The rise of "fintech" brings new risks and challenges for consumer protection, and supervisory authorities need to ensure compliance standards are not lowered as a result, the Central Bank warned today.
Bernard Sheridan, director of consumer protection at the Central Bank, said that supervisory authorities face significant challenges keeping up with the pace and scale of technological innovation – and so too do consumers.
The rise of fintech, evidenced by the emergence of crowdfunding and peer-to-peer lending online platforms, is likely to pose specific challenges for regulators and consumers alike, given that many products and services – such as peer-to-peer lending – exist outside of traditional, regulated activities.
“Boards and senior management of firms have primary responsibility for ensuring they are acting in their customers’ best interests. Innovation and the use of technology cannot be an excuse for lowering standards or for not focussing on consumer outcomes. It is also important that there is close monitoring and oversight of firms’ activities and that supervisory and enforcement actions are taken when necessary,” he said.
Mr Sheridan was speaking at the opening of the International Financial Consumer Protection Organisation (FinCoNet), which he chairs, in Jakarta, Indonesia today.
While Mr Sheridan highlighted the positive impacts of fintech on society in helping to make products and services more accessible, improving service delivery and providing greater convenience for consumers and increasing choice, he warned that innovators need to take existing consumer protection standards into account.
Mr Sheridan further added that “there is a growing recognition among supervisors of the need to focus more on product development, oversight and governance in order to seek to pre-empt problems. This is particularly timely as fintech increases in importance. By developing standards on how products and services should be developed, tested, rolled out and monitored, supervisory authorities are providing the framework within which consumer-focussed innovation can happen”.
