LONDON: There’s an interesting global debate about the role of FinTech companies in loans and credit – whether they should be regulated and, if so, to what end.
China’s P2P lending market grew massively during the early 2010s after a tightening of bank credit, but saw the collapse of many players in the last decade, forcing the government to subsequently place stringent curbs on such lending activities. A 2018 media report showed that among the more than 400 P2P platforms that collapsed in China from June to August of that year alone, included PPMiao, which saw as many as 4,000 people losing as much as US$117 million.
This model has seen more than 1,600 FinTech firms operating in the country with the industry acknowledging the importance of regulation in this growth. He added that “smart regulation has paved the way” for FinTech in the country to become “so ubiquitous that it will soon… be seen as a ‘fourth platform,’ alongside the internet, mobile and cloud” and “will be an intrinsic part of almost every digital experience”.It is important to view the latest salvo between China’s regulators and the P2P sector, which led to the Ant Group suspending its IPO, in this context. Ant’s IPO was hugely exciting.
Although 40 per cent of Ant’s revenues came from the lending, they only came up with 2 per cent of that amount themselves, passing the rest of the exposure onto banks.However, if Ant were a bank or formally regulated lender in China, they would be required to provide at least 30 per cent of that loan amount.
However, the regulators concerns still remained - how were they to balance innovation and growth in the sector with risk management and accountability? Broadly though, the trend seems to be for greater regulation to manage the industry with regulatory hurdles in some countries in the region proving to be onerous.
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