Fintech

Achieving this in practice is complicated, especially in a rapidly changing “new world” with significant digital innovation. For example, in the “old world”, competition was a safe way to ensure equal opportunities for market participants: new entrants would offer new options, price down goods and services, and improve consumers’ welfare. But would this logic apply when very large tech firms are capable of establishing dominant positions through technology? Therefore, it is important to understand the distributional impact of changes whether they are driven by technological advances, crises or policies. That allows us to envisage preventively remedial actions that can smooth transitions and avoid excessive social disruptions like the fallout we have seen from globalization and the global financial crisis. In the context of digital innovation in financial services, welfare outcomes may again change in important ways, and this too will impact societal trust.

These remarks address the welfare implications of digital financial innovation. These welfare implications, including the distributional consequences of innovation, are not yet very well understood or researched. Nonetheless, we can draw on economic theory, economic history and a budding branch of economic research to find answers. These in turn can help us to build policy that delivers on welfare and thus helps to build trust in our financial system.