Danger! The World Economic Forum is calling for governments, established finance players, and fintech (financial technology) startups to band together and draw up more rules and regulations to stop the wave of new fintech players becoming a systematic risk to economies.
In a report co-authored by consultancy Oliver Wyman, the Davos organiser says: "As legacy business models and long-held value propositions in financial services are reshaped by these new ideas, key actors in the system must work to ensure economic growth does not come at the expense of systemic stability."
The report, titled "Understanding the impact of technology-enabled innovation on financial stability" , says that: "The financial sector is at an inflection point", with nimble fintech startups "disintermediating" the jobs traditionally done by big banks.
In other words, finance is moving from being a bunch of one-stop-shops where you can get your mortgage but also trade shares and take a pension, to a bunch of specialised players that can focus on one area thanks to the lower overheads allowed by technology.
The report says:
Use of technology in finance is not new, nor are many of the products and services that are offered by new entrants to the sector. Rather, it is the novel application of technology and its speed of evolution that make the current wave of innovation unlike any we have seen before in financial services.
WEF and Oliver Wyman identify six big advantages to fintech: increased access to financial services through things like your smartphone, lower cost, improved risk management, diversification of risk, increased collaboration, and increased competition.
But the report warns that "technology-enabled innovations bring a new set of risks to the financial system, both conduct and prudential, and has implications for human capital (e.g. increased automation leading to fewer employees)."Here are the six key risks WEF and Oliver Wyman identify: > […]
