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Banking Law > Set 3: FinTech/Credit > Flashcards

Set 3: FinTech/Credit Flashcards

(50 cards)

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1
Q

What is FinTech?

A

The use of technology to innovate and improve financial services, often disrupting traditional banking.

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2
Q

What is FinTech Credit?

A

Technology-driven credit services outside traditional banks, including P2P lending and crowdfunding.

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3
Q

What is the main benefit of FinTech Credit?

A

Broader financial inclusion and efficiency through disintermediation.

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4
Q

What is peer-to-peer (P2P) lending?

A

Direct loans between individuals via a platform that facilitates but does not fund the loan.

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5
Q

What is equity crowdfunding?

A

Raising capital by selling equity to a large number of investors via online platforms.

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6
Q

What is disintermediation in FinTech?

A

Removing traditional intermediaries (like banks) from the financial transaction process.

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7
Q

What does ‘regulatory sandbox’ mean?

A

A supervised space where FinTechs can test products with relaxed regulatory requirements.

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8
Q

What is RegTech?

A

Technology used to enhance compliance with regulatory requirements, e.g., automated KYC.

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9
Q

What is Distributed Ledger Technology (DLT)?

A

A decentralised digital record system, including blockchain, used in FinTech and crypto.

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10
Q

How does FinTech differ from traditional finance?

A

It prioritises speed, automation, and user experience over legacy systems and in-person banking.

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11
Q

What is the key UK statute regulating FinTech activities?

A

The Financial Services and Markets Act 2000 (FSMA).

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12
Q

What does Part 4A of FSMA cover?

A

Authorisation to conduct regulated financial activities.

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13
Q

What does Part 5 of FSMA require?

A

Transparency, disclosure, and fair conduct by authorised firms.

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14
Q

What is the role of the FCA in FinTech regulation?

A

It authorises, supervises, and enforces compliance for FinTech firms under FSMA.

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15
Q

What does GDPR Article 5 require of FinTechs?

A

Lawful, fair, and transparent processing of personal data.

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16
Q

What is required under GDPR Article 25?

A

Data protection must be embedded ‘by design and by default.’

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17
Q

What are the key duties under the Payment Services Regulations 2017?

A

Authorisation, user rights, transparency, and fraud prevention for payment platforms.

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18
Q

What do the Electronic Money Regulations 2011 govern?

A

The issuance and redemption of e-money by firms like digital wallet providers.

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19
Q

What are P2P platforms required to do under 2014 regulations?

A

Conduct borrower due diligence and disclose risk to lenders.

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20
Q

What EU regulation harmonises crowdfunding rules (pre-Brexit)?

A

Regulation 2020/1503—introducing cross-border passporting and governance rules.

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21
Q

What was the issue in FCA v Crowdcube (2021)?

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A

Promoting high-risk investments without proper FCA authorisation.

22
Q

What did the court decide in FCA v Crowdcube?

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A

It was a breach of FSMA—FinTechs must comply with the same standards as traditional firms.

23
Q

What was at issue in Haven Insurance v FCA (2019)?

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A

A data breach due to poor cybersecurity practices.

24
Q

What was the outcome in Haven Insurance?

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A

FCA’s fine was upheld—cybersecurity is a regulatory priority.

25
What happened in Re UK Bond Network (2019)?
A platform breached disclosure duties to investors under FSMA.
26
What principle came from UK Bond Network?
Platforms must provide clear risk information to investors.
27
What was the issue in FCA v Funding Circle (2017)?
Lax creditworthiness assessments of borrowers.
28
What did the court require in FCA v Funding Circle?
Improved borrower vetting and due diligence.
29
What do these cases highlight about FinTech regulation?
The need for robust standards in marketing, data handling, and credit risk.
30
How do courts treat FinTech breaches?
With seriousness, often equating them with traditional financial breaches.
31
What is default risk in FinTech credit?
The risk that borrowers fail to repay, especially without strong credit checks.
32
Why is consumer protection a concern in P2P lending?
There is no deposit insurance and investors bear all credit risk.
33
How does FinTech raise data privacy issues?
Heavy use of personal and financial data increases GDPR compliance burdens.
34
What is regulatory arbitrage in FinTech?
Exploiting gaps between traditional and digital finance regulation.
35
What is operational resilience risk?
Many platforms lack infrastructure to handle shocks (e.g. COVID-19).
36
What challenge does rapid growth pose?
It may outpace regulators’ ability to supervise effectively.
37
What is the role of AML/KYC in FinTech?
Platforms must identify and monitor users to prevent money laundering.
38
What is a limitation of regulatory sandboxes?
They may limit scalability and lead to inconsistent oversight.
39
Why are credit ratings hard to assess on FinTech platforms?
Many lack historical performance data or standardised assessment metrics.
40
How does platform collapse affect investors?
They may lose money due to weak client fund protections and lack of compensation schemes.
41
What does Cranston say about FinTech regulation?
Existing laws are outdated and may not effectively govern new technologies.
42
What risk does Cranston highlight?
Financial instability if innovation outpaces oversight.
43
What is Amao’s critique of crypto exchanges?
They lack transparency and expose users to fraud and theft.
44
What does Amao suggest for FinTech credit?
Enforceable conduct standards to better protect investors.
45
What academic concern exists about investor risk?
Inexperienced investors may be misled by marketing claims.
46
What do academics say about inclusion vs protection?
FinTech improves access but increases the risk of consumer exploitation.
47
How has COVID-19 influenced FinTech?
It exposed vulnerabilities in platforms and led to increased defaults and scrutiny.
48
What is a growing trend among platforms?
Re-intermediation—some FinTechs are becoming licensed banks.
49
What’s a promising hybrid model?
Partnerships between FinTechs and traditional banks (e.g., Santander + Kabbage).
50
What is the academic consensus?
Innovation is valuable, but systemic stability and investor safeguards must keep pace.

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