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3 Fintech > Crowdfunding, Open APIs and Payments > Flashcards

Crowdfunding, Open APIs and Payments Flashcards

(60 cards)

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1
Q

What is crowdfunding?

A

A form of crowdsourcing and alternative finance where individuals/organizations invest or donate to projects for profit or rewards.

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2
Q

How significant is crowdfunding globally?

A

Raised $34 billion in 2015; surpassed venture capital in 2016 (World Bank).

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3
Q

Why is crowdfunding considered disruptive?

A

Challenges traditional finance by offering cheaper, quicker capital-raising, bypassing brokers/advisors.

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4
Q

Who can participate in crowdfunding?

A

Anyone can invest via online registration, KYC, and fund transfer, with no broker fees.

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5
Q

What is an example of successful crowdfunding?

A

Star Citizen raised $2 million via Kickstarter, reaching $250 million by 2019.

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6
Q

What is an early example of crowdfunding?

A

1700s writers/musicians gathered investor funds to publish work.

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7
Q

What was GiveForward, and when was it launched?

A

Early crowdfunding platform launched in 2008 to help Hurricane Katrina-affected families.

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8
Q

What are Kickstarter’s achievements as of 2019?

A

Raised $4 billion from 16.3 million backers, funding 335,000 projects.

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9
Q

How does Kickstarter’s model work?

A

Sponsorship-based; backers receive rewards for pledges, rooted in arts patronage subscription models.

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10
Q

What are the two main types of crowdfunding?

A

Sponsorship-based (e.g., Kickstarter) and investment-based (equity/debt).

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11
Q

What is investment-based crowdfunding?

A

Involves equity or debt, regulated in certain countries (e.g., by UK’s FCA).

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12
Q

How do payment service providers function in crowdfunding?

A

Collect payments, release funds if campaigns succeed, refund backers if targets fail, charging up to 5% fees.

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13
Q

What additional fees do crowdfunding portals charge?

A

Up to 4% in fees, on top of payment service provider fees.

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14
Q

What do crowdfunding portal integrators provide?

A

Middleware for portal design, payment processing, bank integration, and support.

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15
Q

What are the limitations of open source crowdfunding platforms?

A

Functionality/features may not fully match requirements, needing customization (e.g., WordPress-based platforms).

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16
Q

How does crowdfunding benefit businesses beyond funding?

A

Connects with customers, builds loyalty, and sidesteps complex financial aid processes.

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17
Q

What is Electronic Funds Transfer (EFT)?

A

Electronic money transfer between bank accounts via computer systems, without bank staff intervention.

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18
Q

When was EFT technology introduced, and what limited its adoption?

A

Available in the 1970s; US legislation passed in 1978, but big banks restricted access.

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19
Q

What is open banking?

A

Fintech practice using open APIs for third-party apps, enhancing financial transparency with open/private data and open source tech.

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20
Q

Why was open banking initially resisted?

A

Major banks opposed third-party access to their data infrastructure.

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21
Q

How does open banking relate to open innovation?

A

A subspecies, linked to shifts in data ownership attitudes (e.g., GDPR, open data movement).

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22
Q

What is the EU’s PSD2?

A

Revised Payment Services Directive (2015) promoting innovative online/mobile payments via open banking.

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23
Q

What did the UK’s CMA require in 2016?

A

Nine biggest UK banks must allow licensed startups access to transaction-level data.

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24
Q

Who administers PSD2 in the UK?

A

Open Banking Limited, a nonprofit created for the task.

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25
How does PSD2 affect traditional banks?
Challenges revenue streams, competitive edge, and requires adaptation to fintech innovations.
26
What benefits does PSD2 offer European consumers?
Competitive, innovative, secure payment services; direct vendor payments without intermediaries.
27
What security measures does PSD2 mandate?
Stronger identity checks for online payments, especially high-value transactions.
28
What is the status of PSD3?
In preparation to further modernize the payment ecosystem.
29
Why is PSD2 challenging for bank IT teams?
Legacy systems (e.g., mainframes) weren’t designed for API access, making integration costly/risky.
30
What is the Open Bank Project?
Open source RESTful API platform supporting open banking, PSD2, and XS2A with 200 APIs and 10,000+ developers.
31
What are payments in personal finance?
Money transfers to fulfill obligations, often to creditors for loans (e.g., credit cards, mortgages).
32
What is the scale of payment transactions?
Hundreds of billions of transactions, totaling trillions of dollars annually.
33
When did mobile payments begin?
1997, with Coca-Cola’s vending machines accepting payments via text messages.
34
What are cashless payments?
Electronic money transfers without physical cash (e.g., bank transfers, card payments, e-wallets).
35
When did cashless payments surpass cash globally?
In 2015, non-cash payments exceeded cash payments in volume.
36
What are the main types of cashless payments?
Bank transfers, credit card payments, mobile payments, e-wallets, cryptocurrencies.
37
What are the benefits of cashless payments?
No physical transport, quick, global, large transactions, automated processing, unrestricted by hours.
38
Why is the card payments ecosystem complex?
Involves multiple players (card networks, issuers, acquirers, processors, ISOs, gateways) due to jurisdiction, regulatory, and legal issues.
39
What is the role of card networks like Visa and Mastercard?
Facilitate transactions among consumers, merchants, processors, and banks, charging fees based on transaction volume.
40
How does Mastercard make money?
Charges 0.13% of total transaction volume, sets/pays fees to other players, profiting from billions of transactions.
41
What do card issuers do in the payment ecosystem?
Financial institutions (e.g., BOV) issue payment cards, pay merchant banks, and receive interchange fees.
42
Why do interchange fees vary?
Set by card networks, based on card type, transaction type, merchant type, and risk level.
43
What are merchant acquirers?
Financial institutions enabling merchants to accept payments, working directly with them.
44
What is the role of processors in card payments?
Verify transactions, ensure fund availability, perform anti-fraud measures, and settle funds.
45
What are Independent Sales Organizations (ISOs)?
Intermediaries reselling processor services, ensuring secure data transfer, and servicing merchant accounts.
46
How do ISOs make money?
Earn the remainder of merchant discounts after card issuers, networks, and acquirers, based on contract terms.
47
How does the bank transfers ecosystem work?
Funds move via intermediary banks, each taking fees, with potential Forex/exchange rate losses.
48
What is SWIFT?
A cooperative society for secure, standardized bank messaging, not a financial institution or payment system.
49
What types of messages does SWIFT handle?
Over 200, including credit/debit instructions, buy/sell orders, documentary credits, and interbank transfers.
50
Why has SWIFT been criticized?
Accused of monopolistic practices since its founding in 1973 by 239 banks.
51
How do fintech disruptors reduce middlemen in payments?
Use automation, portals, and mobile apps; cryptocurrencies like Bitcoin simplify value chains.
52
How does blockchain simplify global payments?
Eliminates third-party fees, verifies identities, and automates currency conversion via smart contracts.
53
What is Revolut, and when was it founded?
UK-based disruptor bank, founded in 2015, offering innovative mobile banking products.
54
What features does Revolut offer?
Account opening in 60 seconds, transfers in 23 currencies, fee-free spending in 120 currencies, real-time budgeting, card freezing, insurance, and 24/7 support.
55
How has Revolut grown since its launch?
Achieved unicorn status by 2018 ($1 billion+ valuation), gained European Banking License in 2018.
56
How fast are non-cash transactions growing?
Grew 10.1% (2015-2016) to 482.6 billion; projected 12.7% CAGR globally (2016-2021), 21.6% in emerging markets.
57
Why are ATMs declining in the UK?
3,600 removed annually; fintech and mobile payments reduce cash reliance.
58
How are card and cash payment trends changing?
Card payments rose from 14.3 billion (2016) to 21.9 billion (2026); cash payments expected to drop 43% to 8.7 billion.
59
Why is China leading in mobile payments?
$9 trillion in 2016 (vs. $112 billion in US), driven by WeChat/Alipay, less developed banking, and user-friendly QR code platforms.
60
Why is fintech disrupting the payments industry?
Greedy middlemen, large market, slow incumbents, low overheads, open APIs, and enabling cloud technologies.

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