Much has been said and written about the term FinTech, especially in the last decade. In a nutshell, in FinTech we have the partnership of a seemingly odd duo: finance, which is the processing of money, heavily regulated and traditional, and technology, which is the processing of data, mostly unregulated and contemporary.
FinTech is not just a company or a product. It is an ecosystem that contains the incumbents, the startups, and the big technology companies with digital platforms. The wheels of the aforementioned system are made to run more smoothly with the help of the regulators and policymakers, the investors and incubators, and the continuous flow of innovative technologies arising from the fourth industrial revolution, like artificial intelligence (AI), big data analytics, distributed ledger technology (DLT), internet of things, etc.
The purpose of this ecosystem should be mainly one: To provide the people with an easier, faster, cheaper, and more intuitive way of doing their financial business. By doing so, it also contributes to financial inclusion.
Central banks around the world have two main ways of facilitating innovation. The first is by establishing Innovation Hubs. Hubs serve as a single point of contact for all firms (new or incumbent, regulated or unregulated, technology companies, etc.) introducing or considering the adoption of innovative, technology-driven financial solutions/products.
The second is by establishing Regulatory Sandboxes. Sandboxes provide a scheme to enable firms to test innovative financial products, services, or business models based on a specific testing plan agreed and monitored by a dedicated function of the competent authority. Sandboxes may also imply the use of legally provided discretions, for the specific testing period, by the relevant supervisor.
These two initiatives are designed to promote greater engagement on financial innovations between competent authorities and firms. This engagement is increased firstly by enhancing firms’ understanding of regulatory and supervisory expectations and subsequently by increasing the knowledge of authorities about innovations and the opportunities and risks they present.
BoG’s Innovation Hub
In a rapidly evolving FinTech ecosystem, the Bank of Greece (BoG), within its regulatory mandate, has a keen interest in the timely monitoring of the risk implications of financial institutions’ innovative business models and to constantly review its authorisation approaches, while also facilitating the smooth introduction of new innovative financial products and services in the Greek market—all to the benefit of consumers, businesses, and the economy at large. In March 2019, the BoG, for this purpose, set up an Innovation Hub, being at the time the 26th country out of the EU28 to do so.
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