行业报告 Industry Report
The authors of this report have outlined some of the risk and compliance concerns surrounding digital transformation, regulatory reforms on the horizon and suggested some lessons firms might learn from innovators and early adopters. The final article provides an overview how the COVID-19 pandemic poses some real risk for organisations internationally and what compliance officers' need to consider as they continue to face these current risks and challenges. Although the report focuses on China, it is applicable to all large organisations internationally involved in or contemplating digital transformation. The report provides an in-depth overview of the issues that need consideration and some of the bigger regulatory questions that need to be considered by compliance and legal teams.
As you are aware, digital transformation is happening at pace in internationally, but especially in China with the rise of dominant technology providers and the provision of services which expand and diversify the landscape of the financial services sector. Online banks and financial technology companies (fintechs) are offering a wide range of financial services that leverage technology to develop a competitive edge in products offered to customers in China and Hong Kong.
Firms involved in or planning digital transformation need to be aware of the risk and compliance difficulties that advanced technological platforms can introduce and understand the vulnerabilities they can create for customers. Digital transformation needs to be accompanied by improvements in culture, conduct risk, data protection, privacy, cyber security, risk management and third-party outsourcing.
As we have seen from the Ant’s Groups US$37 million initial public offering and dual listing in Shanghai and Hong Kong, micro-lending and big data have thrown up a number of challenges for all regulators that are part of a digital transformation “re-think” about how safe these products are for consumers. Global regulators are concerned about the significant pace of digital transformation in parts of the financial sector that are “outpacing” regulation and the government quite rightly is cautious about systemic issues and is pushing for reform and introducing new rules for fintech firms. As a first step, Chinese regulators are drafting new rules and regulations that will require micro-lenders like the Ant group to fund at least 30 percent of any loan with banks, share customer data and have prudential requirements. This will change business equations in the market.
Regulators are also concerned about the systematic risks and that fintech’s introduce and that they may become “too big to fail” if left unchecked without appropriate regulation. Internationally, regulators have been aware for some time that they do not have the regulatory line of sight they need in the event of a fintech failure, that would affect hundreds of millions of people. Regulators internationally, will turn their eyes to this space this year.
Given this background, the report may help firms to consider wider regulatory developments on the horizon and the appropriate compliance procedures that can address both domestic and international regulatory obligations especially where they are involved with digital transformation and the complex issues it introduces.