A Cashless Society: From Fintech to Regtech

Sparse Regulation Leaves New World Feeling Like Wild West

SMITH BRAIN TRUST – Are we headed for a cashless society, where our lives will be governed by our smartphones? Financial technology, or “fintech,” makes it a real possibility – we can already borrow money, deposit money, lend money, pay for things, all with our phones. But the lack of regulation leaves this new world feeling a bit like the Wild West, says Haluk Unal, a finance professor at the University of Maryland’s Robert H. Smith School of Business.

Unal is one of the organizers of the two-day Financial Stability and Fintech Conference, Nov. 30 and Dec. 1, 2017, in Washington, D.C. The event is co-hosted by the Smith School, the federal Office of Financial Research and the Federal Reserve Bank of Cleveland and brings together regulators, industry representative and scholars. The group will discuss new research and issues surrounding how financial innovations will impact financial stability and the implications for policy and regulation. Some are calling for fintech regulation, but there is debate over whether that would hinder innovation. And a regulatory technology industry – dubbed “Regtech” – has emerged to help financial institutions minimize risk from technology use and comply with regulatory requirements.

“This conference is one of the the first that focuses on the financial stability and regulatory implications of fintech,” says Unal. “Do all of these things – which are totally unregulated – pose any threat to the economy and the financial system?”

There is competition among fintech startups to gain market share in the financial services space. And now banks are reacting and racing to employ their own technology to deliver services in a more efficient way. They are going into digital lending, robo advising and more.

“Naturally, it’s a slow process for banks to keep up with startups,” says Unal. But they see the importance of keeping up. In the Washington, D.C. region, he pointed to Capital One as pouring huge resources into technology and becoming a fintech bank. He thinks there will be an acquisition wave, where big banks will absorb startups to acquire their technology and market share. He also thinks this will lead to some consolidation of the services out there.

Federal Reserve Board Vice Chair for Supervision Randal Quarles and David Yermack of New York University will weigh in on the future of fintech as the keynote speakers at the conference later this month. The event will also feature research forums and policy panel discussions. Watch the livestream: on Nov. 30 and Dec. 1.