Which financial earmarking policy is more effective in promoting FinTech innovation and regulation?
Industrial Management & Data Systems
ISSN: 0263-5577
Article publication date: 24 August 2021
Issue publication date: 5 October 2021
Abstract
Purpose
Recently, the concept of financial technology (FinTech) has attracted extensive attention from international organisations and regulators, in particular, how to achieve a “win–win” situation between financial institutions' FinTech innovation and effective regulation has become a hot topic. This study purposes to explore the evolutionary game relationship between FinTech innovation and regulation by constructing both static and dynamic earmarking game models.
Design/methodology/approach
A simulation experiment was conducted using primary data obtained from a commercial bank in China.
Findings
The results of the theoretical analysis of evolutionary game models were consistent with the corresponding simulation results, proving the validity of the proposed evolutionary game models. It was also found that the dynamic earmarking game model was more stable and effective than the static earmarking game model in promoting FinTech innovation and regulation. Furthermore, when the regulators utilised a dynamic earmarking mechanism, the evolutionary path of financial institutions and regulators' behaviour strategies took the shape of a spiral and eventually converged to a central point, indicating the existence of an evolutionary stable strategy and Nash equilibrium. Finally, because the behaviour strategies of financial institutions were mainly influenced by the regulators' policies, the regulators were inspired to adjust the corresponding regulation policies on FinTech innovation.
Originality/value
This study bridges the knowledge gap in the existing literature on financial innovation and regulation, in particular by establishing evolutionary game models from the perspective of financial earmarking policies. Also, the case study for simulation experiments can gain a more intuitive insight into FinTech innovation and financial earmarking policies.
Keywords
Acknowledgements
The work has been supported by Soft Science Research Program of Zhejiang Province (No. 2020C25004), National Natural Science Foundation of China (No. 51875503, No. 51975512), Zhejiang Natural Science Foundation of China (No. LZ20E050001, No. LY19G030016).
Citation
Xu, Y., Bao, H., Zhang, W. and Zhang, S. (2021), "Which financial earmarking policy is more effective in promoting FinTech innovation and regulation?", Industrial Management & Data Systems, Vol. 121 No. 10, pp. 2181-2206. https://doi.org/10.1108/IMDS-11-2020-0656
Publisher
:Emerald Publishing Limited
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