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Consumer risks from fintech

Consumer risks from fintech

Amidst the hype about the potential for fintech to transform financial services and to improve consumer welfare, the UK Centre for Financial Inclusion has published a more sobering analysis.

The paper (PDF 950 KB) argues that we should not assume that fintech will benefit consumers just because it is new and exciting, or because it has the potential to benefit consumers through lower costs, more personalised services and greater responsiveness and flexibility.

Instead, there is the risk that fintech will:

  • increase costs and reduce value to the consumer;
  • introduce new conduct of business risks (different ways of mis-selling and mis-advising, not least by providers using insights gained from big data to exploit behavioural biases and fears to sell consumers unsuitable products and services);
  • lead to greater financial exclusion and discrimination through big data analytics and the use of personal information;
  • facilitate new types of scams, fraud and data breaches; and
  • create more complexity, fragmentation, opacity and spurious choices, and reduce competition.

To discuss this further, please contact a member of the EMA Financial Services Risk & Regulatory Insight Centre.

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