For FinTech to truly be transformative, a global regulatory approach which accepts the ‘new realities’ created by emerging solutions is needed.

This is according to a new white paper from Deutsche Bank, which argues that the emergence of new technology relating to Open APIs, the cloud, blockchain and artificial intelligence (AI) has driven increasing volumes of digital data, new market players, business models and evolving client expectations.

Yet their transformative impact will only be realised with further global regulatory alignment.

“Technology provides us with a huge opportunity to change our business models, releasing some control of the component value chain in order to better meet the new needs of clients,” said the bank’s chief digital officer Thomas Nielsen. “Getting this right is something that can only be done through collaboration with regulators and a wide range of industry groups.

“We must be responsible – but we need to disrupt, or be disrupted.”

The paper concludes that conducive and forward-thinking regulation stands to be a major catalyst for a thriving and innovative banking industry. For this to happen, any regulatory approach must be: globally aligned; technology-neutral; digitally relevant; embracing of new solutions; and industry-led.

Polina Evstifeeva, head of regulatory strategy at the bank, said this is particularly important in the context of data protection and security standards – as long as the rules vary across jurisdictions, technological solutions will be constrained by local boundaries, diluting their potential to transform the industry.

“This doesn’t mean we have to establish a single global standard for regulation, however. The realistic goal here is attaining a threshold level of alignment across jurisdictions in order to unleash the full benefits,” she added.
Deutsche Bank highlighted a number of areas where regulation may not yet completely account for the ‘new realities’ of technology.

For instance, legislation relies on traditional means of ensuring data and information security – requiring access to premises where data is stored on cloud for the purpose of physical audits, as one example.

Rethinking this approach to rather focus on the advanced distributed platforms and cyber security tools employed by cloud service providers would accelerate the movement of core banking services to cloud, suggested the paper.

It noted a number of similar issues – the European Union’s General Data Protection Regulation (GDPR), for instance, enshrines the right to be forgotten, potentially hindering the opportunities derived from the immutability of blockchain.

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