canada, the monetary authority of singapore and the bank of england released a report on alternative models that could enhance cross - border payments page 3 of 9 and settlements. 1 this teaming up and collaboration will stand us collectively in good stead as robust analysis is conducted on complex issues, not least due to the cross - border implications of many of these developments. in south africa, a fintech unit has been established within the sarb. national treasury, along with the sarb, the financial sector conduct authority and the financial intelligence centre ( fic ), have jointly established an intergovernmental fintech working group. these are evidence of the importance being attached to staying close to and leveraging the fintech phenomenon. and this will continue to happen in a responsible and proactive manner. we will continue to strive to keep abreast of fintech developments and endeavour to apply a balanced analysis to the fintech phenomenon, thus contributing towards a conducive environment in which fintech, regtech and suptech can thrive in support of our country ’ s progress and economic development for the benefit of all south africans. new threats my second observation is that it has become clear to central bankers that the fintech phenomenon is not a passing fad and that it does hold significant transformational potential. however, while there may be benefits, new risks may also manifest. on the positive side, fintech firms are often obsessed with being customer - centric, focusing on the needs and pains of the customer, and providing simplified, convenient, on - demand digital services. as has been noted by professors chuen and teo, given their ‘ legacy - free and asset - lite ’ operating models, fintech firms can innovate speedily through agile approaches. 2 and while there are inefficiencies in any financial service value chain, fintech firms can address these by applying exponential technologies and finding new and innovative ways of providing services. 1 http : / / www. mas. gov. sg / news - and - publications / media - releases / 2018 / assessment - on - emerging - opportunities - for - digital - transformation - in - cross - border - payments. aspx 2 h m treasury, 2016, uk fintech, ‘ on the cutting edge : an evaluation of the international fintech sector ’, available at https : / / www. gov. uk / government / publications / uk - fintech - on - the - cutting - edge page 4 of 9

on the other hand, new threats can be introduced through fintech - inspired innovations. loans can be issued in a matter of minutes using, for example, new scoring techniques by fintech platforms. they leverage social media and apply new techniques such as network analysis, sentiment analysis and natural language processing to unstructured data sources to assess default risks differently. however, in applying new artificial intelligence and machine - learning techniques, concerns arise about the reliability, validity and transparency of the decision - making process. what goes on inside the so - called ‘ black box ’ of new computational learning algorithms? we have all heard about the significant failures of internet finance companies such as ezubao in china. ezubao had been set up as an online peer - to - peer lending scheme in july 2014. it attracted funds of about 50 billion yuan ( us $ 7. 6 billion ) from 900 000 investors. it ceased to trade in december 2015, just a year and a half later. 3 we have to be vigilant of the new threats that may arise as a result of the application of novel technologies. turning to other innovations such as crypto - assets, there are numerous examples over the last few years of exchanges being hacked and invested funds being lost. as has been reported to the japanese regulator, 5 966 bitcoins were stolen and hackers managed to steal 5 billion yen ( about us $ 44. 5 million ) of crypto - tokens. 4 we have recently seen increased attention by south korean and japanese regulators to this domain as a result of these ever - increasing cyber - incidents. with initial coin offerings, the lack of clarity and transparency, with numerous white papers attempting to raise funds quickly through token sales, is another area of concern. so while these new business models may bring benefits, their longevity may be challenged if financial, business and / or operational risks materialise. the provision of financial services is a heavily regulated industry. the main reason for this is not just the protection of consumers. as services and systems evolve and become more interconnected, the spillover effects of risks to the financial sector and ultimately to the real economy increase. we ’ ve seen these contagion issues during the global financial crisis. i would therefore encourage that our assessment of both the potential and the 3 gough neil, 1 february 2016, the new york times 4 https : / / cointelegraph. com / news / japanese - cryptocurrency - exchange - hacked - 59