Governing FinTech 4.0: BigTech, Platform Finance and Sustainable Development

Forthcoming Vol XXVII of the Fordham Journal of Corporate & Financial Law

UNSW Law Research Paper No. 21-57

University of Hong Kong Faculty of Law Research Paper No. 2021/043

84 Pages Posted: 14 Sep 2021 Last revised: 22 Jan 2022

See all articles by Douglas W. Arner

Douglas W. Arner

The University of Hong Kong - Faculty of Law; University of Hong Kong

Ross P. Buckley

University of New South Wales (UNSW) - Faculty of Law

Kuzi Charamba

University of Hong Kong

Artem Sergeev

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

Date Written: September 1, 2021

Abstract

Over the past 150 years, finance has evolved into one of the world’s most globalized, digitized and regulated industries. Digitalization has transformed finance but also enabled new entrants over the past decade in the form of technology companies, especially FinTechs and BigTechs. As a highly digitized industry, incumbents and new entrants are increasingly pursuing similar approaches and models, focusing on the economies of scope and scale typical of finance and the network effects typical of data, with the predictable result of the emergence of increasingly large digital finance platforms. We argue that the combination of digitization, new entrants (especially BigTechs) and platformization of finance – which we describe as FinTech 4.0 and mark as beginning in 2019-2020 – brings massive benefits and an increasing range of risks to broader sustainable development.

The platformization of finance poses challenges for societies and regulators around the world, apparent most clearly to date in the US and China. Existing regulatory frameworks for finance, competition, data, and technology are not designed to comprehensively address the challenges to these trends to broader sustainable development. We need to build new approaches domestically and internationally to maximize the benefits of network effects and economies of scope and scale in digital finance while monitoring and controlling the attendant risks of platformization of finance across the existing regulatory silos.

We argue for a principles-based approach that brings together regulators responsible for different sectors and functions, regulating both on a functional activities based approach but also – as scale and interconnectedness increase – addressing specific entities as they emerge: a graduated proportional hybrid approach, appropriate both domestically in the US, China and elsewhere, as well as for cross-border groups, building on experiences of supervisory colleges and lead supervision developed for Globally Systemically Important Financial Institutions (G-SIFIs) and Financial Market Infrastructures (FMIs). This will need to be combined with an appropriate strategic approach to data in finance, to enable the maximization of data benefits while constraining related risks.

Keywords: BigTech, FinTech, platform economy, digitalization, sustainable development

Suggested Citation

Arner, Douglas W. and Arner, Douglas W. and Buckley, Ross P. and Charamba, Kuzi and Sergeev, Artem and Zetzsche, Dirk Andreas, Governing FinTech 4.0: BigTech, Platform Finance and Sustainable Development (September 1, 2021). Forthcoming Vol XXVII of the Fordham Journal of Corporate & Financial Law, UNSW Law Research Paper No. 21-57, University of Hong Kong Faculty of Law Research Paper No. 2021/043, Available at SSRN: https://ssrn.com/abstract=3915275 or http://dx.doi.org/10.2139/ssrn.3915275

Douglas W. Arner (Contact Author)

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01237

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

Ross P. Buckley

University of New South Wales (UNSW) - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia

Kuzi Charamba

University of Hong Kong ( email )

Faculty of Law, Pokfulam Road
Pokfulam
Hong Kong
Hong Kong

Artem Sergeev

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

Dirk Andreas Zetzsche

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)

European Banking Institute ( email )

Frankfurt
Germany

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