Faculty of law blogs / UNIVERSITY OF OXFORD

FinTech and the Four Horsemen of the Apocalypse


Time to read

3 Minutes


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
Ross P Buckley
ARC Laureate Fellow & Scientia Professor, UNSW Sydney
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

Plague, war, famine and death: the 2020s have so far been marked by the four horsemen of the apocalypse. Everywhere, the greatest toll has fallen on those most vulnerable, causing terrible damage to human development across the world. Yet, as we argue in our new paper, which will lead a special issue of the Banking & Finance Law Review on financial technology, an unexpected ally helps humankind battle the Four Horsemen: finance. Not too long ago finance was the problem child of human institutions. Yet, of late, it has proven effective in mitigating the impact of the manifold crises mankind is facing.

This experience suggests the decade of reforms following the 2008 global financial crisis were effective: finance has been largely resilient in the face of the crises of this decade, and has played important roles in responding to the pandemic, war in Ukraine, and sustainability crises in a range of developed and developing countries. The digitization of finance as well as financial supervision has been central to its positive role.

Looking forward, we suggest that global finance in the next decade will be driven by three central themes: sustainable development, increasingly rapid advances in technology, and a continual tension between economic, financial and technological globalization and fragmentation.

While sustainable development—as reflected in the United Nations Sustainable Development Goals (SDGs)—was a major focus before 2020, the pandemic plus an increasing range of climate, inequality and other sustainability crises have combined to drive the new consensus that sustainability is now a core financial regulatory objective that ranks alongside market efficiency, investor/client protection, market integrity and financial stability.

At the same time, the recent crises have highlighted the central and critical role of technology well beyond the previous trends of digitization and datafication of finance, economic activity and communications. Indeed, we suggest digital finance now plays three core roles in the fight against the Four Horsemen and in pursuit of the SDGs.

The first is that financial inclusion is more important than ever: when crisis mitigation relies on finance, financial exclusion can mean exclusion from crisis mitigants, in particular various types of government support payments. Enhanced access to payments and savings capacities, which allow people to conduct their lives far more efficiently and to think and plan longer term, is today a very high priority of financial regulation. With still over 1 billion people financially excluded, mostly in developing countries, digital finance, which has already facilitated the inclusion of well over a billion people in the last decade, may also speed development and support resilience and responses to future crises for those still in need of access to the financial system. Hence, the need to focus on new technologies to drive inclusion through digital payments, digital identity, and regulatory and supervisory technology.

The second role of digital finance lies in improving the allocation of existing financial resources to support sustainable development. This occurs through business models, incentives, policies and regulations that redirect financial resources both globally and in individual countries to provide SDG-related finance. Examples include ESG and green investment strategies, green investing quotas, the rapid growth of ESG-related awareness worldwide and capital provisioning based on long-neglected sustainability risk factors. Our paper explains how sustainability-oriented financial regulation can support financial stability, resilience and response to the Four Horsemen.

The third is the expansion of resources in the financial system: more people saving and investing provides more financial resources for sustainable development and crisis mitigation. For that, regulators must seek to further the innovation necessary for economic transformation. Again, digital finance may function as a catalyst. Particularly powerful are systems currently under development which reduce the cost of customer acquisition, combined with mechanisms to collect and use data for both regulatory and policy purposes and for individual investment and allocation decisions, such as the new European Single Access Point (ESAP).

How should we ensure financial stability, resilience, inclusion and sustainability, so that the financial system can be effective against the Four Horsemen? To answer this question, our paper synthesizes the core lessons of past decades to develop a three-tiered strategy: (1) digital financial infrastructure as the enabling base, (2) fit-for-purpose financial regulation built on a graduated, proportional, risk-based approach underpinned by technology, and (3) emphasis on the wider ecosystem, particularly relating to data strategies and support for financial and regulatory (!) research and development, through innovation hubs and regulatory sandboxes. Implementation of this strategy asks regulators to a) expand their skillsets, b) ensure openness to innovation, c) explore and mitigate new types of risks, in particular by incorporating the learnings from the natural, physical and social sciences, and d) acknowledge the necessity of learning from trial and error and of adjusting regulations on the run. All of this must be paired with efforts to ensure regional, or global, market access to sustainable finance and investment through some harmonization of core principles paired with expansion of mutual recognition schemes. Recognizing, across borders, sustainability as a core objective of financial regulation will be key to meeting these challenges.

If rightly designed and regulated, finance, particularly digital finance, offers the potential to support the world in realizing the SDGs and effectively battling the Four Horsemen. We will be addressing many of these issues in far more detail in our new book, FinTech, forthcoming with Cambridge University Press in 2023.

Douglas W Arner is the 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.

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

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


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