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

    EBA Analyzes Impact of Unwind Mechanism of Liquidity Coverage Ratio

    EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.

    November 19, 2020 WebPage Regulatory News
    News

    ECB Outlines Views on Possible Changes to AnaCredit Rule and TLTROs

    In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.

    November 19, 2020 WebPage Regulatory News
    News

    IASB Begins First Phase of Post-Implementation Review of IFRS 9

    IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Report Examines Progress in Resolvability of Systemic Institutions

    FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.

    November 18, 2020 WebPage Regulatory News
    News

    EBA Benchmarks National Insolvency Frameworks Across EU

    EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.

    November 18, 2020 WebPage Regulatory News
    News

    FSB Reports Assess Impact of Pandemic on Financial Stability

    FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.

    November 17, 2020 WebPage Regulatory News
    News

    RBNZ Consults on Implementation of Capital Review Changes

    RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.

    November 17, 2020 WebPage Regulatory News
    News

    IASB Announces Andreas Barckow as the New Chair from July 2021

    The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.

    November 17, 2020 WebPage Regulatory News
    News

    HKMA Consults on Capital Rules for Bank Equity Investments in Funds

    HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.

    November 17, 2020 WebPage Regulatory News
    News

    ESRB Supports Extension of Macro-Prudential Measure by Swedish FSA

    ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).

    November 17, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6153