KUALA LUMPUR: The Fintech phenomenon has changed the rules in the financial services industry in response to rapidly changing market demands, requiring regulatory mechanisms that balance risks and opportunities.
Bank Negara Malaysia is one of several central banks to introduce a regulatory sandbox to allow experimentation of genuinely innovative ideas, while preserving consumer protection, said Governor Datuk Muhammad Ibrahim.
"It is clear that the rules have changed, and regulatory authorities are striving to cope with this new environment," he said, in his speech on ‘New Models and Sources of Prosperity in an Uncertain World’ at the 31st Annual G30 International Banking Seminar in Washington on Sunday.
The seminar was held on the sidelines of the IMF World Bank annual meetings.
Policymakers, said Muhammad, may need to develop new systems of regulations (a Regtech for Fintech) that is flexible enough to adapt, and robust enough to manage the rapid technological advancements.
With economic growth increasingly stemming from techno-preneurs and start-ups, productions and markets are becoming less and less homogeneous.
"Regulations need to be localised, particularly taking into account an economy's specific needs and stage of readiness.
"For instance, while we universally stress on the importance of product safety, welfare of workers and consumer protection, the pace and types of regulation for Uber and AirBnB have been highly varied across countries.
Muhammad said that while the meetings have described the global economy as ‘moderate’, ‘lacklustre’ and ‘uncertain’, technology has brought opportunities as never before.
"Our current economic model could well serve us, if it is one that is underpinned by opportunity, complementarity and technology."
He pointed to the rapid income and population growth in emerging markets, which are large and growing consumer markets.
"The rising demand for technologically-intensive goods and services have reignited the growth potential for advanced economies, particularly, in the fields of advanced services and manufacturing," said Muhammad, adding that technology has lowered barriers to entry significantly, and narrowed the gap in comparative advantage between emerging and advanced economies.