Institutional Arrangements for Fintech Regulation: Supervisory Monitoring

The growth of fintech has led to authorities developing new ways of regulating and supervising firms that use new technology to deliver products and services. This paper explores the risks and benefits of these approaches and charts their growth and evolution.
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Volume/Issue: Volume 2023 Issue 004
Publication date: June 2023
ISBN: 9798400245664
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Topics covered in this book

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Economics- Macroeconomics , Economics / General , Inventions , Fintech , sandbox , innovation , regulation , innovationhub , supervision , techsprint , IMF Library , policy sandbox , technology sprint , sector sandbox , publication order , UK Financial Conduct Authority , cross-border sandbox , Emerging technologies , Technological innovation , Global

Summary

The impact of fintech is growing rapidly worldwide, although this growth is uneven across jurisdictions. Depending on the effect of fintech, authorities may adopt a passive approach of monitoring fintech, try and capture new business models in existing regulatory frameworks, develop bespoke regulation, or adopt test and learn policies through institutional arrangements like innovation hubs and sandboxes. The test and learn approach is relatively unique to fintech in financial regulation and supervision and has advantages and disadvantages. While it can help authorities monitor and respond to the challenges of fintech in some scenarios, in others it could lead to risks to consumers and markets, particularly when designed poorly or with an unclear use case. Ultimately, the aim for authorities should be to consider fintech regulation part of the mainstream, where fintech expertise is embedded throughout an organization and not siloed to specific fintech units.