Transcript

The World of Alternative Finance

WORLD OF THE ALTERNATIVE FINANCE The growth of the internet has brought with it a vast range of opportunities for development in every sector. The financial sector is no exception to this, as innovative ways of making payments and exchanging currencies have been conceptualised and implemented along with other technological advancements. Here, we take a look at some alternative methods of payment that have evolved out of traditional bank transfers and card payments. CROWDFUNDING Crowdfunding involves the joint-funding of projects by a number of individuals and organisations. It is often used by small businesses and startups as a method of development. There are three basic models of crowdfunding It's becoming increasingly popular with individuals who wish to put an idea into practice. Sponsorship Lending Investment A BRIEF HISTORY Crowdfunding has been used by musicians and filmmakers since the 1990s. The term 'crowdfunding' was first used in 2006, after it developed from the broader idea of crowdsourcing. There are now over 450 2000 2006 1990 crowdfunding platforms available Official platforms weren't established until the early 2000s. HOW IT WORKS An individual or business pitches their project idea via the crowdfunding platform. This includes reasons that individuals should support the project, rewards for specific amounts donated and a fundraising target. pledge pledge creators idea pledge pledge Rewards are defined by Individuals use the the project creator and can include merchandise, donate money to projects allotted time, the money If the funding target is not If the project reaches crowdfunding platform to its funding target in the reached, the money is typically not taken from and may be promised a goes to the creators and backers and the project is deemed unsuccessful dinner invitations and even film roles. reward for doing so. the project goes ahead. DOES IT WORK? There have been over 6.5 million backers and over 16.3 million total pledges on Kickstarter. KICKSTARTER 65,000 PROJECTS 1.2 BILLION PLEDGED TO PROJECTS SUCCESSFULLY FUNDED PEER-TO-PEER Peer-to-peer transfers and exchanges allow individuals and businesses to transfer money between countries and exchange currency without being affected by exchange rates. There are several companies that will offer to connect different users who wish to exchange money with each other in a secure way. A BRIEF HISTORY The idea of online peer-to-peer transfers and exchanges was theorised in the late 1990s, but didn't emerge as a fully formed service until years later. This alternative process of making international payments and exchanging currency has steadily gained popularity as people have become more comfortable with handling their money online. 1990 2014 HOW IT WORKS user transfer secure server transfer user Users decide on the amount and currency they wish to transfer, and then upload their details. The service provider matches this amount and currency with The money is transferred into the users' accounts by the service provider using a secure system. another user to ensure that the best exchange rate can be found. DOES IT WORK? As peer-to-peer finance methods bypass banks, many see them as a simpler way to find the optimum currency exchange rate. It's now possible to process peer-to-peer transfers between over 150 countries ONLINE PAYMENT The ability to make payments online was a turning point in the internet's history. There are now a range of different services that allow individuals and businesses to pay each other securely online, all of which give users the ability to transfer money quickly without going through a bank. A BRIEF HISTORY In 2002, PayPal became a fully owned subsidiary of eBay, making it synonymous with the eBay brand. PayPal, which has arguably become the most popular global online payment service, was founded in 1998. Other e-commerce options began to gain popularity as 1999 2002 security 1998 became a clear problem when paying directly with credit cards PayPal launched in 1999. Before this breakthrough, credit card payments were used most commonly online. HOW IT WORKS payment payment user's account payment payment Users of online payment services sign up for an account that includes their credit or debit card details Money can then be sent either from the account balance, credit card or debit card and can be received into the account. DOES IT WORK? NOW OVER 193 COUNTRIES 50 MILLION PAYPAL MEMBERS AND REGIONS CRYPTOCURRENCY Crytocurrencies are systems that incorporate the principles of cryptography to create a decentralised currency. The most significant difference between cryptocurrencies and other currencies is that the production of money cannot be abused by individuals. There is a fixed amount of currency that is produced by the system at a rate that is previously decided and publicly known. A BRIEF HISTORY The world's first Bitcoin ATM was launched in 2013 in Vancouver, Canada, which shows the growing popularity of cryptocurrency as a finance option. The first cryptocurrency was Bitcoin, which was created in 2009. Many cryptocurrencies have been created, but 2013 Bitcoin 2009 2011 has been the most successful This was followed by Namecoin and Litecoin in 2011, HOW IT WORKS Example system: Bitcoin. Bitcoins are generated as rewards for users who complete payment processing work with their computers. mining and buying process mining reward exchange peer-to-peer People offer their computing power to verify and record payments in the public ledger. This is called "mining'. Bitcoins can also be obtained in The transfer of Bitcoins uses a exchange for other currencies and in exchange for products. peer-to-peer system and can include an optional transaction fee. DOES IT WORK? TRANSACTIONS AVERAGE Bitcoin is now accepted as payment by 3,000 Virgin Galactic, Wordpress, Reddit, BITCOIN and among others PROCESSED EVERY HOUR BITCOIN CONTROVERSY POPULARITY DISCREPANCIES Bitcoin's rise in popularity has brought with it a range of potential problems involving its association with banks and links to criminal activity. There have been many discrepancies between countries regarding the classification of Bitcoin. Finland Gemany Texas A Texas court classified it as a currency, while a The most transparent of these is the difficulty Bitcoin companies have had in opening bank accounts due to their association with the cryptocurrency. German court found it to be a unit of account and the Finnish government classed it as a commodity. REGULATION CRIMINAL The regulation of Bitcoin has been addressed in different ways across the world. In Canada it is regulated under anti-money laundering legislation. Bitcoin has been linked to criminal activities including theft, money-laundering and the purchase of illegal items. China This has been the main source of controversy, The People's Bank of China ordered all banks to stop dealing with anyone involved in the Bitcoin business. In 2014, the European Banking Authority advised although supporters maintain that the tendency for Bitcoin to be used for criminal activities is the same as that for other currencies. European banks to not deal in cryptocurrencies. CONTACTLESS PAYMENTS There are currently a number of services being developed that aim to implement contactless payment technology. This would involve purchasing items with a phone, smartwatch, specialised wristband or even facial recognition software. The concept behind this technology is to allow users to make quicker transactions that don't require a credit or debit card. A BRIEF HISTORY Although contactless payment systems have not yet been widely implemented, the technology was first used by Mobil in 1997. UK retailers that offer contactless payments include McDonald's, Boots, Subway and Pret A Manger. Most banks also provide contactless credit cards on request. The first contactless cards were issued by Barclaycard in 2008. 1997 2008 HOW IT WORKS The specific process of the payment depends on the item being used. card card reader payment process bank account Contactless cards are held up to a reader, which automatically scans and processes the transaction in a similar way to how it would with a chip and pin card. Contactiess payments using mobile phones and wristbands could also be made in this way, although a specialist reader will be required. DOES IT WORK? ISSUES IN THE UK BANKS OWN I 40.7 174,000 MILLION PATRENT CREDIT CARD CONTACTLESS CARDS CONTACTLESS TERMINALS SOURCES https://www.kickstarter.com/help/stats?ref-footer https://www.currencyfair.com/support/fags/ https://www.paypal.com/uk/cgi-bin/webscr?cmd-xpt/Help/general/TopQuestion1-outside https://bitcoin.org/en/faqlfis-bitooin-really-used-by-people http://www.payyourway.org.uk/new-technology/ http://www.contactless.info/Facts-and-Stats.asp courtesy of www.currencyfair.com e mons

The World of Alternative Finance

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Crowdfunding, Peer-To-Peer, CryptoCurrencies – you’ve probably heard of them, but might not have a good idea what they actually are and how they function. This infographic explains some of the ...

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