The rise of financial technology — more commonly known as fintech — won't threaten the existence of banks and it's the responsibility of authorities to make sure that traditional lenders are prepared for changes in their industry, policymakers and regulators said in a CNBC-moderated panel Thursday.
The comments were made in Bali, Indonesia where the International Monetary Fund and the World Bank are holding their annual meetings. The two organizations on Thursday jointly launched a paper, the Bali Fintech Agenda, to help policymakers around the world strike a balance between encouraging financial innovation and safeguarding the stability of the system.
CNBC's Geoff Cutmore moderated a panel discussion in Bali to discuss the contents of the paper. He asked the panelists whether it's a good idea to allow fintech firms to "cherry pick" profitable segments of the banking industry to operate in — therefore taking money away from a legacy system that's built up over decades and has weathered financial crises.
That question, according to Bank of England Governor Mark Carney, is akin to asking "whether it's a good idea to protect the banks from serving consumers better?"
Carney, who was one of the panelists at the event, said many small and medium-sized enterprises in the U.K. face high costs in tapping the formal banking system for funds. Therefore, reaching those businesses through fintech is "not taking liquidity away, that's providing new liquidity" into the financial system, he said.
The key is to ensure that technological transformation in the financial industry can bring about the maximum benefit and at a minimum costs, which is a "classical problem" that many policymakers face, said Sri Mulyani Indrawati, Indonesia's finance minister who was also a panelist.
The Indonesian government's stance, she added, is that technology can not only help to improve existing ways of doing things but also to pressure the incumbents to improve their business models.
"For the existing business model, like banking, can they do innovation just as agile and innovative? It could be that some of them could come up with a totally different idea and that's good," she said.
As the financial industry increases its technology adoption, the crop of regulators — too — need be refreshed, noted Lesetja Kganyago, governor of the South African Reserve Bank.
"Regulators are usually lawyers and accountants, but we need people who understand data science and technology," he said during the panel discussion.