Take measures to guard against potential risks

Yang Dong

The rapid growth of financial technology, AI, big data, cloud computing, block-chain and search engines in recent years have enabled capital investors and providers to connect more closely and easily with other players, and given rise to new types of financial activities.

It has made it easier for small and micro-sized enterprises to get loans at lower interest rates, making financing more inclusive and mutually beneficial. But the problems and risks it has created also pose a new challenge to regulators.

The diverse forms of financial innovation are fine. Yet the unlawful acts these forms of innovation can cover because of their sophisticated nature are very difficult for regulators to detect. The risks include data security problems such as data fraud and leakage, credit risks brought about by information asymmetry owing to insufficient information disclosure by business owners.

Financial technology should help solve the problem of information asymmetry, by providing detailed information on every aspect of business that will help determine the prices of financial assets and reflect the credit risks. That's why the importance of traceability in such information is greater than the pure statistics of big data.

Many P2P (peer-to-peer) platform owners cannot be held accountable even after breaking the law because the information they disclose to start their businesses is not sufficient enough to bring them to justice. If the regulators cannot find the loopholes and plug them in the early stages, investors may continue to incur losses, soiling the reputation of the industry.

Besides, many traditional financial risks have escalated because of the development of new technologies, which the regulators need to curb through targeted measures.

Yang Dong, vice-dean of Law School, Renmin University of China