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.

A Critical History of Poverty Finance

“…A key technique for doing so has been to carve out time-bound or product-specific regulatory exceptions for experiments with new activities targeting the poor. So-called 'regulatory sandboxes' for fintech applications -time-limited, product-specific licences for particular companies to conduct 'experiments' with 'innovative' practices and technologies -are a good example (see Brown and Piroska 2021). The World Bank and the G20, together with a number of central banks and financial regulators in both the Global North and South, have also increasingly promoted and coordinated targeted regulatory frameworks for fintech applications aimed at promoting 'access' to finance for the 'unbanked' .…”

The fintech transformation of banking: Governance dynamics and socio-economic outcomes in spatial contexts

“…In the Global South and China, where digital solutions fill the market gap, fintech represents not only the substitution of standardized banking functions but also the substitution of banks as intermediaries (Langley, 2016;Brown & Piroska, 2021;Kong & Loubere, 2021). Examples include credit scoring and lending in developing countries with weak banking systems (e.g., DigiFarm in Africa) (Brooks, 2021) or public governance that allows the replacement of banking activities with fintech (e.g., lending platforms and an industry-specific JD platform in China) (Kong & Loubere, 2021).…”

Expansion of servitization in the energy sector and its implications

“…Instead, they should act in the direction of facilitating the field of experimentation and deriving advanced alternatives (Knowlton, 2021;van der Waal et al, 2020). Moreover, it is necessary to promote social discussion by sharing the cases' conflicts and how to develop the discussion (Alaassar et al, 2020;Brown & Piroska, 2022).…”