On Friday (Jan. 7), the People’s Bank of China released its Financial Science and Technology Plan for 2022-2025, which aims to support the growth of the FinTech industry. In it, they suggest that although open banking is popular with consumers, regulators may need to step in to strengthen its control over how technology firms collect and use bank data.
In recent months, China has tightened its grip over internet giants, hitting firms like Alibaba and Tencent with antitrust probes and fines.
In November, a senior member of the PCOB said that China will propose new regulation to curb unauthorized data collection by financial firms. More recently, the government adopted new regulations to look at companies’ algorithms and order changes if necessary.
See also: The Five Things That Will Determine The Success – or Failure – of China’s Digital Yuan Wallet
This new FinTech plan seeks to “strengthen the application of financial data elements, with the goal of deepening the structural reform of the financial supply side and accelerate the digital transformation of financial institutions,” based on an unofficial translation.
The PBOC is aware of the power of data for financial institutions to achieve this digital transformation. Thus, the plan contains several elements fostering data sharing, but it also emphasizes the need to “strengthen the prudential supervision of financial science and technology,” suggesting new regulations may be adopted.
The document released by the PBOC outlines eight goals, although it doesn’t explain how it will attain them.
The first goal is to “strengthen the governance of financial science and technology,” according to an unofficial translation. This first mission suggests that the government will be more involved in monitoring the growth of the FinTech industry to avoid abuses and scandals.
Read more: China Imposes More Supervision Over Payments Ecosystem
The second goal is more interesting as it suggests that open banking may see more public support in the Chinese economy.
This second aim says that the PBOC will “comprehensively strengthen data capacity-building, promote the orderly sharing and comprehensive application of data under the premise of ensuring security and privacy, fully activate the potential of data elements, and effectively improve the quality and efficiency of financial services,” according to unofficial translations.
The specific mention of promoting data sharing, while ensuring data protection and privacy, could indicate that the government may enact new regulation to foster the timid advancements of open banking in China. Yet, the document falls short of including any indication on possible open APIs, standards or if a possible legal mandate to share data will be limited to financial institutions, or it could also include big technology firms.
The third goal aims to build “a green and high-availability data center, set up a secure and ubiquitous financial network, lay out an advanced and efficient computing power system, and further consolidate the ‘digital base’ of financial innovation and development,” according to unofficial translations.
It is unclear if this suggests the creation of a state-owned cloud computing infrastructure where companies could upload information or the launching of private interconnected data centers that will provide access to any company that requests it.
This idea of having a common infrastructure accessible to all FinTech companies is reinforced by the fourth, fifth and sixth aims of the agenda, where the PBOC talks about building an integrated operation center with business, technology and data integration.
But the seventh goal is where the PBOC suggests that these goals won’t be left for the market to decide how to achieve them.
The final goal proposes to “accelerate the all-round application of regulatory technology, strengthen the capacity-building of digital supervision, implement penetrating supervision of financial technology innovation, and build a strong risk firewall of finance and technology.”
This strongly suggests the government’s intentions to closely monitor the evolution of the FinTech industry in China, to enact new regulations for more access to companies’ algorithms and to introduce limits on what big tech companies can do in financial services.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More