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Fintech

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Open Journal of Economics and Commerce
Volume 2, Issue 2, 2019, PP 8-20
ISSN:2638-549X

Fintech
Jairo Toro Diaz1*, Melissa Duque Vélez2, Maria Camila Ortiz Chamosa3
Research professor at Universidad Autonoma de Manizales, Colombia.
*Corresponding Author: Jairo Toro Diaz, Research professor at Universidad Autonoma de
Manizales, Colombia, Email: [email protected]

ABSTRACT
Currently, many people manage their business and their money online, for this reason finance and
technology companies, usually Startups are taking advantage of this situation to look for new financing
options and money management different from traditional banking and in this way offer crowdfunding
platforms, payment by mobile phone and among other financial services that can be done in a virtual, easy
and economical way, that is why this work presents as a general objective to perform a literature review on
Financial Technology or Fintech (Financial Technology). For this, concepts of crowdfunding, Crowdequity,
Crowdlending, Insurtech, cryptocurrencies, their different applications and case studies in countries where
technological finances have been most successful are addressed. Documentary analysis is used as a
research method.
Keywords: Fintech, Crowdfunding, Crowdequity, Cryptocurrencies
JEL Classification:G15, F31, P45

INTRODUCTION virtual payment and cash will become a

The financial industry in the world is marginal form of payment.
undergoing a profound change due to increasing This work has as general objective: To review
internet access and the connection speed that the literature on issues of FinTech in different
allows people to perform virtual activities such databases
as buying and selling products. This virtual
scenario became an opportunity to increase And as specific objectives:
sales of many companies to create a new  Identify key aspects of the use of
business or marketing of products or the criptocurrency
provision of services. The financial industry was
 Identify the current use of the financing
not left behind in this virtual business model,
platforms
which is called FinTech where financial
products and services such as payments, loans,  Addressing concepts such as crowdfunding
management of personal finance, project and crowdequity,
financing (crowd funding), investment  Show the key elements as a factor of success
management, insurance. of crowdfunding platforms
Unlike banks traditions, FinTech offers METHODOLOGY
financial services that move faster, greater
convenience and lower cost, in addition to In order to meet the objective, there is a revisión
understanding the current importance of acting of the literature. In order to do so, the literatura
more like a technology company than a must be detected, obtained and consulted. The
financial one. necessary and relevant is extracted and
collected.
The FinTech have a promising future not only
for the ease of internet access, but also many Information resources used were specialized
countries are betting on an economy without databases: SciElo, Dialnet, EBSCO, Science
cash. Banknotes and coins are falling into Direct, Google scholar and as a search strategy
disuse, and commercial establishments allow or keywords: Fintech, crypto divisas,
you to pay by credit card or through mobile crowfunding, technological finances. When
applications thanks to crypto currency. In viewing documents, a selection is made,
conclusion, the trend will continue to increase discarding those that do not correspond with the

Open Journal of Economics and Commerce V2 ● 12 ● 2019 8

Fintech

prospect of our study. Useful sources of automated teller machine (ATM) in 1967
information are carefully reviewed and byarclays Bank arguably marks the beginning of
extracted from them the necessary information, the modern evolution of FinTech today (p.4).
which is then integrated and developed.
Since the late eighties, finance has been an
THEORETICAL FRAMEWORK industry based on the transmission and
manipulation of digital information. In fact, the
Financial or Fintech Technology (Financial ATM is often the only point for most consumers
Technology) today in which financial transitions move from a
Definition of the Concept purely digital experience to one that involves a
physical product (ie, cash).
"Fintech is a concept that arises from the union
of the words finance and technology, and is a Since 2008 there has been a rapid expansion in
relatively recent phenomenon of companies the types of businesses that create and deliver
trying to change the financial industry through technology to provide financial products and
the incursion of online solutions for financial services.It is important to distinguish three main
processes" (Cardenas, 2015). eras of evolution of FinTech. From about 1866
to 1987, the financial services industry,
"The Fintech comprise different types of
although strongly interconnected with
payment services, financial services, peer
technology remained largely as a similar
transactions, alternative lending platforms and
industry, at least in public perception, a period
new crypto-currencies. And while some of these
that characterize as FinTech 1.0. However, by
companies and new systems such as Bitcoin,
1987, financial services, at least in developed
have apparently been very volatile and
countries, had become not only once again
downright confusing, more and more it has an
highly globalized, but also digital. This period,
appeal to much greater both consumers and
which we characterize as FinTech 2.0,
entrepreneurs "(Glucki, 2016)
continued until 2008. During this period,
"The FinTech sector is the set of non-financial FinTech was dominated mainly by traditional
companies that use digital technology and regulated financial services industry utilizing
associated tools -Computer cloud, blockchain, technology to provide financial products and
big data, artificial intelligence, social networks, services. However, since 2008 (the period are
etc. to provide financial services to consumers known as "FinTech 3.0"), this is no longer
and businesses in a innovative way and under necessarily the case. New startups and
new business models. FinTech industry established technology companies have started
innovations have the potential to transform the to offer financial products and services directly
financial sector and help provide services to to businesses and the general public (Arner et al.
social groups traditionally blind eye by banks (2015).
"(Development Bank of Latin America, 2016). Fintech Companies
Historical Review The FinTech sector is the set of non-financial
companies that use digital technology and tools
The origin of the term Fintech dates back to the
associated with cloud computing, blockchain,
early 1990s and referred to "Technology
big data, artificial intelligence, social networks,
Consortium Financial Services", a project
etc. To provide financial services to consumers
initiated by Citigroup to facilitate efforts for
and businesses in an innovative way and under
technology cooperation (Hochstein, 2015).
new business models. FinTech industry
However, it is only since 2014 (Google trend
innovations have the potential to transform the
search, 2018) that the sector attracts the focus of
financial sector and help provide services to
regulators, industry participants and consumers
social groups traditionally blind eye by banks.
alike.Arner, Barberis and Buckley (2015) assert
(Development Bank of Latin America, 2016).
that FinTech is not an inherently new
development for the financial services industry. The technology giants and telecommunications
In fact, the introduction of the telegraph (first and some large retail chains have also decided
commercial use in 1838) and placement of the to seize the opportunity opened up by the digital
first successful transatlantic cable in 1866 (by revolution to enter the financial business, both
Atlantic Telegraph Company) provided the emerging markets and developed countries. For
infrastructure for the first great period of example, Alibaba, the Chinese e-commerce
financial globalization in the late nineteenth giant is also the largest provider of digital
century Subsequently, the introduction of payments and fund management in China.

9 Open Journal of Economics and Commerce V2 ● 12 ● 2019

Fintech

Amazon offers a payment platform (Amazon players like Google, Facebook, Amazon.
Payments) and a platform loans and credit line Gonzalez has also indicated that these
sellers on its platform (Amazon Lending). companies "have the opportunity to create their
Google, Intel, Apple, Samsung and other big own packages with financial products and
names are also in the market with their own services. And these packages will not be easy to
innovations, on their own or in partnership with reproduce by banks "(Gonzáles, 2014).Then the
other companies. The Chairman of BBVA, geographical location of the most important
Francisco González, has noted that the main companies in FinTech shown:
competitors of banks in the future will be

Source: KPMG and H2 Venture taken from https://www.reportefintech.com/las-10-fintech-mas-importantes/

Some of the most important Fintech companies Kreditech
in the world according to their ranking are:
Credits - Germany - 2012. It offers financial
Ant Financial services based on the use of big data to optimize
Payment Management - China - 2004. It is the services and improved costs.
payment platform world's third largest. Atom Bank
Zhongan Credits - UK - 2014 A fully digital bank,
China - Insurance - 2013 is highlighted by the through which customers can access services 7
use of big data for their operations. It was the days a week, 24 hours a day.
first company to receive an insurance license on For Latin America the ranking is made up of:
the Internet. It operates with Alibaba. It is
public capital. Nubank (Brazil- Payments - 2013)

Qudian (Qufenqi) It is in 12th place worldwide. Highlights:

operates 100% online. From the app you can
China loans - 2014. It offers smart phones,
control the own credit card, Platinum
laptops and other consumer electronics devices
Mastercard.
for students and professionals in China in
monthly payment plans. Customers can choose Kueski (Mexico - Credits - 2012)
flexibly from a range of payment options and It is located at number 47 worldwide.
time periods. Highlights: Users can apply for small loans
Oscar through online applications, determining the
Insurance - United States - 2013. Dedicated to amount of money and time required for refunds.
health care, also uses big data to manage. Guiabolso (Brazil - Credits - 2012)
Avant
It is located at number 48 worldwide.
Loans - United States - 2012. Through the use Highlights: seeks to be a solution for managing
of big data offers personal loans. Points to a personal finances.
wide range of segments.
Lufax Zaveapp (Mexico - Bank - 2015)
Capital market - China - 2011 is the largest Within the ranking it is on the list of emerging
Chinese online financial company. Fintech. Highlights: it aims to help young

Open Journal of Economics and Commerce V2 ● 12 ● 2019 10

Fintech

people achieve their financial goals in the short They Offer an Experience Simple and Quick
term, incorporating different techniques and Purchase
teaching savings. MangoPay associated. It has Through a user-friendly digital interface,
more than 30,000 users. accessible on multiple digital channels that are
Business Groups available at any time and anywhere.
They are Completely Digital Business
The FinTech sector is composed of two groups
of companies: No branches, ATMs or legacy systems, items
impacting operating costs of banks. According
New Ventures to the Corporation Deposit Insurance (Federal
They are mostly young companies. This group Deposit Insurance Corporation) in the United
of companies has innovated both solutions States, the average cost of these items over
offered as business models and tends to wages related reaches between 51% and 60% of
total operating expenses of commercial banks in
specialize in niches within the value chain of
United States (FDIC, 2016).
banks.
They Understand Customer
The average age of a typical company in the
first group is only six years (Venture Scanner, They have tools to understand customers and
2015), but that universe of companies is not meet their needs and protect it from fraud, such
as big data analytics, predictive modeling and
restricted to small businesses.
artificial intelligence (PWH, 2016).
By 2015, more than 36 companies had reached
Leverage Technology
the level of "unicorns" companies founded since
2003 with less than $ 1,000 million (KPMG / To enter segments where banks and other
CB Insights, 2015) valuation. traditional providers are inefficient or suffer
from a lack of transparency or information
Tech Giants asymmetries. In its analysis of the impact of
E-commerce and telephony, such as Amazon, FinTech companies the British government
Samsung, Vodafone and Alibaba. This group points out that the business model "allows
tends to be located in several segments of the [companies] to serve a larger volume of
banking business simultaneously, and integrates consumerslow value, rather than what banks do,
financial services to its business model and which is to serve a low volume of high-value
service package. (Development Bank of Latin consumers." This allows them to present
America, 2016). solutions that promote financial inclusion (UK
Government, 2015).
Advantages of Fintech Companies
Fintech Industry Segments
The FinTech companies disaggregate the value
Next, a description of the main segments where
chain of a bank to enter the market with digital
FinTech companies work and some companies
services in the various segments that compose are identified to illustrate its operation is
both which relate directly to the client (front- offered.
office) and those conducting final or
intermediate functions support customer (back Loans
office) and facilitating processes between these Platforms include loans from person to person
two (middle office). (peer to peer) and companies that make invoice
Essentially, FinTech companies use new discounting, they give microcredits, trade
technologies management and analysis of large finance and working capital. Platforms loans
person to person contacted investors with
data, social networks, artificial intelligence,
borrowers without the presence of a financial
cloud computing, NFC2 and encryption, among
institution. Only the investor bears the risk of
other innovations to offer solutions that are very
the loan, which can diversify through fractional
convenient for customers for three reasons: the investments. It also includes companies that
ease with which they can be used, the speed provide risk analysis and business credit
with which the service, sometimes in real time information. Examples: Lending Club; Prosper,
is provided, and the cost affordable.These Afluenta, On Deck; Kabbage; I delete;
companies differ from banks in several elements NoviKap; Affirm; Patch of Land; Avant; Sofi.
that make it competitive: (Development Bank of (Development Bank of Latin America, 2016).
Latin America, 2016).

11 Open Journal of Economics and Commerce V2 ● 12 ● 2019

Fintech

Payments and Transfers Investment Advice

Electronic Commerce Companies offering financial education tools or
help make investment decisions in some cases
Companies that provide online payment by using algorithms and artificial intelligence.
solutions for e-commerce. (Rojas, 2016). Examples: E-Toro; Kapital; Future Adviser;
Sales nutmeg; betterment; WealthFront. (Rojas,
2016).
Companies offering solutions in retail outlets
(stores and portable), rechargeable cards and Institutional Investment
innovations such as QR code and portable New ways for administrators and financial
scanners. (Rojas, 2016). operators (traders) optimize the profitability of
People investment portfolios including tools for
predictive analysis of the valuation of stocks
Companies that offer solutions to consumers for and bonds and trading tools based on
their digital transactions; includes mobile algorithms. Examples: Kapital, Future Adviser,
wallets, aggregators credit card (PayPal style), Stocktwist, Addepar. (Rojas, 2016).
prepaid cards, and transfers from person to Digital or Online Banking
person digitally. Examples: ApplePay; Samsung
Wallet; Square; PayPal; M-PESA; Eco-Cash. Without physical infrastructure -offices banks or
(Rojas, 2016). ATMs-and with a minimum number of staff.
Examples: Simple; Cardlike, Atom, Moven.
Transfers (Rojas, 2016).
Companies that facilitate transfer money in the Infrastructure
form of cash or card. Examples: WorldRemit;
Companies that offer solutions that improve the
clip; Kantox; CurrencyFair, Transferwise.
functioning of the bank, including managing
(Rojas, 2016).
databases, data analysis and predictive
Administrative Support to Small Business / modeling, and development of the interface for
Non-Profit Organizations applications (Application Programming
Interface, API) third with the internal system of
Digital tools that help small and medium banks. Examples: Kapitall, Future Adviser,
enterprises and non-profit organizations to DemystData, SeekingAlpha, FINITEC. (Rojas,
manage their finances - including taxes, payroll, 2016).
billing, accounting and others. Examples:
Payroll; Znetis; Xero, Scred. (Rojas, 2016). Security, Authentication and Fraud

Personal Finance Includes companies that create products in the

area of security, authentication (eg verification
Tools for individuals to manage their personal of user identity), encryption, detection and
finances - including applications for tracking prevention of fraud (eg payment fraud, loan
expenses, debt repayment and saving money. fraud). Examples: Ebury, Ewise, Standard
Treasury, Riskfied, Dashlane. (Rojas, 2016).
It also includes tools that allow illegal to dispute
credit card charges as well as to help optimize Crowdfunding (Non-Investment)
the rewards offered by credit cards and compare Platforms for financing products, services,
the prices of goods and services. Examples: social causes and creative projects through
Bills & Guard; Credit & Karma, CoverHound. donations or in exchange for benefits such as
(Rojas, 2016). awards, participation in sales or discounts.
Examples: Kikstarter, Indegogo, Tilt. (Rojas,
Equity Financing 2016).
Digital tools for private companies to raise DIGITAL CURRENCY
capital through the so-called crowdsourcing
platforms, which connect companies with Companies offering alternative currencies. The
investors in exchange for equity and debt Bitcoin, and other crypto currency or virtual
instruments.Examples: Circle Up, Gust, Loyal3, coins, emerged as an alternative to conventional
SeedInvest, Seedrs, Crowdcube, OurCrowd. currencies and the current currency system. The
(Rojas, 2016). differences in these currencies compared to

Open Journal of Economics and Commerce V2 ● 12 ● 2019 12

Fintech

traditional are that they do not belong to any Lending Club, ZenCap and Afluenta. The latter
state or country and can be used worldwide is a platform loans to people who was born in
alike. They are decentralized: are not controlled Argentina and recently received US $ 8 million
by any state, central bank, financial institution investment by the IFC and the fund Raising
or company. No intermediaries: transactions are Equity to expand in Latin America.
made directly from person to person. Bitcoins (Development Bank of Latin America, 2016).
can be changed to euros or other currencies and
Companies have emerged that specialize in risk
vice versa as any currency (IEB, 2016).
analysis to banks in emerging markets. Lenndo,
Examples: Bitcoin; Bistamp; Xapo, BitPay.
a Singapore company, uses algorithms that
Fintech Companies and SMEs analyze risk based on behavior patterns and take
data of the individual in social networks-Face
Digital technology and other innovations have
book, Twitter and other networks- to prove
enabled FinTech companies efficiently serve
identity and its ability to predict and payment
areas traditionally underserved by banks as
behavior.
SMEs. Three innovations in particular are being
used to benefit this segment: financing This benefits to millions of potential consumers,
platforms, electronic markets and invoice especially young people, who have stable
discounting services. (Development Bank of salaries but have no bank account.
Latin America, 2016).
Lenndo has a permanent presence in India and
Platforms Financing (Loans and Credit Lines) the Philippines and is incipiently in Colombia.
In Latin America, Destácame, a Chilean
In general, companies lend small amounts and
company, uses a similar methodology but based
loans do not require collateral. They use
on the individual's behavior with service
proprietary and non-traditional methodologies
providers such as utilities,
for analyzing the credit risk of the applicant and
set interest rates on loans and credit lines. For EMarket Places
years, government agencies and development
Other solutions for small businesses have
banks tried that banks lend to SMEs small
emerged from electronic markets. In 2012,
amounts, adjusted to the size of the business.
Amazon, eBay and Alibaba began offering
(Development Bank of Latin America, 2016).
certain customers financing to cover working
They also discussed the credit assessment was capital needs.
not based solely on financial and accounting
Two years later payment processors like PayPal,
data, but used "soft" information, this is one that
Square and SumUp and telecommunications
derives from the knowledge of the customer, its
companies such as Telmex and Safaricom
business and its environment, but that is
decided to do the same (Development Bank of
expensive and is not profitable to do under the
Latin America, 2016).
traditional model of production and distribution
of a bank. According to the World Economic Fourm, this
However, for FinTech both are possible: first, market segment is destined for great growth
because being models of fully digital business given the large volume of information that non-
are lighter in costs and secondly because financial companies have their customers near
alternative methods of credit analysis based on future and therefore the ease with which they
large data allow us to collect and analyze very can assess credit risk same (WEF, 2015).
quickly multiple data on the life of the owner, Financing Bills
your credit history, the business sector and its
customers and suppliers. (Torres, 2008). Traditionally, invoice discounting allows large
companies a relatively inexpensive form of
Among the countries with the highest number of bank financing, but has been out of reach for a
transactions in these platforms include the small business for its low billing volumes.
United States, Britain and China. As in many Companies in FinTech as MarketInvoice
other areas of the FinTech services, China has (England) and NoviCap (Spain) processed
experienced exponential growth in this segment, within 24 hours and online application based on
growing to about 1,500 platforms in 2014, when the value of loans bills.
there were 20 of them in 2011. In Africa,
lending platforms are growing in countries such Credit risk models are based on the frequency of
as Kenya, Tanzania and Ghana (WEF, 2015). use of the service and repayment of loans.
Some names in this space are WeChat, OnDeck, (Development Bank of Latin America, 2016).

13 Open Journal of Economics and Commerce V2 ● 12 ● 2019

Fintech

CROWD FUNDING specific campaigns, with a total share of 29%

and a spectacular growth of 529%. It is a faster
Definition of the Concept and more convenient than traditional forms and
"Crowdfunding is based on the appeals to feeling more directly (Fundraise.com;
"collectivefinance “and thanks to internet Causebox; Fundly). (Financial Disclosure
technology has developed in the world from Observatory, 2014)
2009" (MOLINA, 2016)In many countries Crowdfunding Reward
Crowdfunding is the revolution when financing
projects (MOLINA, 2016), it emerges as a new Here if there is a provision for those who donate
alternative other than traditional credit to the project, for example, in the presale
financing, virtual platforms on the internet delivering something, a book, a magazine, a
where the idea presented and projects in order to disco, free tickets for the artist who supported,
be used obtain funds from third parties, etc. (MOLINA, 2016).
campaigns last for several days, platforms Financial CrowdFunding
charge a fee for the broadcasting service, It is divided in two:
whether it is a network to get money or other Crowdfunding Loan
resources (BUTZBACH, 2012). Crowdfunding
is defined "an open call, essentially through the Known as P2P (person to person loan), here it is
Internet, for the provision of financial resources offered an interest rate on the money received as
either in the form of donation or in exchange for consideration, this method is most often used
some form of reward" (Schwienbacher and and fastest growing in the world (MOLINA,
Larralde, 2010). 2016).
Direct loans to companies or individuals (P2B
"In simple terms, the crowdfunding is the or P2P, direct loans to businesses or
funding of a project or a company bya group of individuals). Globally it is growing more
individuals rather than by professionals (for slowly, but in some countries such as USA and
example, banks, investors venture capital or UK, is the true motor. Its current share is 13%,
business angels)”. In theory, individuals and with growth in 2013 of 71%. However, if we
finance investments indirectly through their compare the total loans with loan assets of
savings, as banks act as intermediaries between banks, their size is still very small. There are a
those who have and those who need money. By different type of discounting bills platforms,
contrast, the crowdfunding occurs without any operating under the trade legislation (Financial
intermediary: entrepreneurs "take advantage of Disclosure Observatory, 2014).
the crowd," anchored money directly from
individuals. The typical mode of Crowdfunding Investment Crowdequity
communication is through the Internet. It invests directly in the equity of companies,
"(Schwienbacher, Larralde) startups and medium companies increasing their
Crowdfunding Type capital. The platforms can be focused
professionals, who benefit from the advantages
The Crowdfunding refers to colective finance, of the Internet, or to retail investors, enabling
where a group of people support or invest access to a type of investment that was
financially in a project, use platforms on the previously within reach. Its current share is
Internet for seeking financial resources in all its 15%, with growth of 114% per annum
forms as: I.) Donation II) Reward III.) (Financial Disclosure Observatory, 2014).It
Investment and IV.) The loan provides for the sale of shares known as Equity
(SCHWIENBACHER & LARRALDE, 2010), Crowdfunding or as a stake in society, there are
which divide the time in non-financial and modalities based on selling bonds (crowdfunded
financial crowdfunding. Lending) in Colombia legislation does not allow
Crowdfunding Non-Financial (MOLINA, 2016).
It is divided in two: Applications
CrowdFunding Donation The first Crowdfunding using the web was
Widely used by non-profit organizations, such conducted by the British band "Marillion" in
as NGOs, the donor receives nothing just the 1997 he financed his tour of the United States,
satisfaction of having supported a project or offered the presale of tickets event collection hit
social cause or idea that was of interest $ 60 thousand dollars, they are usually
(MOLINA, 2016).Many NGOs use CF for considered them as the pioneers of modern

Open Journal of Economics and Commerce V2 ● 12 ● 2019 14

Fintech

Crowdfunding (UP GLOBAL, 2015).Born in the system work (Mollick, 2014). The
2005 Kiva.org platform, the first website Crowdfunding helps finance dreams and
microcredit for entrepreneurs and low-income aspirations of the community (BOTTIGLIA &
students, has provided credit to more than one Pichler, 2016) is a solution to the problem of
million people, after Kiva would follow others financing because banks do not pay easy and
Prosper.com (2006) platforms and has many requirements to the allocation of
LendingClub.com ( 2007), born in 2008 credit, SMEs in Colombia face serious
Indiegogo which was used to finance the difficulties in accessing credit; Crowdfunding is
Sundance Film Festival in 2009, Kickstarter, the a collective financing tool available to advance
world's most important platform born, as of ideas or for business expansion (ROSA, 2015),
April 2017 had raised 2.980.169.711 millions of because bank credit is a constraint that SMEs
dollars, with more than 123,067 funded projects have to develop their economic activities (Perry,
successfully since 2017 there are more than 2007).
2,000 crowdfunding platforms worldwide
CrowdBlending Platforms
(LAUNCH, 2017).
Crowdlending platforms applying for
Platforms on the Web allow you to present ideas
registration of investors and companies or
and make them public, the aim is to make other
individuals, firms providing financial data.
people make contributions, either for a social
cause or to finance an idea or business project, it Those platforms that provide individuals act
has a set time days or months, donations are very quickly, requesting personal data of
made through electronic payment, credit card or borrowers who rely on quick credit analysis. It
other forms such as bank transfer, remittances is possible to invest in different segments of
or payments PayPal, Payoner (OTERO, 2015), loans, both credit rating and target loan
with the process comes three actors, who seeks (reforms, aggregation, etc.).
and needs funding for the idea or project, the Platforms focused on lending to companies
financer and the interaction platform for usually have their own model of risk analysis
facilitating communication among key actors and classification, also using public ratings
(OTERO, 2015). companies like Experian or Informa. The loans
Historical Review are usually approved with collateral and,
subsequently, the information consult the
Crowdfunding is very old dating from the first
investor / donor is drawn future.
century. C., in Rome Cayo Clinio Macenas
patronized artists and poets, its name the word Some platforms discounted notes or other
emerged mecenazgo, later in the 17th century effects, in the short term, using it as collateral
the model was used subscription to finance the for the recovery.
printing of books, as retribution the donor was The interest rate can be set directly by the
mentioned on the cover (BRUNTJE & Gajda, platform as a result of the classification, or let
2015); in 1883 and 1884 Joseph Pulitzer used investors to bid as an auction, thus facilitating
his newspaper to finish the Statue of Liberty in also more risky for the company but a more
New York, gave donors a replica of the statue, transparent market.
managed to raise in six months 100,000 today to
this mode is known as Crowdfunding and a There is diversity of models on how the shares
formula for financing projects and ideas that use are managed on the loan, some platforms
the Internet as a communication channel in receive the amount to invest and they assign it
order to raise funds (VELASCO, 2013). to the requested loan.
Ethan Mollick, who in 1997 conducted the first Even some platform has an option which is
studies on the Crowdfunding phenomenon and invested in all loans that have a certain
regarded him as an opportunity to finance classification, thus diversifying the risk
companies (Mollick, 2014); Gutiérrez explains automatically. Others, on the contrary, exert
the Crowdfunding as project financing among mere intermediary. Revenues platforms tend to
several people who want to support him come from a success fee on the amount
(Gutierrez, 2010). Ariño, it expresses that the financed, between 2-7% and an annual fee by
Crowdfunding is successful thanks to new the lenders. The platform also is responsible for
technologies (Ariño, 2009) to Mollick certifying that the collateral (real, personal, or
Crowdfunding success is due to the low rate of effect) is correct, and to carry out all legal
fraud, the entrepreneur is honored and this helps matters (registration of mortgage loan signing),

15 Open Journal of Economics and Commerce V2 ● 12 ● 2019

Fintech

tracking the loan until maturity, even in case of controlled by its developers, and used and
default (Financial Disclosure Observatory, accepted among members of a specific virtual
2014). community
Crowd Equity Platform Digital currency, however, is a form of virtual
Some of these platforms are aimed at currency that is created and stored
professionals, who generally invest hand electronically. The crypto currency are a type of
promoter / platform, others focus on the retail digital currency, but not unique.
investor. Both require the registration of The crypto currency are therefore a subset of
investors to access information projects or digital currencies based on cryptography.
companies seeking capital. According to the online newspaper Oro and
Companies provide financial information and Finance (2014), TheOxford Dictionary, It
information about your business plan, the included the definition of its translation
market competition. Some platforms, especially (cryptocurrency) last May:
those aimed at retail investors, exercise some
"A digital currency that uses encryption
sort of due diligence (Torres, 2014).
techniques to regulate the generation of
Regarding accessible information; professional currency units and verify the transfer of funds,
investors, who invest a significant minimum of and operates independently of a central bank."
the total requested by the company are provided
with access to the company and the presentation TheCambridge Dictionary, meanwhile, has
of its managers. defined thisword as:
In the standard case, more investors, the "A digital currency produced by a public
information published on the web and those network instead of by any government that uses
questions that investors can make is limited. cryptography to ensure that payments are sent
(Financial Disclosure Observatory, 2014). and received safely" Taken from:
This business model is focused on the https://dictionary.cambridge.org/dictionary/engl
development of new risk models, reducing ish/cryptocurrency
operating costs (through automation and digital Historical Overview
distribution) in the use of so-called big data and Crypto prefix comes from the Greek word
special attention to improving the experience of kruptos, which means hidden, secret.
the clients. Cryptography is the study of methods of data
From another perspective, technology has encryption, mainly used to send a message
advanced so much in recent years12 the time safely and privately, and for security and data
when complex algorithms replace human authentication.
operators in the market looms nearby The crypto currency are backed by mathematics,
(Antonakes, 2015). which means it can not be set by a single group
Financial robots, such as High Frequency or person. Criptocurrency are not linked to the
Trading (HFT) and made 55% of stock trades in availability of physical assets, as in the case of
the US and 40% in Europe, which for many is a gold.
systemic risk considerable13. Criptocurrency use a distributed network to
In addition, the latest generation of these cyber enable payment P2P - peer-to-peer (entre pares,
mills is based on systems of cognitive in Spanish), a system transaction verification
computing enabling functionality as investment without third parties. In order to maintain this
advisers (roboadvisors) given their capacity for security, crypto currency uses mathematical
learning, testing of information and exploitation algorithms and a record of public accounting
of big data (Chishti and Baberis, 2016), credit (called blockchain or cadenas de bloques, in
cooperatives face the challenges of the financial Spanish) so to ensure that every transaction that
sector [...] | Ricardo Palomo-Mediterranean takes place is legitimate and prevent fraud.
Economic Lefty 2017 29 | ISSN: 1698-3726 |
ISBN-13: 978-84-95531-84-1 | [289-310] They are based on algorithms which is defined
as a orderly systematic group that measures and
CRYPTOCURRENCY OR COINS ENCRYPTED allows a calculation and finds the solution of
Definition and Concept problems. In math, logic, computer science and
The European Central Bank (ECB) defined in related disciplines, an algorithm (Greek and
2012 'virtual currency' as "a kind of money Latin, dixit arithmos algorithms and eastern
unregulated, digital, broadcast and usually Greek, which means 'number'

Open Journal of Economics and Commerce V2 ● 12 ● 2019 16

Fintech

Some Types of Cryptocurrency technologically and in charge of the company

In international financial markets, exists a Jelurida. Ardor is a coveted asset in Chinese
variety of crypto currencies, which in the real stocks. And this can be a big boost in the price,
world is considered circulating more than US $ because the fiat money as Chinese Yuan is
90 billion equivalent, some of them are: injected into this tab.
BITCOIN. It´s a virtual currency pioneer in the LITECOIN. It is the sixth largest
world of crypto currency, 48It is already used to cryptocurrency by oldest market capitalization
buy products in many companies. The price of and third, with a global network of payments
a bitcoin is more than US $ 2,612. It is the most and open source fully decentralized without
valuable and popular cryptocurrency. There are central authorities, set up by former engineer
16.4 million units in circulation. Total market Google Charles Lee in 2011, is the daughter of
value is $ 42,888,341. Notably, there is a total the software community free MIT as an
limit of 21 million Bitcoin and then cannot alternative to Bit coin, litecoin comes from the
make more. source code, unit price is US $ 51.3. Total
market must US $ 2,664,903,463. Litecoin
RIPPLE. Created in 2012. It is now the largest
supply has a limit of 84 million coins, compared
and most popular in the world. In total there are
to 21 million bitcoin.STELLAR LUMENS.
the equivalent of $ 9,753,505,715. It´s last
Founded in early 2014 by Jed McCaleb and
contribution was only $ 0.25.
Joyce Kim, Stellar was originally a hard fork in
Ripple is both a payment network (Ripple Net) the Ripple protocol. After making some changes
as a cryptocurrency (XRP).Ripple Net connects in the important consensus code, the network
banks and other large institution, Which offers a led to the creation of "Stellar-core". Lumen
number of advantages and it allows them to Stellar team wants to make money transactions
transfer money and other assets through the cheaper, faster and more reliable than current
network, and this way, banks skip all kinds of systems. In addition, the protocol would connect
government controls for their transactions. It is people around the world by allowing more
used by more than 75 financial institutions efficient cross-border payments. The original
worldwide. All transactions are recorded in the asset on the network Stellar called "stellars"
ledger XRP decentralized so that banks have (released with 100 billion units in 2014); the
easy access to external financing and reducing name was changed to Lumens (XLM) after an
the time and money associated with cross- update 2015XLM is backed by a strong team of
border payments. developers, entrepreneurs and venture
Each transaction through the system is capitalists. If you check the list of board
processed in just four seconds. By comparison, members and advisors, you will find big names
ethereum takes more than two minutes, Bitcoin of people like WordPress, Y-Combinator,
more than an hour, whereas traditional systems Microsoft, Apache, Stripe, Google and many
can take three to five days. others.DASH.Formly known as Darkcoin is a
NEM.(XEM) is a criptodivisa peer-to-peer cryptocurrency open source peer-to-peer-based
launched in 2015. Unlike other crypto Bitcoin software that aims to be fast, easy to use
currencies, NEM has its own original source, and scalable. Dash began in 2014 and is now the
which has introduced new technology featuring world's tenth largest by market capitalization
blockchain as its important test algorithm (POI), cryptocurrency, a total of US $ 1,588,211,952.
accounts multifirm, encrypted messages and a Their unit value is high, is around $ 214.31.
reputation system Eigen trust ++. The NEM Two of the biggest advantages of Dash are
software is used in a string of commercial speed and low rates. You can send money to
blocks called Mijin, which is being tested by anyone in the world for less than $ 0.4 in four
financial institutions and private companies in seconds; which is almost impossible to do
Japan and internationally. In 2016, NEM rose to through a bank. Another benefit is anonymity.
be one of the largest criptomonedas by market While all transactions are public, you do not
capitalization. BURNING. It is another project have to share personal information like your
which aims to bring technology to the masses name and address.Compared to the SHA-256
blockchain. Its beginnings date back to the algorithm Bitcoin, Dash incorporates a total of
community and Adel project, which later 11 algorithms, collectively referred to as X11.
developed the Nxt technology and, ultimately, This makes it much more difficult to get or hack
the Ardor ecosystem is only one member of a the network and a payment method safer than
family of projects that are related Bitcoin cryptocurrency. ETHEREUM. Designed

17 Open Journal of Economics and Commerce V2 ● 12 ● 2019

Fintech

by Russian programmer Vitalik Buterin, in the industry. The company based in Hong
ethereum works in a completely different way Kong raised about $ 15 million in its initial coin
than Bitcoin. Although can do many of the same offering in July 2017 and immediately acquired
things that Bitcoin can do, its main purpose is to 20,000 registered as part of the collection users.
act as a platform for creating distributed Changpeng Zhao, CEO of Binance, has an
applications.The biggest difference between impressive resume with years of experience in
Bitcoin and ethereum is the use of blockchains. criptocurrency. He was Director of
While Bitcoin Blockchain contracts records Development at Blockchain, Co-founder and
showing how digital funds have moved from Chief Technology Officer OK Coin, and
one place to another, Etherum has expanded this Founder and CEO of BijieTech before working
concept. The blockchain of ethereum uses a on Binance.
scripting language much more complex and OMISEGO (OMG). Founded in 2013, Omise is
intelligent contracts can be complex a payment services company backed capital
applications that have a wide range of potential operating in Thailand, Japan, Singapore and
uses. These contracts can be open source for Indonesia. OmiseGO (OMG) is an intelligent
wide variety of services, which include: voting platform contract and token ERC-20 (the
systems, financial exchanges, crowdfunding standard ethereum code). OMG uses an
platforms, intellectual property and autonomous algorithm test participation (PoS) and has a total
decentralized organizations. of 140,245,398 million supply a circulating
GOLEM. It´s an innovative piece of technology current supply of 102,042,552 million tokens.
that works for the decentralization of computing According to the World Economic Forum
power. Although Golem is still in its infancy, if (2018), the number of people worldwide who
successful, would be a global supercomputer have no access to bank accounts amounting to
distributed and accessible to all. It is currently in more than two (2) billion. This number
development, but aims to redistribute power of represents about 35% of the world population.
computing. Incentivized by financial reward, Omise Go can solve this problem, especially in
taxpayers donate their 'CPU cycles' a golem economically developing countries, and aim to
carrying out delegated by network users tasks. use the blockchain technology to carry it out. At
Computers around the world can benefit the end of 2017, there were nearly 1,400
financially by using downtime to perform outstanding crypto currencies, a combined
calculations for network Golem. market cap of about $ 610 billion. Earlier this
BINANCE COIN (BNB). It is the crypto year, the total market limit was only $ 18
currency exchange platform Chinese Binance. billion, representing a gain of almost 3,300%.In
The token is created during the fundraising trading in crypto currencies 2018 it was a year
event (ICO) to finance the development of the of growth, being the biggest winners were
exchange. Currently, the cryptocurrency has a Ripple, which is touted as a new type of
market capital of US $ 180 to 218 million, of payment system for banks, along with lesser
which between USD 18 and 35 million sold known names like NEM, Ardor and Dash.
daily. BinanceItis one of the newest exchanges

Source: Coin Market cap

Open Journal of Economics and Commerce V2 ● 12 ● 2019 18

Fintech

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Citation: Jairo Toro Diaz, Melissa Duque Vélez, Maria Camila Ortiz Chamosa, “Fintech", Open Journal
of Economics and Commerce, 2(2), 2019, pp.8-20.
Copyright: © 2019 Jairo Toro Diaz. This is an open-access article distributed under the terms of the
Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any
medium, provided the original author and source are credited.

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