ABSTRACT
The financial industry is essentially an information technology industry. The modern financial system is built on top of hundreds of years’ accumulations, and through its evolution it has absorbed all kinds of technology innovations over these hundreds of years. However, not one new technology could completely disrupt the whole financial system. If some technology innovation could enhance the financial system by increasing efficiency or reducing costs, it would be absorbed into the financial system. From a central bank’s perspective, the uncertainty of the selection of technologies should be dealt with prudently, because it impacts the credibility of the central bank and its monetary policy. When a new technology emerges, the central bank should not act as a “prophet” and make choices for the market; rather, it should create an environment for competition to allow the optimal technology to stand out and be further developed. For a big country like China, choosing the wrong Fintech paths can be massively costly.
