EBA assesses risks and opportunities from Fintech and its impact on incumbents business models

The European Banking Authority (EBA) published on 3 July the first products of its FinTech Roadmap, namely (i) a thematic report on the impact of FinTech on incumbent credit institutions' business models and (ii) a thematic report on the prudential risks and opportunities arising for institutions from FinTech. Both reports fall under the wider context of the newly established EBA FinTech Knowledge Hub and aim to raise awareness within the supervisory community and the industry on potential prudential risks and opportunities from current and potential FinTech applications and understand the main trends that could impact incumbents' business models and pose potential challenges to their sustainability. 

The report assesses seven use cases, where new technologies are applied or considered to be applied to existing financial processes, procedures and services. The report aims to provide both competent authorities and institutions with useful guidance on such applications. It focuses on micro-prudential aspects, setting out potential prudential risks and opportunities that may arise from each use case:

  • Biometric authentication using fingerprint recognition;

  • Use of robo-advisors for investment advice;

  • Use of big data and machine learning for credit scoring;

  • Use of distributed ledger technology and smart contracts for trade finance;

  • Use of distributed ledger technology to streamline customer due diligence processes;

  • Mobile wallet with the use of near-field communication;

  • Outsourcing core banking/payment system to the public cloud;

Read the full EBA press release here.