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Über dieses Buch

Financial services technology and its effect on the field of finance and banking has been of major importance within the last few years. The spread of these so-called disruptive technologies, including Blockchain, has radically changed financial markets and transformed the operation of the industry as a whole. This is the first multidisciplinary handbook of FinTech and Blockchain covering finance, economics, and legal aspects globally. With comprehensive coverage of the current landscape of financial technology alongside a forward-looking approach, the chapters are devoted to the spread of structured finance, ICT, distributed ledger technology (DLT), cybersecurity, data protection, artificial intelligence, and cryptocurrencies. Given an unprecedented 2020, the contributions also address the consequences of the current emergency, and the pandemic stroke, which is revolutionizing social and economic paradigms and heavily affecting Fintech, Blockchain, and the banking sector as well, and would be of particular interest to finance academics and researchers alongside banking and financial services professionals.



Introduction and Context


Chapter 1. Introduction

We decided to propose to the publisher of this handbook on Fintech and Blockchain about a couple of years ago. The reason we had moved in this direction was the rapid development of new technologies applied to finance and financial intermediation, combined with the Blockchain spread in almost every field of economy and society.
Maurizio Pompella, Roman Matousek

Chapter 2. Fintech and Its Historical Perspective

This chapter gives an overview of how the financial services sector, especially banking, was a driver for ICT development in the last quarter of the twentieth century, and early years of this century. But three complex external phenomena on the technological, social and financial fronts happened nearly simultaneously in the second half of the last decade that led banks to ‘get their eyes off the ball’ and opened the window for a whole new industrial sector to emerge, Fintech. The effects of these three external forces were magnified by the transition from an industrial economy for which the banks were well equipped, to the knowledge economy that they were slow to interpret. Finally, the reader is presented with a framework to understand the industrial organisation of the Fintech sector and insights on how the relationship between banks and Fintech evolved from a highly antagonistic one, to one of collaboration.
Paul David Richard Griffiths

Fintech & Blockchain: International Overview

Chapter 3. Financial Engineering and ICT in the Past

In a holistic approach, the term “Financial engineering” implies integrating applied econometrics and advanced computation to devise tools, models, and strategies for addressing finance-related problems. Information and Communication Technology (Technologies) or ICT is the infrastructure and components that enable people and institutions such as businesses and governments to interact in the digital world. This chapter consists of five sections. An informative overview of the discipline, including the conceptualization of both financial engineering and computational finance, is discussed in the first section. The second section provides a synopsis of the evolution of financial engineering from the early 1700s to present-day Fintech. An overview of algorithm concepts and software implementation and their significance in financial engineering is in the third section. The fourth section delves into ICT, discussing the rise of modern computers and the digital revolution. The final subsection explores the importance of ICT in finance.
Rupesh Regmi, Zhuo Zhang

Chapter 4. Fintech and Blockchain: Contemporary Issues, New Paradigms, and Disruption

Fintech and blockchain technology development are explored in the chapter “FinTech and Blockchain: Contemporary Issues New Paradigm and Disruption.” The decentralized nature of blockchain can be beneficial, but with significant drawbacks and adaptation to existing technology. Its supremacy in innovation and technology questions Fintech’s traditional financial ways of providing financial services. Blockchain research and its broader implications are currently very much associated with the sustainability of financial technologies. Blockchain is evolving in both academia and industry as a vision of the next generation of alternative solutions to existing problems. The chapter also sets out some highlights from the last 20 years, including non-traditional payment schemes, the proliferation of open-source and free software for the public, the cashless era, the reworking of the financial services industry, emerging currencies, and the full domination of the ecosystems of smartphones and financial devices.
Rupesh Regmi, Denesh Rai, Shradha Khanal

Chapter 5. The Challenges and Competitiveness of Fintech Companies in Europe, UK and USA: An Overview

This chapter focuses on the challenges and opportunities of Fintech companies. The authors show how digitalisation is galloping to every business area and in particular in financial sector. It is further argued that the implementation of technological changes is driven by customers demand that is influenced significantly by millennium generation. The changes of the banking sector and its products are distributed across all bank’s activities: retail banking including progressively expanding mobile banking, wholesale banking and of course insurance companies and their use of blockchain.
Roman Matousek, Dong Xiang

Chapter 6. Fintech Unicorns

Fintech has emerged as a disruptor for financial services. Technology maturity in key factors including cloud computing, big -data, artificial intelligence, blockchain and smartphones have culminated in meteoric successes among fintech startups, and the emergence of fintech unicorns —privately -held startups with a valuation exceeding USD $1 billion. The successes among fintech unicorns have sent shockwaves throughout the financial services sector. We discuss the implications of this to the current and future roles of key market players including regulators, incumbent finance, technology and dedicated fintech firms, as well as new entrants. Our insights are underpinned by an analysis of initial public offerings of unicorns in China, as a performance indicator for tech startups, allowing for richer discussion on the components of a successful fintech business model.
David C. Broadstock, Louis T. W. Cheng, Jack S. C. Poon

Chapter 7. Fintech, Bigtech and Banks in India and Africa

The disruption within the financial ecosystems of India and Africa was made possible by pressure on the competitive landscape that did mobilize many financial resources (respectively in IT for Indian incumbents and in M&A for African incumbents). As such, these banks were not able to attend properly the challenge of inclusive growth. At the same period, African mobile operators such as M-PESA paved the way toward mobile payments in Kenya whereas the Indian regional entrepreneurial ecosystem in Bangalore was taking off apart from BPO. With the subprime crisis and the advent of big data and digitization, big techs and financial start-ups took the opportunity to disrupt the local financial ecosystems as incumbents were already weakened. Despite low average incomes, poor financial inclusiveness and a negative legacy, both Indian and African financial ecosystems are the most dynamic at the global scale providing some relevant insights for benchmark for their counterparts.
Tanguy Jacopin

Chapter 8. Fintech and the Real Economy: Lessons from the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) Region

Policymakers in the MENAP region have sought to achieve inclusive growth by promoting development of small and medium-sized enterprises (SMEs), using government vehicles and other initiatives. But, while the programs helped increase the number of SMEs, barriers to growth persist, including limited access to finance, unfavorable business environment, talent gaps, and weak internal managerial capacities. These barriers are manifesting in a predominance of microenterprises that have lower employment generation capacity. Partial implementation of reforms explains some of the underperformance, but frictions in the design of the SME development strategy also played an important role. Sustaining current reforms is, therefore, not sufficient to achieve inclusive growth. Digital technologies can boost SMEs’ productivity and growth and economies are becoming more digital. Thus, for SMEs to be effective engines of inclusive growth, a rethinking of the SME development strategy is needed that makes SMEs digital transformation a priority.
Inutu Lukonga

Blockchain Technology and Cyber Risk


Chapter 9. Alternative Data in FinTech and Business Intelligence

Cong, Li, and Zhang introduce recent research in economics and business-related fields utilizing data from unconventional sources or of unstructured nature. Highlighting unifying themes of such big data and the methodologies for analyzing them at scale, this chapter elaborates the applications of (i) textual analysis in corporate finance, investment, and macroeconomic forecasts, (ii) image processing in financial markets and governance, (iii) digital footprints from social media and mobile devices, and (iv) emerging data from the Internet of Things. The authors also discuss promising directions of using alternative or unstructured data for both academics and practitioners.
Lin William Cong, Beibei Li, Qingquan Tony Zhang

Chapter 10. Bitcoin and Other Blockchain Technologies: Mechanisms, Governance, and Applications

Why was Bitcoin created? How do Bitcoin and other blockchain technologies work? Bitcoin was foremost designed to be a system that operates without any single entity in control. This chapter discusses this fundamental goal of decentralization that Bitcoin intended to achieve, and describes how it was implemented via a mechanism called a blockchain. The chapter then moves on to consider Bitcoin’s three layers of governance to coordinate decision-making among a large decentralized base of users: the consensus protocol, mining incentives, and network upgrades. We end with a discussion and critique of some major categories of current applications of blockchain technologies: payment systems, resource sharing, smart contracts, data security, and private blockchains.
Shoutong Thomas Zhang

Chapter 11. Blockchain and Structured Products

Digital structured products are still in their infancy but there is a growing interest in these products in particular from investors searching for higher-yielding assets in a low-interest-rate environment. Structured digital products such as Arca U.S. Treasury Closed-End Fund or the Genesis Capital cryptocurrency-backed lending are grounded in traditional financial principles enhanced with the efficiency of the blockchain. Others are novel applications of innovative blockchain technology, such as the Ethereum smart contract in the cryptocurrency-backed Dai stablecoin.
Andria van der Merwe

Chapter 12. Categories and Functions of Crypto-Tokens

Cong and Xiao discuss emerging research on digital tokens and cryptocurrencies. They (i) provide a comprehensive categorization of crypto-tokens as observed in practice or being designed, (ii) discuss major issues concerning the economics of using tokens including platform finance, user adoption, stable coins, crowdsourcing, and agency issues, with legal and regulatory implications, and finally, (iii) suggest future directions of digital currency applications and tokenomics research.
Lin William Cong, Yizhou Xiao

Chapter 13. Emerging Prudential Approaches to Enhance Banks’ Cyber Resilience

Cyber incidents can pose a significant threat to the stability not only of the financial system but also of the global economy. Within the financial sector, banks typically have the most public-facing products and services and could be used as entry points for attacks targeting other parts of the financial system. Strengthening cyber resilience is therefore a key area of attention for banking regulators and supervisors. Regulatory expectations on cybersecurity, which can either be embedded into risk management regulations or established as separate cyber resilience regulations, focus on identification, protection, detection, response and recovery capabilities of banks. In terms of supervision, most supervisors are assessing cybersecurity as part of their ongoing risk-based supervisory activities, while others are complementing these with thematic or specialised supervisory reviews. Regulatory expectations generally inform supervisory reviews but in certain cases, such as in testing cyber resilience, supervisors use specific frameworks or tools.
Juan Carlos Crisanto, Jermy Prenio

Chapter 14. Platform Development in Blockchains, Risks, and Regulation

This chapter integrates researches on blockchain platform building, specifically issues related to platform development, the funding of blockchains through ICOs, blockchain associated risks, and the related regulation. We start by providing a general picture of a choice of permissioned vs permissionless platform by a developer. Next we examine the role of ICOs (initial coin offering) in the financing and development of blockchain platforms. We further discuss the various risks posed by this new technology in light of the surge in blockchain applications and conduct a survey on the major regulation toward the blockchain technology/industry at the current stage.
Zenu Sharma, Yun Zhu

Chapter 15. Blockchain and Cyber Risk: Identifying Areas of Cyber Risk and a Risk-Based Approach for Executives

Emerging Technologies such as blockchain, continue to transform businesses. Blockchain, or distributed ledger, continues to be deployed in the healthcare, energy, manufacturing, and financial services sectors. Given the disruptive nature of this technology, there is a strong business need to understand the cyber risk associated with blockchain. With this in mind, this investigation posed the following research questions: What are the risks associated with blockchain? How can these risks be evaluated and integrated into corporate decision-making? Multiple quantitative and qualitative methods were used to analyze the data and to identify trends. This analysis identified cyber risk, in the context of blockchain, using the simple and generally accepted definition of cybersecurity as confidentiality, integrity, and availability (CIA). Based on the results, a cyber-physical risk-based approach is presented which equips executives as they develop their thinking around enterprise cyber risk, particularly with emerging technologies such as blockchain.
Charla Griffy-Brown, Mark W. S. Chun, Howard A. Miller, Demetrios Lazarikos

Blockchain in Financial Services


Chapter 16. FinTech and Financial Intermediation

The emergence of FinTech has come under the spotlight over the past decade, attracting the interest of policymakers and regulators surrounding the financial services arena, and even of the general population. At the early stages of this development, a variety of anecdotal sources referred to this FinTech “revolution” as the disrupting factor of financial intermediaries. This chapter provides a discussion of how the three main product sectors of FinTech are so far seen interacting—or potentially disrupting in the near future—key segments of financial intermediaries, as well as an overview of FinTech regulation and financial stability aspects.
Panagiota Papadimitri, Menelaos Tasiou, Minas-Polyvios Tsagkarakis, Fotios Pasiouras

Chapter 17. Financial Disintermediation: The Case of Peer-to-Peer Lending

This chapter covers the potential uses of blockchain from accounting, legal, and financial perspectives, provides a brief review of smart contracts and includes a high-level summary of classifiers and risk scoring methodologies. We have used the example of disintermediation in peer-to-peer (P2P) online lending as a case study. We identify three main areas in which blockchain as a service can provide advantages: blockchain-based creditworthiness assessments, blockchain and real-time accounting, and historical data-keeping. Finally, we estimate that the funding of P2P platforms will increase from a recent USD 100 billion to USD 150 billion by 2025 (of which we forecast a 10% market share of P2P blockchain-based platforms or USD 15 billion in absolute terms).
Petr Teplý, Yael Roshwalb, Michal Polena

Chapter 18. Fintech and Blockchain Based Innovation: Technology Driven Business Models and Disruption

Information technology is constantly redefining business models. In banking and finance, blockchain and fintech are advancing service provision and users’ engagement, leading some media to coin the expression “Uberization of banking”. This chapter (Part 1 of two) extrapolates from sharing economy models to conclude that, notwithstanding inherent innovative features, blockchain and fintech are not destined to disrupt finance and banking. Through analogy and successive approximations, the authors identify the limitations of the arguments for disruption. Moreover, starting from stylized facts, the authors raise concerns on potential threats arising from financial innovations such as Tokenomics, referred to as “Naught-Backed Securities”. The Handbook concluding Chapter 22 (Part 2 of two) puts forward options for regulators triggered by COVID-19, bringing to the conclusion that the pandemic is an unprecedented opportunity to redefining boundaries and refocusing the priority on innovation for transparency.
Maurizio Pompella, Lorenzo Costantino

Chapter 19. Digital Currencies and Payment Systems: Chinese Way into Internationalisation of the Renminbi

Banking industry with its traditional payment technology based on a centralised clearing institutions started to face a huge and unequal competition. New payment platforms, new providers, and new payment tools allow to omit more expensive but safer banking system. Additionally, a distributed ledger technology (DLT) where payment is done through shared decentralised anonymous peer-to-peer network could cause a huge increase in unauthorised and uncontrolled cash flows. China is gradually increasing its international meaning in international payment system. Its consistent policy—according to the Confucian idea of work established for decades not years—tends to look at that country from a broader perspective. The purpose of this chapter is to show how new payment options and new forms of money that allow China a gradual but systematic internationalisation of the renminbi and strengthening its role as an international medium of exchange outside a traditional banking system.
Ewa Dziwok

Chapter 20. Cryptocurrencies and Other Digital Asset Investments

The current generation of cryptocurrencies provides a medium of exchange and trading in the crypto-economy. Cryptocurrency shares the scarcity of non-renewable commodities—in the case of cryptocurrency the limited supply is rather artificial because scarcity is embedded in the protocol design. Cryptocurrency may add diversity to an investment portfolio because of its low correlation with more traditional assets but a potential investor should recognize the risks typically associated such as the high price volatility and the unique market structure. Billions of dollars invested in the crypto-economy are tied up in what is essentially a digitally stored, random number. While an understanding of the value behind cryptocurrencies is in its infancy, the possibility of a positive return could be sufficient to be included in an investment strategy.
Andria van der Merwe

Chapter 21. How Does Digital Transformation Improve Customer Experience?

This chapter explains how disruptive innovation drives digital transformation. The Agile development delivers a minimum viable product (MVP) with a higher chance of success. The recent research concludes that good end-to-end customer journeys generate business results better than touchpoints. Customer journey mapping is the center of all consumer-focused organizations and can transform business by multi-layer studying on the existing process and soliciting constructive insights and suggestions from stakeholders. The executives always learn lessons from customer journey map exercise. Gartner CX Customer Experience Pyramid proves customer experience driving loyalty, and therefore Spencer recommends focusing on fine-tuning digital services to improve customer care, customer experience, and customer-centricity to achieve better customer satisfaction. Top executives can apply know-how to improve customer satisfaction through digital transformation.
Spencer Li

Fintech in the New Order


Chapter 22. From Disruption to Post-pandemic Scenario

Following the previous Chapter 18, this concluding this chapter (Part 2 of two) puts forward options for regulators triggered by COVID-19, bringing to the conclusion that the pandemic is an unprecedented opportunity to redefining boundaries and refocusing the priority on innovation for transparency.
Maurizio Pompella, Lorenzo Costantino


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