Fintech and the role of government
The time is ripe for a new era of “dot-com-esque” economic growth, enabled by both large and small players who offer digitised financial services.
Speeches and press releases highlight a touchless and seamless financial system with trillions of dollars of capital magically unlocked from the screen of smartphone, and more sandboxes than one can find at your average preschool. There’s rarely a day when even a central banker, finance minister or some other government official isn’t saying something optimistic and supportive about financial technology – fintech.
One question that remains: what support does the fintech industry, and the broader financial ecosystem actually want (or need) from government? Tod Burwell, president and CEO of BAFT, explores.
While fintech can support various public policy goals, governments can offer support by:
- ensuring fintech solutions meet safety and soundness criteria;
- ensuring legal and regulatory frameworks are “digital-ready”;
- reducing administrative obstacles and regulatory complexity;
- endorsing adoption of efficient digitisation solutions;
- offering coordinated government identity protocols.
Innovation is about finding new ways to effectively solve problems, thus, opening new avenues of opportunity. Many of the world’s most successful innovations changed behaviour, expectations, and sparked a new era of creative thinking about what other problems could be solved. The internet solved problems that we didn’t always consciously realise we had, and simultaneously tickled our imagination as to what else we could do with this newfound capability.
While innovators produced operating efficiencies, improvements in safety, living conditions, or enhanced quality of life, the desired role of government was largely to stay as far away from the creative cycle as possible.
Now, as innovation marches toward risk-sensitive and highly regulated industries such as financial services, there must be a balance of “hands-off” and “guiding-hand” approach from the public sector, allowing creative solutions to emerge, while simultaneously ensuring consumers and local economies are protected from catastrophic risk. Fintech companies that clear the first hurdle of validating their individual solution can actually solve a problem, must quickly mature to the reality that they also inherit the responsibility to protect the safety and soundness of the financial system.
Let’s be clear, companies are not asking for more regulation. They do, however, need government collaboration…
This is an excerpt. The full article is available in the May 2017 edition of Banking Technology.