Bank of England: Embracing the promise of fintech
Article Synopsis :
The economy is becoming digital and fintech is just one aspect of this evolution/revolution.
Innovation is happening more often and more rapidly as technology is engaged in solving the problems facing business ever since the first automated accounting systems were introduced.
The Bank of England has acknowledged its need to catch up and embrace what fintech has to offer its role of providing the economy’s financial infrastructure.
Rebuilding the RTGS (real time gross settlement) system will remain a major project. This is because a part of the Bank’s remit is to ensure the UK has a safe and resilient financial infrastructure. It will seek to future proof it through the use of the best practice data standards and new technologies.
This is likely to include the use of distributed ledger technology (DLT) as it enables records to be shared and updated in a distributed and decentralised way. Multiple participants can interact with a single synchronised ledger or database, which each of them share.
This doesn’t mean the Bank is building its future on Bitcoin. DLT – and blockchain, which underpins the likes of Bitcoin – has no standard format and the new platforms in development differ significantly, particularly in access, which was only given to a small number of permissioned users and additional participants.
It is thought DLT may be the answer for achieving resolution of the challenges faced in trying to remove the points of friction in trade finance and cross border payments.
New entrants will be supported by the new bank and new insurer startup units and receive access to RTGS settlement accounts for non-bank payment service providers (NBPSPs).
The Bank will research fintech to understand how it may support the financial system and determine what future policy should look like.
It will adopt new technologies in order to improve its own performance and check proofs of concepts as it continues to develop technology for regulation and supervision (regtech and suptech).
The Bank’s current journey will continue to mitigate risks to monetary and financial stability and ensure a resilient UK financial system as the next generation of innovation and technology becomes available.
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Digital Insurer's CommentsThe Bank of England’s paper positions it as leading the charge towards digital transformation.
Which is only right, as it has responsibility for all the financial infrastructure from which commerce – and the regulation that governs it – flows.
It is encouraging to see such an open and positive approach and should offer encouragement to insurers who are yet to get their collective initiatives in gear.
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