WASHINGTON, April 19 New companies and
established banks are spreading the use of financial technology,
commonly known as "fintech," around the world, raising questions
about how fast-evolving services such as person-to-person
lending can affect financial stability.
On Tuesday, a collection of executives from large banks,
start-ups and regulatory agencies such as the Bank of England
and Western Union, put forward four recommendations for a
global approach to fintech under the banner of the World
Economic Forum, the international non-profit that hosts the
major Davos meeting each year.
They suggested debating "the ethical use of data,"
establishing a forum for the public and private sectors to
discuss issues in fintech, setting industry standards and
monitoring changes so supervisors and regulators can mitigate
Fintech was once dominated by start-ups creating software
for financial services as an alternative to traditional methods,
such as a firm building an on-line platform to match mortgage
borrowers to lenders.
Richard Eldridge, the CEO of Lenddo, which provides credit
scores using non-traditional data in the developing world, said
a few years ago big banks were "stand-offish" about fintech. Now
they are embracing it to serve more people and the industry is
experiencing "exciting times," he said.
Citigroup Inc in China is looking to expand its
digital platform after data showed 95 percent of its clients'
transactions are not made through a branch.
In areas where traditional banking and data collection do
not reach, fintech firms step in, Eldridge said. But, he said,
there needs to be a wide understanding of when data should be
Eldridge contributed to the forum's fintech paper, which
also emphasized industry self-regulation, saying innovators and
users have the best sense of the direction of the fast-changing
"If the industries are regulating themselves they can
maintain these standards in a cutting-edge way," he said. "It's
On Monday, U.S. Senators Sherrod Brown of Ohio, Jeff Merkley
of Oregon, and Jeanne Shaheen of New Hampshire - all Democrats
who advocate strong financial regulation - asked the Government
Accountability Office to review fintech. They also want the
non-partisan auditing agency to look at data security and the
role of regulation.
The senators raised questions about the structures and
underwriting of consumer and small business loans in fintech, as
"As we saw during the crisis, gaps in understanding and
regulation of emerging financial products may result in
predatory lending, consumer abuse, or systemic issues," they
wrote to the GAO.
(Reporting by Lisa Lambert; Editing by Bill Trott)