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

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.

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