Governing Fintech and Fintech as Governance: The Regulatory Sandbox, Riskwashing, and Disruptive Social Classification

ABSTRACT

This article evaluates the sandbox approach as a regulatory answer to the challenges financial technology brings to finance and social relations. Taking fintech as a sociotechnological phenomenon embedded in discourses of solutionism and innovation, we show that the regulatory sandbox accepts these discourses. Instead of containing fintech, the sandbox is designed in a way that advances riskwashing of fintech even if it is disguised as risktaming. Next, we demonstrate fintech’s problematic nature that regulation should control. First, we propose that through its information processing capacity, fintech accelerates the transition from bank-based to market-based finance. Second, we demonstrate that fintech as part of a fintech-financialization apparatus has catallactic and value-extracting governance effects. Third, inserting the fintech-financialization apparatus into Fourcade and Healy’s argument on the social stratification effect of the data-driven economy, we argue that it also has a socially disruptive potential. We critique the regulatory sandbox for being a facilitator to this process and recommend increasing the number and power of veto players and veto points in complex regulatory regimes.

KEYWORDS:

• Fintech
• financialization
• regulation
• governance
• banking
• sandbox

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 From Citibank to Hungarian regulators, Microsoft CEO to there is a growing acceptance of fintech for increasing social inclusion: Citibank: https://www.citivelocity.com/citigps/banking-next-billion/ accessed at 10.12.2020

Hungarian regulator: https://pages.cfte.education/cfte-is-in-sff accessed at 10.12.2020

CEO of Microsoft https://www.youtube.com/watch?v=kSE6eWP_QeU&feature=youtu.be accessed at 10.12.2020

2 https://www2.deloitte.com/uk/en/pages/financial-services/articles/journey-through-financial-conduct-authority-regulatory-sandbox.html?id=gb:2wb:3dn:4ECRSSandboxJourney:5eng:6fs:InnFin accessed at 6.26.2020

https://www.raconteur.net/finance/fca-sandbox-fintech accessed at 6.26.2020

https://www.bakermckenzie.com/en/-/media/files/insight/publications/2018/12/guide_intlguideregulatorysandboxes_dec2018.pdf accessed at 6.26.2020

https://ftalphaville.ft.com/2018/12/05/1543986004000/A--fintech-sandbox--might-sound-like-a-harmless-idea--It-s-not/ accessed at 6.26.2020

https://www.moodysanalytics.com/regulatory-news/Oct-23-19-FCA-Regulatory-Sandbox-Open-for-Applications-to-Cohort-6 accessed at 6.26.2020

https://www.ftadviser.com/regulation/2020/05/05/fca-accelerates-sandbox-pilot-amid-covid-19-concerns/ accessed at 6.26.2020

3 https://www.fca.org.uk/firms/innovation/regulatory-sandbox accessed at 6.27.2020

Additional information

Notes on contributors

Eric Brown

Dr. Eric Brown is Senior Lecturer at International Business School in Budapest. Previously, he taught at Central European University Business School and Eötvös Loránd University, Budapest and worked for the Center for Integrity in Business and Government of the former. His Ph.D. is in Philosophy from Boston College. His research is generally on business ethics, political philosophy, technology studies, and the intersection of philosophy and economics. Particular interests are in global and systemic issues in finance, understandings of rationality, the vulnerability of persons and institutions, and corruption.

Dóra Piroska

Dr. Dóra Piroska is Associate Professor at Corvinus University of Budapest, she is also a Visiting Professor at the IR Department of Central European University. She holds a PhD from the CEU in Political Science. Her research focuses on the political economy of banking and finance, banking regulation and development finance both at the national and international levels. She has a particular interest in the Eastern European region. Recently she has published on the macroprudential bank regulation, the Banking Union's perception in Eastern non-Eurozone member states, and on the crisis-management approaches of the Troika institutions. She published in JCMS: Journal of Common Market Studies, New Political Economy, Competition and Change, Journal of Economic Policy Reform, Policy and Society, Third World Thematics, in thematic volumes with Routledge and Oxford University Press, and in a number of Hungarian outlets.