A Study on Regulatory Scheme in Online Lending to SME Financing

The regulation in the innovative FinTech industry is three-folded. Firstly, as the market for the FinTech expands, rising scrutiny is crucial in sustaining confidence and trust among stakeholders in the industry. As small and medium-sized enterprises (SMEs) encounters the funding gap, stakeholders including regulators may stumble over the “Regulation Gap”, despite of the advertised self-regulation. Therefore, regulators need to work with FinTech firms to safeguard consumers as well as businesses. Secondly, effective financial regulation is crucial to the success of the financial services industry and FinTech. In response to the rapid change in financial industry, regulators need to keep up with new business models entering the financial system. With the rapid rise of FinTech and new online technologies in industry convergence, governmental regulation can benefit from being structured to respond dynamically to the changing financial landscape, by changing from vertical IT silo to open system, from positive to negative regulatory system, and from ex-ante to ex-post regulation. And thirdly, a more supportive and flexible regulatory approach with level playing field along with the innovation pathway is essential for the success of the early adaptors in the newly emerging FinTech businesses. Further, the convergence of the regulatory schemes in global standard of FinTech industry is needed to support innovative SMEs growth in FinTech industry itself as well as in other industry with innovation asking proper funding.