Fintech is currently generating interest from the media. Businesses, governments, and even non-profit organizations are starting to invest in advanced technologies to improve productivity and efficiency while cutting costs. But while this initiative can streamline operations and provide better services to clients, it also has its set of challenges — one of them is the lack of smart regulation.
Lack of Regulation
If left without human supervision and guidance, fintech will create insurmountable problems that can wreak havoc in the industry. They sounded the alarm amid the growing use of artificial intelligence, cloud computing, and big data by banks and other financial companies. These technologies can be programmed to perform tasks with minimal human assistance.
As the author of an article in Central Banking, Ben Shenglin, dean of the Academy of Internet Finance at Zhejiang University lists problems banks will likely face if they depend too much on technology. Among them are the possible decentralization and the risk of making costly errors because no one will be held accountable.
Confusing Regulatory Oversight
On the other hand, there are nations where there is too much control over specific industries. The U.S. has this problem, according to Consumer Finance Director Nick Bourke. Even though the country is the birthplace of some of the financial technologies, Bourke laments the nation’s lack of a unified approach in regulating them.
He cited the American mobile payments industry as an example. The U.S. has eight federal agencies that have oversight on the activities of the industry. Companies should also abide by the rules in each of the 50 states. Fragmented legal restraint over restricts the smooth use of fintech.
Need for Smart Regulation
Too little or too much regulation prevents nations from fully utilizing fintech for productive use. Governments should then strike a balance between development and stability to make sure that financial companies will provide reliable services to their clients. This condition will only take place if the industry and the government come up with a clear and smart plan to regulate financial companies who will make sure that customers will receive the best service.