The Basel Committee on Banking Supervision today released a consultative document on the implications of fintech for the financial sector. Sound Practices: Implications of fintech developments for banks and bank supervisors assesses how technology-driven innovation in financial services, or “fintech”, may affect the banking industry and the activities of supervisors in the near to medium term.
Various future potential scenarios are considered, with their specific risks and opportunities. In addition to the banking industry scenarios, three case studies focus on technology developments (big data, distributed ledger technology, and cloud computing) and three on fintech business models (innovative payment services, lending platforms and neo-banks).
Although fintech is only the latest wave of innovation to affect the banking industry, the rapid adoption of enabling technologies and emergence of new business models pose an increasing challenge to incumbent banks in almost all the scenarios considered.
Banking standards and supervisory expectations should be adaptive to new innovations, while maintaining appropriate prudential standards. Against this background, the Committee has identified 10 key observations and related recommendations on supervisory issues for consideration by banks and bank supervisors.
Click here for more information.