Nice overview of the 12 things regulators should do, in short:
1. Require stronger controls on consumer data
2. Expand traditional data sources
3. Include Fintech innovation in their response to the SME funding gap
4. Provide tax incentives to promote the development of market place lenders
5. Improve regulatory reporting requirements
6. Establish a single licensing agency
7. Clearly define roles and responsibilities in the debt collection MPL
8. Balance the interest of borrowers and the profitability of the MPL industry.
9. Protect Investors through strengthening existing securities laws
10. Rely on the traditional banking sector for clearing and settlement
11. Introduce Risk retention and capital requirements for fintech companies
12. Allow secondary servicer agreements to reduce counterparty risk
Fintech is everywhere these days, and for good reason. The financial technology sector, which includes companies like LendingClub, Square and Kabbage (together termed Marketplace Lenders (MPLs) has disrupted traditional banking practices like loans and payments. Many people have embraced this, and the result so far has been easier online offerings and more competition. There is, however, a possible negative effect of fintech’s rise too: the increase in risk for the financial system as a whole, as fintech tends to be un- or under-regulated. Regulators therefore have the unenviable task of regulating fintech innovations in a way that reduces systemic risks while also allowing for their further development.