Most regulators either accelerated or introduced new innovation initiatives in response to Covid-19. No such initiatives were cancelled, says a report from the World Bank and CCAF.
The World Bank and CCAF (Cambridge Centre for Alternative Finance) have jointly published new research on the impact of Covid-19 on fintech regulation and fintech innovation initiatives.
The report, entitled ‘The Global Covid-19 FinTech Regulatory Rapid Assessment Study’, was prepared with support from the UK Foreign, Commonwealth and Development Office (FCDO), and with 118 central banks and financial regulators from 114 jurisdictions contributing to the research.
The research found that up to 60% of respondents reported an increase in the use or offering of fintech products and services since the Covid-19 outbreak. In particular, an increase in digital payments and remittances services was cited by 60% of surveyed regulators, followed by digital banks (22%) and digital savings or deposits (19%).
Respondents also see rising risks from fintech, specifically in the areas of cybersecurity (78% referenced as a top three risk), operational risks (54%), consumer protection (27%), and fraud and scams (18%). Among surveyed regulators from advanced economies, up to 90% of respondents see cybersecurity as one of their top three risks associated with fintech activities due to Covid-19.
The study also found that regulators in most jurisdictions have been increasingly prioritising fintech amid the pandemic, particularly in emerging market and developing economies. Central banks in particular were more likely to have increased the prioritisation of their fintech work relative to other financial regulators – most notable in relation to digital payments and remittances.
In light of Covid-19, regulators are increasingly recognising that fintech can play a role in supporting regulatory objectives, and that it may be especially helpful in promoting financial inclusion (70%), market development (61%) and competition (47%).
About 54% regarded themselves as being ‘well prepared’ to respond to the challenges of Covid-19, 80% considered themselves resilient and able to be adaptable, and 59% felt that they had adequate resources at their disposal.
The most common Covid-19 related challenges cited by surveyed regulators related to their ability to perform core regulatory functions (e.g. on-site inspections), coordinate with other domestic agencies, and access accurate and timely data.
To support their work on fintech in light of Covid-19, regulators said they would benefit most from skills development (80%) and technical support (67%), with more demand in these areas from regulators in emerging market and developing economies.
As for the impact of Covid-19 on regulatory innovation initiatives, the majority of respondent regulators said they have either accelerated existing initiatives or introduced new ones.
For example, 72% of respondents have either accelerated or introduced initiatives on digital infrastructure, 58% have either accelerated or introduced initiatives regarding regtech/suptech, and 56% did so in regard to innovation offices.
No surveyed regulators reported the cancellation of an innovation initiative due to Covid-19, although around 20 per cent indicated they had delays.
The full report is available here.