Striking a balance between protecting investors and promoting innovation remains the central aim of Asian regulators as they respond to the unprecedented challenges posed by the financial technology boom, an industry conference heard on Friday.
For now they appear relaxed even as the fintech sector attracts vast sums and the speed of change dazzles but, with the mistakes of the global financial crisis still vivid, nothing is being taken for granted.
Regulators from across the region gathered at the biennial World Capital Markets Symposium in Kuala Lumpur to highlight their open approach to fintech.
“The Chinese government adopts a so-called laid-back approach in dealing with the fintech companies in the sales of wealth management products, peer-to-peer lending, payments, and e-commerce, allowing market forces to do their decision making process,” said Liu Jun, head of CSRC Research Centre, an advisory arm of China’s main securities watchdog.
Liu cited the tremendous growth of Alibaba’s online savings product Yuebao as an example, noting how it attracted more than US$92 billion in assets in its first year to become the fourth-largest money market fund in the world.
Ant Financial -- the Alibaba affiliate that owns Yuebao, online payment services firm Alipay, and online lender MYBank -- completed its series A funding in July, valuing the unit somewhere between $45 billion and $50 billion.
“Before the Chinese regulators started launching consultation on fintech regulations in the middle of 2014, the authorities watch closely but they don’t want to intervene the consumer-facing industry,” Liu said.
Tipsuda Tharvaramara, deputy secretary-general of Thailand’s Securities and Exchange Commission, said fintech innovation is more far-reaching and inclusive than the financial innovation that eventually led to 2008 global financial crisis.
“I think the regulators in the emerging markets need to embrace the technology disruption in financial services, rather than stay on the sidelines,” Tharvarama said.
“Prevention is often the best medicine before getting too late,” she added, without elaborating on the type of preventive measures she had in mind.
Trust & Confidence
The fintech industry has grown quickly since the global financial crisis as more and more established banks have been caught up in the glare of misconduct and scandal, prompting investors to seek out alternative channels for their savings.
For those very same reasons it is important that regulators don't take their eye off the fintech ball.
“It is very important that investors and the investing public can have trust and confidence in the markets we regulate, namely conduct risks causing investment loss and market development risks that strive for innovation and growth,” John Price, commissioner of the Australian Securities and Investments Commission, told delegates.
“I think it is important that the fintech companies don’t become systemically important, in a way that we don’t understand,” said Price, who stressed that the regulators should be ensuring a level playing field for all participants and innovators.
“The pace of change and technological development will be the key challenge to regulators in the future, as the required speed of regulatory tools overseeing the fintech markets must be faster than traditional regulatory tools," he said.
If not, regulators could find that a fintech product has become ubiquitous in the marketplace before they have been able to respond with appropriate measures. A case in point discussed by delegates in KL are the draft measures published recently by the People's Bank of China to impose a cap on online transactions of just Rmb1,000 ($157). As a way to curb the growth of China's Rmb8 trillion third-party and mobile payment markets, it could bee seen as a case of too little too late.
Nik Ramlah Mahmood, deputy chief executive of Securities Commission Malaysia, said it was the job of regulators like her to provide adequate oversight of the new money businesses disrupting traditional banks and other financial intermediaries and to protect investors who might be unaware of the underlying risks when using their services.
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