Financial technology is referred to as Fintech. This category is broad, and encompasses the role of technology in the delivery and design of financial products and services. The application covers many segments of business including advice, lending, payments, and investment management. Mobile technologies, superior analytics and big data are used by many Fintech companies, so products can be tailored for the different customer segments. Technology is at the core of Fintech services, and have changed customer interactions. There are numerous positive aspects regarding society including a reduction in consumer prices, increased competition, and a larger access to financial services for individuals traditionally underserved.
Traditional finance companies and startups are active regarding Fintech. The startups generally offer targeted solutions instead of a place for the financial service needs of customers. A lot of these companies are based out of New York, London, San Francisco, Berlin, Singapore, Tel Aviv, and other tech hubs. An example is the famous SpotOption company. Their workforce consists of specializations like engineering, computer science and IT. Investments in Fintech are also made by large financial institutions, insurers, and traditional banks. Some use Fintech to integrate existing services and products, others start their own Fintech incubators.
Current Fintech regulations are being debated. Fintech startups are not subjected to the same regulations as the traditional players because they operate differently. The current regulatory framework was established for the providers of traditional finance services. They are categorized as asset managers, insurers, and banks, and Fintech providers do not fit into this mold. The regulations for financial institutions are extremely clear, but this does not hold true for Fintech distributors. This has led to policy-makers turning their efforts towards understanding the new operating models. The existing framework used in a supervisory capacity is being reconsidered so the balance between financial stability and innovation can be established. With so many new companies quickly accumulating a share in the market, time has become a critical factor.
The World Economic Forum
There are four recommendations being proposed for the financial supervisors and private sector to foster Fintech and safeguard financial stability. The first is a debate to determine the boundaries and ethical data use regarding the business purposes of customer data in the financial system. The second is the establishment of a forum for a private dialogue from the public in the identification of areas where the support of supervisors is necessary to enhance stability, and develop technology. The third is to establish industry standards to enforce and redefine good conduct regarding the innovations enabled by technology. The fourth is the understanding and monitoring of Fintech innovation so national supervisors can be consistently equipped to mitigate any Fintech risks. The formulation of these proposals was based on input from the Steering Committee of the World Economic Forum.
The Future of Fintech
The hope is the recommendations will be widely supported, and translate into policy measures and concrete industry. The timing is believed to be right when the explosive growth of Fintech and new technologies are considered. The recommendations additionally have the backing of some of the best financial minds in the world. According to individuals familiar with Fintech, the actions proposed make a great deal of sense. They have been called sensible, although goodwill will be a necessity before the recommendations can become concrete measures. The biggest challenge is perceived to be the translation of similar insights into action through a careful process of scrutiny. Before this can become a possibility, the participation of all companies and individuals involved with Fintech will be required as the weeks and months pass. The future of Fintech is currently considered to be wide open.