Financial institutions, including banks, are getting closer and closer to financial technologies (fintech) including cryptocurrency, blockchain, mobile payments and smart contracts, as they realize they have to keep pace with progress to make their work more efficient. A group of experts from Bank of Italy recently published a report dubbed “Banks and Fintech: strategies and business models” to explore the bond.
The application of information and communication technologies (ICT) and blockchain for banking plus other major financial services will help revolutionize their business models, especially on the risk management, organizational processes and the internal control system.
The Potential of Blockchain in Fintech
The fintech contributes a lot in retail payments, credits, asset management and small loans, and now the traditional banks are exploring blockchain technology to increase the profitability, value for money, the efficiency of doing business as well as providing other financial services.
Based on the various studies being conducted, financial technology (fintech) has a great impact on the traditional banking system. The technology is largely being used in startups by 90%, social media or internet platforms by around 65% and big tech firms by 60% and these are being perceived as the most disruptive innovations in the financial industry.
The responsible financial and technology authorities in Italy need to map and describe various strategies which banking intermediaries can follow to adopt the technological innovation in its business models. They should also do the following things: motivate banks to adopt new information technologies; analyze the impact of fintech on the competitive environment where banks operate from; assess the effects of fintech on traditional banking business models. This will encourage other big players to change their operations into sustainable technological innovations.
Adopting Blockchain, but still Suspicious About Cryptocurrency
Bank of Italy is known for its contradictory stance towards innovations. Earlier this year, they published a report called “Economic and regulatory aspects of the crypto-activity” that analyzed the economic, accounting and other big profiles of crypto, and also underlines the regulation of cryptoasset exchanges adopted in legal jurisdictions. The report by the central bank shows that cryptocurrency is not categorized as money or any form of financial instrument. However, the Bank of Italy, Consob and other Italian supervisory authorities are going to supervise blockchain tech activities.
Despite the authorities looking into blockchain and fintech, they still think cryptocurrency is speculative, risky, inefficient and dangerous. The Bank of Italy
released a report which was against Bitcoin, the leading crypto by market cap. In fact, the central bank is not happy with how digital currencies including Bitcoin are being used. The bank claims that digital currencies support illegal activities, such as money laundering, fraud, etc., for instance, cybercrime has made the country to lose over 10 billion euros in crypto.