A working group established by the Committee on the Global Financial System and the Financial Stability Board has published a report on FinTech credit.
FinTech credit is credit activity facilitated by electronic platforms such as peer-to-peer lenders. FinTech platforms facilitate various forms of credit, including consumer and business lending, lending against real estate, and non-loan debt funding such as invoice financing. There is also a variation in the creditor base of FinTech credit platforms: some source funding mostly from retail investors, while others use significant funding from institutional investors, banks and securitisation markets. Banks originate loans for FinTech credit platforms in several jurisdictions.
The report is intended to help policy makers understand the functioning of FinTech credit markets, including the size, scope and growth of these activities. It also assesses the potential micro-financial benefits and risks of these activities, and considers the possible implications for financial stability in the event that FinTech credit should grow to account for a significant share of overall credit.
The report is structured as follows:
- section 2 discusses the factors influencing the development of FinTech credit activity;
- section 3 outlines the size and structure of FinTech credit markets across jurisdictions;
- section 4 describes the nature of FinTech credit activity, including platform business models and the characteristics of borrowers and investors;
- section 5 contains a micro-assessment of the efficiency and vulnerabilities of FinTech platforms and markets;
- section 6 analyses the potential financial stability implications of FinTech credit, considering its possible impact on credit provision in the economy and the banking sector; and
- section 7 provides an overview of current regulatory and other policy frameworks for FinTech credit, focussing in particular on how FinTech credit is treated within existing frameworks and whether there have been specific policy initiatives for FinTech credit.
The report contains several key messages:
- the nature of FinTech credit activity varies significantly across and within countries due to heterogeneity in the business models of FinTech credit platforms;
- whilst FinTech credit markets have expanded at a fast pace over recent years, they currently remain small in size relative to credit extended by traditional intermediaries; and
- a bigger share of FinTech-facilitated credit in the financial system could have both financial stability benefits and risks in the future, including access to alternative funding sources in the economy and efficiency pressures on incumbent banks, but also the potential for weaker lending standards and more pro-cyclical credit provision in the economy.
View FSB and CGFS joint report on Fintech credit, 22 May 2017
