FinTech – Page 6 – FinTech and Blockchain Law Watch

Surging Adoption Levels of FinTech Services

Jul 07 2017

No great surprises arising from the EY FinTech Adoption Index 2017 which has revealed impressive growth in consumer uptake of FinTech products and services, with 33% of 22,000 digitally active consumers using FinTech firms – doubling from 16% in 2015. With less brand loyalty and reduced trust in traditional organisations, consumers are increasingly turning to FinTech firms as better alternatives.

Money transfer and payment services are the most popular FinTech category, with 50% of consumers using these services. This has been driven by the increasing popularity of mobile phone payments and online digital-only banks. Insurance is the second most popular service, with insurance premium comparative services simplifying the process of acquiring insurance.

FinTech has particularly excelled in emerging markets, with an adoption by digitally active consumers across China, India, South Africa, Brazil and Mexico averaging 46%. The growing middle class have embraced FinTech to meet the growing demand for financial services, encouraged by cooperative regulators and policymakers.

EY anticipates that FinTech adoption will increase to 52% globally as consumers become more aware of the products and services on offer.

Read the full report here.

ASIC signs fintech Cooperation Agreement with Indonesia

May 05 2017

By Claire de Koeyer and Jim Bulling

The Australian Securities Investment Commission (ASIC) has entered into a Cooperation Agreement (Agreement) with Indonesia’s financial services sector regulator Otoritas Jasa Keuangan (OJK) which focuses on promoting innovation in financial services in their respective markets.

The Agreement establishes a framework for cooperation between ASIC and OJK in the expanding space of financial services innovation, including an agreement to share information on emerging market trends and regulatory issues arising from the growth in innovation.

U.S. Government Accountability Office Issues Long-Awaited Report on Fintech Industry

May 01 2017

By Judith Rinearson and Eric A. Love

The U.S. GAO has issued a long-awaited report on the fintech industry, which focuses on the regulation of marketplace lenders, mobile payments, digital wealth management platforms and distributed ledger technology (“DLT” – often referred to as blockchain). For each of these fintech industry “subsectors,” the GAO report details the nature of the subsector and how it operates, as well as its potential benefits and risks. Moreover, the GAO report addresses industry trends, regulation and oversight for each subsector.

Marketplace lenders. The GAO report indicates that marketplace lenders may provide expanded and quick access to credit at lower cost than banks, although the report also notes risks related to loan term transparency and certain protections for small business borrowers. Read More

CFPB Finalizes Extension of Prepaid Account Rule Effective Date

May 01 2017

By Judith Rinearson and Eric A. Love

On April 20, the CFPB issued a final rule to delay for six months the October 1, 2017 effective date of its comprehensive Final Rule amending Regulation E and Regulation Z as applied to prepaid accounts. The Final Rule will now become effective on April 1, 2018.

In announcing the delay, the CFPB indicated that it has decided to “revisit at least two substantive issues” in the Final Rule through a separate rulemaking process. Based on CFPB Director Richard Cordray’s recent testimony before the House Financial Services Committee, the two substantive issues most likely relate to: (1) the Final Rule’s applicability to “the linking of credit cards to digital wallets that are capable of storing funds,” and (2) error resolution for unregistered prepaid cards. The CFPB can be expected to issue a proposal on these issues “in the coming weeks.”

Notably, the CFPB’s action could help to address concerns raised by Congressional Republicans about the scope of the Final Rule and its potential impact on industry participants and consumers, thus complicating ongoing efforts in Congress to repeal the Final Rule using the Congressional Review Act (CRA). In order to repeal the Final Rule utilizing the CRA, Congress would be required to pass a repeal bill by May 9, 2017.

FCA outlines FinTech and RegTech priorities for year ahead

Apr 20 2017

By Jonathan Lawrence

The UK Financial Conduct Authority (FCA) recently issued its Business Plan 2017/18 that deals with its FinTech and RegTech priorities for the year ahead. The FCA wants to engage more with regional and Scottish FinTech hubs. In its risk outlook, the FCA talks about more complex value chains that utilise FinTech posing a risk to consumer protection and market integrity. The issues associated with the oversight and controls of increasingly complex chains of third party relationships are reflected in the FCA’s priorities. The technological resilience of incumbent firms will also continue to be an area of focus because of the risk of disruption to financial markets. The FCA states that FinTech firms may not fully understand the scope of regulation and its impact on their business model. This could lead to cases of non-compliance with FCA rules, which could pose risks to consumer protection and market integrity. In addition, the FCA fears that greater reliance on technology poses increased operational risk, and risks to market integrity. The FCA believes that FinTech business models shift risk from financial firms to consumers without consumers fully understanding the implications or having adequate safeguards.

Blockchain Has a Perception Problem

Apr 20 2017

By Tyler Kirk

The International Monetary Fund (“IMF”) just wrapped up a panel on “FinTech and the Transformation of Financial Services” here in Washington, DC. Presenting 4 propositions, the IMF invited the panelists and the audience to vote on whether they agreed or disagreed with each. Following the panel’s discussion on each proposition, the votes were compared. To the exclusion of all other Fintech topics, there was an almost singular focus on blockchain in each panelist’s response to the propositions. This focus by itself is illuminating, however the audience and the panel diverged dramatically on one proposition, whether FinTech will help rather than hinder regulation of AML and combatting the financing of terrorism (“CFT”). The panel agreed, 92% to 8%, that FinTech would assist with AML and CFT efforts. The audience was essentially split, agreeing 57% to 43%. Similarly, 40% of the audience believed FinTech posed a threat to financial stability while only 17% of the experts shared that view. The takeaway here is that, while those of us who are intimately familiar with this technology clearly understand its benefits, the general electorate does not. So, does Congress? Financial regulators? Now is the time to engage counsel and shape public policy.

RegTech Association launches in Australia

Apr 13 2017

By Claire de Koeyer and Jim Bulling

Launching in March 2017 the RegTech Association is focused on “promoting the achievements, partnerships, collaborations, incubations and seeding of RegTech in Australia” through advocating, educating and supporting businesses in the sector. This is likely to involve facilitating engagement with industry stakeholders, advancing the use of technology and improving regulatory compliance outcomes.

Bank of England Governor delivers wide-ranging FinTech speech

Jan 26 2017

By Jonathan Lawrence

Mark Carney, the Governor of the Bank of England, has given a wide-ranging speech on FinTech which he delivered at the Deutsche Bundesbank G20 conference on 25 January 2017. It was entitled “The Promise of FinTech – Something New Under the Sun?”. Whilst recognising that FinTech’s true promise springs from its potential to unbundle banking into its core function, systemic risks will evolve. The challenge for policymakers is to ensure that FinTech develops in a way that maximises the opportunities and minimises the risks for society. Read More

Indonesia’s financial services authority issues its first FinTech regulations

Jan 12 2017

By Jonathan Lawrence

Indonesia’s financial services authority (OJK) has issued its first regulations relating to FinTech. The regulations lay out minimum capital requirements, interest rate provision and education and consumer protection rules.

Every Indonesian FinTech P2P lending firm must now register and secure a business licence from the authority. A company must have Indonesian Rupiah 1 billion ($75,000) in capital to register, and a further Indonesian Rupiah 2.5 billion ($188,000) to apply for a business licence. These figures are approximately half those that had been proposed in previously issued draft regulations. Foreign ownership is limited to 85%.

No maximum interest rate has been set, which again contradicts previous drafts of the regulations which set a cap of seven times Bank Indonesia’s seven-day reverse purchase rate per annum.

Muliaman Hadad, chair of OJK, told the Jakarta Post that the regulation was only an initial step in the authorities’ efforts to regulate and supervise the business. “What’s important is they get onto our radar because we don’t want to regulate the prudential aspects hastily. We want to provide [business] transparency guidelines first,” Hadad said. The OJK also has implemented a regulatory sandbox for firms to test services for consumers.

Bank Indonesia set up a dedicated office and regulatory sandbox in November 2016 to help FinTech developers. It will also provide services to help developers to understand Indonesia’s regulatory policies on FinTech, gather and disseminate information on developments, and hold regular meetings with authorities and international bodies interested in the use of technology in finance, Bank Indonesia said.

For a full text (in Indonesian) of the regulations, please click here.

Retailer invests in FinTech

Jan 05 2017

By Jonathan Lawrence

UK department store company House of Fraser is to invest £35m in Tandem, an app-only challenger bank. The move will enable House of Fraser to offer online banking services to shoppers.

Tandem was founded in 2014 and received its UK banking licence a year ago. It has already raised over $30m from investors, including eBay co-founder Pierre Omidyar. Founded in 2014, Tandem raised £1m last year in a crowdfunding campaign, valuing it at £65m.

Tandem competes with other new app-only start-up banks, dubbed “neobanks”, including Monzo, Starling and Atom. It currently offers a savings tool that lets people monitor spending on any bank account. It began rolling out its app in November 2016 and plans to launch credit and debit products in 2017.

House of Fraser was acquired by Chinese conglomerate Sanpower in a £480m deal in 2014. While the company already offers credit and loyalty cards through NewDay, the ability to offer app-only online banking services is a departure that could see other UK retail multiples follow suit.

Tag:FinTech