* Fintech investment tripled last year to $12.2 bln
* Rapid rise a challenge to traditional regulations
* Regulators need to quickly get on top of phenomenon
HONG KONG, Oct 15 (Reuters) - The explosion in new technology-driven start-ups offering a range of alternative financial services is fast-becoming one of the biggest challenges for traditional regulators, the head of an international securities watchdog said on Thursday.
These so-called “fintech” firms offer services ranging from peer-to-peer lending to crypto-currency exchanges, typically operate outside the regulated financial services space and are seen by bankers and think tanks, including the World Economic Forum, as a major threat to entrenched financial players.
Investment in fintech more than tripled last year to $12.2 billion from the previous year, according to data supplied by research firm CB Insights.
David Wright, secretary general of the International Organization of Securities Commissions (IOSCO), told Reuters regulators needed to quickly get to grips with the “fintech revolution” or risk risk rendering reforms on key areas of the financial system, such as clearing and settlement, obsolete.
“It’s a very challenging time for securities regulators: models and markets and structures are changing very fast and you’ve got to be very conscious of that and up to speed,” Wright said on the sidelines of the Thomson Reuters 6th Pan-Asian Regulatory Summit in Hong Kong.
“Regulators first have to understand and be right at the frontier of thinking in terms of how these technologies are developing and, even more difficult, to work out the regulatory implications of this technology,” he added.
In a bid to stay ahead of the curve on fintech, banks including Goldman Sachs, Morgan Stanley and Citi have invested in new payments services, block-chain technology and data analytics.
Wright, who is due to retire from his role in March, said fintech offers many benefits including providing much needed credit to small companies and reducing costs for consumer. But he said regulators had to quickly address potential risks.
“I think regulators have got to wake up quickly. We need as IOSCO to get up to speed, very, very quickly,” he added.
An international body comprising more than 120 national securities watchdogs, IOSCO has played a key role in overhauling the global financial markets following the 2008 crisis.
Editing by Miral Fahmy
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