International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets...
Transcript of International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets...
![Page 1: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/1.jpg)
Matthew SaalOctober 30, 2019
International Perspective on FinTech Regulation
![Page 2: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/2.jpg)
Best available technology has always been used for money: to validate and record balances…
2
![Page 3: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/3.jpg)
…provide safekeeping,…
3
![Page 4: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/4.jpg)
…and facilitate transfers
4
![Page 5: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/5.jpg)
Technology is transforming every industry
5
Always available
Where you want it
Tailored product
On-demand delivery
Asset-light business
Contextualization
Buy only what you want
Banking has lagged
![Page 6: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/6.jpg)
Drivers of digital transformation in financial services
6
Digital FinanceLow cost /
Highly portable computing
Ubiquitous connectivity
Mass data storage and
analytics
Regulatory change
Consumer expectations
![Page 7: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/7.jpg)
The pace of technology adoption in financial services is accelerating
7
![Page 8: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/8.jpg)
New technology and approaches across the value chain are transforming the industry
8
Source: World Bank and IMF (2019). Fintech: The Experience So Far.
![Page 9: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/9.jpg)
Business models are reconfiguring in ways that challenge existing regulatory approaches
9
Existing Regulatory Framework
New products and services
Hybrid businesses that cut across
regulators
New providers from outside the regulated sector
Disaggregated and recomposed value
chains
P2P
Cryptocurrency
Robo-Advisors
Big Data Credit Scoring
Marketplace Finance
E-Commerce Lending
Mobile Remittance
E-Wallets
Cloud-Based
Services
Micro-insurance
Personal Financial
Management
PayGo Solar
Leasing
Carrier Billing
![Page 10: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/10.jpg)
FinTech presents benefits and risks with respect to achieving regulatory objectives
10
![Page 11: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/11.jpg)
ChallengesEnsuring control of potential risks
• Potential Risks to financial stability, integrity, privacy & consumer protection
• Internationalisational of actors in the financial sector w/o requisite regulatory coordination
• Competitive dynamics leading to market concentration / monopolistic behaviors
Financial Inclusion
(new better and more affordable
Financial Services)
• Shift towards dynamic efficiency in the financial sector• Improved variety, customization, and convenience of offerings• Enhanced economies of scale that lower the marginal cost of
serving the bottom of the pyramid• Support digital “real sector” economy to accelerate inclusion:
new business models and channel, new data sources and techniques expand overall demand for formal sector finance.
Regulators must balance the risks and benefits of financial innovation
Leveraging the digital opportunity does not come without challenges
11
![Page 12: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/12.jpg)
Choices depend on market conditions…
12
2015 Venture Capital Investment per US$ 10,000 of GDP(Bubble Size = Unbanked Population)
2014
For
mal
Ban
king
Pen
etra
tion
(%)
Average: 4.88
I II
IIIIV
Bank DominancePartneringTech DominanceRace to the Finish
![Page 13: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/13.jpg)
…and existing regulatory frameworks
13
Civil Law
Entity Based
Common Law
Activity Based
Single Regulator
Multiple RegulatorsPrinciples
Rules
![Page 14: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/14.jpg)
Regulatory tools & frameworks to enable innovation
14
![Page 15: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/15.jpg)
Framework for Choosing Regulatory Tools
Regu
lato
r Pa
rtic
ipat
ion
Maturity & Experimentation of Market
Extensive
Limited
Limited Broad
Updated Law and Regulation
(legislative)
Incremental change
by licensed entities Wait and See
(liberal)
Test and Learn
(bespoke)
Balance risk vs. enabling
environment for innovationRegulatory
Sandbox
Wait-and-See: Monitoring a Trend to understand it better before any interventionTest-and-learn: Custom framework to test a new idea in a live environmentRegulatory Sandbox: live, time-bound testing of innovations under a regulator’s oversight.Regulatory Reform: Reform Existing policy and regulation to allow for new licensing of innovations
15
![Page 16: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/16.jpg)
Comprehensive FinTech law – Mexico
16
![Page 17: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/17.jpg)
Product-Specific Laws and Regulations – Thailand
17
Decree on Digital Assets
Business 2018
Equity Crowdfunding
2015
Debt Crowdfunding (Companies)
2019
P2P Lending (Individuals)
2019
Selected laws, regulations, and notifications 2016-2019
Regulatory Sandboxes2016, 2017
Insurance Electronic Channels
2017
Payment Systems Act
2017
![Page 18: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/18.jpg)
Wait and see approach – China
Source: Aveni and Jenik 2017
P2P lending in China – Policy interventions
18
![Page 19: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/19.jpg)
SupTech
19
Source: Dirk Broeders and Jeremy Prenio, Innovative technology in financial supervision (suptech) – the experience of early users. Financial Stability Institute, July, 2018
Areas of financial supervision in which SupTech is being used
![Page 20: International Perspective on FinTech Regulation · E-Commerce Lending Mobile Remittance E-Wallets Cloud-Based Services Micro-insurance Personal Financial Management ... (Bubble Size](https://reader034.fdocuments.net/reader034/viewer/2022042313/5edf4dd4ad6a402d666aa776/html5/thumbnails/20.jpg)
Challenges• New entrants providing financial services but don’t
fit an entity-based regulatory structure• New products don’t clearly map to rules/regulators• Regulated institutions seeking to adopt new
technologies that regulations don’t cover or supervisors are not equipped to assess and monitor
Goals• Ensure financial stability and integrity• Encourage and accommodate
innovation (for efficiency, inclusion)• Protect Consumers• Foster competition
1. No one size fits all; depends on existing framework, market conditions, resources2. Apply existing regulations where relevant: not everything that looks new is fundamentally new3. Principles based approach, applied at the granular activity level4. Activity based, entity neutral: level playing field for incumbents and entrants to adopt innovations5. Tech neutral: As long as it meets standards for security, privacy, robustness, we shouldn’t care what
specific technology is used underneath 6. Controlled experimentation in regulation alongside new technology/new business models7. Upgrade supervisory capacity, including through use of technology8. Enhance coordination and cooperation across regulators domestically and internationally
Emerging Regulatory Principles
Developing a regulatory strategy
20