The adoption of financial technology (fintech) in traditional banks presents both opportunities and challenges. While fintech can bring about efficiency and innovation, it also poses certain risks and threats to traditional banking institutions.
Threat to Traditional Banks:
Fintech is not only changing the financial environment but also threatening traditional banks, compelling them to adopt fintech or risk losing their competitive edge .
Competition and Transformation:
The revolution brought about by fintech is challenging the traditional banking sector and creating new opportunities and challenges for borrowers, lenders, and financial institutions . This indicates a need for traditional banks to adapt to the changing landscape to remain competitive.
Regulatory Challenges:
The rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector raises concerns about potential risks to the integrity and stability of the financial system, leading to policy challenges and the need for potential regulatory approaches . This suggests that regulatory frameworks may need to evolve to address the unique risks posed by fintech adoption.
Digital Divide and Financial Stability:
The adoption of AI/ML in the financial sector may widen the digital divide between advanced and developing economies, posing challenges to financial stability that need to be addressed through strengthened prudential oversight .
Cybersecurity Challenges:
Fintech firms face cybersecurity challenges, and regulatory measures are required to ensure data protection and financial stability.