The Bank of England has announced that it is exploring new financial technologies by working closer with FinTech companies in order to boost cyber security and new payment systems.

Mark Carney said:

The Accelerator will work with new technology firms to help us harness FinTech innovations for central banking. In return, it will offer firms the chance to demonstrate their solutions for real issues facing us as policymakers, together with the valuable ‘first client’ reference that comes with it.

He added that this wave of innovation sweeping through the world of financial technology promises nothing short of revolution and heralds the dawn of narrow banking and portfolio optimization.

It will change the nature of money, shake the foundations of central banking and deliver nothing less than a democratic revolution for all who use financial services.

FinTech has the potential to affect monetary policy transmission, the safety and soundness of the firms we supervise, the resilience of the financial system, and the nature of shocks that it might face, said Carney, but he added if FinTech enhances participation in financial markets, the wealth channel of monetary policy could strengthen.

He said:

Fintech should neither be the wild west nor strangled at birth. The Bank is devoting considerable resources to ensure whatever develops is sustainable, not ephemeral.

The Bank of England is also at the early stages of examining a digital currency which is a significant move by Mr Carney in his attempts to modernize the central bank and make it more transparent. Interestingly, this is an area that his former employer, the Bank of Canada, is already exploring as it looks at ways in which it can develop a digital dollar.

The fact that the Bank of England is looking at FinTech suggests that this new area is welcomed rather than feared.

For everyone, FinTech may deliver a more inclusive financial system, domestically and globally; with people better connected, more informed and increasingly empowered.

He did warn, however, that ‘the prospect of a central bank digital currency for the UK [was] still some way off.’

Under the FinTech reforms, non-bank providers of payment services will be able to access the Bank of England’s Real Time Gross Settlement (RTGS) service. This is Britain’s banking payments system, which handles around £500 billion of transactions a day. Currently, non-banking companies are required to go through one of four clearing banks with whom they compete.

The Bank of England is also looking at whether distributed ledger technology could be used to make the RTGS system more robust.

Distributing the ledger means multiple copies of the system. It can continue to operate if parts get knocked out. That removes the single point of failure risk inherent in a centralized system.

www.DaoDaily.News