## Balancing Fintech Opportunities and Risks

_IMF News, June 10, 2019_

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**Canonical URL:** [Balancing Fintech Opportunities and Risks](https://www.imf.org/en/news/articles/2019/06/10/sp061019-balancing-fintech-opportunities-and-risks)

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## Bibliographic details
- Published: June 10, 2019

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### Overview
- Remarks by IMF Deputy Managing Director Tao Zhang delivered in Vilnius, Lithuania on June 10, 2019.
- Technological changes have driven rapid advances in financial technology (fintech) that transform the economic and financial landscape.
- Smartphones today have more processing power than “Deep Blue”—the supercomputer that beat chess legend Gary Kasparov in the late 1990s.
- Data stored on smartphones would have required at least a dozen cartons of floppy disks twenty years ago.

### Opportunities from Fintech
- Fintech can support productivity and growth by strengthening financial development, inclusion, and efficiency.
- Expected to promote competition in the financial sector, particularly in payments clearing and settlement.
- Helping to expand financial inclusion.
- Regional examples of opportunity:
  - Africa: leader in mobile money as a driver for greater financial inclusion.
  - Asia: significant advances in nearly every aspect of fintech.
  - Europe: fintech would mainly affect the intensive margin of the provision of financial services given already high levels of financial development and inclusion.

### Risks and Challenges
- Fintech raises potential risks to consumers and investors and, more broadly, to financial stability and integrity.
- Perception that monitoring is still limited and largely confined to activities and entities in the regulatory perimeter.
- Widely acknowledged gaps in the legal framework and the need to modernize data governance frameworks.
- Common concerns identified include:
  - Cybersecurity
  - Money laundering (AML/CFT)
  - Payment services
- Need for greater international cooperation, particularly on:
  - Cyber security and AML/CFT risks
  - Development of legal, regulatory and supervisory frameworks
  - Payment and securities settlement systems
  - Cross-border payments

### Policy Responses and International Cooperation
- The Fund and the World Bank launched the Bali Fintech Agenda last fall to bring together and advance key issues for policymakers and the international community.
- Ongoing work includes a new study to better understand how countries are addressing fintech issues; early conclusions point to:
  - A common concern about cybersecurity, money laundering and payment services
  - A need for greater international cooperation in fintech
- Warning against fragmentation when countries develop isolated national approaches; technology and financial misconduct "know no borders."

### National and Regional Examples: Lithuania and Europe
- Lithuania’s approach to encourage fintech innovation:
  - Streamlined licensing procedures
  - Regulatory sandboxes for testing financial innovation
  - Accelerated development of RegTech solutions
  - Built a platform for blockchain-based solutions
  - Created CENTROlink, a payment system providing direct access to the Single Euro Payments Area for institutions that do not have a banking license
  - Pushing forward with open banking
  - Strengthening the AML/CFT regime through coordinated action by the Bank of Lithuania, Minister of Finance and other agencies
- Europe overall: rapid but uneven fintech growth with Western Europe leading.

### IMF Role and Next Steps
- The IMF’s unique position and universal membership enable it to play a key role in fostering international cooperation on fintech issues.
- The Bali Fintech Agenda is a vehicle for advancing high-level considerations and promoting coordinated policy frameworks.
- This conference (Vilnius) is presented as an opportunity to translate high-level considerations into the development of a vibrant fintech community and appropriate policy frameworks.

### Concluding Observations and Recommendations
- Emphasize greater international cooperation on cyber security, money laundering risks, legal/regulatory/supervisory frameworks, and payment and securities settlement systems.
- Avoid fragmented national approaches; favor coordinated international responses.
- Encourage policies that leverage fintech to provide opportunities for all citizens, addressing demographic challenges and talent retention—illustrated by Lithuania’s experience.
- Implicit recommendation: continue proactive regulatory approaches while fostering innovation (licensing reforms, sandboxes, RegTech, open banking, payment system access).

*Remarks by IMF Deputy Managing Director Tao Zhang, Vilnius, Lithuania, June 10, 2019.*

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## References

- [Tao Zhang](https://www.imf.org/en/About/senior-officials/Bios/tao-zhang)
- [Republic of Lithuania and the IMF](http://www.imf.org/external/country/LTU/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2019/06/10/sp061019-balancing-fintech-opportunities-and-risks_