18 July 2018
On 3 June 2018, the European Banking Authority (EBA) published two reports on:
Both reports aim to raise awareness on potential prudential risks and opportunities from current and potential FinTech applications and understand the main trends that could impact incumbents’ business models and pose potential challenges to their sustainability.
Specifically, the first report, on the impact of FinTech on incumbent credit institutions’ business models, highlights key EBA’s observations.
Incumbents are categorised into:
Potential risks may arise both for incumbents not able to react adequately and timely, remaining passive observers, but also for aggressive front-runners that alter their business models without a clear strategic objective in mind, backed by appropriate governance, operational and technical changes.
In addition, the report sets out five factors that might significantly affect incumbents’ business models from a sustainability perspective:
The second report, on the prudential risks and opportunities arising for institutions from FinTech, assesses seven use cases, where new technologies are applied or considered to be applied to existing financial processes, procedures and services.
It focuses on micro-prudential aspects, setting out potential risks and opportunities that may arise from each use case:
The report aims to provide both competent authorities and institutions with useful guidance on the above applications.
For additional information, read the complete EBA press release here.