The Dark Side of Digital Financial Transformation: The New Risks of FinTech and the Rise of TechRisk
UNSW Law Research Paper No. 19-89
European Banking Institute Working Paper 2019/54
University of Luxembourg Law Working Paper 2019-009
University of Hong Kong Faculty of Law Research Paper No. 2019/112
Singapore Journal of Legal Studies (Forthcoming)
37 Pages Posted: 18 Nov 2019 Last revised: 15 Jan 2020
Ross P. Buckley
University of New South Wales (UNSW) - Faculty of Law
Douglas W. Arner
The University of Hong Kong - Faculty of Law
Dirk A. Zetzsche
Universite du Luxembourg - Faculty of Law, Economics and Finance; Heinrich Heine University Dusseldorf - Center for Business & Corporate Law (CBC); European Banking Institute
Eriks Selga
The University of Hong Kong, Faculty of Law, Students
Date Written: November 18, 2019
Abstract
Over the past decade a long-term process of digitization of finance has increasingly combined with datafication and new technologies including cloud computing, blockchain, big data and artificial intelligence in a new era of FinTech (“financial technology”). This process of digitization and datafication combined with new technologies is taking place in developed global markets and at times even faster in emerging and developing markets. The result: cybersecurity and technological risks are now evolving into major threats to financial stability and national security. In addition, the entry of major technology firms into finance – TechFins – brings two new issues. The first arises in the context of new forms of potentially systemically important infrastructure (such as data and cloud services providers). The second arises because data – like finance – benefits from economies of scope and scale and from network effects and – even more than finance – tends towards monopolistic or oligopolistic outcomes, resulting in the potential for systemic risk from new forms of “Too Big to Fail” and “Too Connected to Fail” phenomena. To conclude, we suggest some basic principles about how such risks can be monitored and addressed, focusing in particular on the role of regulatory technology (“RegTech”).
Keywords: FinTech, RegTech, Systemic Risk, TechFin, BigTech, Too Big to Fail, Too Connected to Fail
JEL Classification: G23, G24, G28
Suggested Citation: Suggested Citation
Ross P. Buckley

University of New South Wales (UNSW) - Faculty of Law ( email )
Sydney, New South Wales 2052
Australia
Douglas W. Arner

The University of Hong Kong - Faculty of Law ( email )
Pokfulam Road
Hong Kong, Hong Kong
China
HOME PAGE: http://hub.hku.hk/rp/rp01237
Dirk Andreas Zetzsche (Contact Author)
Universite du Luxembourg - Faculty of Law, Economics and Finance ( email )
Luxembourg, L-1511
Luxembourg
HOME PAGE: http://wwwen.uni.lu/recherche/fdef/research_unit_in_law/equipe/dirk_andreas_zetzsche
Heinrich Heine University Dusseldorf - Center for Business & Corporate Law (CBC) ( email )
Universitaetsstr. 1
D-40225 Düsseldorf
Germany
+49 211 81 15084 (Phone)
+49 211 81 11427 (Fax)
Eriks Selga
The University of Hong Kong, Faculty of Law, Students ( email )
Pokfulam Road
Hong Kong
Hong Kong
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