Institutional Arrangements for Fintech Regulation: Supervisory Monitoring (IMF Fintech)

Summary

• In Ghana, the growth of mobile money increased access to financial services for unbanked demographics, with 35 percent of adults in rural areas reporting having used the service between 2014 and 2017.p.12
• The Central Bank of Brazil utilizes an artificial intelligence tool named ADAM capable of analyzing 3 million customer exposures in 24 hours across banking and nonbanking supervision.p.20
• The Financial Conduct Authority launched the world's first operational innovation hub in October 2014 under Project Innovate.p.25
• Worldwide, more than 95 sandboxes have been launched or are in preparation to allow firms to test innovative propositions in controlled environments.p.30
• Participation in the UK Financial Conduct Authority sandbox is associated with an average increase in funding raised of 15 percent compared to non-participating firms.p.41
• A study of the UK Financial Conduct Authority sandbox showed 76 percent of first cohort participants remained active after two years, compared to 57 percent of rejected applicants.p.41
• Only 4 percent of bilateral fintech cooperation agreements globally are signed strictly between Emerging Market and Developing Economies.p.43

Key insights

1. Existing supervisory structures are best suited for monitoring fintech where deployment is led by regulated firms or where fintech has matured into mainstream operations.p.17
2. Innovation hubs serve as dedicated central touchpoints providing light-touch feedback and guidance to firms, with individual support engagements typically lasting less than a month.p.26
3. Product-testing sandboxes permit firms to test innovative products with real consumers under close supervisory oversight, usually for testing periods lasting 6 to 12 months.p.36
4. TechSprints bring together domain experts and technical teams over short periods to develop theoretical proof-of-concept solutions for regulatory problems.p.47
5. Approximately 75 percent of crypto asset exchange trading volume occurs on exchanges registered in offshore financial centers.p.43
6. International cooperation is indispensable for effective surveillance because digital financial services operate across borders.p.42