The rise of financial technology —
more commonly known as fintech — won't threaten the existence of banks and it's
the responsibility of authorities to make sure that traditional lenders are
prepared for changes in their industry, policymakers and regulators said in a CNBC-moderated panel
Thursday.
The comments were made in Bali, Indonesia where the International Monetary Fund
and the World Bank are
holding their annual meetings. The two organizations on Thursday jointly
launched a paper, the Bali
Fintech Agenda, to help policymakers around the world strike a
balance between encouraging financial innovation and safeguarding the stability
of the system.
CNBC's Geoff Cutmore moderated a
panel discussion in Bali to discuss the contents of the paper. He asked the
panelists whether it's a good idea to allow fintech firms to "cherry
pick" profitable segments of the banking industry to operate in —
therefore taking money away from a legacy system that's built up over decades
and has weathered financial crises.
That question, according to Bank of
England Governor Mark
Carney, is akin to asking "whether it's a good idea to protect
the banks from serving consumers better?"
Carney, who was one of the panelists
at the event, said many small and medium-sized enterprises in the U.K. face high costs in
tapping the formal banking system for funds. Therefore, reaching those
businesses through fintech is "not taking liquidity away, that's providing
new liquidity" into the financial system, he said.
The key is to ensure that
technological transformation in the financial industry can bring about the
maximum benefit and at a minimum costs, which is a "classical
problem" that many policymakers face, said Sri Mulyani Indrawati,
Indonesia's finance minister who was also a panelist.
The Indonesian government's stance,
she added, is that technology can not only help to improve existing ways of
doing things but also to pressure the incumbents to improve their business
models.
"For the existing business
model, like banking, can they do innovation just as agile and innovative? It
could be that some of them could come up with a totally different idea and
that's good," she said.
As the financial industry increases
its technology adoption, the crop of regulators — too — need be refreshed,
noted Lesetja Kganyago, governor of the South African Reserve
Bank.
"Regulators are usually lawyers
and accountants, but we need people who understand data science and
technology," he said during the panel discussion.
Click here for the original
article.