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:

BCBS report

 

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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Comments
  • Dick Whittington 4 September, 2017 at 1934

    My major concern lies in the fact that 90%+ of fintech companies are in the private sector.
    Will their expertise and potential significant savings opportunities for the consumer ever emerge through the world’s banking platforms.
    Just look at the situation arising between SWIFT and Ripple where the banks are resisting the integration of the Ripple protocol to the detriment of their customers because of the potential loss of a major revenue stream. Who is looking after the consumer??
    Does it make any sense from the consumer viewpoint for banks to resist to implement a new platform which is cheaper, more transparent and so so much quicker. Safer as well given the speed of transaction. Yet the banks resist – for their own interests and to hell with Joe Soap.

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