Handbook of Blockchain, Digital Finance, and Inclusion, Volume 2

ChinaTech, Mobile Security, and Distributed Ledger

Edited by

David LEE Kuo Chuen

Singapore University of Social Sciences, Singapore

Rober t Deng

Singapore Management University, Singapore

ACADEMIC PRESS An imprint of Elsevier

Contents

List of Contributors xv

Preface xix

Chapter 1: The Came ofDian Fu: The Rise of Chinese Finance 7

David LEE Kuo Chuen, Ernie CS. Teo 1.1 Introduction: What Is Dianfu I I S ? 2 1.2 Dian Fu One: Dian Fu in the Equity Market 3 1.3 Dian Fu Two: Dian Fu in China's Peer-to-Peer Lending 15 1.4 Dian Fu Three: Dian Fu in Crowdfunding 22 1.5 Dian Fu Four: Dian Fu in the People's Currency 25 1.6 Dian Fu Five: Dian Fu in Banking 27 1.7 Conclusion 30 Appendix: Acquisitions of Alibaba 33 Acknowledgments 34 References 34 Notes 36

Chapter 2: Balancing Innovation and Risks in Digital Financial Inclusion—Experiences of Ant Financial Services Croup 37

Tao Sun 2.1 Introduction 37 2.2 Definition 38 2.3 Experiences of Ant Financial 40 References 43

Chapter 3: Regulating FinTech in China: From Permissive to Balanced 45

Weihuan Zhou, Douglas W. Arner, Ross P. Buckley 3.1 Introduction 45 3.2 The Evolution of Digital Financial Services in China 46 3.3 Regulation of Digital Financial Services in China 51

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3.4 Conclusion 57 Notes 58

Chapter 4: Big Data Technology: Application and Cases 65

Liu Dawei, Hu Anzi, Li Gen 4.1 Why Big Data Technology Matters? 66 4.2 How Big Data Technology Helps Improving Credit Performance 68 4.3 Brief Introduction of CreditEase: Better Technology, Better Finance 72 4.4 An Instance of Big Data Technology: CreditEase Financial Cloud 75 4.5 Cases and Application Scenarios for CreditEase Financial Cloud 80 References 82 Notes 82

Chapter 5: Trust Management in Mobile Platforms 83

Zheng Yan, Yanxiao Cheng, Ping Yan, Robert H. Deng 5.1 Introduction 84 5.2 Trust, Trust Modeling, and Trust Management 85 5.3 Trust Management in Mobile Platforms 97 5.4 Further Discussions 109 5.5 Conclusions 110 Acknowledgments I l l References I l l

Chapter 6: Security Issues ofln-Store Mobile Payment 115

Xingjie Yu, Su Mon Kywe, Yingjiu Li 6.1 Introduction 116 6.2 Background on In-Store Card Payment 118 6.3 In-Store Mobile Payment Network Models 120 6.4 Issues Related to Token Service Provider 125 6.5 Issues Related to Mobile Payment Service Provider / Token Requestor .. 129 6.6 On-Device Level Issues 132 6.7 Conclusion 141 References 142

Chapter 7: Blockchain - From Public to Private 145

Roy Lai, David LEE Kuo Chuen 7.1 Introduction 146 7.2 Terminology 147 7.3 Overview of the Bitcoin Blockchain 147 7.4 Characteristics of Blockchain 149

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7.5 Types of Blockchains 157 7.6 Conclusion 162 Appendix 1: The Six Layers of Blockchain 167 Appendix 2: Notable Blockchain and Distributed Ledger Technologies 171 References 176 Notes 177

Chapter 8: Blockchain 101: An Introduction to the Future 179

Jeff Carzik, Jacob C. Donnelly 8.1 Two Factors to Achieve Trust 180 8.2 What Problems Do Blockchains Solve? 182 8.3 What Problems Do Blockchains Create? 184 8.4 In Conclusion: The 9 Factors of Blockchain 185 References 186

Chapter 9: Betting Blockchain Will Change Everything - SEC and CFTC Regulation of Blockchain Technology 187

Richard B. Levin, Peter Waltz, Holly LaCount 9.1 Introduction 188 9.2 The Paper Crisis and the National Market System 189 9.3 Blockchain Technologies 193 9.4 SEC Regulation of Blockchain Technology 196 9.5 BTC Trading Corp 200 9.6 CFTC Regulation of Blockchain Technology 205 9.7 Conclusions 211 References 211 Note 212

Chapter 10: Global Financial Institutions 2.0 213

Alyse Killeen, Rosanna Chan 10.1 Blockchain 214 10.2 Global Financial Institutions 217 10.3 Frameworks and Antecedents of Change 219 10.4 Blockchain and Global Financial Institutions 2.0 223 10.5 Needs That Change Post-Global Financial Institutions Blockchain

Adoption 228 10.6 The Innovation Ahead 230 References 239 Notes 240

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Chapter 11: Open-Source Operational Risk: Should Public Blockchains Serve as Financial Market Infrastructures? 243

Angela Walch 11.1 Financial Sector Hype 245 11.2 FMIs and Operational Risk 249 11.3 Open-Source Operational Risks of Public Blockchains 251 11.4 Reflections 266 References 267 Notes 269

Chapter 12: Blockchain Architectures for Electronic Exchange Reporting Requirements: EMIR, Dodd Frank, MiFID l/ll, MiFIR, REMIT, Reg NMS and T2S 271

Careth W. Peters, Guy R. Vishnia Executive Summary 273 12.1 Introduction to Modern Electronic Exchanges and Networks 274 12.2 Evolution of Equity, Commodity, Currency and Derivatives Exchange

Reporting and Transparency Regulations 284 12.3 The Role of Blockchain Technology in Electronic Exchanges 306 12.4 Blockchain Architecture for Order Record Keeping and Transaction

Reporting 315 12.5 Conclusions 324 References 324 Notes 327

Chapter 13: Mobile Technology: The New Banking Model Connecting Lending to the Social Network 331

Paul Schulte 13.1 Technological Advances Making Cell Phones a Center of Financial

Activity 332 13.2 Speed & Massive Data Create New Industries Overnight on Cell Phones:

Alipay & Ant 334 13.3 Insurance Rapidly Changing, Too: Cellular Insurance Empires Being

Created Overnight 336 13.4 Why Are Banks & Insurance Sitting Around? Because Regulators

Forcing Them to 338 13.5 How Cell Phone Apps Are Taking Away Fees From Banks 341 13.6 Why Asia and Why Now? Asia Is a Tabula Rasa Where Young People

Prefer Cell Phone Apps 343

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13 J Amazon, Alibaba, Alphabet, Apple Are the New Bank. These Platforms Threaten Banks 344

13.8 Payments Systems 346 13.9 Two Examples of This in the Emerging World are M Pesa and Its Asian

Twin Bkash 347 13.10 The Jewel in the Crown for Financial Technology: SME Lending

Through the Cell Phone 349 13.11 Why Is This a Private Equity Phenomenon? The US Jobs Act Is a Big

Reason! 350 13.12 Big Data, Crowdfunding and the Small Enterprise (SME): The Magic

Formula 351 13.13 Alibaba and Ant Financial's Cloud Business: The Future of Banking .... 353 13.14 Final Analysis: There Is no Such Thing as Private Information for

Anyone 357 Further reading 359

Chapter 14: Financial Inclusion, Digital Currency, and Mobile Technology 361

Vrajlal Sapovadia 14.1 Introduction 362 14.2 Financial Exclusion 363 14.3 Demand Side Factors of Financial Exclusion 366 14.4 Individual Factors of Financial Exclusion 366 14.5 Environmental Factors of Financial Exclusion 367 14.6 Supply Side Factors of Financial Exclusion 367 14.7 Financial Inclusion and Institutional Support 368 14.8 Legislation and Government Policy in Financial Inclusion 369 14.9 Financial Infrastructure and Financial Inclusion 369 14.10 Digital Currency and Financial Inclusion 370 14.11 Mobile Payments and Financial Inclusion 371 14.12 Global Experience and Opportunities 372 14.13 Challenges and Solutions 378 14.14 The Outlook 382 14.15 Conclusion 383 References 384 Notes 385

Chapter 15: Digital Financial Inclusion in South East Asia 387

Francis Koh, Kok Fai Phoon, Cao Duy Ha 15.1 Introduction 387 15.2 Definition and Review of Digital Financial Inclusion 388

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15.3 Digital Financial Inclusion in South East Asia 393 15.4 Analysis and Discussion 401 References 402

Chapter 16: From the Ground Up: The Financial Inclusion Frontier 405

Griffin Hotchkiss, David LEE Kuo Chuen

16.1 Introduction 405 16.2 Past: 1987-2011 407 16.3 Present: 2011-2016 414 16.4 Future: Beyond 2016 420 Appendix: Myanmar and ASEAN 424 References 428 Notes 428

Chapter 17: Indonesian Microfmance Institutions (MFI) Move to Technology -TBOP's Prodigy Experience 431

Adrian Yeow, David LEE Kuo Chuen, Roland Tan, Michelle Chia

17.1 Introduction 431 17.2 TBOP and Its Prodigy Experience 433 17.3 Applying FinTech Development in MFI Market 448 References 449

Chapter 18: FinTech: Harnessing Innovation for Financial Inclusion 45 7

Dimitrios Salampasis, Anne-Laure Mention

18.1 Introduction 451 18.2 Financial Innovation and Sustainable Development 452 18.3 The Emergence of FinTech 454 18.4 FinTech and Financial Inclusion 456 18.5 Concluding Remarks 459 References ..; 460

Chapter 19: Inclusive Growth as Democratizing Productivity 463

Yuwa Hedrick-Wong

19.1 The Basic Ideas 463 19.2 Inter-Dependency Between Productivity and Inclusion/Exclusion 465 19.3 Inclusive Growth as Democratizing Productivity 468 Notes 470

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Chapter 20: Autonomous Finance 471

Andras Kristof. 20.1 Trust, Accountability and... Autonomy? 471 20.2 Autonomous Organizations 472 20.3 DGD 472 20.4 More Than a Promise 473 20.5 Can't Touch This 473 20.6 Self-imposed, Unbreakable Vow 473 20.7 How The "DAO" Became a Four-Letter Word 474 20.8 The DAO Attack 474 20.9 Are We Ready for This? 475 20.10 A Postmortem 476 20.11 Distributed Autonomous Finance Use Cases 477 Notes 479

Chapter 21: Inclusion or Exclusion? Trends in Robo-advisory for Financial Investment Services 481

Roland Schwinn, Ernie CS. Teo 21.1 Introduction 481 21.2 Robo-advisors 483 21.3 Discussion: What Is the Future of Robo-advisors? 488 21.4 Conclusion: Inclusion or Exclusion? 490 References 491 Notes 492

Chapter 22: How 3D Printing Will Change the Future of Borrowing Lending and Spending? 493

Abhijit Patwardhan 22.1 History of 3D Printing 494 22.2 The 3d Printing Landscape 494 22.3 The Future of Spending by Consumers, Businesses and Governments? .. 503 22.4 The Future of Borrowing and the Risks of Lending 515 Notes 518

Index 521

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