International Organization of Securities Commissions (Iosco) has released a new report that says that changes resulting from fintech are substantial and in certain cases leading to disintermediation and reintermediation, and in other cases testing the boundaries of full disintermediation through the use of technology.  

The report incorporates the finding of three surveys: Committee on Emerging Risks (CER) and the Growth and Emerging Markets Committee (GEMC) survey to gain further insight on the types of Fintech firms in the respective jurisdictions, key regulatory actions taken by members, and the practices of Fintech firms in onboarding investors; the CER, the Affiliate Members Consultative Committee (AMCC),  and World Federation of Exchanges (WFE) survey on distributed ledger technology; and a GEMC survey reviewing the state of development of Fintech in emerging markets, including existing and potential regulatory implications.

The report particularly examines:

• Financing Platforms, including Peer-to-Peer (P2P) lending and equity crowdfunding (ECF)
   
• Retail Trading and Investment Platforms, including robo-advisers and social trading and investing platforms
   
• Institutional Trading Platforms, with a specific focus on innovation in bond trading platforms
   
• Distributed Ledger Technologies (DLT), including application of the blockchain technology and shared ledgers to the securities markets.

“Emerging technologies such as cognitive computing, machine learning, artificial intelligence, and  distributed ledger technologies (DLT) can be used to supplement both Fintech new entrants and traditional incumbents, and carry the potential to materially change the financial services industry”, the report said.

Iosco noted that while firms can operate globally, regulation is overseen within national or sub-national borders. This global nature of Fintech may contribute to challenges that may be addressed by international cooperation and the exchange of information among regulators, it said.

“The emergence of new Fintech players that offer innovative financial products and services which sometimes cut across different industries within the wider economy could impact current regulatory perimeters within jurisdictions”, the report added. “Regulators may face challenges addressing Fintech development while fulfilling their regulatory mandate, such as promoting investor protection, market fairness and financial stability.”

To that end, Iosco said that regulators could continue to explore how to best benefit from the trends in Fintech and the closely associated Regtech (regulation technology).