IMF warns against FinTech risks
Written by Peter Walker
The International Monetary Fund’s (IMF) deputy managing director has warned that while FinTech can support productivity and growth by strengthening financial development, inclusion and efficiency, it “may pose risks to consumers and investors and, more broadly, to financial stability and integrity”.
Speaking at a conference in Vilnius, Lithuania, earlier this week, Tao Zhang said that FinTech is expected to promote competition in the financial sector, particularly in payments clearing and settlement.
“However, there is a perception that FinTech brings risks too, and that monitoring is still limited and largely confined to activities and entities in the regulatory perimeter,” he said, adding: “Gaps in the legal framework are widely acknowledged, as is the need to modernise data governance frameworks.”
Zhang called for greater international cooperation, particularly on cyber security and Anti-Money Laundering risks, the development of legal, regulatory and supervisory frameworks, securities settlement systems and cross-border payments.
Recognising these opportunities and potential challenges, last Autumn the IMF and the World Bank launched the Bali Fintech Agenda, bringing together key issues for policymakers to consider as countries formulate their policy approaches.
“In the coming days we will present the conclusions of a new study conducted to better understand how the countries in the world are dealing with these issues,” Zhang explained. “This work clearly indicates a common concern about cyber security, money laundering and payment services and a need for greater international cooperation in FinTech.”
Regarding Europe, the growth of FinTech has been rapid, but unevenly distributed, with Western Europe leading the way, he stated.
“Some countries in Europe have been encouraging FinTech innovation and exploring regulatory responses proactively, unfortunately, this is not going to be enough – technology knows no borders, neither does financial misconduct.”
Zhang concluded by cautioning against the fragmentation that comes when countries develop isolated national approaches.