Mark Carney has spoken as the chair of the Financial Stability Board, looking at the potential FinTech has to make the financial system inclusive, effective, efficient and resilient. He said that the true promise of FinTech comes from its potential to unbundle banking into its core functions – which are settling payments, performing maturity transformation, sharing risk and allocating capital. He said new entrants such as PSPs, P2P lenders, aggregators, rob0-advisers and innovative trading platforms are now driving this through, and incumbents are having to adopt new technologies to reinforce the benefits of their business models. He noted that systemic risks are bound to evolve, and that policymakers face the challenge of ensuring FinTech develops in a way that maximises the opportunities and minimises the risks. FSB is to examine this, and assess how existing regulatory frameworks address them. It will report to G20 in July. He raised as potential issues:
- the financial services value chain – the loss of the customer relationship on a human level, but modelling matching them with the best available rates;
- broader public policy issues, such as AML/CFT concerns, the increasing withdrawal of correspondent banking services and how to provide digital identity validations, and data protection;
- potential impact of FinTech on financial stability – by looking at which FinTech activities are traditional banking activities by another name, and which could change the safety and soundness of regulated firms or potentially disrupt systemically important markets. The implications for the aggregate level of cyber and operational risk need to be addressed also.
The looked at how supervisory approaches can address the new practices, such as through regulatory sandboxes, adapting authorisation processes and expanding access to central bank money to non-bank PSPs – all of which the UK is doing. Finally, he noted the drive to develop “proofs of concepts with new enabling technologies” from machine learning to distributed ledgers. He finished by stressing how important it is that authorities be alert to the moving perimeter and risks.