Week 1
2-9, Q+A Session 1
Week 2, 7-9, Q+A 2, Introduction
Q1: The Financial Crisis triggered a massive boost in the development of FinTech (L2):
a) Why was this the case?
- Economic downturn caused unemployment. Many (young and) creative people from the
financial sector had to find new jobs (or create them themselves). These people used to come
up with new ideas how to make the financial sector better.
- After the crisis, banks had to deal with much stricter regulation, cost of capital increased.
* therefore lack of resources to foster innovation (one way to do so now is by technology)
- Distrust in banks.
Because of this, banks did not have the capital and manpower available to innovate
themselves.
- But this was possible through new technologies.
b) What is happening now?
- With technology, this innovation can be made easier and reduces costs.
- A lot of new FinTech Startups emerged. They may be less personal but have a lot of data
from the internet that banks don’t have.
c) What are the outlooks?
- These new technologies provide massive opportunities to save costs for banks. They can
work together.
Q2: Exponential growth of FinTech (startups) also bear risks (L2).
a) Discuss why?
- Startups are usually online oriented and temporary in nature. Their intention is to scale up
as quick as possible to sell it or integrate in another company.
- When you launch an app this could consume millions of consumers over one weekend.
b) Find some examples where this was/is/may be the case?
- Bitcoin grew into a bubble rapidly (and much faster than any other market/commodity).
- Startups grow rapidly from too small to care to too big to fail.
c) Come up with ideas what regulators can do? Identify their dilemma?
- At that threshold point you may become interesting for regulators and they might check you
as a company on certain requirements, restrictions and guidelines, aiming to maintain the
stability and integrity of the financial system.
- Checking is still totally up to regulators.
- But when a FinTech startup suddenly has grew
immensely overnight and is now ‘too big to fail’
and it has never been checked by a regulator,
nobody knows how they treat their costumers and
how risky that is.
, Q3: There were several key developments in FinTech (L2).
a) Which ones?
- Ongoing digitalization: information transmission.
- Growing internet use allowed for more scope and economies of scale.
- Growing information advantage of tech firms over other actors in the economy.
- Growing willingness of users to lend their trust to internet technology (instead of classical
physical firms).
b) What were/are the industries at risk?
- Companies that deliver information on physical media and forward information (music and
publishing industry).
- Companies that rely on customer trust or are based on knowing customer characteristics
(intermediaries) and provide services which can be substituted by an (informed) digital agent
(travel agencies, hotels, cabs).
c) What are (in your opinion) key Fintech companies to look out for and what do they do?
Q4: Crowdlending (L8).
a) What is cowdlending? How does it work?
- Also called peer-to-peer lending.
- Borrowers receive loans from multiple individual lenders, usually through an online platform
that directly matches (uses data) lenders with borrowers, bypassing banks and other
financial institutions.
- Lenders charge interest rates and usually choose who to invest in.
- Loans can be securitized but are most often not (no collateral) and are not protected by
government (there may be a secondary market for defaulted loans).
- Mainly addressed at near-prime borrowers who can’t get credit from a bank because they
are too risky.
b) What are the biggest players?
- Lending Club and Prosper are the two biggest crowdlending sites in the US/worldwide and
jointly offered about $26bn in loans.
c) Which lenders are tackled and why?
?
Week 3, 14-9, Q+A 3, Crowdlending
Q1 (L5):
1.) Assume that in a credit market there are two borrowers who want credit and one Bank
that potentially offers credit. Borrower A (BA) and Borrower B (BB) and the bank which
figures as lender (L). Both borrowers want a credit (c) of 100 to invest in a business project
(P) which yields a return (r) of 300. The probability that the project of Borrower A is
successful and yields a return is 80%. The probability that the project of Borrower A fails is
20%. The project of Borrower B is successful with a probability of 10% and fails with a
2-9, Q+A Session 1
Week 2, 7-9, Q+A 2, Introduction
Q1: The Financial Crisis triggered a massive boost in the development of FinTech (L2):
a) Why was this the case?
- Economic downturn caused unemployment. Many (young and) creative people from the
financial sector had to find new jobs (or create them themselves). These people used to come
up with new ideas how to make the financial sector better.
- After the crisis, banks had to deal with much stricter regulation, cost of capital increased.
* therefore lack of resources to foster innovation (one way to do so now is by technology)
- Distrust in banks.
Because of this, banks did not have the capital and manpower available to innovate
themselves.
- But this was possible through new technologies.
b) What is happening now?
- With technology, this innovation can be made easier and reduces costs.
- A lot of new FinTech Startups emerged. They may be less personal but have a lot of data
from the internet that banks don’t have.
c) What are the outlooks?
- These new technologies provide massive opportunities to save costs for banks. They can
work together.
Q2: Exponential growth of FinTech (startups) also bear risks (L2).
a) Discuss why?
- Startups are usually online oriented and temporary in nature. Their intention is to scale up
as quick as possible to sell it or integrate in another company.
- When you launch an app this could consume millions of consumers over one weekend.
b) Find some examples where this was/is/may be the case?
- Bitcoin grew into a bubble rapidly (and much faster than any other market/commodity).
- Startups grow rapidly from too small to care to too big to fail.
c) Come up with ideas what regulators can do? Identify their dilemma?
- At that threshold point you may become interesting for regulators and they might check you
as a company on certain requirements, restrictions and guidelines, aiming to maintain the
stability and integrity of the financial system.
- Checking is still totally up to regulators.
- But when a FinTech startup suddenly has grew
immensely overnight and is now ‘too big to fail’
and it has never been checked by a regulator,
nobody knows how they treat their costumers and
how risky that is.
, Q3: There were several key developments in FinTech (L2).
a) Which ones?
- Ongoing digitalization: information transmission.
- Growing internet use allowed for more scope and economies of scale.
- Growing information advantage of tech firms over other actors in the economy.
- Growing willingness of users to lend their trust to internet technology (instead of classical
physical firms).
b) What were/are the industries at risk?
- Companies that deliver information on physical media and forward information (music and
publishing industry).
- Companies that rely on customer trust or are based on knowing customer characteristics
(intermediaries) and provide services which can be substituted by an (informed) digital agent
(travel agencies, hotels, cabs).
c) What are (in your opinion) key Fintech companies to look out for and what do they do?
Q4: Crowdlending (L8).
a) What is cowdlending? How does it work?
- Also called peer-to-peer lending.
- Borrowers receive loans from multiple individual lenders, usually through an online platform
that directly matches (uses data) lenders with borrowers, bypassing banks and other
financial institutions.
- Lenders charge interest rates and usually choose who to invest in.
- Loans can be securitized but are most often not (no collateral) and are not protected by
government (there may be a secondary market for defaulted loans).
- Mainly addressed at near-prime borrowers who can’t get credit from a bank because they
are too risky.
b) What are the biggest players?
- Lending Club and Prosper are the two biggest crowdlending sites in the US/worldwide and
jointly offered about $26bn in loans.
c) Which lenders are tackled and why?
?
Week 3, 14-9, Q+A 3, Crowdlending
Q1 (L5):
1.) Assume that in a credit market there are two borrowers who want credit and one Bank
that potentially offers credit. Borrower A (BA) and Borrower B (BB) and the bank which
figures as lender (L). Both borrowers want a credit (c) of 100 to invest in a business project
(P) which yields a return (r) of 300. The probability that the project of Borrower A is
successful and yields a return is 80%. The probability that the project of Borrower A fails is
20%. The project of Borrower B is successful with a probability of 10% and fails with a
