Foreword: Financial technology (Fintech) has gradually penetrated into people's daily lives in recent years, and with the added fuel of the epidemic, it has also led to the booming development of Fintech applications, such as paying for meals out to restaurants through electronic payments, or conducting financial transactions through pure online banking. Shopping on e-commerce platforms, etc., includes various emerging applications of financial technology.
What is Fintech?
Fintech is the application of technology to financial services to innovate, hence the term "Financial Technology". With the rapid development of technology, financial technology has changed the operations and strategies of the global financial industry in recent years. Financial technology has also begun to affect many fields, including payment, lending, investment management, insurance, and cryptocurrency.
What is the core technology of Fintech?
The core foundation of Fintech is based on the rapid changes in science and technology. The Central Bank has also mentioned that technologies including big data, artificial intelligence, and blockchain can improve the efficiency of financial institutions. The rapid development of these technologies has also Promote the digitization and automation of financial services.
Blockchain technology: Blockchain technology provides a decentralized trading platform and ensures the transparency and non-tamperability of related transactions. These features are especially important in cryptocurrency transactions and smart contracts.
Further reading:
What is blockchain? Blockchain Lazy Pack helps you understand the advantages and features of blockchain in a simple way
Artificial intelligence (AI) and machine learning: AI technology is widely used in risk assessment, fraud detection and customer service. Machine learning can analyze large amounts of data, predict market trends and provide customized financial service recommendations.
Big data analysis: Financial institutions can find valuable information from huge data, thereby optimizing the decision-making process and improving service quality. For example, by analyzing consumer behavior data, banks can design financial products that better meet needs.
However, as technology continues to evolve, more developing technologies are beginning to have the potential to be integrated with financial services. Forbes, a well-known business and financial news website, mentioned that including Internet of Things (IoT) technology, augmented reality (AR) and virtual reality (VR) technology, smart contracts (Smart Contracts) based on blockchain technology, and Various machine process automation programs, etc., all have the opportunity to become a member of Fintech.
How will Fintech impact my life?
The development of financial technology has subverted the traditional financial industry and has actually had a profound impact on personal lives.
First, changes in payment methods are a notable example. With the popularity of digital payments, more and more people are adopting contactless payment methods.
According to Finextra, a website focusing on financial technology, more and more consumers prefer to use credit cards or digital payment tools such as Apple Pay and Google Pay, which not only improves the convenience of payment, but also reduces the need for cash transactions and biometrics. The application of identification technologies such as fingerprint and facial recognition has significantly improved the security of financial transactions, thereby reducing the risk of fraud.
Secondly, fintech platforms also make borrowing and investing more convenient. A report from the financial technology media platform Fintechmagazine pointed out that services such as "Buy Now Pay Later" (BNPL) provide a new payment method that allows consumers to enjoy the convenience of installment payment without using a credit card. This service It is favored by more and more people because of its convenience.
In addition, financial technology can also provide individuals with more customized financial services through technological connections such as APIs. BGC pointed out in the global financial technology report that the open banking model integrates more consumer behavior data through APIs, allowing financial institutions to provide more personalized services and establish more accurate risk assessment models, further improving financial services. Efficiency and accuracy of service.
Fintech applications and practical cases
Fintech has been applied in personal life, including payment, lending, investment, insurance and other fields. Crypto City has compiled relevant Fintech practical application cases below.
Digital payment:For people, there are two types of digital payments in daily life. One is mobile payment, such as Apple Pay, Google Pay, etc., which uses mobile devices to bind credit cards for contactless payments.
The other type is electronic payment, such as street payment, full payment, all-in-one card, etc., which can be used as a collection and payment agent and has a stored value transfer function. Through digital payment, even if you don’t bring a wallet, credit card, etc., you can still smooth physical and online payments. Go shopping.Embedded Finance: Integrate financial services into non-financial fields, making the overall consumption process more convenient. Well-known applications include shopping websites embedding "buy now, pay later" (BNPL) services. Taiwan's BNPL platform is like AFTEE, and there are also e-commerce companies like momo that have launched "Big Brother Pays Your Installment" and so on. BNPL is very popular among young consumers around the world because it can have an installment-like effect without using a credit card when making personal purchases.
Artificial intelligence applications: Technology information website TechRepublic explains that artificial intelligence and machine learning are widely used in financial technology, such as credit risk assessment, fraud risk assessment such as transaction anomalies, etc., or financial forecasting, etc.
Blockchain and Cryptocurrency: Blockchain technology is not only used in cryptocurrency, but can also be used in applications such as supply chain management, identity verification, and smart contracts. For example, Ethereum's smart contracts allow users to conduct automated transactions and execute agreement content without the need for a middleman. Click here to read more about (Ethereum) and (smart contracts).
Open banking and providing customized services: BGC mentioned in the global financial technology report that open banking allows third-party service providers to use APIs to collect data from social media, news and other sources to understand users’ banking data. Create highly accurate risk assessments for credit review, credit scoring, insurance underwriting, etc. Taiwan's open banking is managed by "Financial Information Co., Ltd." and provides "open API services."
Fintech regulatory issues
The rapid development of financial technology has brought many opportunities and innovations. However, because regulations in the real world are usually difficult to keep up with the speed of technological changes, and if supervision is insufficient, it is likely to bring risks to users. Therefore, many countries There are discussions on whether to strengthen supervision of cryptocurrencies.
Finextra mentioned that as financial technology applications become more developed and more and more personal data is stored and transmitted online, more attention must be paid to information security risks. If hackers attack, it may lead to the leakage of personal data and corporate financial problems. and risks such as loss of goodwill.
In addition, financial technology application platforms such as cryptocurrency exchanges or digital payment platforms can easily become the venue for money laundering and illegal financial activities. Therefore, financial regulatory agencies in various countries will also require financial technology companies to comply with the prevention of money laundering and combating the financing of terrorism. doctrine and other regulations, and at the same time carry out relevant identity verification for users.
In addition, BNPL is very popular among young people, but special reminder is that if BNPL users still fail to pay as scheduled after the end of the installment period, they may have to pay high late fees.
The Taiwan Financial Supervisory Commission also believes that the BNPL business is similar to the credit loan installment business. It reminds the public that BNPL is essentially a loan. In addition to interest, there may also be liquidated damages and delay interest. It is recommended that the public first understand the fee calculation method and evaluate whether they can afford it. .
Will Fintech Regulation Impact the Cryptocurrency Market?
The impact of Fintech regulation on the cryptocurrency market can be said to be far-reaching and complex. This is because strengthening the supervision of Fintech can, on the one hand, increase the transparency and stability of the market and protect investors; but on the other hand, it may also restrict innovative applications in the market.
For example, the core issues in cryptocurrency regulation are market trust and transparency. Supervisory agencies around the world are working hard to formulate regulations that require cryptocurrency platforms to know their customers (KYC) and have relevant prevention and control measures to prevent cryptocurrency from becoming a tool for money laundering, financing of terrorism and other illegal activities.
Next, the legal issues of cryptocurrency are gradually coming to the surface. It is worth noting that the U.S. Securities and Exchange Commission (SEC) successively sued the cryptocurrency exchanges Binance and Coinbase in mid-2023, believing that the exchanges violated securities laws, and also filed legal proceedings against some cryptocurrency projects. Such moves have also triggered a lot of speculation in the market. Although they may protect investors, they may also limit the development of the cryptocurrency market.
With the development of cryptocurrency, the regulatory attitude of regulatory agencies in various countries towards stable coins has also become an important issue. Stablecoins (such as U.S. dollar stablecoins $USDT and $USDC) are cryptocurrencies linked to legal tender. The central bank report also mentioned that the purpose of internationally recommended stablecoins includes protecting investors and maintaining financial stability. Currently, this includes In major countries such as the European Union, the United Kingdom, and Japan, the supervision of stable currencies has gradually begun to expand to multiple levels such as capital requirements, guaranteed asset management, corporate governance, and consumer protection for operators.
In addition, as the influence of large cryptocurrency exchanges gradually increases, various countries have gradually strengthened their supervision of cryptocurrency exchanges.
Taiwan is also promoting legislation in mid-2024. By formulating fraud and crime harm prevention regulations, it hopes to prevent virtual currencies from being abused in fraud cases. For example, if individual currency dealers or business currency dealers are included in the management, they will face criminal liability if they fail to register. In addition, businesses or personnel that provide virtual asset services are also required to complete money laundering prevention, service energy registration or login, otherwise they may face criminal liability. .
Fintech scams you must be aware of
With the booming development of financial technology, as they rely on digital platforms to provide services, they are also facing various network security threats, and it is inevitable that more fraud methods will appear.
Crypto City summarizes common fraud techniques and corresponding preventive measures in the financial technology field below.
1. Identity theft
Identity impersonation is one of the common forms of fraud. Fraudulent groups may steal personal information, such as identity card numbers, bank account passwords, etc., to impersonate users for illegal transactions or loans.
Precautions: Finextra, a website focusing on financial technology, pointed out that financial technology platforms will now provide more biometric methods, such as fingerprints or facial recognition, to increase the security of financial transactions. Many financial institutions in Taiwan will also introduce passwordless identification (FIDO) technology to eliminate the need to enter passwords and avoid data leakage.
2. Social Media Phishing (Social Engineering)
This type of fraud usually involves a fraud group sending phishing emails or text messages to legitimate financial institutions or financial technology platforms, in which users may be tricked into clicking on malicious links or providing sensitive personal information, such as credit card information, online banking logins, etc. Attempts to defraud personal information.
Preventive measures: Users should be more vigilant and avoid clicking on suspicious links in emails and text messages. If they receive a call, they should also check whether it is really from a financial institution. The best way is to check the official website and official phone number separately before checking. Avoid disclosing confidential personal information on relevant contact numbers. Fintech companies should strengthen the detection and protection mechanisms of phishing attacks and educate users to identify phishing scams.
3. P2P lending platform fraud
While online lending platforms (P2P lending platforms) attract borrowers because of their convenience, they also attract many scammers. First, scammers may use false identities to obtain loans and then disappear immediately after obtaining the funds. In addition, there may also be criminals who will set up fake lending platforms to attract investors and then flee with their money.
Precautions: To prevent this type of fraud, P2P lending platforms should have KYC (Know Your Customer) processes and credit assessments in place. The Financial Supervisory Commission also reminded that many fraud syndicates will claim stories of getting rich through P2P lending, but P2P platforms are not financial institutions approved by the Financial Supervisory Commission. It is recommended that the public do not listen to lending platforms that claim guaranteed returns or high profits, understand the platform's operating model, and be cautious. Assess relevant risks.
4. Cryptocurrency scams
The cryptocurrency market has the characteristics of decentralization and anonymity, so there are also many scams. Common cryptocurrency scams include fake ICOs (initial coin offerings), phishing websites, Ponzi schemes, and fake cryptocurrency exchanges. Scammers take advantage of investors' desire for high returns to promote non-existent cryptocurrency projects or trading platforms.
Precautions: Investors should carefully choose the cryptocurrency exchanges they use, and carefully study cryptocurrency projects, especially when participating in ICO projects, to understand the related risks. At present, various countries are also strengthening the supervision of cryptocurrency platforms, and may require platforms to comply with anti-money laundering, KYC and other regulations.
5. Malware attacks
As various fintech applications become more popular, malware attacks have become a common security threat. Scammers may develop malware to steal users' account information or financial-related data.
Preventive measures: Fintechmagazine, a digital media platform focusing on financial technology, pointed out that users should pay attention to only download financial technology applications from official sources and update them regularly. In addition, financial technology companies should also continue to control the security of the software. If the software has Vulnerabilities must also be repaired in a timely manner.
More Fintech Scam News
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Scams are rampant, are you worried that scams are all around us? If you want to stay away from scams, you can also read the (Self-Rescue Guide to Cryptocurrency Scams) previously compiled by (Crypto City).
