The Future of Finance: Why Regulation Matters

25 Pages Posted: 3 Nov 2020

See all articles by Mark Fenwick

Mark Fenwick

Kyushu University - Graduate School of Law

Erik P. M. Vermeulen

Tilburg University - Department of Business Law; Signify (formerly known as Philips Lighting) - Legal Department; Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI); Kyushu University - Graduate School of Law

Date Written: September 14, 2020


FinTech and financial inclusion have become widely discussed topics in recent years. How can we promote technology-driven entrepreneurship and support micro-businesses in the various fields of financial services? How can we encourage more diversity and inclusion in the world of finance?

There are numerous examples of how a combination of smartphones, computer code, and global networks have empowered weaker parties, created more equality and helped solve some of the biggest challenges in the financial services sector. Emerging technologies, in fields such as blockchain and artificial intelligence, mean that such a trend has become a permanent feature of the landscape, disrupting incumbent service providers, regulators, and other policymakers.

It seems clear, that the exponential growth of technology has created a divide between the digital world that we are now inhabiting, and the world as it is generally perceived by government. The result? Governments are, quickly, becoming less and less relevant to the development and deployment of digital technologies. Politicians and public officials are increasingly out of touch with the digital transformation and struggle to find an appropriate response to the evolution of technology and its economic, social, and cultural effects.

This paper explores the various challenges of regulating technology-driven change in financial services. As technology “eats the world,” it creates a plethora of new opportunities, but it also creates tremendous challenges that require some form of government intervention. In a world where agility is essential, governments are sluggish and disconnected. This creates potential risks, most obviously for the consumers of financial services.

In developing answers to these regulatory dilemmas, we argue that traditional approaches to regulating financial services are obsolete and that new thinking is required. State actors are at an enormous informational disadvantage and lack the capacities and resources to keep up with the fast-moving actors that dominate the sector. New and more innovative approaches need to be found. The paper describes several such approaches, including regulatory “co-creation”, policy experimentation, and technology-driven regulation (so-called RegTech). It is only by embracing these new approaches that a regulatory environment be developed that fosters the responsible and safe development and deployment of financial innovation.

Keywords: Financial Technology, FinTech, Financial Innovation, Financial Inclusion, Financial Globalization, Financial Regulation, RegTech, BigTech, Startups, Ecosystems. Entrepreneurship, Banking, Regulation

JEL Classification: G23, G24, G28

Suggested Citation

Fenwick, Mark and Vermeulen, Erik P.M., The Future of Finance: Why Regulation Matters (September 14, 2020). Tilburg Law School Research Paper Forthcoming, Available at SSRN: or

Mark Fenwick

Kyushu University - Graduate School of Law ( email )

744 Motooka, Nishi-ku,
Fukuoka, Fukuoka 819-0395

Erik P.M. Vermeulen (Contact Author)

Tilburg University - Department of Business Law ( email )

Signify (formerly known as Philips Lighting) - Legal Department ( email )

Amstelplein 2

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Kyushu University - Graduate School of Law ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, Fukuoka 812-8581

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