An important determining factor for the development of fintechs and investment decisions in new markets is the regulatory framework. It is fundamental for there to be close cooperation between regulators and supervisory authorities, both between different market sectors and internationally. The main challenge that regulators and supervisory authorities face is how to strike a stable balance between maximising the benefits of financial innovation and minimising risks. However, other important challenges include:
- Cooperation on the privacy of personal data.
- Consumer protection.
- Ensuring competition in the market.
- Protection against cyber threats in an increasingly digital environment.
- Establishing a coordinated and comprehensive approach to addressing cyber risks.
Following changes in market practices, the transformation of the fintech universe now demands changes to the current regulatory framework in order to ensure that new technologies are effective in addressing consumers’ true needs. This is where authorities need to find that balance between maximising the benefits and mitigating risks, whether they be individual or systemic.
One company offering risk management solutions is GDS Modellica, which provides software, decision analysis tools and machine learning techniques to help manage risk, combat fraud and build profitable relationships between companies and their customers. According to the company’s managing director, Antonio García Rouco, “a good credit risk management policy requires three key things: the best possible data (big data), predictive analysis and decision management tools. The combination of analytics and new technology in our solutions enable us to simplify risk management practices whilst also obtaining a solid return on investment”. With their solutions, says García Rouco, “companies are able to foresee risks, manage their decisions proactively and outline potential business strategies.”
Lastly, it is also worth underlining that effective regulation requires the necessary knowledge, skills and tools to guarantee that the market works effectively. This year, most institutions are primarily concerned with foreseeing new risks and seeking solutions, especially cybersecurity risks. An effective regulatory response, given the complexity of fintechs, will involve seeking greater cooperation and coordination both nationally and internationally.