Traditional banking-sector participants are witnessing an emergence of marketplace lenders (MPLs) that is profoundly changing the way individuals and businesses within the financial community interact. An estimated $4.7 trillion in financial services revenue is at risk of being displaced by FinTech. This has made regulators increasingly aware that appropriate reform is needed, given MPLs’ positioning in the financial services market, as well as their evolving business models and increasing institutional support.
Policy-makers are attempting to develop a regulatory framework for MPLs that encourages growth and innovation, while balancing the need for addressing systemic risk and safeguarding consumers. The applicability of current regulations, and the language of those forthcoming, need to be clear and transparent so FinTech firms can appropriately navigate their industry’s ever-changing environment. Failure to do so will have a dramatic impact on MPLs’ potential to improve the world economy as a whole. Furthermore, the regulatory architecture must remain dynamic to handle the innovation coming from MPLs and the fast pace at which they move and evolve.
This publication highlights the major differences in the current regulatory frameworks between China, the UK and the US with respect to MPLs. In particular, it focuses on the differences regarding investor protection and securities laws; clearing, settlement and segregation of client money; risk retention and capital requirements; secondary servicer requirements; tax incentives; promotion of SME lending; credit analysis and underwriting; data protection; regulatory reporting; registration and licensing; debt collection; and interest rate regulation. It then examines and assesses the concerns that these differences raise for MPLs. We hope policy-makers will work together to create a standardized and accommodative framework for FinTech’s growth and innovation.
