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

Asian Journal of Law and Society, Volume 4, Issue 1, May 2017, pp. 109-132 (© Cambridge University Press and KoGuan Law School, Shanghai Jiao Tong University)

32 Pages Posted: 2 Oct 2017 Last revised: 19 Dec 2017

See all articles by Chang-hsien Tsai

Chang-hsien Tsai

National Tsing Hua University - Institute of Law for Science & Technology, College of Technology Management

Kuan-Jung Peng

Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students

Date Written: May 1, 2017

Abstract

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”). Endeavors 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.

Keywords: Financial disintermediation, financial inclusion, principles-based regulation, regulatory sandbox, light-touch/humble regulation, financial technology

JEL Classification: K29, G18, G23, G28

Suggested Citation

Tsai, Chang-hsien and Peng, Kuan-Jung, The FinTech Revolution and Financial Regulation: The Case of Online Supply Chain Financing (May 1, 2017). Asian Journal of Law and Society, Volume 4, Issue 1, May 2017, pp. 109-132 (© Cambridge University Press and KoGuan Law School, Shanghai Jiao Tong University). Available at SSRN: https://ssrn.com/abstract=3035386

Chang-hsien Tsai (Contact Author)

National Tsing Hua University - Institute of Law for Science & Technology, College of Technology Management ( email )

101, Sec. 2, Kuang-Fu Road
HsinChu, 30013
Taiwan

Kuan-Jung Peng

Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students ( email )

Burgemeester Oudlaan 50
PO Box 1738
Rotterdam
Netherlands

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