Global scenario of digital payment

Muhammad Saiful Islam Bhuiya

28 January, 2019 12:00 AM printer

Global scenario of digital payment

Financial Technology or FinTech is the new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services.

The term came into light after global financial crisis in 2008, right now very much popular all over the world.

FinTech actually innovate different digital platform to provide versatile financial services like ‘Crypto currency and E-wallet or payment gateway Platform’ to enable payment and transaction services to deliver credit and lending services that together developed an alternative financial service delivered by tech companies.

FinTech enabled financial services is very much convenient, excessively faster and highly cost effective than traditional financial service provided by incumbent banks.

Although FinTech services already demonstrate its strength and significant benefits, till it suffering due to its cyber security, data privacy, money laundering and other regulatory issues.

Many local and global authorities and regulators all over the world already taken measure and reform regulatory framework as well as utilize regulatory technology (RegTech) to make FinTech robust and adapt its activities.

FSB or Financial Stability Board- an international body work for global financial system addresses 10 regulatory and risk assessment area of FinTech eco system to increase the awareness of  local and international regulatory authorities which are: (1) Managing operational risks from third-party service providers (2) Mitigating cyber risks (3) Monitoring macro financial risks (4) Cross-border legal issues and regulatory arrangements (5) Governance and disclosure frameworks for big data analytics (6) Assessing the regulatory perimeter and updating it on a timely basis (7) Shared learning with a diverse set of private sector parties (8) Further developing open lines of communication across relevant authorities (9) Building staff capacity in new areas of required expertise (10) Studying alternative configurations of digital currencies.

Regulations on Payments, Clearing and Settlement: The European Union (EU) has revised its directive on payment services for regulating new FinTech players, such as payment data aggregators and payment initiation service providers in 2015.

Japan amended its Payment Services Act to establish a regulatory framework for digital currencies, also amended their Banking Act to promote open-innovation between banks and FinTech firms.

Regulations on Deposits, Lending and Capital rising: Argentina, Australia, Brazil, Canada, China, France, Germany, Italy, Netherlands, Spain, United Kingdom, Hong Kong, Indonesia, Kenya, Korea, Singapore and Turkey have amended or clarified existing rules for equity crowd funding and for online marketplace lending, that focus on International Organization of Securities Commissions (IOSCO) principles.

Canada also introduced new crowdfunding rules in May 2015, followed by further amendments in November 2015 and January 2016 that allow companies to use equity crowdfunding to raise capital subject to certain conditions.

UK is conducting a post-implementation review of the crowdfunding market and regulatory framework. In Indonesia, the Financial Services Authority enacted regulation on the legal structure and governance of IT-based direct lending and borrowing services in December 2016.

In August 2016, the China Banking Regulatory Commission (CBRC) and three other ministries jointly issued the Provisional Rules for the Administration of the Business Activities of Online Lending Information Intermediary Institutions.

In USA ‘Jump Start our Business Startups’ (JOBS)Act, signed by Barack Obama in 2012, which legitimized the concept of equity crowdfunding in law.

RegTech (Regulatory Technology) used for FinTech Regulations: There are some innovative digital regulatory technology called ‘RegTech’ used for FinTech Regulations. RegTech is the idea of using technology to make FinTech and firms regulated with more effective way.

‘India Stack’ is the best practice and model of financial infrastructure digitization initiatives. India Stack is the  combination of four levels (a) Digital biometric ID system: includes 10 fingerprints and two iris scans for each individual who is issued with an ID that make it possible for immediate authentication of any individual's identity (b) Open API: That allow to open payment system by bank and non-bank entities (c) E-KYC:  Facilitates a digital platform  where people can place digitized documents through a drop box (d) Include Bank Account: a bank account that is linked to their digital ID and to an electronic payment system that allows prompt payments across the financial system.

Finally we can say, people need best financial services and regulators have to confirm the security of these services. Global and local authorities, policymakers, regulators, supervisors and observers already evaluate and understand the importance FinTech and its services.

From all the mention initiatives regarding ‘FinTech Regulations’ demonstrate that how regulators work for making FinTech secure, robust and compliance that may indicate the approval of  ‘FinTech Enabled Financial Services’ rather than restrict it.


Muhammad Saiful Islam Bhuiya is Assistant Vice President in Card Division at Mutual Trust Bank