{ "title": "What is Really New in Fintech", "publication": "IMF Blog, December 17, 2020", "sourceUrl": "https://www.imf.org/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech", "canonical": "https://www.imf.org/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech", "overlayPath": "/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech/index.md", "summary": "Publication date: December 17, 2020.", "sections": [ { "heading": "Overview", "content": "- Publication date: December 17, 2020.\n- Authors: Arnoud Boot, Peter Hoffmann, Luc Laeven, Lev Ratnovski.\n- Central question: Which transformative aspects of recent financial innovation can uproot finance as we know it, and which policy challenges will the transformation of finance bring?\n- Key premise: Financial innovation today splits into two distinct dimensions—information and communication—each with transformative components." }, { "heading": "New types of information", "content": "- Core finding: The most transformative information innovation is expanded use of alternative data from customers’ digital footprints for credit-worthiness analysis.\n- Traditional method: Credit scoring using hard information (income, employment time, assets and debts).\n - Limitations of hard information:\n - Hard information tends to be “procyclical”: it boosts credit expansion in good times but exacerbates contraction during downturns.\n - Many people (new entrepreneurs, innovators, informal workers, expatriates) may lack sufficient hard data to access credit.\n- Fintech solution:\n - Taps nonfinancial data: type of browser and hardware used to access the internet, history of online searches and purchases.\n - When powered by artificial intelligence and machine learning, these alternative data sources are often superior to traditional credit assessment methods.\n - Potential impact: advance financial inclusion by enabling more credit to informal workers and households and firms in rural areas.\n- Quantitative reach:\n - Fintech’s potential to reach out to over a billion unbanked people around the world." }, { "heading": "New communication channels", "content": "- Drivers: Digital platforms in social media, mobile communication, and online shopping have penetrated much of consumers’ everyday lives, increasing digital footprints and available data.\n- Platform dynamics:\n - Platforms like Amazon, Facebook or Alibaba incorporate more financial services into their ecosystems.\n - Rise of specialized providers competing with banks in payments, asset management, and financial information provision.\n- Effects on banking:\n - Shift from in-person branch visits to remote online communication improves customer convenience and cost-efficiency of financial intermediation.\n - Increases geographic competition among banks, enabling service to more distant customers.\n- Usage trends:\n - The financial sector is already the industry most heavily reliant on computers.\n - Doubling in use of online banking in the past two decades in the European Union’s 15 largest economies.\n - Current usage at 50 percent on average, indicating significant room to grow." }, { "heading": "Policy challenges", "content": "- Prudential regulation:\n - Regulators must assess operational risks of new lending technologies and business models, which face their first real-life stress test during the COVID-19 downturn.\n - Need to ensure regulatory agencies’ expertise matches industry capabilities as more talent enters financial technology and innovation accelerates.\n- Other risks:\n - Cybersecurity: increased online services for financial institutions and customers create potential new opportunities for criminals.\n - Regulatory arbitrage: business models may be tailored to reduce regulatory oversight.\n- Monetary policy implications:\n - Procyclical bias of hard information may require central bankers to be more “countercyclical” (i.e., potentially overcompensate with stimulating or cooling measures stronger than actual economic developments would warrant).\n - New monetary policy transmission channels need to be fully understood.\n - As new players make banks less relevant, central banks may need to adjust their monetary policy implementation toolbox, potentially allowing nonbanks access to liquidity lines and incorporating them in their operations.\n- Competition and data policy:\n - Competition policy must address monopolistic tendencies of large digital platforms driven by network effects and convergence to a few large platforms.\n - Data policies are critical to ensure consumer privacy and efficient and safe collection, processing, and exchange of data." }, { "heading": "Conclusions and recommendations", "content": "- Pace and nature of change:\n - Much technological progress in finance is evolutionary, but its pace is accelerating fast.\n - Fintech’s potential to reach out to over a billion unbanked people around the world, and the changes in financial system structure this can induce, can be revolutionary.\n- Policy guidance:\n - Governments should follow and carefully support the technological transition in finance.\n - It is important to adjust policies accordingly and stay ahead of the curve.\n- Research context:\n - The blog is based on an IMF Working Paper, “Financial Intermediation and Technology: What’s Old, What’s New?” published in August 2020.\n\nSource: What is Really New in Fintech (IMF blog, December 17, 2020).\n\n---\n\n\n References\n\n- Recent IMF and ECB staff research\n- new specialized providers that compete with banks in payments\n- cybersecurity risks\n\nSource: https://www.imf.org/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech/index.md)", "[Structured JSON version](/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech/index.json)", "[Bundle manifest](/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech/bundle-manifest.json)", "Authors: Arnoud Boot, Peter Hoffmann, Luc Laeven, Lev Ratnovski", "Published: December 17, 2020", "Publication date: December 17, 2020.", "Authors: Arnoud Boot, Peter Hoffmann, Luc Laeven, Lev Ratnovski.", "Central question: Which transformative aspects of recent financial innovation can uproot finance as we know it, and which policy challenges will the transformation of finance bring?", "Key premise: Financial innovation today splits into two distinct dimensions—information and communication—each with transformative components.", "Core finding: The most transformative information innovation is expanded use of alternative data from customers’ digital footprints for credit-worthiness analysis.", "Traditional method: Credit scoring using hard information (income, employment time, assets and debts).", "Fintech solution:", "Quantitative reach:", "Drivers: Digital platforms in social media, mobile communication, and online shopping have penetrated much of consumers’ everyday lives, increasing digital footprints and available data.", "Platform dynamics:", "Effects on banking:", "Usage trends:", "Prudential regulation:", "Other risks:", "Monetary policy implications:", "Competition and data policy:", "Pace and nature of change:", "Policy guidance:", "Research context:", "[Recent IMF and ECB staff research](https://www.imf.org/en/Publications/WP/Issues/2020/08/07/Financial-Intermediation-and-Technology-Whats-Old-Whats-New-49624)", "[new specialized providers that compete with banks in payments](https://www.imf.org/en/News/Articles/2020/12/11/sp121120-four-cornerstones-of-payments-in-the-digital-age)", "[cybersecurity risks](https://blogs.imf.org/2020/12/07/cyber-risk-is-the-new-threat-to-financial-stability/)" ], "alternates": { "markdown": "/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech/index.md", "json": "/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech/index.json", "bundleManifest": "/en/blogs/articles/2020/12/17/what-is-really-new-in-fintech/bundle-manifest.json" }, "generatedAtUtc": "2026-08-27T16:28:56.616Z" }