A report published last week by UK Finance (the UK trade association representing the finance and banking industry including around 300 firms offering credit, banking, markets and payment-related services) calls on the industry to create a new risk framework in the light of increasing application for fintech in digital banking services, including in connection with artificial intelligence and DLT based services and products. Focusing on the emerging non-financial and operational risk elements underlying sustainability in the space, the report calls for creation of a new industry risk framework with the following core recommendations:
- Placing the safeguarding of data at the core of sustainable digital finance
- Closing the gap between incumbents’ digital aspirations and the reality of legacy IT estates
- Reviewing the integrity of fintech ‘component solutions’ being integrated into the supply chain
Matthew Hayday of Parker Fitzgerald commented: “Of particular importance to financial firms is understanding how future regulations can affect their digital transformation strategies, how key technologies can be safely adopted within their operating models, and how their risk frameworks can be adapted to take account of new risks and threat vectors arising from cyber and technology risk, as well as data privacy and protection considerations amplified by PSD2 and GDPR.”
One of the themes we have identified arising consistently in recent months for our blockchain and token industry clients is emerging operational risk, in particular around permanency and immutability of data, personal data storage and other data compliance concerns. We are advising a number of clients on these matters including terms for blockchain technology based financial products and services, cryptocurrency fundraising activities (including disclosure matters) and in relation to tokenised fund offerings. The report offers interesting analysis and predictions on these risk topics, amongst others.