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

    SEC Finalizes Capital and Margin Requirements for Security-Based Swaps

    SEC adopted a package of rules and rule amendments to establish capital, margin, and segregation requirements for security-based swaps, under Title VII of the Dodd-Frank Act.

    August 22, 2019 WebPage Regulatory News
    News

    ECB Revises Prudential Provisioning Expectations for New NPEs

    ECB is revising its supervisory expectations for prudential provisioning of new non-performing exposures (NPEs) specified in the “Addendum to the ECB Guidance to banks on non-performing loans” (Addendum)

    August 22, 2019 WebPage Regulatory News
    News

    CFTC Proposes to Revise Information Collection on Margin Requirements

    CFTC is requesting comments on the burdens associated with certain aspects of the Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants (final rule).

    August 21, 2019 WebPage Regulatory News
    News

    FASB to Delay Effective Date for Insurance Contracts Standard

    FASB issued a proposed Accounting Standards Update that would grant all insurance companies that issue long-duration contracts, such as life insurance and annuities, additional time to apply the standard that addresses this area of financial reporting.

    August 21, 2019 WebPage Regulatory News
    News

    EBA Publishes Phase 2 of Technical Package on Reporting Framework 2.9

    EBA published phase 2 of its technical package on the reporting framework 2.9, which includes validation rules, Data Point Model (DPM) data dictionary, and XBRL taxonomies.

    August 21, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Its Consultation Related to SME Financing

    FSB published responses received to the consultation on a report on the evaluation of the effects of financial regulatory reforms on small and medium-sized enterprise (SME) financing.

    August 21, 2019 WebPage Regulatory News
    News

    APRA Revises Related Entities Standard for Banks

    APRA published a strengthened prudential standard APS 222 on associations with related entities, with the aim to mitigate contagion risk within banking groups.

    August 20, 2019 WebPage Regulatory News
    News

    EBA and ESMA Issue Joint Response to EC Letter on Crypto-Assets

    EBA and ESMA issued a joint response to the EC letter, from July 19, 2019, on crypto-assets.

    August 20, 2019 WebPage Regulatory News
    News

    FSB on Responses to Consultation on Wind-Down of Trading Portfolios

    FSB published responses received to the consultation on the solvent wind-down of the derivatives and trading book portfolio of a global systemically important bank (G-SIB).

    August 19, 2019 WebPage Regulatory News
    News

    FSB Publishes Responses to Consultation on Resolvability Disclosures

    FSB published responses received to the consultation on disclosures for resolution planning and resolvability of banks.

    August 19, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3681