Digital Finance

Welcome to KPMG's dedicated page for updates on the regulation of emerging technology use in financial services.

The financial services sector has seen a rapid acceleration in the use of emerging technology and digitisation. As a result, many regulators are navigating how to best ensure the regulatory framework manages the risks of these innovations without destroying their potential to significantly enhance the financial system.

Artificial intelligence and machine learning techniques are being incorporated into firms' processes and are increasingly being used in tools designed for use by customers. Regulators are taking note of ethical concerns where AI models insufficiently consider data cleaning, transformation and anonymisation and where the widespread use of AI models could impact financial stability and/or market integrity

As firms lean on outsourcing to minimise costs and deliver innovative products, there is growing scrutiny on cyber resilience and third-party outsourcing.

Market interest around crypto-assets, and the underlying distributed ledger technology (DLT), continues to grow. The potential benefits of these innovations — to increase payment efficiency, reduce cost and expand financial inclusion — have been widely acknowledged. Regulatory frameworks are now being rolled out to manage the risks. At the same time, central banks continue to develop their initiatives around central bank digital currencies (CBDCs).

In a shift away from traditional business models, big tech players are beginning to offer a variety of platform-based financial services. While the consequent network effects can lead to efficiency gains and lower user costs, they can also be leveraged for anticompetitive activities.

Fundamental building blocks underpinning all emerging technologies and digitisation are infrastructure and data. Firms need to ensure they have the expertise to store and analyse their databases and have in place adequate governance and controls. They need to protect confidential customer and market data, while delivering services more efficiently across borders. This raises legal challenges, which regulators continue to debate.

KPMG firms have a wealth of experience across financial services, offering deal advisory, tax, legal and regulatory compliance insight and helping to implement transformational, technology and organisational change. When launching new innovative products and services, this experience can help clients adapt to changing regulatory requirements, identify and manage emerging risks.