Central banks must “get their hands dirty” with fintech
CENTRAL banks must play a key role in the development of fintech, a Bank of England official has said.
Andrew Hauser, executive director for banking, payments and financial resilience at the Bank, said on Friday that central banks “cannot afford to stand on the sidelines” of technological change and innovation “if they are to continue to deliver their mission of monetary and financial stability”.
They must “roll up their sleeves and get their hands dirty with the technology itself,” he went on to say.
He cited cost pressures on financial intermediaries, new fintech entrants, consumer demand for better technology offerings and an emphasis on competition from public authorities as “strong and persistent forces” that central banks must address.
“The resulting technological change and innovation, though uncertain in timing, will have profound implications for the nature and range of financial services available to households and firms,” he told a meeting of fintech contacts of the Bank of England’s Agency for the South East and East Anglia, held in Cambridge.
“Traditional distinctions between regulated and unregulated activities, retail and wholesale, on-shore and off-shore, will blur as conventional models of intermediation are progressively ‘unbundled’.
“And new networks will emerge to change the way economic agents interact.”
Hauser said that these issues led the Bank to launch its fintech accelerator project in mid-2016, to improve its familiarity with the sector and give fintech firms some insight into the questions and needs that central banks might have, as policymakers, regulators and operators.
He also announced the latest cohort of firms that the fintech accelerator would be working with: distributed ledger technology firm Chain, and data firms NTT Data and Reportix, MindBridge Analytics and Digital Reasoning.
“Through the accelerator and the Bank’s broader fintech work, we have made valuable connections with important parts of the financial and technology sector beyond the regulatory perimeter – relationships that could matter greatly in the years to come,” said Hauser.
“And those engagements with fintech firms have also exposed central bankers to some very different ways of working and thinking: more agile, more willing to experiment, less bound by convention.”