fintech: opportunities for all?€¦ · source: world economic forum, august 2016 • global...
TRANSCRIPT
FinTech: Opportunities for all?
Victoria Cleland, Chief Cashier
P2P Financial Systems 2016 Conference, London
8 September 2016
1
Welcome
2
The Importance of Collaboration
3
• One Bank Research Agenda – February 2015
‘making progress on such a broad agenda
requires input from the wider community of
academics, policymakers and experts’
• Open Forum – November 2015
• Session on: ‘How financial innovation and technology support the
economy’.
‘it is hardly possible to overrate the value…of placing human beings in
contact with persons dissimilar to themselves, and with modes of thought
and action unlike those with which they are familiar…such communication
has always been…one of the primary sources of progress’
John Stuart Mill, 1848
Technology Has Changed The Way We Live Our Lives
4
Source: Google Images
And Has Disrupted Commerce
• Some incumbent businesses fail to adapt…
• While some new ones thrive.
5
Financial Technology – A Big Opportunity?
6
Source: World Economic Forum, August 2016
• FinTech: ‘new applications of technology that have the potential
to change the way the current financial system is structured’
7
Global FinTech Financing Activity ($mns)
Investment and Interest in FinTech
Source: Accenture / CB Insights
0
5,000
10,000
15,000
20,000
25,000
2010 2011 2012 2013 2014 20150
20
40
60
80
100
120
2004 2005 2007 2009 2011 2013 2015
Index 2016 = 100
Google Searches for ‘FinTech’
Source: Google Analytics
Payments
Deposits &
Lending
Insurance
Investment
Accounting
Financial
data
FINANCE
FinTech Impacts the Whole of the Financial Sector
Peer-to-Peer Activity in the UK
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• The UK P2P sector grew 84% in 2015, to
£3.2 billion.
• Fastest growing models:
• Donation-based crowdfunding: up by
507% from £2m in 2014 to £12m in
2015.
• Equity-based crowdfunding: up by
295% from £84m raised in 2014 to
£332m (including real estate) in
2015.
• US P2P platforms issued approximately
$5.5bn loans in 2014. (Source: PwC,
2015)
• PwC’s analysis indicates the market
could reach $150bn or higher by 2025. Source: University of Cambridge Research, 2016
Distributed Ledger Technology (DLT)
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Source: World Economic Forum, August 2016
• Global interest: 24+ countries currently investing in DLT
• Bank experimentation: 80% of banks predicted to initiate DLT
projects by 2017
• Venture capital: US$1.4bn in investments over the past 3 years
• Research: 2,500+ patents filed over the last 3 years
• Central banks: 90+ central banks and corporations engaged in
DLT discussions worldwide
• Consortium efforts: 90+ corporations have joined blockchain
consortia
Opportunities and Challenges for Central Banks?
• The Bank of England’s mission: ‘promote the good of the people of
the UK by maintaining monetary and financial stability’.
• The key focus of the Bank in 2016:
• widening access to central bank money to non-bank Payment
Services Providers;
• being open to providing access to central bank money to new
forms of wholesale securities settlement;
• exploring the use of distributed ledger technology in our core
activities;
• partnering with FinTech companies on projects of relevance to
our mission;
• calibrating our regulatory approach to FinTech developments.
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Distributed Ledger Technology (DLT) and Digital Currencies
• Quarterly Bulletin - September 2014:
• No current risk to Bank objectives from private digital
currencies owing to their small size and limited adoption.
• But DLT considered an interesting innovation.
• DLT enables payment systems to operate in decentralised ways.
• We want to understand:
• How could DLT impact the financial system?
• Could the Bank utilise DLT in providing payments
infrastructure?
12
Provision of Central Bank Money (1) - Banknotes
• Since 1694, the Bank has provided universal access to central
bank money via banknotes.
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• Peer-to-peer distributed payments in central bank money.
New Fiver – issued on 13 September
Yet New technology is Changing Payments Behaviour
Value of payment methods used for spontaneous payments, indexed 2000=100
-
200
400
600
800
1,000
1,200
1,400
1,600
2000 2002 2004 2006 2008 2010 2012 2014
Cash Cheque Debit card Credit card Other
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Provision of Central Bank Money (2) - RTGS
• The Bank has provided accounts for the settlement of interbank
obligations since the mid-19th century.
• 1996: Real Time Gross Settlement (RTGS).
• Electronic payments in central bank money, centralised
system.
• 2016: A wholesale review of RTGS: how we provide it, and
who to.
• What next? Does the system need a new form of central
bank money?
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Is the Future a Central Bank-Issued Digital Currency?
• DLT could provide the technological means for the Bank to offer
a Central Bank Digital Currency (CBDC):
Wider, electronic, 24x7, national-currency-denominated
access to the Banks balance sheet.
• ‘The macroeconomics of central bank issued digital currencies’
Barrdear and Kumhof, 2016.
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Settlement
Banksx Universal
Plus non-bank
financial institutionsPlus UK
households
Plus non-financial
corporates
CBDC Multi-Year Research Programme
Understanding the
economic impact
What are the
macroeconomic impacts
of a CBDC?
How would it affect the
stability and price of bank
funding? How could this be
managed?
What could affect credit
provision in the economy?
What are the implications of
another digital currency
gaining significant use in
the UK? Is this likely?
What are the benefits to
financial stability?
How would the Bank’s
monetary policy
operations be affected?
What monetary and
financial stability tools
could the CBDC offer?
Macro
eco
no
mic F
inan
cia
lS
tab
ility
The feasibility of using
DLT
Are there resilience
benefits?
Can privacy be
guaranteed?Is the system
scalable?
Legal and operational
implications
Transition challenges
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Technology
External Engagement
• World class policy making requires world class research.
• July 2016: We launched a series of research questions covering
the key issues on the feasibility and desirability of CBDC.
• We welcome your contributions.
• Earlier this year: The Bank launched the FinTech Accelerator:
• We will be working with new technology firms to help harness
FinTech solutions that would support central banking.
• Applications closed 24 July 2016, but our next call for
applications will open later this Autumn.
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‘We need diversity of thought in
the world to face new challenges’
Sir Tim Berners-Lee
Central Bank-Issued Digital Currency:
www.bankofengland.co.uk/research
FinTech Accelerator:
www.bankofengland.co.uk/Pages/fintech/default.aspx
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