Bundesbank President Jens Weidmann has expressed that FinTech requires more regulatory oversight because of its potential to threaten financial stability and the banking sector.
In a Reuters report, Weidmann, who is part of the European Central Bank’s Governing Council, is reported as saying that a clearer picture is needed to understand better in what way FinTech could potentially pose a risk to the finance industry.
He said:
Many believe the most disruptive potential is to be found in blockchain or distributed ledger technology, which promises to allow payment transactions and securities settlement to bypass banks and central counterparties altogether.
Despite Weidmann stating that there have been advances in the utilization of digital finance with the increase of consumer access, he stressed that there were concerns over how FinTech would act if the economy took a downturn.
FinTech to Disrupt Banking?
Weidmann is not the only individual who believes that financial technology has the potential to disrupt the banking sector.
Last year, former Group CEO of Barclays, Antony Jenkins, predicted a future within the next ten years where FinTech would substantially disrupt traditionally banking systems as well as the banking sector as a whole.
Not only that, but he believes that those employed within the banking sector would be reduced by as much as 20 percent, possibly reaching as high as 50 percent.
Instances where humans are being phased out can already be witnessed in countries such as India, where one bank has already installed robots to improve on customer service.
Earlier this month, India’s leading private lender HDFC Bank announced that it was using robots in its branches, making it the first to use humanoids in India’s banking sector. As part of an artificial intelligence program that was launched last year, the bank is hoping to improve on its marketing aspects despite the fact that it could potentially cut jobs.
The U.S. Federal Reserve is also interested in FinTech and its growth. So much so, that last month it revealed that it intends to outline how it plans on monitoring FinTech innovations in a research paper. However, while the Fed have been visiting financial technology startups to understand what they do, it’s reported that the research is unlikely to determine any definite answers for now.
It seems without a doubt that the role of FinTech is going to change the traditional banking sector, but instead of the banking industry fretting over the impact it is likely to produce, the two should work together to determine a viable solution that will ensure that both sectors can remain.
Featured image from Flickr/Bankenverband.
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