IFC: towards monitoring financial innovation in central bank statistics

As fintech, or financial innovation and digitalization, transforms the financial sector, it also opens up data gaps in central bank statistics. It does so by introducing new financial products and bringing existing services to a larger market. Data gaps are currently prevalent as (internationally comparable) information on fintech is lacking in official statistics.

To understand innovation, qualitative information, information on evolving structures, and harmonized time series are needed. Against this backdrop, the Irving Fisher Committee on Central Bank Statistics (IFC) Working Group on Fintech Data Issues has reviewed the state of affairs and outlined a targeted roadmap to construct fintech statistics.

Six-step roadmap

The first step is to formulate a classification of fintech that encompasses the various financial market segments of fintech, as data gaps reflect the fact that fintech companies engaged in financial intermediation are not systematically assigned to the financial sector (as identified by eg the International Standard Industrial Classification of all Economic Activities (ISIC)).

Second, based on this definition, lists of fintech enterprises can be derived from various sources (eg existing studies, registers).

Third, linking these lists to existing data in official statistics (eg balance sheet data) will help to answer economic questions about fintech and allow a more comprehensive understanding of its potential development.

Fourth, intra- and inter-institutional cooperation shall be fostered, as data from different sources need to be linked, calling for active support of the related international initiatives that are under way (eg to promote global identifiers).

Fifth, available data from the internet can be sourced (eg through artificial intelligence-supported web search).

Sixth, the resulting information set can usefully be complemented by surveys or compulsory reporting requirements on aspects for which data of sufficient quality are not available from other reliable sources; indeed, the working group (WG) notes that the information available varies from country to country, which can call for flexibly adjusting the various national strategies to construct fintech statistics.

Based on these observations, the WG recommends that central banks should:

1. Promote the global adoption of a revised classification of economic activities that better takes into consideration fintech service providers, in particular by actively supporting the IFC recommendation to revise the ISIC at the United Nations (UN) level. Fintech activities should be assigned to section K (financial services) as part of the value chain of financial products, and specific categories should be established. Central banks could consider ways to implement a revised classification in specific data collection exercises, including payment transactions data and the international banking and financial statistics already compiled by the Bank for International Settlements (BIS) on behalf of central bank committees.

2. Ensure that statistical methodologies used to measure fintech activities adhere to sound professional and scientific standards, in line with the Fundamental Principles for the production of appropriate and reliable official statistics. Specifically, ensure that fintech is considered in the context of the already launched international consultations for the preparation of the next versions of the System of National Accounts (SNA) and Balance of Payments/International Investment Positions (BoP/IIP) standards.

3. Develop a comprehensive process to continuously monitor the situation and address fintech-related data issues that may arise. To compile fintech statistics, central banks could implement the various steps described in this report, which cover the classification of fintech firms, links with existing data, cooperation with other data-providing agencies, and the use of surveys or AIsupported web search.

4. Leverage existing IT innovation and accelerate it, by promoting technological solutions to facilitate the compilation of fintech statistics; cooperating with other domestic and international stakeholders, and making resources available internationally, for instance, by sharing IT tools through the BIS Innovation Hub (BISIH).

Read the full report

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