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Parma Bains, Nobuyasu Sugimoto, and Christopher Wilson
BigTech firms are gradually entering the financial sector and becoming important service providers, particularly in emerging markets. BigTechs have entered financial services using platform-based technology to facilitate payments and more recently expanded into other areas, such as lending, asset management, and insurance services. They accumulate data from their nonfinancial and financial activities and draw on consumer data held in different parts of their business (such as via social media). BigTechs are applying new approaches to existing financial services products and services such as underwriting using big data and are also applying machine learning for their key business decisions, such as pricing and risk management across multiple financial sectors. Incumbent financial firms have also increased their reliance on BigTech firms to host core IT systems (for example, cloud-based services, which have the potential to improve efficiency and security). This rapid and significant expansion of BigTechs in financial services and their interconnectedness with financial service firms are potentially creating new channels of systemic risks. To achieve effective implementation and multiple objectives of financial regulation and supervision, a hybrid approach, combining a mix of entity- and activity-based approaches, is needed.
Parma Bains, Nobuyasu Sugimoto, and Christopher Wilson

. Experience suggests that regulatory approaches that allow for the emergence of fintech start-ups across jurisdictions foster competition in the short term. However, the same regulatory environment may favor the participation of BigTechs in financial services, allowing them to leverage new data sets and their own proprietary data to promote cross-subsidization and potentially lead to monopolistic structures that could hinder competition in the long term. Careful consideration of longer term effects is needed to develop new, or adjust existing, regulation to provide a level

Parma Bains, Nobuyasu Sugimoto, and Christopher Wilson

Title Page FINTECH NOTES BigTech in Financial Services: Regulatory Approaches and Architecture Parma Bains, Nobuyasu Sugimoto, and Christopher Wilson NOTE/2022/002 Title Page FINTECH NOTE BigTech in Financial Services: Regulatory Approaches and Architecture Prepared by Parma Bains, Nobuyasu Sugimoto, and Christopher Wilson January 2022 Copyright Page ©2022 International Monetary Fund BigTech in Financial Services: Regulatory Approaches and Architecture Note 2022/002 Prepared by Parma Bains, Nobuyasu Sugimoto, and

Blockchain Consensus Mechanisms: A Primer for Supervisors VI. REFERENCES Bains, Parma, Nobuyasu Sugimoto, and Christopher Wilson. 2022. “BigTech in Financial Services― Regulatory Approaches and Architecture.” IMF Fintech Note, Washington, DC. https://0-www-imf-org.library.svsu.edu/ en/Publications/fintech-notes/Issues/2022/01/22/BigTech-in-Financial-Services-498089. Basel Committee on Banking Supervision. 2021. Principles for Operational Resilience. March. https://www. bis.org/bcbs/publ/d516.pdf. Bowman, Mic, Debajyoti Das, Avradip Mandal, and Hart Montgomery. 2021. On Elapsed Time

Parma Bains, Nobuyasu Sugimoto, and Christopher Wilson

houses the headquarters of a firm or hosts its activities. VII. References Adrian , Tobias . 2021 . “ BigTech in Financial Services.” Speech to the European Parliament FinTech Working Group, International Monetary Fund, Washington, DC, June 16 , 2021 . https://0-www-imf-org.library.svsu.edu/en/News/Articles/2021/06/16/sp061721-bigtech-in-financial-services . Bank of England . 2020 . “ How Reliant Are Banks and Insurers on Cloud Outsourcing?” January 17 , 2020 . https://www.bankofengland.co.uk/bank-overground/2020/how

Parma Bains

VI. References Bains , Parma , Nobuyasu Sugimoto , and Christopher Wilson . 2022 . “ BigTech in Financial Services―Regulatory Approaches and Architecture .” IMF Fintech Note , Washington, DC . https://0-www-imf-org.library.svsu.edu/en/Publications/fintech-notes/Issues/2022/01/22/BigTech-in-Financial-Services-498089 . Basel Committee on Banking Supervision . 2021 . Principles for Operational Resilience . March . https://www.bis.org/bcbs/publ/d516.pdf . Bowman , Mic , Debajyoti Das , Avradip Mandal , and Hart Montgomery

International Monetary Fund. Monetary and Capital Markets Department

. 19 BigTech in Financial Services: Regulatory Approaches and Architecture, IMF 2022 20 Adrian, Tobias. 2021. “BigTech in Financial Services.” Speech to the European Parliament FinTech Working Group, International Monetary Fund, Washington, DC, June 16, 2021. https://0-www-imf-org.library.svsu.edu/en/News/Articles/2021/06/16/sp061721-bigtech-in-financial-services . 21 https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Reports/2022/1026595/ESA%202022%2001%20ESA%20Final%20Report%20on%20Digital%20Finance.pdf 22 https

International Monetary Fund. African Dept.

/03/GSMAState-of-the-lndustrv-Report-on-Mobile-Monev-2021Full-reportpdf . Bains , P. , Sugimoto , N. , and Wilson , C. 2022 . BigTech in Financial Services: Regulatory Approaches and Architecture . FinTech Notes , Vol. 2022 : Issue 002 . Washington, D.C. : International Monetary Fund . Delechat , Corinne , and Leandro Medina , eds. 2021 . The Global Informal Workforce: Priorities for Inclusive Growth . Washington, D.C. : International Monetary Fund . Enterprise Surveys . 2013 . World Bank , www

International Monetary Fund. Monetary and Capital Markets Department
Ireland’s fintech sector is growing in importance through the entry of innovative new players and digital transformation of incumbents’ business models and products. The Irish Government has adopted an action plan for the development of Ireland’s international financial services sector that includes several initiatives of relevance to fintech. Meanwhile, the Central Bank of Ireland (the Central Bank), the integrated financial services regulator, engages with new entrants with a view to securing consumer interests and safeguarding the resilience of the financial system, thereby harnessing the benefits of fintech while managing additional risks it may generate. The largest sub-sector is represented by payment and e-money institutions (PIEMIs). Recent data show most Irish adults are using digital payments multiple times a week, while 24 percent use their mobile phone for contactless payments. Ownership of crypto-assets is also on the rise, especially among young adults. Beyond payments and crypto-assets, fintech activities are developing on a smaller scale in areas such as insurance and investment management. Meanwhile, the importance of market support firms, including cloud service providers (CSPs), continues to grow.
Parma Bains
Technology plays an increasingly important role in financial services. With the pace of technological inno-vation moving ever faster, the role new technology plays in the provision of financial services is becoming increasingly fundamental. New technology can generate efficiencies for firms, lowering costs that can be passed on to end users. It can increase access to financial services and products for consumers, particularly the most vulnerable; however, new technology can also create new risks and unintended consequences that can harm financial stability, consumer protection, and market integrity. This primer is designed for financial supervisors at central banks, regulatory authorities, and government departments. It adds to existing literature by summarizing key aspects of popular consensus mechanisms at a high level, with a specific focus on how such mechanisms may impact the mandates of supervisors and policymakers when deployed in financial services markets. It could also help inform IMF staff on policy development and technical assistance related to crypto assets, stablecoins, and blockchains.