Digitalisation of financial services is at risk of creating the next financial crisis unless regulators step up to the plate, according to a new report from risk consultancy Parker Fitzgerald. It says that current regulations often conflict and businesses are given “mixed signals” about emerging risks caused by the digitisation of financial services.
Parker Fitzgerald criticises the forthcoming General Data Protection Regulation (GDPR) for imposing “eye-watering” data breach fines, while at the same time, banks are subject to mandatory requirements under PSD2 to provide access to deposit accounts that Parker Fitzgerald says introduce greater vulnerabilities to data security.
Scott Vincent, CEO of Parker Fitzgerald Group, commented: “A full-scale transformation is key to remaining competitive in the next phase of digital banking. As operating models are reimagined, this will open up new opportunities. But the mechanisms through which risks emerge, intensify and spread will lead to new non-financial risks, particularly around cyberattacks and threats to customer data privacy and security.”
He added: “It is not inconceivable that the next financial crisis may emerge from the technology sector. This calls for a harmonisation of technology standards and a greater regulatory coordination across industries to safeguard financial stability.”
The new report from Parker Fitzgerald looks at the impact of regulation since the 2008 global financial crisis, alongside the effects of digitalisation on banking and financial services.
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