The fintech startups are competing with the established financial institutions today. Does that suggest that we need to regulate fintech companies?
In the financial sector, financial technology boom imploding is something that keeps everyone worried. How to deal with this scenario? Well, a ground of global leaders from the finance industry has a solution – they urge the industry incumbents, startups and regulators join hands to Find A Solution to the problem. Where did this group meet? Well, they met at Davos during the World Economic Forum. The finance leaders said in unison that there is urgency as far as this issue is concerned. The rapid growth of fintech has become the need of the hour. They also said that systemic stability has to be maintained at any cost. Browse The Finance Section to Learn More About The Latest Finance News.
Why collaboration is a must?
Well, there are a number of reasons behind it. Let’s take a look below.
- Unregulated companies can come up with fintech products with security vulnerabilities. This can be really dangerous. It’s a threat to the whole industry.
- Traditional finance companies might try to compete with these newcomers with products which are less safe. And this can lead to widespread problems.
- The finance leaders demanded a new common forum for the public sector and private sector.
- Ethical use of financial data is something these leaders root for. A debate on this topic is a must, say the leaders.
- International fintech regulation is a must to avoid the common problems.
- A set of industry standards should be introduced for the fintech companies as well, say these leaders.
Speaking of these big financial leaders, who are they? Well, they are part of large financial companies where they are in prominent positions. Some of them are working as financial regulators in Europe and the US as well. Representatives from some of the biggest banks like UBS, HSBC, Deutsche Bank etc. are part of this group. Or in other words, highly influential people from the financial industry are part of the group. That suggests the significance and urgency of their proposal. It clearly indicates that these suggestions should be taken seriously for the better future of the finance sector.
Asia and Africa have some of the advanced fintech companies. According to one of the leaders, these companies have been part of a ‘regulatory gang’. In case of any new regulatory initiative, it can be enforced in the whole region via this network. According to the leaders, the recommendations they have put forward are common sense recommendations. When regular financial institutions take on these fintech companies, the whole finance sector faces the risks involved with this. Regulators working for the Financial Stability Board have flagged fintech companies saying these companies need close attention. As far as the behavior of the established financial companies, the regulators didn’t find many irregularities. The only thing mentioned is the scenario of intense competition with fintech companies leading to trouble. They agree to the fact that this sector will need to be regulated to avoid another financial crisis in the future. Such behavior can easily turn into a reckless financial behavior in no-time and it needs to be monitored.