The People’s Bank of China (PBOC) announced that it is planning to steadily develop a system of rules to regulate financial technology (FinTech) in the country.
According to Reuters, China’s central bank also revealed that it intends to completely utilize the technology to enhance the flow of credit and reduce financing costs for businesses, as well as improve the ability to prevent risks.
China has become an emerging FinTech market due to its expanding middle class, rapid digitization and electronic payments adoption. And the country has recently seen a surge in companies using the tech to attract the country’s millions of previously unbanked consumers. However, while the technology is fine, the financial services (FinServ) offerings concern the president of Chinese financial investment platform Phoenix Finance.
Vince Zhang said at last year’s East Tech West conference in China that many FinTech firms don’t have the controls to make them safe investments for both consumers and the nation’s economy.
“A lot of companies are not [there] in terms of their business plan, in terms of their risk management process, in terms of their overall management,” he said. “A lot of these corporate control mechanisms are not in place.”
“Without proper risk control mechanism personnel, without proper ways of communicating with regulation, it’s potentially becoming a very big risk going forward,” he added. “I would predict in 2019, the government will regulate more. There will be less and less players in this field.”
Zhang is not the first executive to voice his concerns. Earlier in 2018, BlackRock Co-Founder Robert Kapito warned that the increase in Chinese tech companies offering financial services could leave existing Western firms struggling to compete.
“This is a story that I do not think ends very well,” Kapito said at an event in Switzerland back in April. “Apple was not in the music industry, Google was not in the mobile phone industry and Amazon was not in the groceries business — until they were. Tech companies are going to enter the financial services market in a very, very aggressive way.”