Technological development and new regulation motivate the introduction of innovative financial technologies

Of the total of 125 respondents, 44 use any of innovative technologies, while 15 companies have set up a dedicated team for the development or implementation of innovative technologies. 14 respondents are planning to start using innovative technologies in the future. The API are currently used by 26 financial market participants: banks, insurers, investment companies and payment institutions. The banks use the API primarily to create open banking platforms for cooperation with FinTech companies, while the insurers use the API to exchange information with insurance agents or to operate insurance calculators. Currently, 17 market participants use contactless payments, 16 – biometric solutions, and 14 – cloud computing services. Respondents indicate that over the next two years among the strands to be developed there are both the API and biometric solutions, as well as big data, artificial intelligence and machine learning. At the moment, six market participants in the banking, insurance and private pension sectors in Latvia use artificial intelligence, while one electronic money institution uses machine learning technology. Five market participants use automated or robo-advisor.

"Artificial intelligence and machine learning technologies have a huge potential to transform financial services and bring product and data quality on the next level. Globally, artificial intelligence solutions already enable users to detect fraud, automate functions, provide patterns to assess customer creditworthiness, as well as provide advice on personal financial management," Marine Krasovska, Director of the FCMC's Financial Innovations Department, highlights the trends. "This is an opportunity also for talented people in Latvia to create and develop innovative financial products and services, to test them domestically and then grow on the global stage."

To promote FinTech development, the FCMC offers two support mechanisms to the implementers of innovative ideas: provision of advice at the Innovation Hub and the opportunity to test a product or service in the Regulatory Sandbox. The Innovation Hub is the FCMC's platform, where the FinTech representatives may receive free advice from the FCMC innovation expert team focussing on the management and interpretation of laws and regulations in the financial field related to the financial service solutions, as well as providing advice on IT security and cyber-risks. In the first half of this year, 30 companies from different financial market sectors made use of the possibility to receive advice. The Regulatory Sandbox is a place where existing or potential financial market participants whose activities require a licence from the FCMC may test the proposed innovative financial products, services or business models. In June this year, the first applicant of the FCMC's Regulatory Sandbox closed the testing phase for their solution which enable the banks to monitor transactions automatically with a view to prevent money laundering risk. * A survey of Latvia's financial market participants was conducted by the FCMC in spring 2021 with the aim of clarifying the innovative financial technologies they use. Further information on the survey is available on the FCMC's website.   For further information: Airisa Ādamsone Public Relations Specialist Communications and Financial Literacy Division Financial and Capital Market Commission Phone: +371 67774807 E-mail: airisa.adamsone@fktk.lv