Two central banks have signalled increased engagement with the fintech industry with the Bank of England publishing a detailed report in its latest Quarterly Bulletin into the potential for fintech and the Federal Reserve Bank of New York establishing a Fintech Advisory Group.
In its report, the Bank of England stresses that the implications of fintech as part of the wider shift to a digital economy are only beginning to be realised, but says the potential is “substantial”. It adds that the pace and scale of private sector innovation continues to increase, adding that to support this innovation, it must not only embrace fintech, but take tangible steps to enable new technology and empower providers in order to promote competition.
“The Bank’s role includes providing the right hard and soft public infrastructure required to maximise the benefits from fintech and encourage private sector innovation,” the BoE states. “In the coming years, the Bank will continue its ambitious rebuild of the RTGS system, including future-proofing it to interoperate with innovative business models and technologies and integrating best-in-class data standards.”
The BoE highlights how it will support new entrants through the New Bank Start-up and New Insurer Start-up units, established in 2016 with the UK’s Prudential Regulatory Authority (PRA) and through access to RTGS settlement accounts for Non Bank Payment Service Providers. It adds it will also continue to examine how the financial services landscape might evolve, and what this means for individuals, businesses and financial services providers.
“Research on fintech will help the Bank understand better how it can support this evolving financial system, how it should design future policies and how it should use technology to enhance its capabilities,” the report states. “Part of upgrading its infrastructure involves exploring new technologies and the Bank will continue to undertake PoCs with fintech companies, as well as increase its work on regtech and suptech. Rules and regulations should also keep pace with innovation and mitigate potential risks, while preparing for future innovations.
“By taking these steps, the Bank will continue to mitigate risks to monetary and financial stability as well as ensure that the UK financial system is resilient in light of the next generation of innovation,” it adds.
Meanwhile, the Federal Reserve Bank of New York has launched the Fintech Advisory Group to provide its leaders with a high-level platform to establish clear points of contact with senior representatives and thought leaders from the financial technology industry and consumer organisations. The group’s first meeting will be April 1, 2019.
The New York Fed says the primary goal of the Advisory Group is to present views and perspectives on the emerging issues related to financial technologies, the application and market impact of these technologies, and the potential impact on the New York Fed’s ability to achieve its missions.
“The Fintech Advisory Group will provide the New York Fed with a more complete picture of the rapidly evolving fintech landscape,” says Kevin Stiroh, executive vice president and head of the Supervision Group at the New York Fed. “The Advisory Group will also gather insights that may inform our interaction with market participants and institutions, our training and hiring efforts, and the application of innovative approaches for internal business use.”
The New York Fed says that group members are selected based on their expertise across the breadth of issues relevant to financial technologies. “The initial set of members includes a broad mix of representatives impacted by fintech, including incumbent financial institutions, new entrants, investors, advisory and service groups, nonprofit organizations, and research providers,” it says, adding that members will participate on a rotational basis.
The initial members of the group are Michael Bodson, president and CEO, DTCC; Andrew Boyajian, head of banking, TransferWise; Lee Braine, chief technology office, Barclays; Martin Fleming, chief analytics officer and chief economist, IBM; Gary Gensler, senior advisor, MIT; Lena Mass-Cresnik, chief data officer, Moelis & Company; Patrick Murck, special counsel, Cooley;Ulku Rowe, director of financial services, Google Cloud; Sonal Shah, executive director, Beeck Center for Social Impact and Innovation; and David Waller, partner and head of data science and analytics, Oliver Wyman.