Collaboration between industry and regulators needed to maximise potential of financial technology, says WEF

The World Economic Forum said (20-page / 2.45MB PDF) that the benefits that financial technology could offer, such as boosting people's access to financial services, lowering costs to firms, improving competition and spreading risk, have yet to be fully harnessed.

"The increased use of technology-enabled innovation has had a number of positive impacts on the stability of the financial sector, as well as broader society," the WEF report said. "However, practitioners and policy-makers alike have indicated that exploitation of these benefits are still in their early stages. As such, there is an urgent need both for the private sector and financial supervisors to collaborate and identify actions that can be taken to understand how best to maximize societal utility from these opportunities."

Among the recommendations made by the WEF in its report was for a new global forum to be set up to facilitate discussion between financial firms and policy makers, among others, on "technology-enabled transformation in financial services". The forum should seek to "identify areas where supervisor support is needed to develop technology for enhancing stability", it said.

"A newly created forum that reflects the current and anticipated future state of the financial sector will serve as a valuable learning platform and means of identifying innovation clusters for priority review," the WEF said. "This forum would aim not only to identify and mitigate against risks but also to further capitalise on opportunities stemming from use of technology-enabled innovation."

Luke Scanlon, financial services and technology expert at Pinsent Masons, the law firm behind Out-Law.com, said that the WEF's report reflects the pressing need for standardisation of regulatory requirements across borders.

"As a number of regulators have come out with updated guidance around core financial services technology topics such as outsourcing, mobile, cloud and platforms, businesses operating across borders are faced with the task of assessing compliance against similar but inconsistent requirements," Scanlon said. "A forum for businesses to advocate how such guidance can be better aligned would be well supported."

The WEF also called on governments around the world to facilitate a debate on what the acceptable ethical parameters are for the use of customer data by financial firms.

"The need for a public debate to clearly define boundaries for data use and ownership is a logical step in rebuilding trust with the end consumer," the WEF said. "Customers want more personalised products and services, and should have peace of mind knowing that their chosen financial service provider adheres to standards that are current and clearly defined."

"Most existing data-related standards and fair information practices did not anticipate the level of advanced capture and analytics that technology affords today. Furthermore, there has been limited consideration for how data used to drive business decisions has fundamentally evolved in light of technological transformation and its continued suitability in the current digital context," it said.

The debate should look to establish standards on acceptable uses for personal data when aggregated as well as when processed about specific individuals, it said. "Clear criteria" for defining who owns data and for when data can be transferred between businesses or by regulators should also be aimed for as part of the debate, the WEF said.