In this article, the TTSEC will be discussing the first three (3) considerations of the Bali Fintech Agenda.
The IMF Policy Paper – The Bali Fintech Agenda dated October 11, 2018 identified key considerations for policymakers regarding implementation of Fintech policies. The IMF policy paper essentially provided a blueprint as seen in the diagram below for successfully harnessing Fintech opportunities, by providing a framework for countries to assess their policy options and adapt them to their own circumstances.
The following are three (3) out of the twelve (12) considerations along with a brief description on how the TTSEC will assist the local securities industry in complying with the requirements.
Embrace the promise of Fintech
Fintech has the potential to significantly influence and enhance the provision of financial services within the securities industry. There is the possibility of new business models, new service providers and new products. Overall these developments will lead to greater opportunities and increased financial inclusion, and therefore strengthen the securities industry of Trinidad and Tobago.
The TTSEC acknowledges that there are rapid advancements in Fintech along with its potential social and economic impact. Consequently, the TTSEC has undertaken several initiatives to capture the wide-ranging benefits associated with Fintech. These include the establishment of policies and frameworks to guide Fintech products and services in the Trinidad and Tobago Securities Market.
Through a public statement the TTSEC invited current and possible Fintech providers to approach the regulator. This allowed the TTSEC to understand the products and services so that the appropriate parameters, are established, if necessary. These will ensure customers and Fintech providers are appropriately protected. According to section 6(j)of the SA 2012, the TTSEC has a mandate to ensure the orderly growth, regulation and development of the securities industry.
Enable new technologies to enhance financial service provision
Trinidad and Tobago is positioned as a financial centre in the region with a well-established financial sector including various types of financial institutions. The following infrastructural elements are already firmly established:
- Financial services legislation;
- Telecommunications;
- Broadband internet; and
- Mobile data services.
Most of the TTSEC’s registrants have indicated their desire to automate several business processes such as client application processes. Internal processes, for most registrants, have already been automated. This includes the retention of client records and transactions.
It is expected that most registrants will move to automated collection and processing of data. which will reduce costs, improve efficiency and strengthen AML/CFT compliance. This type of electronic automation may include the use of a data custodian.
The TTSEC acknowledges that, to build trust and encourage innovation, it is important that the Government leads in the implementation and use of Fintech. The digitization of government services is an important step towards digitization of the economy, this would include the following:
- Development of digital ID mechanisms;
- Digital payment system for government services (taxes, fees, VAT, social services, etc.);
- Establishment of governance and cybersecurity/privacy frameworks; and
- Implementation of robust data protection systems.
The TTSEC encourages the continued development of financial infrastructure that will facilitate the Fintech industry in Trinidad and Tobago.
Reinforce competition and commitment to open, free, and contestable markets
The TTSEC has a legislative mandate to foster a fair and efficient securities industry and to build investor confidence in that industry. Encouraging the development of Fintech products/services and providing the proper regulatory framework will ensure there is a level playing field and promote innovation. The use of Fintech can lower barriers to entry and act as a driver for competition. It is also expected that registrants will benefit from lower operational and compliance costs.
The future of AML/CFT compliance may lie in the use of Fintech as it continues to erode the boundaries that currently exist among financial products and services. Customers will demand more simplified business processes and the providers of these services will have a competitive edge in the securities industry. The TTSEC has observed that there is a demand for Crowd Funding or peer-to-peer lending within the local securities industry. This may allow existing and new companies to obtain cheaper capital and ultimately lead to increased economic activity. Existing registrants may have to adjust their roles or business models to compete and remain relevant with new market entrants.
The TTSEC is committed to ensuring there are applicable laws and regulations in place to leverage Fintech capacity, and to lower barriers to entry for non-traditional service providers. This will ensure there is competition and a move towards market contestability. Current Fintech providers will have to be regulated under the SA2012, and will be required to register under one of the following categories: investment adviser, broker-dealer, underwriter, self-regulatory organisation or issuer. If the business model does not fit into the current registration categories, the TTSEC will review the need for legislative amendment according to the prevalence of the product/service. The TTSEC’s Fintech policy and frameworks will be developed to ensure fair treatment of all market participants according to activities and risks. This will ensure a level playing field regardless of the market participant, underlying technology, or method by which service is provided.