Lending and borrowing: closely related to financial intermediation 3. Risk management: closely related to the insurance sector (“InsurTech”) 4. Market support: the “tech” part of FinTech can make simpler or more efficient processes 5. Investment management: E-trading, smart contracts; robo advice  Payments, transfers, clearing, and settlement. Mobile payments (either by banks or non-bank institutions), digital wallets, digital currencies and the use of distributed ledgers for payments infrastructures. These can contribute to the management of massive numbers of transactions as well as to the transfer and settlement of large sums among financial institutions. Lending and borrowing. The most common FinTech innovations in this area are crowdfunding and online P2P lending platforms. These applications are closely related to financial intermediation, a core and heavily regulated element of financial institutions. FinTech applications in this field are still a small fraction of overall credit but in some jurisdictions are growing very rapidly. Risk management. FinTech companies participating in the insurance sector (“InsurTech”) are getting traction in many jurisdictions. They have the potential to affect not only marketing and distribution of insurance, but also underwriting, pricing of risks and settlement claims3. Risk management also concerns the commitment and registration of guarantees and collateral in credit operations. Market support. The “tech” part of FinTech can provide simpler or more efficient processes such as ID verification, data storage and processing (cloud computing), or the execution of orders through smart contracts. The access and contestability of information is an important issue here. Investment management.
Most of money in the economy is currently made of deposits that result from the maturity transformation—from short-term deposits into medium term loans—that banks perform. Banks meet their liquidity needs for disbursement and reserve requirements by borrowing from the central bank. Monetary policy is then operationalized by setting the rate at which commercial banks can store or withdraw money from the central bank. 2  Central Bank of Chile 29 June, 2017  Slide 2  Central bank functions and tools ▪ Monetary policy and macro regulations operate through the financial system, particularly banks ▪ Most of money in the economy is currently made of bank deposits ▪ Banks resolve their liquidity needs—emerging from disbursement and reserve requirements—by borrowing from the central bank ▪ Monetary policy is then operationalized by setting the rate at which commercial banks can store or withdraw money from the central bank  [SLIDE 3] Today money and financial operations are overwhelmingly composed of balance sheet records. For this reason, banks need to be strictly regulated and the central bank must manage monetary policy to ensure stability in the purchasing power of money. The transmission of monetary policy to the economy and, in the end, to inflation, depends on the smooth operation of commercial banks. At the same time, banks operate as a network and provide liquidity to all sorts of activities. Any disruption in the operation of a bank or in the transmission or provision of funds can have serious economic consequences.