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The Innovation Model of Risk Control of Fintech and Regulatory Sandbox
| Content Provider | Semantic Scholar |
|---|---|
| Author | Wang, Xiaodan |
| Copyright Year | 2019 |
| Abstract | The rise of anything is by no means an accident. As a new financial form brought about by technological innovation, the emergence of fintech is the result of the interaction between certain external conditions and internal needs. Relying on the application of cutting-edge technologies such as blockchain and big data, financial science and technology subvert the credit center service model in the banking sector, forming a huge impact and challenge to the traditional financial industry. However, its rapid development brings difficulties to financial regulation, which brings forth the contradiction between the traditional regulatory mode and the current development of financial technology. The proposal of regulatory sandbox mode opens the way for innovation of risk prevention and control mode, and it is also a new thinking for the development of regulatory science and technology in China. 1. Impact and Challenge of Financial Risk Prevention and Control by the Development of Fintech 1.1. Connotation Analysis of Fintech. The fintech ecosystem is maturing. However, so far, the definition of fintech has not been unified at home and abroad, and the understanding of fintech is basically the same: it refers to financial innovation driven by scientific and technological progress. With the advent of the Internet big data era, fintech is the product of the mutual integration of modern technology and traditional finance. It USES information technology to improve and innovate financial products and services as well as relevant business models. Released in March 2016, the financial stability board, the financial technology framework of description and analysis of a panoramic view of report, in the report, the financial technology made a comprehensive standard: the definition of "financial" science and technology is a technology to promote financial innovation, the innovation can lead to the production of a new business model, products or services, and to the whole financial market and financial market related substantive impact of related party. Financial technology is an innovative product of the financial industry in the Internet era. It innovates financial services and a series of products based on Internet, cloud computing, big data, block chain, artificial intelligence and other high and new technologies, so as to improve the efficiency and reduce costs of the financial industry. In general, technology has always been an important part of financial innovation, but technology has not changed the nature of finance, only made it more efficient. Second, fintech is a product of the interaction between supply and demand in society. It is factors such as new technologies, changes in the global financial system, and changes in the financial environment that have converged and interacted over a relatively narrow period that have led to a series of fintech innovations. 1.2. Impact Path Analysis of Financial Risk Prevention and Control by Fintech. From the scandal-plagued business model of lending platforms, P2P, to the fact that icos have been labeled illegal fundraising and closed down domestic bitcoin exchanges, we can see that the risks of fintech cannot be ignored. The main body of fintech is still finance, and technology is only the carrier serving finance. Therefore, the financial attribute of fintech itself determines its high-risk characteristics, and the application of technology in financial products makes the risk more difficult to find. At the same time, the business exchanges between different industries in the market make 2019 9th International Conference on Information and Social Science (ICISS 2019) Copyright © (2019) Francis Academic Press, UK DOI: 10.25236/iciss.2019.021 113 all kinds of risks interwoven and difficult to distinguish, so in the process of separate operation and supervision, it is easy to see the omission of the regulatory department and shirking responsibility events. Firstly, China's existing laws and regulations do not match the development speed of fintech. When new financial products emerge, it is difficult for laws to adjust to the new regulatory environment in time. Second, there is a mismatch between fintech innovation and regulatory development. Digital, intelligent, mobile and other means used in banking, securities, insurance and other Internet institutions make the financial system more efficient, but it will lead to the gradual blurry of the boundaries of different financial institutions, make it difficult to promote the separation of supervision in China, serious will lead to the instability of the entire financial field. Therefore, while enjoying the convenience and prosperity brought by financial technology, we should pay more attention to guard against and defuse the possible financial risks. We will continue to improve the legal and regulatory system without hindering the normal development of fintech. At the same time, we will further explore the functional framework of regulatory authorities and establish a new model of good supervision and control of risks. 2. Analysis of the Fit between Regulatory Sandbox and Fintech Induced Risks 2.1. Analysis on the Connotation and Operation Mechanism of Regulatory Sandbox. Sandbox, also known as sandbox, is a computer language. Early on it was used to test suspicious software, providing a test environment that did not pose a threat to the security of real systems. Regulatory sandbox is to introduce the sandbox into financial regulation and provide a safe test environment for fintech innovation through new regulatory technologies. In this special environment, the regulatory sandbox will also enable companies to achieve real financial innovation while effectively controlling financial risks through special authorization, providing regulatory advice to test companies, and not taking mandatory measures during the test phase. In March 2015, the UK government first proposed the concept of "regulatory sandbox", which was defined by the financial conduct authority as a "safe space" where fintech products could be tested, so as to achieve the compatibility between financial regulatory authorities and fintech companies. The main operating mechanism of the regulatory sandbox is to examine the qualification of the enterprises entering the regulatory sandbox, provide a variety of options for different enterprises and set consumer protection measures. These three parts combine and promote each other to "escort" fintech products in the sandbox, and it is also an innovation of regulatory technology. The specific steps are as follows: the first step is to apply for approval, and the regulatory authorities will conduct qualification examination on the enterprises applying for entering the regulatory sandbox. If the fintech innovative products meet the requirements for entering the regulatory sandbox, they will enter the next step. The second step is the stage test, which is also the process of simulated market trading of fintech innovative products. In this stage, regulators will play an important role, not only monitoring the specific trend of products in real time, but also monitoring and adjusting according to the specific situation, so as to protect the legitimate rights and interests of consumers in the market. The third step is summary evaluation. Regulators analyze and evaluate the performance of products in the sandbox, summarize the conclusion of whether they conform to the real market and timely feedback to fintech companies. 2.2. Analysis of the Effect of Regulatory Sandbox on the Risk Caused by Fintech. First, the regulatory sandbox provides a suitable space for the innovation of fintech products. Neither financial institutions nor non-financial institutions that provide technical support for financial services need to worry about whether they will violate regulatory rules or whether regulation will hinder development. Secondly, it is beneficial for regulators to supervise fintech. In the regulatory sandbox, regulators do not need to worry that excessive innovation of fintech will disrupt the order of the whole financial market, making some operators "take advantage of the loopholes", thus undermining the normal operation of the whole financial market. At the same time, |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | https://webofproceedings.org/proceedings_series/ESSP/ICISS%202019/ICISS19021.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
