Financial technology offers great potential but should recognize risk: Fed’s Williams

April 12, 2016

San Francisco, 12 April, 2016 – While financial technology—or fintech—has the possibility to address some of the longstanding and endemic problems of the financial system, the industry and regulators should be aware of the potential risks, said John C. Williams, president and CEO of the San Francisco Fed today. “The laws of innovation often mirror the laws of physics: For every great stride, there is an equal and opposite risk,” the policymaker said.

Mr. Williams made his remarks at the Lendit USA conference. He noted that he was not directly involved in writing rules governing the industry, and did not wish to address specific regulations. Rather, “my aim is to lay out issues and questions that should be part of the ongoing conversation about how fintech can make our financial system—and ultimately our economy—more successful at achieving its fundamental goals.”

Williams praised the imagination of the industry and said that it could make inroads to addressing issues from poverty and inequality, criminal activity, and access to the financial system. However, he noted, there is always “the other side of the coin” and cautioned of the unintended consequences that could wind up exacerbating those issues instead.

“(T)here’s no question that fintech is going to change the face of financial services on a global scale. I am excited for the changes to come, and I see the potency of the possible. But for fintech’s potential to be met, we need to make sure we don’t reinvent or exacerbate shortcomings that have plagued our financial system thus far. In that regard, well-designed regulation that protects consumers, fosters inclusionary rather than exclusionary practices, and enhances the fairness and resilience of the financial system should help rather than hinder fintech’s contribution to creating a better financial system and economy.”


Matthew Schiffgens
Federal Reserve Bank of San Francisco
(415) 974-3246


The Federal Reserve Bank of San Francisco (SF Fed) serves the public by promoting a healthy, sustainable economy, and supporting the nation’s financial and payment systems. With offices in Los Angeles, Seattle, Salt Lake City, Portland and Phoenix, the Bank serves the Twelfth Federal Reserve District, which includes one-fifth of the nation’s population and represents the world’s fourth-largest economy. As part of the nation’s central bank, the SF Fed informs monetary policy, regulates banks, administers certain consumer protection laws and acts as a financial partner to the U.S. government.