China’s top banking regulator says that the fintech sector is more susceptibility to new forms of data-driven monopoly formation.
Guo Shuqing (郭树清), chair of the China Banking and Insurance Regulatory Commission (CBIRC), warned of new forms of “too big to fail” risk in the fintech sector, pointing in particular to “a small number of tech companies who occupy a dominant position on the small-sum payments market, affect the interests of a large section of the population and possess key financial infrastructure.”
“Certain large-scale fintech companies are involved in various finance and tech areas and engage in cross-sector mixed operations…attention must be given to the complexity and spillover effects of the risk of these institutions, to promptly engage in targeted bomb disposal and remove new forms of systemic risk.”
Guo made the remarks during a speech delivered at the 2020 Singapore Fintech Festival on 8 December.
The CBIRC chair said that the fintech sector’s distinctive characteristic is that the “winner takes all.” While traditional anti-monopoly legislation focuses on trust agreements, market abuses and operator concentration, the fintech sector has seen the emergence of new forms of monopoly conduct, with big tech companies often enjoying data advantages that enable them to impede fair competition and obtain “excessive” returns.
Guo said that this is the reason that the Chinese government has clearly demarcated data as a factor of production alongside labour, capital and technology, as well as highlighted the need to clarify data ownership rights as soon as possible, improve mechanisms for data circulation and price formation, and proposed the “Global Data Security Initiative” (全球数据安全倡议), to improve international coordination with regard to cross-border data flows.
In addition to data concerns, Guo also highlighted Internet-related risk in the fintech sector, pointing out that at present the off-counter transactions rate for China’s banking sector exceeds 90%, and financial services are already highly reliant upon Internet usage.
“Compared to traditional risk, online risk spreads more rapidly across a greater scope and has a greater impact. Abrupt Internet security risks also make greater demands of the emergency handling capabilities of financial institutions…for this reason [we] must focus on Internet security issues.”
Guo also said that regulators need to maintain an “actively prudential attitude” towards fintech, of maintaining and encouraging innovation, while also “firmly defending the baseline.”