Regulation and Supervision of Fintech : Considerations for EMDE Policymakers
Fintech is transforming the global financial landscape. It is creating new opportunities to advance financial inclusion and development in Emerging Markets and Developing Economies (EMDEs), but also presents risks that require updated supervision p...
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| Format: | Technical Note |
| Language: | English |
| Published: |
Washington, DC
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099735204212215248/P173006033b45702d09522066cbc8338dcb http://hdl.handle.net/10986/37345 |
| Summary: | Fintech is transforming the global
financial landscape. It is creating new opportunities to
advance financial inclusion and development in Emerging
Markets and Developing Economies (EMDEs), but also presents
risks that require updated supervision policy frameworks.
Fintech encompasses new financial digital products and
services enabled by new technologies and policies. Although
technology has long played a key role in finance, recent
fintech developments are generating disruptive innovation in
data collection, processing, and analytics. They are helping
to introduce new relationship models and distribution
channels that challenge traditional ways of finance, while
creating additional risks. While most of these risks are not
new, their effects and the way they materialize and spread
across the system are not yet fully understood, posing new
challenges to regulators and supervisors. For example,
operational risk, especially cyber risk, is amplified as
increasing numbers of customers access the financial network
on a 24 by 7 basis. Likewise, increased reliance by
financial firms on third parties for provision of digital
services, such as cloud computing, may lead to new forms of
systemic risks and concentration on new dominant unregulated
players such as big tech firms. This note aims to provide
EMDE regulators and supervisors with high-level guidance on
how to approach the regulating and supervising of fintech,
and more specific advice on a few topics. Preserving the
stability, safety, and integrity of the financial system
requires increased attention to competition and ensuring a
level playing field and to emerging data privacy risks. As a
general principle, policy response should be proportionate
to risks posed by the fintech activity and its provider.
While striking the right balance can be challenging in the
absence of global standards, the IMF-World Bank Bali Fintech
Agenda (BFA), along with guidance by Standard Setting
Bodies, provides a good framework for reference. |
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