The Key Role of the Financial Regulation in FinTech Ecosystem: A Model Validation

摘要

The objective of this research is for describing the key role of financial (FinTech) regulation to manage the risks, keep-up the balance and stability of FinTech ecosystem from the highest impact of risks’ in this industry. FinTech lending has grown rapidly in recent years in many countries and becomes a promising business model in the future, because it is a disruptive innovation to today's financial and banking markets. The rapid development of FinTech lending due to the use of internet-based mobile application platforms, so that it is easily accessible by anyone and anywhere, it encourages an increase in lending to the customers, however credit risk (although absorbed by lenders or investors, still indirectly affects the platform operators), experienced an increase due to non performing loan or NPL. The increase in NPL is an important concern for FinTech lending industry stakeholders, and if it is not addressed it will disrupt the FinTech ecosystem, let alone cause systemic risk, it will be the toughest disturbance in the stability of the FinTech ecosystem, considering that the risk of FinTech lending has a significant influence on the FinTech ecosystem, so that if the level of risk increases, it affects the FinTech ecosystem, this condition requires the key role of financial (FinTech) regulation that can mitigate risk, because financial (FinTech) regulation has a very strong correlation or relationship, so that it can mitigate the risks faced. Another key role of financial (FinTech) regulation is to strengthen the FinTech ecosystem, with new elements needed by the industry and encourage the industry to develop the concept of ecosystem-based risk management in this industry, because it is believed that this concept can mitigate risk as well. Fundamental risks in the FinTech lending industry include: (i) credit risk, (ii) operational risk and (iii) liquidity risk, meanwhile pandemic risk is a new element that is also being investigated, the results of the study show that pandemic risk has a positive correlation with start-up FinTech companies, this means that a pandemic still allows this industry to develop and grow. Financial (FinTech) regulation as a key role is supported by 2 (two) main rules, namely (i) regulatory and (ii) supervisory and 2 (two) complementary provisions to strengthen regulations related to IT process support, namely big data analytics, automation & robotics and FinTech consumer protection agency. The FinTech ecosystem also needs to be strengthened, with new elements needed to exist, such as credit insurance institutions that stand alone and are separated from traditional financial institution element and FinTech consumer protection agency.