As the financial technology (fintech) industry begins to boom, many people from within and from outside the industry are calling for regulations to be examined and brought up to date.
China and particularly Hong Kong is a world leader in fintech, this is because of its financial services heritage and its cutting-edge investment and tech industry.
Companies including CreditEase, a $1bn investment fund, and of course Alibaba are making huge waves around the world, including the USA where CreditEase have recently announced several major investments in fintech companies.
Research suggests that all the main players in the world of financial services are expecting to invest or commission fintech companies in order to retain customers who rely increasingly on fintech products.
Fintech is not led by the big banks, it is led by business who specialize in areas such as digital technology and ecommerce, “disruptors” to traditional banking systems and as such are outside the regulatory safeguards that are currently in place.
While there are contrasting opinions regarding how this new sector should be regulated, many of its big players, such as Eileen Burbridge from Passion Capital in the UK, are predicting that security and particularly cyber security may become a global problem.
The nature of the sector means that regulation is of prime concern and one that needs to factor in the variety of different companies who are involved. Law firms working in this area will need to be multi-disciplined and have the means to operate internationally in order to be effective and help the sector move forward.
In 2016, China announced that it would police online financial services more vigorously, including peer to peer lending platforms, after several scams that relieved investors of up to US$7.6bn.
The Hong Kong Monetary Authority are also beginning to investigate the way in which the fintech sector is regulated. They have launched an initiative – The Fintech Supervisory Sandbox that helps banks to test drive new technological products where and when they are sophisticated enough to do so.
The “sandbox” has been embraced, speaking at the Latham and Watkins Shenzen Technology Conference, Lawrence Yu, Chief Executive of Shulaibao was quoted as saying;
“When you set the rules clearly and fairly, then credible companies have a chance to succeed”. He continued, “Everything is fair when the rules are enforced. A clear, reasonable regulatory body would help start-ups to grow”.
The challenge for law firms, in a wider perspective, will be to navigate new regulations and help fintech companies to map out a plan that will allow them to operate within the new regulations profitably and without hindering innovation.
In addition, they must help fintech companies protect their customers and investors, as without these protections the sector will wither and cease to reach the potential it is currently showing signs of.
Doing this will involve a deep understanding of the Chinese financial services infrastructure as it stands, but more importantly where the infrastructure will be several years down the line.
The tides are changing for the Chinese financial services sector and many would argue that the changes fintech companies are bringing to shore have been a long time in coming.
The overriding vision is that the fintech revolution will bring banking and many other financial services into the 21st century and allow them to compete more successfully.
In order to achieve this big businesses and new innovative enterprises must share the plaudits and profits for delivering an improved and more competitive range of products to customers.
Law firms will play a role that is paramount to this process and that will pave the way for plain sailing through the changes that are to come.
Featured picture via Pixabay.com
