More than 10 years have passed since the global financial crisis broke out, and the financial institutions’ ability to rethink and sophisticate their business has been growing relentlessly. Prof. Saule T. Omarova, law, argues in her latest work that while we are now more cognizant of, and to an extent protected from, the risk in some financial products, the financial system could be ill-equipped for the latest technological innovations in finance, otherwise known as fintech. In her research paper, New Tech v. New Deal: Fintech As A Systemic Phenomenon she suggests that the fintech revolution can’t be as neutral as some actors pretend, because finance is “a matter of utmost and direct public policy significance.”
Omarova writes in New Tech v. New Deal that if we blur the public policy dimension in fintech, and grasp only the private dimension of how it enables transactions, we misrepresent its systemic risk. By doing so, she warns, we help new financial and tech conglomerates avoid financial regulation and circumvent the fundamental separation between banking and commerce, giving them a carte blanche to engage in riskier activities for consumers. This reflection is at the very core of Omarova’s pro-regulation stance, made clear throughout her research work and more recently in her testimony before the Senate two weeks ago.