Managing Director of the International Monetary Fund (IMF) Christine Lagarde recently gave an insightful speech at the G20 seminar on financial innovation – Our Future in the Digital Age – hosted in Fukuoka, Japan. Ms. Lagarde talked about the defining moment for Asia and the rest of the world in terms of adapting and regulating financial innovation. In her speech she also highlighted some of the largest potentialities of fintech, mentioning financial inclusion as one of them, while also raising some concerns about the stability of the financial system, especially with the turmoil that the entrance of big tech firms, such as Google, Amazon, Facebook and Apple, can cause. Let us take a look at some of the other key points that she touched in her opening remarks.
Why don’t we start with the good news? A new joint paper by IMF and the World Bank will be released later in June, after that they have developed the Bali Fintech Agenda, with a few positive highlights already anticipated by Ms. Lagarde at the financial innovation seminar mentioned above. Research shows that many countries are asking for greater international cooperation and that they consider fintech a key transformative factor leading towards financial inclusion, while recognizing that it is something that has a central role “in promoting growth, opening access for poor and rural communities through lower costs, and facilitating women’s participation in the formal economy.” The same applies to the gender gap – a serious problem that fintech is helping to reduce.
There is of course another face of the story, too. During the seminar the potential risks attached to financial innovation were addressed too, like those related to privacy and consumer protection matters. It is a challenging moment to say the least, since it’s not an easy task to to find a way to keep down the risks, keeping consumers and investors and protected and safe with their investments, without killing the positive innovation that fintech is bringing to finance. “Technology always has, and always will, spur innovation in finance. The question is whether these innovations will benefit all, or only a select few. If handled correctly, fintech can cut the cost of utilizing financial tools and enable millions to fulfill their aspirations of building a better life. That is why I believe it is our shared responsibility to create a safe, sound, sustainable and inclusive financial system, protected from criminal abuse.”, Christine Lagarde said.
Ms. Lagarde also wanted to address another key issue, namely, market concentration, which is why she pointed out that “significant disruption to the financial landscape is likely to come from the big tech firms, who will use their enormous customer bases and deep pockets to offer financial products based on big data and artificial intelligence. These developments hold out the promise of accelerating inclusion and modernizing financial markets, but raise, in addition to privacy issues, competition and market concentration concerns, both of which could lead to vulnerabilities in the financial system.” All of this being discussed, when Facebook has just announced its own cryptocurrency called Libra, Amazon launched a new credit card for those with bad credit, and Apple and Google raising their bets on fintech – it is almost obvious that challenging but certainly exciting times are ahead of us.
If interested to learn more, here you can find the full speech of Christine Lagarde.