The real question is how can governments strike the right balance – and how can fintech and financial services industry players alike shape the ongoing conversation?
While governments around the world, and sometimes within the same jurisdiction, have taken different approaches toward fintech, it is clear they see fintech as a critical part of the future of financial services – and believe they have a role in ensuring the sector evolves for the good of consumers, businesses and the global economy.
For most governments, supporting fintech is a means toward achieving four key goals:
To achieve their objectives, many governments are focused on modifying existing regulatory frameworks and enacting new legislation to bridge identified gaps. To support these activities, government typically follow a 'three Es' approach.
Many governments are also supporting fintech in other ways – from providing tax incentives and grants to encouraging mobility of talent. They are also engaging with fintech companies directly to improve their own data and analytics, digital identity, payments and transactional banking. More progressive governments are also opening up their data, in a safe and controlled manner, so startups can create new value.
There is no doubt governments have a key role in the evolution of fintech, but they need to balance their activities carefully – encouraging innovation without hindering evolution. As governments develop policies and programs, there needs to be active engagement with stakeholders, whether through formal feedback mechanisms or ad hoc opportunities and conversations, in order shape a future that benefits all stakeholders.
For more detailed insights into the role of governments in fintech evolution, including a number of key examples, read our latest edition of Frontiers in Finance.