BIS: Regulating fintech: what is going on, and where are the challenges?

17 October 2019

Fernando Restoy, Chairman, Financial Stability Institute, BIS described current developments in the fintech domain and related policy challenges. He drew on ongoing work at the BIS and, in particular, an FSI study they are now conducting on national and global policy initiatives to adjust existing financial regulation to new activities and players.

Fintech-related policy measures can be usefully classified into three groups: (i) those that directly regulate fintech activities; (ii) those focused on the use of new technologies in the provision of financial services; and (iii) those that promote digital financial services more specifically.

The first group of measures relates to the regulation of specific activities such as digital banking, peer-to-peer (P2P) lending or equity raising, robo-advice and payment services. The second group includes new rules or guidelines on market participants' use of technologies such as cloud computing, biometrics or artificial intelligence. The third group covers enabling policy initiatives such as those related to digital identities, data-sharing and the establishment of innovation hubs, sandboxes or accelerators. Over the last few years, most jurisdictions have applied policy measures in some or all of these three areas

To regulate fintech adequately, authorities will need to apply the elusive mix of prudence and determination that is so often required in policymaking. Prudence is needed to avoid discouraging innovations that could eventually benefit society, and also to prevent key public goals - such as financial stability or market integrity - from playing second fiddle to short-term industrial policy aims.

As for determination, this consists primarily in taking action to combat emerging risks as soon as they are recognised. But determination will also be needed to underpin the necessary cooperation between authorities in different fields and jurisdictions.

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