Waves of financial innovations from new players, but also from incumbents on the market, create massive changes in the financial industry. In this light, the highlight of the conference is embracing changes, that is opening doors to financial innovations in the payment landscape, while preventing disruptions to the financial markets and to the overall financial stability. New wave of digitalization can have wide ranging positive effects on the economy – it spurs innovation and productivity, transforms public and private services, contribute to higher financial inclusion by reaching underserved households and overall, improve wellbeing of the society as information, knowledge and data become more widely available. Benefits go hand in hand with challenges to jobs and skills needed, to taxation, financial markets, and invite new thinking on how to preserve fundamentals such as privacy and security, as well as how to preserve monetary and financial stability. Financial innovations, underpinned by digitalization, have a potential to gradually reshape the financial sector. “The Pulse of Fintech” report of KPMG1 shows that Fintech investment globally more than doubled during 2018, and reached $ billion. In addition, while new startups sprouted across emerging fintech subsectors, highly mature areas like payments saw some consolidation through mergers and acquisitions of big developed players. Reports also show that highest number of fintech service providers are in the payments, clearing and settlement category, thus, giving them the potential to gradually undertake a paradigm shift in the payment landscape.
The most frequently mentioned motives of the banks that have formal partnership with fintech firms or develop their own solutions for usage of new technologies included attracting new or maintaining the existing customers as well as cost savings. Among the technological solutions which are already in use or are in testing phase, most of the banks cited cloud services, usage of biometric properties for client identification purposes and using of big data analysis for credit scoring. Currently, the banks do not have experience neither with algorithms used for the purpose of investment advice or decisions nor with any DLT based solutions. The regulators and policymakers also face challenges. Rules and regulations should keep pace with innovation, providing supportive environment but also adequately assessing and mitigating potential risks. Consequently, to apprehend the full benefits of digitalization, the authorities need to reach across traditional policy reluctances and across different levels of institutions, and develop a unified approach to policymaking. The Financial Stability Board stocktake of regulatory approaches to fintech finds that majority of jurisdictions surveyed have already taken or plan to take regulatory measures to respond to fintech. The scope and scale of changes or planned changes vary substantially, depending, among other things, on the relevant size and structure of domestic financial and fintech sectors and the flexibility already provided by the existing regulatory framework. An example of innovation in the legislative area has been set up by the European Union with the revised Payment Service Directive (PSD2).