Finance and the technology are amassing renewed momentum because of the accelerated integration of conventional finance and other technology, popularly known as fintech. However, the development of financial innovation, fintech and artificial intelligence (AI) also introduces new challenges to financial regulation and the total constancy of the financial industry.
Fintech Challenges in the Industry
Recently, fintech has grown into among the most talked-about financial terms in the world. Finance and technological improvements have always been intimately linked – in the past 70 years, the invention and integration into everyday life of their computer, the advent of credit cards along with the very first automated teller machines, or ATMs, have demonstrated the far-reaching effects of technology and finance combined. This trend is presently accelerating faster than ever before, bringing with it enormous reverberations for the whole financial sector.
Fiscal growth, in its modern, much more technological, intelligent and digital personification, is constantly accompanied by new challenges. To begin with, fintech has a propensity to decentralise, endangering the role of insurance and banking institutions. \
Decentralisation of traditional institutions does not necessarily indicate democratisation and greater equality but rather can represent a hidden risk of business segmentation and the advent of new centralised market performers. Striking a balance is a worldwide challenge.
Second, fintech is interdisciplinary. Although many fintech products seem to be simple and standardised, they’re in reality comprehensive products, melding traits of both technology and finance. This mixing of versions and fintech’s virtualisation are two prominent factors that result in complicated channels and manners.
Third, fintech is unmanned, intelligent and mechanised. Its theories, such as AI, large info and cloud computing, are actually quite popular but potentially insecure. When Google’s self-driving vehicle caused its very first road traffic injury in 2016, police found it tough to apportion blame – in the event, the human manager, the software designer or the business be held responsible?
Similarly, in the financial sector, robot consultants depend on AI self-learning and self-operation to learn algorithms and models; if the robot were to move on to the incorrect track or bring problem to the investment, that side should bear the obligation: the investor, the stockholder or the developer? Data security might be compromised from the dangerous leakage of considerable quantities of sensitive financial data and, in a worst-case scenario; an automatic system may even generate and proliferate data leaks far beyond human control. Clearly, fintech is a double-edged sword that must be treated with care — it’s the power to bring about miraculous developments in advantage, but could also severely put at risk consumer rights.
The challenges of fintech to monetary regulation
At precisely the identical period, the integration of finance and fintech gives rise to significant regulatory challenges.
First, the financial regulatory system was overcome and outpaced by fintech and internet financial markets. By way of instance, platforms such as Alipay began third-party payment operations as early as 2003, however, police didn’t issue their third party payment licenses until as recently as 2011. The industry often prohibits regulation: business operators in China generally’get on the bus first, before purchasing a ticket’. China’s financial regulatory bodies currently face the task of solving this issue.
Second, China’s fintech regulation lags behind more sophisticated overseas practices. Presently, China can outperform many countries with its booming fintech development. However, the UK, Singapore and Australia, among others, have much superior regulatory infrastructures.
Fintech ultimately aims to create a monetary system that’s honest, transparent, and effective and shows goodwill, and three strategies may be profitably employed to the end.
1. Discover from global experience
Fintech is driven by three leading international forces: the market, regulation, and technology. The marketplace, widely, refers to what is driven by consumer needs — something that is abundant in China. The use of IT in China exceeds that of many other nations; however, a gap must still be bridged before attaining the levels of the United States. Legislation reveals a deficit in our government, as well as regulatory agencies, systems and capacities that have to be reconciled by studying the processes of other nations.
2. Strengthen the building of overall financial capacity
Present financial oversight stays localised along with Chinese features: meaning local fiscal agencies are filled with huge workloads. Each degree of local government – national, municipal and district confronts the problems of monetary regulation; nonetheless, local financial bureaus continually rely on departments like the National Development and Reform Commission, that lacks resources and labour.
3. Create a pleasant ecosystem
To set up and maintain the sustainable development of fintech along with the financial industry, promote gamers, corporate self-regulation, trade association and regulatory agencies, as well as public opinion and guidance from educational institutions and media, if included in the procedure.
Fintech has brought many advantages and opportunities to the growth of the financial testing industry, but it has also presented daunting challenges and potential risks. Striking a balance between stability and development, and deciding how to control fintech.