The Palgrave Handbook of FinTech and Blockchain

Contents
Notes on Contributors
List of Figures
List of Tables
Part I Introduction and Context
1 Introduction
2 Fintech and Its Historical Perspective
	2.1 Introduction
	2.2 Twentieth Century: ICT Emerging and Evolution
	2.3 Productivity Paradox: The ICT Investment and Its Impact on Performance Conundrum
	2.4 Advent of Twenty-First C and the Inflection Decade: Why Did Banks Lose Control?
		2.4.1 Overview
		2.4.2 The Effect of the Great Recession
		2.4.3 The Effect of Major Technological Breakthroughs
		2.4.4 The Effect of Social Changes
	2.5 The Banking and Fintech Sectors Give Their Views on the Phenomenon
		2.5.1 Overview
		2.5.2 Methodology
		2.5.3 Results
		2.5.4 Highlights of the Empirical Work
	2.6 A New Industrial Sector: A Framework to Understand Fintech
	2.7 Reaction of the Banking Sector to the Fintech Tsunami
	2.8 Discussion
	2.9 Conclusions
	References
Part II Fintech & Blockchain: International Overview
3 Financial Engineering and ICT in the Past
	3.1 Introduction and Conceptualization
		3.1.1 Financial Engineering
		3.1.2 Computation and Computational Finance
	3.2 Evolution of Financial Engineering and Computation
		3.2.1 Evolution of Financial Engineering
		3.2.2 Origin of Computation and Rise of Modern Computers
	3.3 Algorithms
		3.3.1 Analysis of Algorithms
		3.3.2 Software Implementation
	3.4 Information and Communications Technology (ICT)
		3.4.1 Rise of Modern Computers
		3.4.2 Digital Revolution
	3.5 ICT in Finance
	3.6 Conclusion
	References
4 Fintech and Blockchain: Contemporary Issues, New Paradigms, and Disruption
	4.1 Introduction
	4.2 Contemporary Issues: Optimism vs. Pessimism
		4.2.1 Financial Inclusion/Risks
		4.2.2 Scalability
		4.2.3 Lack of Consensus
	4.3 New Paradigms and Disruptive Innovations
		4.3.1 Payments
			4.3.1.1 Non-traditional Payment Schemes
			4.3.1.2 Cashless World
		4.3.2 Deposits and Lending
			4.3.2.1 P2P Lending and Alternative Adjudication
			4.3.2.2 Third-Party APIs and Virtual Technologies
		4.3.3 Market Provision
			4.3.3.1 Smart and Faster Machines
			4.3.3.2 Connecting Buyers and Sellers
		4.3.4 Investment Management
			4.3.4.1 Next Generation of Process Externalization (Robo-Advisors)
			4.3.4.2 Empowered Investors
		4.3.5 Insurance
			4.3.5.1 Connected World
			4.3.5.2 Disaggregating Forces
	4.4 Conclusion
	References
5 The Challenges and Competitiveness of Fintech Companies in Europe, UK and USA: An Overview
	5.1 Introduction
	5.2 Fintech: Creative Destruction of Traditional Banking
		5.2.1 Bank Competition and Technologies
		5.2.2 Competing Areas
	5.3 Competitive Strategies
		5.3.1 Competitive Pressures in Retail Banking
		5.3.2 New Technologies and New Type of Banks
	5.4 Competitiveness and Regulation
		5.4.1 Regulatory Sandboxes and the Impact on Competition
	5.5 Conclusions
	References
6 Fintech Unicorns
	6.1 Introduction
	6.2 Fintech as a Key Driver for Financial Services and Commerce
		6.2.1 Ascendance in Technology: Technology Penetration Has Reached Tipping Points Across Wide Range of Industries
		6.2.2 Availability of Information: Internet Penetration Is Pervasive
		6.2.3 Accessibility Through Smart Mobile Devices: Smart Mobile Devices Have Revolutionized Human Behaviour Interaction with Information and Technology
	6.3 Disruptive Innovation Behind Fintech
		6.3.1 Smartphone Technologies
		6.3.2 Cloud Computing
		6.3.3 Big Data
		6.3.4 Artificial Intelligence
		6.3.5 Blockchain
		6.3.6 Cybersecurity
	6.4 Fintech in USA and China
	6.5 IPOs of Unicorns as a Performance Indicator for Tech Startups: The Case of China17
		6.5.1 Understanding Unicorns
			6.5.1.1 Global Development of Unicorns
			6.5.1.2 Unicorn Investors
			6.5.1.3 The Existing Strategies of Unicorns
		6.5.2 Unicorns in China
			6.5.2.1 Understanding Unicorns in China Through Data
			6.5.2.2 Comparing Unicorns in China and the USA
			6.5.2.3 Fintech-Related Unicorns
	6.6 Conclusions: Future Trends and Roles for Startups, Incumbents and Regulators
		6.6.1 Fintech Is a Disruptor for Financial Services
		6.6.2 Procurement Processes Slow Fintech Adoption Within Financial Institutions
		6.6.3 Fintech’s Disruption Is Confined (Unique) to Region or Countries
		6.6.4 Regulation Creates Frictions for Financial Institution’s Fintech Adoption
		6.6.5 Regulation Creates Opportunities for Fintech Development
		6.6.6 Fintech Is an Enabler, not a Stand-Alone Business
	References
7 Fintech, Bigtech and Banks in India and Africa
	7.1 Introduction
	7.2 Definitions and Magnitudes of the Fintech Ecosystems in Africa and India in Comparison with the Global Fintech Ecosystem
	7.3 IT and M&A or How the Incumbent Position Deteriorated Respectively in India and Africa to Anticipate the New Competitive Landscape
	7.4 Big Data, Digitization and Vertical Silos as Key Success Factors of the Bigtech and Start-Ups in the Advent of the Future Financial Landscape
	7.5 The Role of the Public Sector in the New Financial Landscape
	7.6 Conclusion
	Bibliography
8 Fintech and the Real Economy: Lessons from the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) Region
	8.1 Introduction
	8.2 The MENAP SME Landscape
		8.2.1 Economic Significance of SMEs and Structure
		8.2.2 Constraints to SMEs Growth and Employment Generation
	8.3 Digitalization of MENAP SMEs—Opportunities, Trends, and Constraints
		8.3.1 Salient Issues
		8.3.2 Benefits and Risks of Digitalizing MENAP SMEs
		8.3.3 Status of MENAP SMEs Digital Transformation
		8.3.4 The Digital Ecosystem for SMEs and Constraints to Digitalization
		8.3.5 The Digital Landscape in MENAP and Supply-Side Constraints
		8.3.6 Demand-Side Constraints
	8.4 Conclusions and Policy Options
		8.4.1 An Enabling Environment for the Digitalization of SMEs in MENAP
		8.4.2 Financial Sector and Business Environment Reforms
	References
Part III Blockchain Technology and Cyber Risk
9 Alternative Data in FinTech and Business Intelligence
	9.1 Introduction
	9.2 Texts, Images, Voices, and Videos
		9.2.1 Textual Data and Analyses
		9.2.2 Images
		9.2.3 Voices and Videos
	9.3 Digital Footprints
		9.3.1 Motivation
		9.3.2 Recent Progress
		9.3.3 A Case Study of Microloan Risk Management
	9.4 Applications of IoT-Based Data
		9.4.1 IoT-Based Alternative Data
			9.4.1.1 Improved Customer Experience
			9.4.1.2 Optimized Supply Chain Operations
		9.4.2 The Advance of the IoT-Driven Retail Industry
		9.4.3 Categories of Data from IoT Ecosystem
			9.4.3.1 Geolocation-Based IoT Applications
			9.4.3.2 Case in Focus: AirSage
			9.4.3.3 Case in Focus 2: Tencent Code Solution
			9.4.3.4 Image-Based IoT Applications
			9.4.3.5 Other IoT Data Analytics
	9.5 Concluding Remarks and Future Directions
	References
10 Bitcoin and Other Blockchain Technologies: Mechanisms, Governance, and Applications
	10.1 Introduction
	10.2 How Bitcoin Works
		10.2.1 Motivation of Bitcoin and the Goal of Decentralization
		10.2.2 The Use of the Blockchain to Prevent Counterfeiting
	10.3 Governance
		10.3.1 The Consensus Protocol
		10.3.2 Mining Incentives
		10.3.3 Network Evolution and Upgrades
	10.4 Some Categories of Current Blockchain Applications
		10.4.1 Payment Systems
		10.4.2 Resource Sharing
		10.4.3 Smart Contracts
		10.4.4 Data Security
		10.4.5 Private Blockchains
		10.4.6 Further Potential
	10.5 Conclusion
	References
11 Blockchain and Structured Products
	11.1 An Introduction to Digital Structured Finance
	11.2 Treasury-Backed Digital Products
	11.3 Cryptocurrency-Backed Products
	11.4 Decentralized, Digital Lending
	11.5 Conclusion
	References
12 Categories and Functions of Crypto-Tokens
	12.1 Introduction
	12.2 Token Categories
	12.3 Economic Roles of Tokens
		12.3.1 Token Embedding
		12.3.2 Network Effects
		12.3.3 Adoption and User Base
		12.3.4 ICOs and Platform Finance
		12.3.5 Alignment of Investment and Consumption, and Crowd-Based Mechanisms
		12.3.6 Commitments to Contracts and Token Policy
		12.3.7 Valuation, Volatility, and Stablecoins
		12.3.8 Markets for Tokens and Regulatory Issues
	12.4 Looking Ahead and Future Research Directions
	References
13 Emerging Prudential Approaches to Enhance Banks’ Cyber Resilience
	13.1 Introduction
	13.2 International Regulatory Initiatives
	13.3 Emerging Approaches for the Design of Cyber Resilience Policies
	13.4 Key Regulatory Requirements Relating to Cyber Resilience
		13.4.1 Cybersecurity Strategy, Governance and Risk Management
		13.4.2 Critical Business Services
		13.4.3 Cyber Incident Response and Recovery
		13.4.4 Cyber Incident Reporting and Threat Intelligence Sharing
		13.4.5 Cybersecurity Workforce and Risk Awareness
		13.4.6 Third-Party Dependencies
	13.5 Supervisory Frameworks and Tools
		13.5.1 Controls, Monitoring and Detection
		13.5.2 Testing of Cybersecurity Capabilities
		13.5.3 Cyber Incident Response and Recovery
		13.5.4 Cybersecurity Workforce
		13.5.5 Third-Party Dependencies
		13.5.6 Cybersecurity and Resilience Metrics
		13.5.7 Cooperation and Collaboration Between Authorities
	13.6 Future Policy Considerations
	References
14 Platform Development in Blockchains, Risks, and Regulation
	14.1 Introduction
	14.2 Platform Development
		14.2.1 Permissioned Versus Permissionless
		14.2.2 Consensus Mechanism in Permissioned vs Permissionless Blockchains
	14.3 Digital Tokens, ICOs, and Platform Building
		14.3.1 Digital Tokens
		14.3.2 Platform Development in ICOs
		14.3.3 ICO Versus Airdrop
	14.4 Major Applications of Blockchains
	14.5 Potential Challenges and Risks
		14.5.1 Challenges Faced by DLT/Blockchain Technologies
		14.5.2 Systemic Risk
	14.6 Blockchain Regulation
	14.7 Conclusion
	References
15 Blockchain and Cyber Risk: Identifying Areas of Cyber Risk and a Risk-Based Approach for Executives
	15.1 Introduction
	15.2 Theory
	15.3 Methodology
	15.4 Results
		15.4.1 Confidentiality
		15.4.2 Integrity
		15.4.3 Availability
		15.4.4 Decision-Making and Risk in Firms
	15.5 Findings: The Extended Risk-Based Approach for Blockchain Deployment
	15.6 Conclusion
	References
Part IV Blockchain in Financial Services
16 FinTech and Financial Intermediation
	16.1 Introduction
	16.2 Credit, Deposit and Capital Raising Services
	16.3 Payments and Clearing and Settlement Services
	16.4 Investment Management Services
	16.5 Regulation and Financial Stability
	16.6 Conclusions
	References
17 Financial Disintermediation: The Case of Peer-to-Peer Lending
	17.1 Introduction
	17.2 The Use of Blockchain in Financial Services
		17.2.1 Blockchain Basics
		17.2.2 Current Uses of Blockchain
			17.2.2.1 Accounting Perspective
			17.2.2.2 Legal Perspective
			17.2.2.3 Financial Services Perspective
		17.2.3 Prospects of Blockchain in Financial Services
			17.2.3.1 Payments and Remittances
			17.2.3.2 Credit and Lending
			17.2.3.3 Trading and Settlement
			17.2.3.4 Compliance
			17.2.3.5 Record Management
	17.3 Peer-to-Peer Lending
		17.3.1 Basics Terms
			17.3.1.1 Peer-to-Peer Lending
			17.3.1.2 Relevant Research
			17.3.1.3 Case Study—Lending Process at the Lending Club
		17.3.2 Credit Risk Management Applied in P2P Platforms
			17.3.2.1 Basic Terms
			17.3.2.2 Classification Techniques
		17.3.3 Performance Measurement
		17.3.4 Case Study on the Use of Blockchain in P2P Lending
			17.3.4.1 Advantages of P2P Lending Blockchain Platforms
			17.3.4.2 Disadvantages of P2P Lending Blockchain Platforms
			17.3.4.3 Market Potential
	17.4 Conclusion
	References
18 Fintech and Blockchain Based Innovation: Technology Driven Business Models and Disruption
	18.1 Introduction
	18.2 New Forms of Innovation and Technology-Driven Business Models
	18.3 Stylized Facts
	18.4 Technology Advancements and Human Temptations: Reckless Securitization Morphing into Tokenomics?
	18.5 The Regulatory Landscape
	18.6 More on Disruption
		18.6.1 Extrapolating from Transport Network Companies in the Mobility Sector
		18.6.2 Short-Term Rental Application in the Accommodation and Lodging Sector
	18.7 Summing-up from Sharing Economy Models
	18.8 Concluding Findings
	References
19 Digital Currencies and Payment Systems: Chinese Way into Internationalisation of the Renminbi
	19.1 Introduction
	19.2 Digital Currencies and New Payment Systems
	19.3 Central Bank Digital Currency
	19.4 Quo Vadis China?
	References
20 Cryptocurrencies and Other Digital Asset Investments
	20.1 An Introduction of the Crypto-Economy
	20.2 An Overview of Cryptocurrency Digital Assets—Coins, Tokens, and Derivatives
		20.2.1 Bitcoin and Altcoins
		20.2.2 Stablecoins
		20.2.3 Cryptocurrencies Derivatives—Bitcoin Futures
	20.3 Cryptocurrency Versus Fiat Currency
		20.3.1 Store of Value
		20.3.2 Medium of Exchange
		20.3.3 Unit of Account
		20.3.4 If Not Money—Then What?
	20.4 Cryptocurrency as Alternative Investments
	20.5 Value of Cryptocurrency Investments
	20.6 Stylized Facts of Cryptocurrency Market Structure
	20.7 Stylized Facts of Cryptocurrency Trading Volume and Prices
		20.7.1 Are Prices Distorted by Uneconomic Trading Volumes?
	20.8 Conclusion
	References
21 How Does Digital Transformation Improve Customer Experience?
	21.1 Introduction
	21.2 Digital Transformation
		21.2.1 Digital Transformation Era Comes
		21.2.2 Digital Transformation Strategies
		21.2.3 Digital Services in Practice
	21.3 Customer Experience and Customer Satisfaction
		21.3.1 Customer Journey
		21.3.2 Customer Experience
		21.3.3 Customer Care
		21.3.4 Customer-Centricity
		21.3.5 Customer Satisfaction
	21.4 The Way Forward
	References
Part V Fintech in the New Order
22 From Disruption to Post-pandemic Scenario
	22.1 Why Coronavirus Emergency Does Matter
	22.2 A Few Directions for Policymakers and Regulators in the New Normality
	References
Index