MUMBAI: Noting the rapid growth of India’s financial technology (FinTech) industry, the RBI
underscored how its advent has exposed the banking system to new risks that extend beyond prudential issues in its Financial Stability Report (FSR) released on Thursday.
“The advent of FinTech has exposed the banking system to new risks, which extend beyond prudential issues and often intersect with other public policy objectives relating to the safeguarding of data privacy, cyber security, consumer protection, competition and compliance with AML (anti-money laundering) policies,” it highlights.
BigTechs can scale up rapidly and pose risk to financial stability, which can arise from increased disintermediation of incumbent institutions. Moreover, complex intertwined operational linkages between BigTech firms and financial institutions could lead to concentration and contagion risks and issues relating to potential anti-competitive behaviour, the FSR notes.
Regulators and supervisors face a challenging balancing act between “innovation-friendliness” and “managing risks” to financial stability, which requires more engagement of stakeholders such as regulators, the FinTech industry, and the academia to work toward common principles for the management of FinTech activities, including business and revenue models, governance, conduct, risk management, regulation aspects for promoting a sustainable ecosystem.
BigTechs like Apple, Google and Facebook offer payment services facilities to users across the globe, while the likes of Amazon, Ant Group, Tencent and Baidu, etc, offer a host of other services such as banking, asset management, crowdfunding and insurance apart from payments, noted the FSR, citing a survey of international regulatory and supervisory practices related to BigTech. BigTechs’ entry, the survey points out, has altered the financial landscape.