michelle doyle - lowe : financial evolution – exploring the shift remarks by ms michelle doyle - lowe, acting deputy governor of the central bank of barbados, at the bitt fintech forum “ central bank meets blockchain ”, bridgetown, 3 october 2017. * * * firstly, i would like to warmly thank the organizers of this forum for inviting the central bank of barbados to give a few remarks on the rapidly evolving world of fintech. it is not often that central banks are immersed in what can be considered as ‘ ground - breaking ’ or ‘ evolutionary ’ financial developments. on that score, let me express my gratitude to our host for being able to speak to you this afternoon. in recent time the ‘ hype ’ surrounding distributed ledger technology and fintech solutions has been evidenced by the explosion in the number of google searches being conducted on these keywords. this trend, and even today ’ s forum, reflects the increasing dominance of fintech, supported by the billions of dollars being poured into fintech research and development across the globe. let us first remind ourselves that distributed ledgers at its core, is a computer protocol that allows many participants to record information on a single ledger that is shared among users, so each one sees the same data. the best - known application of distributed ledgers is bitcoin, which is a decentralized digital currency that is an internet - based medium of exchange. i want to draw the distinction between this and other forms of fintech, which is broadly defined as the application of computer programmes and other technology used to support or enable financial services. there are three key differences that we need to be cognisant of related to recent innovations in fintech, compared to prior technological improvements : the first being the fact that today ’ s fintech is being more heavily driven from outside of the financial landscape, as opposed to being led by the traditional market intermediaries. companies such as apple and google via apple pay and google wallet are responding to customers ’ demands and aiding the advancement by offering lower transaction costs and more convenient personalised services that leverage the use of smartphones and speedy settlement. all of these are closely aligned with the desire for and expectation of instantaneous access to goods and money. whereas historically financial innovation in retail financial services resulted in the traditional banking intermediaries remaining dominant players and adopting the technology to suit their needs, this is no longer the case for some of the new technology, which sets the stage for a definitive shift that no central

, distributed ledger technology can be especially effective in the reduction of fraud and anti - money laundering efforts, since several industry observers believe that illegal transactions continue to thrive in the current system, despite the anti - money laundering and combating financing of terrorism regulations. at present, the majority of banking systems are housed on centralized databases, making them more susceptible to cyber - attacks since all the information is stored in one place, and some banking systems are out - dated and susceptible to new forms of cyber - attacks. given that the distributed ledger technology stores, encrypts and verifies every single bit of data in a transaction, any data breach, fraudulent activity, or trades with flagged entities would be made immediately obvious to all parties who have permission to access the data on the ledger. this is especially pertinent since data stored on a blockchain is immutable and irreversible therefore the risk of duplication or errors would be greatly minimized. furthermore, regulators would quickly realize the benefits of easily auditing and tracking all financial transactions. various studies have determined that by employing the use of distributed ledger technology for know your customer ( kyc ) requirements, banks would not only reduce operational and compliance costs, but also increase the efficiency of their compliance processes. using the technology, access to kyc data can be shared by banks and accredited organizations would have no need for a duplicated kyc process. ironically, a goldman sachs report noted that a 10 % reduction in staff could be achieved with the introduction of blockchain technology in kyc procedures, which would equate to us $ 160 million in annual cost - savings. therefore, the response to that very popular question, “ does distributed ledger technology represent an evolution or revolution? ” really depends on who you are asking. from the central bank ’ s perspective, it is more of an evolution that is likely to transform our financial landscape. the role of the central bank in this process is acknowledged as being focused on maintaining financial stability and promoting economic development. this requires that we foster innovation by working together with key stakeholders, to ensure a smooth transition to tomorrow ’ s evolving financial system in a safe and sound manner, supported by the requisite due diligence and regulatory reviews of new market entrants. how can this new technology enable the digitalisation of our economy and what is yet to be determined? in response to the tremendous potential benefits before us, central banks must be open - minded and think outside of the box