Regulatory Response to the Rise of Fintech Credit in The Netherlands

Abstract

The rise of financial technology (fintech) driven business models in banking poses a challenge for financial regulators. While the positive effects on the banking sector in terms of greater diversity and competition are generally recognized and encouraged by regulators, the nature of fintech business models may increase the risk of financial instability. Regulators are exploring ways to resolve this dilemma. The paper in hand makes a contribution to the literature by providing a framework for resolving the dilemma that is evaluated in the context of the regulatory response to the rise of fintech credit in the Netherlands. The semi-structured interviews which we conducted with four senior Dutch regulators resulted in three areas that–from their perspective–required urgent action: fintech credit companies need to lower the risk of overlending, increase pricing transparency, and improve lending standards. These findings were confirmed by the results of they survey among fintech credit clients. The current regulatory response to the rise of fintech in banking in the Netherlands provides an interesting case study that delineates the features of the future regulation of fintech in banking.