Mark Carney, the governor of the Bank of England, warns that Fintech’s market risks would evolve as the sector continues to develop. Carney believes that while new Fintech could reduce costs, improve capital efficiency, and create new economic functions, these changes could impact credit quality, macrocosmic dynamics, and market functioning. Therefore, it is up to the regulators to make sure that Fintech maximizes opportunities and minimizes risks to society.
Carney also warned about the potential dangers of increased reliance on peer-to-peer lending. Since peer-to-peer lending has yet been tested by a downturn, its stability and the lenders’ tolerance to losses are still unclear. Currently, Fintech is a rather uncharted territory; it might generate systemic risks due to its interconnectedness and complexity, or it might reduce systemic risks by introducing a more diverse and resilient system. Policymakers need to be ready to address vulnerabilities as they appear.
I think the complexity of the current regulatory system can be a hindrance for the development of Fintech policies and Fintech companies themselves. While Fintech companies are attempting to blindly meet compliance, the lack of coherent policies not only makes it difficult to plan, but also wastes resources that can be better utilized elsewhere.
Reference: http://bridgingandcommercial.co.uk/article-desc-11491_