FINTECH AND

BLOCKCHAIN
GROUP 4
 112698 SAMUEL WANJEMA

121687 ABDIWASI OMAR

119776 MWATHI ELIZABETH

GROUP 113508 FRED KAUMBU

MEMBERS
123198 MATUA KIZITO

112664 ALEX MUIRURI

124281 KAMWARA ESTHER

 INTRODUCTION
• Fintech is abbreviation for Financial Technology.
• It simply refers to the application of cutting-edge technologies to improve financial services.
• Fintech is the term for the process through which financial services providers incorporate technology to
enhance the usability and delivery of their products to customers.
• In some ways, technology has always aided the growth of the finance industry. Finance and technology
have always gone hand in hand, from the early abacus to modern means of technology.
• From research done over the years, it has been evident that the future of fintech is blockchain.
• Blockchain is largely involved with storing and processing information related to payment. This
information if mishandled can lead to fraud.
• Blockchain therefore verifies transactions to avoid such challenges. Both fintech and blockchain have been
known worldwide due to how decentralized their operations are and this report shows its impact,
advantages, and disadvantages.
 FINTECH HISTORY

FINTECH 1.0 (1886-1967). This era is about

infrastructure. This is an era when we can first start
speaking about financial globalization.

• It started with technologies such as the telegraph

as well as railroads and steamships that allowed
for the first-time rapid transmission of financial
information across borders.

• In 1918, the first electronic fund transfer system

took place called fedwire.
 FINTECH 1.0 CONT…..

Invention of Credit Cards

The 1950s brought us credit cards to ease the

burden of carrying cash.

First, Diner’s Club introduced theirs in 1950,

American Express Company followed with their
own credit card in 1958.
 FINTECH 2.0 (1967-2008)

• This era is about about banks.This period marks

the shift from analogue to digital and is led by
traditional financial institutions.

• It was the launch of the 1st hand-held

calculator and the first ATM installed by
Barclays bank that marked the beginning of the
modern period of fintech in 1967.
 FINTECH 2.0 (1967-2008) CONT…..

• Establishment of NASDAQ 1970s

The world’s 1st  digital stock exchange, which
marked the beginning of how the financial
markets operate today.
• In 1973, SWIFT (Society For Worldwide Interbank
Financial Telecommunications) was established.
 FINTECH 2.0 (1967-2008) CONT…..

• The rise of bank mainframe computers 

The 1980s saw the rise of bank mainframe

computers and the world is introduced to online
banking, which flourished in 1990s with the Internet
and e-commerce business models.

. Used in banking institutions store data

pertaining to client records, domestic
operations and other vital processing
information.
 FINTECH 3.0 (2008-2014)

• This era is about start-ups

Due to Global Financial Crisis that later led to a general

economic crisis become more widely understood, the
public developed a distrust of the traditional banking
system. This led to a shift in mindset and paved a way to
a new industry
 FINTECH 3.0 (2008-2014) CONT…..

• The release of Bitcoin v0.1 in 2009

• This had a major impact on the financial
world
• followed by the boom of different
cryptocurrencies (which, in turn, was
followed by the great crypto crash in 2018)
. Mass-market penetration of smartphones
 FINTECH 3.5 (2014-2017)

• The era of globalization

• signals a move away from the western dominated financial
world and aims at digital banking expansion around the
globe, with improvements in fintech technology.
• This era is marked by an increasing number of new
entrants and their last mover advantages. 
• puts the focus on consumer behaviour and how
they access the internet in the developing world
• E.g. Chinese and Indian markets that never had time to
develop Western levels of physical banking infrastructure
and so were open to new solutions more quickly
 FINTECH 4.0 (2018-TODAY)

• This era is about disruptive technologies.

• Blockchain technologies and open banking 
• Neo banks as game changer e.g. German's N26
relaunched its premium account to cater to the
specific needs and tastes of its subscribers, such
as discounts in coworking spaces and in online
travel booking sites. 
• Integrated payment providers
• Mainstream use cases for NFTs

https://www.youtube.com/watch?v=LJ-
ejvLgUBk
 IMPACT OF FINTECH
1. With smart analytics, financial services organizations can now better understand and serve
their consumers by utilizing the vast amounts of consumer data.

2. Innovative financial services have been developed by organizations with the use of technology

3. Like this, block chain-based services will become more widespread in the years to come as in
the future there is a prospect that robo-advisory will play a big role.

4. Businesses can focus on independent organization and innovation.

5. Organizations may use the cloud's promise to improve cooperation and make procedures more
transparent.
 ADVANTAGES OF FINTECH
• Further service scope -Fintech allows companies to use innovative technology to broaden
their reach and areas of service. Financial technology companies are making good use of
mobile connectivity.
• Speed-When you apply for any loan application online., it must be authorized by digital-
only lenders that can provide same-day funding, which is only feasible because of Fintech
innovation.
• Cost reduction-Fintech is the most cost-effective option for consumers and businesses
alike. It saves money because there are no hidden fees like there are with traditional
businesses.
• Faster Rate of Approval-The rate of approval is a delineating factor that most of the
financial systems should work on.
 ADVANTAGES CONTD

• Efficiency-. When you use financial technology, you are already efficient because it
provides extremely particular services.
• Advanced Security-Financial institutions are able to provide customers with the most
advanced security. Also, high-end monetary services.
 DISADVANTAGES OF FINTECH
• Technology based-risks- Since financial products are bought online, this may leave you
more exposed to technology-based risks. These risks can be: Online hacking, application
security risk, money laundering risk, digital identity risk and cloud-based security risks.
• Lack of Mobile and Tech Expertise-In the fintech industry, some of the finance
companies or banks don’t have proper or convenient mobile banking services.
• Lack of regulation-the regulations around fintech in the world are not perfect, and there is
the possibility that some of these may be some potential fraud in the absence of regulation.
• Lack of physical branches-This can be a disadvantage in the provision of services, since
everything must be dealt with via email or social networks. This is not good for customer
relations because by limiting face-to face interaction, client-seller relationship is at risk of
extinction.
 DISADVANTAGES CONTD

• Unclear rights-Fintech companies may be new to financial industry and use different business
models to traditional providers making it harder to ascertain which ones are regulated, and what your
rights are if something goes wrong.
• Making a rush decision- Since financial products are bought instantly online, without any face-to-
face interaction or brokers, it may make consumers to easily make quick and uninformed decisions.
• Financial exclusion-While technology increases choice and access for most customers, it can
exclude those who do not know how to use the internet or devices which computers, smartphones,
and tablets. For instance, someone without a smart phone or without access to internet may not be
able to access some of these online financial products like online application for loans.
 DISADVANTAGES CONTD

• Sale of customer data-Being an online platform, many people can access

fintech or use fintech and this can put the information of clients at risk. For
example, the Bank of America lost at least $10 million because of an insider
threat that sold about 300 customer data to cyber criminals, this was reported via
an email by the banks’ chairperson Ms. Colleen Haggerty in 2011.
 EXAMPLES OF FINTECH APPLICATION
• Robo-advisors-These are digital platforms that offer financial planning services that
are automated and algorithm-driven and have little to no human oversight. A robo-
advisor uses information from an online survey to inquire about your financial position
and future aspirations before providing advise and carrying out automated investments
on your behalf. Examples include WealthSimple, Wealthfront, Betterment, Ellevest,
SoFi Automated Investing.  
• Investment apps-These are digital platforms that make it simple to trade stocks, ETFs,
and cryptocurrencies on your phone, frequently with little to no commission. Examples
include RobinHood, Merrill Edge, Vanguard, Fidelity, TD Ameritrade, SoFi Active
Investing, E*TRADE etc.
 CONT.

• Microfinance is a banking service provided to unemployed or low-income

individual groups who otherwise would have no other access to financial
services. Microfinance is thus leveraging the true potential of technology
through the numerous digital payment models used in the microfinancing
institutions to carry out transactions in the same day. Thus, these
institutions have being using the same methodology as Fintech payment
solutions to get as many customers as they can
 FEATURES
Quick Processing

People can carry out banking activities through their digital devices. This is because the form filling and
application processing of microfinance institutions are moving online.

Online Status Check

Individuals can immediately know the stage that their application is currently in, thus they can know the
reason for a loan rejection. Also, through this transparency is increased. They also bring in a timely approach
to application which in turn helps businessmen avail loan in the least possible time.

Eliminating boundaries separating lenders and borrowers

As compared to traditional systems and methods that brought about bottlenecks in Microfinance processes,
Fintech involvement on microfinance has brought about ease in customer dealings and also easier and faster
transactions
 LENDING APPLICATIONS

• Alternative lending models

• The offer fast approvals and funding

• Utilization of data

• Offer perks and savings

• Examples of digital lending applications include TALA, BRANCH and TIMIZA

 C0NT

Payment applications-PayPal, Venmo, Block (Square, Zelle, and CashApp. These apps
make it easy to pay individuals or businesses online and in an instant.

Personal finance applications-Mint, YNAB, and Quicken SimpliFi. These apps can
assist you in tracking impending bill payments, identifying the categories in which you
spend the most money, keeping track of your credit score, and managing your
investment portfolio. Some even let you pay your bills straight through the app.

Crypto apps-They include wallets, exchanges and payment applications enables you to
store and conduct transactions in digital currencies and tokens like Bitcoin and NFTs.
 CONT
• P2P lending platforms-These are lending platforms that allow individuals and
proprietors of small businesses to obtain loans from a variety of people who contribute
microloans to them. Examples include Prosper, MyConstant, Funding Circle etc. This is
how they work: you invest in a P2P platform which is the loan originator, the lending
company lends money to borrowers, the borrower repays the loan inclusive of interest
to the lending company and the lending company deducts a fee and transfers the rest
back to your investor account
• InsurTech-This is the application of technological innovation to the insurance sector.
For instance, drivers who have auto insurance receive payments based on their mileage.
These miles are tracked in real-time by a telematics system within the car, allowing the
premium to be computed and paid. This lowers errors while also streamlining the
process.
 BLOCKCHAIN DEFINITION
• Blockchain is a series of blocks that contain information, it was initially inscribed by a group
of researchers in 1991 to avoid backdating of digital time stamps. It was further expanded by
Satoshi Nakamoto in 2009 and its when bitcoin which is a native coin was introduced. The
native coin is built on the blockchain.
• The original block is known as a genesis block, each block has the following features, hash
rates and data of the block. The data found on a blockchain is dependent to the type of
Blockchain, for example the blockchain containing Bitcoin has the following data, sender,
receiver, and amount of bitcoin. The hash in a blockchain acts as a fingerprint which is
unique to each block, this is the security mechanism of the block.
• The blocks are chronological, this means that there is a flow of information from one block to
another. Each block contains the hash rate of the previous block, and this is used to uphold
security as tampering with the information in a block will change the hash rate making the
block invalid as it won’t agree with the previous.
 BLOCKCHAIN

• Examples of key blockchains based on their market caps include Ethereum, Solana,
Avalanche, Algorand and Hedera which is an alternative of the blockchain. Hedera
uses the hash graph technology and it’s meant to solve the blockchain trilemma.

• The blockchain trilemma, which is held that, a blockchain can only achieve two out
of the three benefits at any given time. These benefits are decentralisation,
scalability, and security.

• https://youtu.be/yubzJw0uiE4
 IMPACT OF BLOCKCHAIN IN FINANCE
•With blockchain introduction, the finance realm has been disrupted as need for
decentralisation arose. Decentralisation in this case is a need to remove the middleman
in financial services. This middleman includes banks.

•The finance world being a sensitive sector, transparency is highly advocated for,
blockchain champions that as all information is publicly displayed and cannot be
altered, this technology is referred to as distributed ledger technology. With DLT
technology it ensures KYC which is know your customer is done once as the
information will be held in the blockchain under cryptographic security thus eliminate
need for constantly verifying the customer several times.
 CONT
• Another impact that the blockchain brought in finance is the introduction of stable coins which
could later act in the position of digital currency to countries. In Africa countries such as Nigeria
and Ghana have rolled out their digital currencies. These currencies are in a broader term referred
to as central bank digital currencies (CBDCs). With these digital currencies the physical currency
of a country will be represented in the internet space by the CBDCs, and they will hold the same
value as the physical ones.

• Blockchain has also paved way for decentralised organisations which are known as DAOs,
these organisations have been able to come up with products such as DEFIs which simply stands
for decentralised finance platforms. With these platforms customers can lend or borrow from each
other without having to involve a financial institution such as a bank .
 USECASES OF BLOCKCHAIN
• The blockchain having impacted the finance world as mentioned above, then the question
that follows is how it impacts the real world.

• Blockchain which has brought about DEFIs has an existing marketplace. Good examples of
DEFIs include UNISWAP which is built on the Ethereum blockchain, SAUCESWAP built on the
hedera hash graph and AAVE built on the Ethereum blockchain. DEFIs uses smart contracts
which is simply code written on a blockchain to create protocols that replicate existing financial
services in an open and transparent manner. DEFI services include a blockchain based securities
exchange such as BINANCE and Coinbase, blockchain based derivatives and a decentralised
debt market such as AAVE.
 USE CASES OF BLOCKCHAIN
• The blockchain other use is supporting CBDCs which are digital currencies which will make cross
border payments easy and transition costs will be fair universally. A good example is the XRP stable
coin and the USDT (Tether). XRP is a stable coin owned by Ripple company which is currently
pursuing a court case with the SEC (securities and Exchanges commission) on crypto assets.

• The blockchain has also enabled introductions of NFTs marketplaces where customers can buy,
sell, and transfer digital art. The best blockchain for the NFTs is the Hedera Hash graph which comes
with predicable gas fees and low transactions costs. Examples of the NFTs market is Opensea.io and
hash axis.com. NFTs have their use cases such as protecting creators value as for digital art the creators
can get value for their art every time the art changes ownership. Recently LG has partnered with
hedera to create televisions that have an inbuilt NFT marketplace where customers can buy, sell and
display NFTs from their living rooms.
 CBDCS
• The central bank of Kenya took it upon themselves to issue a discussion paper on CBDCs.
The country through its leadership has found it necessary and important to engage in the
discussion to ensure the financial system of the country remain relevant both domestically
and internationally.

• https://youtu.be/uUogJ6pjTkg

• According to a survey that was carried out on central banks by the bank for international
settlements 86 % of central banks are actively researching on the CBDCs, 60% are
actively experimenting on them while 14% have rolled out pilot phases on them .
 MAIN USES

Retail payments- these covers domestics payments that include payments of goods and
services locally or transfer of payments domestically. The retails payments methods
include cards payments, pesalink, mobile payments services and use of cards for
payments.

Wholesale payments- they include transfer of large volumes and therefore addresses
payment methods such a cross border payments. These payments are conducted by kenya
electronic payment and settlement systems, east African payment systems and regional
payment and settlement systems
 OPPORTUNITIES
Enhanced cross border payments- the current SWIFT system that is used for cross
border payments has proved to be of great importance, but it comes with its own
limitations, these limitations as have been noted by various studies include high
transaction costs that are because of the different conversion rates of currencies in
different countries

Financial stability- this can be noted by the diversification of payments methods which
simply is moving from relying on the conventional methods only to including other
newer methods which payments can be done.

Cubbing of systematic risks- with CBDCs in place the settlement will be with the
central bank hence eliminating need for other banks.
 RISKS
1) Technology risks- the fact that the internet is increasing become unsafe due to hackers
possess a challenge to the CBDCs. For those countries will lower literacy levels fraud
could increase as literate people could easy manipulate those who are not conversant
with the technology.

2) Infrastructure costs- the fact that CBDCs will save on the issue of printing money, they
will introduce production costs such as costs of setting, running and maintaining the
infrastructure.

3) Monetary policies- the fact that CBDCs will be introduced by central banks, policies
could continue being controlled by the bank so centralisation will be maintained contrary to
the intended decentralisation
 OTHER JURISDICTIONS

• Bank of England

• Singapore project Ubin

• Canada project Jasper

• Project Hamilton
 ADVANTAGES OF BLOCKCHAIN

• Enhanced Security-Data might be sensitive and crucial hence blockchain can

significantly change how your crucial data information is viewed. This is through the
creation of a record that can’t be altered and is encrypted end-to-end thus preventing
fraud and unauthorized activity.

• Greater Transparency-Without blockchain each organization must keep a separate

data base. Hence, blockchain uses a distributed ledger thus all transactions and data are
recorded identically in multiple locations. All users with the permission to access see
the same information at the same time thus providing full transparency.
 ADVANTAGES OF BLOCKCHAIN
• Instant Traceability-Blockchain creates an audit trial that documents the provenance of
an asset at every step on its journey. Industry’s troubled with counterfeiting and fraud- this
might help provide proof. Also, it’s possible to share data about provenance directly with
customers.

• Increased efficiency and speed-Traditional paper- heavy processes are time consuming,
prone to human error and often requires third party mediation. By streamlining these
processes with blockchain, transactions can be completed faster and more efficiently. Also,
documentation can be stored on the blockchain along with transaction details thus
eliminating the need to exchange paper. Furthermore, there would be less need of
reconciling multiple ledgers as clearing and settlement are much faster.
 ADVANTAGES

• Automation-Transactions are automated with smart contracts which increase

efficiency and speed the process even further. Once pre-specified conditions are
met, the next step in transaction or process is automatically enabled. Smart contracts
reduce human intervention as well as third parties to verify the terms of a contract
have been met. In Insurance for example, once a customer has provided all
necessary documentation to file a claim, the claim can automatically be settled and
paid.
 DISADVANTAGES OF BLOCKCHAIN
• It is a distributed network but not a distributed computing system as it relies on nodes to
function properly. The quality of blockchain is dependent on the quality of nodes. Nodes
perform the same task which means it lacks mutual assistance and synergy.

• Data is unchangeable. Once the data is written it cannot be removed. If a person uses a
program that runs on blockchain technology, they cannot be able to remove its trace from
the system if they don’t want it anymore. Human made errors can lead to discrepancies as
they cannot be fixed.
 DISADVANTAGES OF BLOCKCHAIN

• Users maintain private keys. Blockchain does not offer a great deal of control to its users.
Users need to maintain and own their private keys which is extremely crucial to access all
assets stored on the ledger.

• Scalability-blockchain transactions take time to implement due to their encrypted,

complex, and distributed nature. The more people or nodes join the network, the slow it
becomes. For instance, in Bitcoin the number of transactions is dependent on the network.
 DISADVANTAGES OF BLOCKCHAIN
• Storage – blockchain is not meant to store and send terabytes worth of data as the network
of computers does not have enough storage to hold large amounts of data.

• Consumes a lot of energy. Platforms that use the proof of work consensus protocol
consume a lot of electricity which is not beneficial to the environment.

• Unavoidable security flaws. Blockchain is secure but vulnerable to 51% attack. Some
users can exploit certain loopholes within a contract to manipulate the system for their
gain.
 ADVANTAGES OF CRYPTOCURRENCIES
• Decentralized-

• Protection from inflation

• Accessibility

• Easy transfer of funds-

• Secure and private-

 CONS OF CRYPTOCURRENCIES

1. Scalability

2. Cybersecurity

3. Price volatility

4. Regulations
 CONCLUSION
• Both fintech and blockchain have positive effects on finance systems that could later
become revolutionary if tapped into. The decentralized nature of both concepts has
been both appreciated and criticized by people. The risks that companies and
businesses go through to implement both complex concepts call for more research and
innovation in that field. Financial analysts should be more positive in implementing
fintech and blockchain rather than focusing on critics.
.