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Thursday 23 May 2019


New FinTech business models ‘a threat to FIs’

Written by Chris Lemmon

The rapid adoption of enabling technologies and the emergence of new business models pose an increasing challenge to incumbent banks, a consultative document on the implications of FinTech has found.

The report, from The Basel Committee, assessed how FinTech may affect the banking industry and the activities of supervisors in the near to medium term. Various future potential scenarios were considered, with their specific risks and opportunities.

It found that banking standards and supervisory expectations should be adaptive to new innovations, while maintaining appropriate prudential standards. The committee identified 10 key observations and related recommendations:

1. the overarching need to ensure safety and soundness and high compliance standards without inhibiting beneficial innovation in the banking sector;
2. the key risks for banks related to FinTech developments, including strategic/profitability risks, operational, cyber and compliance risks;
3. the implications for banks of the use of innovative enabling technologies;
4. the implications for banks of the growing use of third parties, via outsourcing and/or partnerships;
5. cross-sectoral cooperation between supervisors and other relevant authorities;
6. international cooperation between banking supervisors;
7. adaptation of the supervisory skillset;
8. potential opportunities for supervisors to use innovative technologies;
9. relevance of existing regulatory frameworks for new innovative business models; and
10. key features of regulatory initiatives set up to facilitate FinTech innovation.

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