Global Reach, Local Touch
Disruption as usual
Financial technology, or “fintech”, is technology enabled financial solutions. These tools and platform has become more consumer focused and integrated within our daily lives. Mobile payment and peer-to-peer money transfers are great examples of efficient fintech products.
Fintech companies are set to expand in size and geographically. In early April, it was reported that Ant Financial, which controls Alipay, is set to raise US$10 billion in a funding round. Its main business, which include payments, wealth management and lending to consumers and SME businesses, are traditionally reserved for banks. This constant disruption to the financial services landscape raises concerns about data security and cyber security threats.
Data protection and cyber security are some of the key challenges. Fintech revolution drives enormous amounts of data, such personal information and transaction data, that needs to be stored properly. There is also the threat of fraudulent activity, such as fake identities using fake accounts. All these pose a threat to the financial stability.
Regulators are playing a game of catch up, as they pass laws and regulations to oversee and supervise the disruptive technology. In China, for example, regulators demanded high capital requirements, mandated appointment of a custodian bank, full disclosure of fund information and a ban on unsecured cash loans. These requirements have proven very costly for local fintech firms.
Road to Compliance
Regulatory technology (“RegTech”) is the adoption of new technologies to facilitate the compliance with regulatory requirements. The difference between RegTech and traditional methods is agility: RegTech has the ability to learn new regulations and its application through past assessments and analytics. It can also automate routine compliance tasks, such as financial reporting, and use data analytics to identify trends and risk areas. In order for RegTech to reach its full potential, Fintech companies, banks, and other players need to work together to identify the key risks and optimal solutions.
PKF is committed to helping clients with the digital transformation of compliance activities. We provide advice on compliance and internal controls framework and its application of IT and digitalized solutions. Please contact us to explore what opportunities could be relevant for your firm.
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