This paper surveys 31 jurisdictions on their policy responses to fintech developments. The key aim of this study is to provide a cross-country overview of the responses that financial authorities have pursued in relation to fintech. The paper is based on responses to a survey conducted in early 2019 by the Financial Stability Institute (FSI).
Technological innovations in financial services (fintech) are increasingly transforming the way financial services are provided. The challenge for policymakers is to maximise the benefits of fintech while minimising potential risks for the financial system.
Building on the work by global standard-setting bodies and other international organisations, authors propose a conceptual framework through which they analyse policy responses to fintech, referred to as the “fintech tree”.
Policy responses to new fintech activities take various forms. Regulatory authorities may respond to fintech activities in a number of ways. For example, authorities may put in place fintech-specific licensing regimes that require entities to go through an authorisation process before they can offer their fintech services. Alternatively or complementarily, they may issue requirements that are fintech-specific, modify existing ones or even prohibit certain activities.
Authorities pursue a range of approaches when regulating fintech activities. For digital banking, licensing regimes or other specific requirements are the exception. Some jurisdictions, however, have launched initiatives to facilitate the establishment of new banks, including digital banks.
For enabling technologies, regulators have adjusted their existing regulations to add technology-specific elements in existing laws, regulation or guidelines. As a result of the level of market adoption, some technologies have received more attention than others. Regulators have been particularly active on application programming interfaces (APIs), cloud computing and biometric-based identification and authentication. In contrast, for artificial intelligence, machine learning and, to some extent, distributed ledger technology, authorities have not gone beyond conducting risk assessments and issuing general guidance.
Public policies that enable the provision of digital services have received much attention. Policy responses to fintech may need to weigh several policy objectives.
At the international level, authorities are working to address emerging risks and develop schemes that facilitate a coordinated regulatory response for global challenges.
Going forward, financial authorities may face further challenges as technology evolves and is applied to new services. Continuous efforts from authorities will be needed to understand novel business models and their underlying risks, to build or maintain the skills and capacity to adequately assess potential implications on financial markets and to adjust their regulatory responses in an agile manner.
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