Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Fintech for inclusion takes centre stage amid accelerating change

251 views

Published on

Digital payments and SupTech were the two main topics that emerged at the recent meeting in Basel of the Global Financial Standard Setting Bodies (SSBs) on new developments in FinTech.
The presentation slides were prepared and delivered by Better Than Cash Alliance member, Bangko Sentral ng Pilipinas.

Published in: Technology
  • Be the first to comment

Fintech for inclusion takes centre stage amid accelerating change

  1. 1. OVERVIEW OF RECENT INDUSTRY DEVELOPMENTS: “FINTECH FOR INCLUSION” TAKES CENTRE STAGE AMID ACCELERATING CHANGE Pia Roman Fourth Conference on Standard-Setting Bodies and Innovative Financial Inclusion 25-26 October 2018 Basel, Switzerland
  2. 2. Why Fintech & Financial Inclusion? • Financial Inclusion seen as key enabler of development, and is noted as a specific target in seven of the UN’s SDGs • Digital financial services in particular can empower people to lead productive & healthy lives • Target groups like women, youth, smallholder farmers, MSMEs, migrants, & refugees especially benefit from innovative financial services
  3. 3. “Fintech” – Then… • The Financial Stabiity Institute (FSI) was jointly created in 1998 by the Bank for International Settlements and the Basel Committee on Banking Supervision. Its mandate is to assist supervisors around the world in improving and strengthening their financial systems. • In 2012 FSI joined the G20’s Global Partnership for Financial Inclusion (GPFI) to hold their first conference on “Standard-Setting Bodies and Financial Inclusion: Promoting Financial Inclusion through Proportionate Standards and Guidance”  Focused on proportionality, esp around KYC, formalization, branchless banking, and consumer protection at the Bottom of the Pyramid  Notable ”innovative” services relevant to financial inclusion were mobile money payments and use of agents in some low-income countries, while new payment services linked to bank or credit card accounts had been emerging in high income countries
  4. 4. “Fintech” – … and Now • Adoption happening at much faster pace than past innovations • Key features include improved service & reach by traditional & new FSPs, streamlined infrastructure, reduced intermediation, strategic role of data, customer empowerment • Fintech touches not only financial services sector but every business that financial sector deals with, which is to say, all of them Source: Business Insider Intelligence, May 17, 2018, “Fintech could be bigger than ATMs, PayPal and Bitcoin combined”
  5. 5. And it’s not just in high income countries…
  6. 6. What’s included in Fintech? * FSB, June 2017: “Financial Stability Implications from Fintech: Supervisory and Regulatory Issues that Merit Authorities Attention,” http://www.fsb.org/wp- content/uploads/R270617.pdf • The Financial Stability Board (FSB) is an international body that monitors and makes recommendations about the global financial system. The FSB defines fintech as:  “Technologically enabled financial innovation that could result in new business models, applications, processes, or products with an associated material effect on financial markets and institutions and the provision of financial services” • Drivers include:  Shifting consumer expectations around convenience, speed, cost & user-friendliness  Advances in technology related to the internet, big data, mobile technology & computing power  Evolving regulatory environment & related changes in business incentives for incumbents & new players
  7. 7. Recent Fintech Developments of Interest* Fintech-based business models:  “Challenger” banks  Incumbents building own digital banks  Multiple partnership iterations between traditional & new FSPs  “Bigtech” moving into finance Fintech-based applications:  Open APIs Fintech-based processes:  Big data analytics & deep learning  Blockchain/DLT/smart contracts  Cloud computing  NFC expansion  AI, algorithms & robotics  Robo-advisors  Digital identity systems/verification/KYC utilities Fintech-based products:  Mobile & web-based financial services  Next generation digital lending  Payments innovations  Crowdfunding & peer-to-peer lending  Digital fiat currencies, tokens  Cryptocurrencies & ICOs Regtech/Suptech Tools:  Reporting, compliance, monitoring, analysis tools * Categories taken from FSB definition
  8. 8. How are Recent Fintech Developments Enabling Inclusion? (1/5)  Expanding competition  Reducing cost of acquisition for new customers  Greater reach into previously under-served markets  Faster service innovation by moving development outside of legacy core banking systems Fintech-based business models:  “Challenger” banks  Incumbents building own digital banks  Multiple partnership iterations between traditional & new FSPs  “Bigtech” moving into finance
  9. 9. How are Recent Fintech Developments Enabling Inclusion? (2/5) • Greater data learnings for business model refinement, customer centric product design • Remote onboarding, monitoring • Bitcoin-enabled remittances • Cheaper data storage along with more sophisticated service provisioning • Expanded ecosystem development • Enhanced financial literacy tools and behavioral “nudges” • Cost-effective “personalized” advice at scale • Broader, more reliable CDD tools and verification systems • Real-time service monitoring Fintech-based processes:  Big data analytics & deep learning  Blockchain/DLT/smart contracts  Cloud computing  NFC expansion  AI, algorithms & robotics  Robo-advisors  Digital identity systems/verification/KYC utilities
  10. 10. How are Recent Fintech Developments Enabling Inclusion? (3/5) • Faster innovation, reduced cost of integration • Enhanced opportunities for collaboration between service providers • Interoperability • Third party applications development that helps spur usage • Faster ecosystem development (“digital rails”) Fintech-based applications:  Open APIs
  11. 11. How are Recent Fintech Developments Enabling Inclusion? (4/5) • Real-time reporting, monitoring & data analysis • Direct links between supervisors, service provider systems • New oversight tools - geolocation, cluster analysis • Lower cost of compliance => lower cost of service Regtech/Suptech Tools:  Reporting, compliance, monitoring, analysis tools
  12. 12. How are Recent Fintech Developments Enabling Inclusion? (5/5) • Remote, paperless service offerings & digital only customers • Democratization of access by smaller players • Cloud-based loan origination services • Providing a digital “human touch” (interactive co-browsing tools, video chat, chatbots) • New data sources & origination requirements • Streamlined workflows, lower cost of compliance • Reduced cash handling costs Fintech-based products:  Mobile & web-based financial services  Next generation digital lending  Payments innovations  Crowdfunding & peer-to-peer lending  Digital fiat currencies, tokens  Cryptocurrencies & ICOs
  13. 13. At the same time, these development raise risks & issues to be aware of… • Fast changing business models, rapid ability to scale • Risk of regulatory arbitrage &/or “gaming the system” • Supervision & monitoring of real-time, high volume transactions in a way that also allows for immediate mitigation of high risk situations • AI brings new risks – unregulated fintech firms, big data analytics, changing nature of activities performed by FSPs (supervision of individuals vs. supervision of algorithms). Also unresolved liability questions with AI (civil, criminal, administrative). • Open APIs introduce unregulated third-party developers • Increased need for inter-regulator coordination • Consumer protection, redress and liability along multi-party digital value chains • Digital ponzi schemes • Data privacy and protection critical to prevent fraud/criminal activity, as well as non- financial risks such as inappropriate government use of personal data that discourages use of formal financial services • Cybercrime (phishing, malware)
  14. 14. What have the SSBs been doing on this topic? • Fintech & Market Structure in Financial Services Sep 2018 • The Use of Regtech & Suptech by Firms & Authorities Aug 2018 • Crypto-Assets Report, Jul 2018 • Fintech Credit Markets Around the World Sep 2018 • FSI: Innovative Technology in Financial Supervision (Suptech) Jul 2018 • BCBS: Sound Practices: Implications of Fintech Developments for Banks and Bank Supervisors, Feb 2018 • CPMI: Cross-Border Retail Payments, Feb 2018 • CPMI: Distributed Ledger Technology in Payment, Clearing and Settlement: An Analytical Framework Feb 2017 • FATF Fintech and Regtech Initiative Platform Mar 2018 • Deposit Insurance & Financial Inclusion: Current Trends on Insuring Digital Stored-Value Products, Oct 2018 • Fintech Survey (forthcoming) • IOSCO Fintech Network May 2018 • IOSCO Research Report on Financial Technologies (Fintech) Feb 2017• Draft Application Paper on the Use of Digital Technology in Inclusive Insurance Feb 2018 • Fintech Developments in the Insurance Industry, Mar 2017p
  15. 15. In October 2018 the World Bank & IMF announced their “Bali Agenda” to support national regulators • Embrace the Fintech Revolution • Enable new technologies to enhance financial service provision • Reinforce competition & commitment to open, free & contestable markets • Foster Fintech to promote financial inclusion & developing financial markets Foster enabling environment to harness opportunities Address potential risks & improve resilience Strengthen financial sector policy framework Promote international collaboration • Monitor developments closely to deepen understanding of evolving financial systems • Adapt regulatory frameworks & supervisory practices for orderly development & stability of the financial system • Modernize legal frameworks to provide & enabling legal landscape • Safeguard financial integrity • Ensure the stability of monetary & financial systems • Develop robust financial & data infrastructure to sustain Fintech benefits • Encourage international cooperation & coordination, and information sharing • Enhance collective surveillance & assessment of financial sector risks
  16. 16. How do regulators and policymakers filter out the noise and focus on key issues? • Fintech-related changes to traditional financial services business models, structures & operations may require supervisors to reassess their current supervisory models and resources in order to ensure continued effective oversight of the financial system. • The same technologies that offer efficiencies and opportunities for fintech firms and traditional financial service providers, such as AI/ML/advanced data analytics, DLT, cloud computing and APIs, may also have the potential to improve supervisory efficiency and effectiveness. • Consumer protection, including data privacy and protection, redress and dispute resolution will require more active involvement on the part of regulators and supervisors than traditionally addressed. • Just as fintech is blurring the lines between sectors, so too must policymakers, regulators, supervisors and SSBs proactively collaborate to 1) research & understand fintech developments & their implications, and 2) address cross-cutting issues as they arise. Source: BCBS: Sound Practices: Implications of FinTech Developments for Banks and Bank Supervisors, February 2018

×