Prudential Regulation of the Banking-Like Business of Fintech Companies in China

This article discusses the impact of FinTech companies engaged in banking-like business on the financial market. The operating model of FinTech company’s banking-like business is usually that Internet companies engage in activities like payment, wealth management, making loans through their financial services companies. These financial service companies rely on the strong technical support of Internet technology groups, the group’s large and stable customer base, and complete business chain. FinTech has positive impact on the financial market but also brings potential prudential risks. Because these FinTech giants, while engaged in banking-like businesses and already systemically important, are not as tightly regulated as commercial banks. This article focuses on China’s FinTech market, and discusses how to prevent the systemic risks brought by FinTech companies’ banking-like business from the perspective of prudential regulation. To find effective solutions, this paper will analyze the operation models of FinTech companies’ banking-like business and its potential risks. This paper suggests that the prudential supervision of FinTech’s banking-like businesses can be improved in terms of regulatory sandboxes, authorisation and exit mechanisms, liquidity risk, regulatory arbitrage, and RegTech.