This week I attended the conference, FinTechStage Luxembourg, which brings together FinTech start-ups, investors, financial institutions, technology partners, and regulators to discuss the evolving financial market ecosystem. Some of the key takeaways from the day-long discussion among industry experts included:
- Luxembourg is aiming to attract UK FinTechs post-Brexit by becoming a hub to access the EU
- Artificial intelligence
- Digital identities
- Banking the underbanked in developed countries
- Data protection
For the purpose of this blog post, I will focus on the RegTech component of the conference as that subject stood out to me as one of the more thought-provoking topics as the financial services industry transitions into a technology industry and the effect this has on the entire value chain across all industry players. Lázaro Campos, co-founder of FinTechStage, introduced RegTech (and RiskTech) as "recent risk-centric regulations require firms to be more coordinated and streamlined in terms of information production and delivery for trading, risk, compliance, and financial reporting". One of the major points within this theme was that the application of new technologies will aid in making processes more efficient, and importantly, democratise opportunities by opening the market to previously unprofitable and underbanked client segments.
While "incumbents and technology vendors have invested in regulatory solutions for years, the theme of RegTech is an interesting investment theme that has emerged over the past year and has since become mainstream" (Matteo Rizzi, co-founder of FinTechStage). It was made clear that regulators are as encumbered with the increase in regulations as are financial market players.
Nadia Manzari, Head of Innovation, Payments, Markets Infrastructure and Governance for the Commission de Surveillance du Secteur Financier, commented that regulators need to be innovative in order to foster a healthy FinTech ecosystem. The subject of FinTech sandboxes was at the heart of much of the discussion – does each regulator need to offer such an environment? Regulators from the UK, Singapore, Hong Kong, Malaysia, Indonesia, Australia, and Thailand have been coming forth with plans to establish FinTech sandboxes, which enable financial institutions and start-ups to experiment with financial technology solutions that may not yet comply with new regulations. The benefits of sandboxes (versus piloting, for example) emerged as a debatable topic, but it is evident that regulators' evolving perspective on FinTech is indicative of a larger theme that is occurring in the regulatory space: the centralised banking system with which we are familiar will change in the near future.