The Law of Fintech: How Artificial Intelligence and Innovative Technologies Contribute to a Sustainable Financial Industry and Its Effective Regulation

Fintech, also known as financial technology, is a term used to describe technologically enabled financial service innovations that have the potential to create new business models, applications, processes, and products, all of which could have a meaningful impact on the financial markets and institutions as well as the provision of financial services. Fintech is perceived as the biggest revolution in the history of the modern financial services industry, contributing to a more efficient, inclusive, and sustainable economy. A task group on digital financing has been established by the United Nations (UN) with the aim of exploiting digitalization to create a financial system that is focused on the needs of global citizens and to accelerate the UN’s Sustainable Development Goals. Against this background, the chapter aims to investigate the exact meaning of Fintech and to explore the best approach of regulating Fintech to ensure its sustainable growth. The chapter first discusses a variety of technology developments in financial services, especially artificial intelligence (AI), that have formed the foundation of modern Fintech. Then, the chapter evaluates the main business models of Fintech, which are operated by different entities like Fintech start-ups, incumbent financial institutions, and BigTech companies. It also assesses the key elements of an effective regulatory framework for Fintech, including a regulatory sandbox, regulatory technology, data protection, and corporate finance law. Finally, the chapter sheds light on how AI and other innovative technologies contribute to the development of a more sustainable financial industry that benefits most people, companies, and countries.