L2

1. Peer-to-Peer (P2P) Model - connects individuals directly (without banks), Funding Circle

2. Subscription Fee - Users pay a monthly fee for premium features

3. Freemium Model - Basic service is free, advanced features cost extra

4. B2B Model (Business to Business) - FinTech provides services to other financial institutions or companies

The FinTech industry is heavily regulated

Although innovation moves fast, it must still follow laws that protect consumers

Challenge: FinTechs must balance innovation and compliance

Fintech regulation aims to ensure:

• consumer protection - safe customer data and funds

• Financial stability - avoiding systematic risk

• Fair competiton - ensuring equal access between banks and FinTechs

• Anti Money Laundering (AML) & Know your customer (KYC) - preventing fraud and terrorism financing

1) PSD2 - (2018) forces banks to share customer data via APIs

2) GDPR (General Data Protection Regulation) - Ensures that personal data is collected, stored, and processed securely

3) AMLD (anti-money-laundering Directives) - requiring customer verification

1. Cybersecurity risk - hacking, phishing …

2. Data Privacy risks - leakage of private data

3. Operational risk - failures in technology

4. Regulatory risk - changing rules make compliance complex and costly

5. Financial stability risk - if FinTechs operate outside traditional safety nets - if they fail - consumers can lose money

• strong cybersecurity systems (multi-factor authentication)

• Compliance checks

RegTechs = Regulatory Technology

• Fintechs that use technology to help companies comply with regulations efficiently

Example: automated identity verification

! Becoming a crucial sub-sector of FinTech