Opening Remarks: Vienna Conference on the Bali Fintech Agenda

January 28, 2019

Thank you, Governor, for your eloquent opening remarks. And thank you for hosting this conference, here in the Bank’s remarkable Kassensaal.

We’re pleased that the Bank is the site of the very first in our series of conferences, which we’ll convene this year in every region, worldwide. The purpose of our conferences is to promote broad discussions on — and develop a better understanding of — how our member countries are incorporating the high-level considerations proposed in the Bali Fintech Agenda in their national frameworks. That will surely be a daunting challenge for policymakers, as we aim to reap the potential benefits of new financial technologies , while also managing their risks.

This conference will give us an opportunity to reflect on the relevance of the elements of the Bali Fintech Agenda (or “BFA”) to each economy’s conditions; to share experiences; to voice concerns and explore challenges; and to discuss various policy approaches.

Technological change, along with market developments, present us with a wide range of new options — and an array of new risks. With the BFA outlining an integrated approach, our task now is to adjust the policy framework in a comprehensive manner around these trends — aiming to grasp the full, positive potential of Fintech for the good of society.

The BFA started in response to the call — by many member countries of the World Bank Group and the IMF — to have a high-level conceptual framework that can tie together the many challenges inherent in the digitalization of financial services.

Maintaining the momentum of the BFA — after its launch last October at our Annual Meetings — the Bank and the Fund have already started to set this agenda into action.

We’ve already conducted a survey that will provide insights into how our membership sees the agenda’s priorities. The survey results — combined with a summary of recent Fintech developments and regulatory responses — will soon be presented in a formal paper to our Executive Board. We are also furthering our understanding of Fintech issues through our dialogue with national authorities in the context of our Article IV consultation and Financial Sector Assessment Program reports. And we’ve been working closely with standard-setters in each of their respective areas.

In facing the challenges ahead, everyone has a role to play. Given the diversity within our global membership, the experiences of policymakers with Fintech vary widely. Some jurisdictions have been at the frontier, with pro-active and sometimes experimental proposals — while others, until now, have observed from the sidelines.

The financial industry continues to move at breakneck speed — and not necessarily in a linear fashion. (Consider, for example, the recent gyrations of cryptocurrency prices, or the rise and fall of Initial Coin Offerings.) We’ll begin today’s discussions by considering the continuing Fintech developments driven by private-sector innovation, and we’ll explore the private sector’s view of the coming evolution of the dialogue with policymakers.

We’ll also discuss a very promising area, where Fintech seems ready to provide a major benefit to society — promoting Financial Inclusion. Making financial services available to populations that now have little, or no, access to finance is a profoundly important priority in global development.

Those services include making payments, as well as ensuring easier access to credit — through peer-to-peer networks, for example. This is already happening at scale in such places as Kenya, where the M-Pesa mobile-phone wallet is being widely used.

Those benefits, however, are accompanied by new challenges. For instance: Since those broader types of access to financial services are provided by non-bank firms — such as telecom operators and lending platforms — new regulatory issues have arisen. Financial regulations, in the past, have been focused more on licensed institutions — principally, banks. So how should these new areas be regulated?

Amid today’s discussions, we’re looking forward to hearing your thoughts about the Financial Inclusion theme — as well additional issues in financial development. They include new ways of raising funds, managing risks, and prioritizing national development strategies. We’re also mindful of ensuring that the new landscape is competitive, so that we can realize the full value of the new efficiencies promised by new technologies.

Another opportunity that we’ll discuss today — where the potential for cost savings and time efficiency is enormous — is cross-border payments. Banks currently play a major role in international money transfers — but banks’ role is changing in light of new entrants, including telcos, Big Tech, and other firms. In Kenya, for example, M-Pesa users can now make payments to China’s WeChat users.

This area includes a wide array of policy challenges that, by their nature, require a coordinated international framework. We must seek ways

  • to improve the payments infrastructure, to enable greater efficiency;

  • to broaden access to, and review the oversight of, this infrastructure to new entrants — and ensure the interoperability of systems to maximize the benefits of innovation;

  • to oversee and appropriately address the transformation of the banking business due to new technologies; and

  • to mitigate the risk of money laundering in the new payment channels.

In addition, some fundamental services of central banks relate to the issuance of currencies — specifically, the question of whether central banks should issue digital currencies (or “CBDCs”). According to a recent survey by the Bank for International Settlements: 70 percent of central banks are currently involved in — or soon will be involved in — this complex area, with one-third of them now seeing the issuance of CBDCs as likely.

In today’s discussions, we’ll explore the costs and benefits of CBDCs — along with the implications for “banking as we know it.” Panelists will delve into the implications of Fintech for providing central-bank services — as well as for developing robust data infrastructures, to address privacy and cyber risk concerns.

With all of these new developments occurring around us, we must also change what regulators and supervisors monitor and analyze. Classic prudential reporting frameworks, which rely on statutory powers, will need to be complemented by new data-collection frameworks. They must cover new entrants and new channels — and the legal basis for doing so, may not yet be in place.

Similarly, issues regarding the regulatory perimeter must be addressed. For example: What is the appropriate regulatory approach to crypto assets — and, more generally, to new products and activities? What are the stability implications — and, as we identify new risks, how can we mitigate them? Such adjustments should be embedded in strong institutional and legal frameworks that guarantee financial integrity.

After considering all of these issues: Our final session of the day, will be devoted to a roundtable, in which participants will be invited to share their experiences and ask further questions.

As we start developing our work program, to follow-up on the Bali Fintech Agenda, we can begin our efforts by taking three specific steps.

First: Given the comprehensive nature of these challenges, and these opportunities, it would certainly be useful for all jurisdictions to begin consultations with all of the relevant parties in this area — with central banks, regulators, and private-sector participants — to come up with country-specific approaches. Taking into account the comparative advantages and specific situations of each jurisdiction, the priorities are likely to differ from country to country, and the focus will have to shift to meet their specific needs. For some countries, Anti-Money Laundering/Countering the Financing of Terrorism issues may be the top priority; for others, financial inclusion may be the central concern; for still others, the leading priority may be infrastructure.

Second: Another concrete step would be to have regional consultations and cooperation efforts. Tomorrow, Tom Richardson will explore this issue in greater depth, when he talks about the role that the Joint Vienna Institute can play.

And third: We can commit ourselves to sharing knowledge, and to engaging in more events like this one, to reach beyond our own specific countries’ conditions and concerns. Agreeing to pursue a robust program of publications by our respective institutions can be very helpful, as well, in promoting broader knowledge-exchange.

I’m looking forward to our discussions over the next two days, and I’ll be eager to keep in touch with all of your institutions — as we move forward in the months to come, to advance this exciting agenda.

With that, I’ll wish you well, hoping that you’ll have productive discussions today and tomorrow — and now I’ll turn the proceedings over to Tom.

IMF Communications Department

PRESS OFFICER: Andreas Adriano

Phone: +1 202 623-7100Email: