Financial Technology ("Fintech") is gaining momentum and appears to disrupt the status quo of the traditional financial services industry. It has radically changed the way financial services are offered. Fintech offers alternative financial services enabling customers to receive faster, more convenient and cheaper services. In a nutshell, Fintech is the use of technology to disrupt and change traditional financial services.
Imagine living in a world were various forms of financial services are rendered to customers through technology solutions as opposed to natural persons. But for the recent inroads technology is making in the provision of financial services, before now, such possibilities would have been dispelled at a glance. From air ticket bookings and payment of utility bills, to shopping on e-commerce platforms, mobile payments, crowdfunding and peer-to-peer lending, the disruptions technology have brought in the financial services industry cannot be ignored. We live in a world with endless possibilities in the area of flexible payment systems and swift electronic-based customer care service system. Put differently, the Application Program Interface ("API") designed to interface with the developed software/programs, can now execute payment instruction with zero third party human interface. In light of foregoing, there's no doubt that a regulatory framework is necessary to catch up with the fintech development and provide certainty to the market players.
Jamie Dimon [CEO of JP Morgan] in his address to JP Morgan shareholders, "Silicon Valley is coming.... startups are coming for Wall Street, innovating and creating efficiency in areas that are important to companies such as JPMorgan, particularly in the lending and payments space...... "We are going to work hard to make our services as seamless and competitive as theirs. The foregoing statements drive home the impact technology is having on financial services globally. From wealth management, to other complex financial services, e.g., lending, financial institutions/wealth managers are devising more flexible cost effective approaches to providing financial services to their customers around the globe without human interference.
Fintech is by its very nature disruptive and therefore a reasonable measure of regulation as a framework is a sine qua non-for its effective operations in the financial services industry. Thus, if regulatory regimes do not give clarity to Fintech's operations, some grey areas will set in leading to possible frauds and cybercrimes. Whilst many have argued that there is a limit to what technology can do in terms of provision of financial services, others maintain that robots or programs may not totally displace the role of human beings when it comes to risk assessment and structuring of complex corporate transactions. Whatever may be the case, the fact remains that there is an urgent need for regulators in the financial sector to prepare for the task ahead. If we can get to where we are now, particularly in payment services, we may as well be prepared to accept situations where the full process of lending will be handled by technology as is the case with peer-to-peer lending or crowdfunding.
The Fintech sector is currently among the most crowded tech sectors in Nigeria. Almost every commercial bank has on Fintech platform or the other that they are backing; because they know that it is the future of the financial services. Among different Fintech markets, United Kingdom is well ahead of others in establishing a regulatory system that combines Fintech's development with customer's protection. In Nigeria, technological disruptions are majorly in payment services. This informs the reason why regulators in the financial service space have issued guidelines and regulations in areas such as, Mobile Money Payment Services, International Mobile Money Remittance Service, Transaction Switching Standards, etc. This however has created some uncertainties and vacuum in terms of the appropriate regulatory and holistic framework required to regulate the emerging areas of disruption in the financial services.
In conclusion, whilst we acknowledge the efforts of Government in protecting online transactions from cybercrimes by the enactment of the Cyber Crimes Prevention & Prohibition Act, 2015, there is also a need for more regulation and law to regulate the Fintech space. That said, care should be taken not to use excessive regulations to stifle the ideas and innovations of startup companies in the Fintech industry.
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