The Impact of Financial Technology Innovation on the Banking Industry and Financial Supervision

With technological progress, online, electronic and automated financial service of financial technology innovation allow society to reduce transaction cost, eliminate price risk and enhance market efficiency. The impact of financial technology innovation on the banking industry is categorized into transboundary finance and crossboundary finance. Transboundary finance is the process of banking industry’s transformation, including the existence of mobile banking and the repositioning of physical branches. Crossboundary finance is the co-opetition relationship between the banking industry and other industries, such as third-party payment and peer-to-peer lending. Not only does the banking industry face the challenge triggered from financial technology innovation, the financial authorities are also responsible for making adjustment to financial supervision and monetary policy. Within transboundary finance and crossboundary finance, the banking industry faces tremendous threat and challenge. This paper summarizes three major strategies: (1) The bankers should be well-prepared as early as possible. To overcome challenge in this digital era, it takes time to cultivate customer’s habit, to implement the banking information system and to plan training program. (2) The bankers should balance both information security and convenience. To protect consumer rights and to provide high-quality financial service, they should improve information security by financial technology innovation and keep a sharp eye on this issue. (3) To create a win-win situation, the bankers should cooperate with other industries in open-minded strategies. Since financial technology innovation alters the consumer behavior and business models in the banking industry, the financial authorities should adjust policies and supervisory mechanism to adapt to new business operation and marketing strategies as well as enhance consumer rights and protection. The process of financial technology innovation makes financial service without limitation of space and time. It reduces transaction cost, lowers asymmetric information, enhances market efficiency and influences monetary policy. The central bank is responsible for examining the effect of traditional monetary policy to enhance efficiency, boost and stabilize economic situation.