Third-Party Payment： Supervision and Self-Regulation of Internet Finance

The Electronic Payment Act, promulgated on February 4, 2015, marks a milestone in Taiwan’s development of online third-party payment in the field of Internet finance. This article starts from the characteristics of finance and network to the phenomenon of financial exclusion in traditional finance. It further discusses how integration of finance and network facilitates inclusive finance and financial democracy, allowing a more equitable distribution of financial resources. As financial development always exerts a large impact on the society, it should be appropriately supervised. This article argues that the supervision should balance between financial stability and financial innovation and that self-regulation is a more desirable financial regulatory model. Third-party payment deserves special discussion because the payment procession is the key instrument to secure online transactions as well as accumulate users’ credit information and transaction records. In terms of regulating this specific form in internet finance, Taiwan and countries around the world have focused on the following points — requirements for the establishment of payment processing institutions, prevention of money laundering, protection for the funds, and interests of consumers. The criticism and advice the Act has received from scholars and practitioners are illustrated in paragraphs. In addition to discussions on the current regulations, this article also elaborates the proper ways to develop financial innovation to attain inclusive finance and financial democracy after the enactment of the Act. This article argues that third-party payment platforms should develop investment funds or online micro-lending by leveraging big data and integrating with e-commerce platforms since investment funds maximizes the investment power of small funds while micro-lending accelerates lending process and reduces default risk. In this way, everyone can enjoy suitable financing instruments meeting their needs. Such combination will be known as ""platform of finance"". Both supply and demand sides release trading information and matches are created with the help of technology and credit rating on the platform, reaching the vision of financial instruments accessible for all.