Financial Innovation and Technology after COVID-19: a few Directions for Policy Makers and Regulators in the View of Old and New Disruptors

Abstract

Innovation and technology have led to the redefinition of business models and development of new ones in many bricks and mortar sectors. Similarly, blockchain and fintech have impacted the finance and banking industries and are expected to further affect them in the future, leading some media to coin the expression “Uberization of banking”. The authors extrapolate from sharing economy models to conclude that while blockchain and fintech are poised to advance finance and banking, there are no disruptive features that corroborate the term. By analogy and successive approximations, this article identifies the limitations of the arguments for disruption in finance and banking. Besides, hinging upon stylized facts, the article establishes similarities with sharing economy models to identify potential threats stemming from financial innovations such as Tokenomics, tagged as “no-ABSs”. Eventually, the authors identify entry points and ways forward arising from the COVID-19 pandemic for policy makers and regulators to regain their pivotal role in policing the market and ensuring transparency while driving innovation.

Impact of Covid-19 Pandemic on Financial Innovation, Cashless Society, and Cyber Risk

“…A study by Pompella and Constantino (2021) confirmed that FinTechs showed a significant degree of resilience during the global pandemic. This finding was also confirmed by the World Bank study (2021) which showed on a sample of 1,385 fintech companies from 169 countries that FinTechs recorded a strong year-over-year growth in the first half of 2020.…”

Understanding the Factors of Financial Innovation in Industrial Revolution 4.0 Era

“…The level of financial innovation also needs to be regulated because it can trigger economic movements and at the same time trigger economic instability (Lauretta, 2018). Regulation can have a positive or negative effect depending on how strong the strategy is and how clear and binding the policies created by the local government are (Kok Pompella & Costantino, 2021;Katusiime, 2021). For example, macroeconomic policy has a positive effect in the short term but has a negative effect in the long term Katusiime, 2021).…”