Global regulators have warned that increased levels of data are urgently required in order for comprehensive regulation of the burgeoning fintech market to continue.
Last month, the Financial Stability Board (FSB) released a report assessing the effects of fintech growth upon the global economy. The FSB was created in 2009 in the aftermath of the financial crisis to monitor instability in the world’s financial system. Bank of England Governor, Mark Carney, an advocate of UK fintech, chairs the board.
The report identifies risks requiring the attention of policy makers and regulators, noting ten areas that require attention, of which three are considered priorities: managing operational risk from third-party service providers, mitigating cyber risks, and monitoring macro-financial risks that could emerge as fintech grows and the potential that contagion means that risk to the wider market grows with it.
The FSB concluded that, “there are currently no compelling financial stability risks from emerging fintech innovations given the relatively small size of the fintech relative to the financial system, experience shows that they can emerge quickly if left unchecked”.
Fintech comprises a small but no longer insignificant portion of the UK economy. In comparison to the financial sector as a whole, the FSB declared the risk to the wider economy was minimal, given fintech’s size. However, when it comes to the domino effect that trigger financial crisis’, size isn’t always everything, and so it is heartening and reassuring to see the FSB’s promotion of heightened regulation through improved data collection.
Regarding crowd finance – both crowdfunding and lending – the FSB was upbeat, noting the positive impact fintech has on traditional fund raising and capital formation. As innovations such as smart contracts edging into the mainstream and peer-to-peer models being adopted by more industries, the crowd looks set to play an important role in the ongoing revolution.
One area of concern in the report is marketplace lending, where the FSB urges caution in relation to maturity mismatch, where borrower and investor end up with incongruent investment schedules. At present, this is only a small problem but, given sector growth, the volume of mismatching looks set to rise, which could lead to unnecessary – and potentially damaging – complexity. The FSB urges caution and specific monitoring of this situation.
The report ends positively, highlighting the benefits fintech may bring to the global financial system. In support of crowd finance, the report identified decentralisation and increased intermediation as key benefits.
So, the priority for the global fintech community, including crowd finance, must be to be positive but vigilant as the sector grows. The FSB noted, “any assessment of the financial stability implications of fintech is challenging given the limited availability of official and privately disclosed data.” In order for growth to continue in a regulated manner, the FSB called for more transparent data to be made available to regulators and monitoring bodies.
This is what TAB provides: transparent, structured data for all market crowd finance participants. This report shows that TAB’s mission is aligned with that of regulators and the FSB. By providing data from all areas of crowd finance, we intend to play our part in facilitating robust regulation and market growth.