How much of Fintech is hype and how much is reality, and how should policy and regulation respond to this fast-changing industry? This seminar will consider how the financial services landscape may be transformed by the widespread adoption of financial technology and how central banks and regulators can mitigate potential risks to financial stability and integrity without stifling innovation.
How much of Fintech is hype and how much is reality, and how should policy and regulation respond to this fast‑changing industry? Panelists discussed how the financial services landscape may be transformed by the widespread adoption of financial technology and how central banks and regulators can mitigate potential risks to financial stability and integrity without stifling innovation.
Key Points:
· Potential of Fintech. Digital ledger technology is “analogous to e‑mail for money” and could potentially revolutionize efficiency gains in the financial services industry (Blythe). The technology could dramatically cut costs for cross‑border payments and expand access to financial services by providing customization at scale. For example, Paytm—India’s largest mobile Fintech company—has over 270 million registered users, many of whom had been “unbanked.” The company offers a range of financial products, including a new “digital gold” system that targets customers who historically save their money in bullion (Deora).
· Data: Fintech companies are challenging traditional business models with “alternative” data approaches, including by incentivizing consumers to voluntarily share data to get credit or buy commercial products. Paytm, for example, reduced its transaction fees to zero by collecting data on its users which the company uses for commercial personalization and individual sizing and pricing of loans (Deora). Cumplo, a peer‑to‑peer lending company in Chile, has driven down interest rates for loans to small businesses by creating a platform for private lenders to access data on potential borrowers (Shea).
· Regulatory challenges. The appropriate point of departure for regulators should be to determine what the emergence of Fintech means for policy objectives. The potential for lower cost and more efficient business models could align with financial inclusion and access objectives but could also undermine competition policy if Fintech companies are regulated more lightly than banks (Kganyago). In this regard, the role of regulators is not to “pick the winners” but to assess the benefits and potential costs, and where social costs deviate from, or exceed private costs, use public policy to intervene (Knot). Regulators will likely also have to shift their focus from financial entities to financial activities (Menon).
· Sandbox approach. Many regulators are using “sandboxes” to create a space for financial institutions and non‑financial players to experiment with financial technology solutions, with some regulatory oversight and support. The hope is that by lowering barriers to entry for fintech players, opportunities for learning are created, and partnerships between financial institutions and fintech companies can be fostered (Menon).
Quotes:
“There will be some big losers who fall asleep at the switch. The incumbents today who try to resist will have their core profit engines undermined.” Blythe Masters
“This is happening. You will see distributed ledger technology deployed in earnest, in the real world, in large consequential, systemic market infrastructures sometime during the course of next year.” Blythe Masters
“Whatever money you make from payments, 10 years from now that’s zero.” Madhur Deora
“Our interests are 100 percent aligned with regulators. Our business is to eliminate asymmetries of information.” Nicolas Shea
“From the perspective of the central bank, the central question is, what does the emergence of Fintech mean for policy objectives?” Lesetja Kganyago
“Much of the regulation we have in place is tailored toward large, complex institutions that have big compliance and risk management departments. You cannot have those supervisory expectations for Fintech companies.” Klass Knot
“Regulation is going to have to become increasingly activity‑based rather than entity‑based.” Ravi Menon
Committee on Payments and Market Infrastructures (CPMI). 2017.
Distributed Ledger Technology in Payment, Clearing and Settlement: an Analytical Framework. Basel: Bank for International Settlements.
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He, Dong, Ross B. Leckow, Vikram Haksar, Tommaso Mancini Griffoli, Nigel Jenkinson, Mikari Kashima, Tanai Khiaonarong, Céline Rochon, and Hervé Tourpe. 2017.
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Christine Lagarde
Managing Director
IMF
Christine Lagarde has been Managing Director of the International Monetary Fund since July 2011. She held various ministerial positions within the French government, including Finance and Economy Minister (2007–11), Minister for Foreign Trade, and Minister for Agriculture and Fisheries. She was also Chairman of the Global Exchange Committee and Global Strategic Committee of Baker & McKenzie.
Born in Paris in 1956, Christine Lagarde completed high school in Le Havre and attended Holton Arms School in Bethesda (Maryland, USA). She then graduated from law school at University Paris X, and obtained a Master’s degree from the Political Science Institute in Aix en Provence.
After being admitted as a lawyer to the Paris Bar, Christine Lagarde joined the international law firm of Baker & McKenzie as an associate, specializing in Labor, Anti-trust, and Mergers & Acquisitions. A member of the Executive Committee of the Firm in 1995, Christine Lagarde became the Chairman of the Global Executive Committee of Baker & McKenzie in 1999, and subsequently Chairman of the Global Strategic Committee in 2004.
Christine Lagarde joined the French government in June 2005 as Minister for Foreign Trade. After a brief stint as Minister for Agriculture and Fisheries, in June 2007 she became the first woman to hold the post of Finance and Economy Minister of a G-7 country. From July to December 2008, she also chaired the ECOFIN Council, which brings together Economics and Finance Ministers of the European Union, and helped foster international policies related to financial supervision, regulation, and strengthening global economic governance. As Chairman of the G-20 when France took over its presidency for the year 2011, she set in motion a wide-ranging work agenda on the reform of the international monetary system.
On July 5, 2011, Christine Lagarde became the eleventh Managing Director of the IMF, and the first woman to hold that position. On February 19, 2016, the IMF Executive Board selected her to serve as IMF Managing Director for a second five-year term starting on July 5, 2016.
Christine Lagarde was named Officier in the Légion d'honneur in April 2012.
Madhur Deora
CEO and Founder
Paytm
Madhur Deora is Paytm’s Senior Vice President and Chief Financial Officer. Mr. Deora leads Paytm’s finance function and investments and fundraising activities as well as the company’s financial services and entertainment businesses. He has over 17 years of professional experience in investment banking. Prior to joining Paytm in October 2016, he served as Managing Director in Citigroup’s investment banking business in a career spanning New York, London, and Mumbai. In his last role at Citigroup, he was responsible for Telecom, Media, Technology, Internet and Private Equity clients in India. In 2015, he also led the fundraising discussions for Paytm with Ant Financial and Alibaba. He graduated cum laude from Phillips Exeter Academy and cum laude from the University of Pennsylvania's Wharton School of Business.
Lesetja Kganyago
Governor
Reserve Bank of South Africa
Lesetja Kganyago is Governor of the South African Reserve Bank. In his previous role as Deputy Governor of the South African Reserve Bank he was responsible for research, financial stability, bank supervision, financial regulatory reform, financial surveillance, risk management and compliance, and the South African Reserve Bank college.
Klass Knot
President
Dutch Central Bank
Klaas Knot is President of the Dutch Central Bank (DNB)and, by virtue of that position, a Governor of the International Monetary Fund and holds seats on the Governing Council and General Council of the European Central Bank as well as on the Financial Stability Board (FSB), where he chairs the Standing Committee on Assessment Vulnerabilities. Governor Knot is Professor of Economics of Central Banking at the University of Groningen and Professor of Monetary Stability at the University of Amsterdam. Before joining the Governing Board of DNB, he was Deputy Treasurer-General and Director of Financial Markets at the Dutch Ministry of Finance.
Blythe Masters
Chief Executive Officer
Digital Asset
Blythe Masters is CEO of Digital Asset, a New York headquartered financial technology company that builds distributed, encrypted straight through processing tools for wholesale financial service providers using distributed ledger technology. Blythe joined Digital Asset in 2015 after 27 years at J.P.Morgan, where she served in senior positions including Head of Global Commodities, CFO of the Investment Bank, and Head of Global Credit Portfolio and Credit Policy and Strategy. She also served as the Chair of trade associations SIFMA and the GFMA. Blythe is currently on the board of The Breast Cancer Research Foundation and is co-Chair of the Global Fund for Women. She is also Group Senior Advisor on Blockchain for Banco Santander and Chair of Governing Board of Hyperledger at the Linux Foundation.
Ravi Menon
Managing Director
Monetary Authority of Singapore
Ravi Menon is Managing Director of the Monetary Authority of Singapore (MAS). He was previously Permanent Secretary at the Ministry of Trade & Industry (MTI) and Deputy Secretary at the Ministry of Finance (MOF). During his 16 years in the MAS, he has been involved in monetary policy, econometric forecasting, organisational development, banking regulation and liberalisation, and integrated supervision of complex financial institutions. Mr. Menon spent a year at the Bank for International Settlements in Basel, as a member of the secretariat to the Financial Stability Forum, and is a member of the Financial Stability Board (FSB) Steering Committee.
Nicolás Shea
Chilean Entrepreneur
Nicolás Shea is a Chilean entrepreneur, having founded Cumplo, eClass, the Chilean Association of Entrepreneurs (ASECH), Start-Up Chile, and TODOS. He holds an M.Sc. in Management from the Stanford Graduate School of Business, an M.Sc. in Education from Columbia University´s Teachers College, and a B.A. in business & economics from Universidad Católica de Chile, where he teaches entrepreneurship to future engineers.
