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Fintech credit

Fintech credit

The Financial Stability Board and the Committee on the Global Financial System have published a paper (PDF 737 KB) on the risks posed by fintech developments, this time focusing on credit facilitated by electronic platforms.

The paper recognises the potential benefits of fintech credit (lower transaction costs, increased access to credit), and the currently low market share of such forms of credit.

But risks are also identified - lower lending standards, untested risk assessment processes, exposure to cyber security risks, the likely strong pro-cyclicality of fintech lending (strong during booms but potentially subject to a sharp reversal during downturns), and the absence of reliable data for assessing the growth and nature of fintech credit.

The last two of these risks may be of particular relevance to financial stability.

At the micro level the paper highlights the different regulatory approaches being taken by national regulators. At a macro level the conclusion seems to be in the “keep a close eye on developments” territory, rather than anything more specific.

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

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