III Meeting of the Fintech Forum

On October 2017, CEMLA presented the Initiative to establish the Fintech Forum, to its Board of Governors and Assembly of Central Bank’s Governors of Latin America and the Caribbean. This regional initiative aims at promoting the exchange of knowledge and experience of central banks, international organizations and other relevant institutions, in order to analyze the dimensions and implications of the fintech phenomenon in central banking mandates. The Forum is envisaged to address strategic challenges that financial innovation entails for monetary and financial stability, and for the proper functioning of central banks of Latin America and the Caribbean.

Since its implementation, three meetings have been held. This III edition of the Forum, was held in virtual format, on August 18-20, 2020. It was attended by 111 representatives from 25 central banks (Argentina, Aruba, Barbados, Belize, Bolivia, Brazil, Chile, Colombia, Costa Rica, Curaçao en Sint Maarten, Dominican Republic, Ecuador, El Salvador, Guatemala, Guyana, Honduras, Jamaica, Mexico, Nicaragua, Peru, Spain, Suriname, Saint Kitts and Nevis, Trinidad & Tobago, and, Uruguay), and participants from international organizations and the industry.

The III Meeting served to discuss and share experiences and regional perspectives on fintech developments, including Central Bank Digital Currencies, fintech data gaps, Open Banking and Bigtechs, among other key issues.

Since its presentation in 2017 as a CEMLA’s initiative, the Fintech Forum has had the purpose to promote the sharing of experiences and knowledge from central banks, international institution and other relevant institutions on the most relevant topics regarding Fintech.

The third Meeting served to discuss a list of topical fintech-related issues concerns. It started with a review of the current approaches that central banks are taking to understand and regulate both the new financial technologies and market entrants. It follows a discussion on remarkable efforts that central banks and CEMLA are conducting to boost its response capacity toward financial technologies and innovation. Afterwards, Professor Darrell Duffie delivered a keynote on Central Bank Digital Currencies (CBDC) and payments innovation, where he discussed the main implications of digital money for the financial system and the monetary policy. The Meeting continued with a discussion on CBDC from the industry perspective, namely key developments on blockchain, cross-border payments and velocity of money. Next, as part of the Forum’s activities, it was presented the main findings of the working groups n Fintech Data Gaps and Central Bank Digital Currencies. Finally, a tour-de-table was set to discuss the future steps for the Forum.

Session 1. Open Banking and Bigtechs

The session started with a presentation on Bigtechs. It was shown their various business models as well as the services that currently these companies offer and the common features they display, namely flexibility, dynamism, high reliance on data, high capitalization and advance technology. It was highlighted that Bigtechs could have several important implications for financial stability, payments systems, supervision and monetary policy.

The session continued with a review on Open Banking. An overview was made on the current Open Banking status of different jurisdictions as Mexico, Brazil, Canada, India, South Korea and the United States, among others. Then, it was pointed out the main drivers for Open Banking developments implementation, including: promotion of competition, innovation encouragement, increase on payments systems efficiency and promotion of financial citizenship. It was mentioned the need for regulators to adapt to these new developments and some of the regulation issues that have to be considered.

The first session ended with a presentation from the current regulatory developments of Banco Central de la República Argentina to advance a functional approach, that is to regulate the financial activities (and respective risks), instead of the institutions per se. It was underlined that among the main challenges under this type of approach, some of the more relevant are the need of a constant adjustment in the functions (activities) and sub-functions under supervision, a good financial and operational risk management, and the safeguard of a healthy economy.

Session 2. Central Bank Efforts to Embrace Fintech Developments

The second session was devoted to showcase concrete and remarkable efforts led by central banks of the region to embrace fintech development. It began with the case of Banco Central de Chile and the establishment of a Technological Observatory and the TechLab, a part of the central bank’s strategic plan. The Obsevatory has the goal of catalyzing knowledge-building and the adoption of disruptive technologies. The TechLab is aimed at becoming a space for technologies testing in an experimental stage. The main initiatives that the Observatory and the Lab are advancing, relates to Big Data, CBDC, digital ´payments and Distributed Ledger Technology (blockchain), which are being studied through different projects.

The session continued with the case of Bank of Jamaica. This central bank’s efforts are twofold. First, they launched fintech regulatory sandboxes to provide a platform to encourage innovation in financial services, promote financial inclusion and competition as well as benefit consumers. Second, and given that crypto-assets are not a legal tender and are unsupervised in Jamaica, they just launched a project on (hybrid) retail Central Bank Digital Currency, where by the help of internal and external experts, the design of such a CBDC will take under consideration accessibility, availability, resilience, interoperability and the ability to monitor and identify AML/CFT issues.

Finally, it was presented the main results of the CEMLA Innovation Hub after a year of implementation. The Hub, which seeks to build capacities regarding new financial technologies across regional central banks, has served to explore how new technologies can underpin financial stability and financial market infrastructures surveillance. It has focused on novel techniques from Machine Learning (ML), Network Science and Distributed Ledger Technology (DLT). The Hub launched 9 different use cases with central banks from Bolivia, Chile, Colombia, Ecuador, El Salvador, Peru and Uruguay, on issues regarding to anomaly detection on payments systems, interbank exposures characterization, measurement of systemic and credit risks, price rigidity and payment systems design using DLT.

Session 3. Keynote lecture on Central Bank Digital Currencies and Payment Systems Innovation

The keynote lecture from Professor Darrell Duffie started with a review of the impacts of CBDC and payment systems’ innovations in aspects such as, payments efficiency, monetary policy transmission (both domestic and cross-border), privacy and data security, financial inclusion, financial stability and central banks’ footprint and independence. Professor Duffie led the attendees to review important developments like fast payments launched by both public and private initiatives over the world. This was followed by a review of policy options to improve payment systems as the allowance of compliant private stablecoins, or the allowance of fintechs and banks to distribute hybrids of CBDC, the introduction of a general-purpose CBDC, or the use of regulations and fast-payments infrastructure to promote a more open, efficient, and competitive bank-railed payment system. Finally, a discussion between Professor Duffie and the meeting attendants focused on the concerns that central banks had about the implementation and implications of the issuing of a CBDC.

Session 4. CBDC from the industry perspective.

The fourth session of the meeting aimed to focus on selected industry developments related to CBDC and blockchain projects, cross-border payments and the velocity of money. The session started with a review on the work done by the World Economic Forum regarding CBDC, firstly it was presented a number of research projects, reports and speeches conducted along with central bank, international institutions and private sector. The Forum focused on presenting the CBDC policymaker toolkit and the project of exploration of blockchain to enhance government transparency. Afterward, the session continued with an academic presentation on the velocity of money from a CDBC perspective. Celo Labs highlighted that a demurrage-money model based on a Central Bank Digital Currency could be an influential approach to improve monetary systems. Finally, the session ended with a policy presentation on cross-border payments in the Caribbean region. Bitt presented an overview of cross-border payments, noting that this market is complex, costly and time consuming, thus limiting its development. Bitt noted that it is of crucial importance to improve the regional economic architecture and thus social conditions by the improvement of cross-border payments mechanisms.

Session 5. Data Gaps Working Group

The fifth session was devoted to analyze the main insights obtained in the policy report from the working group on Fintech Data Gaps which its participants were Brazil, Chile, Costa Rica, Honduras, Ecuador, Trinidad and Tobago, and Spain.

Session 6. Central Banks Digital Currencies Working Group

In this session was presented the lessons learnt and the key insights obtained from the working group on Central Bank Digital Currencies which its participants were Bahamas, Chile, Colombia, Ecuador, Jamaica, Peru, Uruguay and Sweden.

Session 7. Tour-de-table/Next steps

In the last part of the Meeting was summarized the work done by each working group, and was discussed the future steps for the Forum as the need to raise the awareness of the Forum’s work in each central bank, and the study of possible future topics like Bigtechs, financial inclusion and regulatory issues.

 

Tuesday, August 18

Central Banking of the future: The Fintech effect and other technological trends
Dr. Manuel Ramos-Francia, Director General, CEMLA

Session 1. Open Banking and BigTech
Moderated by Pablo Furche, Banco Central de Chile

• Ana Fernández, Banco de España – BigTechs, a new challenge for central banks

• Antonio Fonte, Banco Central do Brasil – Regulatory initiatives for Open Banking

• Pablo García, Banco Central de la República de Argentina – Regulation of Payment Services Providers: A functional approach   

Session 2. Central Bank Efforts to Embrace Fintech Developments
Moderated by Natalie Haynes, Bank of Jamaica

• Miguel Musa, Banco Central de Chile – The strategic approach of a Fintech Lab

• Novelette Panton, Bank of Jamaica – Efforts to embrace Fintech developments

• Serafín Martínez-Jaramillo, CEMLA – The Regional Innovation Hub       

Wednesday, August 19

Session 3. Keynote lecture on Central Bank Digital Currencies (CBDC)
Professor Darrel Duffie, Stanford University
Moderated by Serafín Martínez-Jaramillo

Session 4. CBDC from the industry perspective
Moderated by Andrés Velasco, Banco de la República (Colombia)

• Ashley Lannquist, World Economic Forum – CBDC and blockchain projects
• Ezequiel Copic, Celo Labs – Velocity of Money and CBDC
• Marla Dukharan, Bitt – Cross-Border Dimension for CBDC

Thursday, August 20

Session 5. Data Gaps Working Group
Facilitated by José Manuel Marqués, Banco de España and Fernando Ávila, Banco de Mexico

• Report presentation
• Policy discussion

Session 6. Central Bank Digital Currencies Working Group
Facilitated by Jorge Ponce, Banco Central del Uruguay and Raúl Morales-Reséndiz, CEMLA

• Report presentation
• Policy discussion

Session 7. Tour-de-table/ Next steps
Moderated by Serafín Martínez-Jaramillo, CEMLA

 

Ana Fernández
Banco de España
Ana Fernández is the Head of the New Products and Services Unit in the Financial Innovation Division at the Banco de España. This Division was established in March 2018 with the aim to monitor the financial innovation process and assess its potential implications. Together with her team, Ana analyses the use of new technologies and the emergence of new trends, such as artificial intelligence or DLTs. Ana moved into this position from the Payment Systems Department of the central bank, where she had been working for 15 years on the oversight of financial market infrastructures and following closely the transformation of the payments market.

Antonio Fonte
Banco Central do Brasil
Mr. Antonio Guimarães holds a Master in Economics, a graduate degree in Statistics and Accounting and a degree on Mechanical Engineering and in Law. Fourteen years of experience in banking supervision and eight years of experience in financial regulation. Currently, Head of Division at the Financial System Regulation Department at Central Bank of Brazil.

Pablo García
Banco Central de la República Argentina
Pablo is the manager of Payment Systems at the Central Bank of Argentina, graduate of the University of Buenos Aires where he studied Political Science and Business Administration, and also holds a Master’s degree from the London School of Economics.

He has worked at the intersection of payments and international development for more than 10 years across Latin America, Africa, and South Asia. He has collaborated with multiple research and implementation projects for international organizations such as the World Bank, the Inter-American Development Bank and the United Nations Development Program, as well as for Fintech start-ups and SMEs. Between 2015 and 2017 he functioned as CGAP’s Regional Representative for Latin America.

Pablo has published numerous articles about payments, development and financial inclusion and is a regular lecturer on these topics.

Miguel Musa
Banco Central de Chile
He is the Portfolio Project Management, currently leading the Technological Observatory and TechLab, innovation-oriented project from the Strategic Plan 2018-2022 of the Central Bank of Chile. He holds a Master of Science from the MIT.

Novelette Paton
Bank of Jamaica
Novelette Panton is the Division Chief of the Financial Markets Infrastructure Division at the Bank of Jamaica where she has responsibility for the Payment System and Cambio & Remittance, Licensing & Monitoring Departments. The Payment System Department is responsible for ensuring that Jamaica’s payment and settlement systems, in particular, the systemically important systems, inclusive of the Real Time Gross Settlement (RTGS), the Central Security Depository (CSD), the Automated Clearing House (ACH) and the Quality Network (QNET) Systems are safe, efficient, reliable and secure. Mrs. Panton’s area of responsibility also extends to the provision of authorization to Payment Service Providers to issue electronic retail payment services, as well as, researching and advising on FinTech innovations. In addition, the licensing and supervision of Money Services Businesses (MSBs), that is Cambios and Remittance entities fall under the purview of the Cambio & Remittance, Licensing & Monitoring Department.   She is currently pursuing a Doctor of Philosophy (PhD) in Economic Development Policy at the University of the West Indies (Mona).  

Mrs. Panton is a member of the CARICOM Central Bank Fintech Working Group and the Center for Latin American Monetary Studies (CEMLA) FinTech Forum.  She serves as an adjunct lecturer at the Heriott-Watt University, Edinburgh Business School (B & B University College).

Serafín Martínez-Jaramillo
Advisor, CEMLA
Serafin Martinez-Jaramillo is a senior financial researcher at the Financial Stability General Directorate at Banco de México and currently he is an adviser at the CEMLA. His research interests include: financial stability, systemic risk, financial networks, bankruptcy prediction, genetic programming, multiplex networks and machine learning. Serafin has published book chapters, encyclopedia entries and papers in several journals like IEEE Transactions on Evolutionary Computation, Journal of Financial Stability, Neurocomputing, Journal of Economic Dynamics and Control, Computational Management Science, Journal of Network Theory in Finance and some more. Additionally, he has co-edited two books and two special issues at the Journal of Financial Stability. Serafin holds a PhD in Computational Finance from the University of Essex, UK and he is member of the editorial board of the Journal of Financial Stability, the Journal of Network Theory in Finance and the Latin American Journal of Central Banking.

Darrel Duffie
Stanford University
Darrell Duffie is the Adams Distinguished Professor of Management and Professor of Finance at Stanford Graduate School of Business. He is also Professor (by courtesy) in the Department of Economics, Stanford University, Senior Fellow of the Stanford Institute for Economic Policy Institute, and Senior Fellow (by courtesy) of the Hoover Institution at Stanford University.

Duffie is a Fellow of the Econometric Society, a Research Fellow of the National Bureau of Economic Research, a Fellow of the American Finance Association, and a Fellow of the American Academy of Arts and Sciences. He was the 2009 president of the American Finance Association. Duffie serves on the board of Dimensional Funds and was a member of the board of directors of Moody’s Corporation from 2008-2018. Duffie chaired the Financial Stability Board’s Market Participants Group on Reference Rate Reform. He is a Project Advisor of The G30 Working Group on Digital Currencies.

Duffie’s research focus is the design and regulation of financial markets. His most recent books include How Big Banks Fail (Princeton University Press, 2010), Measuring Corporate Default Risk (Oxford University Press, 2011), Dark Markets (Princeton University Press, 2012), and Fragmenting Markets: Post-Crisis Bank Regulations and Financial Market Liquidity (forthcoming, 2020, DeGruyter).

Ashley Lannquist
World Economic Forum (WEF)
Ashley Lannquist is a Project Lead for Blockchain & Digital Currency at the World Economic Forum’s Centre for the Fourth Industrial Revolution in San Francisco. She manages projects related to central bank digital currency, stablecoins, and blockchain for government transparency and anti-corruption. Ashley is the lead author of the World Economic Forum’s January 2020 “CBDC Policy-Maker Toolkit.” She is also a co-founder of the Mobility Open Blockchain Consortium (MOBI) and U.C. Berkeley’s blockchain executive education program. Ashley has an MBA from the Haas School of Business at U.C. Berkeley and a Bachelor of Arts in Economics and European Studies from Barnard College of Columbia University. She previously also worked in fixed income investment management on Wall Street for six years.  

Ezequiel Copic
cLabs Inc.
Ezechiel Copic is a Partner at cLabs Inc., working on the Celo platform. He is focused on official sector outreach and engagement. Ezechiel is a former central banker, having spent many years at the Federal Reserve Bank of New York in a variety of roles, focused on the understanding and implementation of monetary policy for the Federal Reserve System. Additionally, he also served as Director of Central Banks & Public Policy at the World Gold Council, advising central banks on gold reserves management. Ezechiel is a member of the World Economic Forum's Digital Currency Governance Consortium, and serves as Team Vice Lead for the Digital Currency Global Initiative, a collaborative effort by the ITU and Stanford University.

Marla Dukharan
Bitt
With over 20 years’ experience as an economist in the Caribbean financial services sector, Marla Dukharan is regarded internationally as a chief point of reference on regional economic issues. Her resolve to play an active role in supporting solutions to the Caribbean’s economic and social challenges led her to join Bitt Inc as Chief Economist in 2017. At Bitt, Marla contributes to the adoption of technologies in the Caribbean that boost financial and economic inclusion and lower the cost of financial services, enabling the region to transcend the constraints of traditional business and banking channels.

A clear and deep commitment to making a difference in the Caribbean is the driving force behind her career and work. She has taken a leading role in driving discussion, action and public policy choices that foster gender equality, reduce income inequality and promote new models of fiscal and economic resilience to lead the region toward a more prosperous and sustainable future.

Marla is passionate about resolving the dichotomy of slow economic growth in a region with limitless potential and works openly to bring important issues to the forefront of public awareness, enabling the transition from attention to action on topics that directly hinder growth.

José Manuel Marqués Sevillano
Banco de España
José Manuel Marqués Sevillano is Head of the Financial Innovation Division at Bank of Spain (Banco de España). In this position, he focuses on studying the main trends transforming the financial system and define the main implications for the central bank. Prior to this position he has been Head of the International Financial Markets Division and held a number of different positions within the bank since joining in 1996. Marqués has written a number of articles on financial markets and participated on the G20 on sustainable finance. Marqués has a BA in Economics and Business from University of Zaragoza, and an MSc from University Pompeu Fabra, Barcelona.

Fernando Ávila
Banco de México
Fernando Avila is the director for Financial Information at the Financial Stability General Directorate at Banco de México. He holds a master degree on Financial Engineering from the University of Michigan and he has worked for more than 15 years at banco de México always on topics related to risks which threaten the Financial System.

Jorge Ponce
Banco Central del Uruguay
Jorge Ponce is Head of the Economic Research Department at Banco Central del Uruguay.
Previously, he was Head of the Financial Stability Department. Jorge is also Professor of Economics and Finance at Universidad de la República in Uruguay. He holds a Ph.D. in Economics from the Toulouse School of Economics. His academic production has been published in the Journal of Financial Intermediation, the Journal of Financial Stability and the Journal of Banking and Finance, among other scientific publications.

Raúl Morales
CEMLA
Raul Morales Reséndiz is Manager of Financial Markets and Infrastructures at CEMLA, the Latin American and Caribbean central banking association, based in Mexico City. Mr. Morales heads the Secretariat of the Working Group on Payment System Issues for Latin America and the Caribbean, the regional payments committee hosted by CEMLA that provides forum for central bank cooperation. His research has focused on payments oversight, payments and financial inclusion and cross-border payments.
He holds a master degree in Economics and Public Policy the Instituto Tecnólogico y de Estudios Superiores Monterrey (ITESM), and a bachelor degree in Economics from the National University of Mexico (UNAM).

• CEMLA: Fintech: key issues and challenges for central banks
• Key aspects around financial technologies and regulation policy report
• Key aspects around Central Banking Digital Currencies policy report