BCBS ponders implications of fintech developments, calls for public feedback
Basel Committee on Banking Supervision (BCBS) has published a report, “Sound practices: implications of fintech developments for banks and bank supervisors”, and is asking for public feedback until 31 October 2017.
“As fintech developments remain fluid, the impact on banks and their business models is uncertain,” it says in the introduction to report.
“While some market observers estimate that between 10-40% of revenues and 20-60% of retail banking profits are at risk over the next ten years, others claim that banks will be able to absorb the new competitors, thereby improving their own efficiency and capabilities.”
Either way, “banks will find it increasingly difficult to maintain their current operating models, given technological change and customer expectations”, it predicts.
“The current position of incumbent banks will be challenged in almost every scenario.”
The rapid pace of technology development, the proliferation of new fintech firms and investment in the fintech industry, resulting in lower barriers to entry in the financial services market “may prove to be more disruptive than previous changes in the banking industry”, BCBS says.
Total global investment in fintech companies 2010-16:
The BCBS task force has identified ten key observations and recommendations – published in the report – which tackle:
- Nature and scope of banking risks and their changes over time with the growing adoption of fintech.
- Key risks – strategic, operational, cyber and compliance.
- Emerging technologies and how to leverage them.
- Fintech partnerships and collaborations.
- Issues beyond the scope of prudential supervision.
- Cross-border operations.
- Reassessment of current supervision models.
- Improving supervisory efficiency and effectiveness.
- Closing “unintended regulatory gaps” (as current regulatory, supervisory and licensing frameworks generally predate the technologies and new business models of fintech firms).
- Striking the right balance between safeguarding financial stability and consumer protection and encouraging innovation.
Full report can be found here.
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