A global group comprised of senior figures from non-financial companies, the banking sector and the academic world must be brought together to evaluate the steady rise of fintech, according to a new report from the World Economic Forum (WEF).
Published on 19 April, the WEF paper – The Role of Financial Services in Society: Understanding the impact of technology-enabled innovation on financial stability – argues that the tasks of regaining equilibrium and public trust since the crash has been “complicated by the rapid deployment of financial and technological innovation”.
Those factors, it says, “have fundamentally changed how a financial services company and the value it delivers are defined”.
It adds: “As legacy business models and long-held value propositions in financial services are reshaped by these new ideas, key actors in the system must work to ensure economic growth does not come at the expense of systemic stability.”
As such, it proposes that a “newly created forum that reflects the current and anticipated future state of the financial sector will serve as a valuable learning platform and means of identifying innovation clusters for priority review”.
“This forum would aim not only to identify and mitigate against risks, but also to further capitalise on opportunities stemming from use of technology-enabled innovation.”
In some instances, the report points out, it may be appropriate for public-sector bodies to develop utilities or infrastructure that can be shared by all parties in the financial system. “Members of this forum,” it says, “will be well positioned to help identify which functions may benefit from this level of public support.
“For example, it may be beneficial for the regulatory community to create a data repository that aggregates financial information collected from the private sector that can then be sanitised and shared for use in enhancing risk models.”
WEF head of banking and capital markets Matthew Blake said: “Historically, an inherent tension has often existed between innovation and stability.
“This publication represents the first time that incumbents, financial supervisors and fintechs have come together collectively to address the present wave of technology-enabled transformation in the financial services sector.”
Bank of England executive director Andy Haldane – who helped compile the report – added: “Many clusters of innovation have the potential to scale very quickly, potentially transforming the architecture of the financial sector.
“The regulatory community recognises this and has begun to work with the private sector to understand, and develop appropriate safeguards for, this new financial architecture, in ways that benefit users of financial services.”