CHAPTER 2 FINTECH DISRUPTION IN FINANCIAL SERVICES I pdf

FINTECH DISRUPTION IN FINANCIAL SERVICES I: DR. NIK HADIYAN NIK AZMAN
CROWDFUNDING & BLOCKCHAIN

Blockbuster vs Netflix



Kodak
vs.

Digital Camera



Physical Bank
vs

Digital Bank

BETTER 1 MOBILE
EXPERIENCE TO TRANSFER

CUSTOMER

5 DISRUPTION? 2
CLOSE THE GAP
UNIQUE
AND FLEXIBLE

43
CHANGE THE
BEHAVIOUR OF
CUSTOMER

WHAT IS FINTECH • Digital finance innovations
DISRUPTION?
promise a major disruption of

global finance.

• Crowdfunding and blockchain

can be regarded as two

innovations that may disrupt

traditional financial

intermediation but in different

ways

• Crowdfunding platforms

substitute for traditional

financial intermediaries

• The trust element inherent

in blockchain enables

blockchain to eliminate the
need for intermediaries

Revolution…

Fintech 1.0 Fintech 3.0

1967-2008

1866-1967 2008-now

Fintech 2.0

• Financial institutions are embracing the disruptive nature of FinTech
• Evolution of FinTech through three major eras

BLOCKCHAIN

BLOCKCHAIN

• Blockchain is said to have the potential to disrupt
the way the global financial system works (Fanning
and Centers, 2016; Pollari, 2016).

• The first blockchain was conceptualised by Satoshi
Nakamoto in 2008

• In January 2009, this concept was implemented as
a core component of the cryptocurrency Bitcoin.

• Bitcoin became the first digital currency without
requiring a trusted authority

HOW DOES IT WORKS?

How exactly do nodes reach a consensus?
How can we guarantee that transaction information is truthfully

added?

The decentralisation Technically, Bitcoin has a There is a publicly accessible
mechanism of Bitcoin is mathematical algorithm and ledger containing existing
transactions on a block-by-
achieved through a protection against invalid block basis
combination of technical transactions is cryptographic
methods and incentive

engineering

Tom’s transaction If anyone wants to alter Then invalidate the whole
information is added to the Tom’s transaction, this block
means the hash will change
existing ledger
cryptographically

(a new hash)

How to solve honesty issue?

1. Giving nodes an incentive
• Utilising a proof-of-work (PoW)
mechanism.
• The honest nodes (those creating
the blocks that end up in the long-
term consensus chain) will be
rewarded

2. A proof-of-work function using a
hash puzzle is built in the Bitcoin
protocol.

Bitcoin PoW function has THREE
properties:

Hash

• Hash puzzle

Cost

• Cost for a Miner

Verify

• verify that a node has
computed proof-of-work
correctly

Example…

“In social media industry, Steemit is a blogging and social
networking website that uses blockchain-based rewards
platform for publishers. In identity protection industry, to
combat the growing centralisation of voting processes in
Australia, Horizon State aims to apply blockchain technology
to let people vote in a more democratic, decentralised way
and this voting is not merely politics related. In the emerging

cloud computing file sharing industry, Filecoin is a
decentralised storage network that turns cloud storage into

an algorithmic market”

•2.0 Involves the addition of Reflect of
intelligent contracts Blockchain
Evolution…
•3.0 stage is the widely
innovative application stage.



What is
Crowdfunding?



Type of
Crowdfunding?

Type of Crowdfunding?

Trend of Crowdfunding

Example of
Crowdfunding





Effect of
Crowdfunding



Example…. “In the United States, The CROWDFUND Act
of Jumpstart Our Business Startups (JOBS)
Act in 2015 is considered a milestone for
crowdfunding as it enables equity-based
crowdfunding to serve as a legal alternative

for entrepreneurs and small business
owners to sell equity via social networks and

various Internet platforms”

Crowdfunding & Entrepreneurs

“The efforts by
entrepreneurial
individuals and groups—
cultural, social, and for-
profit—to fund their
ventures by drawing on
relatively small
contributions from a
relatively large number
of individuals using the
internet, without
standard financial
intermediaries”