D367 Innovation in Finance
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Free D367 Innovation in Finance Questions
Explain how fiat currency differs from commodity money.
- Fiat currency has intrinsic value, while commodity money does not
- Fiat currency is backed by government trust, whereas commodity money is backed by physical goods
- Commodity money is more widely accepted than fiat currency
- Fiat currency can be exchanged for a fixed amount of gold
Explanation
Fiat currency derives its value from government regulation and public trust rather than from a physical commodity. In contrast, commodity money has intrinsic value because it is made of materials like gold or silver, which are valuable on their own. This distinction allows fiat currency to be widely used for transactions without being tied to physical reserves, giving governments greater flexibility in managing monetary policy and supply.
Correct Answer Is:
Fiat currency is backed by government trust, whereas commodity money is backed by physical goods
If a government implements strict regulations on cash transactions, what might be the potential implications for the use of physical cash in society?
- Physical cash usage is likely to increase as people resist regulations
- The use of physical cash may decline as people adapt to digital alternatives
- There will be no change in the use of physical cash
- Physical cash will become the only accepted form of payment
Explanation
Strict regulations on cash transactions, such as limits on cash payments, can encourage the adoption of digital payment methods. Consumers and businesses are likely to shift toward electronic transactions for convenience, compliance, and record-keeping. Over time, the reliance on physical cash may decrease, leading to a more digital and traceable economy while still retaining cash for limited purposes.
Correct Answer Is:
The use of physical cash may decline as people adapt to digital alternatives
What is an example of a decision artificial intelligence (AI) model?
- Predicts customer churn patterns
- Plaittrack forecasts Omar's most likely next purchase based on patterns
- Recommends portfolio adjustments automatically
- Detects fraudulent transactions in real time
Explanation
A decision AI model uses algorithms to analyze data and predict outcomes or behaviors to support decision-making. For example, Plaittrack forecasts an individual’s most likely next purchase based on historical patterns. This allows companies to anticipate customer behavior, tailor recommendations, and improve engagement. Decision AI models apply analytics to make informed, data-driven predictions that can guide business strategy and operational actions.
Correct Answer Is:
Plaittrack forecasts Omar's most likely next purchase based on patterns
Using Google Wallet, consumers can pay for goods in stores. At check out, mobile users simply pass or tap their phone on a merchant terminal and payment is transferred. Users receive an SMS text message confirmation. The Google Wallet and similar payment systems are based on ________ technology.
- Bar code
- QR code
- Augmented reality
- NFC
Explanation
Google Wallet and similar mobile payment systems use Near Field Communication (NFC) technology. NFC allows devices to communicate securely over short distances, enabling contactless payments at merchant terminals. Users simply tap or bring their phones close to the terminal to complete transactions quickly and safely, with immediate confirmation sent via SMS or app notifications. This technology enhances convenience and streamlines in-store payment experiences.
Correct Answer Is:
NFC
Which benefit does near field communication (NFC) offer retailers?
-
Faster checkout
-
Transaction speed
-
Contactless payments
-
Seamless scanning
Explanation
Explanation:
Near-field communication (NFC) technology enables retailers to process payments quickly and securely by allowing customers to tap their devices at the point of sale. This reduces transaction time, minimizes queues, and enhances the overall shopping experience. The speed and convenience provided by NFC improve operational efficiency and customer satisfaction, making it a valuable tool in modern retail environments.
Correct Answer:
Transaction speed
How have fintechs changed the way traditional banks conduct business?
-
They implement AI-powered chatbots to handle customer service inquiries efficiently across all channels.
-
Some banks now partner with fintechs and adopt their innovations to improve services.
-
They utilize blockchain technology to streamline interbank settlements and reduce transaction costs.
-
They integrate mobile-first platforms to enhance digital customer engagement and loyalty programs.
Explanation
Explanation:
Fintechs have driven significant changes in the way traditional banks operate by introducing innovative technologies and business models. Many banks have responded by partnering with fintech companies or adopting their solutions to enhance service delivery, improve operational efficiency, and meet customer expectations for faster, more convenient, and digitally-driven financial services. This collaboration helps banks remain competitive in a rapidly evolving financial landscape while leveraging fintech innovations without developing them entirely in-house.
Correct Answer:
Some banks now partner with fintechs and adopt their innovations to improve services.
What is the primary function of a blockchain?
- To provide a platform for cryptocurrency exchanges
- To serve as a central database for banking transactions of cryptocurrency
- To ensure the privacy of distributed online communications
- To act as a digital ledger that records transactions across multiple computers
Explanation
A blockchain is a decentralized digital ledger that records transactions across a network of computers. Its primary function is to ensure transparency, immutability, and security of transaction data without relying on a central authority. Each transaction is verified and linked in blocks, creating a permanent and tamper-resistant record. This technology underpins cryptocurrencies, smart contracts, and various applications requiring trustless, distributed record-keeping.
Correct Answer Is:
To act as a digital ledger that records transactions across multiple computers
Peer-to-peer lending, which allows individuals to borrow and lend money while bypassing financial institutions, is also called
- crowd jumping
- social lending
- buddy lending
- Web investing
- angel investing
Explanation
Peer-to-peer (P2P) lending, also known as social lending, enables individuals to lend and borrow money directly without relying on traditional financial institutions. P2P platforms connect borrowers with investors, allowing loans to be funded collectively. This approach often reduces costs, increases access to credit, and provides lenders with investment opportunities, creating a decentralized alternative to conventional banking.
Correct Answer Is:
social lending
Which of the following is NOT considered a traditional payment method in modern finance?
- Checks
- Credit cards
- Cryptocurrencies
- Debit cards
Explanation
Cryptocurrencies are not considered traditional payment methods. Traditional payment methods include checks, credit cards, and debit cards, which are regulated, widely accepted, and backed by banks or financial institutions. Cryptocurrencies, by contrast, are digital assets that operate independently of central authorities and rely on decentralized networks, making them non-traditional in the context of modern finance.
Correct Answer Is:
Cryptocurrencies
How does "NFC" support mobile payment?
- It stores money electronically
- It enables exchange of data between the mobile device and the payment terminal
- It securely transfers the money to the seller
- It uniquely identifies the buyer
Explanation
Near Field Communication (NFC) technology enables mobile payment by allowing the mobile device to communicate wirelessly with a payment terminal over short distances. When a user taps or holds their device near the terminal, NFC exchanges the necessary data to process the transaction quickly and securely. This facilitates contactless payments, improving convenience and speed in retail and other payment environments.
Correct Answer Is:
It enables exchange of data between the mobile device and the payment terminal
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