LONDON (Reuters) - The rise of fintech does not pose any compelling risks to financial stability, according to a review by global regulators, but this may change as the sector grows.
While financial technology is changing how financial services and information are being delivered, there is no evidence that services like crowdfunding, “robo” advice and cloud computing will fundamentally change underlying activities such as lending, the Financial Stability Board (FSB) said in a report published on Tuesday.
The findings of the FSB, which coordinates regulation for the Group of 20 Economies (G20), signal no immediate rush to bring in new rules at the global level to mitigate financial stability risks.
Regulators have taken a relatively relaxed approach to fintech, given its tiny size compared to banks with investment totaling $21 billion in the first nine months of 2016, but the FSB said it would keep monitoring the sector.
Apart from potential risks, fintech offers potential benefits as well, such as greater efficiency, transparency, competition and resilience of the financial system, and economic growth, it said.
“The FSB will continue to monitor and discuss the evolution of the potential financial stability implications of fintech developments,” it said.
A lack of data is also making it harder to assess financial stability threats, and regulators don’t want to stifle a new sector with heavy handed rules.
Fintech activities are already covered within broader financial rules, and many countries are already planning to take further measures to protect consumers and investors, the FSB said.
It identified three “priority areas” for international collaboration on monitoring fintech: managing operational risks such as management failures; mitigating cyber risks; and monitoring risks to the financial system that could emerge as fintech activities increase.
The report classifies fintech by activities and primary function, an essential first move before fashioning any new rules.
“Regulators need to understand the impact that developments in fintech can have on financial stability, especially given the rapid rise of innovation in this space,” said Carolyn Wilkins, senior deputy governor at the Bank of Canada and chair of the FSB’s fintech issues group.
“Our report today sets out a clear picture of supervisory and regulatory issues, which the FSB will continue to monitor and discuss going forward.”
Reporting by Huw Jones; Editing by Susan Fenton