Crossing The Rubicon

Blockchain is streamlining payments, machine learning is enabling central banks to delve deeper into their data, and artificial intelligence (AI) is improving risk management processes, amid musings of machine‑executable regulation. Throughout all of this, the financial sector has continued to evolve, as 2018 shapes up to be an explosive year for fintech. 

Such innovation, however, introduces new risks to the financial system. At the end of 2017, the Financial Stability Board published a report into the financial stability implications of AI and machine learning in financial services. Buried deep within the report – between mentions of new entrants, fragmentation and disruption – was the suggestion fintech and AI are partial to the same vulnerabilities as current banking processes: they may become ‘too big to fail’. 

Central banks – more than ever – have to be alert and, if necessary, take action to ensure the safety and soundness of the financial system. Their reputations are on the line and it is no longer acceptable to be a ‘fast follower’. But how do central banks go about regulating a sector of which they have relatively little expertise and without quashing innovation?

In July 2018, Central Banking launched its first annual FinTech & RegTech Global Awards with this question in mind. The answer – or answers – are provided within the awards articles published in this special edition focus supplement. They show how, from an official sector perspective, technological innovation is being harnessed to improve central banking across the monetary policy and financial stability planes. 

It is a rich field, with advances in payments, supervision, data, risk management, financial infrastructure and that most elemental of central bank services: currency. The winners are geographically dispersed and encompass organisations ranging from start‑ups to multinational infrastructure providers. It represents, as it should, a microcosm of the fintech world.

With the promise of reduced costs, speedier processes and more convenient services for customers, technology has begun to infiltrate the financial services industry. We are already seeing the results: cross-border payment times have been reduced from between three and five days to 30 minutes; banks can identify customers with biometric information; mobile payments can be made using just a phone number; and, thanks to UBS, we now have cloned virtual economists. 

For almost 30 years, Central Banking has been a trusted resource for the world’s central banks via its editorial content, training and bespoke conferences. Building on its founding mission to form a common central banking community – where discussion around emerging challenges and opportunities facing central banks is fostered – this year, its scope has extended.

Rachael King
Chairperson, Central Banking FinTech & RegTech Global Awards

Read the full Central Banking FinTech RegTech Global Awards 2018 Winners In Focus report