Financial Technology & Innovations Flashcards

Which consensus mechanism does Ethereum use after 'The Merge' in 2022?

Answer: Proof of Stake

Ethereum transitioned from Proof of Work to Proof of Stake in September 2022, reducing energy consumption by ~99.95%.

In the context of open banking, what does PSD2 regulate?

Answer: Third-party access to bank account data via APIs

PSD2 (Payment Services Directive 2) is a European regulation requiring banks to open their payment infrastructure and customer data to licensed third parties via APIs.

What is the primary function of a payment gateway in e-commerce?

Answer: Securely transmitting transaction data between merchant and bank

A payment gateway encrypts and securely transmits transaction data from the merchant's website to the acquiring bank and card networks.

Which technology underpins most modern robo-advisor platforms for portfolio management?

Answer: Modern Portfolio Theory combined with algorithmic rebalancing

Robo-advisors typically apply Modern Portfolio Theory (MPT) with rule-based or ML-enhanced algorithms to construct and automatically rebalance diversified portfolios.

What does 'tokenization of assets' mean in fintech?

Answer: Representing ownership of real-world assets as digital tokens on a blockchain

Asset tokenization involves creating digital representations of real-world assets (real estate, art, bonds) on a blockchain, enabling fractional ownership and easier transfer.

Which metric best measures how quickly a digital lending platform can approve a loan application?

Answer: Time-to-Decision (TTD)

Time-to-Decision (TTD) measures the elapsed time from application submission to approval or denial, a key competitive differentiator for digital lenders.

What is 'RegTech' primarily designed to help financial institutions do?

Answer: Automate compliance and regulatory reporting processes

RegTech (Regulatory Technology) uses software to help financial institutions efficiently comply with regulations, automate reporting, and manage risk.