## Fintech: Capturing the Benefits, Avoiding the Risks

_IMF Blog, June 20, 2017_

## Source details

**Canonical URL:** [Fintech: Capturing the Benefits, Avoiding the Risks](https://www.imf.org/en/blogs/articles/2017/06/20/fintech-capturing-the-benefits-avoiding-the-risks)

## Other formats

- [Markdown version](/en/blogs/articles/2017/06/20/fintech-capturing-the-benefits-avoiding-the-risks/index.md)
- [Structured JSON version](/en/blogs/articles/2017/06/20/fintech-capturing-the-benefits-avoiding-the-risks/index.json)
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## Bibliographic details
- Authors: Christine Lagarde
- Published: June 20, 2017

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### Overview and context
- Author: Christine Lagarde
- Publication date: June 20, 2017
- IMF staff paper referenced: Fintech and Financial Services: Initial Considerations
- Core premise: Financial technology (Fintech) could make cross-border payments and transactions as simple as sending an email, affecting consumers and businesses globally.

### Definition and key technologies
- Fintech is described as the collection of new technologies whose applications may affect financial services, including:
  - artificial intelligence
  - big data
  - biometrics
  - distributed ledger technologies such as blockchains

### Promised benefits and use cases
- Fintech offers the promise of faster, cheaper, more transparent and more user-friendly financial services for millions around the world.
- Specific opportunities highlighted:
  - Artificial intelligence combined with big data could automate credit scoring, so that consumers and businesses pay more competitive interest rates on loans.
  - “Smart contracts” could allow investors to sell certain assets when pre-defined market conditions are satisfied, enhancing market efficiency.
  - Mobile phones combined with distributed ledger technology could enable peer-to-peer payments that bypass banks, simplifying cross-border purchases (example: ordering tea leaves from abroad could become as easy as paying for a cup of tea next door).

### Structural implications for financial intermediation
- Intermediaries common to financial services (banks, firms specialized in messaging services, correspondent banks clearing and settling transactions across borders) will face significant competition.
- New technologies such as identity and account verification could lower transaction costs and increase counterparty information, making middlemen less relevant.
- Possible evolution: existing intermediaries may be pushed to specialize and outsource well-defined tasks to technology companies, possibly including customer due-diligence.

### Risks and challenges
- Potential misuse: new technologies could become tools for fraud, money laundering and terrorist financing.
- Consumer protection risks: potential compromises of consumer identities.
- Financial stability risks: new sources of instability could arise as services become increasingly automated.
- Legal ambiguity: the need to clarify the legal status and ownership of digital tokens and assets.

### Regulatory and policy recommendations
- Reimagine oversight:
  - Shift focus from exclusively well-defined entities (banks, insurance companies, brokerage firms) to include attention on specific services regardless of who offers them.
  - Implement rules to ensure sufficient consumer safeguards, including privacy protection, and to guard against money laundering and terrorist financing.
- Strengthen international cooperation:
  - Recognize that advances in technology know no borders and coordinate to prevent networks from moving to less regulated jurisdictions.
  - Clarify legal status and ownership of digital tokens and assets through international dialogue and rulemaking.
- Preserve regulation’s role:
  - Maintain regulation as an essential safeguard to build trust in the stability and security of networks and algorithms.
- Leverage the IMF’s platform:
  - Use the IMF’s fully global membership to serve as a platform for discussions among the private and public sectors on the rapidly evolving topic of Fintech.

### Strategic conclusion
- Adapting regulatory frameworks and oversight is presented as both possible and necessary to ensure that the promise of Fintech is enjoyed by everybody.

*Source: IMF blog post "Fintech: Capturing the Benefits, Avoiding the Risks" by Christine Lagarde, June 20, 2017.*

---

## Content in this bundle

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- **Tecnología financiera: Captar los beneficios, evitar los riesgos**
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  - [Tecnología financiera: Captar los beneficios, evitar los riesgos (PDF)](/external/spanish/np/blog/2017/061917s.pdf){rel="external" type="application/pdf"}

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## References

- [عربي](https://blog-montada.imf.org/?p=5427)
- [https://www.imf.org/wp-content/uploads/2017/06/BLOG-1099x500-China-Guangzhou-women-starting-at-signboard-Imagine-China-Newscom-ichphotos188094.jpg](https://www.imf.org/wp-content/uploads/2017/06/BLOG-1099x500-China-Guangzhou-women-starting-at-signboard-Imagine-China-Newscom-ichphotos188094.jpg)
- [Fintech and Financial Services: Initial Considerations.](http://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2017/06/16/Fintech-and-Financial-Services-Initial-Considerations-44985)

_Source: https://www.imf.org/en/blogs/articles/2017/06/20/fintech-capturing-the-benefits-avoiding-the-risks_