SYDNEY, Australia—Fintech companies will ultimately constitute a systemic risk, the Reserve Bank of Australia is warning. As a result, the bank is arguing regulatory authorities should develop standards to set up the technological change that is sweeping the payment sector.
“Most of the rules for financial institutions aim at the stability of financial institutions. It aims at supervisory supervision, so it is not the current problem with fintech. When any of these companies are big enough, there will be systemic problems. It then raises the issue of what standards we then impose on them,” said RBA Assistant Governor Michele Bullock, according to the Australian Financial Review.
According to Bullock, regulatory authorities should avoid binding requirements on a particular type of fintech company and instead focus on the function it provides.
“Regulators cannot turn back now. They must be active and supervised to ensure that consumers and investors are protected. Their task is to protect consumers from falling victim to fraud or losing their savings,” said Bullock.
The assistant governor also stressed the importance of having resilient retail payment systems in increasingly cashless society, where “an interruption could threaten the economy’s ability to run smoothly,” The Australian Financial Review noted.