Over the last few years, there has been a convergence of factors that have driven traditional banking businesses into new frontiers. On the one hand, there has been an increase in the cost delivery due to the tightening of the regulatory~compliance grip, while on the other; the market has become massively disrupted with the entrance of new companies into the sector that offers innovative, efficient and cheaper ways to do banking.
Whether bankers are on top of these developments or not, the Bank for International Settlements has recognised a threat to the finance sector from the delivery of evolving banking practices. To counter this threat, BIS has published guidance for the facilitation of Fintech which can be found here [LINK].
"The emergence of fintech is only the latest wave of innovation to affect the banking industry. While banks have under gone various technology enabled innovation phases before, fintech has the potential to lower barriers of entry to the financial services market and elevate the role of data as a key commodity, and drive the emergence of new business models"
Bank for International Settlements
The document explores the implications and considerations bankers should be investigating in respects to their own business models, and ten potential considerations have been listed by the central regulator. One area of the paper that is interesting is what the Bank for International Settlements perceives as a Sectoral Innovation which is explored diagrammatically below.
Bank for International Settlements on Types of Services
As bank's business models have become unfastened, the associated risk environment is also in flux.
Given that the global investment into Fintech is currently doubling every twenty-four months, Operational Risk Departments and Auditors are going to need to be proactive and well prepared. In the coming years ahead the emergence of new threats that may have impacts on banks' operations and business models have been identified as a high possibility by the regulator. At present, BIS has identified the following risks may become key focal points for bankers and the table below is worth pondering over.
Bank for International Settlements on Fintech Risks
It's an interesting read, and the document gives bankers insight into specific concerns the regulators are monitoring, general trends in the banking sector, and what potentially lies ahead for risk managers. If you didn't pick up the link before, here it is again [LINK].