Anticipatory FinTech Regulation: On Deploying Big Data Analytics to Predict the Direction, Impact and Control of Financial Technology

Abstract

Financial Technologies (FinTech) lie at the heart of disruptive innovation comprising critical infrastructure for much of modern business practice and national security. Modern FinTech sectors are data driven – startup finance, commodities and investment instrumentation, payment systems, trading platforms, exchange markets, market failure regulation, underwriting and syndication, risk assessment and management, advisory services, commercial banking, transaction settlement through financial intermediaries, corporate disclosure and governance, and currencies. This paper demonstrates that most FinTech innovations, scholarship and public policy development are significantly informed by big data analysis balancing: (1) FinTech innovation incentives, (2) market failure forensics, and (3) public policy development. FinTech almost always deserves a wary eye – experience reveals that many FinTech mechanisms externalize social costs of their design flaws, opacity/obscurity and malfunctioning. Some FinTechs appear intended to skirt regulation suffering regulatory lag, the delay following the first appearance of novel FinTechs and the later development, assessment, and deployment of reliable regulatory mechanisms. FinTech policy issues span from the traditional regulation of financial markets, through systemic costs of FinTech intellectual property (IP) concerns and ultimately to national security risks imposed by the financial system’s centrality among critical infrastructures.