Fintech is everywhere these days, and for good reason. The financial technology sector, which includes companies like LendingClub, Square and Kabbage (together termed Marketplace Lenders (MPLs) has disrupted traditional banking practices like loans and payments.
Many people have embraced this, and the result so far has been easier online offerings and more competition. There is, however, a possible negative effect of fintech’s rise too: the increase in risk for the financial system as a whole, as fintech tends to be un- or under-regulated. Regulators therefore have the unenviable task not to regulate fintech innovations in a way that reduces systemic risks while allowing for their further development.
The rewards for regulators should outweigh the costs: If regulated well, fintech could have a positive impact on SME financing, jobs and growth in otherwise anemic economic conditions in most countries. That prospect is already making them look at novel ways of crafting policies.
