By Nigel Bowen

With crypto crashing, neobanks collapsing, Buy Bow Pay Later (BNPL) services going from being the disruptors to being disrupted and tech industry rationalisation looming, what is a regulator to do?

Ross Buckley is KPMG Law – King & Wood Mallesons Professor in disruptive innovation and law at the University of New South Wales. He’s also the co-author of BigTech and Platform Finance: Governing FinTech 4.0 for Sustainable Development, a recently published how-to manual for fintech regulators across the globe.

Alan Tsen has been a tax lawyer, the founding general manager of Stone & Chalk, a chairperson of Fintech Australia and a member of the Federal Government’s Fintech Advisory Group and the Australian Securities and Investment Commission’s Digital Finance Advisory Panel.

Buckley and Tsen believe Australia’s politicians and regulators have done a reasonably good job of fostering and regulating fintechs, but warn they are in no position to rest on their laurels given the challenges barrelling towards them.

A proportional approach to regulating financial services

Financial services businesses now fall into three broad categories: fintech start-ups of varying size and scope, well-resourced industry incumbents (the Big Four banks, in the Australian context) and globe-spanning tech behemoths.

It would arguably be neither wise nor fair for regulators to treat differently sized players exactly the same, yet the playing field still needs to remain more or less level.

“There’s always going to be tension between regulators and the regulated, between entrepreneurs and public servants,” Tsen observes. 

“Yet the Federal Government has done well in encouraging fintechs to emerge and compete with the banks. ASIC has taken a thoughtful approach to crafting regulations for new financial products, such as Buy Now Pay Later, that previous generations of regulators could never have imagined existing. 

“ASIC has also looked at what has worked overseas, such as open banking and regulatory sandboxes, and introduced those things here in a localised form.”

Buckley agrees. “Yes, Australian regulators learnt some lessons from their foreign counterparts, but things are moving so fast that it’s a huge challenge for regulators everywhere to keep up,” he says. 

“ASIC has taken the graduated and proportional approach to regulation I believe works best.”

While a proportional regulatory approach might seem like a no-brainer, it’s harder to achieve in practice than in theory. 

“Thanks to the GDPR [General Data Protection Regulation], in Europe the field is tilted in favour of incumbents and big tech companies with the resources to comply with lots of regulation,” Buckley notes.  

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