Faculty of law blogs / UNIVERSITY OF OXFORD

Governing BigTech in Finance: Opportunities and Challenges of FinTech 4.0


Time to read

3 Minutes


Ross P Buckley
ARC Laureate Fellow & Scientia Professor, UNSW Sydney
Artem Sergeev
PhD candidate at the University of Hong Kong
Douglas W Arner
Kerry Holdings Professor in Law, RGC Senior Fellow in Digital Finance and Sustainable Development, and Associate Director, HKU-Standard-Chartered Foundation FinTech Academy, University of Hong Kong
Dirk A Zetzsche
Professor of Law and ADA Chair in Financial Law (Inclusive Finance) at the Faculty of Law, Economics and Finance, University of Luxembourg
Kuzi Charamba
Postdoctoral Fellow at the Asian Institute of International Financial Law, University of Hong Kong

The ‘BigTechs’—especially Google, Amazon, Facebook and Apple (GAFA) in the United States, and Baidu, Alibaba and Tencent (BATs) in China—have grown to permeate all aspects of society and the economy in their home countries and increasingly globally. This growth has been due to technological evolution (digitization, datafication, digitalization), conducive regulatory approaches in the US and China in particular (at least prior to 2020), and the network effects which characterize data industries. While the resulting concentration and dominance have long been a source of concern in the European Union, the US and China are also increasingly seeking to balance the benefits of large digital platforms against concerns about abuses of dominance and risks of concentration of data and market position. These pre-existing trends have been amplified and reinforced by the digitalization driven by COVID-19 in 2020 and 2021. The governance of BigTechs and the rise of data are thus emerging as major issues for the twenty-first century.

The focus of our latest paper is how these trends intersect with finance. We identify a new period in the evolution of FinTech, commencing in 2019-2020, and characterized by this combination of digitization, concentration and platformization of finance. We dub this period FinTech 4.0 and suggest it will bring massive benefits for, and an increasing range of risks to, broader sustainable development.

Digital innovations present tremendous opportunities for sustainable development through new business models that provide access to alternative finance and greater financial inclusion. Such business models can, among other things, improve access to financing for SMEs, decrease costs of international remittances, and facilitate digital transactions thereby contributing to broader sustainable development.

Meanwhile, as highlighted by recent regulatory actions against BigTechs in China and the US, existing regulatory frameworks for finance, competition, data, and technology are not designed to address well the challenges and risks of BigTech and digitization. To address these regulatory gaps, we need to build new domestic and international regulatory approaches to maximize the benefits of network effects and economies of scope and scale in digital finance while monitoring and controlling the attendant risks of platformization of finance across the existing regulatory silos.

We argue for a principles-based approach that brings together regulators responsible for different sectors and functions, regulating on a functional activities-based approach, and also—as scale and interconnectedness increase—addressing specific entities as they emerge: a graduated proportional hybrid approach, which we see as appropriate both domestically in the US, China and elsewhere, and for cross-border groups. This idea builds on the experience in international financial regulation of supervisory colleges and lead supervision for Globally Systemically Important Financial Institutions (G-SIFIs) and Financial Market Infrastructures (FMIs). This approach includes five main principles:

  • Principle One: Attainment of foundational financial regulatory objectives      
  • Principle Two: Reflexive and iterative regulation
  • Principle Three: Encouragement of responsible, long-term oriented actors
  • Principle Four: Oversight and enforcement
  • Principle Five: An express commitment to sustainable development

Principle One highlights the importance of clearly defined financial regulatory objectives. As BigTechs engage in financial activities, it is imperative that regulators and policymakers remain focused on these foundational objectives, particularly with new actors not native to the financial sector. Principle Two highlights that policymakers need to adopt an approach to regulation that is both reflexive and iterative. This is underlined by two realities of digital finance platforms: first, the technology they employ is developing rapidly; and second, societal capacity to engage with that technology varies widely (particularly in developing countries). Principles Three and Four focus on ensuring that digital finance platforms comply with guidelines and regulations that mitigate their negative impact on the environment and society. Specifically, given the complexity of the actors and their activities, oversight and enforcement mechanisms should be deployed at various levels of operations and impact of digital finance platforms. This will affect actors and regulators at the entity, national, international and transnational levels. Lastly, Principle Five emphasizes that governance frameworks and initiatives should require a board-level commitment of digital finance platforms to incorporate the SDGs into their business plans and models, particularly when operating in developing countries. The above principles can be implemented through a range of more specific permissive or restrictive policies such as laissez-faire, command and control regulation, unbundling, and public utility regulation.

When it comes to broader implications of the principles-based approach, our paper emphasizes that international financial supervisory organizations should consider forming a joint standing committee or working group whose principal focus is to galvanize and coordinate action towards the realization of the Bali FinTech Agenda. The 12 policy elements of this Agenda form a broad umbrella which captures many of the relevant financial inclusion and developmental issues. National governments should also consider the establishment of interagency teams and units that can work congruently on issues that relate directly to digital finance platform governance. For example, these could entail representatives from the ministries of finance, justice, competition, privacy and international affairs, among others, coordinating relevant policy and regulation that address the full range of digital finance platform activity within their jurisdictions. In essence, cooperation, flexibility, oversight, and commitment to sustainable development will be essential for the effective governance of BigTech and FinTech 4.0. This will not be easy, or simple, but will be necessary if these powerful trends and developments are to be directed to serving people and societies.

Ross Buckley is Scientia Professor, and the KPMG Law – King & Wood Mallesons Professor of Disruptive Innovation and Law at UNSW Sydney, Australia.

Artem Sergeev is a PhD candidate at the University of Hong Kong in international law and legal theory.

Douglas Arner is Kerry Holdings Professor in Law, RGC Senior Fellow in Digital Finance and Sustainable Development, and Associate Director, HKU-Standard Chartered Foundation FinTech Academy, University of Hong Kong

Dirk Zetzsche is Professor of Law, ADA Chair in Financial Law (Inclusive Finance), Faculty of Law, Economics and Finance, University of Luxembourg.

Kuzi Charamba is a Postdoctoral Fellow at the Asian Institute of International Financial Law, University of Hong Kong.


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