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FinTech Special Edition -- Financial Innovation and FinTech --

September 21, 2018
Payment and Settlement Systems Department
Bank of Japan


In recent years, financial innovation, called FinTech which combines financial services with new information technologies, has been attracting global attention. Indeed, FinTech has an extensive impact on financial services. It enables those services to spread to the whole world including emerging and developing economies. This is often called "financial inclusion". It also facilitates new entries to the financial sector and enhances competition between incumbents and entrants. Furthermore, it highlights the growing importance of big data and IT platforms.

This report highlights the actions taken by relevant entities applying these technologies to various financial services such as payments and settlements. It focuses on three areas in which technologies have substantially advanced in this decade: i) smartphones, ii) artificial intelligence (AI) and big data analyses, and iii) blockchain and distributed ledger technology (DLT).

FinTech has the potential to spread financial services throughout the world and to promote the "globalization" of those services. It can also contribute to the "personalization" of financial services, involving the provision of those services tailored to each user's needs by using AI, big data analyses and smartphones. It can further contribute to making both financial and non-financial services "seamless". It will help new economic activity and development visible thus contributing to the solution of social challenges such as protecting the elderly from fraudulent activity.

For further development of FinTech, the report calls for the following measures. First, communication and cooperation should be promoted among a wide range of players in the private sector and the public entities. Second, in pursuing new types of financial transactions such as those related to crypto-assets, participants need to recognize the extent of risks inherent in such transactions, and relevant service providers ought to provide appropriate information and explanation to consumers and investors. Third, in order to prevent those risks from materializing, relevant entities need to take measures which include enhancing information security and preventing cyber-attacks.

Central banks are making efforts to engage in research and experimentation in the field of FinTech. The Bank of Japan established the FinTech Center in its Payment and Settlement Systems Department in April 2016. The Center performs a range of operations to promote FinTech. The Bank is also participating in international discussion as well as conducting research activity through its own initiatives such as Project Stella, a joint research project on DLT with the European Central Bank.


This document is an abridged English translation of the Japanese original published on February 7, 2018, with the exception of the footnote for the Project Stella.

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