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· In a newly released paper, executives from large banks, start-ups and regulators including Western Union, UBS, HSBC, Ripple and Bank of England unite around recommendations to sustain the rise of fintech
· Their recommendations focus on preservation of financial stability, ethical use of customer data and suitability of existing regulatory standards
· The paper is part of the World Economic Forum’s ongoing dialogue between policy-makers, industry participants, academics and society at large
· To view the full paper, click here
New York, USA 19 April 2016 – For the first time, senior finance executives, start-ups and policy-makers agreed on actions to minimize risk and capitalize on opportunities created by technology-enabled innovation (commonly referred to as “fintech”). In a joint articulation prepared by the World Economic Forum, they propose four recommendations for the private sector and financial supervisors aimed at safeguarding financial stability and fostering fintech. The recommendations are to:
1. Debate the ethical use of data to clarify the boundaries on the use of customer data for business purposes by actors in the financial system
2. Set up a forum for public-private dialogue on transformation to identify areas where supervisor support is needed to develop technology for enhancing stability
3. Proactively set industry standards to redefine and enforce an approach to good conduct in light of new technology-enabled innovations
4. Monitor and understand fintech innovation in a consistent way to ensure that national supervisors are well equipped to mitigate risks arising from fintech
“Historically, an inherent tension has often existed between innovation and stability. This publication represents the first time that incumbents, financial supervisors and fintechs have come together collectively to address the present wave of technology-enabled transformation in the financial services sector,” said Matthew Blake, Head of Banking and Capital Markets at the World Economic Forum.
“Global fintech companies have vast access to consumer and business data that enable businesses to develop products and services that meet the emerging needs of consumers,” said Hikmet Ersek, President and Chief Executive Officer of The Western Union Company. “With that access comes great responsibility, the need to balance business offerings with risks, and concerns that relate to ethical data usage and digital security,” he said.
“One of the most important challenges we need to solve is building a framework that's global first and scales to accommodate the fast-changing landscape,” explained Chris Larsen, Chief Executive Officer of Ripple. “It will require close partnership between the private and public sectors internationally to establish everything from policy and regulation to technical web standards that will foster innovation and early adoption while minimizing risks,” he said.
“Many clusters of innovation have the potential to scale very quickly, potentially transforming the architecture of the financial sector,” noted Andy Haldane, Executive Director, Financial Stability, Bank of England. “The regulatory community recognizes this and has begun to work with the private sector to understand and develop appropriate safeguards for this new financial architecture, in ways which benefit users of financial services,” he said.
The paper was developed by the Forum in collaboration with Oliver Wyman, and was first discussed at the World Economic Forum Annual Meeting 2016 in Davos among financial leaders in the public and private sectors. It is based on more than 50 interviews with experts from across the industry. If implemented, the measures could help spur the development of fintech innovations while safeguarding the stability of the financial system.
Notes to Editors:
To view the full paper, click here.
Read our blogs: http://wef.ch/agenda
Additional quotes and information:
“It has become very clear that technology is a differentiating force in financial services which can create a comparative advantage for incumbents and new entrants alike,” said Axel Weber, Chairman of the Board of UBS. “We are always looking for ways to optimize our business with technology – this may be organically or through partnerships with external parties,” he said.
“Financial technology has the potential to provide a vast array of services at low cost but, as with any innovation, can involve risks and unintended consequences. This report offers a valuable framework for balancing costs and benefits in this important and disruptive arena,” said Randall S. Kroszner, Norman R. Bobins Professor of Economics at the University of Chicago.
“The private and public sectors face a significant challenge as they continue to adapt their business models to better compete and monitor risk in the financial sector post-crisis. The industry has shifted its focus from regulatory reform to growth, and is using technology to accomplish this – we must work collectively to continue the build-out of the sector’s risk management capabilities, but not at the expense of innovation,” said Ted Moynihan, Global Managing Partner of Financial Services at Oliver Wyman.
The paper was developed as part of the World Economic Forum’s Role of Financial Services in Society initiative, which aims to complement the ongoing regulatory reform process, bringing together a wide range of senior financial stakeholders, including leaders of financial institutions, financial policy-makers, academics and representatives of civil society. Recently, the initiative has focused on understanding the effects of rapid technological transformation on the financial system and associated implications for regulation and public policy.
List of Contributors:
Stefano Aversa, President and Member of the Board, AlixPartners; Erik Berglöf, Professor and Director, Institute for Global Affairs, London School of Economics; Michael C. Bodson, President and Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC); Michael Budolfsen, Vice-President, UNI Europa Finance; Ann Cairns, President, International Markets, MasterCard Worldwide; Dominic Casserley, Chief Executive Officer, Willis Group; John Cryan, Chief Executive Officer, Deutsche Bank; Darrell Duffie, Dean Witter Distinguished Professor of Finance, Stanford Graduate School of Business, USA; Hikmet Ersek, President and Chief Executive Officer, The Western Union Company; Douglas Flint, Group Chairman, HSBC; Jacob Frenkel, Chairman, JPMorgan Chase International; Philip J. Jennings, General-Secretary, UNI Global Union; Robert Johnson, President, The Institute for New Economic Thinking (INET); Carsten Kengeter, Chief Executive Officer, Deutsche Börse AG; Randall S. Kroszner, Norman R. Bobins Professor of Economics, Booth School of Business, University of Chicago, USA; Michel M. Liès, Group Chief Executive Officer, Swiss Reinsurance Company; John Lipsky, Senior Fellow, Foreign Policy Institute, Johns Hopkins School of Advanced International Studies (SAIS), USA; Kevin Lynch, Vice-Chairman, BMO Financial Group; Ted Moynihan, Managing Partner Financial Services, Oliver Wyman; Guillermo Ortiz, Chairman of the Board of Directors, Grupo Financiero Banorte SA de CV; Gary Parr, Vice-Chairman, Lazard Frères & Co.; Joseph Peter, Executive Vice-President and Chief Financial Officer, Nissan Motor Co.; Marcello Sala, Executive Vice-Chairman of the Management Board, Intesa Sanpaolo SpA; Davide Serra, Founder and Chief Executive Officer, Algebris Investments; Arun Srivastava, Head of Financial Services, Baker & McKenzie; Dominique Thormann, Chief Financial Officer, Renault; Adair Turner, Senior Fellow, The Institute for New Economic Thinking (INET); and Axel A. Weber, Chairman of the Board of Directors, UBS.