## Fintech—A Brave New World for the Financial Sector?

_IMF Blog, March 21, 2017_

## Source details

**Canonical URL:** [Fintech—A Brave New World for the Financial Sector?](https://www.imf.org/en/blogs/articles/2017/03/21/fintech-a-brave-new-world-for-the-financial-sector)

## Other formats

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## Bibliographic details
- Authors: Christine Lagarde
- Published: March 21, 2017

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### Emerging technologies
- Technology is rapidly changing virtually every facet of society, including communications, business and government.
- The financial world is at a critical juncture: the widespread adoption of new technologies, such as blockchain-based systems, offers many potential benefits but also gives rise to new risks, including risks to financial stability.
- Key open questions highlighted:
  - How exactly will these technologies change the financial world?
  - Will banks be replaced by blockchain-based systems that facilitate peer-to-peer transactions?
  - Will artificial intelligence reduce the need for trained professionals, and can smart machines provide better financial advice to investors?
- Status of applications: Significant investment is going into fintech, but most real-world applications are still being tested.

### Soaring investment and innovation
- Definition: Financial technology, or fintech, encompasses products, developers and operators of alternative financial systems.
- Growth statistic: Fintech investment quadrupled from 2010 to 2015, to $19 billion annually.
- Forms of fintech innovation cited:
  - Peer-to-peer lending
  - High-frequency trading
  - Big data and robotics
- Success stories and impacts:
  - Cell phone-based banking in Kenya and China is bringing millions of previously “unbanked” people into the mainstream financial system.
  - Virtual currency exchanges allow people in developing countries to transfer money across borders quickly and cheaply.

### Regulatory challenges and risks
- Criminal-finance risks:
  - Cryptocurrencies like Bitcoin can be used to make anonymous cross-border transfers, increasing the risk of money laundering and terrorist financing.
  - Need to define the legal status of a virtual currency, or digital token.
  - Need to figure out how best to perform customer due diligence on virtual currency transfers.
- Financial stability risks:
  - The potential impact on financial stability from the entry of new types of financial services providers into the market is a medium-term concern.
- Regulatory questions:
  - Should new technologies—often driven by algorithms—be subject to the same type of regulation used in the past?
  - Are new regulatory approaches needed for evolving technologies?
  - Can the forces of innovation help reduce risks and maximize benefits?
- Regulatory innovation examples:
  - “Regulatory Laboratory” in Abu Dhabi
  - “Fintech Supervisory Sandbox” in Hong Kong
  - Purpose: promote innovation by allowing new technologies to be developed and tested in a closely supervised environment.

### IMF engagement and research agenda
- IMF activities:
  - The IMF published a paper on virtual currencies (date unspecified in the source) focusing on regulatory, financial, and monetary implications.
  - The IMF has broadened its focus to cover blockchain applications more generally.
  - The IMF has established a High-level Advisory Panel of Leaders in Fintech to help understand developments in the field.
  - The IMF expects to publish a new study on fintech in May.
- Monitoring: The IMF is closely monitoring fintech developments.

### Framing and tone
- The author invokes literary contrasts to frame fintech’s promise and perils:
  - Aldous Huxley’s vision of a frightening future.
  - Shakespeare’s line from The Tempest: “O wonder! How many goodly creatures are there here! How beauteous mankind is! O brave new world.”

*Christine Lagarde — March 21, 2017 — IMFBlog (IMF, organization of 191 countries).*

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## Content in this bundle

- **金融科技：金融业的“美丽新世界”？IMF博客; 2017年3月21日**
  - [金融科技：金融业的“美丽新世界”？IMF博客; 2017年3月21日 (Markdown version)](/external/chinese/np/blog/2017/032317c.pdf.md){rel="alternate" type="text/markdown"}
  - [金融科技：金融业的“美丽新世界”？IMF博客; 2017年3月21日 (PDF)](/external/chinese/np/blog/2017/032317c.pdf){rel="external" type="application/pdf"}
- **フィンテック―金融セクターのすばらしい新世界？ : クリスティーヌ・ラガルド; IMF ブログ2017年3月21日掲載**
  - [フィンテック―金融セクターのすばらしい新世界？ : クリスティーヌ・ラガルド; IMF ブログ2017年3月21日掲載 (Markdown version)](/external/japanese/np/blog/2017/032117j.pdf.md){rel="alternate" type="text/markdown"}
  - [フィンテック―金融セクターのすばらしい新世界？ : クリスティーヌ・ラガルド; IMF ブログ2017年3月21日掲載 (PDF)](/external/japanese/np/blog/2017/032117j.pdf){rel="external" type="application/pdf"}
- **Staff Discussion Note**
  - [Staff Discussion Note (Markdown version)](/external/pubs/ft/sdn/2016/sdn1603.pdf.md){rel="alternate" type="text/markdown"}
  - [Staff Discussion Note (PDF)](/external/pubs/ft/sdn/2016/sdn1603.pdf){rel="external" type="application/pdf"}

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## References

- [عربي](http://blog-montada.imf.org/?p=4774)
- [High-level Advisory Panel of Leaders in Fintech](http://www.imf.org/en/news/articles/2017/03/15/pr1784-imf-managing-director-welcomes-establishment-of-high-level-advisory-group-on-fintech)

_Source: https://www.imf.org/en/blogs/articles/2017/03/21/fintech-a-brave-new-world-for-the-financial-sector_