Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Alipay vs Predatory Lending

Old-fashioned predatory lending might be one of the biggest threats to cutting-edge digital payment platforms. Ant Financial learned that lesson the hard way after getting into trouble with the Chinese government.

Ant will cap interest on loans on Alipay; and its microlending platform Sesame Credit, at 24% starting November 30, Reuters reported. The move came after the Chinese government announced a crackdown on predatory lending.

That prompted Ant to take a look at some of its lenders and discovered that some of the interest rates were above the legal limit. It also found what was described as “inappropriate collection methods.”

The move came after the People’s Republic ordered provincial authorities to suspend regulatory approval for new internet microlenders and restrict access for lenders. If the loans were too high for the Chinese government; which has no reputation as a guardian of individual rights, one has to wonder how bad they were.

Battles over Financial Regulation begin will spread Worldwide

The next obvious crackdown on such loans will come here in the U.S. where they are also proliferating. A major problem will be companies using technology such as the blockchain to make loans across national borders.

Financial regulation has also become controversial here in the USA: where President Trump is feuding with liberal bureaucrats for control of the Consumer Financial Protection Bureau. The Bureau apparently had two leaders; Obama admiration holdover Leandra English and Trump appointee Michael Mulvaney, for a short while.

English even went to court and tried to get a court order to keep Mulvaney out of office. U.S. District Judge Timothy J. Kelly finally ruled that Mulvaney is the legal director on 28 November, The Washington Post reported.

Even with that ridiculous dispute over, the battles over consumer protection and financial regulation are only beginning. China’s government’s decision to take control of consumer finance might give it a crucial edge in the coming international Fintech wars.

Hopefully, the U.S. will not concede control and regulation of international financial technology over to the People’s Republic or the European Union. If that happens, America might find itself helplessly behind in those crucial fields. The last thing the world needs is the Chinese government acting as sheriff over the Wild Wild West of cutting-edge finance.