Featured Product

    EBA Reports Assess Impact of Fintech on Business Models of Banks

    July 03, 2018

    EBA, as the first products of its fintech roadmap, published a thematic report on the impact of fintech on incumbent credit institutions' business models and a thematic report on the prudential risks and opportunities arising for institutions from fintech. Both reports fall under the wider context of the newly established EBA FinTech Knowledge Hub.

    Report on the impact of fintech on incumbent credit institutions' business models. Based on the observations of EBA, incumbents are categorized into (i) proactive/front-runners, (ii) reactive, and (iii) passive in terms of the level of adoption of innovative technologies and overall engagement with fintech. The report highlights that potential risks may arise both for incumbents not able to react adequately and timely, remaining passive observers, but also for aggressive front-runners that alter their business models without a clear strategic objective in mind, backed by appropriate governance, operational, and technical changes. The report concurs that currently the predominant type of relationship between incumbents and fintech is partnership with fintech firms, which is considered a "win-win" situation. The report sets out five factors that might significantly affect incumbents' business models from a sustainability perspective:

    • Digitalization/innovation strategies pursued to keep up with the fast-changing environment
    • Challenges arising from legacy Information and Communication Technology (ICT) systems
    • Operational capacity to implement the necessary changes
    • Concerns over retaining and attracting staff
    • Increasing risk of competition from peers and other entities

    Report on the prudential risks and opportunities arising for institutions from fintech. The report assesses seven use cases, under which new technologies are applied or considered to be applied to the existing financial processes, procedures, and services. The report aims to provide both competent authorities and institutions with useful guidance on such applications. The report found that no significant implementation of sophisticated technologies has been noted yet by institutions, possibly because of security concerns and filtering the hype around fintech. From the prudential risk perspective, there is a growing shift toward operational risk, arising mainly from the accentuation of ICT risks as institutions move toward more technology-based solutions. Dependencies on third-party providers, heightened legal and compliance risks, and negative impact on conduct risk add to the overall increased operational risk. The potential efficiency gains and improved customer experience are the predominant potential opportunities while the changing customer behavior is an important factor triggering institutions' interest toward fintech. The report focuses on micro-prudential aspects, setting out potential prudential risks and opportunities that may arise from each use case:

    • Biometric authentication using fingerprint recognition
    • Use of robo-advisors for investment advice
    • Use of big data and machine learning for credit scoring
    • Use of distributed ledger technology and smart contracts for trade finance
    • Use of distributed ledger technology to streamline customer due diligence processes
    • Mobile wallet with the use of near-field communication
    • Outsourcing core banking/payment system to the public cloud

     

    Related Links

    Keywords: Europe, EU, Banking, Fintech, Fintech Roadmap, Fintech Knowledge Hub, EBA

    Related Articles
    News

    ECB Allows Temporary Relief in Leverage Ratio Amid COVID-19 Pandemic

    ECB published a decision allowing the euro area banks under its direct supervision to exclude certain central bank exposures from the leverage ratio.

    September 21, 2020 WebPage Regulatory News
    News

    ESAs Launch Survey on Templates for Product Disclosures Under SFDR

    ESAs launched a survey seeking feedback on the presentational aspects of product templates under the Sustainable Finance Disclosure Regulation (SFDR or Regulation 2019/2088).

    September 21, 2020 WebPage Regulatory News
    News

    ECB Proposes Integrated Reporting Framework to Reduce Burden for Banks

    ECB published input of the European System of Central Banks (ESCB) into the EBA feasibility report on reducing the reporting burden for banks in EU.

    September 21, 2020 WebPage Regulatory News
    News

    ECB Finalizes Methodology to Assess CCR and A-CVA Risk of Banks

    ECB finalized the guide on assessment methodology for the internal model method for calculating exposure to counterparty credit risk (CCR) and the advanced method for own funds requirements for credit valuation adjustment (A-CVA) risk.

    September 18, 2020 WebPage Regulatory News
    News

    EBA Provides Opinion on Definition of Credit Institution in CRR

    EBA published an Opinion addressed to EC to raise awareness about the opportunity to clarify certain issues related to the definition of credit institution in the upcoming review of the Capital Requirements Directive and Regulation (CRD and CRR).

    September 18, 2020 WebPage Regulatory News
    News

    APRA Consults on Alignment of Daily Liquidity Report for Banks

    APRA is consulting on updates to ARS 210.0, the reporting standard that sets out requirements for provision of information on liquidity and funding of an authorized deposit-taking institution.

    September 17, 2020 WebPage Regulatory News
    News

    FED Releases Scenarios for Second Round of Stress Tests on Banks

    FED released hypothetical scenarios for a second round of stress tests for banks.

    September 17, 2020 WebPage Regulatory News
    News

    FED to Temporarily Revise FR Y-14 Reports to Conduct Stressed Analysis

    FED is proposing to temporarily revise the capital assessments and stress testing reports (FR Y-14A/Q/M) to implement the changes necessary to conduct stressed analysis in connection with the re-submission of capital plans, using data as of June 30, 2020.

    September 17, 2020 WebPage Regulatory News
    News

    FED Revises Information Collection Under Market Risk Capital Rule

    FED adopted a proposal to extend for three years, with revision, the information collection under the market risk capital rule (FR 4201; OMB No. 7100-0314).

    September 17, 2020 WebPage Regulatory News
    News

    EBA Seeks Input on ESG Disclosure Practices of Banks

    EBA published a voluntary online survey seeking input from credit institutions on their practices and future plans for Pillar 3 disclosures on the environmental, social, and governance (ESG) risks.

    September 17, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5809