechs. FinTechs by the very nature of their formation were agile, asset light
and disruptive in nature. Unlike their established peers, they were starting from scratch.
They had to bring about offerings that were superior in customer experience and were cost
effective at the same time. They were also starting at a time when investment capital was
difficult to come by. Even though there were these and many other challenges in front of
FinTechs, they also had advantages in the form of less regulatory pressure, and they were
free to offer unconventional ways of doing traditional business. All of these factors resulted

in multiple FinTechs emerging in the payments, lending, wealth management and insurance
space.
Answer 3= Up until now, financial services institutions offered a variety of services under
the single umbrella. The scope of these services encompassed a broad range from traditional
banking activities to mortgage and trading services. In its most basic form, FinTech
unbundles these services into individual offerings. The combination of streamlined offerings
with technology enables FinTech companies to be more efficient and cut down the costs
associated with each transaction. New technologies, like machine learning and artificial
intelligence, predictive behavioural analytics, and data driven marketing, will take the
guesswork and habit out of financial decisions. Learning apps will not only learn the habits
of users, often hidden to themselves, but will engage users in learning games to make their
automatic, unconscious spending and saving decisions better. Fintech is also keen adaptor
of automated customer service technology, utilising chat bots to and artificial intelligence
interfaces to assist customers with basic task and keep down staffing costs. Fintech is also
being leveraged to fight fraud by leveraging information about payment history to flag
transactions that are outside the norm.
Answer 4=P2P lenders connect lenders and borrowers, using advanced technologies to
speed up loan acceptance. These technologies are designed to increase the efficiency and
reduce the time involved in access to credit. While P2P lending originally involved direct
matching of individual lenders and borrowers on a one-to-one basis, it has evolved into a
form of marketplace lending where institutional and high net worth individual investors
lend into a pool that borrowers can access.
Answer5=Crowd Funding is a way of raising debt or equity from multiple investors via
internet-based platform. Securities and Exchange Board of India (SEBI) has defined crowd
funding as “solicitation of funds (small amount) from multiple investors through a web-
based platform or social networking site for a specific project, business venture or social
cause”.

14. GLOSSARY
• Artificial Intelligence (AI)-AI refers to the simulation of human intelligence in machines
that are programmed to think like humans and mimics their actions. The term may also
be applied to any machine that exhibits traits associated with a human mind such as
learning and problem-solving. The ideal characteristic of artificial intelligence is its
ability to rationalise and take actions that have the best chance of achieving a specific
goal.
• Blockchain technology: Blockchain is a distributed ledger in which transactions--
involving digital currencies or securities are stored as blocks (groups of transactions
that are performed around the same point in time) on computers that are connected to
the network. The Ledger grows as the chain of blocks increases its size. Each new block
of transactions must be verified by the network before it can be added to the chain. This
means that each computer connected to the network has full information about the
transactions in the network.
• Cloud computing: Cloud-based IT services can deliver Internet based access to the
shared pool of computing resources that can be quickly and easily deployed.
Infrastructure, platform services and mobile, back-end as a service are offered under
cloud-based services. The use of these services is an important enabler for new entrants
to the financial services arena to set up quickly and with low startup cost: with easy
options to expand their capability as a firm grows.
• Credit cards: A credit card is a payment card issued to users or card holders to enable
the card holder to pay a merchant for goods and services, based on the card holder’s
promise to the card issuer to pay them for the amounts so paid plus other agreed
charges. The card issuer usually bank create a revolving account and grants a line of
credit to the card holder, from which the card holder can borrow money for payment
to a merchant or as a cash advance.
• Crowdfunding: Crowd Funding is a way of raising debt or equity from multiple
investors via internet-based platform. Securities and Exchange Board of India (SEBI)
has defined crowd funding as “solicitation of funds (small amount) from multiple
investors through a web-based platform or social networking site for a specific project,
business venture or social cause”.

• Digital economy: It refers to an economy that is based on digital technologies. The

digital economy is also sometimes called Internet economy new economy or web
economy. Increasingly, the digital economy is intertwined with the traditional economy
making a clear delineation harder. In this new economy, digital networking and
communication infrastructures provide a global platform over which people and
organizations device strategies, interact, communicate, collaborate and search for
information.
• Peer to peer lending: P2P lenders connect lenders and borrowers, using advanced
technologies to speed up loan acceptance. These technologies are designed to increase
the efficiency and reduce the time involved in access to credit. While P2P lending
originally involved direct matching of individual lenders and borrowers on a one-to-
one basis, it has evolved into a form of marketplace lending where institutional and
high net worth individual investors lend into a pool that borrowers can access.
• Robo-Advisors: A robo-advisor (also spelled as robo-advisor) is a digital platform that
provides automated, algorithm-driven financial planning and investment services with
little to no human supervision. A typical robo-advisor asks questions about your
financial situation and future goals through an online survey. It then uses the data to
offer advice and automatically invest for you. The best robo advisor offer easy account
setup, robust goal planning, account services, and portfolio management. Additionally,
they offer security features, comprehensive education, and low fees.

15. CASE STUDY

COVID-19 and FinTech
The economy of India is often recognised as one of the most rapidly developing economies
in the world. Emerging nations like India has been affected by epidemic caused by COVID-
19, which has slowed their economic growth and development. In Indian markets and
economies, the rate of spread of the virus has outpaced the growth of any other major
macroeconomic indicator. This pandemic calamity has initially resulted in an economic
recession, and it has subsequently resulted in a sluggish economic market. On the other side,
banking and finance is one of the industries that has one of the most rapid rates of expansion
during the pandemic. In spite of this, India has quickly become the most important
worldwide player in the financial technology business.
According to the newsletter by Tafti, Jariwala, Jain and Gupta (2020), the following is true:
“The persistent dissemination of COVID-19 has emerged as one of the most significant
dangers facing the global economy and the financial markets. India, along with many other
countries all over the world, is pursuing a number of different strategies in order to reduce
the impacts of the corona virus outbreak.” It is necessary to take these preventative
measures in order to lessen the impact that the outbreak will have on the Indian financial
markets. In addition, “the negative impact of the COVID 19 epidemic is filtering down to
important sectors of the Indian economy,” with the manufacturing, auto, retail, aviation and
hospitality industries suffering the brunt of the slowdown. The financial technology industry
is not an exception to this trend. In addition, the epidemic causes an increase in the number
of digital financial transactions as a result of the unpredictability of the situation during the
lockdown. This is due to the fact that there is “a boost from the Government, which has
committed monetary help to the impoverished via direct payments to bank accounts”.
People in India have been encouraged by the country’s financial services industry to “Go
Digital” with their financial dealings.
Moreover, there have been few reports of an increase in the number of digital payments
being made as a result of increased acceptability during the closure. Online pharmacies,
online grocery stores, OTT players (telecom and media), EdTech’s, online gaming, recharges,
and payments for utilities and bills are some examples of these business. It does this by

altering the entire internal mechanism in order to represent the shift from the old
conventional system to the new digital one.
According to the study that was compiled as part of Bharat inclusion initiative by MSC, 2020,
it was said “The first few months of the year 2020 has been a living nightmare for India. The
increasing number of COVID-19 cases, lockdown around the country, and people’s fear of
contracting the virus have taken a toll on their mental, emotional, and financial wellbeing “.
According to the finding of the study, Fintech companies whose primary focus is on the area
of financial services known as savings and investment face obstacles. It takes place as a
consequence of fluctuating market conditions and the feeling of customers. They were forced
to make changes to their whole business as a result of the comments they received.
Moreover, Fintech companies have demonstrated “No month-on-month” (MoM) growth in
their new customer base. It has also led to a lack of fresh funds and support becoming
available as a result.
The FinTech industry find itself at an inflection moment as the globe continues to cope with
the socio-economic consequences of the COVID-19 problem,” said PwC’s report from 2020.
The opportunities that arise in the changing environment to rethink financial business
models might be beneficial to Fintech companies”. The mood of investors is reflective of the
consistent growth of the Fintech sector. Even though businesses are working around the
clock to adjust the new normal and address the obstacles, there is a significant amount of
potential for FinTech in the current context due to the significant demand for digital and
contact less financial service delivery. “It is a representation of the ever-changing
mechanisms that are taking place within an all-round the industry”. According to the finding
of the study, “in the post COVID age, there is an immediate need to shift towards entirely
digital, paperless, and presence-less end-to-end operations.” The Indian financial system has
benefitted favourably from the rapid expansion of FinTech penetration and acceptance,
which has had a favourable influence.
Question to Solve:
Briefly study this case study and figure out the factors which impacted the growth of FinTech
in India?

16. SUGGESTED BOOKS AND REFERENCES

BOOKS
• FinTech: The technology driving disruption in the financial service industry: Parag Y
Arjunwadhakar.
• FinTech For Dummies, Steven O’ Hanlon, Sussanne Chishti
• EMERGING FINTECH, Understanding and Maximizing their Benefits, Paul Taylor
• FINTECH REVOLUTION; Navigating the intersection of Finance and Technology:
Victor Solano
• Financial Technology (FinTech) and Digital Banking in India: Jaspal Singh
REFERENCES
• https://www.investopedia.com/terms/f/futurescontract.asp#:~:text=A%20futures%
20contract%20is%20a,trading%20on%20a%20futures%20exchange.
• https://www.investopedia.com/articles/07/roots_of_money.asp
• https://fintechmagazine.com/digital-payments/story-paypal-worlds-most-valuable-
fintech-firm


SEMESTER 4
DITF402
REGULATIONS
Unit 2: Key Areas of FinTech and Financial Apps 1

Unit 2
Key Areas of FinTech and Financial Apps
Table of Contents
Fig No /
SL SAQ /
Topic Table / Page No
No Activity
Graph
1 Introduction - -
3-4
1.1 Learning Objective - -
2 What is driving the movement toward Digital
- 1 5
Currency?
3 What is digital currency? - - 6
4 Central Bank Digital Currencies (CBDC) - - 7-8
5 Virtual Currencies (Including Crypto-
- 2 8-10
Currencies)
6 FinTechs in the payment industry - - 10-12
7 Challenges of Digital Currencies - - 13-15
8 Summary - - 15
9 Terminal Questions - - 16
10 Answers to Sub Divided Questions and Terminal
- - 16-20
Questions
11 Suggested Books and References - - 20

1. INTRODUCTION
In today's fast-paced world, the demand for convenience and efficiency has led to the rapid
growth of digital payments. The shift from traditional cash payments to digital payments has
been a game changer for the financial industry, making transaction faster, more secure, more
accessible to people worldwide.
The evolution of payment systems has been nothing short of remarkable. In the past, cash
was king, and people would use it to buy goods and services. However, as technology
advanced, so did the way we make payments. Today we have plethora of digital payment
options, including credit and debit cards, mobile payments, and other online payments. One
of the most significant advantages of digital payments is the speed and convenience. With
just a few clicks, you can transfer money from your account to another account or pay for
goods and services. Gone are the days of having to carry around cash or worry about finding
an ATM.
Another benefit of digital payment is their security. Traditional cash payments are
susceptible to theft and counterfeiting, while digital payments use encryption and
authentication methods to ensure the safety of transactions. This has led to a significant
reduction in fraud and financial crime.
In recent years, the rise of cryptocurrencies has taken the financial world by storm. Bitcoin,
the first and most well-known cryptocurrency was created in 2009, and since then,
thousands of other cryptocurrencies has been developed.
Crypto currencies are digital or virtual currencies that use encryption technique to regulate
their generation and verify the transfer of funds. Unlike traditional currencies,
cryptocurrencies are decentralised, meaning that they are not controlled by any central
authority, such as a government or bank.
One of the key advantages of cryptocurrencies is their level of security. The blockchain
technology that underpins cryptocurrencies make them virtually impossible to counterfeit
or double spend. This had made cryptocurrencies an attractive option for people who value
privacy and security. Another advantage of Crypto currencies is the global reach.
Cryptocurrencies can be used to make transactions with anyone, anywhere in the world,

without the need for a centralised intermediary. This has made them an appealing option for
people who want to avoid the fees and restrictions of traditional banking systems.
While digital payments and cryptocurrencies have many benefits, they also come with their
fair share of challenges. One of the most significant challenges is the issue of regulation. As
digital payments and Crypto currencies continue to grow, government and financial
regulators are struggling to keep up with the pace of change. The decentralized nature of
Crypto currencies, in particular, poses a significant challenge to regulators. Because they are
not controlled by any central authority, it can be difficult to enforce regulations and prevent
illegal activities such as money laundering and terrorism financing.
Another challenge is the issue of security. While digital payment and cryptocurrencies are
generally considered to be secured, they are not immune to cyber-attacks or other form of
hacking. As the use of digital payments and cryptocurrencies continue to grow, the risk of
security breaches will only increase. Despite these challenges, digital payments and
cryptocurrencies offer many opportunities for the financial industry. They have the potential
to make transaction faster, cheaper and more secure, and they can also increase financial
inclusion by providing access to financial services for people who were previously excluded.
The rise of digital payment and Crypto currencies has transformed the way we make
transaction and has opened up new opportunities for the financial industry. While there are
certainly challenges in the financial industry that need to be addressed, the benefits of these
technologies cannot be ignored. As we continue to navigate the intersection of finance and
technology, it is essential that we embrace the opportunities that digital payments and
cryptocurrencies offer while also being mindful of their potential risks.

❖ Discussion on financial innovation in digital payment system
❖ Comprehending the meaning of blockchain technology and how it is helpful in
cryptocurrency mining.
❖ Evaluating the process involved in financial transaction.
❖ Working on advantages and disadvantages of using digital currency

2. WHAT IS DRIVING THE MOVEMENT TOWARD DIGITAL CURRENCY?

Digital currencies are the part of the global trend of moving away from the traditional
payment types such as physical cash with coins/notes or cheque to the newer methods of
payments such as contact less payments. These methods are more convenient like one does
not need to carry cash around, are more secure (one does not need to write a paper check
and post it), and do not require physical contact between payer and payee (which was
exaggerated by COVID-19 pandemic). This trend has been supported and added by
following: -
• Technology advances across the Financial Services industry and in particular, banks,
technology firms, and regulators.
• Increased government regulation and legislation to ensure that payment
infrastructures is more robust and secure.
• Changes in customer behaviour to stop using cash, cheques, and other more traditional
payment methods. The key demographic tends to be the younger generation who are
happy not to use cash. However, it is important to know that sizeable part of society
especially older people are still keen to use cash and to the lesser extent cheques for
payment. This mean that cash will be around for a while, yet which means firms and
society in general will need to support it.
• Increased standards globally across the financial service industry allows much quicker
and safer payments as well as the cheaper integration across payment technologies.
• Payment firms and providers are starting to merge into larger and more dominant
firms which gives them the capacity and cost efficiencies to push out newer payment
methods quicker and cheaper.
Q1. Why shift from traditional payment to digital payment has been game changer for
financial industry?
Q2. What are the different payment options available to the end user? What are the
advantages of doing digital payment?
Q3. What is crypto currency? What are the advantages of having crypto currency?

3. WHAT IS A DIGITAL CURRENCY?

There are various definitions for digital or virtual or cryptocurrencies which mean trying to
understand this area can be confusing to the layperson. Therefore, at its basic level, a digital
currency is any currency that is stored in a digital form. In other words, customer balances,
transfers and transactions are performed in stored on a computer system. The data could be
stored in a centralised manner where there is a central Book of Records owned by single
organization such as the central bank. Alternatively, the data could be stored in a distributed
database such as the blockchain across its users with only its users being able to access it.
There are two main types of digital currencies namely:
• A Central Bank Digital Currency (CBDC) is it currency issued by the central bank. For
example, the EU’s European Central Bank (ECB) , the UK’s Bank of England (BOE) or the
US Federal Reserve System (Fed)
• A virtual currency is the currency that has been issued by the organization or body that
is not a central bank. (Sometimes virtual currencies are referred to a crypto currency
to reflect that there storage and usage are highly encrypted.)
Both of these are explored in more details below:

4. CENTRAL BANK DIGITAL CURRENCIES (CBDC)

As mentioned earlier, a CBDC is a digital currency that employs technology to record a
country’s official currency in a centralized digital format. The centralized storage would be
managed, overseen, and underwritten by a single party such as the relevant country’s central
bank or financial regulator. CBDC are sometime referred as a Digital base currency or Digital
flat currency. It is important to note CBDC are not digital copies of country’s existing
currency, but they are the part of the base money supply and currency their worth. While
there has been a large amount of discussion regarding CBDC, the actual roll out globally has
been slow.
The advantage of CBDC are as follows:

• Customers can use them very quickly over devices such a website, mobile devices,
wearables, tablets and any other IoT devices. Balances are real time and
payment/transfer can be made instantly.
• Because the currency is digital then it removes the need to carry large amount of cash
(notes and coins) around.
• CBDC are cheaper to operate (because there is no physical cash to account for) which
means payment both domestically and internationally are much cheaper, and
customers are charged lower fees.
• CBDC are better at combating fraud because all movements, transfers, balance
inquiries, and so on can be tracked much easier.
• Finally, CBDC can operate on a 24-hour day 365 days per year basis because there is no
need to move or administer physical cash.
However, there are several disadvantages for CBDC namely:

• The roll out of CBDC is very slow at the moment and it is unclear which countries will
roll out CBDC soon. In Dec 2001 only 5 countries have issued CBDC although around 14
are performing pilot investigations.
• CBDC are entirely reliant on a single central data store. Therefore, if the central hub has
problems or completely fails then the relevant central bank cannot fall back or rely on
traditional paper money and points.

Finally, CBDC often requires special software to operate which most organizations and
individuals may not have access to.
5. VIRTUAL CURRENCIES (INCLUDING CRYPTO-CURRENCIES)

A virtual currency is any type of unregulated digital currency that has not been issued or is
controlled by central bank. Examples are Bitcoin, Litecoin and XRP. These currencies are
controlled by the technologist who created both the currency and the technology that
underpins it. These currencies are often used by unique group or set of customers. Unlike
CBDCs, virtual currencies are not underwritten by central bank or any other organization.
For these reasons, they are sometimes referred to as close currencies or less friendly as
functional currencies. Although like CBDC, virtual currencies can we centralised where there
is a single central record of balance and activity but most of them are decentralised.
Decentralised currencies are where a distributed or decentralised technology is used to
verify transactions and movement across the user base. The most common or well-known
decentralized technology is Blockchain. This is a network that links records or blocks. When
a transaction is requested then this request is sent to all the computers on the network for
verification. If the request is approved, then a permanent and unalterable record or block is
added to the blockchain. If the request is rejected there is no updates or changes are made.
The key advantage of blockchain is that it is not centralised which means unlike centralised
database it is impossible to hack into and change in a fraudulent banner.
The advantage of virtual currencies is as follows.

• Customers can use them very quickly over devices such as websites, mobile devices,
• Virtual currencies can operate on a 24-hour day 365 days per year basis because there
is no need to move or administer physical cash.
• Because the currency is digital then it moves the need to carry large amount of cash
around.
• Virtual currencies and in particular cryptocurrencies allow anonymity when
processing transactions. While it could be seen as a good thing for the customer

especially if they want to keep their identity secret, it has led to claims that these
currencies are being used for criminal activity.
• Finally, a virtual currency can operate on a 24 hour per day 365 days per year basis
because there is no need to move or administer physical cash.
However, there are several disadvantages for virtual currencies namely:

• The lack of regulation from an independent third party means there is possible higher
chance of virtual currencies to be used for criminal activity such as criminal proceeds,
money laundering and tax avoidance.
Also, this lack of regulation poses problems for locals and international regulators because
they cannot track their usage, they do not understand the impact they are having on
monetary policy, they cannot ensure there is a suitable protection around payments
infrastructure and finally, they cannot ensure there are suitable consumer protections in
place.
At the moment, it is unclear how the regulators will react to these currencies. They could
only implement initial light regulation that may have little material impact but alternatively
they could impact heavy and complex regulation which could make the currencies costly and
complex to use or even completely unusable.
• The price of virtual currencies is very volatile with large price swings. While price
increases are normally received well, there are often nasty socks in the price drop
dramatically.
• The take up and the usage of virtual currencies by major stores and online websites is
low because suppliers and customers would still prefer to use traditional payment
method of cash and credit cards. Also, some users and shops have complained that it
can several minutes for a virtual currency transaction to process.
• Virtual currencies require specialist software to operate which most organizations and
individuals may not have access to.
• Finally, while being decentralised does, it advantages, it does have its own set of issues.
The entire infrastructure is reliant on a collection of PCs, tablets, and other devices. Any
issues with this could be cause issues.

Q4. What do you mean by digital currency?

Q5. Why the significance of cash will always be there in the financial transaction?
Q6. What are the factors supporting the digital currency movement?
6. FINTECHS IN THE PAYMENT INDUSTRY

The payments industry is one of the most complex industries in the financial world. There
are multiple players in this industry who work in tandem to make a payment transactions
work. The payments were initially handled by banks in return of the presentment of a check,
draft or a withdrawal note. In the initial days, a payment was only possible to the bearer of a
check, draft or a withdrawal note if specified accordingly, or else, the payment was
transferred to the account, specified on the check. Therefore, for a large part payment were
handled in cash, until the first credit card was introduced. Thereafter, multiple banks
introduced their own credit cards. Similar to the revolution brought about by the
introduction of credit cards in the banking industry, the FinTechs are reshaping the payment
industry by bringing in innovative customer journeys. A brief understanding of the entire
payment ecosystem and different entities involved is essential to understand the impact
caused by FinTechs from a business and technology perspective. The moment an individual
swipes his/her credit card at a point of sale (POS), the payment process begins, and different
entities of the ecosystem start interacting with each other. Let us begin by taking a
hypothetical case of an individual purchasing tea from a tea shop and explore all the entities
involved therein by the transaction. Let us take the case of Suman, a hypothetical customer,
swiping her card at a hypothetical tea shop called Chai by Chance. In the payment ecosystem,
the tea shop is called a “merchant” and Suman is described as a “card holder.” Chai by Chance
would have a bank account, and the bank holding this account would be called an “acquirer”
bank. Suman would also have a relationship with a specific bank who would have issued a
credit card to Suman. This bank is called as “issuer” bank and in most cases the issuer bank
will issue cards associated with different card schemes like Mastercard and Visa. The card
scheme is an intermediary who is responsible for connecting all the entities in the ecosystem.
The moment Suman swipes her card at the tea shop, an authorization request is sent from

the point-of-sale system to the merchant’s acquirer bank. The point-of-sale system is
typically a credit card swipe machine, a Europay, Mastercard and Visa (EMV) credit card or
a tap card machine. The acquirer bank then forwards the request to the “card scheme.” The
card scheme works with the issuing bank to understand if the customer is eligible for the
desired credit and if the customer has a relevant balance in his/her bank account. If all goes
through well, Suman is allowed to conduct the purchase and she walks out of the store with
her tea. The merchant provides a bill to her and keeps a copy of it, as a proof of the
transaction. Once the transaction is completed at the POS, there are multiple transactions
carried out at a later time to close settlements for the transactions initiated. The acquirer
bank then creates batches of settlements and sends the details of these transactions to the
respective card schemes. The card schemes then process this information and create batches
of settlement requests to be sent to the respective issuing bank. Upon getting the payment
request, the issuing bank pays the card scheme and which in turn pays the acquiring bank.
In some cases, the card processing companies like American Express and Discover play a
dual role of issuing a bank and card scheme as well. This is a very simplified version of the
complexities and variations involved in processing the transactions across multiple banks,
merchants and credit cardissuing companies globally. Since the process is complex and
usually the commission charged is correlated to the number of entities involved, the
FinTechs have started disrupting this market by letting payments happen differently. As
mentioned above, investments in a payment FinTech have been the highest followed by
FinTechs in the wealth management space. P2P payments, wallets and POS solutions are
some of the areas that have been disrupted by FinTechs. Besides the FinTechs transforming
the payment space directly, there are FinTechs that are disrupting the industry that enables
the payment business. The business functions that these FinTechs are disrupting include on-
boarding, know-your-customer (KYC) and loyalty-related solutions.
With the introduction of wallet companies like PayPal in the late 1990s, the wallet revolution
had already begun, but it was intensified with the advancement in mobile technology and the
availability of client-side scripting technology. With the launch of the first-generation iPhone
the smartphone industry and later other mobile devices transformed the way business was
being done. Mobile devices slowly started becoming the preferred channel for e-commerce
transactions. A large number of apps were launched that were facilitating shopping using the

mobile device directly. At the end of the purchase process, the customer would make the
payments. After the purchase was done, the customer would initiate a payment using his/her
card information. At this point the mobile application enabling shopping would make a
request to the payment gateway to execute the transaction. In this process, a customer has
to remember his/her credit card information and there could be multiple cards he/she
would wish to use. Additionally, every time, the user would have to specify his/her shipping
and invoicing details. In some cases, the user would have to provide the loyalty information
as well to accumulate miles from the purchase made. All of this together made the payment
interface quite complex for a customer. A more simplified version of the same could be
wherein a consumer stores all his/her credit card/debit card/banking information in a
single application and all his/her purchases can then be routed through this application.
Such an application that could enable payments using a single interface for purchases made
using online or mobile channels is called a digital wallet. The digital wallet in turn could
potentially store the credit card details, identity details, shipping and invoicing information
and even could store loyalty-related information.
Digital wallets as explained above are solutions that provide a common interface for
conducting payments online or through a mobile device. The wallets in turn store the credit
card details, identity details, shipping and invoicing information and even could store
loyalty-related information. The wallets that store this information on a server are called
server-side wallets. Then there are wallets that store the information on client devices and
therefore do not store an individual-specific information on the server. The client-side
wallets are more popular than server-side wallets. There are about 1,000+ FinTechs
worldwide in this business.

7. CHALLENGES OF DIGITAL CURRENCIES

1. The future is unclear which means firms will struggle to plan for it
The future of digital currencies is very unclear at the moment which is very challenging for
the firms to plan for this. Regarding CBDCs, there is a lot of talks and discussion about what
could happen. In 2021, only five countries have issued CBDC although another fourteen are
performing pilot investigations. This means that firms cannot allocate people, money, and
effort into developing products and enhancing their operating models to support the roll out
of CBDCs. Even if more CBDCs were launched then it is unclear whether customers will want
to use CBDC unless forced to do by national central banks and/or by regulators. People may
still want to use a traditional currency as they do now. Virtual currencies are better defined
because there are more currencies already up and running with the large number of users.
However, their take up still relatively low and still it is unclear whether the public will start
to use them more or has their growth stalled. Also, there is a risk that if national authorities
start to regulate virtual currencies heavily then it could make them less attractive to users
which means they or at least some of them could become redundant. Therefore, and similar
to CBDCs above, the firms cannot allocate people, money, and effort into developing products
and enhancing their operating models to support the virtual currencies because of this
massive amount of uncertainty. This means it is very much a case of “wait and see” approach
to see how the marketplace develops.
2. Digital Currencies could impact existing industry models and firms will need to react.
While most people and organization in the western world will have several bank accounts,
there are millions or not billions of people in other parts of the world who do not have a bank
account. Therefore, if digital currencies particularly virtual currencies became popular then
these people who do not have bank account could use these currencies for their account as
opposed to using the traditional banks. This will create new competition challenges for their
existing banks. Taking this further: apart from not picking up new customers, this movement
could result in firm’s existing client moving their account to the new digital currencies which
could result in (a) a loss of client and profitability (b) a large number of cash outflows which
could impact the firm’s liquidity position in even their stability, and (c ) reduce cross-selling
opportunities.

Therefore, firms will need to rethink their business model to cope up with this. For example,
they may want to move around from traditional bank accounts and deposit holding and look
to develop new products around advice and other value-added services.
3. The United States and other western countries could lose their dominant currency
positions.
At the moment, the United States and other Western countries dominate the currency
market in terms of safe currencies and trading. The dominance provides economic power.
However, if other countries issue a CBDC or a particular virtual currency becomes popular
then it could take away activity from the United States and other Western countries
currencies which mean they lose their hegemony.
The United States and Western countries will need to plan for this. On the positive side, they
could look try and ensure their currencies are popular by perhaps issuing their CBDCs. Also,
from a negative point of view, they could look to ban or implement tough trade embargos on
countries issuing CBDCs that threaten them. Also, they could look to ban or heavenly regulate
any virtual currencies that appear to be danger.
Firms will also need to plan for this. They will need to ensure that they can process any new
currencies but ensure the product are relevant and their operating model can cope. It may
also be necessary for firms to set up offices and operations in countries that are issuing the
new digital currencies.
4. The use of cash is reducing but some people will still want to use it
As mentioned earlier, there is a growing trend to move anyway from cash as a payment
method but there are still people and customers who will want to use cash. These people will
be nervous about completely abandoning cash and moving to digital currencies. Therefore,
there is a certain amount of social acceptance required. Therefore, firm will need to support
traditional cash for the foreseeable future.
5. Operating Models will become increasingly more complex.

While the future of digital currency is still unclear, firms at some point will need to be able
to process a range of new CBDCs and virtual currencies. This will be in addition to the
existing traditional currencies that they currently support. Therefore, form will need to add

component to the operating model to cater for this. This will involve adding in technology
changes to be able to cope up with accounting, payments, and so on for each of the individual
digital currencies. Please understand that these digital currencies operate differently then it
will mean that a large number of individual technology changes required although some sort
of shared standard may develop overtime. These technology changes will need to be
supported by new processes, newly skilled staff, as well as relevant oversight and risk
control measures. This will involve present legal and regulatory changes. Some virtual
currencies are anonymous which will present real challenges for firms while trying to
process their KYC or anti money laundering checks. This means some form may not be able
to support these currencies because they will not be able to perform these checks.
8. SUMMARY
Digital currencies are an emerging technology that could genuinely reshape a major part of
the Financial Service industry. At a bare minimum, firms will need to enhance their already
thin and stretched operating models, at a cost, to support a range of differing digital
currencies. This will cover implementing new technology, upgrading processes, ensuring
staff are suitably skilled and reviewing existing legal arrangements. While regulations
around digital currencies are generally light, it is safe to say that if their popularity and use
increase then the amount of regulation will increase which will create costs and further
overheads for firms to comply with. Also, the introduction of digital currencies could result
in a loss of new accounts an existing client. This will impact revenue figures and could force
firms to reshape parts of their business to focus on advice and value-added activities. Finally,
the rise of digital currencies could impact the United States and western countries ‘s
dominance of Financial Services. Therefore, firms will need to ensure their product are
relevant it may be necessary for firms to set up offices and operation in the countries that
are issuing the new digital currencies.

Q7. What are the advantages of having Central Bank Digital Currency?
Q8. What are the advantages block chain is having because it is not centralized?
Q9. What are the challenges firms are facing while planning for complete digitalization in
payment system?
Q10. What are the disadvantages the traditional banking system will face if digitalization is
implemented?
10. ANSWERS TO SUB DIVIDED QUESTIONS AND TERMINAL

QUESTIONS
Ans1=The shift from traditional cash payments to digital payments has been a game changer
for the financial industry, making transaction faster, more secure, more accessible to people
worldwide.
Ans2=Today we have plethora of digital payment options, including credit and debit cards,
mobile payments, and other online payments. One of the most significant advantages of
digital payments is the speed and convenience. With just a few clicks, you can transfer money
from your account to another account or pay for goods and services. Gone are the days of
having to carry around cash or worry about finding an ATM
Ans3= In recent years, the rise of cryptocurrencies has taken the financial world by storm.
Bitcoin, the first and most well-known cryptocurrency was created in 2009, and since then,
thousands of other cryptocurrencies has been developed.
Crypto currencies are digital or virtual currencies that use encryption technique to regulate
their generation and verify the transfer of funds. Unlike traditional currencies,
cryptocurrencies are decentralised, meaning that they are not controlled by any central
authority, such as a government or bank.
One of the key advantages of cryptocurrencies is their level of security. The blockchain
technology that underpins cryptocurrencies make them virtually impossible to counterfeit
or double spend. This had made cryptocurrencies an attractive option for people who value
privacy and security. Another advantage of Crypto currencies is the global reach.

Cryptocurrencies can be used to make transactions with anyone, anywhere in the world,
without the need for a centralised intermediary. This has made them an appealing option for
people who want to avoid the fees and restrictions of traditional banking systems.
While digital payments and cryptocurrencies have many benefits, they also come with their
fair share of challenges. One of the most significant challenges is the issue of regulation. As
digital payments and Crypto currencies continue to grow, government and financial
regulators are struggling to keep up with the pace of change. The decentralized nature of
Crypto currencies, in particular, poses a significant challenge to regulators. Because they are
not controlled by any central authority, it can be difficult to enforce regulations and prevent
illegal activities such as money laundering and terrorism financing.
Another challenge is the issue of security. While digital payment and cryptocurrencies are
generally considered to be secured, they are not immune to cyber-attacks or other form of
hacking. As the use of digital payments and cryptocurrencies continue to grow, the risk of
security breaches will only increase. Despite these challenges, digital payments and
cryptocurrencies offer many opportunities for the financial industry. They have the potential
to make transaction faster, cheaper and more secure, and they can also increase financial
inclusion by providing access to financial services for people who were previously excluded.
The rise of digital payment and Crypto currencies has transformed the way we make
transaction and has opened up new opportunities for the financial industry. While there are
certainly challenges in the financial industry that need to be addressed, the benefits of these
technologies cannot be ignored. As we continue to navigate the intersection of finance and
technology, it is essential that we embrace the opportunities that digital payments and
cryptocurrencies offer while also being mindful of their potential risks.
Ans4= A digital currency is any currency that is stored in a digital form. In other words,
customer balances, transfers and transactions are performed in stored on a computer
system. The data could be stored in a centralised manner where there is a central Book of
Records owned by single organization such as the central bank. Alternatively, the data could
be stored in a distributed database such as the blockchain across its users with only its users
being able to access it. There are two main types of digital currencies namely:

• A Central Bank Digital Currency (CBDC) is it currency issued by the central bank. For
example, the EU’s European Central Bank (ECB) , the UK’s Bank of England (BOE) or the
US Federal Reserve System (Fed)
• A virtual currency is the currency that has been issued by the organization or body that
is not a central bank. (Sometimes virtual currencies are referred to a crypto currency
to reflect that there storage and usage are highly encrypted.)
Ans5= Changes in customer behaviour to stop using cash, cheques, and other more
traditional payment methods. The key demographic tends to be the younger generation who
are happy not to use cash. However, it is important to know that sizeable part of society
payment. This mean that cash will be around for a while, yet which means firms and society
in general will need to support it.
Ans6=The following factors supports digital currency movement. The factors are:-
• Technology advances across the Financial Services industry and in particular, banks,
technology firms, and regulators.
• Increased government regulation and legislation to ensure that payment
infrastructures is more robust and secure.
• Changes in customer behaviour to stop using cash, cheques, and other more traditional
payment methods. The key demographic tends to be the younger generation who are
happy not to use cash. However, it is important to know that sizeable part of society
payment. This mean that cash will be around for a while, yet which means firms and
society in general will need to support it.
• Increased standards globally across the financial service industry allows much quicker
and safer payments as well as the cheaper integration across payment technologies.
• Payment firms and providers are starting to merge into larger and more dominant
firms which gives them the capacity and cost efficiencies to push out newer payment
methods quicker and cheaper.

Ans7= The advantage of CBDC are as follows:

• Customers can use them very quickly over devices such a website, mobile devices,
• Because the currency is digital then it removes the need to carry large amount of cash
(notes and coins) around.
• CBDC are cheaper to operate (because there is no physical cash to account for) which
means payment both domestically and internationally are much cheaper, and
customers are charged lower fees.
• CBDC are better at combating fraud because all movements, transfers, balance
inquiries, and so on can be tracked much easier.
• Finally, CBDC can operate on a 24-hour day 365 days per year basis because there is no
need to move or administer physical cash.
Ans8= The key advantage of blockchain is that it is not centralised which means unlike
centralised database it is impossible to hack into and change in a fraudulent banner
Ans9= The future of digital currencies is very unclear at the moment which is very
challenging for the firms to plan for this. Regarding CBDCs, there is a lot of talks and
discussion about what could happen. In 2021, only five countries have issued CBDC although
another fourteen are performing pilot investigations. This means that firms cannot allocate
people, money, and effort into developing products and enhancing their operating models to
support the roll out of CBDCs. Even if more CBDCs were launched then it is unclear whether
customers will want to use CBDC unless forced to do by national central banks and/or by
regulators. People may still want to use a traditional currency as they do now. Virtual
currencies are better defined because there are more currencies already up and running
with the large number of users. However, their take up still relatively low and still it is
unclear whether the public will start to use them more or has their growth stalled. Also, there
is a risk that if national authorities start to regulate virtual currencies heavily then it could
make them less attractive to users which means they or at least some of them could become
redundant. Therefore, and similar to CBDCs above, the firms cannot allocate people, money,
and effort into developing products and enhancing their operating models to support the

virtual currencies because of this massive amount of uncertainty. This means it is very much
a case of “wait and see” approach to see how the marketplace develops.
Ans10= (a) a loss of client and profitability (b) a large number of cash outflows which could
impact the firm’s liquidity position in even their stability, and (c ) reduce cross-selling
opportunities.

BOOKS
Arjunwadhakar
• FinTechs For Dummies, Steven O’ Hanlon, Sussanne Chishti
Victor Solano


SEMESTER 4
DITF402
REGULATIONS
Unit 3: Growth of Fintech in Global Market 1

Unit 3
Growth of Fintech in Global Market
Table of Contents
Fig No /
SL SAQ /
No Activity
Graph
1 Introduction - -
3-4
2 Global FinTech Investment - 1 5-7
3 Disruptions in FinTech - - 7-8
4 Technology Revolution in Banks and in Asset - 2 9-10
Management Firms
5 From Insurance to InsurTech - - 11-12
6 Insurtech: disrupting the insurance industry - - 13-14
7 InsurTech Panorama - - 15
8 Robo-advisors and the democratization of
- - 16-18
investing
9 Summary - - 18
11 Answers to Sub-Divided Questions - - 19-21
12 Answers to Terminal Questions - - 21-23

1. INTRODUCTION
The FinTech Revolution has transformed the financial industry and reshaped how we
manage our finances. The digitization of financial services has made them more accessible,
affordable, and convenient for consumers, and it has paved the way for financial inclusion.
FinTech has also driven innovation and competition in the financial industry, encouraging
traditional players to modernize their services and offer new products to remain
competitive. Another lasting impact of the FinTech Revolution is the democratization of
financial services. With the rise of robo-advisors, neo banks, and challenger banks, access to
financial services has become more affordable and available to a broader range of people.
Consumers can now access personalized financial advice, manage their investments, and
make transactions from their smartphones, eliminating the need for physical bank branches.
The FinTech Revolution has brought about its fair share of challenges and risks, which the
financial industry must address to ensure the longevity of the sector. One significant
challenge is cybersecurity, as the digitization of financial service has made them more
susceptible to cyber-attacks. As financial institutions and FinTechs increasingly on digital
data, they must ensure that they have robust security measures in place to protect their
customer’s sensitive information. Another challenge for the financial industry is the
regulatory environment. The emergence of new fintech players and the adoption of new
technologies have made it difficult for the regulators to keep up with the changes. Financial
institutions and Fintech must ensure that they comply with the relevant regulations, which
may differ between jurisdictions, to avoid penalties and reputational damage.

Challenge of
FinTech Revolution
• CyberSecurity
• Regulatory Supervision
As the Fintech Revolution continues to evolve, we can expect to see further innovation in the
financial industry. One trend that likely to gain traction is the integration of blockchain
technology and decentralised finance (DeFi). Blockchain technology has the potential to
rationalise revolutionize how we store, transfer, and verify financial data, while DeFi
platforms can enable users to access financial services without intermediaries. Another area
of growth in the fintech industry is likely to be InsurTech. Insurance companies are
increasingly adopting new technologies such as artificial intelligence and big data, to
personalise insurance products and streamline claims processes. The InsurTech industries
expected to grow significantly in the coming year, with more companies entering the market
and offering innovative insurance solutions.
1.1 Learning Objectives

❖ Worked on advantages and challenges of having FinTech in Financial services.
❖ Drawing the roadmap of branchless financial services, digital bank using DeFi
❖ Working on different dimensions of FinTech like WealthTech, PayTech, InsurTech,
RegTech, Capital Market Tech
❖ Comprehending the changes brings in Insurance Industry and Financial Advising by
InsurTech, Robo-Advisors

2. GLOBAL FINTECH INVESTMENT

FinTech has experienced substantial growth due to heavy investments and new trends in the
financial industry. It has produced different financial services products that can disrupt the
way in which customers transact with their banks. In a report by London FinTech week on
July 18th, 2016 it was stated that Fintech investment has increased to 8.8 billion $ in China,
between July 2015 and June 2016. This figure represented a 252% increase since 2010.
Globally, the total investment in FinTech since 2010 is 80 billion $. China continued to see
big deals in 2017 with three mega deals, including Dianrong (220 million $), Feidee (200
million $) and Dashu Finance (117 million $). In addition, Alibaba, JD Finance and Tencent
made regional investments to expand their domestic reach. Global investments continue to
pour into FinTech startups. In 2015, investors put 19 billion $ into these companies. By mid-
August of 2016, FinTech funding for that year had already hit $ 15 billion. Venture capitalists
used to dominate FinTechs funding, yet, in the first half of 2016, private and corporate
investors were also ramping up their investments. In Q3 2017, global investment in FinTech
companies reached $8.3 billion across 274 deals while venture capitalists put $3.3 billion,
raising their corporate role to 18.4% participation as opposed to 16% in 2016. US Companies
accounted for more than 50% of the biggest global deals, including Intacct ( $ 850 million),
CardConnect ($ 750 million), Xactly ($ 564 million) and more. According to CB Insights, 2017
was a record year for VC-backed FinTechs as it reached $ 16.6 billion, up 336.8% from 2013
and 20.3% from 2016. From July 2015 to June 2016, peer to peer lending and payments, as
well as direct lending, were the FinTech categories that received the highest funding, with $
5.3 billion.
Some regions are more open to FinTech innovation than others. The factors that contribute
to FinTech growth include government support, a developed culture of innovation,
proximity to customers, specialised talent, and flexible regulations.
Considering these factors, the cities that have the best environment for FinTech are London,
Singapore, New York, Silicon Valley and Hong Kong. These centres have seen many years of
either financial or technological (in the case of Silicon Valley) development. They also
understand that it is important to collaborate with an ecosystem of firms to achieve greater
results. In Europe, London combines booming technology with the world’s largest financial

services sector. Some of the companies based in London are Atom Bank, Funding Circle,
Monzo, World Pay and Zopa. The success story of World Pay and Transfer wise shows that
London can stand independently and scale up companies. London is strong in retail banking,
neo banking, foreign exchange, and wealth management. Moving to US, New York is the home
to Wall Street, the largest capital base in the world. There is considerable human talent and
huge investors. OneDeck and Betterment are two big FinTechs based here. Silicon Valley is
linked with technology in general, and much of that has been directed toward finance.
Venture capitals are huge in this area, and their substantial expertise in scaling up
companies. PayPal, Square, Lending Club and Sofi are based here. In Asia, Hong Kong is an
important point of reference, as it is the largest Asian financial centre. They are especially
strong in B2B solutions, as Hong Kong is involved in so much trade. The proximity to China
is also a strategic asset. Welend, a lending platform, is the biggest success story that has come
out of this city. Singapore has also created a top financial centre. The government is investing
heavily to support the sector, and even regulatory Sandbox has been created for innovation
safely. Finally, Shanghai cannot be ignored. China is the biggest FinTech market based on the
amount invested and the total usage. Shanghai is the strong in asset management, liquidity
management, and blockchain. “Unicorns” such as Ant Financial, Lufax, and Zhong An are
based here.
Asia is the king of high value FinTechs, with China being the main hub. There are ten unicorns
to be considered. The main reason for the high valuations lies in the amount of people living
there. When we look at the China alone, there are over 500 million smartphone users, and
the mobile payment market is worth 235 billion $. On the landing arena, Lufax, Shanghai
based peer to peer financing and loan platform with at least 20,000 loans approved since it
began it operation in 2011. It is valued at $ 18.5 billion. In the same space, Jimubox ( $ 1
billion) is online peer-to-peer lending platform for individuals and small businesses. In the
payment arena, Qufengi ($ 1.3 billion) is an online electronic retailer that allows its customer
to pay in monthly instalments. Born in India, One97 is the company behind Paytm, an online
platform for online shopping and bills payment. Founded in 2000 in New Delhi, India, Paytm
transit 8,00,000 orders daily with 50 million registered wallets. An affiliate of China's Alibaba
Group, Ant Financial operates the Sesame credit rating system and the Alipay payment
platform. It is currently worth $ 60 billion, making it the biggest fintech company globally.

1. Explain what advantages FinTech brought in Financial Services?

2. Although FinTech brought revolution in the Financial Services, but it brings many
challenges in its implementation. Discuss the challenges of FinTech?
3. What advantages Block Chain Technology brings in Financial Services?
3. DISRUPTIONS IN FINTECH
FinTech is an overarching term for the combination of finance and technology. However,
within FinTech, many sub-categories apply to specific sectors of the financial world. Let’s
discuss them one by one:
1. Capital Market Tech.- in which companies leverage newer technology such as artificial
intelligence, machine learning and blockchain, is led by seasoned capital markets
veterans and is both collaborating with and disrupting the financial services
incumbents.
2. Wealth Tech-unites wealth and technology to provide digital tools for personal and
professional wealth management and investing. This sector includes brokerage
platforms, automated /semi-automated robo-advisors, and self-directed investment
tools for individual investors and advisors to navigate the changing landscape in wealth
management.
3. InsurTech-is a combination of insurance and technology. It refers to innovations that
generate efficiency and cost savings from the existing insurance industry model.
4. RegTech – is a community of technology companies that solve regulatory challenges
through automation. The increase in major regulatory policy and the rise in digital
products have made it imperative for companies to check for and implement
compliance issues, and this can be difficult with old, manual processes.
5. PayTech-refers to the combination of payments and technology. Innovative payment
services now form part of the PayTech ecosystem and have dominated the early days
of the FinTechs revolution through mobile, cross-border, peer-to-peer and

cryptocurrency payments. Financial Institutions have had to digitize their current

offerings to create new channels linked to a digital platform.
6. AI in Finance- refers to how artificial intelligence, machine learning, deep learning is
applied across financial service companies today and how they could be used in the
future.
7. LegalTech -combines the nature of legal technologies and their relationship with data,
the Internet of Things (IoT), cybersecurity, and distributed ledger technologies as well
as ethical considerations of the technological advancement.
LegalTech
WealthTech InsurTech
FinTech
PayTech RegTech
Capital
Market Tech

4. TECHNOLOGY REVOLUTION IN BANKS AND IN ASSET MANAGEMENT

FIRMS
Innovation in Banking Industry

Some larger financial institutions have adopted the phrase “we are just a technology
company that happens to have a banking licence”. This is mostly a marketing gimmick,
although it is perhaps partially true for some of the new challenger banks that are attempting
to disrupt the incumbent banks. However, with customer acquisition costs high and
increasing regulatory hurdles to surmount, new challenger banks need to decide whether
they will build their own technology stack themselves or work with FinTech partners to
develop the innovations required to topple the incumbents.
The financial institutions that are effectively managing this move to become fintech
companies are those that understand how to move quickly to deliver what the customer
needs in an industry on the verge of further change. Most of those who succeed have taken
in hybrid approach, focussing on partnerships, acquisitions, and internal initiatives.
Several incumbent banks are known to be developing new digital first products in a bid to
keep the new wave of the challenger banks and providers in the background: an example is
Bo from the Royal Bank of Scotland. They are gradually adopting much more ambitious
cloud-based platforms, despite their paranoia about their data being hacked on which they
can offer or launch numbers of platforms. These initiatives are being supported by likes of
Amazon, Google and Microsoft which provides cloud hosting services and enable banks to
develop Core Banking Software as a Service (SaaS) platforms with the required encryption
security.
Technological changes in Asset Management Firms

Traditionally, serious investors have valued personal investment advice from human
experts, and they have not minded playing for it. However, the asset management industry
has been attacked from two different angles:
• One of these is the march toward passive investment such as Exchange Traded Funds
or ETFs overactive asset management. ETFs are traded like stocks where the holdings
track to some well-known index such as Standard & Poor (S&P) 500

• The other is the rise in popularity of robo advisors, which uses ETFs as a strong part of
their strategy. A robo-advisor is an investment selection tool that use algorithms and
machine learning to offer investment advice and management to users. The trends
toward passive asset management have been apparent for some time in the
retail/business-to-consumer (B2C) space., but we are lately also seeing it with the
larger business to business (B2B) investors as the stock market index return continue
to rise and they are looking to cut costs to further enhance returns for the clients.
Wealth-Tech firms are enabling investor to self-manage their portfolios by offering users
technology enabled tools to help make investing decisions. These tools can include full-
service brokerage alternatives, automated and semi-automated robo advisors, self-service
investment platforms, asset class specific marketplace and Portfolio management tools for
both individual investors and advisors. They consider not only investment opportunities but
also factor such as user’s goal, income, marital status, and risk aversion to differentiate on
their offering. They enable those who can't afford a traditional financial advisor to have
similar-if not more informed-advice at lower cost.
4. What is InsurTech?
5. China is the hub of FinTech Revolution. What factors nurture FinTechs Revolution?
6. What do you mean by Wealth Tech?
7. What is the current status of Global FinTech Investment?

5. FROM INSURANCE TO INSURTECH

The concept behind Insurance is relatively straightforward. At its simplest level, insurance
is a product or service to mitigate against the risk of something nasty happening (often with
an associated financial or another type of loss). The party which could be impacted will pay
a cash premium to an insurance firm who will then pay a financial amount to re-compensate
this party if the event happens. The size of the premium is dependent on the size of the
compensation and the likelihood of the event happening. For example, for a large
compensation which is likely to happen then the premium will be large whereas for the small
compensation with a low likelihood then the premium will be smaller. The types of events
that could happen are vast, namely:
• Death-On the death of the insured person then a pre-agreed amount of money will be
paid to the policy holder (who are typically family members of the person who have
died). In some countries it is termed as Life Assurance as opposed to Insurance to
reflect the fact death will happen as opposed to the insurance which is to mitigate
against an event that could happen.
• Critical Illness Insurance-In this insurance plan, the insurer will pay a lump sum or a
series of regular payments if the policy holder is diagnosed with one of the specific
illnesses detailed in the pre agreed insurance policy.
• Accidental insurance-The policyholder is paid either a lump sum or a set of regular
payments if they are injured per the terms of the pre-agreed insurance policy.
• Vehicle insurance-this provide financial insurance against vehicle damage, bodily
injuries, and the personal liability that could result from a traffic accident. Some policies
may also cover damage to the vehicle caused by the events other than the traffic
accident such as theft, vandalism, natural disaster and others.
• Building insurance-This insurance provide financial support to the losses that could
happen to the customer’s home such as replacing damaged contents, refunding any
extra living expenses, and so on.
However, it cannot be stressed be enough how important the insurance industry is to day to
day running of the global economy. This is because many activities cannot take place unless
Insurance is in place. For example, individuals need insurance to drive a car, airline and pilots

need insurance to fly their planes, any individual need professional and personal insurance
to perform their work. Finally, there is subset of the insurance industry called Reinsurance,
which is when an insurance firm realise, they have too much exposure to a type of risk then
they will look to re-insurance this risk with another insurance firm.
If the banking and asset management firms thinks that they, have it tough with the rise of
fintech firms, there are many that believe that the insurance industry is even more prone to
disruption-and innovation. InsurTech firms initially started to explore offerings that large
insurance firms had little incentive to pursue. For example, they offered customers the ability
to customise their policies, and they used Internet enabled devices to collect information
about behaviour such as driving habits that could be used to dynamically price insurance
premiums. Traditionally, the insurance market has worked with relatively basic levels of
data to group respective policyholders together to generate diversified portfolio of people.
However, InsurTech firms are tracking their data and analysis issues by taking inputs from
various devices, including GPS tracking of cars and activity trackers on wearables so that
they can monitor more defined risk grouping and therefore allow certain products to be
more competitively priced.
In addition to better pricing models, InsurTech firms are using highly trained artificial
intelligence to help brokers find the right mix of policies to complete an individual insurance
coverage and credit score. In some cases, they can replace brokers entirely, further
disintermediating the process and saving costs. Apps are also being developed that can
combine contrasting policies into one platform for management and monitoring. Some of the
benefits of that might include enabling customers to purchase on demand policies for
microevents and enabling groups of individual policyholders to become part of a customized
group that is eligible for rebates or discounts.
Insurance is a highly regulated industry. Major brokers and underwriters have survived by
being both prudent and risk averse. They are therefore suspicious of working with InsurTech
startups, particularly those that want to disrupt their stable industry. Many InsurTech
startups require the help of traditional insurers to handle underwriting issues, so the
incumbent players here are likely to collaborate with and invest in their junior partners.

6. INSURTECH: DISRUPTING THE INSURANCE INDUSTRY

The Insurance industry has traditionally been perceived as slow moving, bureaucratic, and
resistant to change. However, in recent years, a new wave of technology driven innovation
has emerged, known as Insurtech. This has disrupted the industry by offering new,
innovative, and personalised insurance products and services.
InsurTech companies are reshaping insurance by providing new ways of delivering

insurance, such as on-demand coverage, and by making insurance more accessible and
affordable. They use data driven insights to personalise products and pricing, giving
customers more control over their insurance options. These companies also focused on
improving the customer experience by making the claim process faster and more efficient.
Personalization and customization are two key aspects of InsurTech. These companies use
customer data to tailor products and services to individual needs. This approach not only
provide customers with better options but also help insurers identify new market segments
and product opportunities. For example, a home-owner with a smart home security system
may be offered a discount on their insurance premium, while a driver who only uses their
car on weekends may be offered at lower premium rate.
Another key driver of InsurTech is the use of big data and AI. Insurers are increasingly using
data analytics to analyse customer behaviour and claim data, and to identify new market
opportunities. Artificial intelligence is being used to automate underwriting, claim
processing, and fraud detection, enabling insurers to provide faster and more accurate
services.
One example of how InsurTech is using big data and artificial intelligence is the use of
telematics in auto insurance. Telematics involves installing a small device in a vehicle that
collects data on driving behaviour, such as speed, braking and acceleration. This data used
to personalise insurance premiums based on actual driving habits, rather than relying on
general assumption about the driver’s risk level.
The future of insurance is likely to be heavenly influenced by InsurTech. As the use of

technology becomes more pervasive in the insurance industry, insurers will need to adapt
and embrace new ways of doing business to remain competitive. For example, traditional

insurers may need to partner with InsurTech companies to provide new products and
services or to access new customer segments.
However, there are also some potential risks and challenges associated with InsurTech. One
of the biggest risks is the potential for data breaches and cyber-attacks, which can
compromise customer information and erode trust in the industry. Insurers will need to
invest in cyber security measures to protect customer data and maintain their reputation.
Another challenge is the potential for regulatory hurdles. As InsurTech continues to disrupt
the industry, regulators may need to update laws and regulation to ensure that consumer
protection and privacy are maintained.
In conclusion, InsurTech is disrupting the insurance industry by offering new, innovative,

and personalised insurance products and services. Personalization and customization, as
well as the use of big data and artificial intelligence, are the key drivers of InsurTech. As the
use of technology becomes more pervasive in the industry, insurers will need to adapt and
embrace new ways of doing business to remain competitive. While there are potential risks
and challenges associated with InsurTech , the future of insurance is likely to be heavily
influenced by this technology driven innovation.

7. INSURTECH PANORAMA
In the Insurance Industry, there are some new digital players. This self-named “InsurTech”
are technology driven insurance companies, are using new technologies to deliver coverage
to a more digitally savvy customer base. The new rising market was state backed by
lowering, in some locations, the regulatory barriers.
In Australia, Singapore, and the United Kingdom for example, InsurTech have been
encouraged to test their new business methods on specific customer groups without having
to conform to the full regulatory frameworks that apply to incumbents. Emerging business
owners understand that they have two options. They can either become disruptive by
diverging of their more mature counterparts, or they can converge and collaborate with
them. Authentic values, principles, and beliefs are necessary to support small teams of hand-
picked and extraordinary individuals working for a single vision, aim, and goal, regardless of
the competitive approach adopted.
In order to generate low-cost, high precision solutions that propel their organization into
twenty first century, incumbent players, like their younger market competitors, are learning
to restructure their operations to accommodate easily disruptive achievements and lean
processes. They will seek out and promote ideas and goods that will help them grow,
differentiate themselves, and get a competitive edge. They must, however, be willing to learn
from the struggles of those young founders, and remember that, in uncertain times, seeking
win-win arrangements with those younger players can yield significant benefits.

8. ROBO-ADVISORS AND THE DEMOCRATIZATION OF INVESTING

Investing used to be an exclusive activity for the wealthy. It required substantial knowledge,
time, and money to be successful. However, with the rise of robo-advisors, investing is
becoming more accessible to everyone. Robo advisors are digital platforms that provide
automated investment management services. They use algorithms to create and manage
investment portfolios based on the user’s goal, risk tolerance, and time horizon. The use of
technology has enabled robo-advisors to provide low-cost investment services to the
masses, making it accessible to investors of all levels. One of the primary advantages of robo-
advisor is their ease of use. They make investing simple and straight forward. The user-
friendly interface of robo-advisors allow users to create and manage their investment
portfolios with just a few clicks. They provide an excellent alternative to traditional
investment management which can we time consuming and require significant knowledge
and experience. Another benefit of robo-advisors is their low cost. Traditional investment
management services are often expensive and have high minimum investment
requirements. On the other hand, robo-advisors have lower fees and no minimum
investment requirements, making them more accessible to people with smaller investment
portfolios.
Robo advisors have democratized access to financial device by making it more affordable
and accessible. They provide access to professional investment management services to
people who may not have time or knowledge to manage their investments. Additionally, robo
advisors can create customized investment portfolios based on user’s goals and risk
tolerance. Another advantage of robo-advisor is the ability to provide investment advice
without bias. Human financial advisors may have conflict of interest or biases that can affect
their investment advice. However, robot advisor uses algorithms to create investment
portfolios based on the user’s goals and risk tolerance, eliminating any bias.
Robo-advisors can also provide investment advice to people who may not have access to
traditional financial advisors. People living in remote areas or those with disabilities may
find it challenging to meet with a financial advisor in person. Robo advisor can provide
investment advice remotely, making it more accessible to people in different parts of world.

The rise of robo-advisors has led to concerns about the future of human financial advisors.
Some argue that robo-advisors will replace human financial advisors, while others believe
that they will always be place for human advisors. Robo-advisors are excellent at providing
automated investment management advisory services. However, they lack the personal
touch of human financial advisors. Human advisors can provide emotional support and
guidance to their clients during difficult times. Additionally human advisor can provide more
holistic view of their client’s financial situation, including tax and estate planning.
The future of human financial advisors in a robo-advisory world may be in providing a hybrid
service. Financial advisors may use robo-advisors to manage their client’s investment
portfolios and focus on providing more comprehensive financial planning services. This
hybrid model may provide clients with best of both worlds: the convenience and low cost of
robo-advisors and the personal touch and holistic view of human financial advisors. Robo-
advisors are changing the way we invest, making it more accessible and affordable for
everyone. They provide automated investment management services, which can be
customized to the user’s goal and risk tolerance. Additionally, robo advisors democratise
access to financial advice by making it more affordable and accessible to the people who may
not have the time or knowledge to manage their investments. Despite the rise of robo
advisors there will always be placed for human financial advisors in the industry. Human
advisors provide a personal touch and more holistic view of their client’s financial situation,
including tax and estate planning.
The future of human financial advisor in a robo-advisory world may be in providing a hybrid
service, where they may use robo advisors to manage their client’s investment portfolios
while focusing on providing more comprehensive financial planning services. As the fintech
revolution continues to grow, it is important to embrace the changes and make informed
decisions. The rise of robo-advisors is just one example of how technology is changing the
financial industry. It is essential to understand the advantages and disadvantages of these
changes to make the best decisions for our financial future.
In conclusion, the rise of robo advisors is simplifying investment management and

democratizing access to financial advice. Robo-advisors provide low cost, personalised
investment services that can be accessed remotely, making them more accessible to people

in different parts of world. Although they may be concerns about the future of human
financial advisors in this robo-advisory world, there will always be placed for human
advisors in the industry. It is essential to embrace the change bought on by the FinTech
revolution and make informed decisions to prepare for the future.
9. SUMMARY
The FinTech Revolution has transformed the financial industry, parameters like digitization
of financial services brought modernization of services, offers more products, brings more
accessibility, affordability thus paving the roadmap of financial inclusion. With the rise of
robo-advisors, neo banks, and challenger banks, access to financial services has become
more affordable and available to a broader range of people. Although FinTech Revolution
face challenge of cyber-security, regulatory compliance but the factors like integration of
Block Chain technology and Decentralized Finance, InsurTech, PaymentTech has bring many
changes in the financial sector. Robo advisor in Investment decisions, InsurTech in Insurance
is helping a lot in these financial domains. FinTech has experienced substantial growth due
to heavy investments and new trends in the financial industry. Globally, the total investment
in FinTech since 2010 is $ 80 billion. The factors that contribute to FinTech growth include
government support, a developed culture of innovation, proximity to customers, specialised
talent, and flexible regulations. Considering these factors, the cities that have the best
environment for FinTech are London, Singapore, New York, Silicon Valley and Hong Kong.
These centres have seen many years of either financial or technological (in the case of Silicon
Valley) development. Asia is the king of high value FinTechs, with China being the main hub.


1. What changes Robo-advisors bring in Investment world?
2. What advantages and disadvantages Robo-advisors brings over Human Financial
Advisors?
3. What is the concept of Telematics in InsurTech?
4. What do you mean by Reinsurance?
5. What do you mean by robo-advisors?
6. What is the application of Artificial Intelligence in InsurTech?
7. What do you mean by RegTech?
8. What do you mean by Insurance?
11. ANSWERS TO SUB-DIVIDED QUESTIONS

Answer1= The FinTech Revolution has transformed the financial industry and reshaped how
we manage our finances. The digitization of financial services has made them more
accessible, affordable, and convenient for consumers, and it has paved the way for financial
inclusion. FinTech has also driven innovation and competition in the financial industry,
encouraging traditional players to modernize their services and offer new products to
remain competitive. Another lasting impact of the FinTech Revolution is the democratization
of financial services. With the rise of robo-advisors, neo banks, and challenger banks, access
to financial services has become more affordable and available to a broader range of people.
Consumers can now access personalized financial advice, manage their investments, and
make transactions from their smartphones, eliminating the need for physical bank branches.
Answer2= The FinTech Revolution has brought about its fair share of challenges and risks,
which the financial industry must address to ensure the longevity of the sector. One
significant challenge is cybersecurity, as the digitization of financial service has made them
more susceptible to cyber-attacks. As financial institutions and FinTechs increasingly on
digital data, they must ensure that they have robust security measures in place to protect
their customer’s sensitive information. Another challenge for the financial industry is the
regulatory environment. The emergence of new fintech players and the adoption of new
technologies have made it difficult for the regulators to keep up with the changes. Financial

institutions and Fintech must ensure that they comply with the relevant regulations, which
may differ between jurisdictions, to avoid penalties and reputational damage.
Answer3= Blockchain technology has the potential to rationalise revolutionize how we store,
transfer, and verify financial data
Ans4=InsurTech is the use of new technologies like artificial intelligence and big data, to
personalise insurance products and streamline claims processes. It -is a combination of
insurance and technology. It refers to innovations that generate efficiency and cost savings
from the existing insurance industry model.
Answer5= The factors that contribute to FinTech growth include government support, a
developed culture of innovation, proximity to customers, specialised talent, and flexible
regulations.
Answer6= It unites wealth and technology to provide digital tools for personal and
professional wealth management and investing. This sector includes brokerage platforms,
automated /semi-automated robo-advisors, and self-directed investment tools for
individual investors and advisors to navigate the changing landscape in wealth management.
Answer7= FinTech has experienced substantial growth due to heavy investments and new
trends in the financial industry. It has produced different financial services products that can
disrupt the way in which customers transact with their banks. In a report by London FinTech
week on July 18th , 2016 it was stated that Fintech investment has increased to 8.8 billion $
in China, between July 2015 and June 2016. This figure represented a 252% increase since
2010. Globally, the total investment in FinTech since 2010 is 80 billion $. China continued to
see big deals in 2017 with three mega deals, including Dianrong (220 million $), Feidee (200
million $) and Dashu Finance (117 million $). In addition, Alibaba, JD Finance and Tencent
made regional investments to expand their domestic reach. Global investments continue to
pour into FinTech startups. In 2015, investors put 19 billion $ into these companies. By mid-
August of 2016, FinTech funding for that year had already hit $ 15 billion. Venture capitalists
used to dominate FinTechs funding, yet, in the first half of 2016, private and corporate
investors were also ramping up their investments. In Q3 2017, global investment in FinTech
companies reached $8.3 billion across 274 deals while venture capitalists put $3.3 billion,

raising their corporate role to 18.4% participation as opposed to 16% in 2016. US Companies
accounted for more than 50% of the biggest global deals, including Intacct ( $ 850 million),
CardConnect ($ 750 million), Xactly ($ 564 million) and more. According to CB Insights, 2017
was a record year for VC-backed FinTechs as it reached $ 16.6 billion, up 336.8% from 2013
and 20.3% from 2016. From July 2015 to June 2016, peer to peer lending and payments, as
well as direct lending, were the FinTech categories that received the highest funding, with $
5.3 billion.

Answer1= Investing used to be an exclusive activity for the wealthy. It required substantial
knowledge, time, and money to be successful. However, with the rise of robo-advisors,
investing is becoming more accessible to everyone. Robo advisors are digital platforms that
provide automated investment management services. They use algorithms to create and
manage investment portfolios based on the user’s goal, risk tolerance, and time horizon. The
use of technology has enabled robo-advisors to provide low-cost investment services to the
masses, making it accessible to investors of all levels. One of the primary advantages of robo-
advisor is their ease of use. They make investing simple and straight forward. The user-
friendly interface of robo-advisors allow users to create and manage their investment
portfolios with just a few clicks. They provide an excellent alternative to traditional
investment management which can we time consuming and require significant knowledge
and experience. Another benefit of robo-advisors is their low cost. Traditional investment
management services are often expensive and have high minimum investment
requirements. On the other hand, robo-advisors have lower fees and no minimum
investment requirements, making them more accessible to people with smaller investment
portfolios.
Answer2= Robo-advisors can also provide investment advice to people who may not have
access to traditional financial advisors. People living in remote areas or those with
disabilities may find it challenging to meet with a financial advisor in person. Robo advisor
can provide investment advice remotely, making it more accessible to people in different
parts of world. Another advantage of robo-advisor is the ability to provide investment advice
without bias. Human financial advisors may have conflict of interest or biases that can affect

their investment advice. However, robot advisor uses algorithms to create investment
portfolios based on the user’s goals and risk tolerance, eliminating any bias.
Robo-advisors are excellent at providing automated investment management advisory

services. However, they lack the personal touch of human financial advisors. Human advisors
can provide emotional support and guidance to their clients during difficult times.
Additionally human advisor can provide more holistic view of their client’s financial
situation, including tax and estate planning.
Answer3= Telematics involves installing a small device in a vehicle that collects data on
driving behaviour, such as speed, braking and acceleration. This data used to personalise
insurance premiums based on actual driving habits, rather than relying on general
assumption about the driver’s risk level.
Answer4= There is subset of the insurance industry called Reinsurance, which is when an
insurance firm realise, they have too much exposure to a type of risk then they will look to
re-insurance this risk with another insurance firm.
Answer5= A robo-advisor is an investment selection tool that use algorithms and machine
learning to offer investment advice and management to users. They provide access to
professional investment management services to people who may not have time or
knowledge to manage their investments. Additionally, robo advisors can create customized
investment portfolios based on user’s goals and risk tolerance. Another advantage of robo-
advisor is the ability to provide investment advice without bias.
Answer6= Artificial intelligence is being used to automate underwriting, claim processing,

and fraud detection, enabling insurers to provide faster and more accurate services.
Personalization and customization are two key aspects of InsurTech. These companies use
customer data to tailor products and services to individual needs. This approach not only
provide customers with better options but also help insurers identify new market segments
and product opportunities. For example, a home-owner with a smart home security system
may be offered a discount on their insurance premium, while a driver who only uses their
car on weekends may be offered at lower premium rate.

Answer7=It is a community of technology companies that solve regulatory challenges

through automation. The increase in major regulatory policy and the rise in digital products
have made it imperative for companies to check for and implement compliance issues, and
this can be difficult with old, manual processes.
Answer8=Insurance is a product or service to mitigate against the risk of something nasty

happening (often with an associated financial or another type of loss). The party which could
be impacted will pay a cash premium to an insurance firm who will then pay a financial
amount to re-compensate this party if the event happens. The size of the premium is
dependent on the size of the compensation and the likelihood of the event happening. For
example, for a large compensation which is likely to happen then the premium will be large
whereas for the small compensation with a low likelihood then the premium will be smaller.

BOOKS
Arjunwadhakar
• FINTECH REVOLUTION; Navigating the intersection of Finance and Technology: Victor
Solano
• FinTechs IN A FLASH: Financial Technology made Easy: Agustin Rubini
• Insurance & InsurTech: An Evolutionary Map: Florian Nagy
• Auth N Capture: Aditya Kulkarni


SEMESTER 4
DITF402
REGULATIONS
Unit 4: Future of FinTech in Financial Market 1

Unit 4
Future of FinTech in Financial Market
Table of Contents
Fig No /
SL SAQ /
No Activity
Graph
1 Introduction - -
3-5
2 Financial Technologies and its applications in
- 1 6-9
BFSI
3 Banking and Financial Services in India - - 10
4 Technologies Used by Banking Institution - - 11-12
5 Significance of Digitization - -
5.1 Digital Economy - - 12-14
5.2 Digitization in Banking Sector - -
6 Responsibility of Banks in the Emerging
- - 15
Scenario
7 Summary - - 16
9 Answers of Sub-Divided Questions and Terminal
- - 17-22
Questions
10 Case-let - - 23-24

1. INTRODUCTION
The synergistic marriage of finance and technology is referred to as “FinTech” or Financial
Technologies. It could be done by software or an application on a mobile device that by
disrupting conventional methods of conducting financial transactions utilised in particular
by banks and other organizations and provide financial services which are both
technologically advanced and contactless so that this may improve the quality of their
services and to run their operations more efficiently. The banking and financial services
business has been radically transformed by FinTech as a result of their ability to simplify
complex financial decision making. Online transactions consist of Internet banking, banking
software, online stock trading etc making the lives of both customers and financial
authorities easier. It is now common practice to make digital payments in several currencies,
peer-to-peer lending is more common than the traditional method of applying for a loan at a
bank, and filing an insurance claim can be done in just a few minutes from the comfort of
your own home. Now applications based on big data, data science is employing data from
everything from our mobile phone activity to the usage of social media to our internet surfing
to our online shopping and more. The world’s financial institutions, including banks and
brokers, are adapting to meet the requirements of the general public. They are trying to
entice and keep consumers by utilising artificial intelligence (AI), cryptocurrencies and
blockchain technologies. The utilization of various fintech applications and solutions has
made all of this a reality.
There are several kinds of financial technology applications. Now, let’s take a look at the ways
in which these apps have impacted the finance industries and brought about the changes:
Digital Payments-Mobile wallets are replacing credit cards as a preferred method of

payment among consumers nowadays. Individuals now have the ability to make payments
more efficiently and transmit money to another one another without having to use
traditional banks, thanks to digital banking.
Investment and Wealth Management-People are able to not only keep their assets in a
single location but also manage their financial portfolios at will and from any location in the
globe with the help of central management window, thanks to the investment solutions that
are available. More automation is possible because of data analysis tools that are utilised,

particularly in the process of asset rebalancing. The cloud-based systems that are integrated
with bots are currently being utilised to advise consumers on asset management and
financial matters.
Lending/Loan-It is now possible for people all around the world to apply for loans using
their mobile phones. Credit are being extended to groups that previously could not afford
them because of improved risk models and new data sets. In addition, consumers now have
the ability to obtain their credit reports on several occasions during the year without being
required to divulge their score. Because of this, the whole process of lending money becomes
far more open to scrutiny.
Trading-Anybody with access to the Internet may now invest in the market through the use
of online trading applications, access risk in real time, and share their expertise directly
inside the online platform itself.
Personal Banking-Consumers now have the ability to manage their finances online. The
creation of online wallets and profiles to maintain services by financial institutions and
startup companies operating in this field is a major contributor to the world of digitization
since it enables users to have a better and more expedient experience overall.
Insurtech-A better experience for customers is also being provided by the insurance
businesses that are utilising digital technologies. Customers are able to undertake actions
such as acquiring additional services and filling out claims straight from the app at any time,
eliminating the need for them to go through the laborious procedure that they were required
to follow in the past.

(Source:https://bfsi.economictimes.indiatimes.com/news/insurance/the-rise-of-
insurtechs-in-india-no-more-the-new-kid-in-town/86416353)
The use of technology to Insurance principles is referred to as “InsurTech” and it provides

businesses with the capacity to deliver individualised insurance services and ensure the
confidentiality of customer data. InsurTech provides an online means for filing claims as well
as mechanism for managing policies, all of which contribute to the simplification of the
insurance process.
Regtech- Regtech is an industry that focuses on automating the compliance process of

financial institutions, which are also commonly referred to as the rules of the institutions. It
is possible to administer enormous quantities of data, in a timely and cost-effective manner,
such as the transaction records and compliance papers, without sacrificing either timelines
or cost. For example, corporate tax filings are an example of a compliance document.

❖ Working on innovation in FinTech which is helping banking and financial services.
❖ Comprehending the need and use of tools of FinTech after COVID 19.
❖ Analysing the tools like RegTech, InsurTech in regulation, compliance process, Insurance
industry
❖ Comprehending the responsibilities of banks in the emerging scenario.

2. FINANCIAL TECHNOLOGIES AND ITS APPLICATIONS IN BFSI

The following are the list of some of the financial technologies that are utilised in Banking
and Financial Services:
➢ Machine learning and Artificial Intelligence-Both machine learning (ML) and
artificial intelligence (AI) are subfields of computer science that work hand in hand
with one another. When it comes to the development of intelligent systems, these two
technologies are by far the most common. Artificial Intelligence (AI) refers to the
process of developing a computer programme that is capable of emulating human
intellect. As a result, a “artificial intelligence system” does not need to be pre-
programmed and may instead make use of algorithms that are capable of working with
their own inherent intelligence. It makes use of machine learning methods like the
Reinforcement Learning Algorithm, as well as Deep Learning, Neural Networks. AI
gives financial institutions the ability to automate processes in order to provide
individualised and contactless customer experiences. Machine learning, often known
as ML, is the process of gaining knowledge via the analysis of data. Machine Learning is
a subfield of artificial intelligence that focuses on the development of software that
enables computers to learn from the large datasets and adjust their parameters in
response to new information in order to improve the user experience. When vast
amounts of data are given into a machine learning system, the system is better able to
provide accurate predictions and draw appropriate conclusions from the data.
Some of the capabilities of AI and ML software includes credit scoring, fraud detection,
collections optimization, customer engagement and cross selling, robo-advisors for wealth
management, helpdesks in regulatory compliance. Also, Machine Learning is utilized in the
automation of stock trading processes and the provision of financial advising services to
investors. KNOW YOUR CUSTOMER often known as KYC, is now the most important use of
machine learning in the banking industry. Machine Learning is being used by financial
institutions to do market research and to enhance loan approval processes. In addition to
this, they are improving the efficiency of the contact centre operations by applying machine
learning.

➢ Blockchain-Because of its capacity to safely store transaction records and order

sensitive data, blockchain technology is swiftly gaining acceptance in the financial
industry. This is due to the fact that it can be used to create distributed ledgers. Because
the Blockchain Technology encrypts every transaction, the likelihood of a successful
cyber-attack is significantly reduced when it is deployed. In addition, the technology
behind blockchain is the basic for the variety of cryptocurrencies that are now in
circulation. Because Blockchain Technology does not permit the change or deletion of
any transaction after it has been confirmed, any error must be remedied by the
execution of a different operation.
Applications that facilitate stock trading make use of blockchain technology to keep track of
the financial transaction throughout its full life cycle. They provide innovative, safe, and cost-
effective financial products and services that are both technologically and operationally
cutting edge. The most significant financial institutions in India are putting this technology
to use in order to facilitate international trade. Blockchain Technology is being implemented
by financial institutions for a wide range of uses, including client identification, combating
money laundering, facilitating international money transfers, digital currency transactions
such as Bitcoin and trade finance.
➢ Data Analytics and Big Data- Banks and financial services firms place a premium on
data from customers and markets. Big databases are utilised to extract information
about consumer’s preferences, spending patterns, and investing activity. After this, the
findings are included into the process of developing predictive analytics, which is a
method that entails utilising data and a mathematical algorithm in order to generate
predictions about how customers will act in the future. In addition, the information that
is acquired is helpful in the process of developing marketing strategies and fraud
detection systems.
➢ Algorithmic Trading- A better educated set of trading decisions may be worked by the
applications of algorithms, which is what is meant by the phrase “algorithmic trading”.
Traders typically utilise mathematical models that continually analyse business news
and trading activity for any variables that may influence share prices to grow or drop
or fluctuate. The model come pre-programmed with instructions on many factors, such

as time, price, quantity, and other variables, for automatically executing deals without
the trader’s active participation. These instructions allow the model to make trades
without the trader’s active participation.
In contrast to human traders, algorithmic trading is able to simultaneously examine vast

volumes of data and, as a result, carry out thousands of transactions per day. Traders now
have the ability to make rapid decisions because of machine learning, providing them an
advantage over the market average.
➢ Fraud Detection and Prevention- Fraud is a significant problem of financial

institutions and businesses that provide financial services, as it results in annual losses
totalling billions of dollars. The tendency of a financial institutions to retain large
quantity of information online raises the stakes when it comes to the possibility of a
breach in security. As a result of developments in technology, fraud in the financial
industry is coming to be seen as an increasingly serious threat to the integrity of vital
data. Before there were fraud detection systems, there was a predetermined set of
criteria that criminals were able to circumvent with relative ease. The vast majority of
today’s businesses use machine learning to detect and prevent fraudulent financial
activity, which has led to the widespread adoption of automated systems in the
establishments. Machine learning occurs when large databases are combed through in
search of any anomalies, and the results are then forwarded to security professionals
so that the further investigations can be carried out.
➢ Portfolio management (Robo-advisors) Applications that are hosted on the Internet
and make use of machine learning are known as robo-advisors. They are investment
management organizations that use algorithms to assist their customers in maximising
the returns on the investments by allocating the appropriate amount of their funds to
a variety of assets. Robo-advisors are also known as online investment advisors. They
make it simpler for people of all ages to have access to low-cost investing possibilities
while requiring very little work on their part.
➢ Loan underwriting-The banking and insurance companies have access to millions of
client records, which can be used to train machine learning models and automate the
underwriting process. These models can then be utilised to streamline the process.

Because machine learning algorithms can make underwriting and credit scoring
decisions quickly, organizations can save both the time and the financial resources that
they would have spent on humans if they had to rely on those decisions.
➢ Robotic Process Automation. -The phrase “Robotic Process Automation” (RPA) is a
word that refers to the practise of outsourcing manual, repetitive duties to robots
rather than people in order to streamline the procedures that are carried out inside
financial institutions. The following are the RPA applications in finance that see the
most widespread use:
• Collecting information and compiling data
• Transaction management
• Management of regulatory compliance
• Management of communication and marketing through chatbots and electronic
letters
➢ Mobile Payments- One common use of financial technology is the creation of mobile
payment applications and gateways. Customers may conduct financial transactions via
these applications, eliminating the need for them to physically visit a bank. For instance,
Paytm, Google Pay and Phone Pe are all example of Indian companies that provide their
customers the ability to send and receive money using mobile devices at low cost per
transaction.
Q1. Mention the innovations in financial services by Financial Technologies?

Q2. Why are Digital wallets and Payments replacing the use of Credit Cards?
Q3. Explain how InsurTech is bringing innovation in Insurance Industry?
Q4. Explain the application of Machine Learning in financial Industry?
Q5. Explain how automation brought innovation in financial services?
Q6. How the likelihood of any cyberattack can be reduced after proposing block chain
system in the financial system?

3. BANKING AND FINANCIAL SERVICES IN INDIA

The new generation of modern financial technology is converting the Indian banking and
financial services sector into a cashless society and banking a nation that has not yet been
banked by generating strong solutions. Fintech startups, which are companies that provide
financial services and are sometimes known as “Fintech,” are causing a shakeup in the whole
industry by entering the banking industry and primarily moving into significantly diversified
markets such as payments, loans, insurance, remittances, and other areas. Indian financial
technology business such as Paytm, Zerodha, Google Pay and PhonePe, amongst others, are
just a few instances of successful financial technology startups that are driving incumbents
along the path of digital revolution while collaborating with them along the way. India has
one of the world’s largest populations that doesn't have an account at a bank.
The financial technology sector in India has been working hard to develop cutting-edge
technologies, educate those who do not have access to traditional banking, and increase the
number of people who make use of India's various financial services. Initiatives such as NPCI,
Jan Dhan Yogana, JAM Trinity, Aadhaar and others were launched by the Government of India
in collaboration with its regulatory body, the Reserve Bank of India, and its subsidiaries, such
as IDBRT, with the intention of a furnishing the entire Indian banking system with the
necessary infrastructure to support both physical and electronic payment and settlement
systems. These measures further worked as catalysts in the formation of FinTech, which
have also assisted the unbanked people to commerce digital payments and various
transactions within only a few minutes. Additionally, the data exposure in India, which was
led by inexpensive data and mobile adoption, further offered opportunity for new technology
models to establish themselves in the convenience of the people. This was made possible by
the fact that mobile adoption was so widespread.
Blockchain and artificial intelligence are quickly becoming the primary areas of interest for
India’s banking sector. In point of fact, these two technologies what’s driving the fintech
revolution in the BFSI sector of the Indian economy.

4. TECHNOLOGIES USED BY BANKING INSTITUTION

Let’s discuss the financial technologies implemented by different banks: -
1. Using block chain technology, ICICI Bank and Emirates NBD, the largest bank in Dubai,
have successfully completed a cross-border transfer pilot project. The introduction of
block chain technology has enabled a significant reduction in the amount of time
required to settle international money transfers, which has gone from two days to just
a few minutes.
2. ICICI Bank’s Money Coach is the country’s first automated and robotics based financial
guidance service for customers. This counsel is known as smart Robo advisor. It is a
tool for individual financial management that supports people in assisting and
accomplishing their financial goals, and it is used by individuals.
3. Ipal- It is a chat bot in ICICI bank that can be accessible through various channels such
as online-banking, smartphones, and other similar devices. It is a virtual financial
assistant that is driven by artificial intelligence and is available to the consumers at any
time and from any location through the use of Amazon Alexa and Google Assistant
devices. In addition, the intelligent bot offers its services through the website in mobile
app.
4. By using Big Data, banks now provide real time credit evolutions of customers by
making use of innovative algorithm that is based on Big Data. In a matter of seconds,
the credit worthiness of the consumer may be ascertained, thanks to an algorithm that
makes use of an intelligent combination of customer’s financial and digital activity. This
activity includes checks with credit bureaus, purchase trends, and the frequency of
purchases. Big data analytics and machine learning are helping banks to enhance its
customer service and retention rates, as well as its ability to acquire new customers.
These technologies are being utilised by them in order to enhance the intelligence and
effectiveness of their digital endeavours. SBI organized a hackathon called “Code for
Bank” with the goal of inspiring software engineers to propose solution for the banking
sector that make use of emerging technologies such as blockchain and artificial
intelligence.

5. Smart slips: Provide customers with the ability to submit cash deposit, withdrawal, and
check deposit slips online using Net banking. Customers may then finish the transaction
at a physical banking location.
6. SBI has launched an innovative programme that it aimed at fostering creative start-ups
companies in their pursuit of becoming scalable and sustainable organizations in the
Fintech space. The programme is called the SBI FinTech Innovation Incubation
Program (FIIP), and it was named after the program’s intended purpose. The
overarching objective of this effort is to instil a culture of innovative financial
technology and an entrepreneurial mindset among the Indian population.
7. SBI launched smartphone software named YONO (You Only Need One) a year ago. This
app mixes banking services with aspects of “lifestyle” purchases, and the company has
aspirations to expand it beyond individual customers and into the agricultural and
commercial sectors.
5. SIGNIFICANCE OF DIGITIZATION
Digitization is the process by which technology lowers the costs of storing, sharing, and
analysing data. This process has changed how financial institutions behave, how industrial
activities was organized, and how governments operate. Digitization has coincided with the
increased prominence of platforms and marketplaces that connect diverse agents in social
and economic activity. Platforms are most readily identified with these technical standards,
i.e. engineering specifications for hardware and standards for software. The pricing and
product strategies that platforms use differ from those of traditional firms because of the
presence of network effects. Network effects are within platforms because participation by
one group affects the utility of another group. furthermore, network effects make the
analysis of competition between platforms more complex than the analysis of competition
between traditional firms. Digitization has partially or fully replaced many tasks that were
previously done by human labourers. At the same time, computers have made some workers
much more productive. Another consequence of digitization is that it has drastically reduced
the costs of communication between workers across different organizations and locations.
This has led to the change in geographic and contractual organization of production.

5.1 Digital Economy

It refers to an economy that is based on digital technologies. The digital economy is also
sometimes called the internet economy, new economy or web economy. Increasingly, the
digital economy is intertwined with the traditional economy making a clear delineation
harder. In this new economy, digital networking and communication infrastructures
provides a global platform over which people and organizations devise strategies, interact,
communicate, collaborate and search for information. It is widely accepted that the growth
of the digital economy has widespread impact on the whole economy. Various attempts at
categorising the size of the impact on traditional sectors have been made. Given its expected
broad impact, traditional firms are actively assessing how to respond to the changes brought
about by the digital economy. For Corporations, timing of their response is of the essence.
Banks are trying to innovate and use digital tools to improve their traditional business.
5.2 Digitization in Banking Sector

Information technology (IT) has transformed the functioning of businesses, the world over.
It has (a) bridged the gaps in terms of the reach and the coverage of the systems (b) enabled
better decision making based on the latest and accurate information, (c) reduced costs and
(d) improved overall improvement in efficiency. In the Indian context, the financial sector,
especially the banking sector, has been a major beneficiary from the inroads made by IT.
Many new processes, products and services offered by banks and other financial
intermediaries are now IT-centred. Banks have traditionally been in the forefront of
harnessing technology to improve their products, services and efficiency. They have, over a
long time, been using electronic and telecommunication networks for delivering a wide
range of value-added products and services. The delivery channels include, inter alia, direct
dial up connections, private networks, public networks and the devices including telephone,
personal computers (PCs), automated teller machines (ATMs), networking of ATMs in the
form of shared payment networks, and core banking solutions.
With the popularity of PCs, easy access to Internet and world wide web(www), internet is
increasingly used by banks as a channel for receiving instructions and delivering their
products and services to their customers. This form of banking is generally referred to as
Internet banking, the range of products and services offered by different banks vary widely

both in their content and sophistication. Effective integration of technology with sound
business practices requires business process re-engineering and banks in India need to
follow up on the beginnings made in this regard.
Reserve Bank of India (RBI) has played a proactive role in the implementation of IT in the
banking sector. IT-based initiatives are focused on meeting the three-pronged objective of
better housekeeping, improved customer service and overall systematic efficiency. India
with its uniquely rich payment ecosystem is now emerging as a global leader in innovative
population scale payment systems. RBI and the Government have articulated a vision of a
less-cash society and guided its evolution with feet firmly on the ground. The growth of
financial services in India has largely been led by the banks. RBI and the banks have led the
initial trust, development and support of digital payments infrastructure and systems. Non-
banks have entered the market and expanded the range of payment services available to the
Indian client backed by their strength in technology and customer-centric innovation. Banks
and non-banks are partnering to offer the combination of trust and innovations to the Indian
customers.

6. RESPONSIBILITY OF BANKS IN THE EMERGING SCENARIO

The country is going through a significant change, in the digitization of the economy, and the
payments system. As a result, there will be many individuals who are new to digitization,
formalisation, and payment systems. They will require help, and they will look to the banking
systems to provide that help (in so far as digital banking and payments are concerned).
However, such a capacity is also seen to be missing within the banking system. Digital
payments are growing rapidly and are seeing adoption across the country. While the
technology continues to evolve, newer users are continuously engaging with the payment
system. It is important that these users are educated about the benefits and dangers of the
digital payments. They must also be made aware of their rights, and the importance of
protecting their data and privacy. In addition, the users must be educated on how they can
get redress for any problems that they face while accessing the system. So, while the banks
are working towards educating the customers, they must also look to build capacity within
the banking system, bank employees, agents, etc., so that they in turn can help educate the
customers and take the country along in this transformation. All brand Staff, call centre staff
and frontline agent must be aware of the bank’s digital products and be able to educate
customers. They can then help create digital habits with the customer. Additional capacity is
required in the financial service providers, and in the technology service providers to ensure
that the newer payment system continue to operate and scale smoothly, and are protected
from the security threats, etc.

7. SUMMARY
In this unit we discussed how financial technologies is impacting banking and financial
services. The banking and financial services business has been radically transformed by
FinTech as a result of their ability to simplify complex financial decision making. Online
transactions consist of Internet banking, banking software, online stock trading etc making
the lives of both customers and financial authorities easier. There are several kinds of
financial technology applications like digital payments, Wealth Management Tech like robo-
advisors, InsurTech, peer-to-peer lending, RegTech etc which is bringing digital
transformation and is more suited for the customers and bankers post COVID era.
Technologies like machine learning, artificial intelligence, block chain, big data are being
employed by financial institutions and banks. The era where we had open outcry system for
trading is now shifted electronic trading and there we can see big and big financial
institutions are employing algorithmic trading which is not easy to believe, all thanks to
Financial Technology. Although increase in technology implementation over banking and
financial institutions has increased the threat of cyber frauds and scams but it is roles and
responsibilities of financial institutions and customers to be aware of these issues and learn
to get adapt to the new technology.

Q1. How Financial Inclusion is possible with Financial Technology?
Q2. Mention the latest technological advancement brough by Indian banks to revolutionize
their financial service?
Q3. What do you mean by digital economy?
Q4. What are the responsibilities of banking institutions towards their customers, common
individuals in regard to innovations in financial technologies?
Q5. Explain how Big Data and data analytics tools helps in predicting likely demand of future?
Q6. Explain how algorithmic trading is different from human trading?
Q7. Mention the application of Robotic Process Automation in finance?
9. ANSWERS OF SUB-DIVIDED QUESTIONS AND TERMINAL QUESTIONS

Answers of Sub-Divided Questions
Answer1 =The banking and financial services business has been radically transformed by
FinTech as a result of their ability to simplify complex financial decision making. Online
transactions consist of Internet banking, banking software, online stock trading, InsurTech,
RegTech, PayTech, Capital Market Tech. This is possible by the use of artificial intelligence
(AI), cryptocurrencies and blockchain technologies.
Answer2 = Once India was the country with 70% transactions in cash. While countries like
US had 20% and UK 11%. Thanks to innovation like Unified Payment Interface in 2016 and
COVID 19, Contactless payment are becoming more popular now a days. According to the
study done by Chase, after COVID-19, 73% of respondent said this is more convenient. Firms
like Google, Apple, Goldman Sachs are investing billions to make the use of cards obsolete.
Services initiated by financial houses like “Buy Now, Pay Later” is actually bypassing the need
of credit card and provide a alternate method of making payment. Now as these methods
rise in popularity, the threat on the use of card and popularity of credit card decreases.
Answer3= A better experience for customers is also being provided by the insurance
businesses that are utilising digital technologies. Customers are able to undertake actions
such as acquiring additional services and filling out claims straight from the app at any time,

eliminating the need for them to go through the laborious procedure that they were required
to follow in the past.
The use of technology to Insurance principles is referred to as “InsurTech” and it provides

businesses with the capacity to deliver individualised insurance services and ensure the
confidentiality of customer data. InsurTech provides an online means for filing claims as well
as mechanism for managing policies, all of which contribute to the simplification of the
insurance process.
Answer4 =When vast amounts of data are given into a machine learning system, the system
is better able to provide accurate predictions and draw appropriate conclusions from the
data. Machine Learning works on gaining knowledge by analysing the data. KNOW YOUR
CUSTOMER often known as KYC, is now the most important use of machine learning in the
banking industry. Also, Machine Learning is utilized in the automation of stock trading
processes and the provision of financial advising services to investors. Even machine
learning is used in credit scoring, fraud detection, collections optimization, customer
engagement and cross selling, robo-advisors for wealth management, helpdesks in
regulatory compliance.
Answer5= Automation in financial services is because of AI, Machine Learning, Robo

advisors etc. FinTechs have also been key catalyst in transforming the traditional ways of
doing business using artificial intelligence, machine learning and blockchain technologies.
Artificial intelligence has been actively used by FinTechs to define alternate ways of
determining credit score as well as detecting the chances of loan default by individual
borrowers. artificial intelligence has also made 24/7 assistance possible, by means of
chatbots, that can answer users’ questions at any time of the day. Similarly, FinTechs have
been able to leverage blockchain to build an exchange for cryptocurrencies. They have also
put blockchain to use in offering cross border and other multiparty transactions where trust
and consensus is important. Blockchain enables financial services suppliers to perform large
amounts of transactions in a split second, and with maximum transparency, while also
keeping information safe. This technology is also responsible for the automation of
numerous processes, that otherwise can cost companies and their internal employees
valuable time and resources. Thus, we can conclude that all of these applications in finance,

translate into fewer human errors, more time for internal specialists that can be used for
innovation, and reduced costs.
Answer6= Because the Blockchain Technology encrypts every transaction, the likelihood of
a successful cyber-attack is significantly reduced when it is deployed. In addition, the
technology behind blockchain is the basic for the variety of cryptocurrencies that are now in
circulation. Because Blockchain Technology does not permit the change or deletion of any
transaction after it has been confirmed, any error must be remedied by the execution of a
different operation.
Answers to Terminal Questions

Answer1=India has one of the world’s largest populations that doesn't have an account at a
bank. The financial technology sector in India has been working hard to develop cutting-edge
technologies, educate those who do not have access to traditional banking, and increase the
number of people who make use of India's various financial services. Initiatives such as NPCI,
Jan Dhan Yogana, JAM Trinity, Aadhaar and others were launched by the Government of India
in collaboration with its regulatory body, the Reserve Bank of India, and its subsidiaries, such
as IDBRT, with the intention of a furnishing the entire Indian banking system with the
necessary infrastructure to support both physical and electronic payment and settlement
systems. These measures further worked as catalysts in the formation of FinTech, which
have also assisted the unbanked people to commerce digital payments and various
transactions within only a few minutes. Additionally, the data exposure in India, which was
led by inexpensive data and mobile adoption, further offered opportunity for new technology
models to establish themselves in the convenience of the people. This was made possible by
the fact that mobile adoption was so widespread.
Answer2= Let’s discuss the financial technologies implemented by different banks: -

1. Using block chain technology, ICICI Bank and Emirates NBD, the largest bank in Dubai,
have successfully completed a cross-border transfer pilot project. The introduction of
block chain technology has enabled a significant reduction in the amount of time
required to settle international money transfers, which has gone from two days to just
a few minutes.

2. ICICI Bank’s Money Coach is the country’s first automated and robotics based financial
guidance service for customers. This counsel is known as smart Robo advisor. It is a
tool for individual financial management that supports people in assisting and
accomplishing their financial goals, and it is used by individuals.
3. Ipal- It is a chat bot in ICICI bank that can be accessible through various channels such
as online-banking, smartphones, and other similar devices. It is a virtual financial
assistant that is driven by artificial intelligence and is available to the consumers at any
time and from any location through the use of Amazon Alexa and Google Assistant
devices. In addition, the intelligent bot offers its services through the website in mobile
app.
4. By using Big Data, banks now provide real time credit evolutions of customers by
making use of innovative algorithm that is based on Big Data. In a matter of seconds,
the credit worthiness of the consumer may be ascertained, thanks to an algorithm that
makes use of an intelligent combination of customer’s financial and digital activity. This
activity includes checks with credit bureaus, purchase trends, and the frequency of
purchases. Big data analytics and machine learning are helping banks to enhance its
customer service and retention rates, as well as its ability to acquire new customers.
These technologies are being utilised by them in order to enhance the intelligence and
effectiveness of their digital endeavours. SBI organized a hackathon called “Code for
Bank” with the goal of inspiring software engineers to propose solution for the banking
sector that make use of emerging technologies such as blockchain and artificial
intelligence.
5. Smart slips: Provide customers with the ability to submit cash deposit, withdrawal, and
check deposit slips online using Net banking. Customers may then finish the transaction
at a physical banking location.
6. SBI has launched an innovative programme that it aimed at fostering creative start-ups
companies in their pursuit of becoming scalable and sustainable organizations in the
Fintech space. The programme is called the SBI FinTech Innovation Incubation
Program (FIIP), and it was named after the program’s intended purpose. The
overarching objective of this effort is to instil a culture of innovative financial
technology and an entrepreneurial mindset among the Indian population.

7. SBI launched smartphone software named YONO (You Only Need One) a year ago. This
app mixes banking services with aspects of “lifestyle” purchases, and the company has
aspirations to expand it beyond individual customers and into the agricultural and
commercial sectors.
Answer3= It refers to an economy that is based on digital technologies. The digital economy
is also sometimes called the internet economy, new economy, or web economy. Increasingly,
the digital economy is intertwined with the traditional economy making a clear delineation
harder. In this new economy, digital networking and communication infrastructures
provides a global platform over which people and organizations devise strategies, interact,
communicate, collaborate, and search for information. It is widely accepted that the growth
of the digital economy has widespread impact on the whole economy. Various attempts at
categorising the size of the impact on traditional sectors have been made. Given its expected
broad impact, traditional firms are actively assessing how to respond to the changes brought
about by the digital economy. For Corporations, timing of their response is of the essence.
Banks are trying to innovate and use digital tools to improve their traditional business.
Answer4= While the technology continues to evolve, newer users are continuously engaging
with the payment system. It is important that these users are educated about the benefits
and dangers of the digital payments. They must also be made aware of their rights, and the
importance of protecting their data and privacy. In addition, the users must be educated on
how they can get redress for any problems that they face while accessing the system. So,
while the banks are working towards educating the customers, they must also look to build
capacity within the banking system, bank employees, agents, etc., so that they in turn can
help educate the customers and take the country along in this transformation. All brand Staff,
call centre staff and frontline agent must be aware of the bank’s digital products and be able
to educate customers. They can then help create digital habits with the customer. Additional
capacity is required in the financial service providers, and in the technology service
providers to ensure that the newer payment system continue to operate and scale smoothly,
and are protected from the security threats, etc.
Answer5= Banks and financial services firms place a premium on data from customers and
markets. Big databases are utilised to extract information about consumer’s preferences,

spending patterns, and investing activity. After this, the findings are included into the
process of developing predictive analytics, which is a method that entails utilising data and
a mathematical algorithm in order to generate predictions about how customers will act in
the future.
Answer6= The model of algorithmic trading come pre-programmed with instructions on

many factors, such as time, price, quantity, and other variables, for automatically executing
deals without the trader’s active participation. These instructions allow the model to make
trades without the trader’s active participation. In contrast to human traders, algorithmic
trading is able to simultaneously examine vast volumes of data and, as a result, carry out
thousands of transactions per day. Algorithmic trading attempts to strip emotions out of
trades, ensures the most efficient execution of a trade, places orders instantaneously and
may lower trading fees.
Answer7= The following are the RPA applications in finance that see the most widespread
use:
• Collecting information and compiling data
• Transaction management
• Management of regulatory compliance
• Management of communication and marketing through chatbots and electronic letters

10. CASE-LET
Understanding RuPay framework and its implementation
RuPay is an Indian domestic card payment scheme conceived and launched by National
Payments Corporation of India (NPCI). It aims to fulfil RBI’s vision to offer a domestic, open-
loop, multilateral system which will allow all Indian banks and financial institutions in India
to participate in electronic payments. “RuPay”, the word itself has a sense of nationality in it.
“RuPay” is the coinage of two terms Rupee and payment. The RuPay visual identity is a
modern and dynamic unit.
The orange and green arrows indicate a nation on the move and a service that matches its
pace. The colour blue stands for the feeling of tranquillity which is the people must get while
owning a card of the brand “RuPay”. The bold and unique typeface grants solidity to the
whole unit and symbolizes a stable entity.
RuPay was created to fulfil the RBI’s desire to have a domestic, open loop, and multilateral
system of payments in India. In India, 90% of credit card transactions and almost all debit
card transactions are domestic. However, the cost of transactions was high due to monopoly
of foreign gateways like visa and MasterCard. In recent years, the usage of credit and debit
cards (called plastic money) has increased manifold. It was thought that if this process of
transactions is made India-centric, the cost come down drastically. RuPay facilitates
electronic payment at all Indian banks and financial institutions and competes with
Mastercard and Visa in India. NPCI maintains ties with Discover Financial to enable the card
scheme to gain international acceptance.
RuPay card was launched on March 26, 2012. NPCI entered into a strategic partnership with
Discover Financial Services (DFS) for RuPay card, enabling the acceptance of RuPay Global
cards on Discover’s global payment network outside of India.
RuPay cards are accepted at all ATMs across India under National Financial Switch, and
under the NPCI’s agreement with DFS, RuPay cards are accepted on the international
Discover Network. All point-of-sale (POS) terminals in India are under RuPay platform. To
enable this, RuPay has certified major banks in India to accept the RuPay card at their

respective PoS terminals located at different merchant locations. In addition to the ATM and
PoS terminals, RuPay cards are accepted online on e-commerce websites.
Problem to Discuss
Q1. What was the objective of RBI to introduce RuPay in India?
Q2. How you can justify the concept of Duopoly in plastic money business which was
challenged by RuPay?
Q3. What was the need of NPCI to have a strategic partnership with Discover Financial
Services (DFS)?

BOOKS
Arjunwadhakar
Victor Solano
• FinTechs IN A FLASH: Financial Technology made Easy: Agustin Rubini
• Insurance & InsurTech: An Evolutionary Map: Florian Nagy
• Auth N Capture: Aditya Kulkarni


SEMESTER 4
DITF402
REGULATIONS
Unit 5: Payments and Regulations 1

Unit 5
Payments and Regulations
Table of Contents

No Table / Activity
Graph
1 Introduction
4-6
2 Distributed Ledger Technology 1 7-9
3 Understanding Blockchain 10-12
4 Understanding Bitcoin 13
5 What is a Cryptocurrency? 13
6 Who created Bitcoin? 14
7 Who controls Bitcoin? 14
8 What is Decentralization? 15
9 Mining Bitcoin 2
9.1 How does mining work?
9.2 Proof-of-Work
16-20
9.3 Mining and Security
9.4 Is Mining Profitable?
9.5 Mining Pools
10 Bitcoin Wallet 20-21
11 Exploring Bitcoin Blockchain 22
12 Output Total and Estimated Transaction Volume
12.1 Transaction Fees-
12.2 Height- 23-24
12.3 Timestamp-
12.4 Relayed By.

12.5 Difficulty-
12.6 Nonce
12.7 Confirmations
13 Understanding Hashes 24
14 Summary 25-26
15 Case Study 26-27
17 Answers to Self-Assessment Questions 28
18 Answers to Terminal Questions 28-31

1. INTRODUCTION
Blockchain technology has been called the greatest innovation since the Internet.
Proponents of the technology claim it will disrupt every industry that exists today and impact
the lives of almost everybody on the planet within a few decades. Is blockchain technology
one of the greatest technological revolutions in history or it is just a hype?
Will blockchain technology cause governments and banking system to change the way they
will process information, or will it be business as usual?
Are the evangelists of blockchain technology companies too excited and creating another
tech bubble in what is essentially just a new way to create a database? Let's try to find the
answer for this problem. To put it simply, a blockchain is like a database; it's a way of storing
records of values and transactions. Unfortunately, that simple definition won't excite people
and will leave many people thinking “so what? All that hype for a new type of database?”
However, calling blockchain a new type of database is like saying email is a new way of
sending people letters. While the Blockchain is a data base, that definition does not explain
the true genius behind how the blockchain stores records of values and transactions. In the
past when any asset of value or transaction was recorded in a database, people relied on a
third party like a bank, government, or company to record this information. People trust that
banks won’t steal their money as the government regulates them. If the bank fails, people
trust that the government will ensure the deposits of money are safe. When transferring
money or paying for goods and services, people trust credit card companies and banks will
take the correct amount from their bank account and deposit it into the account of the seller.
The seller trusts that the credit card company will pay them the money and if there is any
dispute or fraud on the transaction it will be handled through the credit card company.
If a buyer at a store is paying with cash, the seller trusts that they can take this piece of paper
with a number on it that is backed by the government to another store and exchange it to
pay for other goods and services. The sellers also trust that if they take the note to the bank,
they can convert it into digital cash balance in their bank account that can be used to pay for
purchases using credit cards or online transactions.

The common theme from everyday transactions is that we trust the institutions and the
centralised databases they maintain to accurately keep a record of our lives. In recent
decades, we have seen how banks can take wrong turns. Trust in investment groups have
been proven to be prone to exploitation. As a result, people have been looking for a system
of transacting money that is fraud proof. Even in the United States, which has one of the most
developed and regulated financial systems in the world, major financial institutions failed
during the Great Financial Crisis. Financial companies that had existed for hundreds of years
collapsed almost overnight taking people’s life savings with them. In 2015 in Greece, a
developed country that is part of European Union, banks froze all bank account deposits and
only allowed people to withdraw around $70 a day from ATMs. If banks can collapse and
governments can freeze bank withdrawal in the United States of America and Europe, how
can people in less developed and regulated countries trust their banks and governments?
The simple answer is they can’t trust them.

A decentralised database built on the blockchain removes the need for centralised
institutions and databases. Everyone on the blockchain can view and validate transactions
creating transparency and trust which lays at the core of the blockchain; it provides a system
of trust between people without the need for an intermediary involved in the transactions.
The blockchain allows people to transact between each other and with anything of a value.
Blockchain is one of the underlying technologies of Bitcoin, which has been created using a
range of other cryptographic technologies combined with the blockchain.
Bitcoin is a digital currency, primarily used for payments. Bitcoin uses a one-way blockchain
technology; however, the blockchain can be used to record and transfer anything of value,
not just financial transactions.
Blockchain based system are being used for a wide range of applications across different
industries, including digital identities, social networks, voting, cloud storage, decentralised
applications. There are seemingly endless possibilities for blockchain based system that
companies, and government are currently developing. Bitcoin, on the other hand, is still only
being used for digital payments. While Bitcoin is gaining in popularity with its price
continuously hitting records highs, it is designed primarily as a method of payment.


❖ Understanding the importance of Distributed Ledger Technology, Smart Contract in
functioning of cryptocurrencies.
❖ Work on the relationship among distributed ledger technology, blockchain and bitcoin
❖ Evaluate the bitcoin mining process, the relevance of proof-of-work, double-spending
process.

2. DISTRIBUTED LEDGER TECHNOLOGY

A disruptive technology that could help solve many of the financial system’s current
problems is the Distributed Ledger. One of the reasons why banks get into trouble is lack of
trust in each other, as trust is vital to the success of the financial transactions. Distributed
Ledger allows people to trust each other unreservedly. Distributed Ledger is a type of
database. Their key features is that they hold data that have been replicated and shared
across multiple sites, countries, or institutions. This data has been stored with consensus,
meaning that there is no doubt about its authenticity, and it is typing public. Instead of
grouping transactions into a block, records are stored consecutively in a continuous ledger,
and new transactions can only be added after a quorum has been reached by participants.
The use of Distributed Ledgers is great for real time, secure data sharing. There are different
types of distributed ledgers, and the main difference is the way in which consensus is
achieved. Examples of distributed Ledgers are Ripple, Multi-chain, and the Hyperledger
Project.
Ledgers can either public or private. Public ledgers allow anyone to contribute data, and all
participants can see an identical copy of the ledger. This is the case with Bitcoin, a database
that goes against censorship. Private ledgers allow the distribution of identical copies of the
ledger, but only to limited number of participants. This is the type of Ledger that the banks
are considering when investing in the technology.
Distributed Ledger Technology is an innovation with potentially broad application in

financial market infrastructures (FMIs) and in the economy. It's most common use at the
present is for the digital currencies, but firms are stepping up their Research and
Development activities for other uses including securities trading, smart contracts and land
and credit registries. If widely adopted, distributed Ledger technology can pose a new
challenge for regulation. Though there are no imminent concerns, constant monitoring of
developments in the application of distributed Ledger technology to financial services and
systems is prudent given the significant potential of the technology.

1. What is the primary advantage of blockchain technology over traditional

centralized databases?
a) Enhanced scalability and coordination
b) Reduced counterparty risk
c) Faster settlement time
d) Transparency and trust without the need for intermediaries
2. Which technology is considered one of the underlying technologies of
Bitcoin?
a) Decentralized applications
b) Cloud storage
c) Blockchain
d) Digital identities
3. What is the primary purpose of Bitcoin?
a) Secure digital identities
b) Decentralized voting
c) Decentralized social networks
d) Digital payments
4. What problem does blockchain technology aim to address?
a) Lack of transparency in financial transactions
b) Counterfeit digital identities
c) Centralized control of data
d) Slow settlement time in banking systems
5. Which of the following statements is true about blockchain-based systems?
a) They are primarily used for digital payments.
b) They are limited to financial transactions.
c) They can be used for a wide range of applications across different
industries.
d) They rely on centralized intermediaries for transaction validation.

6. What is the key feature of Distributed Ledger technology?

a) Replication and sharing of data across multiple sites
b) Real-time, secure data sharing
c) Authenticity and consensus in data storage
d) Public access to stored data
7. Which of the following is an example of a distributed ledger?
a) Blockchain
b) Email
c) Centralized database
d) Credit card transaction
8. What is the main difference between public and private ledgers?
a) Public ledgers allow anyone to contribute data, while private ledgers
have limited participants.
b) Public ledgers are more secure than private ledgers.
c) Private ledgers provide real-time data sharing, while public ledgers do
not.
d) Public ledgers are used for digital currencies, while private ledgers are
used for securities trading.
9. What are some potential applications of Distributed Ledger technology?
a) Digital currencies and smart contracts
b) Email communication and credit card transactions
c) Land and credit registries and securities trading
d) Ripple, Multi-chain, and Hyperledger Project
10. What challenge could the widespread adoption of Distributed Ledger
technology pose for regulation?
a) Increased security risks in financial systems
b) Limited scalability for large-scale transactions
c) Inability to achieve consensus among participants
d) Need for constant monitoring and regulation updates

3. UNDERSTANDING BLOCKCHAIN
Blockchain is a distributed ledger in which transactions--- e.g., involving digital currencies
or securities are stored as blocks (groups of transactions that are performed around the
same point in time) on computers that are connected to the network. The first blockchain
was created within the original computer code for Bitcoin. When a transaction occurs on the
Bitcoin network, it is grouped together with other transactions into a block. This block is
linked to the previous blocks on the Bitcoin blockchain through a process known as “mining”.
When a block of transactions is added, it is linked to the previous block on the blockchain,
that block is also linked to the block before it. The blocks are linked together, using
cryptography, so the transactions, data and order of blocks cannot be altered or deleted. The
ledger grows as the chain of blocks increase in size. Each new block of transactions must be
verified by the network before it can be added to the chain. This means that each computer
connected to the network has full information about the transactions in the network. The
blocks are linked together like a chain of blocks, hence the name blockchain. We would have
noticed that when we transfer money between banks, the money is removed from our
account but does not appear in other bank account instantly because each bank maintains a
separate ledger and has to reconcile them individually. Blockchain potentially has far
reaching implications for the financial sector, and this is prompting more and more banks,
insurers, and other financial institutions to invest in research into potential applications of
this technology. When bitcoins are sent from one person to another, the transaction is
reconciled on the same ledger that everyone has access to. This means that the transaction
occurs almost instantly because the sending and receiving of the bitcoins is processed at the
same time on the same ledger. When a transaction is created, it is sent to all computers
connected to the Bitcoin network, computers validate these transactions, group them into
blocks and add them to the Bitcoin blockchain. When a block of transactions is added, it is
updated on the public ledger which all computers on the network have access to and can
validate. Frequently cited benefit of blockchain is its transparency, security, and the fact that
transactions are logged in the network. Some of the disadvantages include the lack of co-
ordination and the scalability of this technology. One of the best-known applications of
blockchain technology at the present time is Bitcoin. Transactions in this virtual currency
are largely anonymous. Everyone on the Bitcoin network can view transactions all the way

back to the very first transaction. There is a lot of transparency on the Bitcoin network which
also prevents against fraud. As everyone on the network can see all the transactions and
balances, it is easy to check if transactions are valid. Once a transaction occurs on the Bitcoin
network, it is recorded and can't be altered or deleted. This creates a permanent record of
every transaction that has ever occurred, along with an audit trial of where the Bitcoins came
from. A new block of transactions is added to the Bitcoin blockchain approximately every 10
minutes.
It has also been observed that market participants in other securities market are exploring
the usage of blockchain or distributed database technology to provide various services such
as clearing and settlement, trading etc. Indian securities market may also see such
developments soon and, therefore, there is a need to understand the benefits, risks, and
challenges such developments may pose. It provides complete and secure transaction
records, updated, and verified by users, removing the need for a central authority. These
technologies allow for direct peer-to-peer transactions, which might offer benefits, in terms
of efficiency and security, over existing technological solutions. The impetus behind the
development and adoption of distributed Ledger technology are the potential benefits. The
main benefits are as under:
1. Reduced cost.
2. Faster settlement time
3. Reduction in counterparty risk
4. Reduced need for third party intermediation
5. Reduced collateral demand and latency.
6. Better fraud prevention
7. Greater resiliency
8. Simplification of reporting, data collection, and systematic risk monitoring
9. Increased Interconnectedness.
10. privacy
A blockchain is one type of data structure that can provide consensus and security when
sharing data. It is the most secure database model upon which financial transactions in the
digital world can be built.

The common notion about traditional databases is that they are stored in a single server with
that server entrusted to manage that database, whereas, in the blockchain database, there is
a decentralised system, in which there are many interdependent computers involved in
managing the database. This makes it virtually impossible to hack the database because no
single computer is trusted. However, the immutability of blockchain based currencies has
been called into question after Ethereum was attacked on June 17th, 2016. The hacking began
at around 4 a.m. when someone found a way to use bugs in the code to withdraw money from
the Decentralised Autonomous Organization (DAO). In less than four hours, the hacker had
withdrawn $ 45 million, which resulted in a drop in the price of Ethereum of 40% and the
DAO token by 70%.
By principle, distributed ledgers are inherently harder to attack because a cyber-attack

would have to attack all the multiple shared copies of the same database simultaneously to
be successful. This is not to say that distributed ledger technologies are invulnerable to
cyber-attack because if someone can find a way to ‘legitimately’ modify one copy, that can
modify all the multiple copies of the ledger.
Blockchain systems are typically comprised of two major components. These two
components are peer-to-peer network and a database. Regarding the network, Blockchain
comprises a group of computers connected through a communication model known as Peer-
to-Peer Network. This is the mechanism by which computers communicate new changes to
that database.
The second major component of the blockchain system is the database itself. The database
is an accumulation of the transaction history. The system allows for transactions to be
recorded in the order in which they occur.

4. WHAT IS BITCOIN?
Bitcoin is a network with a digital currency called bitcoins that can be exchanged for goods
and services electronically like traditional fiat currencies such as U.S Dollars or Euros.
However, unlike other currencies, Bitcoin is not created or controlled by central government.
Bitcoin is decentralised, meaning there is no central bank, government, company or
institution that controls the currency. Bitcoins are transferred directly from one person to
another without the need for banks or financial intermediaries. Bitcoins are created and
transferred by a network of thousands of computers around the world all connected to the
Bitcoin network. Bitcoins can be sent over the internet to other person like an email. We
don’t think about sending international emails anymore as any different to sending an email
to someone in the same office. As Bitcoin gains in popularity, international money transfers
may be treated the same as transferring money locally.
5. WHAT IS A CRYPTOCURRENCY?
One of the foundation technologies of Bitcoin is cryptography which involves encrypting
messages or information with codes, so they are hidden from everyone except people with
access. Bitcoin is known as the first successful global cryptocurrency; the word
cryptocurrency is the combination of the words “cryptography” and “currency”.

6. WHO CREATED BITCOIN?

Bitcoin was created by anonymous computer programmer or group of people known as
Satoshi Nakamoto. The real identity of Satoshi Nakamoto is still unknown. Bitcoin was based
on previous work in the field of cryptography and electronic cash. Satoshi Nakamoto
published a paper in 2009 titled “Bitcoin: A peer-to-peer Electronic Cash System”. Bitcoin
was created as a fully electronic currency and payment system based on mathematics and
cryptography. Bitcoin was designed so that it would not be controlled by government, banks,
or central authority.
7. WHO CONTROLS BITCOIN?

Bitcoin is not controlled by any single organization. Computer programmers from all over
the world work together on Bitcoin, however decisions about changes are made by the entire
network. People from all over the world contribute their computing power to process
transactions on the Bitcoin network. Transactions are processed and agreed upon by most
of the network. This makes it almost impossible to manipulate transactions, as transactions
must be approved by majority of the network. This group oversight keeps the network safe
and secure while controlling transactions that occur. To hack the network and gain control
over Bitcoin, more than 50% of the computers must be controlled at the same time. This
would require hacking thousands of computers at once, which is almost impossible given the
size of Bitcoin network. The Bitcoin code is open source, so anyone can view the code and
help make improvements to Bitcoin. When a change is suggested, the proposal is given to the
Bitcoin network. The computers connected to the Bitcoin network, vote on whether to
approve or reject a proposal. If there is majority support for a proposal, then the change is
implemented by the programmers. When a change is made, a new version of the Bitcoin
software is released.

8. WHAT IS DECENTRALIZATION?
Currently when we send a transaction, we must use a bank or financial intermediary. Money
in bank accounts is held by banks. The bank control our money and charges fees on that
money. We trust our life savings to bank and financial intermediaries. That trust comes at
the price of high transaction fees.
However, for billions of people in the world, they are unable to trust the banks, governments,
or legal systems in their countries. The Bitcoin network has no financial intermediary. Funds
are transferred across the network, directly from one person to another. They are
transferred through the Bitcoin network, but the Bitcoin network is not controlled by one
organization. The Bitcoin network is a thousand of computers around the world working
together to process transactions and record them on the Bitcoin blockchain. The
decentralization of Bitcoin network means that there is no central server or database. The
hacker would have to control over 50% of all the computers on the Bitcoin network at the
same time which is almost impossible to manipulate a transaction on the decentralized
Bitcoin ledger. Transactions are constantly being checked with all transactions sent to
thousands of computers to validate. With centralized systems, people rely on the
intermediary to perform these checks. The decentralized structure of Bitcoin means there
are thousands of computers performing these third-party checks to validate transactions
between people. If one computer on the Bitcoin network is shut down, there are thousands
more with an exact copy of the Bitcoin blockchain that will continue to operate.

9. MINING BITCOIN
Mining is the process of adding blocks to the blockchain and creating new bitcoins. For each
block added to the blockchain, new bitcoins are created that are paid as a reward to the
computer that adds the block to the blockchain. Getting this reward for adding a block to the
blockchain is compared to mining small gems out of a large piece of rock, there is a lot of
work, chipping away at a large block to gain a small reward for all the effort. A miner is a
computer connected to the Bitcoin blockchain network that solves a puzzle to add a block to
the blockchain. The miner that successfully solves a puzzle can add a new block to the
blockchain and is rewarded in Bitcoin for their effort, this is known as the block reward. The
puzzle that the miners are trying to solve is difficult to solve, but easy to confirm it is correct
once the answer has been found. This is like a combination to a lock, it is difficult to guess,
but once the combination to the lock is found, other people can enter that combination
number and confirm it opens the lock.
9.1 How Does Mining Work?

When a transaction is sent on the Bitcoin network, it remains as pending until it is added to
a block on the network. Miners connected to the Bitcoin network can select any of the
pending transactions to be included in a block. Usually, they will select the transactions with
the highest transaction fees, as they receive the transaction fees along with the block reward.
A hash is the encrypted output of all the transactions, an example hash that we saw when
exploring the Bitcoin blockchain was:
0000000000000a2591c882666342e6f7380a275d5b98e1882f85347c48db
A block can only be added to the network if it has a valid hash number below the current
network target. The puzzle that the miners are trying to solve is finding a number that
creates a hash that is lower than the network target. This can be thought of like rolling a dice,
the network target might be 4, so if you roll a number less than 4, you can add a valid block
to the blockchain and receive the block reward. Skill does not play a factor in rolling a lower
number, it is pure chance. The faster you roll, the more times you roll and the greater the
chance you have of getting a number below 4. The Bitcoin network is designed to add a block
to the blockchain every 10 minutes, as more miners join the network, they increase the
chance that the number they guess will be below the network target. In the dice example, if

it takes 1 person 10 minutes to roll a number below 4 then another person joins the network,
then in theory it will halve the time taken. The Bitcoin network adjusts by decreasing the
network target to 2 which increases the difficulty. Now they must roll a number below 2
before it is considered below the network target, and they can add a block to the blockchain.
Once a valid block is added to the blockchain, all the miners repeat this process for the next
group of transactions to add another valid block to the blockchain. The Bitcoin network does
this on a very larger scale, with hundreds of thousands of computers randomly guessing
number to create a hash number that is lower than the network target. After every 2,016
blocks the network target is adjusted to ensure block are being added every 10 minutes.
9.2 Proof-of-Work
The process of randomly guessing numbers to create a valid hash and add a block to the
blockchain is known as “proof of work”. It takes a large amount of electricity and computing
power during the process so a valid hash act as a proof that work was completed and
resources such as computing power and electricity work contributed to the network. The
computing power of Bitcoin network is over 10,000 times more powerful than the world's
500 most powerful supercomputers combined. Given the computing power of the Bitcoin
network, there is a criticism that resources are wasted in a process that is essentially
randomly guessing numbers. Other cryptocurrencies use alternative methods such as
“proof-of-stake”, “proof-of-burn”, “proof-of-activity” and “proof-of-capacity”.
9.3 Mining and Security

The more miners the Bitcoin network has, the more secure it theoretically is, Bitcoin is a
decentralised network and all computers connected to the network have access to the
blockchain. Whenever a transaction occurs, it is updated across all computers on the
network. Any computer can add a block to the blockchain but most computers on the
network must accept it as valid. To control a decentralised network, over 50% of the
computing power of the network would need to be controlled. The more miners and
computing power contributed to the network, the more difficult the network is to control. It
is almost completely unfeasible to control over 50% of the computers on the Bitcoin
network.

9.4 Is Mining Profitable?

The simple answer is “no”, Bitcoin mining is no longer profitable on a human computer. The
difficulty of Bitcoin mining has increased and there are companies with access to cheap
electricity running thousands of computers all mining Bitcoin. This makes it unfeasible to
profitably mine on a home computer. Mining requires a large amount of electricity and top
of the range mining specific computer chips, known as ASICs. Even with free electricity, it
would take a very long time to recover the initial costs of buying the computer equipment to
mine bitcoins.
9.5 Mining Pools

If we have a mining specific computer card and access to free/cheap electricity, we can
combine our computing power into a mining pool. A mining pool combines the computing
power of small computers making them work together to mine Bitcoin. This still requires a
fast computer chip or mining specific chips and electricity however it allows individuals or
smaller miners to combine resources to compete against larger mining operations. There are
a range of Bitcoin mining pools, however it does take some technical knowledge to set up a
computer to mine and connect it to a mining pool. There are mining profitability calculators
online, that show the potential profits based on computed speed and electricity costs.
www.cryptocompare.com/mining/calculator
www.coinwarz.com/calculators/bitcoin-mining-calculator
Eight of the ten largest mining pools are in China and most are private or difficult to join if
we can't read or write Chinese characters. While bitcoin mining is very competitive and not
profitable, it may be possible to mine other cryptocurrencies and then exchange them for
bitcoins. There are also cryptocurrencies like Storj that pay for hard drive space instead of
computing power. Coinwarz is one of the most popular sites for determining cryptocurrency
profitability.
Cloud Mining is where computing power is purchased from a large mining company that
have existing computers mining bitcoins. They have access to cheap electricity and large
numbers of fast computer chips already mining. Although cloud mining saves set up costs
such as purchasing equipment and reduce the ongoing costs, there may be still ongoing
maintenance fees. While the mining reward for a block may be large, most people are unable

to mine a block by themselves. They have to combine computing power in a mining pool or
through cloud mining. There are two famous cloud mining companies, Hashflare and
Genesis-mining.
11. What is the main characteristic of Bitcoin that sets it apart from traditional
fiat currencies?
a) It is controlled by a central government.
b) It is regulated by financial intermediaries.
c) It is decentralized and not controlled by any central authority.
d) It is physically tangible like coins and banknotes.
12. Who created Bitcoin?
a) A group of anonymous computer programmers.
b) The United States government.
c) Satoshi Nakamoto, an anonymous individual or group.
d) The World Bank.
13. What is the purpose of mining in the Bitcoin network?
a) To create new bitcoins and add blocks to the blockchain.
b) To control and regulate the Bitcoin network.
c) To encrypt and secure transactions on the network.
d) To validate transactions and prevent double spending.
14. What is the concept of decentralization in the context of Bitcoin?
a) The distribution of bitcoins among different users.
b) The control of the Bitcoin network by a central authority.
c) The ability to mine bitcoins using home computers.
d) The absence of a central server or authority controlling the network.

15. Why is it almost impossible to manipulate transactions on the Bitcoin network?

a) The use of encryption and cryptography in the network.
b) The high transaction fees charged by the network.
c) The approval of transactions by a majority of the network.
d) The centralized control of transactions by mining companies
10. BITCOIN WALLET

In order to send or receive bitcoins, we must first set up a Bitcoin wallet. There are a wide
range of options to do this which all have different advantages and disadvantages. Most
wallet passwords, private keys and recovery phrases are only issued once. If we don't write
them down and back them up, we may lose access to our wallet and bitcoins. Always we need
to make sure to have backup of wallet passwords, private keys and recovery phrases in
several locations when we generate our wallets. For most wallets, there is no bank or
financial institution that we can contact to reset a password or access our account. Losing
keys, passwords or recovery phases is one of the biggest reasons people lose their bitcoins.
There are numerous cases where people purchased Bitcoins in the early days and not paid
attention to it, they lost their keys, sold, or threw out their computers only to find out later
their Bitcoins would be worth millions of dollars. $10 worth of Bitcoin purchased in 2010
would be worth over $ 1 million at today’s prices, so it is easy to see how so many people
that owned small amount of under $50 in early days, forgot to pay much attention to it and
now they've lost access to millions of dollars.
A Bitcoin wallet is made up of three main parts:

1. Bitcoin address -This is like an email address; it is public, and we can provide this
address to everyone. However, instead of sending us emails, they can send bitcoins to
this address. A Bitcoin wallet can contain multiple addresses. A Bitcoin address is
similar to an email address, you can give this to anyone you want to send emails to you.
If people have your email address, they can send you emails but they can't access your
email or pretend to be you. This is the same with Bitcoin, if people have our Bitcoin

address, they can send us bitcoins but can't access our bitcoins or pretend to be us on
the Bitcoin network.
2. Private key-Private key is our password to access our Bitcoin address and the Bitcoins
held on that address. A private key proves ownership of the Bitcoins and allows us to
authorise transactions and send bitcoins from an address. It is essential that this
address is kept secure and private with backups of your private key in different
locations. A Bitcoin private key is like a password used to prove that we are the owner
of the email address. If we lose our email password, people can still send us emails and
our emails will still be in our inbox, however we won’t be able to access them. If
someone has our password to our email account, they can access our emails and sends
emails pretending to be us. This is the same as Bitcoin private key if we lose our private
key people will still be able to send us bitcoins, but we won't be able to access them. If
someone has our private key, then they can access our Bitcoins and send transactions
pretending to be us.
3. Software/Bitcoin client to access our wallet-In order to transact on the Bitcoin network,
we will need to access it via Bitcoin client, this can be websites, software, or another
method of authorising and generating transactions. If we think about a Bitcoin address
being similar to an email address, then the below is an easy way to think about the
comparison. Bitcoin client/software is similar to accessing email through the Gmail
website or Microsoft Outlook software to access and send emails. Even if we have an
email address and an email password, we still can't send or access our emails without
accessing a website or using software connected to the Internet/email network.
Without email software, our email address will still exist, our inbox will still receive
email. We may be also to see previous emails received and write email drafts offline.
however, without the software connected to the email network we can't send emails or
access new mails. This is the same with Bitcoin, our Bitcoin address will still exist and
can receive bitcoins. We can use our address and private key to manually generate
transactions offline. However, without a Bitcoin client/software connected to the
network, we can’t send those transactions we have generated offline, see new bitcoins
we have received or access our bitcoins.

11. EXPLORING BITCOIN BLOCKCHAIN

The Bitcoin blockchain is the database of all Bitcoin transactions that have occurred since
the beginning of Bitcoin. We can check the status of transactions, view previous transactions,
view wallet address balances and even trace transactions back to the very transaction on the
Bitcoin blockchain. www.blockchain.info is the prominent website to explore bitcoin
blockchain.
A new block, containing a collection of bitcoin transactions, is added onto the bitcoin
blockchain every 10 minutes, when a block is added to the blockchain, the transaction in the
block becomes part of the blockchain. When we send bitcoins to another bitcoin address, the
transaction will be pending until it is added into a block on the blockchain. The first block on
the blockchain is known as the “genesis block”, it is blocking number 0 on the blockchain.
The next block added to the blockchain is block 1, each block added on top of that increases
in number, also known as block height. When a block is added on the blockchain, it refers to
the block before it, block 10 refers to the block 9, block 9 refers to the block 8 continuing all
the way to the first block (block 0) on the blockchain. The block is linked together like a chain,
which is where the name blockchain originates from. If we go the website blockchain.info
home page, it shows the latest blocks added to the blockchain. The home page shows
columns with block height, age, transactions, total sent, relayed by and size (kb). Imagine if
the block height is 473609. This number highlights the number of blocks on the blockchain
when this block is added. The next block to be added on top of this block will be 473610.
Please remember that age of block is 10 minutes and a total of 2427 transactions contained
in the block. Normally the size of block is limited to 1000 kb. When we see a block, there will
be lot of information mentioned there. Let discuss some of the fields to understand more
about block and the data contained in blocks on the blockchain.

12. OUTPUT TOTAL AND ESTIMATED TRANSACTION VOLUME-

Output total is 9,958.61973656 BTC and estimated transaction volume is 601.46273237
BTC. An analogy to understand output total and estimated transaction volume can be
understood with an example of purchasing coffee from a shop, let assume the cost of coffee
is ₹ 5, and I paid ₹ 20 for the coffee because I don’t have the change then the cashier would
give me back ₹ 15 in change. The output total of this transaction is ₹ 20, and the estimated
transaction volume is ₹ 5.
12.1 Transaction Fees- When a Bitcoin transaction is sent, there is small transaction
fee for sending the transaction. The total combined transaction fees for all transactions in
the block is 0.77493411 BTC, which is around $ 2000. These transaction fees are paid to the
miner that mined the block. One bitcoin can be split into smaller decimal amounts, the
smallest amount being one millionth of a bitcoin, known as Satoshi.
12.2 Height- This is the number of the block on the blockchain. The block has a block
height of 473609 (Main Chain)”. It is the 473, 609th block added to the main Bitcoin
blockchain after the first block.
12.3 Timestamp- The time the block was added to the blockchain, let this block was
added on 2023-05-16 03:20:06. Received Time is the time when the block was received by
the network, generally the received time is equal to timestamp (when it was created)
12.4 Relayed By- Each block is added to the Bitcoin blockchain by a miner, this is
generally a group of computers that combine their computing power and allocate it to the
Bitcoin blockchain. Let this block was added by a miner that is identified as “Bixin”. Bixin
may be here is the company name that has a large amount of computing power dedicated to
Bitcoin mining.
12.5 Difficulty- Suppose it is visible as 711,697,198,173.76. This is the current network

difficulty of the proof-of-work algorithm that miners must solve to add a block to the
blockchain. The difficulty is adjusted to ensure blocks are added to the blockchain
approximately every 10 minutes.

12.6 Nonce-Nonce stands for “Number used once”, this is the answer to the puzzle that
miners must solve to add a block to the blockchain. It is a randomly generated number that
when combined with the transaction data in the block, will generate a hash that is lower than
the current bitcoin network hash target.
12.7 Confirmations – It is the number of blocks that have been added to the bitcoin
blockchain after the block that contains this transaction. The more confirmations a
transaction has, the less likely it will be reversed or changed. Many companies wait for 6
confirmations before accepting a transaction as valid.
13. UNDERSTANDING HASHES

The block also contains hash data, this is the encrypted hash of all the transaction data and
the nonce of the block. The smallest change to any data in the block would change the hash.
Even changing a letter from lowercase to uppercase will result in a completely different hash.
Each block contains the hash of the previous block on the blockchain, and this chain
continues from the first block, this prevents anyone from manipulating or altering previous
transactions in an attempt steal bitcoins. If the data is changed in a block, it will change the
hash, which will no longer link to the block before it or after it and the chain be broken. The
only way change can be made valid is to change the hashes of every block on the block-chain
after that block. This is impossible to do after 6 blocks, due to the amount of computing
power required.

14. SUMMARY
• Distributed Ledger Technology (DLT) is a type of database that shares and replicates
data across multiple sites, countries, or institutions.
• DLT ensures trust and authenticity by storing data with consensus and allowing public
access.
• Benefits of DLT include reduced cost, faster settlement time, reduced counterparty risk,
and simplified reporting.
• Blockchain is a specific type of DLT that stores transactions as blocks linked together
in a chain.
• Blockchain gained popularity through its implementation in the Bitcoin network and is
known for transparency and security.
• Blockchain relies on cryptography to ensure the immutability and integrity of
transactions.
• Challenges faced by blockchain include scalability and coordination issues.
• Bitcoin is a decentralized digital currency operating on the Bitcoin network, which is
based on blockchain technology.
• Bitcoin enables direct peer-to-peer transfer of funds without the need for banks or
financial intermediaries.
• Cryptocurrency is a type of digital or virtual currency that uses cryptography for
security.
• Decentralization refers to the absence of a central authority or intermediary controlling
a network or system.
• In the context of Bitcoin, decentralization means the network is operated by a
distributed network of computers.
• Mining is the process of adding new blocks to the blockchain and creating new bitcoins.
• Miners validate transactions by solving complex mathematical puzzles and are
rewarded with bitcoins.
• Mining helps maintain the security and integrity of the Bitcoin network.
• Proof-of-Work (PoW) is the consensus mechanism used in Bitcoin and other blockchain
networks.

• PoW requires miners to solve computational puzzles to validate transactions and

create new blocks.
• PoW prevents double-spending and ensures network security but consumes significant
computational power and energy.
15. CASE-STUDY
Current Status of Crypto-Currency in India
As of my knowledge cutoff in September 2021, the current status of cryptocurrency in India
has been a subject of ambiguity and regulatory uncertainty. The Indian government has
taken a cautious approach towards cryptocurrencies, expressing concerns about potential
risks such as money laundering, fraud, and investor protection. However, it is important to
note that cryptocurrency regulations are subject to change, and the situation may have
evolved since then.
In April 2018, the Reserve Bank of India (RBI), the country's central bank, issued a circular
prohibiting regulated financial institutions from providing services to individuals or
businesses dealing with cryptocurrencies. This led to a significant setback for the
cryptocurrency industry in India, with exchanges facing challenges in operating and
accessing banking services.
Nevertheless, the ban was challenged in the Supreme Court of India, which led to a positive
development for cryptocurrency enthusiasts and businesses. In March 2020, the court ruled
that the RBI circular was unconstitutional, lifting the ban and providing a legal framework
for the cryptocurrency industry to operate.
Since then, there have been discussions and debates around introducing comprehensive
cryptocurrency regulations in India. The government has shown an inclination towards
implementing regulations to address concerns and provide clarity in the cryptocurrency
space. Reports have suggested that the government is considering the introduction of a bill
that would classify cryptocurrencies as assets and establish a regulatory framework for their
trading and taxation.

However, it is important to monitor the latest developments and consult up-to-date sources
to accurately understand the current status of cryptocurrency in India, as regulatory
positions and policies can change over time.
Questions: Based on this discussion, work on the challenges in front of regulatory body for
the implementation of cryptocurrencies in India?

Q1. Is blockchain technology truly one of the greatest technological revolutions in history, or
is it just hype?
Q2. Will blockchain technology cause governments and the banking system to change the
way they process information, or will it be business as usual?
Q3. Explain the concept of cryptocurrency and its connection to cryptography. Provide an
example of the first successful global cryptocurrency and elaborate on its decentralized
nature.
Q4. Discuss the process of mining in the context of Bitcoin and explain how it contributes to
the security of the network. Highlight the difference between proof-of-work and proof-of-
stake mechanisms.
Q5. Evaluate the profitability of Bitcoin mining and describe the concept of mining pools.
Compare and contrast cloud mining with traditional mining approaches.

17. ANSWERS TO SELF-ASSESSMENT QUESTIONS

Answer 1: D) Transparency and trust without the need for intermediaries.
Answer 2: C) Blockchain
Answer3: D) Digital payments
Answer4: C) Centralized control of data
Answer5: C) They can be used for a wide range of applications across different industries.
Answer 6 : C) Authenticity and consensus in data storage
Answer 7 : A) Blockchain
Answer 8 : A) Public ledgers allow anyone to contribute data, while private ledgers have
limited participants.
Answer 9: C) Land and credit registries and securities trading.
Answer10: D) Need for constant monitoring and regulation updates.
Answer11: C) It is decentralized and not controlled by any central authority.
Answer 12 : C) Satoshi Nakamoto, an anonymous individual or group.
Answer 13 : A) To create new bitcoins and add blocks to the blockchain.
Answer14: D) The absence of a central server or authority controlling the network.
Answer 15 : C) The approval of transactions by a majority of the network.

Answer 1= The answer to whether blockchain technology is one of the greatest technological
revolutions or just hype lies in the potential impact it can have across industries and the
actual adoption and implementation of the technology. While blockchain has garnered
significant attention and enthusiasm, it is still in the early stages of development and
widespread adoption. It has shown promise in areas such as decentralized finance, supply
chain management, and digital identity, among others. The true potential of blockchain lies
in its ability to provide transparency, security, and trust without the need for intermediaries.
By enabling peer-to-peer transactions and decentralized systems, it has the potential to
disrupt traditional industries and empower individuals. However, there are challenges that
need to be overcome, such as scalability, regulatory concerns, and interoperability with
existing systems. To determine whether blockchain is truly revolutionary, it is important to
assess its impact in the long term. If it continues to evolve, address these challenges, and find

practical applications beyond cryptocurrencies, it could indeed be considered one of the

greatest technological revolutions. However, if it fails to live up to its potential or faces
significant limitations, it may be seen as overhyped.
Answer 2= The potential impact of blockchain on governments and the banking system is a
complex and evolving topic. While blockchain technology has the potential to disrupt
traditional systems, it is unlikely to completely replace them in the near term. Instead, we
can expect a combination of traditional systems and blockchain-based solutions to coexist,
with gradual changes in how information is processed.
Governments and banks are exploring the use of blockchain technology to improve
efficiency, transparency, and security in various processes. For example, governments are
exploring blockchain for land registries, voting systems, and identity management. Banks are
exploring blockchain for cross-border payments, trade finance, and Know Your Customer
(KYC) processes.
However, widespread adoption and integration of blockchain into existing systems will take
time due to various factors, including regulatory considerations, technological challenges,
and the need for industry-wide collaboration. Governments and banks are likely to approach
blockchain implementation cautiously, ensuring proper regulatory frameworks are in place
and addressing concerns around privacy, security, and scalability.
Therefore, while blockchain has the potential to bring significant changes to the way
governments and banks process information, it will likely be a gradual transition rather than
an immediate disruption. It will require collaboration between various stakeholders,
including governments, financial institutions, and technology providers, to navigate the
complexities and fully leverage the benefits of blockchain technology.
Answer 3 : Cryptocurrency is a digital or virtual form of currency that utilizes cryptographic

techniques for secure financial transactions, control the creation of additional units, and
verify the transfer of assets. It is built on the foundation of cryptography, which involves
encoding and decoding information to ensure its confidentiality and integrity.
The first successful global cryptocurrency is Bitcoin. Bitcoin was introduced in 2009 by an
anonymous programmer or group of people known as Satoshi Nakamoto. It operates on a

decentralized network, meaning it is not controlled by any central government, bank,

company, or institution. Instead, transactions are conducted directly between individuals,
and the entire network of thousands of computers around the world, known as nodes,
validates and records these transactions on the Bitcoin blockchain.
Answer 4: Mining is the process by which new Bitcoins are created and added to the
blockchain while also serving as the mechanism for verifying and securing transactions on
the Bitcoin network. Miners, who are computers connected to the network, compete to solve
complex mathematical puzzles, and the first one to find a solution gets to add a new block of
transactions to the blockchain. This process is known as proof-of-work.
Proof-of-work is a consensus mechanism used by Bitcoin to achieve distributed consensus.

It requires miners to invest computational power and solve the cryptographic puzzle,
making it computationally expensive and time-consuming. Once a valid block is added, it is
difficult to alter the blockchain, as it would require redoing the proof-of-work for all
subsequent blocks, which is practically infeasible and adds a high level of security to the
network.
On the other hand, proof-of-stake is an alternative consensus mechanism used by some

cryptocurrencies. Instead of miners competing through computational work, validators are
chosen to create blocks based on the number of coins they "stake" or hold. In this system, the
chances of being chosen to validate a block are proportional to the number of coins staked.
Proof-of-stake requires less energy consumption compared to proof-of-work, but critics
argue it may lead to centralization of power and wealth in the hands of those with more
coins.
Answer 5: Bitcoin mining, once profitable for individual miners using regular computers, has
become highly competitive and unprofitable due to the increasing difficulty and the
dominance of large mining operations with access to cheap electricity and specialized
hardware called ASICs. As a result, individual miners find it challenging to recover the initial
investment costs.
To address this issue, miners can join mining pools. Mining pools allow individual miners to
combine their computing power, making them work together to mine Bitcoin. The rewards

earned from mining are distributed among pool participants based on their contributed
computing power. This approach provides smaller miners with a chance to compete against
larger mining operations and receive more consistent rewards.
Cloud mining is another option where individuals can purchase computing power from large
mining companies that already have established mining operations. Cloud mining eliminates
the need for upfront investment in hardware and reduces ongoing maintenance costs.
However, users should be cautious as some cloud mining services may have hidden fees and
may not always be as profitable as initially claimed.
In summary, Bitcoin mining has shifted from being profitable for individuals to becoming a
competitive industry dominated by large mining operations. Joining mining pools or utilizing
cloud mining services can be alternative approaches for individuals to still participate in
mining and potentially earn rewards. However, it is essential to thoroughly research.


SEMESTER 4
DITF402
REGULATIONS
Unit 6: Effect of Technology in Changing Personal Financial Practices 1

Unit 6
Effect of Technology in Changing Personal
Financial Practices
Table of Contents

No Table / Activity
Graph
1 Introduction
3-5
2 What is Bitcoin (BTC)? 1 6-12
3 Important points to keep in mind for 2 12-25
Cryptocurrency Trading
4 Summary 26
6 Answers 28-31
7 Case Study 32

1. INTRODUCTION
Year 2008 exploded into a global financial earthquake. It witnessed the collapse of the
banking system in US that happened to be major financial crisis widespread all over the
world. On 15th September 2008, Lehman Brothers, filed for bankruptcy, which remains
the largest bankruptcy filing in the US history till date. In order to prevent a possible collapse
of the world financial system, many large financial institutions were bailed out by the
government. But the very same year marked the beginning of something that impacted the
world banking system. It was the year white paper on Bitcoin was published. On 1st
November 2008, a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”
by Satoshi Nakamoto was posted to a cryptographic mailing list. The paper abstract states:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent
directly from one party to another without going through a financial institution.”
In January 2009 first ever set of 50 bitcoins was released, with the release of the first block
in the blockchain: The “Genesis Block”. Later in January 2009, first Bitcoin transaction took
place between Satoshi Nakamoto and Hell Finney. And soon Bitcoin started gathering the
momentum. The early traction was very low, limited to mainly technology enthusiasts and
its price was less than 4 cents, now Bitcoin has reached to ₹ 22,43,305 or $ 27,178.32 (as per
31st May 2023).
Considering the growth of Bitcoin, it can be considered as an ideal mode of investment for
investors who look for creating risky asset portfolio. Giving an example of the growth of
Bitcoin, their market capitalization rallied from less than 16 billion $ in Jan 2017 to more
than 320 billion $ in Jan 2018. That’s a significant 20 times growth in the market cap in 9 th
year.
S. No Name Market Cap Price

1 Bitcoin $ 243,336,472,394 $ 14,483.70
2 Ethereum $ 133,153,613,476 $ 1373.33
3 Ripple $ 77,457,366,485 $2
4 Bitcoin Cash $46,595,558,279 $ 2755.55
5 Cardano $ 22,181,153,314 $0.86

(List of top five cryptocurrencies in terms of market cap, as on 13 Jan 2018)

There are many indexes which tracks the movement of cryptocurrencies, most prominent
are Coin Market Cap, Coingecko and World Coin Index. Coin Market Cap is one of the most
widely used index. Different indexes employ distinct criterion to rank cryptocurrencies, for
example Coin Market Cap uses the total market cap (market cap=price ×circulating supply).
Investment is not a one-time activity, it is a continuous process which requires patience,
proper knowledge, and discipline for the best results. In case of cryptocurrencies, it is the
segment with high risks and high returns. Before the entrance of cryptocurrencies, a 10-fold
profit in less than a year was rare in the market. As a result, the advent of cryptocurrency
has given birth to many millionaires. However, it is vital that one knows where the money is
put and following considerations to be made before investing:
1. Understand the technology and purpose of the cryptocurrency.
2. We should not be swayed away by the success of ICO (Initial Coin Offering) or high
growth of a cryptocurrency in short term.
3. Need to access the credibility of the company, their running product, or services. Portal
like News BTC, CCN, COINDESK, COIN TELEGRAPH, BITCOIN MAGAZINE can be used
for getting updated and insight information about Bitcoin.
4. Since investment in cryptocurrencies is highly risky, follow a rule that invest only that
money that we can afford to lose. Before making investments, target price, stop loss
price to be decided, once it is achieved (if target price is achieved in case of profit, or if
value dips to stop loss price in case of loss) then exiting partially of fully to be followed.
More than one exit indicators can be set up, and when it is reached, certain percentage
of exit to be followed.
5. An age-old technique to decide portfolio allocation in cryptocurrency is Investment
%=100-Age. This means if an investor age is 30 years, he should invest 30% of his
investment in cryptocurrencies and 70% in less risky assets like equity, debentures etc.


❖ Learning the basics of investment in cryptocurrency
❖ Analysing the different types of cryptocurrencies and work on feature of each.
❖ List down the role of exchanges, wallet in cryptocurrency trading
❖ Worked on problems like scalability, sustainability with Bitcoins and realized the concept
of Hard Fork

2. WHAT IS BITCOIN (BTC)?

Bitcoin is a virtual digital currency as good as electronic cash. Anyone in possession of the
Bitcoin can transfer it to any party in the world, at any point of time, without any regulations,
any checks, statutory validations, or dependence on a central authority. The sender and
receiver remain anonymous as they are addressed using a string of alphanumeric characters.
A wallet address is similar to bank account number. It is a string of alphanumeric characters,

making the transactions anonymous. Most Bitcoin addresses have 34 characters. Every
transaction is recorded in a public ledger, which is verified and maintained by an
interconnected network of computers. These computers which manage the public ledger are
rewarded with some Bitcoins for successful work. Any computer which has the required
capacity for computations can be a node (also referred to as “full node”). The entire system
is open and runs through full nodes across the globe, making the whole system independent
of any central agency or authority.
One of the primary objectives to develop Bitcoins was to ease the transfer of money without
depending upon TRUST enabled ecosystem. A transfer of currencies without depending on
banks or any nodal agency and at a lower cost compared to what banks charges, in the safest
way possible. It is their limited supply that makes Bitcoins even more fascinating. Only 21
million Bitcoins will be released in total.
Bitcoin Features:
• A peer-to-peer cryptographic currency
• It is decentralized.
• It has no physical form.
• It is not backed by any commodity, such as gold.
• Not promised or supported by a central agency.
• Limited Supply: 21 million Bitcoins
• Transaction recorded in a public distributed ledger or folder. No centralized version
exists for a hacker or an official to corrupt. Hence, it has no single point of failure.
• All Bitcoin transactions are time-stamped, making them irreversible or impossible to
tamper with. Hence the double spending is avoided.

• Since every block is connected to the adjacent blocks, it cannot be corrupted easily.
Altering any unit of information on Blockchain would require substantial computing
power to override the entire network.
• 1 Bitcoin is equals to 108 SATOSHI. Bitcoin can be converted to Satoshi. This conversion
enables transactions and purchases of bitcoins in small units (like 0.001 BTC) if the
market accepts it.
This strong feature of Decentralized payment system, with anonymous transactions, is

currently beyond the realms of government bodies, and can be used for payments across the
borders. This attracts many, especially dark forces towards cryptocurrency.
Monetary transaction in Block-chain system:

• Hypothetically there is Person “A” representing any individuals who does not have to
depend on any central authority for undergoing transaction. If a node shuts down or
crashes, other nodes will support the system. Confirmations from multiple nodes, that
are involved, are required for a successful transaction.
• Person “A” can make a transaction to any person “B” across the globe, if both of them
have bitcoin wallets. The wallet address of “B” is required to send the BITCOINS and
private key of wallet of “A” is required to authenticate the transaction.
• The transaction records only the wallet addresses of “A” and “B”, thus making those
who are involved anonymous. Nobody in the network will know who “A” or “B” is.
• There are no questions asked during a transaction. In blockchain transactions, there is
not any authority to ask questions.
• The transactions are secure.
But the Bitcoin transactions are exposed to certain significant disadvantages:

• No central authority can be held accountable in case of any mishaps.
• Transactions are recorded in the ledger accessible to all the participating nodes, thus
making it public. Though transactions with bitcoins are anonymous, they are not
private.
How to own Bitcoins?

• Bitcoin Mining

• Participation in Bitcoin Mining pools

• Personal buying/selling or exchanges.
• Online/offline sales of goods in exchange for bitcoins
• Bitcoin Exchanges/Brokers
Bitcoin Mining, Rewards and Halving

Mining is the participation of a computer (full node) in the Bitcoin network to facilitate the
Bitcoin transactions. It involves verification of the transactions, providing the required
computing capacity for a successful transaction and updating these transactions in a block
of public ledger.
In every 10 minutes on an average, a new block is added to the Blockchain. The creation of a
new block accompanies the release of certain number of bitcoins to be awarded to the
successful miner. In 2009, 50 Bitcoins was initially released as reward for every block added.
This reward is halved after the mining of every 2,10,000 blocks. The blockchain software
continues to calculate how many blocks have been added to the blockchain. When the
number hits 2,10,000 the halving event takes place. This reduction of BTC reward is called
HALVING.
When Bitcoin was first created in 2009, the block reward was set at 50 bitcoins per block.
However, as part of the Bitcoin protocol's design, the block reward is halved approximately
every four years in an event known as the "halving." The most recent halving occurred in
May 2020, reducing the block reward from 12.5 bitcoins to 6.25 bitcoins. To date, almost
80% Bitcoins have been mined. By 2140, all of the 21 million bitcoins will be released.
How is Mining Done?

Initially, Bitcoins could be mined using CPU from normal desktop computers. However, since
the successful mining includes rewards for the most competing node, the miners should
upgrade their systems to win the race. This race is eventually led to the usage of specific
hardware designed for faster mining and compatible with the SHA256 algorithm of
blockchain. Secure Hash Algorithm 256 is a cryptographic hash function that generates an
encrypted output of 256-bit size. SHA 256 plays a critical role in Bitcoin transaction as it is
used to generate digital signatures, signed by the transacting parties and in Bitcoin mining

to create hash of the latest block for successful addition. SHA256 is a highly compute-
intensive algorithm. More computing power to run SHA256 means that we able to run the
algorithm faster and more likeable to successful mining. This can be quantified using Hash
Power, however the disadvantage of doing mining is that the existing ASIC machines are
expensive, consumes lot of energy and produces lots of noise and heat. Bitcoin Core is the
official software that runs the entire system. Since the competition in gaining Bitcoin
rewards is very high and the process is compute-intensive, cloud mining is the best solution
wherein multiple parties pool their money, expertise, space etc to build an effective mining
rig. The bitcoins earned is shared among mutually by the parties.
Buying and Selling Bitcoins through Exchange

Multiple platforms are available online connecting individuals to Bitcoin sellers within the
geographical region itself. If Bitcoin is legal in a country, one can easily buy and sell goods
using bitcoins as people do in Japan, Singapore, Canada, United States of America, etc. Japan
at present is one of the friendliest countries towards Bitcoin and cryptocurrency in general.
It has declared Bitcoin and other cryptocurrencies as legal means of payment. A large
number of retail outlets in Japan accepts Bitcoin as a mode of payment. In Canada, Bitcoin or
other virtual currencies are not a legal tender. Still, it is allowed to use digital currencies to
buy goods and services on the internet and from stores that accept them.
On 30th October 2013, world’s first Bitcoin ATM was installed and used in Vancouver,
Canada. It was a two-way ATM that converted virtual currency to conventional cash and
back. On 13 December 2017, Bitcoin ATM in Singapore crashed when the price soared high.
Exchanges allow buying and selling of bitcoins in exchange for the local fiat currency or other
cryptocurrencies. An exchange is supposed to be the space where buyers meet sellers and
thus bid price can be made equals to ask price. Presently in India, many of so called
“exchanges” act as mere currency converters or brokers, as there is a strong difference in the
BUY PRICE and SELL PRICE.
Some of the exchanges or brokers functioning in India are Unocoin, Koinex, Zebpay,
Coinsecure. Some of the international exchanges or brokers in operation are Binance, Bittrex,
Coinbase, Poloniex.

1. What was the largest bankruptcy filing in US history till date?

a) Lehman Brothers
b) Goldman Sachs
c) JPMorgan Chase
d) Bank of America
2. When was the white paper on Bitcoin titled "Bitcoin: A Peer-to-Peer
Electronic Cash System" published?
a) 1st January 2008
b) 15th September 2008
c) 1st November 2008
d) 31st May 2009
3. What is the total supply of Bitcoins?
a) 10 million
b) 21 million
c) 50 million
d) 100 million
4. Which cryptocurrency had the highest market capitalization on 13th January
2018?
a) Bitcoin
b) Ethereum
c) Ripple
d) Bitcoin Cash

5. What is the formula used by Coin Market Cap to calculate market

capitalization?
a) Market cap = price × circulating supply
b) Market cap = price ÷ circulating supply
c) Market cap = circulating supply ÷ price
d) Market cap = price + circulating supply
6. Which index is one of the most widely used to track the movement of
cryptocurrencies?
a) Coin Market Cap
b) Coingecko
c) World Coin Index
d) All of the above
7. What percentage of an investor's age is recommended to be invested in
cryptocurrencies according to the age-old technique mentioned?
a) 10%
b) 30%
c) 50%
d) 70%
8. What is the primary objective of developing Bitcoins?
a) To create a decentralized payment system
b) To provide anonymity in transactions
c) To enable cross-border payments
d) All of the above

9. What is the cryptographic hash function used in Bitcoin transactions and mining?
a) SHA256
b) MD5
c) SHA1
d) AES
10. When was the most recent Bitcoin halving event?
a) May 2020
b) May 2018
c) May 2016
d) May 2014
3. IMPORTANT POINTS TO KEEP IN MIND FOR CRYPTOCURRENCY

TRADING
• Never use public computers, office computers or open public wi-fi networks like
internet café or cafeteria wi-fi
• Use a personal computer for exchange. Install appropriate antivirus and antimalware
programs on desktop.
• Continuous updating of browser to latest version for security is important. In case of
Google chrome, enable extensions to block ads, tracking sites, key loggers etc.
• Refrain from clicking casual links and unwanted emails that are flourishing nowadays
on the Internet to open accounts.
• Existing personal or professional ids should not be used for exchange.
• Avoid exchanges having less information about team details, office address, prefer to
trade with multiple exchanges. Money to be deposited only after KYC/ID approval.
• Google Authenticator should be downloaded in mobile and 2FA (2-factor
authentication) to be activated for all accounts. Credit card should be avoided for
trading on cryptocurrency.

• Keeping cryptocurrencies in hardware wallet or paper wallet like “Ledger Nano s” or

“Trezor” etc for more security is preferred. Avoid investing in new coins for low cost
and high returns.
Bitcoins as a source of Investment

Bitcoin has gained considerable attention as an investment asset in recent years. As with any
investment, it is important to consider various factors before deciding whether to invest in
Bitcoin. Here are some key points to consider:
• Volatility: Bitcoin is known for its high price volatility. Its value can experience
significant fluctuations over short periods of time. While this volatility presents
opportunities for profit, it also carries increased risk. Investors should be prepared for
price swings and have a long-term perspective.
• Potential Returns: Bitcoin has delivered substantial returns for early adopters and
long-term holders. However, past performance is not indicative of future results, and
it's important to recognize that Bitcoin's price can be influenced by a range of factors,
including market sentiment, regulatory developments, and macroeconomic conditions.
• Diversification: Bitcoin can be considered as part of a diversified investment portfolio.
Including Bitcoin in a portfolio that includes traditional assets like stocks, bonds, and
real estate can potentially provide diversification benefits. Diversification helps spread
risk across different asset classes and may help mitigate the impact of a single
investment's performance.
• Regulatory and Security Risks: Bitcoin operates in a relatively new and evolving
regulatory landscape. Regulatory changes or restrictions can impact the market and the
value of Bitcoin. Additionally, investing in Bitcoin carries security risks, such as the
potential for hacks, scams, or the loss of private keys. It's essential to take necessary
precautions and use reputable platforms for buying, selling, and storing Bitcoin.
• Market Liquidity: Bitcoin has a large and active market, which provides liquidity for
buying and selling. However, during periods of extreme market volatility, liquidity can
be impacted, leading to potential challenges in executing trades at desired prices.
• Research and Understanding: It is crucial to thoroughly research and understand
Bitcoin and the underlying blockchain technology before investing. This includes
studying its potential use cases, market trends, risks, and technical aspects. Educating

oneself about the technology and staying updated with relevant news and
developments is essential.
• Time Horizon and Risk Tolerance: Bitcoin's long-term prospects and its role in the
global financial system remain uncertain. It is important to align your investment
decision with your time horizon and risk tolerance. Investing in Bitcoin should be
approached with a long-term perspective, and it's essential to be comfortable with the
potential risks and uncertainties involved.
How to safeguard and Store Bitcoins?

A Bitcoin wallet is a reference to its public key and private key that represents the BITCOINS
accessible by it. Similar to a traditional bank account, a wallet represents the cryptocurrency
we hold. In order to access the data, we need set of private keys and public keys. Most Bitcoin
addresses have 34 characters of random digits and letters (uppercase and lowercase) with
the exception that the uppercase letter “O”,”I”, lowercase “l”, number “0” are not used to
avoid visual ambiguity. A private key is similar to a password. It is the digital signature of an
individual to authenticate a transaction and is required to unlock wallet. This is similar to
our account details where email addresses is like public key and account password is private
key. Web/Exchange wallet like BitGo, Coinapult, Coin.space gives an individual hosted wallet
services where they manage our private keys, secure funds with a password and enable our
funds with a password, other security measures. Bitcoins parked by a customer in an
exchange wallet are secured using cold storage techniques. Koinex, an Indian exchange
supports multiple cryptocurrencies, provides all time, easy access to our cryptocurrency
from any device and any part of world, making wallet a preferable choice.
Often the paper wallet contains a QR code, making it simple to scan the public key and
facilitate a transaction. Even though the paper wallet may seem a bit uncomfortable, it is
highly secure and comes at almost zero cost. Unocoin, the Indian exchange, provides support
for Bitcoin paper wallet. Like paper wallet, there is hardware wallet having hardware device
that stores our Bitcoin private key and allows us to execute transactions in a cryptocurrency
network. Examples are Ledger nano S, Trezor, Keepkey.

Beyond Bitcoin: Bitcoin and its siblings-Forking

Forking in simple terms, is a change in the existing set of rules, which may lead to either a
split or branching into two parts (HARD FORK) or an upgrade to a new set of rules (SOFT
FORK). The software (Bitcoin Core) governing the Bitcoin network protocol was released by
SATOSHI NAKAMOTO for the first time. Presently, this software is driven by the consensus
of the community (developers, miners, node operators, wallet administrators). Hence,
opinions will always be there regarding the change of rules in the software to which entire
community may agree or not agree. The difference in opinions may divide the community
and eventually results in branching of the block chain at a particular block. This forking
(branching or split) of the blockchain is called Hard fork, which is a split in the community
between people who follow the old set of rules and those who support the new set of rules.
The hard fork occurs after a particular number of blocks in generated. The group of miners,
following the new set of rules, generally uses a new name for its blockchain to differentiate
it from the existing branch.
Hard Fork: Pros and Cons

All the people holding the currency essentially, the private key during the fork is rewarded
with the new coins also, in a 1:1 ratio (generally, but not always). Thus, there is a rise in the
wealth of Coin Holders. For instance, when BITCOIN was hard forked to Bitcoin Cash, all the
BITCOIN holders received an equal amount in numbers of BITCOIN CASH. The hard fork
divides the community, which results in the generation of a new cryptocurrency. Bitcoin is a
currency driven by the consensus of community. Hence the extent of the split of the
community decides the strength of the currency. It gets weaker as the community gets
divided more. The hard fork may divide the market. Many investors may choose to invest in
the new cryptocurrency, BITCOIN CASH (BCH), which was the hard fork of Bitcoin in August
2017, soon conquered the market and reached the list of top three by market capitalization
in November 2017. The value of BCH witnessed a whooping rise from $ 767 on 2nd August
2017 to $ 3785 on 20th December 2017. Since a fork from the change in the existing set of
rules, all the participating nodes, miners, exchanges and any associated platforms need to
upgrade their software with the new set of rules. Hence, the implementation and realization
of the newly forked coins may take some time.

Till now the Bitcoin has been forked many times, subsequently resulting in the splitting of
the blockchain and generation of new coins. Few of prominent names are Bitcoin Gold,
Bitcoin Diamond, Segwit2X(B2X). Sustainability and scalability are two major concerns in
Bitcoin market, encouraging people to look for improvements. Many significant changes
have been made to the newly forked coins, but none of these changes seem to be whole in
true sense.
The problem of sustainability- At present Bitcoin mining is a highly computing intensive

process. The need for expensive hardware and significant amount of electrical energy added
to the fact that too much heat and noise is produced during mining, makes it a tough job.
Besides, Bitcoin mining is an extremely competitive segment. Only a successful miner would
be rewarded with the coins. This high competition results in inefficient computing and
wastage of resources of the other participating nodes. It also decreases the incentives of
miners and hence there is always an increased pressure of upgrading the system. Bitcoin is
an open source and decentralised project and does not have a centralised authority to
improve it. It relies on a peer review process in which independent developers propose
improvements and ask the users to accept these changes. Every time Bitcoin is forked, it
divides the community. But that’s how a decentralized community would work.
The problem of Scalability (Transaction Charges)- Bitcoin was supposed to replace the
existing payment methods by providing border less transactions at a low fee and in much
less time. Currently, the time taken, and the fees charged by the Bitcoin network for cross-
border large transactions is much less compared to that of banks (or existing financial
systems). However, this trend deviates when it comes to domestic micropayments. For the
small transactions, IMPS through an Indian Bank is much faster and cheaper than Bitcoin
network. Bitcoin withdrawal fees as charged by exchange koinex.com on 06th Jan 2018 was
0.001 BTC which would be around ₹ 1228 in value while the IMPS fees as on that date was
merely ₹ 5 in addition to GST. This makes Bitcoin not suitable for micropayments and it fails
to replace the domestic banking IMPS system.
Transaction Time and Rule of Confirmation- Bitcoin network requires a certain minimum
number of confirmations from the network nodes for a transaction to get approved. The
bitcoin community has adopted six blocks as a standard confirmation period. Once a

transaction is performed in a block of the blockchain, it has to be followed up by at least six

additional blocks to get confirmed. A transaction being conducted depends on the mutual
consent of the transacting parties involved. For small payments or retail purchases like
buying stationery, parties may agree for transactions with only one confirmation. For
example, some of the top exchanges in the market accept 2 or 3 confirmations rather than
going by the rule of 6 confirmations. But in large transactions, the recipient may ask to wait
for six confirmations. Assuming that the average time to add a new block is 10 minutes, the
transaction will require around 20 minutes to get approved with at least 2 confirmations.
This factor increases the waiting time. Since other transactions would carry a high
transaction fee as a tip, the transactions with the lower fees would be given lesser priority in
its validation. Taking all these factors into account, Bitcoin network, at times, may take much
more than 20 minutes for a transaction to get executed. This is a substantial waiting time. A
person shopping for his or her wedding is unlikely to have such an amount of patience to
transact in Bitcoins. This waiting time decreases the acceptance of the bitcoin network in
retail channel payments.
Bitcoin Cash (BCH)

On the Bitcoin Blockchain, there are limited number of transactions that can be included in
each block. A block is the data file of transactions which is limited by the file size of 1 MB.
Each transaction added increase the file size, once the data files reach 1 MB, no more
transactions can be added. A block is added every 10 minutes, so any pending transactions
not added in a block will need to wait at least 10 minutes to be processed. The more
transactions that occur on the Bitcoin Blockchain, the greater the number of pending
transactions waiting to be processed. This leads to the backlog of unprocessed transactions
and slower transaction processing times. Bitcoin Cash was created when the Bitcoin network
could not reach an agreement about what changes to implement to resolve these issues. This
disagreement resulted in part of the network splitting off to create a new cryptocurrency
known as Bitcoin Cash.
On 01st August 2017, a large section of the community broke away and forked Bitcoin to form
Bitcoin Cash. One of the major points of difference during this fork from others was the size
of the block in Bitcoin Cash. As on 06th Jan 2018, block size of Bitcoin is 1 MB while that of

Bitcoin Cash is 8 MB. A large block allows more transactions to be written in it. Both in BTC
and BCH, a new block is formed every 10 minutes on average. Hence, a large block increases
the transaction capacity and speed, as is the case with Bitcoin Cash. Though it appears that
Bitcoin cash had attempted to solve the problem of scalability, it truly had not done so.
Increasing the block size to 8 MB does not make Bitcoin cash ready for micropayments in the
future or increase the transaction speed in comparison with Visa or PayPal. Till date, the size
of Bitcoin Cash community is pretty low as compared to Bitcoin Core community. However,
Bitcoin cash has somehow gathered the interest of investors and retail payments channel,
thus bringing it into the list of top five cryptocurrencies by market cap as on 06th Jan 2017.
Though it may have gathered an excellent support, a mere 8 MB size of the block won’t
suffice. It will be forced to increase the block size to stay in the race. But until it is segwit
activated, there may not be much of a difference to expect.
While Bitcoin Cash contains the word “Bitcoin” in its name, it is not same as Bitcoin. There is
only one Bitcoin, known as “Bitcoin”, with no additional words on the end. This is the original
Bitcoin Blockchain that was created, which most alternative cryptocurrencies are based on.
Bitcoin Cash is an altcoin, it copied the Bitcoin source code and blockchain and created a new
cryptocurrency. Everyone that held Bitcoin at the time of split was entitled to receive the
same amount of Bitcoin Cash. It is very easy to create a new cryptocurrency and there are
thousands of other cryptocurrencies similar to Bitcoin Cash. Most of these have also copied
the Bitcoin source code and blockchain before creating their own cryptocurrencies. There
are several others which have Bitcoin in their name, like Bitcoin Dark, Bitcoin Plus.
These are all alternative cryptocurrencies that can be used in similar way as Bitcoin.
Bitcoin Gold (BCG)

A Bitcoin community group wanted to do away with mining that was intensive in computing.
It wanted to shift from the typical ASIC mining machines to user-friendly hardware. The
group aspired and envisioned mining to be done in desktop computers. Since the consensus
among the entire community could not be drawn, they forked away in Oct 2017, giving birth
to Bitcoin Gold. Bitcoin Gold uses “Equihash” proof-of-the work algorithm that can be used
to mine on CPUs and GPUs. This algorithm enabled true decentralization as it takes way the
power of large mining pools and helped in solving one of the major problems of Bitcoin.

However, all the problems were not solved, especially the issue of scalability. Besides, the
Bitcoin Gold community is pretty small in number to date. A small community can hardly be
decentralized. In many occasions, they have been found unprepared. Events like pre-mining
of coins by the developer team, the launch of Bitcoin Gold without Replay protection, the
presence of a suspicious file in their official wallet, DDOS attack, etc. have earned them a
terrible reputation.
Bitcoin Segwit2X (B2X)

This fork was proposed to be conducted in November 2017 but finally happened in late
December 2017. The block size was increased to 4 MB and new blocks are created every 2.5
minutes along with the implementation of segwit protocol. This increases the number of
transactions per second. B2X does not use ASIC dependent SHA256 algorithm. In its place,
X11 proof-of-work algorithm which is mineable by CPU/GPU is used. Though X11 Algorithm
decentralizes mining, the true success depends on the features of the coin and the
community support.
Ethereum
Ethereum is the second largest cryptocurrency by market capitalization after Bitcoin. Many
people predict that Ethereum will surpass Bitcoin as the largest cryptocurrency in the future.
While the Bitcoin network is mainly used for financial transactions and payments, the
Ethereum network allows people to build decentralized applications (dapps) and smart
contracts that run on the blockchain network.
Blockchain is one of the major underlying technologies of Bitcoin, however Bitcoin is just one
example of what blockchain technology is capable of. Ethereum opens up the blockchain
technology for much a wider range of possibilities. As mentioned earlier, the Bitcoin
network is more powerful than the 500 largest supercomputers in the world combined.
However, most of the processing power of the Bitcoin network is wasted, generating random
numbers in the proof-of work algorithm to add blocks to the blockchain. The Ethereum
network allows programmers and companies to create applications that run on a
decentralized network of computers. This better utilizes the computing power of the
network and means applications run across an entire network of computers, not just one
central server.

Decentralized Applications (dApps)

Currently almost all applications and websites are centralized, meaning they are installed
and run from one central server. dApps utilize the computing power, storage space and
resources of the entire network of computers connected to it. Decentralized apps do not have
single entity controlling them and they don’t run on central servers. dApps run across all the
computers connected to the network, when any data is shared it is distributed across a
network of computers, if one of the computers on the network is hacked or crashed, the other
computer would not be impacted. No central authority can shut down websites or servers
that they disapprove of, if they remove one computer from the network, the application and
information still run across all the computers on the network.
Smart Contracts
Smart Contracts are contracts that don’t require lawyers or court to enforce them. They are
written in a computer programming language that runs on a blockchain. The computer codes
automatically verify contracts, executes, and enforces the contract terms. The degree of
autonomy of the smart contracts can be decided, they can be fully or partially self-enforcing
and self-executing. Smart Contracts do not have to be purely financial transactions, almost
anything of value can be exchanged using a smart contract. Companies are currently building
smart contracts in a wide range of different industries such as music licenses, loyalty
programs, product warranty, verify digital image, insurance contract and more.
A major risk with Bitcoin transactions is that if you send bitcoin to an address, the other
person has automatic ownership of the bitcoins. There is no way to reverse the transaction,
request a refund or contract any third-party intermediary if there is dispute or issue with
the transaction.
If you are purchasing an item, and you send bitcoins to the seller address first, there is no
guarantee the seller will send the items. As Bitcoin wallets are also anonymous, you have no
way to contact the person you send the bitcoins to. If bitcoins are sent to the wrong address
or the receiver of the Bitcoin does not send you the item purchased, then your bitcoins are
gone and you have no way to get them back.
Smart Contracts can reduce many of the risks involved with transactions as they act as
intermediary ensuring the conditions of a transaction are met and enforced.

Ethereum Tokens and ICOs

Ethereum allows programmers to create their own coins on the Ethereum blockchain known
as tokens. This allows companies to quickly utilize blockchain technology without having to
create and manage their own blockchain. Recently there have been a large number of
companies raising money through Initial Coin Offerings (ICOs) which are usually tokens
issued on the Ethereum network. Many of the new cryptocurrencies being created are not
stand-alone cryptocurrencies with their own blockchains but are tokens issued on top of the
Ethereum blockchain.
Ethereum and Blockchain 2.0

As we know already that Blockchain is the key foundation technologies of the Bitcoin, so the
Blockchain created by Bitcoin is considered to be blockchain 1.0, it is used primarily as a
distributed ledger for storing transactions on the Bitcoin network. Ethereum has taken the
possibilities of blockchain beyond the original blockchain concept. The capabilities that the
Ethereum platform has enabled through decentralized applications and smart contracts can
be considered blockchain 2.0. When the future of blockchain technology is discussed, it is
generally referring to blockchain 2.0, dApps and smart contracts. The new capabilities of
blockchain 2.0 are predicted to have a much greater impact on the world than Bitcoin has.
Blockchain 2.0 takes blockchain technology into areas far outside of financial transactions.
Difference between Ethereum and Bitcoin

Bitcoin is a decentralized distributed ledger mainly used for financial transactions, but
Ethereum is a decentralized computing platform mainly used for running applications and
smart contracts. Bitcoin is designed to be used for payment and exchange of value. The
currency on the Ethereum network is called “Ether” is designed to be used as payment for
computing power when running decentralized applications and smart contracts. Ethereum
along with the “Ether” currency was never designed to be a replacement for Bitcoin. It serves
an entirely different purpose and while it is growing in popularity and value faster than
Bitcoin, it is not seen as a competitor to Bitcoin for financial transactions.
Race between Cryptocurrencies and VISA/Master-card

Assuming we use 300 bytes per each Bitcoin transaction and if we want to match it with that
of VISA Inc. transactions with a peak of 47000 transactions per second, blockchain will

require nearly 8 GB block size and a frequency of one transaction per 10 minutes in average.
That means adding a load greater than 1000 GB of data every other day. This makes the
blockchain huge which will be difficult or almost impossible to manage by a CPU/GPU. The
existing bitcoins in the market are highly unlikely to solve this issue.
“But one of the most discussed solutions to this scalability issue, at present, is the development
of Lightning Network”.
The best part in Lightning Network is that it does not require any change in the core software
of Bitcoin, and hence, no forking required. All it needs is the implementation of segwit
protocol, which was done in August 2017 to the core Bitcoin software. Lightning Network
runs like an independent application, as an additional layer on the top of the blockchain.
“Lightning Network uses Bitcoin blockchain as the security layer to create a bunch of
contracts by which people can stream the money back and forth for a period”. It is also
associated with its doubts and risks and is still tested and developed for a better future of
Bitcoin in large or other cryptocurrencies that can implement the Lightning Network.
“Lightning network may make micropayments feasible. It may unlock the potential of Bitcoin
to do micro retail transactions instantly, like buying a cup of coffee”.
The first successful trial of Lightning network was done on 28th December 2017, for an online
phone bill payment in Bitfrefill, which was instant, and used zero fees. Now, this is incredible
as the demand of a retail customer would be fast and cheap transactions.
There are negative views also about the Lightning Network like the presumptions of its
failure or that the associated mathematics does not make any sense.
“Lightning Network is not exclusively meant for Bitcoin. It can be implemented on other
alternative coins, viz. LITECOIN (LTC).”
Even though it is pretty early to comment on the success of Lightning network, the vision
and efforts certainly seem to be in the right direction. Litecoin is a peer-to-peer
cryptocurrency based on blockchain. It is similar to Bitcoin as it was a fork of the bitcoin core
client and is segwit adapted. The major difference from Bitcoin are as follows:

• Litecoin uses Scrypt as Hashing algorithm, which is a memory intensive process, not
computer intensive) and hence can run on CPU/GPU with reasonably powerful Graphic
cards. This makes Litecoin more decentralized than Bitcoin.
• Average block generation speed is 2.5 minutes for every block which makes the
Litecoin transactions much faster than Bitcoin.
• Block supply is limited to 84 million which is 4 times that of Bitcoin.
• Litecoin mechanism makes it consensus easy and deceases the need of forking.
• Since Litecoin has faster processing times for transactions and payments and continues
to make improvements while the Bitcoin network still struggles to reach agreement on
many changes.
A strong advantage for Bitcoin is that it has larger number of people holding stakes in it. The
brand recognition is much higher than the others. Somewhere down the line, Bitcoin
community will have to work beyond the Hard Forks and work collectively for its vision to
be realized.
Ripple
Ripple is a cryptocurrency payment network that is being created in collaboration with
major financial institutions. It is being heralded as the new global payment network for
settling transactions between banks and financial institutions. Bitcoin along with the
underlying blockchain technology was seen as a way to remove centralized control of
payments from governments, banks and financial institutions. Bitcoin and the original
blockchain technology were created to be open source and decentralized. Each person on
the network is able view the Bitcoin code and transact directly between each other without
financial intermediaries being involved.
Ripple is not decentralized or open source, it is seen as banks and large financial institutions
taking decentralized, open source blockchain technology and turning into traditional
centralized, close source systems. While Ripple may change the way banks and financial
institutions settle transactions, for many people it is seen as moving away from what Bitcoin
and blockchain technology was originally designed to for by putting power and control of
payments back into the hands of large financial institutions.

11. What is forking in the context of cryptocurrencies like Bitcoin?

a) A change in the existing set of rules
b) A process of upgrading the software
c) A split in the community between old and new rules
d) All of the above
12. Which of the following is an example of a hard fork?
a) Bitcoin Cash (BCH)
b) Ethereum
c) Bitcoin Gold (BCG)
d) Ripple
13. What is one advantage of a hard fork?
a) It rewards coin holders with new coins
b) It increases the strength of the currency
c) It improves sustainability and scalability
d) All of the above
14. What is one challenge faced by Bitcoin in terms of scalability?
a) High transaction fees for small payments
b) Lengthy transaction confirmation times
c) Limited number of transactions per block
d) All of the above
15. Which cryptocurrency is known for its focus on decentralized applications
and smart contracts?
a) Bitcoin
b) Bitcoin Cash
c) Ethereum
d) Ripple

16. What is the purpose of smart contracts?

a) Enforcing and executing contracts automatically
b) Providing a refund for disputed transactions
c) Acting as an intermediary in transactions
d) Increasing the security of Bitcoin transactions
17. Which term is used to describe the additional layer built on top of the Bitcoin
blockchain to enable faster and cheaper transactions?
a) Bitcoin Cash
b) Lightning Network
c) Ethereum
d) Ripple
18. Which cryptocurrency uses the Scrypt hashing algorithm and has faster
block generation times than Bitcoin?
a) Bitcoin Cash
b) Ethereum
c) Litecoin
d) Ripple
19. What is one criticism of the Lightning Network?
a) It requires forking of the Bitcoin blockchain
b) The associated mathematics is questionable
c) It only works with Bitcoin and not other cryptocurrencies
d) It slows down transaction processing times
20. What is Ripple's main focus as a cryptocurrency?
a) Providing decentralized and open-source payments
b) Collaborating with banks for global payment settlement
c) Enabling micropayments and retail transactions
d) Improving the scalability of the Bitcoin network

4. SUMMARY
• Bitcoin is a virtual digital currency that operates on a decentralized network, enabling
peer-to-peer transactions without the need for intermediaries. Transactions are
recorded in a public ledger called the blockchain, which is maintained and verified by a
network of computers known as nodes. Bitcoin's supply is limited to 21 million coins,
and new coins are created through a process called mining.
• Bitcoin mining involves verifying and adding transactions to the blockchain, and miners
are rewarded with newly created Bitcoins for their work. The value of Bitcoin is known
for its volatility, and it can be acquired through mining, exchanges, or accepting it as
payment.
• On the other hand, Ethereum is a blockchain platform that allows developers to build
decentralized applications (dApps) and execute smart contracts. It supports a broader
range of functionalities with its programmable blockchain and Turing-complete
programming languages. Ethereum's blockchain initially used a proof-of-work
consensus algorithm, but it is transitioning to a proof-of-stake algorithm called
Ethereum 2.0.
• While Bitcoin primarily serves as a digital currency, Ethereum's blockchain allows for
the creation and management of tokens, facilitating various use cases like NFTs, utility
tokens, and more. Bitcoin has a larger and more established community, while
Ethereum gained traction through its smart contract capabilities and decentralized
applications. Both cryptocurrencies are essential players in the digital asset space, each
with its own distinct purpose and functionality.
• Ripple focuses on payment solutions for financial institutions but is seen as a departure
from the decentralized principles of Bitcoin and blockchain technology.

Short Essay Type Questions
1. When was the white paper on Bitcoin titled "Bitcoin: A Peer-to-Peer Electronic Cash
System" published?
2. What was the market capitalization of Bitcoin on 13th January 2018?
3. How many Bitcoins will be released in total?
4. What is the formula used by Coin Market Cap to calculate market capitalization?
5. When did the most recent Bitcoin halving event occur?
6. What is the cryptographic hash function used in Bitcoin transactions and mining?
7. How often is a new block added to the Bitcoin blockchain?
8. What was the initial block reward for mining a new block in 2009?
9. What is the official software that runs the Bitcoin network?
10. Name one cryptocurrency exchange or broker functioning in India.
Essay Type Questions

1. What are some important points to keep in mind for cryptocurrency trading?
2. What are some key points to consider before investing in Bitcoin as a source of
investment?
3. How can you safeguard and store Bitcoins?
4. What is forking in the context of cryptocurrencies, and what are the pros and cons of
hard forks?
5. What are the scalability and sustainability concerns in the Bitcoin market?
6. What is the difference between Ethereum and Bitcoin?
7. What are decentralized applications (dApps) and smart contracts?
8. What is the Lightning Network and how does it address the scalability issue in Bitcoin?
9. How does Ripple differ from Bitcoin and Ethereum?
10. What are some advantages and disadvantages of using smart contracts?

5. ANSWERS
Self-Assessment Questions
Answer 1: a) Lehman Brothers
Answer 2: c) 1st November 2008
Answer 3: b) 21 million
Answer 4: a) Bitcoin
Answer 5: a) Market cap = price × circulating supply
Answer 6: d) All of the above
Answer 7: b) 30%
Answer 9: a) SHA256
Answer 10: a) May 2020
Answer 11 d) All of the above
Answer 12. a) Bitcoin Cash (BCH)
Answer 13. d) All of the above
Answer 14. d) All of the above
Answer 15. c) Ethereum
Answer 16. a) Enforcing and executing contracts automatically
Answer 17. b) Lightning Network
Answer 18. c) Litecoin
Answer 19. b) The associated mathematics is questionable
Answer 20. b) Collaborating with banks for global payment settlement

Short Essay Type Questions
Answer 1: On 1st November 2008.
Answer 2: $243,336,472,394.
Answer3 : 21 million.
Answer 4: Market cap = price × circulating supply.
Answer5 : In May 2020.
Answer 6 : SHA256 (Secure Hash Algorithm 256).

Answer 7: Approximately every 10 minutes.

Answer8 : 50 Bitcoins.
Answer 9: Bitcoin Core.
Answer 10: Unocoin, Koinex, Zebpay, Coinsecure (anyone).

Essay Type Questions
Answer 1: Some important points to keep in mind for cryptocurrency trading include:
• Avoid using public computers, office computers, or open public Wi-Fi networks.
• Use a personal computer with appropriate antivirus and antimalware programs.
• Keep your browser updated and use extensions to block ads and tracking sites.
• Be cautious of clicking on casual links and unwanted emails.
• Avoid using personal or professional IDs for cryptocurrency exchange.
• Trade with exchanges that provide detailed information about their team and office
address.
• Use Google Authenticator and enable 2-factor authentication for all accounts.
• Prefer keeping cryptocurrencies in a hardware or paper wallet for enhanced security.
• Exercise caution when investing in new coins with low cost and high return claims.
Answer 2: Some key points to consider before investing in Bitcoin are:

• Volatility: Bitcoin is known for its high price volatility, so be prepared for price swings
and have a long-term perspective.
• Potential Returns: Bitcoin has delivered substantial returns in the past, but past
performance is not indicative of future results.
• Diversification: Bitcoin can be considered as part of a diversified investment portfolio.
• Regulatory and Security Risks: Bitcoin operates in a new and evolving regulatory
landscape and investing carries security risks.
• Market Liquidity: Bitcoin has a large and active market, but liquidity can be impacted
during periods of extreme volatility.
• Research and Understanding: Thoroughly research and understand Bitcoin and the
underlying technology before investing.

• Time Horizon and Risk Tolerance: Align your investment decision with your time
horizon and risk tolerance.
Answer 3: Bitcoins can be safeguarded and stored in different ways, such as:
• Using a personal wallet: Install a reputable wallet on your personal computer or mobile
device and securely store your private keys.
• Hardware wallets: Use hardware wallets like Ledger Nano S or Trezor, which store your
private keys offline.
• Paper wallets: Generate a paper wallet with the private and public keys printed on
paper, which can be stored securely.
• Secure exchanges: Choose reputable exchanges with strong security measures and
enable 2-factor authentication.
• Avoiding public Wi-Fi: Never access your Bitcoin wallet or make transactions using
public Wi-Fi networks.
Answer 4: Forking in cryptocurrencies refers to a change in the existing set of rules of a

blockchain network. A hard fork is a split in the blockchain community, where some
participants follow the old rules and others support the new rules. The pros of hard forks
include the distribution of new coins to existing holders and potential wealth increase.
However, hard forks can also divide the community and lead to weaker currencies. There
can be market division, and the implementation of the new coins may take time.
Answer 5: Scalability and sustainability are major concerns in the Bitcoin market. Scalability
refers to the ability of the network to handle a large number of transactions. Bitcoin's current
block size limit and transaction confirmation time pose challenges for scalability, especially
for micropayments and retail channel payments. Sustainability is related to the energy-
intensive mining process, the need for expensive hardware, and the competitive nature of
mining, which can lead to inefficient resource usage. These concerns drive the search for
improvements and have led to the creation of new cryptocurrencies through hard forks.
Answer 6: Ethereum and Bitcoin are both cryptocurrencies, but they have different purposes
and functionalities. Bitcoin is primarily used as a decentralized digital currency for financial
transactions, while Ethereum is a decentralized computing platform that allows the creation

of decentralized applications (dApps) and smart contracts. Ethereum's native currency is

called Ether and is used for payment within the Ethereum network. Ethereum opens up
possibilities beyond financial transactions and is considered blockchain 2.0 due to its ability
to run dApps and execute smart contracts.
Answer 7: Decentralized applications (dApps) are applications that run on a decentralized

network of computers, utilizing the computing power and resources of the entire network.
They do not rely on a central server and provide increased security and resilience. Smart
contracts are self-executing contracts with the terms of the agreement directly written into
code. They automatically verify, execute, and enforce contract terms, eliminating the need
for intermediaries and providing increased transparency and efficiency.
Answer 8: The Lightning Network is a proposed solution to the scalability issue in Bitcoin. It
is an additional layer built on top of the Bitcoin blockchain that allows for faster and cheaper
transactions. By creating a network of off-chain payment channels, the Lightning Network
enables users to conduct transactions directly between each other without involving the
main blockchain. This helps alleviate the congestion on the Bitcoin blockchain and enables
micropayments and faster transaction processing.
Answer 9: Ripple is a cryptocurrency payment network created in collaboration with major

financial institutions. Unlike Bitcoin and Ethereum, Ripple is not decentralized or open
source. It aims to facilitate transactions between banks and financial institutions, which is
seen by some as moving away from the original principles of decentralization and removing
centralized control. Bitcoin and Ethereum, on the other hand, were designed to provide
decentralized, peer-to-peer transactions and open access to blockchain technology.
Answer 10: Advantages of smart contracts include increased efficiency, automation, reduced
reliance on intermediaries, and the ability to enforce contract terms without the need for
legal action. They provide transparency, immutability, and security. However, disadvantages
include the potential for coding errors, lack of flexibility in complex situations, and the
challenge of resolving disputes in a code-based environment. Smart contracts also require
thorough understanding and auditing to ensure their proper execution.

6. CASE STUDY
Future of crypto-Currency: Government Backed Cryptocurrency
Several governments around the world have shown interest in or have already developed
their own government-backed cryptocurrencies. Here are a few examples:
• China - Digital Currency Electronic Payment (DCEP): The People's Bank of China
(PBOC) has developed a digital currency called DCEP, also known as the Digital Yuan. It
is a central bank digital currency (CBDC) aimed at replacing some of the physical cash
in circulation. DCEP is being piloted in various cities across China.
• Bahamas - Sand Dollar: The Central Bank of the Bahamas introduced the Sand Dollar, a
digital version of the Bahamian dollar. It is the first CBDC to be officially launched and
rolled out nationwide. The Sand Dollar is designed to enhance financial inclusion and
promote efficiency in the country's payment system.
• Sweden - e-krona: The Riksbank, the central bank of Sweden, has been exploring the
possibility of introducing an e-krona as a complement to physical cash. The e-krona
project aims to ensure a secure and efficient payment system while maintaining
financial stability.
• Venezuela - Petro: The Venezuelan government launched the Petro as a cryptocurrency
backed by the country's oil reserves. It was introduced as a way to bypass economic
sanctions and attract foreign investment. However, the Petro has faced criticism and is
not widely recognized or traded globally.
• Marshall Islands - Sovereign (SOV): The Marshall Islands plans to launch its own digital
currency called the Sovereign. The SOV is intended to be used as legal tender alongside
the US dollar, which is currently the official currency of the country.
It's worth noting that the nature and implementation of government-backed

cryptocurrencies can vary significantly. Some are designed as central bank digital currencies
(CBDCs) for domestic use, while others aim to facilitate international transactions or
overcome specific economic challenges. The level of adoption and acceptance of these
cryptocurrencies can also vary.
Analyse this case study to find the possibility of Government of India backed Cryptocurrency.


Books and Website Links
Arjunwadhakar
Solano
• Next Level Investing for Young Adults: Jacob Reed
• Cryptocurrency for Beginners with special focus on Indian Market: Vignessh B
• Bitcoin Basics: Logic and Magic of Digital Gold: Gaurav Bansal
• Blockchain: Ultimate guide to understanding Blockchain, Bitcoin, cryptocurrencies,
smart contracts and the future of money: Mark Gates


SEMESTER 4
DITF402
REGULATIONS
Unit 7: Key components of successful financial advisor 1

Unit 7
Key Components of Successful Financial
Advisor
Table of Contents

No Table / Activity
Graph
1 Introduction to Cryptocurrency 1
3-7
2 Different types of Cryptocurrencies 2 8-14
3 Benefits of Cryptocurrency Investments 14-18
4 Summary 18
6 Answers 19-20
7 Case study 21-22

1. INTRODUCTION TO CRYPTOCURRENCY
Cryptocurrencies are type of digital currencies, which is used as a medium of exchange. It is
a digital asset that you can use to purchase goods and services. Some of these digital assets
allow you to access apps or games where you can claim rewards by using them. You can also
trade your cryptocurrency “coins” and exchange them at a profit within the markets they
operate in. A coin is one unit of a cryptocurrency, like a banknote or a stock. It’s not a physical
coin but rather a collection of data that are stored and secured on a block.
To understand cryptocurrency, it is necessary to understand cryptography first. According

to Economic Times “Cryptography is associated with the process of converting ordinary
plain text into unintelligible text and vice versa. It is a method of storing and transmitting
data in a particular form that only those from whom it is intended can read and process”.
Cryptography is used to encode the information within each cryptocurrency coin to make it
unique and secure. Cryptography is where these digital assets get their name from, and they
are stored and secured through a blockchain system. Blockchains are digital ledgers that
record every transaction relating to a particular coin, and each cryptocurrency coin has its
own blockchain. Each crypto coin is made up of a data string that is protected by a code or
cipher. Blocks contain information relating to transactions involving that coin that have been
verified and declared legitimate. The blockchain makes each coin unique and prevents
crypto owners from fraudulently replicating a coin to use it to pay for something more than
once. This fraudulent use of crypto coins by replication is called “double spending”.
Blockchains are secured by unique keys that are almost impossible to guess, and this
protects a coin’s location and transaction history.
The major need behind cryptocurrency is the problems that the current system has: -
• Around 3 billion people can’t access financial services, that’s nearly half of the
population.
• Financial Inequality is growing. The middleman ‘s like banks, brokers make the process
expensive and time consuming.
• Current payment systems are outdated.
• People are losing trust in banks, because of the recent issues occurring in financial
institutions.

The first ever cryptocurrency that was created was of course Bitcoin. Bitcoin was the first
product of blockchain technology developed by anonymous Satoshi Nakamoto in 2008, it
was described as peer-to-peer also known as P2P version of electronic money.
Cryptocurrencies are created by a process called mining, very different from mining ore.
Mining a cryptocurrency required powerful computers to solve complex problems. Bitcoin
remained as the only crypto till 2011, after that to rectify the flaws, they found in it and
decided to create alternative coins also known as altcoins.
With great power comes great responsibility. Here are the solutions that a decentralized
network can provide.
• Eliminating money printing and cost held in it.
• Giving people control over their money.
• Cutting out the middleman.
• Reducing corruption
• Rare, securely transferable
Considering cryptocurrency as a way to build wealth means broadening your perspective

beyond traditional financial markets. Cryptocurrencies challenge the traditional system of
centralized financial markets whose values is benchmarked against cash, stocks, or
commodities. It is new way of thinking about the relative value of assets, managing your
investment portfolio, decentralized markets, and the concept of using cash to buy items.
Statistics shows that 97% of cryptocurrency users are confident in their assets, and more
than 50% of these users use their cryptocurrencies as a source of income. Users can earn
most types of cryptocurrencies by mining them or creating them. Mining requires a large
amount of computing power and time, where your computer works through algorithms and
codes to try and crack the cryptographic hashes. Harshes are codes, keys or puzzles used to
secure a cryptocurrency ‘s blocks on the blockchain. If you manage to decipher a block’s
hashes, you have successfully verified a transaction on the blockchain as legitimate. A
successful miner is rewarded with a new cryptocurrency coin, and your successful mine
makes you the owner of that unit of cryptocurrency. This information is also recorded on
the blockchain. As it stands currently, cryptocurrencies can be obtained by buying them on
a cryptocurrency exchange, by mining them using powerful computers, or through a reward

for successfully and legitimately solving decryption codes or puzzles on the blockchain. Each
new cryptocurrency is introduced to the crypto market with its own unique whitepaper. The
document explains the purpose of the cryptocurrency, the rules governing its value and
exchange, and the projected value of the coin on the market. A cryptocurrency can be used
as a form of cashless payment, so you would exchange a certain number of coins to buy
something. Some cryptocurrencies are valuable because they can’t be replicated. Others
stabilize their value by tethering it to a traditional currency like the US Dollar. What makes
these digital assets challenge traditional financial systems is that they work through a secure
and direct system of decentralized finance where cryptocurrency owners trade directly with
each other without having to go through a financial institution like a bank or government
agency. Owing and trading financial assets like stocks, bonds, real estate, cash etc requires
to make a financial investment in a third party like a company or a bank. The value of
cryptocurrency fluctuates depending on their use and demand for it in the market. Statistics
shows that there are more than 84 million crypto wallets active around the world. This is
staggering number, despite the fact that one person can have more than one crypto wallet,
as long as their wallet IDs are unique for each one. Every type of cryptocurrency serves the
purpose of being an asset for investment. For example, Bitcoin is meant to be a replacement
for cash that is used to purchase goods and services. So, before you consider adding a few of
the 20,000 types of cryptocurrencies to your crypto wallet or general investment portfolio,
its important to know exactly what you are getting into and how crypto investments actually
works. You need to have a good understanding of the investment landscape in which
cryptocurrencies exists so that you can avoid the risks and scams out there. As with most
financial decisions, aiming yourself with the right information allows you to be more
informed and make the best decision for your personal circumstances.

1. What is the primary purpose of cryptocurrencies?

a) To eliminate financial inequality
b) To challenge the current payment systems
c) To serve as a medium of exchange for goods and services
d) To give people control over their money
2. How are cryptocurrencies secured?
a) Through encryption and cryptography
b) By physical storage in banks
c) Through government regulations
d) By linking them to traditional currencies
3. What is the process of creating new cryptocurrencies called?
a) Mining
b) Trading
c) Investing
d) Minting
4. What is the purpose of blockchain in cryptocurrencies?
a) To prevent fraudulent replication of coins
b) To facilitate transactions between banks and users
c) To ensure the uniqueness of each coin
d) To eliminate the need for cryptography
5. What is the term used to describe the fraudulent use of a cryptocurrency
more than once?
a) Double spending
b) Counterfeiting
c) Replication
d) Hacking

6. How do cryptocurrency owners earn new coins?

a) By solving cryptographic puzzles
b) By buying them on a cryptocurrency exchange
c) By investing in traditional financial markets
d) By participating in online games or apps
7. What is a whitepaper in the context of cryptocurrencies?
a) A document explaining the purpose and rules of a cryptocurrency
b) A physical form of cryptocurrency
c) A government regulation for cryptocurrency trading
d) A type of cryptocurrency wallet
8. How are cryptocurrencies different from traditional financial systems?
a) They require the involvement of banks and government agencies
b) They rely on physical cash for transactions
c) They operate through a decentralized and direct system of finance
d) They are not recognized as legal tender in most countries
9. What is the primary reason for the growing interest in cryptocurrencies?
a) The ability to earn passive income through mining
b) The elimination of financial inequality
c) The recent issues occurring in financial institutions
d) The challenges posed to traditional financial markets
10. How can cryptocurrencies be used as a form of investment?
a) By buying and selling them on cryptocurrency exchanges
b) By investing in stocks and bonds through cryptocurrencies
c) By converting them into physical assets like real estate
d) By trading them for traditional currencies at a profit

2. DIFFERENT TYPES OF CRYPTOCURRENCIES

There is no way we can go through the unique features of each of the 20,000 types of
cryptocurrencies. However, most types of cryptocurrencies do fall into the following four
main categories that denote what you can do with the crypto coins or tokens you own:
• Utility cryptocurrencies- This type of crypto allows you to use your coins for a
particular purpose. This purpose can be paying for goods or services, buying new coins,
or redeeming rewards on an app or website. These coins are used more for exchanges
or redemption than for asset ownership.
• Equity cryptocurrencies-These crypto coins can be equated to owning stocks in a
company because they represent actual ownership of part of an asset like a piece of real
estate or a stake in a company. You have to register your equity ownership on that
cryptocurrency’s blockchain. These coins are considered investments.
• Asset backed cryptocurrencies-The value of these digital assets lies in the fact that they
represent ownership of a tangible physical asset like cash, diamonds or gold. You need
to exchange your crypto coins with the owner of the physical asset to claim it. These
coins are considered investments.
• Build-in cryptocurrencies-These are also known as “intrinsic” or “native”
cryptocurrencies because their value lies in the inherent value of the coin itself. Bitcoin
and Dogecoin are examples of a built-in cryptocurrency because its value is determined
by its demand in the market. These coins operate like a currency.
Let’s briefly understand few of the most popular and valuable brands of cryptocurrency and
how they work:
• Bitcoin-The pioneer coin that brought cryptocurrency and blockchain technology into
the mainstream financial arena. Bitcoin occupies the majority of the crypto market; is
the most in demand; and is the most valuable. One Bitcoin unit is currently available in
market at around ₹ 25 lakh or 30,000 $ as per 7th July 2023.
• Ethereum-Ether coins are second most valuable cryptocurrency in the market. The
Ethereum blockchain uses “smart contracts” that automatically triggers irreversible
transactions within the blockchain when certain conditions are met. Its popular

because transactions are fast, and an infinite amount of Ether is available for mining.
One Ether coin currently available at ₹ 1,53, 798 or $ 1860 as on 7th July 2023.
• Tether-The third most valuable cryptocurrency is a stablecoin that is tethered to or
backed by the value of the US Dollar. Tether coins are viewed as a more stable crypto
option because their value is unlikely to fluctuate like other types of cryptocurrencies.
One Tether coin currently costs $ 1 as on 7th July 2023.
• Binance Coin-Binance is a cryptocurrency exchange platform. Paying for your
transactions on this exchange in Binance coin reduces your transaction fees, so it has
become one of the preferred type of cryptocurrencies on the market. One Binance coin
currently costs about $ 233 as on 7th July 2023.
• Solana: There are only 480 million Solana coins available for issue on the market. Its
platform boasts one of the fastest transactions rates in the crypto market, processing
50,000 transactions per second. This makes it ideal for fast traders who prefer to use
less computing power. One Solana coin is about $ 20 as on 7th July 2023.
Advantages of Cryptocurrencies
There are pros and cons to investing your time and money into cryptocurrencies, just like
any other investment or financial decision. Let’s start by looking at a few of cryptocurrencies
undeniable advantages:
• The reward is potentially high: Mining for cryptocurrencies or exchanging your money
to purchase cryptocurrency coins are high risk financial decisions because the
cryptocurrency market can be unpredictable and sometimes volatile. The market can
experience negative trends or price drops if not enough coins are being mined or if
there is no demand to buy them. Conversely, a sudden high supply of coins coupled with
a proportionately high demand will drive the price and value of a cryptocurrency up.
You will then be able to sell it for a high price or trade it for a more valuable type of
cryptocurrency. Your ability to reap the benefits of this advantage depends on how
much risk you are willing to take on.
• The security of blockchain technology: This digital ledger is protected behind high walls
of ciphers, codes, and cryptography that are practically unsolvable without a lot of
efforts and computing power. The blocks that make up the blockchain are equally
secure, but even if these blocks are hacked, its impossible to hack an entire blockchain

because it’s a distributed ledger. This means that an entire blockchain is not stored in
one place like a bank or server. Its is a decentralized system, which makes it secure.
Cryptocurrency transactions that are verified as legitimate remain on that coin’s
blockchain permanently and can’t be removed.
• The lack of third-party financial institutions- The decentralized storage, security, and
transaction system used for cryptocurrencies means that you don’t need to go through
a bank, credit provider, or government agency to trade, purchase, or manage your
crypto-portfolio. You have total control of your cryptocurrency wallet. This means
more financial freedom and the ability to monitor your investments in your time.
• Fast and private transactions: The blockchain ledger is available to the public, and the
address of your crypto wallet is visible on the ledger. This address is known as “public
key”. However, you have a private key that grants you access to your wallet. This key is
encrypted so you can remain anonymous within a cryptocurrency exchange platform.
Transactions are fast because you buy, sell, or trade directly with other crypto owners,
instead of going through a bank or stock exchange.
• The ability to avoid the impact of inflation: Inflation is a financial inevitability. It happens
when price increase and the purchasing value of cash decreases. The value of a
cryptocurrency is influenced by its supply and demand in the market, not by its supply
and demand in the market, not by the value of a commodity like gold or a traditional
currency like the US Dollar. Unlike cash, most cryptocurrencies only generate a certain
number of coins to be issued to owners. Therefore, there is no risk of there being too
much cryptocurrency in the market without it being spent, like there is with cash.
Dis-advantages of Cryptocurrencies.
Consider a few of the potential downsides of cryptocurrency as a concept to help in
investment decisions.
• Market Volatility: Financial markets are inherently unpredictable, and the

cryptocurrency market is no exception. It is almost impossible to predict when
cryptocurrency prices will rise and fall, and this is a risk. You can absorb this risk firstly
by thoroughly researching the types of cryptocurrencies you are considering investing

in, and secondly by diversifying your financial portfolio with other types of assets like
stocks or real estate.
• Susceptible to cyber-attacks: Blocks and the blockchain are heavily encrypted and
securely stored, but this is not always the case on cryptocurrency exchanges platform.
You need your private wallet keys to access most exchange platforms, and your wallet’s
public key will likely be saved by the exchange platform. This information can be
hacked while you are trading on a crypto exchange. The anonymity and privacy offered
by cryptocurrency trading also make it vulnerable to fraudulent activities. Keep a
lookout for phishing attempts through suspicious messages, especially if you are new
trader or on exchange. You may victim to fraudulent and false transactions where
people present you with fake proof of transaction in exchange of money to receive
cryptocurrency reward. If the transaction is fake, you will not lose money as you won’t
receive reward.
• The risk of losing data: The intense security of the blockchain and your private wallet
key means that if you lose the means to access them, you might never get back in. You
can lose your entire portfolio if you lose your private key. There is no legal right or
procedure to claim back cryptocurrency that you lost due to a technical error in the
system because cryptocurrency operates on a decentralized system with no single
authority or agency controlling transactions.
• The risk of irreversible transactions: Smart Contracts are computer programs and codes
used to automatically trigger transactions or instructions on a blockchain through the
fulfilment of conditions. For example, a smart contract could state that if three blocks
are verified, then User A’s crypto wallet will be rewarded with a 5% portion of one
bitcoin. These instructions are automated, and once they are programmed, and the
conditions are fulfilled, they are irreversible. If the crypto is sent to the wrong wallet,
this can’t be undone.
• Environmental concerns with cryptocurrency mining: Mining cryptocurrency requires a
high level of computer power, which consumes a lot of energy. Your average laptop or
desktop PC will not be able to mine cryptocurrency. This puts pressure on network
servers and increase energy consumption, which is bad for environment. A country’s
carbon footprint can significantly increase if it is a Bitcoin hub. Bitcoin rich countries

that rely on coal consumption to provide electricity for mining, which is harmful to the
environment.
11. Which type of cryptocurrency represents ownership of a physical asset?

a) Utility cryptocurrencies
b) Equity cryptocurrencies
c) Asset-backed cryptocurrencies
d) Built-in cryptocurrencies
12. Which cryptocurrency is considered the pioneer in the crypto market and
has the highest value?
a) Bitcoin
b) Ethereum
c) Tether
d) Binance Coin
13. Which cryptocurrency uses smart contracts and has fast transaction speeds?
a) Bitcoin
b) Ethereum
c) Tether
d) Binance Coin
14. Which cryptocurrency is known as a stablecoin and is backed by the US
Dollar?
a) Bitcoin
b) Ethereum
c) Tether
d) Binance Coin

15. Which cryptocurrency is associated with the Binance exchange platform and
can be used to reduce transaction fees?
a) Bitcoin
b) Ethereum
c) Tether
d) Binance Coin
16. Which cryptocurrency has one of the fastest transaction rates in the market
and is suitable for fast traders?
a) Bitcoin
b) Ethereum
c) Tether
d) Solana
17. What is one advantage of cryptocurrencies?
a) Low market volatility
b) Lack of security in blockchain technology
c) Dependence on third-party financial institutions
d) Fast and private transactions
18. What is one disadvantage of cryptocurrencies?
a) Low market volatility
b) Susceptibility to cyber-attacks
c) High dependence on third-party financial institutions
d) Slow and public transactions
19. What is the risk associated with losing access to your private wallet key?
a) Loss of all your cryptocurrency holdings
b) Risk of irreversible transactions
c) Increased market volatility
d) Exposure to cyber-attacks

20. What is one environmental concern associated with cryptocurrency mining?

a) Increased energy consumption
b) Decreased carbon footprint.
c) Reduced dependence on coal consumption
d) Positive impact on the environment
3. BENEFITS OF CRYPTOCURRENCY INVESTMENTS

Cryptocurrency is a very young industry, especially when compared to traditional financial
institutions and currencies that have been the accepted standard for centuries. Despite its
youth, the concept of cryptocurrency offers a few key benefits for new and experienced
investors that can provide a sort of safety net when building wealth through investing.
Decentralized Finance (DeFi): There is no intermediary involved in the exchange of

cryptocurrencies. Initially, the point of Bitcoin was that it offered a way for Bitcoin users to
share or trade their wealth directly through a peer-to-peer electronic cashless system.
Traditional investments and trading through long standing financial institutions like banks
or stock exchanges require asset owners to go through a centralized system. This system is
usually monitored and legally regulated by a government agency and administered by
institutions in partnership with or with permission from the government. Central banks are
now considering offering their own forms of cryptocurrency to have a stake in this growing
market. Governments are also considering placing tighter limitations and regulations around
crypto investments and policies to prevent fraud and scams on crypto exchange. Despite
these trends of the centralized financial system acknowledging the development of the
crypto market the decentralized system will remain its hallmark feature and contribution to
the future of finance.
Blockchain Technology is also a benefit of the decentralized nature of cryptocurrency

because its blocks are stored as strings of data in the form of codes. The blockchain is not
based on a cloud storage system where all the transaction data for that cryptocurrency is
stored on central server. Instead, blockchain data is stored on a node network that can be
physically stored, stored in cloud storage facilities, or both for extra security. This

decentralized storage and transaction system means that cryptocurrencies cannot be hacked
or destroyed at one single point of entry. If a block or piece of transaction data is hacked, the
rest of the blockchain remain intact. A disaster like the 2008 recession is unlikely to occur
within the crypto market because it is decentralized.
Direct Transactions: Cryptocurrency allows you to complete secure transactions by virtue

of the fact that you have a crypto wallet. You just need to have your private key to access
your crypto wallet and make sure that the transaction goes into the correct wallet. Crypto
exchanges don’t require authority from central banks or the government to validate
transactions. Crypto coin owners can trade directly, and if the transaction is legitimate, its
stored on the blockchain, or ledger. On some stock exchanges, you can end up paying about
2% of purchase price to the intermediary or broker, and the government can sometimes
charge you up to 10% of your stock value to liquidate the asset. Cryptocurrency transactions
can cost between nothing to 1.5% of the purchase price of the transaction. Smart Contracts
automate and verify the transactions process without the need for human intervention. You
therefore have more control over what happens within your investment portfolio.
Portfolio Diversification: Investing in cryptocurrencies can help you avoid financial

mismanagement. Cryptocurrency can help in portfolio diversification by providing exposure
to a different asset class with unique characteristics. Here's how cryptocurrency can
contribute to portfolio diversification:
• Low correlation: Cryptocurrencies, such as Bitcoin or Ethereum, have historically
shown a low correlation with traditional asset classes like stocks, bonds, and real
estate. This means that their price movements often do not align with the broader
market trends. By including cryptocurrencies in a portfolio, investors can potentially
reduce the overall risk through diversification.
• Potential for high returns: Cryptocurrencies have demonstrated significant price
appreciation in the past, with some experiencing exponential growth. By allocating a
portion of the portfolio to cryptocurrencies, investors can potentially capture the
upside potential and benefit from substantial returns. However, it's important to note
that cryptocurrencies also carry higher volatility and risks.

• Hedge against inflation: Cryptocurrencies are often considered as a hedge against

inflation. Unlike traditional fiat currencies, most cryptocurrencies have a limited
supply, making them resistant to inflationary pressures. In times of economic
uncertainty or rising inflation, the value of cryptocurrencies may increase, providing a
potential hedge for the overall portfolio.
• Access to emerging technologies: Cryptocurrencies are based on blockchain
technology, which has the potential to disrupt various industries and reshape the way
transactions are conducted. By investing in cryptocurrencies, investors gain exposure
to the underlying technology and the potential benefits it may bring. This exposure to
innovative technologies can contribute to portfolio diversification and provide
opportunities for growth.
• Global exposure: Cryptocurrencies offer a global investment opportunity as they
operate on a decentralized network accessible to anyone with an internet connection.
This allows investors to diversify their portfolios beyond domestic markets and gain
exposure to different countries and regions.
It's important to note that while cryptocurrency can contribute to portfolio diversification,
it also comes with unique risks. Cryptocurrency markets can be highly volatile, and the
regulatory environment is still evolving. It's crucial to conduct thorough research,
understand the risks involved, and carefully manage the allocation within a diversified
portfolio.
Risks of Cryptocurrency Investments

Your risk appetite can determine your financial future. It is important to have the bigger
financial picture in mind, which includes your financial goals for the future and your present
financial responsibilities. Financial independence is relative, and it’s about more than simply
becoming rich. Popular financial gurus act on instinct when making financial decisions.
However, they are experts, and their instincts are informed by years of experience with
financial success and failure. The following points should be kept in mind when thinking
about cryptocurrency investment:
• Cryptocurrency’s reliance on technology-Decentralized blockchain technology forms
the foundation of the 20,000 types of cryptocurrencies available on the market. This

technology is fairly secure because its is heavily encrypted with ciphers and codes.
However, just like every other financial platform, cryptocurrency blockchains are
susceptible to cyberattacks, hacking, and attempts at fraudulent transactions. The
security of the crypto wallet relies on the security of the blockchain technology.
Therefore, if this technology is hacked, glitches or shut down, your investment are risk
of disappearing or being fraudulently accessed. A glitch in the system could ne
irreversible and destroy your investment. The potential damage caused by blockchain
technology crashing differs from crash in financial market. With cryptocurrencies like
Bitcoin, your stake lies in the system and the technology keeping it running.
• Some coins have limited uses: Unlike more traditional investments like stocks, shares,
and real estate, cryptocurrency investments are not backed by or tethered to the value
of a physical asset or piece of collateral. So if you choose to exchange $ 20,000 for the
equivalent value of a cryptocurrency, that $ 20,000 is now operating within a
cryptocurrency exchange with a specific purpose and cannot be exchanged for tangible
assets like gold, oil, or a share in real estate. Cryptocurrency has not yet been
universally accepted as an alternative to cash in terms of paying for everyday goods
and services, and this can place limitations on the value of your investment. Some coins
only operate as currency within certain applications where they can be redeemed as
rewards for discounts, purchases or loyalty programs.
• Not yet a well-established financial industry: As much as we are globally moving
towards a cashless society in general, cash is still king. Cash now comes in many more
forms than it did before. There are credit cards, which makes us to pay by scanning a
QR code on phone and then there are smart watches that can be linked to bank account.
It is unlikely that cryptocurrency will entirely replace the banking system in the next
decade, especially if you consider that banks are now levelling up by developing
artificial intelligence programs to automate and secure payments. Banks are also
developing their own cryptocurrencies to remain relevant and in public demand.
Cryptocurrencies are young in relation to the banking system, and many people are still
sceptical about legitimacy. Scepticisms aside, crypto currencies pride itself on being
decentralized and extremely secure, which traditional banks have never been able to

assure users of without any doubts. Therefore, investing in cryptocurrencies might be

a step in the right direction for the future of finance.
4. SUMMARY
• Cryptocurrencies are digital assets used as a medium of exchange, stored and secured
through blockchain technology.
• Cryptography is used to encode and secure the information within each cryptocurrency
coin.
• The major need for cryptocurrencies arises from problems in the current financial
system, such as lack of access to financial services, growing financial inequality,
outdated payment systems, and loss of trust in banks.
• Bitcoin was the first cryptocurrency created, and it was followed by the development
of alternative coins or altcoins.
• Different types of cryptocurrencies fall into categories like utility, equity, asset-backed,
and built-in cryptocurrencies.
• Popular cryptocurrencies include Bitcoin, Ethereum, Tether, Binance Coin, and Solana.
• Advantages of cryptocurrencies include potential high rewards, security through
blockchain technology, absence of third-party intermediaries, fast and private
transactions, and protection against inflation.
• Disadvantages of cryptocurrencies include market volatility, susceptibility to cyber-
attacks, risk of losing access to wallets, irreversible transactions, and environmental
concerns with mining.
• Benefits of cryptocurrency investments include decentralized finance, direct
transactions, portfolio diversification, exposure to emerging technologies, and global
investment opportunities.
• Risks of cryptocurrency investments include reliance on technology, limited use of
some coins, and the industry's relative newness and lack of widespread acceptance.

1. What is the purpose of cryptography in cryptocurrency?
2. What is the role of blockchain in cryptocurrency?
3. What is the advantage of decentralized finance (DeFi) in cryptocurrency?
4. How can cryptocurrencies help in portfolio diversification?
5. What are the risks associated with cryptocurrency investments?
6. How does the lack of regulation and investor protection impact cryptocurrency
investments?
7. Why is portfolio diversification important in cryptocurrency investments?
6. ANSWERS
Answer 1: c) To serve as a medium of exchange for goods and services.
Answer 2 : a) Through encryption and cryptography
Answer 3 : a) Mining
Answer 4 : a) To prevent fraudulent replication of coins
Answer 5: a) Double spending.
Answer 6: a) By solving cryptographic puzzles.
Answer 7 : a) A document explaining the purpose and rules of a cryptocurrency
Answer 8 : c) They operate through a decentralized and direct system of finance
Answer 9 : d) The challenges posed to traditional financial markets
Answer 10 : a) By buying and selling them on cryptocurrency exchanges
Answer 11 : c. Asset-backed cryptocurrencies
Answer 12 : a. Bitcoin
Answer 13: b. Ethereum
Answer 14 : c. Tether
Answer 15 : d. Binance Coin
Answer 16: d. Solana
Answer 17: d. Fast and private transactions.
Answer 18: b. Susceptibility to cyber-attacks.
Answer 19: a. Loss of all your cryptocurrency holdings.

Answer 20: a. Increased energy consumption.

Answer 1: Cryptography is used in cryptocurrency to encode the information within each
coin, making it unique and secure. It protects the data stored in the blockchain and ensures
the integrity of transactions.
Answer 2: Blockchain is a decentralized digital ledger that records every transaction relating
to a specific cryptocurrency. It ensures transparency, security, and immutability of
transactions by storing them in a distributed network of nodes.
Answer 3: Decentralized finance eliminates the need for intermediaries like banks, allowing
users to have direct control over their funds and engage in peer-to-peer transactions. It
offers more financial freedom and reduces reliance on traditional financial institutions.
Answer 4: Cryptocurrencies offer low correlation with traditional asset classes, providing
diversification benefits to investment portfolios. They can potentially deliver high returns,
act as a hedge against inflation, and provide exposure to emerging technologies and global
markets.
Answer 5: Some risks of cryptocurrency investments include market volatility, susceptibility

to cyber-attacks, the risk of losing access to funds due to technical errors or lost private keys,
the risk of irreversible transactions, and environmental concerns related to cryptocurrency
mining.
Answer 6: Cryptocurrencies operate in a less regulated environment compared to traditional

investments. This lack of regulation and investor protection can make it challenging to seek
legal recourse in case of fraud or loss of funds. It's important for investors to conduct
thorough research and exercise caution.
Answer 7: Portfolio diversification helps spread the risk across different assets and reduces
the potential impact of any single investment. Including cryptocurrencies in a diversified
portfolio can help mitigate risks associated with volatility and provide exposure to unique
investment opportunities.

7. CASE STUDY
Cryptocurrency Bill: The Road Ahead
The Cryptocurrency Bill 2021 is a legislative initiative that was introduced in the Lok Sabha
by the government to regulate the thriving market of cryptocurrency in India. The industry
has seen a rush in investment in the last few years, especially during the covid period not
just domestically but also internationally.
Crypto trading platforms like WazirX, CoinDCX, Zebpay, etc. in India are witnessing a big leap
in volumes. An unregulated crypto market is unfavourable and risky even when the
government wants to protect young entrepreneurs and investors. By introducing the
Cryptocurrency Bill in 2021, the government officially took a step toward regulating
cryptocurrency. The bill seeks to create a favourable structure for the creation of the official
digital currency that will be issued by the Reserve Bank Of India (RBI). It also prohibits all
other private cryptocurrencies but, with certain exceptions to boost the underlying
technology of cryptocurrency. In the Union Budget of 2022, the government already took the
step of imposing a 30% tax and 1% TDS on gains from virtual digital assets or
cryptocurrencies.
Is Cryptocurrency In India Legal or Not?

Cryptocurrencies as a payment medium in India are not regulated by any central authority.
There are no rules and regulations, or any guidelines laid down for settling disputes while
dealing with cryptocurrency. So, trading in cryptocurrency is done at investors’ risk.
The Finance Minister of India, Nirmala Sitharaman, proposed to tax digital assets and has
increased the debate on the legality of cryptocurrencies in the country. While many have
embraced the decision to tax virtual currency as it is the first step to recognizing it, the
government is yet to pass any official clarification on this matter of whether currencies like
Bitcoin are legal or not in India.
Based on the various key statements made by the Reserve Bank Of India Governor as well as
various government spokespersons including the Finance Minister of the country, one can
conclude that cryptocurrency is illegal, but there is no certain ban on it in India. They are

unregulated but according to the recent Union Budget 2022, the government of India
announced a 30% tax on gains from cryptocurrencies and a 1% tax deducted at source.
Question: Analyse the case given above and discuss the road map of cryptocurrency
implementation in India.

Books and Website Links
Arjunwadhakar
Solano
• Next Level Investing for Young Adults: Jacob Reed
• Cryptocurrency for Beginners with special focus on Indian Market: Vignessh B
• Bitcoin Basics: Logic and Magic of Digital Gold: Gaurav Bansal
• Blockchain: Ultimate guide to understanding Blockchain, Bitcoin, cryptocurrencies,
smart contracts and the future of money: Mark Gates
• https://www.forbes.com/advisor/in/investing/cryptocurrency/crypto-bill/


SEMESTER 4
DITF402
REGULATIONS
Unit 8: Future of Investing 1

Unit 8
Key Components of Successful Financial
Advisor
Table of Contents
SL Fig No / Table SAQ /

Topic Page No
No / Graph Activity
1 Introduction - -
3-5
2 Meaning of Metaverse - 1 6-9
3 Role of Blockchain in the Metaverse - 2 9-13
4 Smart Contract, Blockchain, and the Metaverse - 3 14-18
5 DEFI in the Metaverse - 4 19-23
6 Summary - - 23-24
7 Case-Study - - 25
9 Answers - - 26-30

1. INTRODUCTION
The metaverse, a virtual environment where millions of individuals might soon converse to
work, play and socialize, is causing quite a stir in the tech industry. The concept, however, is
not as novel as it may appear. Since 2003, individuals have gathered in the online
environment of Second Life to perform all of the activities.
There are two recent events that are not directly related to metaverse technological growth
but have led to the popularity of the metaverse. One is COVID, where there has been concern
that we may have to relocate certain social and leisure activities online. Many major
corporations are attempting to figure out how to profit from this. The other is merely Meta’s
argument that it is a big deal and rebranding themselves to attempt to align with it. However,
Meta previously Facebook hopes that a billion individuals will use their metaverse.
We are witnessing specific industry prospects with the metaverse, such as collaborative
brainstorming and design. There are innovative ways for individuals to use virtual reality to
hold effective long-distance meetings. There are several questions to be answered to achieve
anything resembling the scale of the Internet. If we want to develop a multi-billion-dollar
virtual world, everyone will have to work in tandem. The idea that all of those niches might
be filled by a single corporation like Meta, Google, or Apple seems unrealistic.
Another thing we need is digital money so that people may trade. A money system that
transcends numerous local currencies is required to create metaverse systems in which one
person may build a car and sell it to many others. However, to some extent, we have that
with cryptocurrencies. Products like Tilia Pay may fuel virtual economies in many industries
as they try to entice consumers to come in and invest money in their edition of the metaverse
and then enable individuals to cash out their digital profits. Tilia is the only licensed and
insured money transmitter focussing on cryptocurrency, gaming, NFT. Virtual environments,
game, publishers, and non -fungible tokens exchange may lawfully enable creators and
others to convert cryptocurrency into cash using their Tilia wallet. Another innovation like
Upland, an NFT based digital property trading environment where people may play a form
of monopoly by purchasing, selling, and trading virtual assets tied to real world locations, is
one of the new concepts. Certainly, some investors are spending millions of dollars for land
which does not exist in the real world, and rather, the plot is found on the metaverse. A tract

of digital real estate represented by NFT is called NFT metaverse land. Depending on the
platform, the owner can utilize their property for socializing, marketing, work, gaming, and
other purposes. Cryptocurrency is commonly used to monetize transactions in the virtual
environment. Non-fungible tokens (NFTs), rather than cryptos, are the principal means of
monetizing and trading value inside the metaverse. An NFT is a one-of-a kind digital asset.
Although NFTs are generally works on digital art (such as films, photographs, music or 3D
objects). Similarly, Zenescope tried bringing dark and twisted Grimm’s Universe into reality.
In July 2021, Coca-Cola introduced a non-fungible token (NFT) collection, which is sold for $
5,75,000 in an online auction. Similarly, Seoul became the first city to declare ambitions to
go completely meta. The government stated that it would develop a fully realized virtual
environments for all aspects of its municipal government, like economic, cultural, tourism,
educational and civic service.
Clothing products like Ralph Lauren, Gucci, Balenciaga, Hermes, Nike and Dior have launched
collections targeting Gen Z gamers. Similarly doctors before performing any surgeries at
Uconn Health put on Oculus headsets and practice procedures in virtual reality, inserting
pins in simulated shattered bones and learning from experience. Neurosurgeons using
virtual reality by wearing Augmedics headsets work on spinal fusion procedure. Plastic
surgeons employ digital twin technologies, synthetic media, haptics, robotics to do their
process.
Consider climbing Everest, swimming with sharks, or flying over the Grand Canyon within
the four walls of your living room. According to tech experts, all of these will be achievable
in the metaverse. In its completely developed form, the metaverse promises to provide real-
life experiences, sounds and even smells, allowing you to go on a journey of ancient Greece
or visit a Seoul café from the comfort of your own home.


❖ Understand the concept of the Metaverse and its potential to revolutionize the internet.
❖ Recognize the essential components of the Metaverse, including high bandwidth
networks, open standards, virtual reality technologies, blockchain technology, computing
power, and 3D immersive simulations.
❖ Comprehend the role of blockchain in the Metaverse, including its ability to enable
ownership of digital assets, provide transparent and secure transactions, prevent
counterfeits, and ensure data integrity.
❖ Identify the significance of NFTs in the Metaverse and their role in proving ownership of
digital assets.
❖ Explore the authentication of self-identity and the use of cryptocurrencies as a form of
payment in the Metaverse.
❖ Understand the potential of DeFi (Decentralized Finance) in the Metaverse, including its
ability to provide financial services and products, enable secure and transparent
transactions, and enhance the decentralized nature of the Metaverse.
❖ Recognize the opportunities for cryptocurrency investment in the Metaverse, including
the potential growth of metaverse coins and the integration of blockchain technology in
virtual environments.
❖ Identify the future prospects of the Metaverse, including the need for decentralized
financial systems, the impact of DeFi and NFTs, and the role of businesses in supporting
the decentralized Metaverse.

2. MEANING OF METAVERSE
Metaverse is a combination of the words “meta”, which means “beyond” and “verse” which
means universe. As a result, “Metaverse” refers to a virtual environment outside of a reality.
Because the Metaverse is a subset of the internet’s progression, it cannot be considered
static. For example, we have gone through several stages of internet technology, from
sending text-based communications to sharing memories through photographs, and finally,
video based online interactions. We have arrived in the Metaverse, which will give us a new
and improved version of the internet, complete with a 3D virtual and augmented reality. It
creates a virtual environment that mirrors the actual world and allows users to accomplish
anything they can in it. Employees may work in a virtual office, and students can enrol in
online programs, individuals can shop, and many more fun activities. Metaverse is expected
to improve today’s internet and its utility across numerous industries with these features.
Components of the Metaverse

Decentralized Blockchain based Metaverse projects are the norm nowadays. Gaming
platforms, NFT markets, and virtual product development platforms like Minecraft are
examples of these projects. Furthermore, some innovative Metaverse projects merge all of
these platforms into a single project. However, the following are the essential elements of
the Metaverse:
• To host the Metaverse, a high bandwidth network of computers is necessary, as it
functions independently of any centralized data transfer for reliable and real time
communications.
• Images, videos, text, music, 3D things and 3D scenarios all have open and interoperable
standards.
• HTML, Javascript, WebXR, Webassembly, WebGPU Shader language, and others are
examples of open programming language standards required.
• Virtual Reality headsets, smart glasses, Omni treadmills, industrial cameras, scanning
sensors, and other virtual, augmented and mixed reality technologies are necessary to
transport people to the Metaverse’s virtual realm.
• Blockchain technology and Smart Contracts make transparent, censorship-resistant
advantages and permissionless transactions possible.

• Computing power is used to execute data processing, artificial intelligence, and

projection with speed and precision.
• 3D immersive simulations will support virtual space habitats that mimic real world
ecosystems.
• Payment gateways that accept digital payments in both crypto and fiat currency.
1. What is the meaning of the term "Metaverse"?

a) A virtual environment for gaming and entertainment
b) A virtual world outside of reality
c) A combination of virtual reality and augmented reality
d) An advanced version of the internet with 3D capabilities
2. Which industry has seen the use of virtual reality for surgical practice?
a) Gaming
b) Fashion
c) Healthcare
d) Real estate
3. What technology is essential for transporting users to the virtual realm of the
Metaverse?
a) Virtual Reality headsets
b) Industrial cameras
c) Omni treadmills
d) Scanning sensors
4. What technology enables transparent and censorship-resistant transactions
in the Metaverse?
a) Blockchain technology
b) Artificial intelligence
c) Smart Contracts
d) Computing power

5. What is the role of 3D immersive simulations in the Metaverse?

a) Mimicking real-world ecosystems
b) Enabling virtual socializing
c) Creating virtual product development platforms
d) Hosting high bandwidth networks
6. What are the essential elements required for the Metaverse to function?
a) Open and interoperable standards for media
b) High bandwidth network of computers
c) Virtual reality headsets and smart glasses
d) All of the above
7. What type of currency is commonly used for monetizing transactions in the
Metaverse?
a) Local currencies
b) Digital currencies
c) Cryptocurrencies
d) Fiat currencies
8. Which city declared ambitions to develop a fully realized virtual
environment for all aspects of its municipal government?
a) New York City
b) Seoul
c) Tokyo
d) London
9. What is the primary purpose of NFTs in the Metaverse?
a) Monetizing and trading value
b) Enabling virtual social interactions
c) Creating virtual property trading environments
d) Hosting high-bandwidth networks

10. What is the main advantage of using Smart Contracts in the Metaverse?
a) Speed and precision in data processing
b) Transparent and censorship-resistant transactions
c) Mimicking real-world ecosystems
d) Interoperability of media standards
3. ROLE OF BLOCKCHAIN IN THE METAVERSE

Blockchain is a system that records transactions permanently, generally in a decentralized
and online system known as ledger. The most popular blockchain based cryptocurrency is
Bitcoin. When you purchase bitcoin, the transaction is logged to the Bitcoin blockchain
network, shared between thousands of separate computers across the world. This
decentralized monitoring system is extremely difficult to manipulate or distort. In
Comparison to conventional banking systems, online blockchains like Bitcoin and Ethereum
are also transparent-all transactions are open to anybody on the network. On a blockchain
network, products like artwork and music are non-fungible tokens (NFTs).
What does all of this blockchain cryptocurrency asset madness have to do with the
metaverse? Everything! To begin, the blockchain enables the ownership of digital assets in a
virtual environment. You will possess that NFT in the physical world and the virtual world.
In today’s context, the phrase “Metaverse” refers to a virtual place constructed using 3D
technology within the new internet. Furthermore, the metaverse is not being constructed by
a single organization or corporation. Separate organizations will create different virtual
worlds, eventually interoperable establishing the metaverse. People will want to bring their
belongings with them when they move between virtual environments, like from
Decentraland’s virtual spaces to Microsoft’s. The blockchain will confirm ownership of your
virtual products in both virtual environments if two virtual environments are compatible.
You can access your cryptocurrency products as long as you can access your cryptocurrency
wallet. The objective of metaverse is to give individuals a virtual reality experience that, in
many respects may outperform physical reality in terms of experiences and possibilities.
Blockchain’s un-hackability and integrity are crucial features for any virtual reality platform

to acquire widespread acceptance. Blockchain enables quick information verification and

enables cryptographically safe and secured payments. Blockchain is a critical component of
how virtual reality will be deployed. The metaverse will need and expect trades executed on-
demand, which blockchain may enable. Transactions are required for a realistic virtual
reality world to function and work as promised, and these transfers must be safe and almost
instantaneous. Individuals in this environment will have to be able to: a) trade and interact
as easily as if they were in reality, and b) be confident that these transactions will be
executed.
Blockchain transactions, viable and established technologies, allow people and organizations
to make digital, transparent, and real time transactions. However, even if blockchain
technologies are not used permanently, the move toward digital and online payment is
expanding. Transacting and partaking in business has become a popular progression,
growing even more prevalent with the introduction of cryptocurrency payments by Visa,
Mastercard, and PayPal. Blockchain based payments become even more common in a virtual
environment, like the metaverse. It stands to reason that such transactions will continue to
rise to prominence in the future. The metaverse is still a new and quickly growing field.
Blockchain will need to play a substantial role in its future application to enable and realize
a fully working metaverse.
This notion is intimately tied to recent technological advancements like Blockchain,

augmented and mixed reality, NFT, etc. The user is immersed in a virtual realm where they
can do anything in real life, such as visiting intriguing destinations, meeting people, acquiring
art, and selling real estate. Experts agree that establishing a Blockchain based Metaverse can
create a fantastic virtual environment that will revolutionize how everyone involved
interacts.
So, what does Blockchain have to do with the Metaverse? Many blockchain based systems
now employ non fungible tokens and cryptocurrencies to create, own, and monetize
decentralized digital assets. Due to the inherent flaws of the centralized data storage, the
Metaverse idea is inadequate without blockchain. The ability of blockchain to operate
internationally as a digital source based on the concept of decentralization separates the
Metaverse from the capabilities of the traditional internet, which takes the form of websites

and apps. Without the intervention of a centralized entity, the blockchain based Metaverse
allows access to any digital place.
Payment settlements are one of the most prominent applications of Blockchain technology
in the Metaverse. Customers will soon be able to shop in virtual storefronts. We can be
confident that Bitcoin will soon find its place in a decentralized environment. MANA, which
is used to acquire virtual property in the game “Decentraland”, is one of the Metaverse
examples of the usage of the virtual currency in the Metaverse. Million-dollar transactions
are already taking place in this Metaverse, and it’s only the beginning. Users will be able to
purchase virtual equivalents of everything that can be bought in the actual world in the
future. This technology will not be restricted to games: easily becomes the tastebud for
virtual lending, borrowing, investing and trading. As a result, the potential of cryptocurrency
looks to be limitless.
In the metaverse, the blockchain’s digital signature process and distributed nature can assist
authors in proving that they are the true owners of the certain material, as well as users in
proving that they are authentic users. Using blockchain might decrease NFT counterfeits in
the metaverse since each node authenticates the status and possession of all assets on the
system, preventing them from being reproduced or altered. It is not only about virtual
products. In the future, when individuals upload their memory into the metaverse, we cannot
verify that their memories are not changed or manipulated by anybody without the
validation and verification provided by the blockchain. Storing metaverse information, data,
NFTs, pictures, and other artworks on the blockchain ensure permeant storage since the data
becomes permanent. This will prevent unauthorized tampering with anything of value held
in the metaverse. The FIO protocol allows creators to register their work with a readily
accessible address that works as a one-of-a-kind signature for their work, prohibiting NFT
frauds.
Many current metaverses and virtual environments are successful because they gamify
social and brand interactions. Blockchain based metaverse platforms provide stronger
digital incentive mechanisms for this gamification. This includes tokens and in-world virtual
currency. The metaverse will enable peer-to-peer interactions to provide employment,

economic power, lending, and trade. The metaverse and NFTs certification solutions will
serve as a virtual business enabled financial system.
Few Blockchain projects like The Ethereum Blockchain was the first to be powered by Smart
Contracts. Ethereum developed the decentralized application (D’App) ecosystem with its
various standards. Hence, the Ethereum Virtual Machine (EVM) has become a web3 space
standard. As the journey through ETH 2.0 progresses, we will notice a significant movement
the metaverse. Telos’ blockchain network, Avalanche blockchain’s acceleration,
development, and venture capital mechanisms have drawn metaverse developers to the
network. Telos because of its dual purpose EVM and EOS feature, Avalanche availability on
three sub chains, X-Chain, C-Chain, and P-Chain, developers may design projects with wide
range of features and needs. Qtum, a rising blockchain, has enormous promises. It Proof-of-
Stake (POS) UTXO paradigm highlights the potential, enabling smart contract execution and
scalability.

11. What is the role of blockchain in the metaverse?

a) Ensuring virtual reality experiences
b) Facilitating secure and transparent transactions
c) Enabling virtual property ownership
d) All of the above
12. Which type of tokens are commonly used for digital assets in the metaverse?
a) Non-fungible tokens (NFTs)
b) Bitcoin
c) Ethereum
d) Cryptocurrencies
13. Why is blockchain important for transactions in the metaverse?
a) It ensures the immutability and security of transactions
b) It allows for instantaneous and safe transfers
c) It enables easy trading and interaction within virtual environments
d) All of the above
14. What is one of the prominent applications of blockchain technology in the
metaverse?
a) Virtual reality experiences
b) Creating decentralized digital assets
c) Establishing virtual storefronts
d) Building gamification mechanisms
15. Which blockchain project was the first to be powered by Smart Contracts?
a) Ethereum
b) Telos
c) Avalanche
d) Qtum

4. SMART CONTRACT, BLOCKCHAIN, AND THE METAVERSE

The introduction of blockchains supported by smart contracts has resulted in new
paradigms for metaverse technology. Smart Contracts establish a model in which
decentralized apps exist in metaverse environments and multiple blockchains. Smart
Contract are the propeller that drives all of the activities in blockchain networks. Blockchain
feature is coded for every decentralized app. Due to the features blockchains provides, smart
contracts for metaverse perform extremely due to their decentralized nature. Blockchains
aid in the security of metaverse activity. They are appropriate for trade and all forms of
internet business. Blockchains also aid in connecting metaverse participants who are not
required to be localized. Smart Contracts on blockchains allow for interactions inside
metaverse networks while also allowing for transaction redundancy. They enable more
innovation without increasing the expense factor found in centralized technology.
Working on smart contract enables very little or no maintenance expenses, and it enables
faster development and cheaper operating expenses for project developers. Finally, smart
contracts allow new features to the metaverses without modifying the metaverse
framework.
The integration of smart contracts, blockchain technology, and the metaverse holds great
potential. Smart contracts can enable secure and transparent transactions within the
metaverse, ensuring trust and reducing the need for intermediaries. Blockchain technology
can enhance the security, decentralization, and interoperability of the metaverse by
recording and validating transactions and digital assets. The metaverse, in turn, can provide
a platform for decentralized applications, virtual asset ownership, and unique user
experiences facilitated by smart contracts and blockchain technology.
NFTs
Non-fungible tokens, according to many analysts, will play an important role in the
Metaverse. These coins will be utilized in digital art exchange, where they are currently
widely used as proof of ownership of digital assets. Furthermore, NFTs have a huge potential
for integration into any metaverse crypto projects, including purchasing game assets,

avatars and other items. Furthermore, if this field develops further, non-fungible tokens will
soon be used as proof of real estate ownership.
An NFT is, in general sense, a key to certain sections of the Metaverse. Aside from that, tokens
will ultimately be used as a prize in Metaverse NFT games (instead of fungible tokens). Non-
fungible tokens will be used to give value to specific digital assets: this is critical since
practically any digital asset may be copied indefinitely, and only a certificate of ownership
embedded in a digital object can prove the legal owner’s right.
Authentication of Self-Identity
Self-identity authentication is done in the Metaverse in the same way as a social security
number is assigned. The blockchain stores all information about an individual user, including
age, activity, attractiveness, and other attributes. This provides maximum openness and
protects the Metaverse from illicit activity. Furthermore, self-identity authentication
prevents the potential of someone in the virtual environment from committing criminal acts
under a fake name.
Cryptocurrency Investment in the Metaverse

Cryptocurrencies act as money in the metaverse space. This is based on the blockchain idea,
and this is where the term “metaverse coins”, “metaverse tokens”, “metaverse
cryptocurrencies” comes from. Tokens are used for transactions inside each metaverse
project. Numerous metaverse projects are already under development, and their coins are
accessible for purchase, with some even listed on specific cryptocurrency marketplace.
These projects are attracting the attention of both cryptocurrency investors and fans
because of their potential. According to Macro, a UK-based research group, metaverse
currency gains have surpassed Bitcoin’s by a whopping 37,000 percent. Metaverse projects
span from digital games to NFTs exchanges, each with distinct idea and real-world use cases.
Platforms such as Decentraland and the Sandbox have created virtual environments that
incorporate cryptocurrency, allowing players to design and monetize structures such as
virtual casinos and theme parks. The money utilized in Decentraland is called MANA, and it
can be purchased in platforms like Coinbase. NFTs also play a key part in the metaverse,
allowing players to fully own their characters, in-game objects, even virtual lands. The
greatest transaction to date was an NFT of a 259-parcel digital real estate in Decentraland,

which sold for more than $ 900,000. Different Metaverse cryptocurrencies are Alien Worlds,
Chromia, Ceek VR, Metahero, Wax (Waxp) , Enjin Coin, The Sandbox, Theta Network,
Decentraland (MANA), Render, Wilder World, Terra Virtua Kolect etc. The Sandbox, which is
considered as the one of the top valuable metaverse cryptocurrency, is a necessity for any
trader wanting to profit from the increase of virtual reality applications. Theta is an advanced
video and entertainment blockchain network that debuted in 2018. THETA introduced TNT-
20 token TDROP in 2022.
Shopping in the Metaverse

Metaverse cryptocurrencies will be used for payment in many virtual environments. From
buying luxury fashion to buying a digital house next door to Snoop Dogg, shopping is a key
component of the systems that make up this burgeoning digital space. But you will need
money to do all of this. Here’s everything you need to know to get started and for this you
are required to create a cryptocurrency wallet before you can even set up an account on
metaverse network such as Sandbox or Decentraland. This wallet will house all your virtual
money. MetaMask, is a common wallet that can be set up using either a mobile application
or a Google Chrome browser plugin. You can use debit or credit card to convert your
currency to crypto in the wallet. Conversion will be facilitated via crypto marketplace like
Wyre or Transak but be aware that they will normally charge a fee. Binance, Gemini and
Coinbase are some of the most popular places to acquire metaverse cryptocurrency. These
exchangers will assist you in converting fiat currency into metaverse coins. You may trade
your existing crypto for metaverse tokens immediately, such as Bitcoin or Ether.
Opportunity for Payment Systems

Traditional Banking and payment network providers should move into the metaverse to
minimize disintermediation. The traditional financial sector should adopt blockchain based
technology and aggressively seek cryptocurrency and metaverse related collaborations and
acquisitions. Conventional payment systems and payment cards will have little place on the
decentralized blockchain network, so they will have to make great decisions early on to
position themselves in the metaverse. For instance, VISA’s network can now convert
cryptocurrency to fiat currency. According to VISA, the project is part of an initiative to
simplify life for cryptocurrency firms. Visa intends to make it easier for consumers to balance

their accounts on the VISA network by not forcing them to convert their crypto holdings into
fiat money, such as US Dollar, Indian Rupees.
Similarly, Mastercard has also announced it move to provide this feature for its customers.
Mastercard’s attempt to follow VISA’s announcement earlier that it will collaborate with 50
cryptocurrency networks on card initiatives that allows users to convert and spend virtual
currency at 70 million businesses.
Metaverse Cryptocurrency-Investment Tips

Small Metaverse Coins can be difficult to get.
One challenge for investors searching for the next blockbuster metaverse coin is that many
younger projects are not featured on popular exchanges. The bulk of the leading metaverse
cryptocurrencies featured on CoinMarketCap is difficult to obtain in the marketplace.
Smaller tokens pose a greater risk due to a lack of liquidity, increased market volatility, and
a greater likelihood of project failure. Furthermore, if you want to utilize a decentralized
platform, keep in mind that it may not provide the same level of security as a centralized one.
Look before you leap.

It is usually dangerous to embark on a cryptocurrency investment just after its prices have
skyrocketed. There is no certainty that the prices will remain, and it is difficult to determine
the extent to which speculations have driven the prices higher.
Furthermore, many metaverse projects are underway, and we have no idea which ones will
flourish. Like those in the fashion or art worlds, these trends are extremely hard to forecast,
particularly if you do not utilize the platforms and are not connected to gaming and
metaverse groups. However, some believe metaverses will become a multi-trillion-dollar
sector in the coming years, and that cryptocurrency will play a significant role. However, as
with any crypto investment, always put in money you can afford to lose and conduct your
research. Examine the management team, the project’s prospects, and the size of the
community. If you can utilize the product or visit the virtual environment you wish to invest
in, that is much better.

16. What is the role of smart contracts in the metaverse?

a) Enabling secure and transparent transactions
b) Facilitating virtual asset ownership
c) Enhancing decentralization and interoperability
d) All of the above
17. Which technology records and validates transactions and digital assets in the
metaverse?
a) Smart contracts
b) Non-fungible tokens (NFTs)
c) Blockchain
d) Cryptocurrencies
18. What role do NFTs play in the metaverse?
a) Proof of ownership for digital assets
b) Prizes in metaverse NFT games
c) Proof of real estate ownership
d) All of the above
19. How does self-identity authentication work in the metaverse?
a) Through social security numbers assigned on the blockchain
b) By storing user information on the blockchain
c) By preventing illicit activity in the metaverse
d) All of the above
20. What is the significance of metaverse cryptocurrencies?
a) They act as money within virtual environments
b) They can be used for transactions in metaverse projects
c) They have the potential for significant returns on investment
d) All of the above

5. DEFI IN THE METAVERSE

DeFi refers to the network of financial apps built on the blockchain network. Decentralized
finance is a project that supports open-source tools and decentralized systems to provide
different financial services and goods. The goal is to build and run financial Dapps on an open
and trust less platform, like blockchain networks and other peer-to-peer (P2P) technologies.
Today, DeFi’s three most important functions are:
• Developing financial banking services (e.g., issuance of stablecoins)
• Providing networks for peer-to-peer or pooled lending and financing.
• Enabling complex financial products like decentralized exchanges, tokenization
platform, derivatives and futures markets
There are numerous kinds of DeFi services available within those three categories. Funding
protocols, software development services, index generation, subscription payment methods,
and data analysis use cases are a few more examples of services and applications. KYC, AML
and other identity management services may all be done with DeFi dApps. When compared
to the conventional banking system, decentralized finance offers various advantages. Thanks
to smart contracts and distributed systems, launching a financial application or product
becomes significantly less complicated and safe thanks to smart contracts and distributed
systems. Many dApps, for example, are being built on top of the Ethereum blockchain, which
has fewer entry hurdles and lower operational expenses. To summarize, the DeFi movement
moves traditional financial goods to an open-source and decentralized environment,
eliminating the need for intermediaries, lowering total costs, and significantly enhancing
security.
To use the metaverse cryptocurrencies, you must first purchase them. You do so by going
through a series of fiat currencies and bank third parties. But that defeats the purpose of a
decentralized trading system. Decentralized finance or DeFi, comes into play at this point.
You may purchase and sell metaverse coins utilizing smart contracts, P2P transactions, and
more using DeFi systems.
Proponents of a completely decentralized metaverse expected this metaverse project to

emerge. For a metaverse to work ideally, there is a need for an open, trust less financial

system with a high transaction rate. The metaverse also would require the storage and
processing of a tremendous amount of data, which is where. NFTs as identity, as a DeFi
passport, this on-chain credit score-all of these things are kind of muddled together. We can
begin to see how these elements interact and prepare the stage for Web3. The metaverse
would benefit greatly from a decentralized banking system. Participants would be able to
make cross-border transactions at a low cost if transactions were decentralized, and
decentralized financing might help fund new and creative enterprises in the virtual
environment. Because DeFi protocols already exist in the digital world, adapting them for
the metaverse would be straight forward task. Prominent banks and financial institutions
will surely be looking at the metaverse, and decentralized finance still has a long way to go
before competing with its centralized counterparts. Compared to the $ 2.3 trillion worldwide
retail business, annualized network income for all DeFi technologies is anticipated to be $ 5
billion. However, DeFi has developed significantly in just a few short years, and both
regulation and the gradual stability of DeFi marketplaces will continue to drive acceptance
in the coming years. DeFi might rise in the virtual environment and leave conventional banks
far behind, depending on how decentralized the metaverse becomes and how much freedom
participants have. It is also contingent on when the metaverse happens. The underlying
software that regulates it will be published soon; therefore, it is already here. However, it is
possible that the metaverse will not reach a billion people until 2031.
Regardless, decentralized finance can significantly impact the metaverse’s financial sector.
Many parts of the metaverse must be figured out before the idea can become a reality. Before
the metaverse can materialize, many puzzles’ parts must come together. Casting aside the
technological limitations of an “always-on” ecosystem, a Decentralized finance system
involving NFTs, which we could call the “Metaverse Fi”, is likely to be the missing piece.
A crypto-decentralized centrepiece is essential for a metaverse’s success: it requires its

financial system and governance token, where value can be earned, transferred, lent,
borrowed, or invested interchangeably in both a real world or virtual environment, and most
importantly, without the need for a governance system. While the metaverse may exist only
in the virtual environment, I think its usage of NFTs and DeFi to bring it to life is solidly
grounded in reality. The goal of an open metaverse is a compelling vision that motivates

individuals and draws businesses. But if it encompasses people from chine to the US, it will
have to deal with the impact that growing government monitoring and control will have on
DeFi.
DeFi Products in the Metaverse

Valour Inc.
Valour Inc. (“Valour”) the firm’s fully owned subsidiary and a leader in virtual asset exchange
traded products (“ETPs”), has received permission to release a metaverse and gaming index
ETP. The technology company is working to close the gap between conventional financial
markets and decentralized finance. With the metaverse and gaming index ETP, investors will
acquire direct exposure to different metaverse related and protocol-based initiatives with a
single investment. The ETP will include an index of the top five virtual assets connected to
the metaverse, and it has received regulatory clearance to be distributed throughout EU
markets.
DAO Ventures Metaverse

DAO ventures will introduce Metaverse Farmer, the world’s first DeFi metaverse Index Fund
with Yield, enabling investors to benefit from the non-fungible token and cryptocurrency
gaming trends. The DAO ventures Metaverse Farmer (MVF) is a cryptocurrency index und
that spreads an investor’s funds among a selected group of cryptos. MVF is a smart contract-
based platform build on Ethereum. The weights and components of the portfolio were
chosen based on factors like user growth and market cap. MVF lowers portfolio volatility
and provides investors with extra benefits.
Future of Metaverse
On the other hand, the decentralized metaverse is intended to help the many who are in a
position to enjoy the benefits of the metaverse rather thana the few who hold the bulk of the
network. The decentralized metaverse’s success is critical for the free market and
enterprises of all forms and sizes. Ans there is lot the business sector can do to help balance
the scales. MetaFi has many platforms to grow on and crypto investors searching for a
project. What it lacks is something that many of us can provide, business. Many businesses
are already reaping the rewards. Some of the most sought-after goods or services right now
are those that bring blockchain into the hands of the general public. For example, the IoTeX-

powered Ucam blockchain-supported residential security camera recently received a CES

innovation award, and Starcrazy is one of the most popular metaverse Play2Earn games on
the market. These two enterprises have one thing in common: they both participate in the
decentralized metaverse and profit from it.
21. What is the primary goal of decentralized finance (DeFi)?

a) To build and run financial Dapps on a trust less platform
b) To provide centralized financial services on the blockchain
c) To eliminate the need for cryptocurrencies in financial transactions
d) To create a metaverse for virtual gaming
22. Which of the following is NOT one of the three main functions of DeFi?
a) Developing financial banking services
b) Enabling complex financial products
c) Providing decentralized gaming platforms
d) Offering peer-to-peer lending and financing
23. What are some advantages of decentralized finance compared to the
traditional banking system?
a) Lower costs, enhanced security, and elimination of intermediaries
b) Higher transaction speed and increased scalability
c) Enhanced privacy and increased regulatory compliance
d) Reduced need for blockchain technology and smart contracts
24. How can decentralized finance (DeFi) be utilized in the metaverse?
a) By purchasing metaverse coins through fiat currencies and bank third
parties
b) By using DeFi systems to buy and sell metaverse coins through smart
contracts and P2P transactions
c) By relying on traditional centralized banking systems for metaverse
transactions
d) By developing virtual reality applications for DeFi platforms

25. What role can decentralize finance (DeFi) play in the financial sector of the
metaverse?
a) Providing open and trust less financial services within the metaverse
b) Enabling cross-border transactions and funding for virtual enterprises
c) Integrating NFTs and identity management into the metaverse's financial
system
d) All of the above
6. SUMMARY
• The Metaverse is a virtual environment outside of reality, combining 3D virtual and
augmented reality with the internet.
• It consists of decentralized blockchain-based projects, including gaming platforms, NFT
markets, and virtual product development platforms.
• Key components of the Metaverse include a high-bandwidth network, open and
interoperable standards for digital content, programming language standards, virtual
reality technologies, blockchain technology, computing power, 3D immersive
simulations, and payment gateways.
• Blockchain plays a crucial role in the Metaverse by enabling ownership of digital assets,
ensuring transparency and security, facilitating secure and instantaneous transactions,
and providing authentication and verification.
• NFTs (non-fungible tokens) have a significant role in the Metaverse, representing
ownership of digital assets and enabling the trading of virtual items, art, and real estate.
• Blockchain and smart contracts support decentralized finance (DeFi) in the Metaverse,
allowing for decentralized banking services, peer-to-peer lending and financing, and
the creation of complex financial products.
• Cryptocurrencies, such as MANA in Decentraland, are used as a medium of exchange in
the Metaverse, allowing for virtual land ownership, in-game purchases, and investment
opportunities.

• DeFi products in the Metaverse include index funds, yield farming, and decentralized
financial platforms that leverage the potential of NFTs and cryptocurrency gaming
trends.
• The future of the Metaverse holds the promise of a more immersive and interconnected
virtual world, where individuals can work, learn, shop, and interact in a decentralized
and secure environment.
7. CASE-STUDY
MANA, New Revolution in Metaverse
MANA, the native cryptocurrency of Decentraland, holds a vital position within the
metaverse ecosystem. Decentraland is a decentralized virtual world where users can buy,
sell, and interact with virtual land, digital assets, and experiences. MANA serves as the
primary medium of exchange and value within this virtual environment.
One of the key functions of MANA is to facilitate virtual land ownership. Users can acquire
parcels of land in Decentraland by purchasing them with MANA. This ownership grants
users’ full control and rights over their virtual properties, enabling them to develop,
monetize, and customize their land as they see fit. MANA acts as the currency through which
land transactions occur, providing a means for users to establish their presence and build
within the metaverse.
Additionally, MANA plays a crucial role in the trading of digital assets within Decentraland.
Users can buy, sell, and trade various virtual items, such as art, clothing, accessories, and
collectibles, using MANA. These digital assets are represented as non-fungible tokens
(NFTs), with each item having a unique identity and value. MANA acts as the currency for
these transactions, facilitating the exchange of value between participants.
Furthermore, MANA holders have governance rights within Decentraland. They can
participate in the decision-making process, including voting on proposals related to platform
upgrades, community initiatives, and economic policies. This democratic governance
structure ensures that the Decentraland community has a say in shaping the future and
direction of the metaverse.

Overall, MANA serves as the lifeblood of economic activity, virtual land ownership, and
community participation within the Decentraland metaverse. It enables users to engage in
commerce, establish their presence, and contribute to the development and growth of the
virtual world. MANA's importance lies in its ability to provide a decentralized and secure
means of value exchange within the metaverse, fostering a vibrant and immersive digital
economy.
Question-What is the need of MANA in Decentraland?
Question-Is this concept of trading on virtual items, land a scam or it have any future?
1. What is decentralized finance (DeFi) and how does it relate to the metaverse? Discuss
the potential benefits of integrating DeFi into the metaverse's financial system.
2. Discuss the potential impact of decentralized finance (DeFi) on the future of the
metaverse. What challenges and opportunities lie ahead for DeFi in the virtual
environment?
3. Describe the role of DeFi products in the metaverse, using Valour Inc. and DAO
Ventures Metaverse as examples. How do these products contribute to the
development of the decentralized financial ecosystem in the metaverse
4. What is the role of blockchain in the metaverse? Discuss how blockchain technology
contributes to the security, transparency, and interoperability of the metaverse.
5. Explain the role of non-fungible tokens (NFTs) in the metaverse. Discuss their
significance in terms of digital asset ownership and proof of authenticity.
6. Discuss the potential of cryptocurrency investments in the metaverse. Explain the role
of metaverse cryptocurrencies and the opportunities they present for investors.
7. How do smart contracts contribute to the development of the metaverse? Discuss the
advantages and applications of smart contracts in the context of the metaverse.

9. ANSWERS
Answer 1: b) A virtual world outside of reality.
Answer 2: c) Healthcare.
Answer 3: a) Virtual Reality headsets.
Answer 4: a) Blockchain technology.
Answer5: a) Mimicking real-world ecosystems.
Answer6: d) All of the above
Answer7: c) Cryptocurrencies
Answer8: b) Seoul
Answer9: a) Monetizing and trading value
Answer10: b) Transparent and censorship-resistant transactions
Answer 12: a) non-fungible tokens (NFTs)
Answer 14: c) Establishing virtual storefronts.
Answer 15: a) Ethereum.
Answer 17: c) Blockchain.
Answer 21: a) To build and run financial Dapps on a trust less platform.
Answer 22: c) Providing decentralized gaming platforms.
Answer 23: a) Lower costs, enhanced security, and elimination of intermediaries.
Answer 24: b) By using DeFi systems to buy and sell metaverse coins through smart
contracts and P2P transactions.
Answer 25 : d) All of the above


Answer1: Decentralized finance, or DeFi, refers to the use of blockchain networks and peer-
to-peer technologies to provide various financial services and goods without relying on
intermediaries. In the context of the metaverse, DeFi plays a crucial role in enabling
decentralized trading and financial transactions using smart contracts and P2P transactions.
By integrating DeFi into the metaverse's financial system, participants can benefit from
lower costs, enhanced security, and the elimination of intermediaries. Cross-border
transactions can be conducted at a low cost, and decentralized financing can help fund new
and creative enterprises within the virtual environment. The use of DeFi protocols that
already exist in the digital world makes adapting them for the metaverse a straightforward
task. Overall, integrating DeFi into the metaverse's financial sector can revolutionize the way
financial services are provided, offering greater accessibility, efficiency, and freedom for
participants.
Answer 2: Decentralized finance has the potential to significantly impact the financial sector
of the metaverse. By providing open and trustless financial services, DeFi can create a
seamless and efficient financial ecosystem within the virtual environment. Participants can
access a wide range of DeFi services, including decentralized exchanges, tokenization
platforms, and lending and financing networks, all built on blockchain technology. This can
enable secure and transparent transactions, eliminate the need for intermediaries, and
reduce costs. However, challenges lie ahead for DeFi in the metaverse, including the need for
scalability to handle the storage and processing of a tremendous amount of data, and the
integration of identity management systems using NFTs. Additionally, regulatory
considerations and the impact of government monitoring and control may affect the growth
and adoption of DeFi in the metaverse. Despite these challenges, the potential opportunities
for DeFi in the virtual environment are vast, as it offers a decentralized alternative to
traditional banking systems and has the potential to transform the way financial services are
conducted in the metaverse.
Answer 3: DeFi products play a crucial role in the development of the decentralized financial
ecosystem within the metaverse. Valour Inc., through its subsidiary, offers a metaverse and
gaming index ETP, which provides investors with direct exposure to different metaverse-

related and protocol-based initiatives through a single investment. This product bridges the
gap between conventional financial markets and decentralized finance, allowing investors to
participate in the growing metaverse industry. On the other hand, DAO Ventures introduces
the Metaverse Farmer, the world's first DeFi metaverse Index Fund with Yield. This smart
contract-based platform built on Ethereum spreads an investor's funds among a selected
group of cryptocurrencies based on factors like user growth and market cap. By investing in
this index fund, investors can benefit from the trends of non-fungible tokens (NFTs) and
cryptocurrency gaming within the metaverse. These DeFi products contribute to the
development of the decentralized financial ecosystem in the metaverse by providing
investment opportunities, reducing portfolio volatility, and facilitating the growth of the
metaverse industry. They enable individuals to participate in the metaverse's financial
sector and profit from its potential growth and innovation.
Answer 4: Blockchain plays a vital role in the metaverse by providing security, transparency,
and interoperability. With its decentralized and immutable nature, blockchain technology
ensures the security of transactions and digital assets within the metaverse. It prevents
unauthorized tampering with virtual products and establishes ownership through
cryptographic verification. Blockchain's transparency allows for the verification of
transactions by all participants on the network, creating trust and reducing the need for
intermediaries. Additionally, blockchain enables interoperability between different virtual
environments in the metaverse. By recording and validating transactions and digital assets
on a blockchain, users can carry their belongings across virtual worlds, establishing
ownership and access rights. This interoperability is crucial for the seamless movement of
users and assets within the metaverse. Overall, blockchain technology enhances the security,
transparency, and interoperability of the metaverse, creating a robust and reliable
environment for participants.
Answer 5: Non-fungible tokens (NFTs) play a significant role in the metaverse, particularly
in terms of digital asset ownership and proof of authenticity. NFTs are unique tokens that
represent ownership of specific digital assets, such as artwork, music, virtual real estate, and
in-game items, within the metaverse. By using NFTs, individuals can establish and prove
their ownership of these assets in both the physical and virtual realms. The blockchain

technology underlying NFTs ensures the immutability and transparency of ownership

records, preventing counterfeiting or unauthorized duplication of digital assets. With NFTs,
creators can monetize their work, and users can fully own and trade their virtual assets,
providing a new paradigm for the digital economy within the metaverse. NFTs also have the
potential to extend beyond digital art and virtual assets, serving as proof of ownership and
authenticity for various real-world assets and experiences. Overall, NFTs are a crucial
component of the metaverse, enabling ownership, value creation, and secure transactions
for digital assets.
Answer 6: Cryptocurrency investments in the metaverse present significant potential and

opportunities for investors. Metaverse cryptocurrencies, also known as metaverse coins or
tokens, serve as the digital currencies within virtual environments, allowing participants to
engage in transactions, purchase virtual goods, and access various services. These
cryptocurrencies leverage blockchain technology to provide secure, transparent, and
efficient means of exchange within the metaverse. As the metaverse grows and gains
mainstream adoption, the demand for metaverse cryptocurrencies is expected to increase,
potentially driving their value and creating investment opportunities. Investing in metaverse
cryptocurrencies allows individuals to participate in the growth of the metaverse industry
and benefit from its potential economic impact. However, it is essential for investors to
conduct thorough research, assess the project's prospects, and understand the risks
associated with smaller tokens and the volatility of the cryptocurrency market. As with any
investment, it is crucial to invest only what one can afford to lose and consider factors such
as the management team, community size, and the project's real-world use cases. Overall,
cryptocurrency investments in the metaverse offer opportunities for individuals to
participate in the emerging digital economy and potentially benefit from the growth of the
metaverse sector.
Answer 7: Smart contracts play a crucial role in the development of the metaverse by
enabling secure and automated transactions, interactions, and governance within virtual
environments. Smart contracts are self-executing contracts with the terms of the agreement
directly written into lines of code. In the metaverse, smart contracts leverage blockchain
technology to facilitate various activities, such as asset ownership, trading, renting, and in-

game interactions. They provide advantages such as transparency, immutability, and

trustless execution. Smart contracts eliminate the need for intermediaries, reducing costs
and enhancing efficiency. They enable participants in the metaverse to interact and transact
with each other seamlessly, ensuring the fulfillment of predefined conditions and
automating the execution of transactions. Additionally, smart contracts enable decentralized
governance within the metaverse, allowing stakeholders to participate in decision-making
and ensuring fairness and transparency. The applications of smart contracts in the
metaverse are vast, including virtual asset ownership, decentralized marketplaces, in-game
rewards, and automated governance mechanisms. Overall, smart contracts empower the
metaverse by providing secure and efficient infrastructure for transactions and interactions,
enhancing the user experience and enabling innovative use cases within virtual
environments.

FinTech in Credit Card Market Unit-12
Introduction
Digital lending, also known as online or e-lending, utilizes digital platforms and technology to provide
loans efficiently. Key features include online applications, automated underwriting, faster approvals,
personalized terms, alternative data integration, and mobile accessibility. This modern approach
streamlines lending, catering to diverse needs. Lending history dates back millennia, evolving with
civilization. Banks, credit cards, and industrialization shaped lending. The digital age brought online
lending platforms and fintech companies, revolutionizing lending. Peer-to-peer (P2P) lending
connects individuals directly, bypassing banks. Borrower evaluation, investor selection, and returns
characterize P2P lending. Notable FinTech players like LendingClub, Zopa, and Prosper have
transformed P2P lending, offering borrower-investor connections. Pioneers like Zopa and Prosper
expanded offerings, adapting to industry evolution.
The evolution of FinTech has reshaped various sectors within the financial industry. Digital lending
has streamlined loan processes, using automation and alternative data for quicker approvals. Peer-
to-peer lending connects borrowers and lenders directly through online platforms. Prominent
FinTech players in this space include LendingClub, Zopa, and Prosper. Integration of FinTech in credit
cards has brought about contactless payments, mobile wallets, and AI-driven fraud detection,
enhancing convenience and security. Unsecured loans, like personal and credit card loans, have
become accessible through online platforms, enabling borrowers to secure loans easily. Next-
generation commerce, or Commerce 2.0, caters to modern consumer preferences with
personalization, omnichannel integration, and sustainability. Customer shopping behaviours have
shifted toward online and mobile shopping, social commerce, and ethical considerations. The
evolution of point of sale (POS) systems has progressed from traditional cash registers to cloud-based
and mobile POS, offering advanced analytics and integration with e-commerce. Mobile POS (mPOS)
systems have gained prominence, allowing businesses to process transactions on portable devices
with flexibility and security. These trends collectively reflect the transformative impact of FinTech on
financial services, customer experiences, and the retail landscape.
The mPOS (Mobile Point of Sale) business model involves providing businesses with mobile-based
payment solutions using smartphones or tablets. Key components include hardware and software
sales, transaction fees, subscription/licensing fees, and value-added services. Customization,
integration, and data analytics enhance offerings. Revenue streams may come from hardware
upgrades, white label solutions, partnerships, and international expansion. This model caters to
cashless trends and customer convenience.
Square, established in 2009, is a significant fintech player offering comprehensive financial solutions.
Its payment processing services, Cash App for peer-to-peer transactions, and support for online
commerce highlight its impact. Klarna, founded in 2005, offers innovative payment solutions for
online shopping. "Buy now, pay later" and instalment options, along with user-friendly checkout and
risk assessment algorithms, have transformed e-commerce. Both Square and Klarna exemplify
fintech's transformative role in shaping the future of digital commerce.
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Learning Objective:
• Define digital lending and its features.

• Explain benefits of digital lending including convenience and accessibility.
• Summarize historical lending evolution from ancient times to modern digital age.
• Describe P2P lending model and its differences from traditional lending.
• Analyse benefits and potential risks for borrowers and investors in P2P lending.
• Identify and evaluate FinTech leaders in lending such as LendingClub, Zopa, Prosper.
• Understand FinTech's role in transforming lending, streamlining processes, enhancing
accessibility, and offering personalization.
• Discuss technology's impact on customer behaviour in borrowing and lending, emphasizing
online platforms and digital experiences.
• Explain significance of credit evaluation and underwriting in digital lending, including
algorithmic approaches and alternative data sources.
• Recognize benefits and challenges, including faster approval, convenience, security, and data
privacy.
• Reflect on future trends driven by FinTech, like blockchain, AI underwriting, and mobile
accessibility.
• Define mPOS and its role in transforming transaction processes.
• Identify mPOS features such as portability, mobile compatibility, wireless connectivity, and
security measures.
Digital Lending
Digital lending, also known as online lending or e-lending, refers to the process of providing financial
services, particularly loans, through digital platforms and technology. It involves using digital
channels and automated processes to originate, underwrite, and disburse loans, making the lending
process faster, more efficient, and convenient for both borrowers and lenders.
Key features of digital lending include:
• Online Application: Borrowers can apply for loans through online platforms, websites, or
mobile applications. The application process typically involves filling out digital forms and
submitting necessary documents electronically.
• Automated Underwriting: Digital lending platforms often use algorithms and advanced data
analytics to assess a borrower's creditworthiness and risk. This automated underwriting
process allows for quicker and more consistent loan approvals.
• Faster Approval and Disbursement: Digital lending reduces the time it takes for loan approval
and disbursement. In many cases, borrowers can receive funds in their accounts within a few
days or even hours, as compared to the longer turnaround times in traditional lending.
• Personalization: Digital lending platforms may use borrowers' data and financial history to
personalize loan offers and terms, making the lending experience more tailored to individual
needs.
• Integration of Alternative Data: Digital lenders often leverage alternative data sources, such
as social media profiles, utility bill payments, and online transaction history, to assess
creditworthiness, especially for borrowers with limited traditional credit histories.
• Mobile Accessibility: Many digital lending platforms offer mobile apps, allowing borrowers to
access loan services on-the-go, enhancing accessibility and convenience.
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• Collaboration with Traditional Lenders: In some cases, traditional financial institutions may
partner with or establish their digital lending platforms to complement their existing loan
offerings and reach a broader customer base.
Digital lending has grown in popularity due to its ability to streamline the lending process, offer
convenience, and serve segments of the population that may have limited access to traditional
banking services. However, like any form of lending, it also carries certain risks, such as the potential
for data breaches and cybersecurity issues, and borrowers should exercise caution when dealing with
online lenders.
History of Lending
The history of lending dates back thousands of years, with the practice evolving alongside the
development of human civilization and economic systems. Here is a brief overview of the key
milestones in the history of lending:
• Ancient Times: Lending has roots in ancient civilizations like Mesopotamia, Egypt, and
Greece. Merchants and traders lent money to fund business ventures, charging interest for
the service.
• Roman Empire: In ancient Rome, moneylenders (feneratores) provided loans at high-interest
rates, sometimes exploiting desperate borrowers.
• Middle Ages: During the Middle Ages, Jewish moneylenders played a significant role in
lending, as Christian doctrine forbade usury, i.e., charging interest. The Knights Templar and
Lombards were notable lenders during this era.
• Rise of Banking: In the late Middle Ages and Renaissance, banks emerged, providing loans
and becoming vital financial institutions in Europe.
• 18th and 19th Centuries: Modern banking practices and regulations began to take shape.
The establishment of central banks and development of commercial banks facilitated more
organized lending.
• Industrial Revolution: The rise of industrialization in the 18th and 19th centuries led to
increased lending for business expansions and infrastructure development.
• 20th Century: Consumer lending and personal loans became more common, especially after
the Great Depression. The introduction of credit cards in the mid-20th century revolutionized
consumer lending.
• Late 20th and 21st Centuries: The digital age brought about significant changes in lending.
Online lending platforms and fintech companies emerged, offering innovative lending
solutions and easier access to credit.
Throughout history, lending has played a vital role in economic growth, enabling individuals and
businesses to finance various endeavours. However, it has also faced challenges related to usury
laws, exploitation, and economic downturns. Today, lending continues to evolve with advancements
in technology and changes in financial regulations.
Peer-to-peer Lending
Peer-to-peer (P2P) lending, also known as crowdlending or social lending, is a form of online lending
that connects individual borrowers directly with individual lenders through an online platform. In this
lending model, traditional financial intermediaries like banks are bypassed, allowing individuals to
lend and borrow money from one another without the need for a brick-and-mortar financial
institution.
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Key features of peer-to-peer lending include:
• Online Platform: P2P lending platforms provide an online marketplace where borrowers can
list their loan requests, and investors can browse and choose loans to fund.
• Borrower Evaluation: The P2P platform evaluates the creditworthiness of borrowers using
various criteria, including credit history, income, and other relevant data.
• Investor Selection: Individual investors can review listed loans and decide which ones they
want to fund. They can diversify their investments by spreading their money across multiple
loans to reduce risk.
• Loan Funding: Once enough investors commit to funding on a specific loan, the total loan
amount is disbursed to the borrower.
• Loan Repayment: Borrowers repay the loans in instalments over a predetermined period,
including both principal and interest.
• Returns for Investors: Investors earn returns on their investment through the interest paid by
borrowers. The P2P platform may charge a fee or commission from both borrowers and
lenders to generate revenue.
P2P lending provides benefits for borrowers, such as potentially lower interest rates, especially for
those with good credit scores. It also offers investors an opportunity to earn higher returns
compared to traditional savings accounts or other investments.
However, P2P lending also comes with certain risks. Borrowers may default on their loans, causing
investors to lose some or all of their invested funds. Additionally, the lack of government-backed
deposit insurance means that investments in P2P lending are not protected in the same way as bank
deposits.
It's essential for both borrowers and investors to carefully research and understand the risks and
benefits involved before participating in peer-to-peer lending.
FinTech Player in peer-to-peer lending
There are several significant FinTech players in the peer-to-peer lending industry. Some of the well-
known names include:
LendingClub Corporation is a prominent FinTech player in the peer-to-peer lending space. Founded in
2006 and headquartered in San Francisco, USA, LendingClub operates an online marketplace that
connects borrowers seeking personal loans with individual investors looking to fund these loans.
Key points about LendingClub:
• Peer-to-Peer Lending: LendingClub follows a peer-to-peer lending model, where borrowers

can apply for loans online, and individual investors can choose which loans to fund.
• Credit Evaluation: LendingClub assesses the creditworthiness of borrowers using various data
points, such as credit history, income, and debt-to-income ratio.
• Loan Funding: Once a loan request is listed and fully funded by investors, the funds are
disbursed to the borrower.
• Investor Returns: Investors receive returns on their investments through monthly
repayments from borrowers, which include both principal and interest.
• Expansion of Services: Over time, LendingClub has expanded its services beyond personal
loans to include other financial products like small business loans.
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LendingClub has been a significant player in the FinTech industry, helping to facilitate borrowing and
lending between individuals and shaping the P2P lending landscape. However, as with any company,
it's important to verify the latest information to ensure accuracy and currency.
Zopa
Zopa is one of the pioneering and well-known companies in the field of peer-to-peer lending. It was
founded in the United Kingdom in 2005, making it one of the earliest P2P lending platforms in the
world. The name "Zopa" originally stood for "Zone of Possible Agreement," reflecting its aim to
connect borrowers and lenders to reach mutually beneficial loan agreements.
Zopa operates as an online marketplace that allows individual investors (lenders) to lend money
directly to individual borrowers. Borrowers apply for loans, and Zopa assesses their creditworthiness.
Investors can choose which loans to fund, and once a loan is fully funded, the money is disbursed to
the borrower. Borrowers then make monthly repayments, including principal and interest, to the
investors.
Over the years, Zopa has grown and expanded its offerings beyond personal loans to include other
financial products and services. It has also faced regulatory changes and challenges, as the P2P
lending industry has evolved. Nevertheless, Zopa remains an influential player in the peer-to-peer
lending sector and has contributed to shaping the alternative lending landscape.
Prosper
Prosper Marketplace, Inc., commonly known as Prosper, is a prominent FinTech player in the peer-to-
peer lending industry. Founded in 2005 and based in San Francisco, USA, Prosper operates an online
lending platform that connects borrowers seeking personal loans with individual investors who want
to fund these loans.
Key points about Prosper:
• Peer-to-Peer Lending: Prosper operates on a peer-to-peer lending model, allowing borrowers

to apply for personal loans online and investors to choose loans to fund.
• Credit Evaluation: Prosper evaluates borrowers' creditworthiness based on various factors,
including credit history and income.
• Loan Funding: Once a loan request is listed and fully funded by investors, the loan amount is
disbursed to the borrower.
• Investor Returns: Investors receive returns on their investment through monthly repayments
from borrowers, including both principal and interest.
Prosper has been a significant player in the P2P lending space, offering borrowers access to credit
and providing investors with opportunities for potential returns through borrower repayments.
However, the status and details of companies may change over time, so it's advisable to verify the
latest information about Prosper to ensure accuracy.
Question 1: What is digital lending?
A) Providing loans using physical documents and in-person interactions.
B) The process of offering financial services through digital platforms and technology.
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C) A form of credit evaluation used in traditional lending.
D) Borrowing money from banks for online purchases.
Question 2: What are the key features of digital lending?
A) Offline applications, manual underwriting, and slow approval processes.
B) Use of cash transactions, limited personalization, and manual borrower evaluation.
C) Online applications, automated underwriting, and integration of alternative data.
D) Limited accessibility through mobile apps and collaboration with traditional lenders.
Question 3: What role did the digital age play in lending practices?
A) It had no impact on lending practices.
B) It led to the decline of lending institutions.
C) It brought about changes in lending practices with the emergence of online lending platforms and
fintech companies.
D) It only affected traditional banking services, not lending.
Question 4: What is the purpose of peer-to-peer (P2P) lending platforms?
A) To connect borrowers with traditional banks.
B) To bypass borrowers and connect lenders directly with banks.
C) To connect individual borrowers directly with individual lenders through online platforms.
D) To offer credit evaluations for borrowers.
Question 5: What is a potential benefit of P2P lending for borrowers?
A) Higher interest rates compared to traditional bank loans.
B) Government-backed deposit insurance protection.
C) Lower interest rates, especially for borrowers with good credit scores.
D) Limited accessibility through mobile apps.
Question 6: What is a potential risk associated with P2P lending for investors?
A) Guaranteed high returns on investments.
B) Government-backed deposit insurance protection.
C) Borrowers defaulting on loans, causing potential loss of invested funds.
D) Access to credit for borrowers with limited credit history.
Question 7: Which company was founded in 2006 and operates an online marketplace connecting
borrowers and individual investors?
A) Zopa
B) Prosper
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C) LendingClub Corporation
D) Knights Templar
Question 8: What does "Zopa" originally stand for?
A) Zero Obligation Payment Agreement
B) Zone of Potential Agreement
C) Zenith of Peer-to-Peer Applications
D) Zoning out on Personal Assets
Question 9: What is Prosper Marketplace, Inc. known for in the lending industry?
A) Providing insurance for P2P lending investments
B) Offering government-backed loans to borrowers
C) Operating an online lending platform connecting borrowers and individual investors
D) Facilitating direct lending between banks and borrowers
Question 10: How has lending evolved over time in response to advancements in technology and
changes in financial regulations?
A) It has remained unchanged since ancient times.
B) It has become less accessible due to technology.
C) It has faced challenges in adapting to modern practices.
D) It has continued to evolve with advancements in technology and changing regulations.
Integration of FinTech with Credit Card Market
FinTech in credit cards refers to the integration of financial technology solutions into the credit card
industry to enhance the overall customer experience, security, and convenience of credit card
transactions. Here are some ways in which FinTech has impacted the credit card sector:
• Contactless Payments: FinTech innovations have facilitated contactless payments, enabling

users to tap their credit cards on compatible payment terminals for quick and secure
transactions.
• Mobile Wallets: FinTech has given rise to mobile wallet applications, allowing users to store
their credit card information securely on their smartphones and make payments using NFC
technology or QR codes.
• Digital Credit Cards: Some FinTech companies offer digital credit cards that users can use for
online purchases, with unique virtual card numbers generated for each transaction,
enhancing security.
• Artificial Intelligence (AI) for Fraud Detection: FinTech-powered AI algorithms analyse
transaction patterns in real-time to detect and prevent fraudulent credit card activities,
providing enhanced security to users.
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• Personalized Rewards and Offers: FinTech solutions help credit card issuers analyse spending
patterns to offer personalized rewards, discounts, and cashback offers to cardholders.
• Credit Card Aggregators: FinTech platforms provide credit card aggregators that allow users
to compare different credit card offerings, rewards, and interest rates to choose the best-
suited option for their needs.
• Blockchain and Security: Blockchain technology is being explored in the credit card industry
to enhance transaction security, reduce data breaches, and streamline the settlement
process.
• Open Banking and Data Sharing: FinTech advancements in open banking enable users to
access credit card information through third-party applications, fostering a more
interconnected and convenient financial ecosystem.
• Real-time Transaction Notifications: FinTech-enabled credit cards send real-time transaction
notifications to users' smartphones, keeping them informed about their spending in real-
time.
• Digital Onboarding: FinTech solutions have simplified the credit card application and approval
process, enabling users to apply online and get instant approvals for credit cards.
These FinTech advancements have significantly transformed the credit card industry, providing
consumers with more convenience, security, and personalized benefits while accelerating the pace of
innovation in the financial sector.
Consumer Lending
An unsecured loan is the one that does not have any assets or securities against it and so is riskier for
lenders. However, it is less risky for the borrower because they have no property that serves as a
guarantee if they fail to repay the loan. Because of this, the lender charges higher interest rates to
offset the risk. An Unsecured loan can be of many types: signature or personal, credit card, student,
or peer-to-peer loan. A borrower can secure a signature loan from credit unions and banks. They can
use it for any purpose and usually pay off the loan monthly. If they have good credit standing, they
can expect to pay of a loan at a low interest rate. A credit card is another type of loan unsecured loan
provided by credit card companies. A credit card holder uses it to pay for whatever they need.
Normally, they pay a high interest rate on their credit card balance if they fail to pay their balance in
full and on time. A credit card company may offer a 0% interest rate for a time to encourage people
to apply for its card. Digital lending allows customers to get an unsecured loan through online
lenders. In the United Kingdom, this lending market is worth around 2 billion pounds. Customers
avail of digital lending because of convenience, simplicity, transparency, and flexibility and
personalisation. They do not have to go to a bank branch to apply for a loan, they can use mobile app
anywhere and anytime to gain access to credit. They are only required to provide some information
and answer few questions. Usually, they have to select loan maturity and value. The system’s
algorithms will take care of the rest of the complex process using a collection of past data. Lastly
digital lending can provide borrowers with incentives for keeping a good loan repayment record so
that they get preferential terms and better rates the next time they apply for an online loan.
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FinTechs Companies in Credit Card Sector
Avant Credit is a fintech company that specializes in providing online personal loans. Avant is known
for using technology and data analytics to offer personalized loan products to individuals with
varying credit profiles. Here are some key points about Avant Credit:
• Online Lending Platform: Avant Credit operates entirely online, allowing customers to apply
for personal loans through its website or mobile app. This digital approach streamlines the
loan application process and enables quick funding decisions.
• Personal Loans for Various Credit Profiles: One of Avant's key features is its focus on serving
customers with a range of credit scores. While traditional banks might decline loan
applications from individuals with less-than-perfect credit, Avant considers applicants with
various credit histories.
• Credit Scoring and Risk Assessment: Avant uses proprietary algorithms and data analytics to
assess an applicant's creditworthiness. They consider factors beyond just credit scores,
taking a more holistic approach to evaluate a borrower's ability to repay the loan.
• Loan Terms and Amounts: Avant offers unsecured personal loans, which means borrowers do
not need to provide collateral to secure the loan. Loan amounts and terms vary based on the
applicant's creditworthiness and financial situation.
• Customer Support: Avant provides customer support through various channels, including
email, phone, and online chat, to assist borrowers throughout the loan process.
• Mobile App: Avant offers a mobile app that allows customers to manage their loans, make
payments, and access account information conveniently on their smartphones.
ZestFinance, also known as Zest AI, is a fintech company that specializes in providing artificial
intelligence (AI)-powered credit underwriting and risk assessment solutions. The company was
founded in 2009 with the aim of using advanced machine learning and data analytics to improve
credit decisions and enhance financial inclusion. ZestFinance focuses on helping lenders make more
accurate and fair credit assessments, especially for customers with limited credit histories or
subprime credit profiles. They analyse a wide range of data points to assess creditworthiness and
predict a borrower's ability to repay loans, offering more reliable insights than traditional credit
scoring models.
ZestFinance's AI-driven underwriting platform has been adopted by various financial institutions to
improve their lending practices, reduce credit risk, and expand access to credit for underserved
populations. By leveraging AI technology, ZestFinance aims to make lending more inclusive and
support responsible lending practices in the financial industry.
LendUp is a fintech company that provides online short-term loans and credit services. The
company's mission is to provide accessible and responsible credit to individuals with limited credit
history or who may not qualify for traditional bank loans. LendUp focuses on promoting financial
inclusion and offering a pathway to better financial health for its customers.
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Here are some key points about LendUp:
• Short-Term Loans: LendUp offers short-term loans, often referred to as payday loans or cash
advances. These are typically small-dollar loans designed to cover emergency expenses or
bridge financial gaps until the borrower's next pay-check.
• Credit Building: LendUp emphasizes credit building and provides an opportunity for
borrowers to improve their credit scores over time. By repaying loans on time and using their
services responsibly, customers may gain access to better loan terms and higher credit limits.
• Ladder Program: LendUp has a unique feature called the "LendUp Ladder" program. As
customers repay their loans and demonstrate responsible borrowing behaviour, they can
climb the ladder, gaining access to more favourable loan terms and lower interest rates.
• Online Platform: LendUp operates entirely online, allowing customers to apply for loans,
manage their accounts, and make payments through their website or mobile app.
• Educational Resources: In addition to offering loans, LendUp provides educational resources
and tools to help customers improve their financial literacy and make informed financial
decisions.
• Regulatory Compliance: LendUp operates in compliance with state and federal regulations
and seeks to be transparent and fair in its lending practices.
As with any financial service, it's crucial for borrowers to fully understand the terms and conditions
of the loans they are taking and to borrow responsibly. While LendUp aims to provide an alternative
to traditional payday loans with a focus on credit building, short-term loans can carry high interest
rates, so borrowers should carefully consider their financial situation before applying for any loan.
For the most up-to-date information about Lend Up’s services and offerings, I recommend visiting
their official website.
Next Generation Commerce
Next-generation commerce, often referred to as "Commerce 2.0" or "E-commerce 2.0," represents

the evolution of traditional e-commerce in response to advancements in technology, changing
consumer behaviours, and market trends. It encompasses innovative and transformative approaches
to buying and selling goods and services, leveraging cutting-edge technologies and new business
models. Some key aspects of next-generation commerce include:
• Personalization: Next-gen commerce platforms use advanced data analytics and artificial
intelligence to offer personalized shopping experiences to individual customers. They analyse
customer preferences, behaviours, and purchase history to provide relevant product
recommendations and tailored offers.
• Omnichannel Integration: Next-generation commerce seamlessly integrates various sales
channels, such as online marketplaces, social media, mobile apps, brick-and-mortar stores,
and more. This allows customers to interact with brands and make purchases through their
preferred channels.
• Mobile Commerce: Mobile devices play a central role in next-gen commerce, as consumers
increasingly use smartphones and tablets to shop. Mobile commerce platforms are
optimized for smaller screens and offer features like mobile wallets and mobile-exclusive
offers.
• Voice Commerce: The rise of virtual assistants and smart speakers has given birth to voice
commerce, where customers can make purchases using voice commands. Next-gen
commerce platforms support voice-enabled shopping to cater to the growing trend of voice
search and shopping.
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• Augmented Reality (AR) and Virtual Reality (VR): Next-gen commerce embraces AR and VR
technologies to enhance the shopping experience. Customers can virtually try on products,
visualize furniture in their homes, or experience immersive shopping environments.
• Social Commerce: Social media platforms have become essential for commerce, with next-
gen strategies leveraging social commerce features. Customers can discover products
through social media, and brands can sell directly through social platforms.
• Subscription-Based Commerce: Next-gen commerce includes subscription-based models
where customers sign up for recurring deliveries of products or services. This offers
convenience and regular revenue for businesses.
• Sustainability and Ethical Commerce: Next-generation commerce emphasizes sustainable
and ethical practices. Consumers increasingly seek eco-friendly products, and businesses
align their values with social and environmental responsibility.
• Blockchain and Cryptocurrency: Some next-gen commerce platforms embrace blockchain
technology for secure transactions and supply chain transparency. Cryptocurrencies are also
explored as alternative payment options.
• Instant and Same-Day Delivery: Next-gen commerce prioritizes fast and efficient delivery
options, offering customers same-day or instant delivery choices for certain products.
Next-generation commerce is characterized by its focus on customer experience, convenience, and

innovation. It continually evolves to meet changing market demands and technological
advancements, shaping the future of commerce in a digitally connected world.
Change in Customer Shopping Behaviour
Customer shopping behaviour has undergone significant changes in recent years, driven primarily by
advancements in technology, shifting demographics, and changes in consumer preferences. Some of
the key changes in customer shopping behaviour include:
• Online Shopping: The rise of e-commerce has led to a significant increase in online shopping.
Consumers now prefer the convenience of shopping from their homes or mobile devices,
with access to a wide range of products and the ability to compare prices and read reviews.
• Mobile Shopping: Mobile devices have become an integral part of the shopping process.
Consumers use smartphones and tablets to research products, read reviews, and make
purchases on the go.
• Omnichannel Shopping: Customers now expect a seamless shopping experience across
multiple channels, such as online, mobile, and brick-and-mortar stores. They may start their
shopping journey online and complete the purchase in-store or vice versa.
• Social Commerce: Social media platforms have become a key influencer in shopping
behaviours. Consumers discover products through social media ads and recommendations,
leading to impulse purchases.
• Personalization: Customers expect personalized shopping experiences tailored to their
preferences and past behaviours. They are more likely to engage with brands that offer
personalized product recommendations and relevant offers.
• Sustainability and Ethical Shopping: Consumers are increasingly conscious of sustainability
and ethical practices. They prefer to support brands that align with their values, such as
those promoting eco-friendly products or fair-trade practices.
• Instant Gratification: With fast delivery options and same-day shipping, customers now
expect instant gratification. They value speed and efficiency in the shopping and delivery
process.
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• Reviews and Recommendations: Customer reviews and recommendations play a significant

role in shaping purchasing decisions. Consumers trust peer reviews and rely on them to
make informed choices.
• Subscription Services: Subscription-based models have gained popularity, with consumers
subscribing to products and services for convenience and regular deliveries.
• Experience-Driven Shopping: Customers seek shopping experiences beyond just the
transaction. They value interactive and experiential elements in physical stores and online
platforms.
• Influencer Marketing: Influencers and social media personalities influence customer buying
decisions. Customers often trust recommendations from influencers they follow.
Overall, the change in customer shopping behaviours reflects a demand for convenience,
personalization, sustainability, and engaging experiences. Businesses need to adapt their strategies
and embrace digital transformation to meet the evolving needs and expectations of modern
consumers.
Point of Sales Evolution
Point of Sale (POS) systems have evolved significantly over the years, transforming the way
businesses handle transactions and manage their operations. The evolution of POS can be
summarized in the following stages:
• Traditional Cash Registers: In the past, businesses used mechanical cash registers to process
transactions manually. These cash registers were basic machines that could record sales
amounts and calculate totals but had limited functionality.
• Electronic Cash Registers: The introduction of electronic cash registers brought
improvements in terms of accuracy and efficiency. These systems used digital displays and
electronic keypads for faster data entry and included features like tax calculation and basic
sales reporting.
• Standalone POS Systems: Early standalone POS systems emerged in the 1970s. They were
computer-based and equipped with specialized software to handle sales, inventory, and
reporting. These systems allowed businesses to manage more complex transactions and
track sales data.
• Integration with Barcode Scanners: Barcode scanners were integrated with POS systems in
the 1980s, enabling faster and more accurate item scanning and price lookup. This
integration significantly reduced human errors and improved checkout times.
• Cloud-Based POS Systems: With the rise of the internet and cloud technology, cloud-based
POS systems became popular in the 2000s. These systems allowed businesses to access their
data from any device with an internet connection, offering greater flexibility and real-time
data syncing.
• Mobile POS (mPOS): The advent of smartphones and tablets led to the development of
mobile POS systems. These systems leverage mobile devices to process transactions on the
go, making it easier for businesses to accept payments anywhere, anytime.
• Integrated Payment Solutions: Modern POS systems are often integrated with various
payment methods, including credit cards, debit cards, mobile wallets, and contactless
payments. This integration streamlines the checkout process and enhances customer
convenience.
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• Advanced Analytics and Reporting: POS systems now offer advanced analytics and reporting
features. Businesses can analyse sales data, inventory levels, customer preferences, and
other metrics to make informed decisions and improve their operations.
• POS and E-commerce Integration: Many businesses now integrate their POS systems with
their e-commerce platforms. This integration allows for seamless inventory management and
sales tracking across both online and offline channels.
• AI and Personalization: Some advanced POS systems leverage artificial intelligence (AI) to
offer personalized customer experiences. AI-powered POS can analyse customer data and
provide tailored recommendations or promotions, enhancing customer satisfaction and
loyalty.
• Contactless and Biometric Payments: The latest evolution includes the integration of
contactless and biometric payment options. These innovations further speed up transactions
and enhance security.
Overall, the evolution of POS systems has revolutionized the way businesses handle transactions,
manage inventory, and analyse data. The integration of technology has made POS systems more
efficient, secure, and customer-friendly, shaping the future of retail and other industries.
m-POS
mPOS stands for "Mobile Point of Sale." It refers to a portable and wireless point-of-sale system that
allows businesses to process transactions using mobile devices such as smartphones or tablets.
mPOS systems leverage the power of mobile technology to transform these devices into fully
functional payment terminals, providing flexibility and convenience for businesses and customers
alike.
Key features of mPOS systems include:
• Portability: mPOS systems are lightweight and easy to carry, enabling businesses to accept
payments on the go, at events, or in remote locations.
• Mobile Device Compatibility: mPOS applications can be installed on smartphones and
tablets, turning them into secure and reliable payment terminals.
• Card Payment Acceptance: mPOS systems can accept various payment methods, including
credit cards, debit cards, contactless payments, and mobile wallets.
• Wireless Connectivity: mPOS devices connect to the internet via Wi-Fi, 3G, 4G, or Bluetooth,
providing seamless and instant transaction processing.
• Security: mPOS solutions implement encryption and tokenization technologies to ensure the
security of sensitive payment data.
• Inventory Management: Some mPOS systems integrate with inventory management
software, allowing real-time tracking of product availability and stock levels.
• Receipt Generation: Digital receipts can be generated and sent to customers via email or
SMS, reducing paper waste.
• Customer Data Collection: mPOS systems can capture customer information, helping
businesses build customer databases for marketing and loyalty programs.
• Flexibility for Small Businesses: mPOS solutions are particularly popular among small
businesses and mobile merchants, providing them with an affordable and easy-to-use
payment solution.
• Contactless and NFC Payments: mPOS devices often support contactless payments using
Near Field Communication (NFC) technology, enabling quick and secure transactions.
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mPOS has become increasingly popular in various industries, including retail, hospitality, events, food
trucks, and transportation. It offers businesses the ability to process transactions quickly and
efficiently, enhance customer service, and adapt to changing customer preferences for cashless
payments. As technology continues to evolve, mPOS solutions are expected to further integrate with
other business systems and offer even more advanced features for seamless and smart payment
processing.
Question 11: What is the primary focus of the mPOS (Mobile Point of Sale) business model?
a) Providing software for computer systems
b) Offering inventory management solutions
c) Enabling businesses to accept mobile-based payments
d) Providing data analytics for marketing
Question 12: Which of the following is NOT a component of the mPOS business model?
a) Subscription or Licensing Fees
b) Hardware and Software Sales
c) Face-to-face customer service
d) Transaction Fees
Question 13: What is the purpose of Zest Finance in the credit card sector?
a) Providing mobile wallet solutions
b) Offering mobile payment platforms
c) Enhancing credit underwriting and risk assessment with AI
d) Developing contactless payment technologies
Question 14: Which feature of next-generation commerce leverages virtual assistants and smart
speakers for shopping?
a) Personalization
b) Omnichannel Integration
c) Voice Commerce
d) Social Commerce
Question 15: What is a key benefit of mobile POS (mPOS) systems?
a) They only accept cash payments.
b) They require a physical connection to the internet.
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c) They cannot generate digital receipts.
d) They provide flexibility for accepting payments on the go.
m-POS Business Model
The mPOS (Mobile Point of Sale) business model revolves around providing mobile-based payment
solutions to businesses, enabling them to accept card payments through smartphones or tablets. The
primary components of the mPOS business model are as follows:
• Hardware and Software Sales: mPOS providers sell or lease mobile devices equipped with
their proprietary software to businesses. The hardware includes card readers or contactless
payment terminals that can be attached to the mobile devices, while the software comprises
the mobile application used to process transactions.
• Transaction Fees: The mPOS business model generates revenue through transaction fees
charged to businesses for each payment processed using their platform. These fees are
typically a percentage of the transaction amount and may vary depending on the payment
method (credit card, debit card, contactless, etc.).
• Subscription or Licensing Fees: Some mPOS providers offer subscription-based pricing
models or licensing fees for businesses to access and use their software. This can include
additional features, analytics, or integrations with other business tools.
• Value-Added Services: To differentiate their offerings and generate additional revenue, mPOS
providers may offer value-added services such as inventory management, sales reporting and
analytics, customer relationship management, and loyalty programs.
• Customization and Integration: mPOS providers may charge fees for customizing their
software to meet specific business needs or for integrating their platform with the
businesses' existing systems, such as accounting software or e-commerce platforms.
• Data Analytics and Insights: mPOS companies can leverage transaction data and customer
information to provide insights and analytics to businesses, helping them make informed
decisions and optimize their operations.
• Hardware Upgrades and Support: Offering hardware upgrades or maintenance services can
be an additional revenue stream for mPOS providers. Businesses may pay for the latest
device models or for ongoing technical support.
• White Label Solutions: Some mPOS providers offer white label solutions, where businesses
can rebrand the mPOS software as their own and offer it to their customers under their
brand name. This allows mPOS providers to generate revenue through licensing or
partnership agreements.
• Partnerships and Referral Programs: mPOS providers can partner with financial institutions,
payment processors, or other businesses to expand their customer base. They may offer
referral programs or revenue-sharing arrangements to incentivize partners to promote their
mPOS solutions.
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• International Expansion: As mPOS providers grow, they may explore opportunities for
international expansion, targeting businesses in different regions and countries to broaden
their market reach.
Overall, the mPOS business model centers on providing convenient and cost-effective payment
solutions to businesses, enabling them to streamline transactions, improve customer experience,
and adapt to the growing trend of cashless payments. As technology continues to advance and
consumer preferences evolve, mPOS companies will need to innovate and offer new features to stay
competitive in the rapidly evolving payments industry.
FinTech in Next Generation Commerce Segment
Square- Square is a prominent fintech company founded in 2009, offering a comprehensive suite of
financial services and solutions. Its core payment processing services enable businesses to accept
card payments through hardware and software solutions. Square's Cash App allows individuals to
send and receive money, invest in stocks, and buy/sell cryptocurrencies. The company also supports
online commerce with website builders and payment gateways. Square Capital provides quick access
to business loans, while its small business tools include payroll processing and employee
management. Square's user-friendly approach and continuous innovation have made it a leading
player in the fintech industry, catering to businesses and individuals alike.
Square is a prominent fintech company that provides a range of financial services and solutions for
businesses and individuals. Founded in 2009 by Jack Dorsey and Jim McKelvey, Square has grown into
a major player in the financial technology industry. Here are some key aspects of Square:
Payment Processing: Square's core offering is its payment processing services. The company provides
merchants with hardware and software solutions to accept card payments in-store and online.
Square's card readers and point-of-sale (POS) systems are widely used by small and medium-sized
businesses to process transactions.
Mobile Payments: Square is known for its mobile payment solution called Square Cash, which allows
individuals to send and receive money using their smartphones. It competes with other peer-to-peer
payment apps like Venmo and PayPal.
Online Commerce: Square offers tools and services for businesses to establish an online presence
and conduct e-commerce. It provides website builders, online stores, and payment gateways to
facilitate online transactions.
Cash App: Square's Cash App is a mobile payment app that allows users to send and receive money,
invest in stocks and cryptocurrencies, and make purchases with a Cash Card linked to the app.
Small Business Solutions: Square has expanded its offerings to include a suite of tools for small
businesses, including payroll processing, employee management, marketing, and analytics.
Financial Services: Square Capital is Square's lending division, offering business loans to eligible
sellers based on their transaction history. This service provides quick access to capital for businesses
to grow and expand.
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Cryptocurrency Support: Square allows users of its Cash App to buy and sell Bitcoin, further
integrating digital assets into its platform.
Innovation: Square continues to innovate and expand its offerings, regularly introducing new features
and services to meet the evolving needs of businesses and consumers.
Square's user-friendly approach and focus on simplifying financial transactions have made it popular
among small businesses and individuals. The company's integrated solutions and disruptive approach
to the financial industry have contributed to its success in the fintech space. Square's growth and
impact on the financial technology sector make it an influential player in the digital economy.
Klarna
Klarna is a Swedish fintech company founded in 2005 that offers innovative payment solutions and
financial services for online shopping. It provides consumers with flexible payment options like "buy
now, pay later" and instalment plans, allowing them to shop seamlessly and pay later. Klarna's user-
friendly checkout process and data-driven risk assessment algorithms make it a popular choice
among consumers and merchants alike. The company's services have significantly impacted the e-
commerce landscape, transforming the way people shop and pay for their purchases online. Klarna
has grown into one of the leading players in the fintech industry, driving forward the future of digital
commerce.
SUMMARY
• Digital lending refers to providing loans through digital platforms and technology.
• Features include online applications, automated underwriting, faster approval, and
personalization.
• Integration of alternative data and mobile accessibility are common.
• Collaboration with traditional lenders can complement digital lending.
• Offers convenience but carries risks like data breaches and cybersecurity concerns.
• Lending has ancient origins in civilizations like Mesopotamia and Rome.
• Banks emerged during the Renaissance, shaping modern lending practices.
• Consumer lending and credit cards became prominent in the 20th century.
• The digital age introduced online lending platforms and fintech innovations.
• P2P lending connects individual borrowers with individual lenders through online platforms.
• Borrower evaluation, investor selection, loan funding, and repayment are key elements.
• P2P offers potential lower rates for borrowers and higher returns for investors.
• Risks include borrower defaults and lack of deposit insurance protection.
• LendingClub is a major player in P2P lending connecting borrowers and investors.
• Zopa is a UK-based P2P platform founded in 2005, connecting lenders and borrowers.
• Prosper Marketplace, based in San Francisco, USA, offers P2P lending services.
• FinTech integrates technology into the credit card industry for enhanced customer
experience and security.
• Contactless payments enable quick and secure transactions through tapping credit cards on
terminals.
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• Mobile wallets store credit card info on smartphones for NFC or QR code payments.
• Digital credit cards offer unique virtual card numbers for online purchases.
• AI detects fraud in real-time, while personalization tailors rewards and offers.
• Credit card aggregators compare offerings; blockchain enhances security.
• Real-time notifications keep users updated on spending.
• Digital onboarding simplifies application and approval processes.
• Unsecured loans lack collateral and are riskier for lenders.
• Next-gen commerce (Commerce 2.0) evolves e-commerce with technology.
• Personalization uses AI for tailored shopping experiences.
• Omnichannel integration offers seamless multi-channel shopping.
• Mobile commerce and voice commerce cater to mobile and voice search.
• AR and VR enhance shopping experiences.
• Social commerce leverages social media platforms for sales.
• Subscription-based models provide convenience and regular revenue.
• Sustainability and ethical considerations influence buying decisions.
• Blockchain, cryptocurrency, and instant delivery are trends.
• Online shopping rises, driven by e-commerce convenience.
• Mobile devices play a central role in shopping behavior.
• Omnichannel experience expected across various channels.
• Social media influences buying decisions via recommendations.
• Personalization, sustainability, and ethical considerations matter.
• Instant gratification and reviews influence purchase decisions.
• Subscription services gain popularity for convenience.
• Experience-driven shopping seeks interactive and immersive elements.
• Influencers on social media impact customer decisions.
• mPOS stands for Mobile Point of Sale. Portable and wireless system for processing
transactions. Uses smartphones/tablets as payment terminals. Accepts card, contactless, and
mobile wallet payments. Offers wireless connectivity and data security. Supports inventory
management and digital receipt generation.
CASE-STUDY
Impact of peer-to-peer lending in Chinese Real Estate Sector
Peer-to-peer (P2P) lending had a significant impact on China's real estate sector, both positive and
negative. Initially, P2P lending platforms provided an alternative source of financing for property
developers and investors, particularly those who struggled to secure loans from traditional banks.
This increased access to capital fuelled construction projects and real estate development, driving
economic growth in the sector.
However, the rapid proliferation of P2P lending in the real estate space brought about several
challenges. The lack of proper regulations and oversight led to the emergence of fraudulent and
poorly managed platforms. Investors seeking higher returns were lured into risky ventures without
sufficient due diligence, resulting in financial losses and eroded trust in the system.
As risks mounted, Chinese authorities intervened to mitigate potential financial instability. The
government introduced stricter regulations on P2P lending to curb fraud and protect investors. Many
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P2P platforms faced shutdowns or stricter operational requirements. This regulatory crackdown
disrupted the flow of funds from P2P lending to real estate projects, leaving developers in search of
new financing options.
The decline of P2P lending in real estate financing prompted a shift in the sector's landscape.
Developers needed to adapt their strategies, exploring avenues such as equity financing, traditional
bank loans, and partnerships. This shift marked a transition from the unregulated and high-risk P2P
lending environment to a more regulated and diverse financing ecosystem.
In conclusion, while P2P lending briefly provided a boost to China's real estate sector by expanding
access to funding, its unchecked growth led to fraudulent activities and investor risks. Regulatory
responses aimed at addressing these issues ultimately reshaped the financing dynamics of the real
estate sector, encouraging developers to explore more stable and regulated financing options.
Discuss the challenges ahead of Chinese regulatory bodies in regulating real estate sector because of
crowdfunding or peer-to-peer lending?
Terminal Questions
Question 1: Explain the concept of digital lending and how it has transformed the lending industry.
Highlight the key features of digital lending and discuss its benefits for both borrowers and lenders.
Also, elaborate on the risks associated with digital lending and the measures borrowers should take
to ensure a safe and secure online lending experience.
Question 2: Trace the historical evolution of lending practices from ancient civilizations to the
modern digital age. Discuss key milestones in lending history, such as the roles of moneylenders in
ancient times, the emergence of banks during the Middle Ages, and the introduction of credit cards
in the 20th century. Explain how lending has adapted to economic changes and technological
advancements. Compare the challenges faced by lenders in different eras with the challenges posed
by the digital lending revolution.
Question 3: Describe the concept of peer-to-peer (P2P) lending and its role in reshaping the lending
landscape. Explain the core features of P2P lending platforms, including borrower evaluation,
investor selection, loan funding, and repayment. Analyse the advantages of P2P lending for both
borrowers and investors, along with the associated risks. Discuss how P2P lending contributes to
financial inclusivity and how it differs from traditional banking models.
Question 4: Discuss the significant FinTech players in the peer-to-peer lending industry, focusing on
LendingClub, Zopa, and Prosper. Explain their roles in the P2P lending landscape, including their
business models, credit evaluation methods, loan funding processes, and investor returns. Analyse
the impact of these players on the financial services sector and how they have shaped the alternative
lending ecosystem. Address any challenges these companies have faced and their contributions to
financial innovation.
Question 5: What is mPOS, and how does it benefit businesses?
Question 6: How has customer shopping behaviour changed in recent years, and what factors have
contributed to these changes?
Question 7: How has the point of sale (POS) system evolved over time, and what are some of the key
stages in its development?
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Question 8: What is Next-Generation Commerce, and how does it differ from traditional e-
commerce?
Question 9: Could you explain the concept of "Unsecured Loan" and provide examples of different
types of unsecured loans?
Question 10: How has FinTech impacted the credit card industry? Provide some examples of FinTech
innovations in this sector.
Answers to Self-Assessment Questions
Answer 1: B) The process of offering financial services through digital platforms and technology.
Explanation: Digital lending, also known as online lending or e-lending, refers to providing loans
through digital platforms and technology, making the process faster and more efficient.
Answer 2: C) Online applications, automated underwriting, and integration of alternative data.
Explanation: Key features of digital lending include online applications, automated underwriting, and
the integration of alternative data sources to assess creditworthiness.
Answer 3: C) It brought about changes in lending practices with the emergence of online lending
platforms and fintech companies.
Explanation: The digital age resulted in significant changes in lending practices with the rise of online
lending platforms and fintech companies offering innovative lending solutions.
Answer 4: C) To connect individual borrowers directly with individual lenders through online
platforms.
Explanation: P2P lending platforms facilitate direct connections between individual borrowers and
lenders without involving traditional banks.
Answer 5: C) Lower interest rates, especially for borrowers with good credit scores.
Explanation: P2P lending can offer lower interest rates, particularly for borrowers with good credit
scores, compared to traditional bank loans.
Answer 6: C) Borrowers defaulting on loans, causing potential loss of invested funds.
Explanation: Investors in P2P lending face the risk of borrowers defaulting on their loans, which can
result in a loss of the invested funds.
Answer 7: C) LendingClub Corporation
Explanation: LendingClub was founded in 2006 and operates an online marketplace connecting
borrowers and individual investors.
Answer 8: B) Zone of Potential Agreement
Explanation: The name "Zopa" originally stood for "Zone of Potential Agreement," reflecting its aim
to connect borrowers and lenders for mutually beneficial loan agreements.
Answer 9: C) Operating an online lending platform connecting borrowers and individual investors
Explanation: Prosper Marketplace, Inc. operates an online lending platform connecting borrowers
seeking personal loans with individual investors.
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Answer 10: D) It has continued to evolve with advancements in technology and changing regulations.
Explanation: Lending has evolved with advancements in technology and changes in financial
regulations, leading to various innovations and changes in lending practices over time.
Answer 11: The correct answer is c) Enabling businesses to accept mobile-based payments. The
mPOS business model revolves around providing businesses with the ability to accept card payments
through smartphones or tablets, enhancing convenience and streamlining transactions.
Answer 12: The correct answer is c) Face-to-face customer service. While customer service is
important, it is not explicitly mentioned as a component of the mPOS business model in the provided
information.
Answer 13: The correct answer is c) Enhancing credit underwriting and risk assessment with AI. Zest
Finance specializes in providing AI-powered credit underwriting and risk assessment solutions to help
lenders make accurate and fair credit decisions.
Answer 14: The correct answer is c) Voice Commerce. Voice commerce is a feature of next-
generation commerce that allows customers to make purchases using voice commands through
virtual assistants and smart speakers.
Answer 15: The correct answer is d) They provide flexibility for accepting payments on the go. Mobile
POS (mPOS) systems are known for their portability and ability to process payments anywhere,
making them ideal for businesses that require mobility.
Answer 1: Digital lending, also known as online lending or e-lending, refers to the process of
providing financial services, particularly loans, through digital platforms and technology. This
approach leverages digital channels and automated processes to streamline the lending process,
making it faster, more efficient, and convenient. The key features of digital lending include online
application, automated underwriting, faster approval and disbursement, personalization of loan
terms, integration of alternative data, mobile accessibility, and collaboration with traditional lenders.
The impact of digital lending has been transformative. Borrowers can conveniently apply for loans
online, eliminating the need for physical visits to banks. Automated underwriting algorithms assess
creditworthiness and risk, expediting loan approval. Faster approval and disbursement ensure that
borrowers receive funds quickly, addressing urgent financial needs. Personalization of loan offers
tailors borrowing experiences to individual needs, while the integration of alternative data extends
credit opportunities to individuals with limited traditional credit histories.
Benefits of digital lending include speed, convenience, improved access to credit, and financial
inclusion for underserved populations. However, digital lending also comes with risks, such as data
breaches and cybersecurity issues. Borrowers should ensure they are dealing with reputable lenders
and protect their personal and financial information when engaging in online lending.
Answer 2: The history of lending dates back thousands of years, evolving alongside human civilization
and economic systems. In ancient times, merchants lent money to fund business ventures. In the
Roman Empire, moneylenders charged high-interest rates, and the Middle Ages saw the rise of
Jewish moneylenders due to Christian usury restrictions. The Renaissance brought banks, central
banks formed in the 18th and 19th centuries, and the Industrial Revolution spurred business lending.
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The 20th century witnessed the growth of consumer lending and personal loans, culminating in the
introduction of credit cards. Late 20th and 21st centuries marked the digital age, with online lending
platforms and fintech companies revolutionizing lending. Each era faced challenges, such as usury
laws, economic downturns, and lack of financial inclusivity.
Digital lending's challenge lies in data security and privacy concerns. While historical challenges were
rooted in regulatory frameworks and financial systems, digital lending navigates issues of trust and
cybersecurity, necessitating robust measures to protect borrowers and lenders in an online
environment.
Answer 3: Peer-to-peer (P2P) lending, also known as crowdlending, connects individual borrowers
directly with individual lenders through online platforms, bypassing traditional intermediaries. P2P
lending platforms provide an online marketplace where borrowers list loan requests, investors select
loans to fund, and loans are disbursed once fully funded. Borrowers then repay the loans in
instalments, and investors earn returns through borrower interest payments.
P2P lending offers advantages like potentially lower interest rates for borrowers and higher returns
for investors compared to traditional banking models. Borrowers benefit from reduced costs, while
investors diversify their portfolios. However, P2P lending comes with risks, including default rates and
lack of deposit insurance.
P2P lending enhances financial inclusivity by extending credit to underserved individuals and small
businesses that may struggle with traditional lending. Unlike traditional banks, P2P lending facilitates
direct interactions between borrowers and lenders, often resulting in more competitive interest rates
and a streamlined lending process.
Answer 4: LendingClub, Zopa, and Prosper are prominent FinTech players in the peer-to-peer lending
industry. LendingClub connects borrowers and investors through an online marketplace, assessing
creditworthiness through various data points. Once loans are funded, LendingClub facilitates
repayments to investors. Zopa, an early entrant, operates in the UK, offering personal loans while
ensuring credit evaluation and repayment. Prosper, based in San Francisco, provides a platform for
borrowers to access personal loans directly funded by individual investors.
These FinTech players have revolutionized lending by removing traditional intermediaries, reducing
costs, and improving accessibility. They employ advanced algorithms and data analytics to assess
creditworthiness, enabling more accurate risk assessment. Their success lies in leveraging technology
to streamline lending processes, promote financial inclusivity, and challenge conventional banking
models.
However, these platforms have also faced regulatory challenges and the need to maintain borrower
and investor trust. Despite challenges, their contributions to financial innovation have reshaped how
individuals access credit and invest their money, fostering a more inclusive and diversified lending
landscape.
Answer 5: mPOS stands for "Mobile Point of Sale." It refers to a portable and wireless point-of-sale
system that enables businesses to process transactions using mobile devices like smartphones or
tablets. mPOS offers several benefits to businesses, including portability for on-the-go transactions,
compatibility with various payment methods, wireless connectivity, security through encryption,
real-time inventory management, digital receipt generation, and the ability to capture customer data
for marketing purposes.
22 | P a g e
Answer 6: Customer shopping behaviour has undergone significant changes due to advancements in
technology, shifting demographics, and evolving consumer preferences. Factors such as the rise of
online shopping, increased use of mobile devices for shopping, the integration of social media in
commerce, demand for personalized experiences, a focus on sustainability and ethics, the influence
of customer reviews and recommendations, and the expectation for instant gratification have all
contributed to the transformation of customer shopping behaviour.
Answer 7: The point of sale (POS) system has evolved through various stages:
• Traditional cash registers

• Electronic cash registers
• Standalone POS systems
• Integration with barcode scanners
• Cloud-based POS systems
• Mobile POS (mPOS)
• Integrated payment solutions
• Advanced analytics and reporting
• POS and e-commerce integration
• AI and personalization
• Contactless and biometric payments
Each stage brought improvements in accuracy, efficiency, data analysis capabilities, and integration
with new technologies, ultimately enhancing the overall retail and business experience.
Answer 8: Next-generation commerce, also known as Commerce 2.0 or E-commerce 2.0, represents
the evolution of traditional e-commerce in response to technology advancements and changing
consumer behaviour. It includes aspects like personalization, omnichannel integration, mobile
commerce, voice commerce, AR and VR integration, social commerce, subscription-based models,
sustainability and ethical commerce, blockchain and cryptocurrency integration, instant and same-
day delivery, and more. Next-gen commerce focuses on enhancing customer experience, offering
convenience, and leveraging innovative technologies to shape the future of buying and selling goods
and services.
Answer 9: An unsecured loan is a type of loan that doesn't require any collateral or assets to secure
the loan amount. While this is less risky for the borrower, lenders usually charge higher interest rates
to compensate for the increased risk. Examples of unsecured loans include signature or personal
loans, credit card loans, student loans, and peer-to-peer loans. These loans are typically based on the
borrower's creditworthiness and repayment ability rather than any physical collateral.
Answer 10: FinTech has significantly transformed the credit card industry through various
innovations, such as:
• Contactless payments for quick and secure transactions

• Mobile wallets that store credit card information on smartphones
• Digital credit cards with unique virtual numbers for online security
• AI-powered fraud detection algorithms
• Personalized rewards and offers based on spending patterns.
• Credit card aggregators for comparing different offerings.
• Blockchain technology for enhanced security
• Real-time transaction notifications
23 | P a g e
• Digital onboarding for simplified application processes
These innovations enhance customer experience, security, and convenience while accelerating
innovation in the financial sector.
24 | P a g e

DITF402 - FinTech Payments and Regulations - Missing Some Units

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DITF402: FinTech Payments and Regulations Manipal University Jaipur (MUJ)

Units 1 to 8 and Unit 12 only , rest of

MASTER OF BUSINESS ADMINISTRATION

Unit 1: Over-View of FinTech 1

SL Topic Fig No / SAQ / Page No

Unit 1: Over-View of FinTech 2

Unit 1: Over-View of FinTech 3

1.1 Learning Objective:

Unit 1: Over-View of FinTech 4

2. OVER-VIEW OF FINTECH INDUSTRY

Unit 1: Over-View of FinTech 5

Unit 1: Over-View of FinTech 6

FinTech companies, which include start-ups, technology companies, and established

During the 50 years of FinTech developments, innovators have created sophisticated

Unit 1: Over-View of FinTech 7

Currently FinTech is digitalizing retail financial services through robo-advisors for

Q1. Why PayPal considered to be revolution in FinTech field?

Unit 1: Over-View of FinTech 8

4. WHY FINTECH IS IMPORTANT?

Upgraded Payment Systems

Speed and Convinence

Why FinTech is important in Business World?

Unit 1: Over-View of FinTech 9

5. WHY FINTECH BECOMES POPULAR NOW?

Unit 1: Over-View of FinTech 10

Unit 1: Over-View of FinTech 11

to-peer (P2P) lending platforms, crowdfunding, blockchain technology, distributed Ledger

Unit 1: Over-View of FinTech 12

Unit 1: Over-View of FinTech 13

8. THE FINANCIAL CRISIS, REGULATION, AND TRUST

Unit 1: Over-View of FinTech 14

9. FROM CUSTOMERS TO USERS OF FINANCIAL SERVICES

Unit 1: Over-View of FinTech 15

Unit 1: Over-View of FinTech 16

11. TERMINAL QUESTIONS

Q3. Explain how FinTech is bringing revolution in Financial services Industry?

Q4. What do you mean by peer-to-peer lending?

Q5. What do you mean by Crowdfunding?

12. ANSWERS TO SUB-DIVIDED QUESTIONS

Unit 1: Over-View of FinTech 17

Answer 4= Fintech or financial technology refers to the integration of technology into

Unit 1: Over-View of FinTech 18

13. ANSWERS TO TERMINAL QUESTIONS

Unit 1: Over-View of FinTech 19

Unit 1: Over-View of FinTech 20

Unit 1: Over-View of FinTech 21

• Digital economy: It refers to an economy that is based on digital technologies. The

Unit 1: Over-View of FinTech 22

15. CASE STUDY

Unit 1: Over-View of FinTech 23

Unit 1: Over-View of FinTech 24

16. SUGGESTED BOOKS AND REFERENCES

Unit 1: Over-View of FinTech 25

MASTER OF BUSINESS ADMINISTRATION

Unit 2: Key Areas of FinTech and Financial Apps 1

Unit 2: Key Areas of FinTech and Financial Apps 2

Unit 2: Key Areas of FinTech and Financial Apps 3

1.1 Learning Objective

Unit 2: Key Areas of FinTech and Financial Apps 4

2. WHAT IS DRIVING THE MOVEMENT TOWARD DIGITAL CURRENCY?

Unit 2: Key Areas of FinTech and Financial Apps 5

3. WHAT IS A DIGITAL CURRENCY?

Both of these are explored in more details below:

Unit 2: Key Areas of FinTech and Financial Apps 6