Technology, Innovation and the Democratization of Financial Services

Abstract

Innovation is the life-blood of financial markets. Today, more than ever, technological advances provide the underpinning. New products, applications, processes, players and even markets continue to debut: from decentralized payment and settlement systems to virtual currencies, proprietary computer algorithms, high speed trading, robot advisors, blockchain, big data and alternative lending and capital markets made possible by crowd funding. They provide the promise of a wider opening of the financial market to a bigger audience, with better services and products and at lower costs. Yet, due to its very nature, innovation can pose unprecedented challenges and risks to the financial system, market infrastructure and existing players. History has demonstrated that as innovations bring growth and efficiency, it can also make the financial market vulnerable and fragile. In the final analysis, financial markets are about certainty, confidence and trust. A robust, transparent and purposeful legal framework will provide the bedrock upon which stakeholders can foster, develop and use new ideas, and manage their attendant risks. There is a danger however that stakeholders might draw too much from the past to deal with the future. How could different stakeholders work together to build the trust and confidence to support financial market innovations?