The question is - how will we keep up?
“We can look at blockchain as a train passing by, or we can try to hop on for the ride.” - Sanda Liepina, Chairman of the Management Board at the Association of Latvian Commercial Banks.
Developments in fintech are providing incredible opportunities for the future of finance, however the biggest challenge to make the most of these opportunities, is keeping up with the developments of technology at a governing level. This was a consensus at the European Commission discussion on the Future of Finance, presented by the Digital Freedom Festival. The discussion participants agree that some levels of regulation are necessary, as well as policies that enable FinTech developments.
A central focus was placed on the importance of regulation on the development of innovations in the field of finance. Specifically in the field of blockchain, Initial Coin Offerings (ICOs), and artificial intelligence (AI).
The European Commission has taken a pro-active stance in the face of FinTech developments. Some initiatives are advocating for the development of an exploratory sandbox for technologies that we need, such as AI, as well as classifying elements of ICOs to provided legal backing for backers.
Similarly, the Association of Latvian Commercial Banks has suggested that Latvia, in co-operation with other European countries, develop the possibility for KYC (Know Your Customers) applications for financial services. That would allow for a safe and shared ledger of customer identity that can be shared among different financial institutions. It was also noted that Latvia is a leader in digital banking, with 90% of payments done digitally in Latvia, and ⅓ of instant payments done in Europe are coming out of Latvia.
Latvia is making an effort to provide unified, open banking, allowing for startups to access and partner with large financial institutions, based on the PSD2 regulation. Some startups taking advantage of this are, for example, Nordigen (transaction categorization), Notakey (customer identification), and ToneBoard (voice analysis).
It was highlighted that though innovations in finance technologies are promising, they also pose risks that should not be forgotten. From growing technological capabilities of cyber criminals, which is an ongoing race of technology, to cases where loopholes in ICOs allow cofounders to extract millions of invested dollars that are then lost to the investors. These sorts of irritations serve as a driving stimulus to keep up with technological advances and provide regulations needed to protect consumers. It is expected that in time, the same amount of regulations and limitations that are applied to cash transactions, will and should eventually be placed on cryptocurrencies.
Equally important, highlighted by Agnese Dagile, the Economic Advisor of the European Commission Representation in Latvia, is to ensure that technological innovations do not eclipse the technical skills of the people. She highlights the responsibility of society as a whole to provide necessary skills to use digital opportunities to ensure that we have a Digitally Smart (DS) society, as opposed to a Digitally Dumb (DD) society.
The discussion was moderated by Martins Vaivars, CEO of Toneboard. Discussion participants included;
- Peteris Zilgalvis, Co-Chairman of the European Commission Financial Technology Task Force
- Flora Coleman, Government Relations at TransferWise
- Sanda Liepiņa, Chairman of the Management Board at the Association of Latvian Commercial Banks
Introductory statements were made by Juris Sleiers, co-founder of the Digital Freedom Festival and Agnese Dagile, the Economic Advisor of the European Commission Representation in Latvia.
The discussion was the first panel kicking off a series of events hosted by the Digital Freedom Festival, which is underway in Riga, November 27-28. Its main goal was to identify the challenges and opportunities presented by FinTech, to engage in dialogue and find cooperation potential among startups, policy makers and opinion leaders resulting in better outcomes.