• Login
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
  • Home
  • News
    • General
    • Political
  • Economy
  • Business
    • Agribusiness
    • Aviation
    • Banking & Finance
    • Energy
    • Insurance
    • Manufacturing
    • Markets
    • Maritime
    • Real Estate
    • Tourism
    • Transport
  • Technology
    • Telecom
    • Cyber-security
    • Cryptocurrency
    • Tech-guide
    • Social Media
  • Features
    • Interviews
    • Opinions
  • Reports
    • Banking/Finance
    • Insurance
    • Budgets
    • GDP
    • Inflation
    • Central Bank
    • Sec/Gse
  • Lifestyle
    • Sports
    • Entertainment
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video
No Result
View All Result
No Result
View All Result
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
No Result
View All Result
Home Business Banking & Finance

Fast-moving FinTech poses challenge for regulators

3 years ago
in Banking & Finance, Business, Features, highlights, Home, home-news, latest News
3 min read
0 0
0
63
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

Fast-moving FinTech poses challenge for regulators

Technology sometimes moves at a dizzying pace. When it comes to innovation in financial activities, often referred to as FinTech, the world is seeing major advances.

For banks, FinTech disrupts core financial services and pushes them to innovate to remain relevant. For consumers, it means potentially wider access to better services. Such changes also raise the stakes for regulators and supervisors—while most individual FinTech firms are still small, they can scale up very rapidly across both riskier clients and business segments than traditional lenders.

This combination of fast growth and increasing importance of FinTech financial services for the functioning of financial intermediation can come with system-wide risks, which we cover in our latest Global Financial Stability Report.

Adding risk

Digital banks are growing in systemic importance in their local markets. Also known as neobanks, they are more exposed than their traditional counterparts to risks from consumer lending, which usually has fewer buffers against losses because it tends to be more uncollateralized. Their exposure also extends to higher risk-taking in their securities portfolio, as well as higher liquidity risks (specifically, liquid assets held by neobanks relative to their deposits tend to be lower than what would be held by traditional banks).

These factors also create a challenge for regulators: the risk management systems and overall resilience of most neobanks remain untested in an economic downturn.

RelatedPosts

 Importers and Exporters Association Decries “Mafiarian” Auctions of Perishable Goods at Ghana’s Ports

Nigeria Leads as Africa’s Wealthiest Economies Lose Over 8,000 Millionaires in 10 Years

Financial Stocks Gain as Accra Bourse Slips on Prime Index Decline

Not only do FinTech firms take on more risks themselves, they also exert pressure on long-established industry rivals. Look for instance at the United States, where FinTech mortgage originators follow an aggressive growth strategy in periods when home lending is expanding, such as during the pandemic. Competitive pressure from FinTech firms significantly hurt profitability of traditional banks, and this trend is set to continue.

gfsr chart

Another technological innovation, which has grown rapidly in the past two years, is decentralized finance, a crypto-based financial network without a central intermediary. Also known as DeFi, it offers the potential of delivering more innovative, inclusive, and transparent financial services thanks to greater efficiency and accessibility.

However, DeFi also involves the buildup of leverage, and is particularly vulnerable to market, liquidity, and cyber risks. Cyberattacks, which can be severe for traditional banks, are often lethal for these platforms, stealing financial assets and undermining user trust. The lack of deposit insurance in DeFi adds to the perception of all deposits being at risk. Historically, large customer withdrawals often follow news of cyberattacks on providers.

gfsr chart 2

DeFi activities mainly occur in crypto-asset markets, but growing adoption by institutional investors has strengthened the links to traditional financial institutions. In some economies, DeFi is helping to accelerate cryptoization, in which residents embrace crypto assets instead of the local currency.

Stepped-up regulation

As more financial-services activity moves from regulated banks to entities and platforms with little or no oversight, so do the associated risks. Despite FinTech stepping in to challenge traditional banks on their own playing field, they bring more than competition. In fact, the two often remain intertwined, including through the provision of liquidity and leverage by banks to FinTechs.

These pose challenges for financial authorities in the form of regulatory arbitrage (in which firms move or set up operations in less-regulated sectors and regions) and interconnectedness that may require supervisory and regulatory action, including better consumer and investor protection.

Policies that target both FinTech firms and traditional banks proportionately are needed. This way, the opportunities that FinTech offers are fostered, while risks are contained. For neobanks, this means stronger capital, liquidity, and risk-management requirements commensurate with their risks. For incumbent banks and other established entities, prudential supervision may need greater focus on the health of less technologically advanced banks, as their existing business models may be less sustainable over the long term.

The absence of governing entities mean DeFi is a challenge for effective regulation and supervision. Here, regulation should focus on the entities that are accelerating the rapid growth of DeFi, such as stablecoin issuers and centralized crypto exchanges. Supervisory authorities should also encourage robust governance, including industry codes and self-regulatory organizations. These entities could provide an effective conduit for regulatory oversight.

Tags: Fast-moving FinTech poses challenge for regulatorsFinTech financial servicesGlobal Financial Stability Report.IMFinnovation in financial activities
No Result
View All Result

Highlights

Ghana in Talks With Nigeria Over Possible Barter Deal to Swap Gas for Electricity

Ghana set to Save $300m in Debt Restructuring Deal With IPPs – ACEP’s Ben Boakye Discloses

Morocco and Madagascar set up Historic CHAN Final in Nairobi

US Open: Defending Champions Swiatek and Sinner Cruise Into Second Round

Otto Addo Names Strong 24-Man Squad As Black Stars Prepare For Crucial World Cup Qualifiers Against Chad and Mali

FEC 2025: NRGI Warns Fossil Fuel Investments Risk Undermining Africa’s Energy Transition; Lists Innovative Financing Instruments to Plug Transition Funding Shortfall

Trending

Business

 Importers and Exporters Association Decries “Mafiarian” Auctions of Perishable Goods at Ghana’s Ports

August 27, 2025

 Importers and Exporters Association Decries “Mafiarian” Auctions of Perishable Goods at Ghana’s Ports The Importers and Exporters...

Nigeria Leads as Africa’s Wealthiest Economies Lose Over 8,000 Millionaires in 10 Years

August 27, 2025

Financial Stocks Gain as Accra Bourse Slips on Prime Index Decline

August 27, 2025

Ghana in Talks With Nigeria Over Possible Barter Deal to Swap Gas for Electricity

August 27, 2025

Ghana set to Save $300m in Debt Restructuring Deal With IPPs – ACEP’s Ben Boakye Discloses

August 27, 2025

Who we are?

NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World

NorvanReports is a unique data, business, and financial portal aimed at providing accurate, impartial reporting of business news on Ghana, Africa, and around the world from a truly independent reporting and analysis point of view.

© 2020 Norvanreports – credible news platform.
L: Hse #4 3rd Okle Link, Baatsonaa – Accra-Ghana T:+233-(0)26 451 1013 E: news@norvanreports.com info@norvanreports.com
All rights reserved we display professionalism at all stages of publications

No Result
View All Result
  • Home
  • Business
    • Agribusiness
    • Aviation
    • Energy
    • Insurance
    • Manufacturing
    • Real Estate
    • Maritime
    • Tourism
    • Transport
    • Banking & Finance
    • Trade
    • Markets
  • Economy
  • Reports
  • Technology
    • Cryptocurrency
    • Cyber-security
    • Social Media
    • Tech-guide
    • Telecom
  • Features
    • Interviews
    • Opinions
  • Lifestyle
    • Entertainment
    • Sports
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video

Welcome Back!

Login to your account below

Forgotten Password?

Create New Account!

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
NORVANREPORTS.COM | Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.