Lagarde highlights the potentially disruptive nature of financial technology

By Leika Kihara

FUKUOKA (Reuters) – The managing director of the International Monetary Fund, Christine Lagarde, warned Saturday that the growing presence of technology giants using big data and artificial intelligence could disrupt the global financial system considerably.

The rapid development of financial technology (fintech) has increased the access of low-income households to low-cost payment and settlement systems in emerging countries where traditional banking networks are scarce.

However, he expressed concern over the growing dominance of large technology companies in mobile payments, which could force global decision makers to rethink how they regulate the banking system and ensure the security of financial settlements.

"A big disruption of the financial landscape is likely to come from large technology companies, who will use their huge customer bases and their vast pockets to offer financial products based on big data and artificial intelligence," said Lagarde. at a financial technology symposium on the sidelines of the G20 Financial Leaders Meeting in Fukuoka, South Japan.

While this innovation could help modernize financial markets, it could make the financial system vulnerable, including putting payment and settlement systems under the control of a handful of technology giants, she said. added.

"This represents a unique systemic challenge for financial stability and efficiency, and I hope we can talk about it during the G20, and resolve it in a cooperative and consistent manner."

Lagarde said China presents an example of a compromise between the benefits and challenges posed by financial technology.

"Over the last five years, China's technological growth has been extremely successful and has enabled millions of newcomers to access financial products and create high-quality jobs," he said. she said. "But this has also led two companies to control more than 90 percent of the mobile payments market."

Discussing the pros and cons of financial innovation is a topic of discussion at the two-day meeting of the Group of 20 Finance Ministers and Central Bank Heads that kicked off on Saturday.

(Report by Leika Kihara, edited by Kim Coghill)