Victoria Cleland Chief Cashier P2P Financial Systems 2016 Conference London 8 September 2016 1 Welcome 2 The Importance o f Collaboration 3 One Bank Research Agenda February 2015 ID: 527480
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Slide1
FinTech: Opportunities for all?
Victoria Cleland, Chief CashierP2P Financial Systems 2016 Conference, London8 September 2016
1Slide2
Welcome
2Slide3
The Importance
o
f Collaboration
3
One Bank Research Agenda – February 2015
‘making
progress on such a broad agenda
requires input from
the wider community of
academics
, policymakers and
experts’
Open Forum – November 2015
Session on:
‘How financial innovation and technology support the economy’.
‘it is hardly possible to overrate the value…of placing human beings in contact with persons dissimilar to themselves, and with modes of thought and action unlike those with which they are familiar…such communication has always been…one of the primary sources of progress’
John Stuart Mill, 1848Slide4
Technology
H
as Changed
T
he Way We Live Our Lives
4
Source: Google ImagesSlide5
And
H
as Disrupted Commerce
Some incumbent businesses fail to adapt…
While some new ones thrive.
5Slide6
Financial Technology – A Big Opportunity?
6
Source: World Economic Forum, August 2016
FinTech:
‘new
applications
of technology that have the potential to change the way the current financial system is
structured’Slide7
7
Global
FinTech
Financing Activity ($
mns
)
Investment and Interest in FinTech
Source: Accenture / CB Insights
Google Searches for ‘FinTech’
Source: Google AnalyticsSlide8
Payments
Deposits & Lending
Insurance
Investment
Accounting
Financial data
FINANCE
FinTech Impacts the Whole of the Financial SectorSlide9
Peer-to-Peer Activity in the UK
9
The UK
P2P
sector grew 84% in 2015,
to £3.2 billion.
Fastest growing models:
Donation-based crowdfunding: up by 507% from £2m in 2014 to £12m in 2015.
Equity-based crowdfunding: up by 295% from £84m raised in 2014 to £332m (including real estate) in 2015.
US P2P platforms issued approximately $5.5bn loans in 2014. (Source: PwC, 2015)
PwC’s analysis indicates the market could reach $150bn or higher by 2025
.
Source: University of Cambridge Research, 2016Slide10
Distributed
Ledger Technology (DLT)
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Source: World Economic Forum, August 2016
Global interest
: 24+ countries currently investing in DLT
Bank experimentation
: 80% of banks predicted to initiate DLT projects by 2017
Venture capital
: US$1.4bn in investments over the past 3 years
Research: 2,500+ patents filed over the last 3 years
Central banks: 90+ central banks and corporations engaged in DLT discussions worldwideConsortium efforts
: 90+ corporations have joined blockchain consortiaSlide11
Opportunities and Challenges for Central Banks?
The Bank of England’s mission:
‘promote
the good of the people of the
UK by maintaining monetary and financial
stability’.The key focus of the Bank in 2016:widening
access to central bank money to non-bank Payment Services Providers; being open to providing access to central bank money to new forms of wholesale securities settlement; exploring the use of distributed ledger technology in our core activities;partnering with FinTech companies on projects of relevance to our mission;
calibrating our regulatory approach to FinTech developments.
11Slide12
Distributed Ledger Technology (DLT) and Digital Currencies
Quarterly Bulletin - September 2014:No current risk to
Bank objectives from private digital currencies owing to their small size and limited adoption.
But DLT considered an interesting innovation.
DLT enables
payment systems to operate in decentralised ways. We want to understand:How could DLT impact the financial system?Could the Bank utilise DLT in providing payments infrastructure?
12Slide13
Provision of Central Bank Money (1) - Banknotes
Since 1694, the Bank has provided universal
access to central bank money via banknotes
.
13
Peer-to-peer distributed payments in central bank money.
New Fiver – issued on 13 SeptemberSlide14
Yet New technology is
Changing Payments Behaviour
Value of payment methods used for spontaneous payments,
indexed 2000=100
14Slide15
Provision of Central Bank Money (2) - RTGS
The Bank has provided accounts for the settlement of interbank obligations since the mid-19th century.
1996: Real
Time Gross Settlement (
RTGS).
Electronic payments in central bank money, centralised system.2016: A wholesale review of RTGS: how we provide it, and who to.
What next? Does the system need a new form of central bank money?
15Slide16
Is the Future a Central Bank-Issued Digital Currency?
DLT could provide the technological means for the Bank to offer a Central Bank Digital Currency (CBDC):
W
ider, electronic, 24x7, national-currency-denominated
access to the Banks balance sheet.
‘The macroeconomics of central bank issued digital currencies’
Barrdear and Kumhof, 2016.
16
Settlement
Banks
x
Universal
Plus non-bank financial institutions
Plus UK households
Plus non-financial corporatesSlide17
CBDC Multi-Year Research
Programme
Understanding the economic impact
What are the
macroeconomic impacts
of a CBDC?
How would it affect the
stability and price of bank funding
? How could this be managed?
What could affect credit provision
in the economy?
What are the implications of another digital currency gaining significant use in the UK
? Is this likely?
What are the benefits to financial stability?
How would the Bank’s monetary policy operations
be affected?
What monetary and financial stability
tools could the CBDC offer?
Macroeconomic
Financial
Stability
The feasibility of using DLT
Are there
resilience benefits?
Can privacy be guaranteed? Is the system scalable?Legal and operational implications
Transition challenges
17
TechnologySlide18
External Engagement
World class policy making requires world class research.
July 2016: We launched a
series of research
questions covering the key issues on the feasibility and desirability of CBDC.
We welcome your contributions. Earlier this year: The Bank launched the FinTech Accelerator:We will be working with new technology firms to help harness FinTech solutions that would support central banking.
Applications closed 24 July 2016, but our next call for applications will open later this Autumn.
18Slide19
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‘We need diversity of thought in the world to face new challenges’
Sir Tim Berners-LeeSlide20
Central Bank-Issued Digital Currency:
www.bankofengland.co.uk/researchDigitalCurrenciesTeam@bankofengland.co.uk
FinTech Accelerator:
www.bankofengland.co.uk/Pages/fintech/default.aspx
FinTechAccelerator@bankofengland.co.uk
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