The New Regulatory Mindset in the Age of Rapid Fintech Development
Pei Sai Fan
Regulators and the private sector should be trusted partners. In the early stages of scientific and innovative technological development, regulators should ensure that innovation is "in place", stay on board innovation trends, and thoroughly understand the latest developments and trends in innovation. This is to implement standardization for the industry, advocate compatibility and interoperability between innovative products, and guide the integration and collaborative development of the innovation chain, so as to open up technological channels, accentuate innovative technological achievements, and contribute a greater welfare for society and consumers.
The Monetary Authority of Singapore (MAS) knows this very well, thus it had previously promoted coordination and cooperation among payment service providers. In 2016, it has launched a unified reader; and in 2018 launched the world's first unified payment QR code - SGQR, which allows information systems and applications of different payment service institutions to communicate with each other, operate compatibly, and improving efficiency and facilitation among customers. The 2019 Payment Services Act passed by the Parliament empowered the MAS to instruct major payment service institutions to use common platforms or adopt unified standards to achieve interoperability between payment systems and benefit consumers.
Regulators should bear in mind that regulations are not for its namesake. The ultimate purpose of regulation is to contribute to development. The regulation of financial technology also requires brains and innovation. Given the highly dynamic nature of technology, it is essential that governments and the private sector work together to become trusted partners and co-creators of solutions, rather than sticking to their traditional roles as regulators and regulated entities.
The development of fintech is changing rapidly especially in its early stage. In addition, the compliance of start-up companies in fintech is also uncertain. It is necessary for the regulators to cooperate with the fintech industry and work side by side. As regulators learn and regulate, they are able to judge and promote the compliance of new technology solutions or products in time, thus achieving a good balance between compliance and innovation, as well as between regulation and development.
Fintech includes many different technologies, which will bring about different significant risks and issues, such as identity in digital currency and digital payment, investor protection and scams of P2P crowdfunding, cybersecurity in big data, and privacy and hacker attacks of distributed ledger etc. Regulations must be targeted and formulated based on the risks brought by technology and cannot adopt the "one size fits all" treatment for all fintech enterprises.
Therefore, financial regulators must be able to use trial and error to experiment, so long as they do not affect the overall situation such as causing financial market turbulence or affect the public's trust in the financial market. In the early stages of development of fintech, the government should try to guide the innovation and development of technology through soft approaches, such as providing guiding principles or advice.
If policymakers can pay attention to macroeconomic data collection, analyse the whole market and closely monitor the market monopoly or systemic risk, it will help regulators issue countermeasures in time, preventing and resolving the risks in advance. Since prevention is better than cure, reducing tough administrative intervention that happens after will help people build confidence in fintech and the economic market.
About The Author
Professor Pei is an adjunct professor at NUS, NTU, and professor at the APEC Institute of Business. He is also a member of the Professional Qualifications Committee at Chartered Financial Technology Practitioner (CFTP) of Singapore, former Director of Banking Supervision at Monetary Authority of Singapore (MAS), and First Director of MAS Academy.