Mark Carney Cautions of Financial Technology (FinTech) Threat to Banks
Bank of England Governor Mark Carney has cautioned that new fintech could harm the business model of banks as savers move in the opposite direction of conventional moneylenders.
Carney explained that competition in the fintech space could decrease dedication “and the stability of funding of incumbent banks” which would compel the Bank to step in.
“If this happens, the Bank of England would need to ensure prudential standards and resolution regimes for the affected banks are sufficiently robust to these risks,” Carney said.
A few customers and small businesses are being attracted to fintech firms as another option to raise money or seek guidance, with crowdfunding, robot consultants and P2P lenders seen as affordable and more available.
Despite touching on the risks fintech firms could pose to customary moneylenders, Carney stated there was no compelling reason to strengthen up directive for the segment as it has so far “avoided undertaking traditional banking activities.”
The government is pushing to be viewed as a fintech pioneer, with Carney remarking that the UK financial technology sector – worth about £7 billion and employing around 60,000 individuals – could support development if held properly.
“The challenge for policymakers is to ensure that fintech develops in a way that maximises the opportunities and minimises the risks for society,” he expounded.
To keep pace with the sector, the central bank is currently accepting its fourth batch of applications for its fintech accelerator.
Conventional banks are trying to respond to the threat by putting their own money into the business, with the Chancellor Philip Hammond declaring that Barclays is to open a fintech accelerator in London which will house more than 500 workspaces for new businesses.
Hammond, speaking together with Carney at the Treasury’s first global meeting on the nascent sector, encouraged businesses to “go out and get the business” in Asia post-Brexit.
“If the UK is going to make the most of the freedoms it will have after leaving the European Union we have to build trade links with the fast-growing economies of Asia, we have to invest in the skills of the future and our economy must remain at the cutting edge,” he specified at the conference, seven days after he was promoting British fintech in India together with Carney.
“Not just of Fintech [but] of AI [artificial intelligence], biotech – of every area in which we have the potential to lead the world into this new industrial revolution.”
“The world does not owe us a living. We will have to strive and graft and fight to seize opportunities; and make the most of them,” the Chancellor supplemented.
Not everybody is persuaded, anyway. TransferWise’s CEO Taave Hintikus, who was likewise talking at the meeting in London’s Old Billingsgate Market, stated that if he must set his business up today he would not base it in the City, arguing that the UK’s vote to leave the EU threatens its standing as a fintech centre.