Fintech regulation: how to achieve a level playing field

FSI Occasional Papers  |  No 17  | 
02 February 2021
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 |  27 pages

How regulation should evolve to encourage fair competition between traditional banks and new fintech and big tech players is now being debated. Some advocate moving from an entity-based to an activity-based regulatory approach under the principle "same activity, same regulation". However, there is only limited scope for further harmonising the requirements for different players in specific market segments without jeopardising higher-priority policy goals. In fact, there seems to be a strong case for relying more, and not less, on entity-based rules. The regulatory framework should incorporate entity-based requirements for big techs in areas such as competition and operational resilience that would address the risks stemming from the different activities they perform. This strategy would not only help regulation to achieve its primary objectives, but would also serve to mitigate competitive distortions. 

Keywords: big techs, competition, financial stability, activity-based regulation, anti-trust, AML/CFT, consumer protection, banks, payment services

JEL classification: G18, G21, G28, L41, L51