FINTECH AND PAYMENTS

Abstract

Abstract This chapter uses mobile payments and distributed ledger business models and technologies as case studies to demonstrate how operational problems in the payments system can trigger and transmit financial distress. It also examines proposals for central bank digital currencies (CBDCs) and proposals to use distributed ledger technology for post-trade processing, concluding that while there are strong use cases for these types of fintech innovations, they are not without financial stability risks. This chapter therefore stresses the need for a new type of “macro-operational” regulation that responds to the potential systemic interactions of operational problems. Finally, this chapter considers the risks associated with increased reliance on a small group of third-party technology vendors (particularly cloud computing vendors).