GENEVA – New technologies are leading the way for new financial services. While there are certainly some interesting innovations in the offing, it is important to recognize that many of the financial industry’s core functions will largely remain unchanged.

This is the view of Thomas Jordan, chairman of the governing board of the Swiss National Bank (SNB), the country’s central bank. Delivering the keynote speech at Sibos in Geneva, Jordan says “the role of financial intermediaries is, first, to help their clients fund new investments and, second, to offer them investment opportunities and asset protection strategies.

“Their third role is to facilitate securities safekeeping, and their fourth is to execute payments on behalf of their clients. Customers have long required these basic services, and they will continue to need them in the future. In short, the economic function of the financial industry has not changed.”

However, he points out that the technologies and channels by which financial services are requested and delivered are changing. “The digitalization of payment transactions, for instance, has helped to make cashless payments cheaper and simpler for customers – even if efficiency could still be further improved, especially where cross-border payments are concerned.”

The advent of dematerialized securities years ago, Jordan cites, is another example of innovation within the financial industry. This change has increased the efficiency of securities settlement and safekeeping. “These days, traditional bank counters have morphed into apps that live on our smartphones,” he continues. “Such useful innovations have the potential to improve aggregate economic welfare.”

The challenge for regulators and central banks, he reflects, is to make sure they fully understand the effects and side effects of these new mechanisms at an early stage. The same goes for innovation affecting financial market infrastructure especially those that are systematically important.

Such assessments of new technologies are based on a set of internationally accepted guidelines called Principles for Financial Market Infrastructure. He says these principles define the criteria that infrastructure must meet thereby setting standards for innovation in this field.

“Central banks and regulators have the duty to pass legislations that guarantee the safety of financial market infrastructure by protecting the stability, resilience and availability irrespective of technological change,” Jordan believes. “But they must also take onboard the efficiency goals of infrastructure providers and their participants.”

Regulatory adjustments may be needed to catalyze the positive effects of certain innovation. He says that the possibility of adjusting the regulatory framework is very topical in Switzerland at the moment. “Specifically, it concerns the issue of lowering the barriers to market entry for fintech companies. FINMA, the Swiss Financial Markets Supervisor Authority, supports the introduction of a new licensing category for fintech companies.”

Jordan agrees that financial technology is evolving rapidly and calling into question many existing structures. Despite this, he insists that it is important to bear in mind that the fundamental needs of companies and households that are met by financial services remain largely unchanged. “The usefulness and the success of new technologies will hinge upon whether they can meet these basics needs more cheaply and more securely than existing solutions.”

He says at the SNB, it is neutral to technologies underpinning financial market infrastructures. “Our focus is on safety and efficiency. Dialogue is essential between market participants, regulators and central banks.”

This is especially true in view of current technological changes, which he says make walking the line between stability and innovation particularly challenging. “This exchange of views with practitioners helps us to correctly assess the uses and the risk of new technologies. Such discussions are critical if we are to exploit the technologies of the future at the right time and at the right conditions.”