Regulatory Changes

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Del curso dictado por Copenhagen Business School

FinTech and the Transformation in Financial Services

311 calificaciones

Copenhagen Business School

FinTech and the Transformation in Financial Services

311 calificaciones

Curso 2 de 4 en SpecializationDigital Transformation in Financial Services

The FinTech revolution is rapidly transforming the financial industry. The use of digital technologies is the norm, and together with regulatory and market changes it is creating a revolution. After completion of the module, you'll be able to: describe the changes that influence the financial sector, understand the complexity of the payment infrastructure, identify and explain the key payment instruments and how they function, understand the types of money that exits, and recognize changes in the regulatory frameworks and how they inhibit or promote innovation. To begin, I recommend taking a few minutes to explore the course site. A good place to start is the navigation bar on the left. Click Course Content to see what material we’ll cover each week, as well preview the assignments you’ll need to complete to pass the course. Click Discussions to see forums where you can discuss the course material with fellow students taking the class. Be sure to introduce yourself to everyone in the Meet and Greet forum! This course should take about four weeks to complete. You can check out the recommended course schedule below to see a quick overview of the lessons and assignments you’ll complete each week. By the time you finish this course, you’ll have mastered mastered the transformational forces of digitalization and the new competitive dynamics it gives rise to, learned from leading financial companies and seen inspirational examples from the digital masters. Good luck as you get started. I look forward to seeing you in class!

De la lección

FinTech essentials

In this module, we begin exploring FinTech. We start off by get to know Fintech, by looking into six different FinTech domains, followed by FinTech as an area of investments. Then we dig into the technologies of FinTech, before we look at the regulatory changes that transforms the industry. After completion of the module, you will be able to: summarize the domains of FinTech; describe the FinTech market and make arguments for what the sector is emerging; outline the Financial technologies and how the are transforming the market; give examples of how regulations influence the FinTech market

Regulatory Changes6:35

Conoce a los instructores

Jonas Hedman
Associate Professor
Department of Digitalization
Stefan Henningsson
Associate Professor
Department of Digitalization

Regulatory changes transforms the financial sector and the changes in

the regulatory system provide opportunities and

challenges for both existing and new actors.

A first and important learning from this lesson is

that the financial market is highly regulated.

There are numerous of legislations,

rules, and standards that control,

monitor, and protect consumers,

merchants, banks, and the banking system.

Interestingly, I said before,

regulation are also challenging for all the actors in a

particular since regulatory frameworks are continuously changing.

So what drives regulatory changes?

The first reason is to increase competition in the market.

A second reason is to protect the consumers.

And finally, to prevent financial crime.

Before going into the details of some of the regulations,

let's first just define what regulation refers to.

Would regulation refer to legal frameworks or

laws such as the Patriot Act or the Payment Service Directive 2.

The important aspect of legal framework is that they are mandatory.

And if you break or don't act as the framework stipulates,

there is a sanction or punishment.

For instance, a fine or in the worst case, you go to jail.

Standards are also a type of regulation but they are voluntary.

So there is no formal sanction or punishment if you don't follow the standard.

Usually, a standard is an agreement between two or more actors in an industry.

The role of standard is to ensure that

the transaction in the banking system functions in a smooth way.

Now remember, that legal frameworks are unique for each jurisdiction.

For instance, each country has its own legal frameworks.

There are even differences within a country.

For instance, in the United States,

the individual states may regulate the area of payments.

To further complicate the matter, in many jurisdictions,

there are several authorities from the government to regulate the financial sector.

For example, in the United States,

banking is regulated by the Federal Reserve System,

the Federal Deposit Insurance Corporation,

the office of Comptroller of the currency and the National Credit Union Administration,

the Office of Thrift Supervision as well as regulators at the state level.

So if you need to learn more about the details of a specific jurisdiction,

you have to look for that information yourself.

But there will be a lot of help in the readings.

Besides the differences between different jurisdictions,

regulation can also be divided into four broad categories

depending on what area of the financial industry they regulate.

The four areas are: Stock exchanges; Listed company;

Investment management; and banks and financial service providers.

In the remainder of the lesson,

we're going to focus on one specific regulatory framework.

It is the Payment Service Directive 2 or PSD2.

The reason for why I've chosen this framework,

it is implication for retail banking in Europe.

One person expressed implication in the following word,

"As the Payment Service Directive 2 becomes implemented,

banks' monopoly and the customer's account information

and payment services is about to disappear.

The new EU directive opens the door to any company interested in eating a bank's lunch."

The director's aim is to

increase Pan-European competition in the payment industry also from

non-banks and to provide for a level playing field by

harmonizing consumer protection and

the rights and obligation for payment providers and users.

In short, Payment Service Directive 2 enables bank customers,

both consumers and businesses,

to use third party providers to manage their finances.

So in the near future,

you may use Facebook,

Google, when you pay your bills,

making transfer, or analyzing your spendings

while still having your money placed in your own bank account.

For this, two new types of actress has been created.

Account Information Service Provider,

who have access to that account information of the bank customers.

They could analyze your spending behavior,

or aggregate your account information from several banks into one overview.

The other type is Payment Initiation Service Provider.

They can initiate payments on the behalf of the account holder.

Basically, you as a bank customer,

gives the right to

a third-party payment providers to make payments from your bank account.

The idea is to create competition in the payment area and hopefully

reduce the price of making a payment or improve the data that you get as a customer.

So from a customer and a third-party provider's perspective this sounds pretty good.

But what are the implications for a bank?

We know that banks are closed by definition.

They are not transparent and open.

The Payment Service Directive 2 forces bank to open up to a substantial cost.

Banks have to rebuild their system and create different interfaces so-called open APIs.

The expected business implications for the banks is that they will

lose about 9% of their retail payment revenues by 2020.

The global implication of Payments Service Directive is the idea of open API,

which is looked into across the globe.

But in those cases,

it's called open banking which we'll come back to later in the course.

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