The Basel Committee on Banking Supervision published a contribution where they assess the impact of technology-driven innovation in financial services, or “fintech”, on both the banking industry and the activities of supervisors in the near to medium term. The increasing presence of new business model based on fintech developments is posing incumbent challenges to financial institutions.
The impact of such new technologies are however not bounded to the banking sector: the analysis contributes also with a focus on technology developments (big data, distributed ledger technology and cloud computing) and three cse studies on fintech business models (innovative payment services, lending platforms and neo-banks).
The contribution enhanced the key implications on a set of supervisory issues, here quoted:
- the overarching need to ensure safety and soundness and high compliance standards without inhibiting beneficial innovation in the banking sector
- the key risks for banks related to fintech developments, including strategic/profitability risks, operational, cyber- and compliance risks
- the implications for banks of the use of innovative enabling technologies
- the implications for banks of the growing use of third parties, via outsourcing and/or partnerships
- cross-sectoral cooperation between bank supervisors and other relevant authorities
- international cooperation between bank supervisors
- adaptation of the supervisory skill set
- potential opportunities for supervisors to use innovative technologies (“suptech”)
- relevance of existing regulatory frameworks for new innovative business models
- key features of regulatory initiatives set up to facilitate fintech innovation