FSB and CGFS publish joint report on the functioning of FinTech credit markets

On 22 May 2017, the Financial Stability Board (FSB) and the Committee on the Global Financial System (CGFS) published a report on FinTech credit.

FinTech credit – that is, credit activity facilitated by electronic platforms such as peer-to-peer lenders – has generated significant interest in financial markets, among policymakers and from the broader public. Yet there is significant uncertainty as to how FinTech credit markets will develop and how they will affect the nature of credit provision and the traditional banking sector.

The report covers current regulatory and other policy frameworks for FinTech credit, focusing in particular on how FinTech credit is treated within existing frameworks and whether there have been specific policy initiatives for FinTech credit (section 7).

The report provides several key messages:

  • The nature of FinTech credit activity varies significantly across and within countries due to heterogeneity in the business models of FinTech credit platforms.
  • Although FinTech credit markets have expanded at a fast pace over recent years, they currently remain small in size relative to credit extended by traditional intermediaries.
  • A bigger share of FinTech-facilitated credit in the financial system could have both financial stability benefits and risks in the future, including access to alternative funding sources in the economy and efficiency pressures on incumbent banks, but also the potential for weaker lending standards and more procyclical credit provision in the economy.
  • The emergence of FinTech credit markets poses challenges for policymakers in monitoring and regulating such activity. Having good-quality data will be key as these markets develop.