CFP Financial Technology & Innovations 2 — Questions and Answers
Question 1: Which consensus mechanism does Ethereum use after 'The Merge' in 2022?
- Proof of Work
- Proof of Stake (Correct answer)
- Delegated Proof of Stake
- Proof of Authority
Correct answer: Proof of Stake
Ethereum transitioned from Proof of Work to Proof of Stake in September 2022, reducing energy consumption by ~99.95%.
Question 2: In the context of open banking, what does PSD2 regulate?
- Cryptocurrency exchanges
- Third-party access to bank account data via APIs (Correct answer)
- Central bank digital currencies
- Cross-border wire transfer fees
Correct 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.
Question 3: What is the primary function of a payment gateway in e-commerce?
- Issuing credit cards to consumers
- Securely transmitting transaction data between merchant and bank (Correct answer)
- Underwriting consumer loans
- Setting interchange fees
Correct 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.
Question 4: Which technology underpins most modern robo-advisor platforms for portfolio management?
- Quantum computing
- Modern Portfolio Theory combined with algorithmic rebalancing (Correct answer)
- Blockchain smart contracts
- Neural language models exclusively
Correct 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.
Question 5: What does 'tokenization of assets' mean in fintech?
- Converting fiat currency into cryptocurrency
- Representing ownership of real-world assets as digital tokens on a blockchain (Correct answer)
- Replacing card numbers with random tokens for security
- Issuing loyalty reward points digitally
Correct 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.
Question 6: Which metric best measures how quickly a digital lending platform can approve a loan application?
- Net Interest Margin
- Time-to-Decision (TTD) (Correct answer)
- Loan-to-Value Ratio
- Debt Service Coverage Ratio
Correct 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.
Question 7: What is 'RegTech' primarily designed to help financial institutions do?
- Develop new consumer-facing mobile apps
- Automate compliance and regulatory reporting processes (Correct answer)
- Mine cryptocurrency at scale
- Replace human financial advisors
Correct 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.
CFP Financial Technology & Innovations 2
Which consensus mechanism does Ethereum use after 'The Merge' in 2022?