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The FinTech Revolution and Financial Regulation: The Case of Online Supply-Chain Financing

Published online by Cambridge University Press:  15 March 2017

Chang-hsien TSAI  and
Kuan-Jung PENG
Chang-hsien TSAI
Affiliation:
Institute of Law for Science and Technology, National Tsing Hua University, Taiwan
Kuan-Jung PENG
Affiliation:
Erasmus University Rotterdam, The Netherlands University of Hamburg, Germany University of Bologna, Italy
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Abstract

Online supply-chain financing has been a relatively novel funding channel for suppliers as small- and medium-sized enterprises (“SMEs”) to obtain loans in that the revolution of financial technology (“FinTech”) transforms traditional supply-chain financing, which used to be administered only by official banks, to an online model also used by electronic commerce platforms (“e-commerce platform”). Endeavours towards financial inclusion of the underserved SMEs could rationalize why we should allow for or encourage FinTech innovations exemplified by the online supply-chain financing mentioned above. What would be an adaptive regulatory regime for such innovative FinTech-enabled financial services as the online supply-chain financing? Within our conceptual framework to regulate the FinTech industry at the early stage, rather than rigorous rules traditionally placed on large financial institutions, a principles-based strategy should be adopted to strike a balance between financial stability and access to financial services advanced by disruptive innovations. As a necessary complement, regulatory sandboxes would be needed to spur a shift in institutional philosophy to a principles-based regulatory regime. In other words, the regulatory attitude of FinTech regulation should be humble and light-touch to promote innovation for improving digital financial inclusion, albeit on the premise of containing potential systemic risk and protecting consumer interest in the meantime.

Keywords

financial disintermediationfinancial inclusionprinciples-based regulationregulatory sandboxlight-touch/humble regulationfinancial technology
Type
Law and Finance in (South)East Asia
Information
Asian Journal of Law and Society , Volume 4 , Issue 1 , May 2017 , pp. 109 - 132
Copyright
© Cambridge University Press and KoGuan Law School, Shanghai Jiao Tong University 

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