Fintech and the Innovation Trilemma

Fintech and the Innovation Trilemma

Whether in response to robo advising, artificial intelligence, or crypto-currencies such as Bitcoin, regulators around the world have made it a top policy priority to supervise the exponential growth of financial technology (or “fintech”) in the post-crisis era. However, applying traditional regulatory strategies to new technological ecosystems has proved conceptually difficult. Part of the challenge lies in managing the trade-offs that accompany the regulation of innovations that could, conceivably, both help and hurt consumers as well as market participants. Problems also arise from the common assumption that today’s fintech is a mere continuation of the story of innovation that has shaped finance for centuries. This Article offers a new theoretical framework for understanding and regulating fintech by showing how the supervision of financial innovation is invariably bound by what can be described as a policy trilemma.

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