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moeti damane

@iamSANhedrin

, 13 tweets, 10 min read

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Lets talk about the #MonetaryPolicy Implications for #FinancialInnovation / #FinTech...

I am sure by this time we have all heard of the phenomenon known as #FinTech. Recently, I used the #GoogleTrends platform to ascertain the degree of search interest in the term "FinTech". The graphs depict a surge in interest from around 2014...

I took the #GoogleTrends analysis a bit further and determined where (geographically) interest in the search term #FinTech was most pronounced...

Okay, from the information thus far you can appreciate the growing interest in the so called #FinTech. Curious minds would want to know what it is, what implication it has on everyday operations. Policy makers, especially those in
financial markets should be even more curious

It is important to note that there is currently no consensus on what #FinTech is. However, in broad strokes, it can be understood to be a new financial industry that applies technology to improve financial activities...

In terms of examples, #FinTech can range from the more common to the more intricate. As common as Automatic Teller Machines #ATMs to more complex systems: #BlockChain / #DistributedLedgers...all of these are similar in that they increase efficiency in financial service provision

How can the rise of #innovation in the #financial services / financial markets space affect the day to day running of say, #MonetaryPolicy?

To answer this question, you'd have to have an understanding of the role of the #banking sector in the #transmission of #CentralBank #MonetaryPolicy...If central banks transmit desired policy stance through #interestrate channel, can #FinTech affect this relationship? Yes, how?

I do not want to be lengthy in this "brief". So, lets get straight to what I consider key points...The rise of #FinTech will give way to the emergence of #NonBank #Finance as a substitute to traditional commercial bank finance...are you already starting to see something?

Look at it this way, if a #CentralBank wants to cool down an economy experiencing high inflation etc, it would implement tighter #MonetaryPolicy & increase its key policy rate. Commercial #Banks respond & increase their lending rates. This leads to a slowdown in #Credit growth...

In this simple example, the central bank works through commercial banks to arrive at a desired end. How would the situation play out if, in our context, #FinTech leads to a rise in alternate sources of credit (#NonBank Finance)?

I will want to end this thread by leaving the previous question unanswered. What remains clear is this: The #MonetaryPolicy #Transmission mechanism of #CentralBanks given the rise of #FinTech will have to be re-looked at and new lessons learned...new #Research necessary too..!