Bridging the divide: finance and technology

The annual P2P Financial Systems workshops (P2PFISY) for 2016 hosted by University College London (UCL) brought together academics, technologists, policy makers, regulators and fintech providers to analyse how technology is changing financial services.

The event was attended by The Bank of England (BoE) and a diverse range of experts to address questions of practical importance on: digital currencies and Blockchain technologies, P2P lending and Crowdfunding, digital money transfer,  mobile banking and mobile payments.

Victoria Cleland, Chief Cashier at BoE, outlined the latest wave of fintech activity with a particular focus on distributed ledger technologies (DLT) and the central bank digital currency (CBDC) as part of her speech ‘Fintech: Opportunities for all?

“We are undertaking more fundamental long-term research on the wide range of questions posed by the potential of a central bank-issued digital currency (CBDC). Whether a CBDC would be feasible and whether it would benefit the economy and the financial sector, over the medium term are big issues, and the answers remain far from clear. We have embarked on a multi-year research programme so that any future decision is informed with a full understanding of the implications”, Cleland said.

Cleland also noted that since 2010, more than $50bn has been invested in roughly 2,500 fintech companies’ and over 24 countries are currently investing in DLT with $1.4bn in investments over the past three years. In addition, over 90 central banks are engaged in DLT discussions and more than 60 have joined blockchain consortiums like R3CEV.

Cleland further emphasised the need to explore and understand how we define fintech and the impact it is having. “We need to understand what fintech means for the entities we regulate, how it might impact the overall safety and soundness of the financial system, and how it could alter the transmission mechanism for monetary policy.”

The pace of fintech innovation and investment has rapidly increased in recent years. PWC estimates that within the next three to five years, investments in fintech will exceed over $150bn. However, the firm also highlighted how the lines are being blurred between technology firms and traditional financial institutions in a report entitled, ‘How fintech is shaping financial services’. Accordingly to the research, 83% of the financial institutions who took part in the report believe their business are at risk of being lost to stand-alone fintech companies.

Nonetheless, there is a growing understanding that traditional financial services firms and new fintech providers can collaborate and learn from each other, rather than competing for market share.

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