World Bank study into the impact of COVID-19 on the regulation of FinTech and regulatory innovation initiatives

1 decembrie 2020

The World Bank and the Cambridge Centre for Alternative Finance jointly publishes the Global COVID-19 FinTech Regulatory Rapid Assessment Study to understand the impact of COVID-19 on the regulation of FinTech and regulatory innovation initiatives. One hundred and eighteen central banks and financial regulators from 114 jurisdictions contributed to the research, which was supported by the UK Foreign, Commonwealth and Development Office (FCDO).

This represents one of the largest empirical studies to date on the impact of Covid-19 regarding the regulation and supervision of FinTech, as well as related regulatory innovation initiatives.

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Highlights from the report

Regulators observed strong increases in the use or offering of many fintech products and services since the outbreak of the pandemicin particular digital payments and remittances (60 per cent of respondents reporting an increase), digital banks (22 per cent), and digital savings or deposits (19 per cent). Respondents in jurisdictions with more stringent Covid-19 containment and closure measures are more likely to have reported an increase in digital payments and remittances services.

Regulators in emerging market and developing economies are more likely to have reported increases in the usage of digital payments and digital banks. In advanced economies, there is evidence of an increase in the usage or offering of InsurTech and WealthTech (both reported as a 24 per cent increase).

Respondents see rising risks in the FinTech market concerning cybersecurity (78 per cent referencing as a top three risk), operational risks (54 per cent), consumer protection (27 per cent) and fraud and scams (18 per cent). 90 per cent of surveyed regulators from advanced economies see cybersecurity as one of their top three increasing risks associated with FinTech activities due to Covid-19.

The priority of FinTech for regulators has either increased, or remained high, in light of Covid-19. In emerging market and developing economies, almost two-thirds of regulators said it has increased in priority. Over half of regulators in advanced economies said it has remained high. Central banks are more likely to have increased the prioritisation of its FinTech work relative to other financial regulators in light of Covid-19 (65 per cent among central banks versus 38 per cent among other financial regulators).

Regulators recognise that FinTech can play a role in supporting regulatory objectives in light of Covid-19. FinTech may be especially helpful in advancing regulatory objectives to support financial inclusion (70 per cent overall considered it supportive, and 81 per cent in emerging market and developing economies), market development (61 per cent overall) and promoting competition (47 per cent overall).

The regulatory responses in light of Covid-19

The majority of regulators have taken policy measures in light of Covid-19, but the majority of these measures were not specifically targeted at FinTech. These financial sector-wide measures which may have implications for FinTech included actions in relation to anti-money laundering (AML) and digital identity (49 per cent of respondents), economic relief schemes (42 per cent), business continuity plans (39 per cent), measures to enhance cybersecurity (29 per cent) and measures focusing on promoting employment and talent (17 per cent).

37 per cent of surveyed regulators have taken at least one regulatory measure specifically targeting FinTech sectors or activities. The most salient measures, especially in emerging market and developing economies, were directed at digital payments and remittances (65 per cent of respondents in emerging market and developing economies), such as waiving transaction fees, partially or in whole, and raising transaction thresholds. Other measures included facilitating digital capital raising and creating digital banking frameworks.

80 per cent of regulators felt that they have been resilient and adaptable in their response to the challenges of Covid-19. Just over half (54 per cent) regarded themselves as being ‘well prepared’, 80 per cent considered themselves resilient and able to be adaptable, and 59 per cent felt that they had adequate resources at their disposal.

Key internal challenges for regulators have emerged. Most common are challenges to perform core regulatory functions (e.g. on-site inspections of firms) (49 per cent overall, and 65 per cent of respondents from advanced economies), coordination with other domestic agencies (39 per cent), access to accurate and timely data (29 per cent), increased demand on resources (29 per cent), and restricted access to essential information or technology (28 per cent). Regulators in jurisdictions with more stringent Covid-19 measures are more likely to have indicated that domestic coordination is challenging (46 per cent vs 34 per cent).

Regulators observed ongoing support by FinTechs to Covid-19 relief efforts in their jurisdictions. The top five use cases were digital disbursement of payments and remittances (38 per cent), delivery of governmental relief and stimulus funding (28 per cent), healthcare applications for contact tracing (22 per cent), ensuring business continuity (17 per cent) and support for SMEs (12 per cent).

To support their work on FinTech in light of Covid-19, regulators considered they would benefit most from skills development (80 per cent) and technical support (67 per cent), with more demand from regulators in emerging market and developing economies.

The impact of Covid-19 on regulatory innovation initiatives

The majority of respondent regulators have either accelerated existing regulatory innovation initiatives or introduced new initiatives.For example,72 per cent of respondents have either accelerated or introduced initiatives on digital infrastructure, 58 per cent have either accelerated or introduced initiatives regarding RegTech/SupTech, and 56 per cent did so in regard to innovation offices. Regulators from emerging market and developing economies are more likely to have developed new initiatives or accelerated planned initiatives.

No surveyed regulators reported the cancellation of an innovation initiative due to Covid-19, although around 20 per cent indicated they had delays.

Regulators in jurisdictions with high Covid-19 stringency measures are more likely to have accelerated their regulatory sandbox initiatives (42 per cent) compared to those in lower stringency jurisdictions (33 per cent). Regulators in lower stringency jurisdictions are more like to have launched a new regulatory sandbox in light of Covid-19 (21 per cent vs. 13 per cent).

Non-central bank financial regulators are more likely to have accelerated (39 per cent vs 26 per cent) and introduced (32 per cent vs 17 per cent) RegTech/SupTech initiatives in light of Covid-19.Respondents in high stringency jurisdictions are more than twice as likely (43 per cent vs 21 per cent) to have accelerated RegTech/SupTech initiatives compared to lower stringency jurisdictions.

The main challenges for planning and implementing regulatory innovation initiatives are around communication and coordination. In particular, respondents noted challenges regarding difficulty with external communications (43 per cent), coordination with other domestic agencies (43 per cent), reprioritisation of funding and resources (34 per cent), required speed of delivery (30 per cent) and restricted access to and availability of necessary technology (25 per cent). Respondents from high Covid-19 stringency jurisdictions reported a higher degree of challenges across the board. Central banks indicated more challenges regarding the speed of delivery for regulatory innovation initiatives (56 per cent) compared to other financial regulators (15 per cent).

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Gabriela Nistor – director general adjunct BT

Tendinţele pe care le-am remarcat înainte de începerea pandemiei s-au accelerat pe perioada stării de urgenţă. Am văzut acest lucru ca o oportunitate, un tipping point pentru bancă. Post-pandemie nu avem cum sa ne întoarcem la comportamentul financiar pe care îl aveam până în februarie a.c. Relaţia românilor cu online-ul s-a schimbat. In plus, cardul fizic se va dematerializa. Vom asista la o scădere a cererii pentru cardurile fizice, respectiv la o creştere a preferinţei pentru componenta digitală a acestora.”

Sondaj

In 23 septembrie 2019, BNR a anuntat infiintarea unui Fintech Innovation Hub pentru a sustine inovatia in domeniul serviciilor financiare si de plata. In acest sens, care credeti ca ar trebui sa fie urmatorul pas al bancii centrale?