Fintech and Financial Services: Initial Considerations
Staff Discussion Notes, June 19, 2017
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- Fintech and Financial Services: Initial Considerations
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Bibliographic details
- Authors: Dong He, Ross B Leckow, V. Haksar, Nigel Jenkinson, Mikari Kashima, Tanai Khiaonarong, Celine Rochon, Hervé Tourpe
- Published: June 19, 2017
- Series: Staff Discussion Notes
- DOI: https://doi.org/10.5089/9781484303771.006
Overview
- Authors: Dong He, Ross B Leckow, V. Haksar, Nigel Jenkinson, Mikari Kashima, Tanai Khiaonarong, Celine Rochon, Hervé Tourpe
- Publication date: June 19, 2017
- Publication type: Staff Discussion Notes No. 2017/005
- Pages: 49
- Volume: 2017
- Issue: 005
- DOI: https://doi.org/10.5089/9781484303771.006
- ISBN: 9781484303771
- ISSN: 2617-6750
Executive summary
- A new wave of technological innovations, often called “fintech,” is accelerating change in the financial sector.
- The paper sets out an economic framework for thinking through the channels by which fintech might:
- provide solutions that respond to consumer needs for trust, security, privacy, and better services,
- change the competitive landscape, and
- affect regulation.
- The analysis combines a broad discussion of trends across financial services with a focus on cross-border payments and especially the impact of distributed ledger technology.
- Overall findings:
- Boundaries among different types of service providers are blurring.
- Barriers to entry are changing.
- Improvements in cross-border payments are likely.
- The paper argues that regulatory authorities need to carefully balance efficiency and stability trade-offs in the face of rapid changes, ensure that trust is maintained in an evolving financial system, and highlights the importance of international cooperation.
Key findings and themes
- Market structure and competition:
- Blurring of boundaries among different types of service providers.
- Changing barriers to entry, influenced by factors such as fixed costs, sunk costs, and network externalities.
- Potential shifts in concentration, contestability, and vertical/horizontal integration.
- Payments and distributed ledger technology (DLT):
- Focus on cross-border payments as a central case study.
- Distributed ledger technology may affect the payments chain, payment instruction processes, and payment patterns.
- Improvements in cross-border payments are likely, though trade-offs exist.
- Consumer considerations:
- Fintech innovations address consumer needs for trust, security, privacy, and better services.
- Information asymmetries and matching frictions are relevant for adoption and product differentiation.
- Policy and macro-financial implications:
- Implications for monetary policy, central banks, fiat money, and digital currencies.
- Potential effects on financial stability and the financial sector more broadly.
- Importance of maintaining trust and addressing systemic risks as technologies evolve.
Policy recommendations and regulatory considerations
- Balance efficiency and stability trade-offs:
- Regulatory authorities should weigh efficiency gains from fintech against potential stability risks.
- Preserve trust in the financial system:
- Ensure mechanisms for trust, security, and privacy keep pace with technological changes.
- Adapt regulatory frameworks to changing market structures:
- Monitor and respond to changing barriers to entry, market concentration, and new intermediaries.
- International cooperation:
- Cross-border implications, especially for payments and DLT, necessitate enhanced international cooperation among regulators and supervisors.
- Supervisory focus areas implied by the analysis:
- Competition policy, consumer protection, data privacy, cybersecurity, and oversight of new payment arrangements.
Subjects and keywords
- Subjects: Blockchain and DLT, Emerging technologies, Fintech, Technology, Virtual currencies
- Keywords: adoption, barriers to entry, Blockchain and DLT, central banks, competition, concentration, cross-border payment, cross-border payments, digital currencies, economies of scale, Emerging technologies, entry, fiat money, financial regulation, financial sector, financial stability, Fintech, Fintech firm, fixed costs, Global, horizontal integration, information asymmetries, innovation, intermediaries, international cooperation, market contestability, market structure, matching, monetary policy, network externalities, payment instruction, payment pattern, payments chain, product differentiation, SDN, sunk costs, transaction costs, vertical integration, virtual currencies
Staff Discussion Note: "Fintech and Financial Services: Initial Considerations", Staff Discussion Notes 2017, 005.
Content in this bundle
- EXECUTIVE SUMMARY