Remarks by Angel Gurría
15 October 2019 - Santiago, Chile
(As prepared for delivery)
The digital revolution is opening up unprecedented opportunities to overcome our current economic, social and environmental challenges. Technologies are spreading at break-neck speed:
In finance, the ongoing digitalization process holds many promises to enhance access and improve services, including for the most vulnerable groups in society.
Let me make just two examples:
- First, as shown by the initial research the OECD and the ABD are doing for APEC, new technologies can significantly enhance the affordability and effectiveness of disaster risk insurance. For instance, mobile apps are being used to distribute insurance coverage and settle claims in the event of a loss, providing quicker access to the financial resources which households and businesses need to recover and rebuild.
- Second, Peer-to-peer (P2P), or user-matching, lending platforms enable retail investors and institutions to directly lend to consumers and businesses, including new borrowers such as MSMEs. These platforms could benefit the 1.7 billion adults that remain unbanked, many of which reside in the APEC region. Lending of such platforms is anticipated to rise to US$490 billion in 2020 and the 2016 to 2024 annual growth rate to be 48.2%.
Of course, digital financial services also carry new risks, in both advanced and emerging markets.
Concerns around financial stability, financial integrity, competition, financial consumer protection, and data flows/interoperability have to be taken seriously. Major cybersecurity incidents, misuse of products, and malfunctioning can quickly undermine the public’s trust in digital financial services, the financial system and technological innovation.
And new patterns of exclusion may emerge, if we don’t address the digital divide which is still stark. In the Republic of Korea, at the end of 2018 over 40% of inhabitants had a fixed broadband subscription, whereas in Colombia, a country soon entering the OECD, it is hardly over 13%.
So what does this all mean for policymakers and regulators?
As FinTech is developing, it is imperative that authorities be vigilant in assessing risks and implications for the global financial system. We must ensure that framework conditions are in place that enable innovation, fair competition as well as the protection of the system and consumers.
Concretely speaking, this means that:
- It is important to have a level playing field for all market players. In particular, the fundamental concept of “same business, same risks, same rules” should apply: for instance, firms offering stablecoins should be subject to the same standards expected of financial firms, e.g. banks and assets managers;
- Which means that regulation should be and remain “technology-neutral”. It needs to be transparent, principles-based and non-discriminatory.
- Regulation should also be adjusted to the level of risk, in other words, follow a principle of proportionality – a small fintech start-up has a very different risk profile than a large bank.
- This points to another requirement: the need for flexible, innovation-friendly regulatory frameworks, such as “sandboxes” which are now being used in an increasing number of jurisdictions.
- Given the global nature of digital financial assets, and that FinTech technologies and activities fall under different regulatory regimes and with the purview of various supervisory bodies - prudential, data protection, consumer and investors protection, competition policy - the appropriate regulatory approach will need to include both enhanced cross-border and cross-agency collaboration.
Finally, we must ensure that we support our citizens and businesses left behind in today’s digital revolution. As the report we just delivered to you shows, boosting financial literacy, particularly among vulnerable groups, is key to ensuring we all benefit from the digitalisation of financial markets. These considerations will be at the heart of the upcoming APEC’s Digital Financial Inclusion Roadmap which will be supported by the OECD.
As the Asia-Pacific forges ahead with the adoption of FinTech, the OECD is here to work with you to make the most out of this transformation.