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Wu Xiaoling: Implement tiered license management for platform fintech companies and explore to establish personal data account system

Time: 2021-06-29 13:21 Print

On June 10, the China Wealth Management 50 Forum (CWM50) and Tsinghua PBCSF co-launched the project of "Study on the Regulation of Platform Fintech Companies". Wu Xiaoling, initiator of the project, Chairwoman of the Board at Tsinghua PBCSF, and General Counsel of CWM50, briefed on the idea and background of the project.

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She noted that, while entering a crucial period of the digital transformation, large platform fintech companies are playing an increasingly important role in social and economic development. Yet problems and exposed risks attract great attention. For this purpose, the project was launched to study the supervision problem of platform fintech companies. The team argues that, according to the nature of the financial business chain it enters, the node financial services of a platform fintech company should be subject to supervision and licensed operations; all data companies that cooperate with financial institutions should be subject to unified and differentiated financial regulation according to the nature of the cooperation, with the intensity of regulation varies according to the level of its engagement in the financial business. At the same time, to adapt to the development of the digital economy and to balance personal data protection and data resources mining, the report also proposes to explore the establishment of a personal data account system.

The following is the full text of the speech: 

Implement tiered license management for fintech companies and explore to establish a personal data account system 

--a speech at the launch event of the project "Study on the Regulation of Platform Fintech Companies" 

June 10, 2021

Wu Xiaoling

Dear guests, colleagues, and friends, Thank you for attending the launch ceremony of the project "Study on the Regulation of Platform Fintech Companies". 

While digital transformation is entering a crucial period, large platform fintech companies are playing increasingly important roles in social and economic development. The development of information technology and platform economy has refined the division of labor. Starting with third-party payment, large technology platform companies have entered the field of financial services by harnessing data sources and arithmetic algorithms. Platform fintech companies are engaging in certain nodes of traditional financial business and carry out financial services in regard to the specific business node, which is the result of social division of labor in the era of digital economy. 

The merit is that they have expanded the scope and improved the efficiency of financial services and customer experience, and promoted the digital transformation of the financial system. However, they have also brought new risks and challenges in areas including monopoly of platform companies, protection of personal privacy, the discrimination of algorithms, over-indebtedness of individuals, credit risk, and systemic financial risk, where we suggest, high priority should be given to explore and study on the regulation of platform fintech companies. 

We believe that the nodal financial services should be regulated and licensed according to the nature of the financial business chain that they are engaging in. We should further classify traditional business license by business process, implement tiered license management for platform fintech companies, and integrate consistent and differentiated regulatory policy. Cases to be followed include the establishment of a third-party payment license, independent of banks, by the regulator; and the issuance of payment licenses in banking business to companies conducting third-party payment business to strengthen supervision. 

In addition to the supervision of credit risk, the supervision of the nodal financial business should focus more on the supervision of data governance, including the legality of data collection, the protection of personal privacy, the ethics of algorithms, and the security of data and technology. We believe that all data companies that cooperate with financial institutions should be subject to unified and differentiated financial regulation according to the nature of the cooperation, with the intensity of regulation varies according to the level of its engagement. 

To adapt to the development of the digital economy, and to balance personal data protection and data resources mining, the report also proposes to explore the establishment of a personal data account system. Data is an important resource for the economy, and the value of data can only be realized in practice and application. We recommend that platform companies create data accounts for individuals, through which individuals' right should be fully informed about data collection. The action ensures the individuals’ data rights be fully protected, and regulation in the data collection process be standardized . At the same time, we can eliminate illegal actions in data processing, and promote the standardization and development of data collaboration. 

Processed to be desensitized and untraceable, the data can be made into products and put in for trade, which reflects the fact that data is a property shared by individuals and platforms. With the authorization of the individual, the third parties may access the personal data accounts and provide value-added services to customers for a fee , which also lies in the key feature of the public data resource property. We hope that personal data accounts can set a sound policy foundation for the collaborative development and use of data resources. 

As human society is entering the era of digitalization, we are facing more challenges, and the competition between countries will be gradually shifting to the digital field. We are hoping that our study will inspire more valuable ideas and quality researches, to promote better economic and social development in China and the world.

Thank you!