Fintech and your business
Five things you need to consider
14 December 2018
1. Regulation: Fintech and regulation – do you need to be compliant?
Fintech creates tension between the existing financial regulatory environment and the challenges to that framework brought about by new technologies. For financial institutions, embracing new technologies means considering questions such as: What are the regulator’s expectations? How does adopting new technology affect operational risk? Will the cybersecurity profile of the institution change as result? For non-financial institutions seeking to provide financial services, understanding the multi-layered regulatory framework is key – is a licence necessary for the service? Is there a regulatory “light” regime available? What conduct rules and other obligations apply to the product?
2. M&A: Should you be buying or competing with fintech businesses?
Fintech is spurring a wide range of M&A activity as new banking startups expand through acquisitions and established financial institutions jump-start technological transformation by acquiring emerging fintech companies. It is not only in the financial sector that fintech is driving acquisition: corporates who had not until now been involved in financial services are integrating solutions that would have traditionally been the stronghold of financial services. M&A is a specialised pursuit and one that established players may not always be familiar with.
3. Intellectual Property: Are you protected?
Fintech is driven by innovation. Developing a strategy to identify when and how these innovations can be protected through intellectual property (IP) rights is critical to any company dealing with fintech. It is through the exploitation of these IP rights that the value of the innovation can be realised. This is especially important in M&A transactions where acquiring underlying IP, and ensuring that there are no conflicting claims to that IP, drives the value of the deal. Companies need to implement processes to protect and defend these important assets, particularly if collaborating with others in fintech.
4. Data protection: A growing threat?
Cybersecurity and data protection are key concerns in all technology business, and fintech is no exception. Traditional financial sector service provision involves complex questions of data protection and security and as financial sector players move further online and embrace big data and other cuttingedge technologies, their businesses increasingly resemble those of the leading global technological innovators.
5. Technology: Are you prepared for the change?
Products, service offerings and speed to market depend on access to the right technology, and only those who embrace this technology will succeed. For emerging fintech businesses, leveraging new technology means creating ground-breaking, untested business models – identifying key regulatory constraints, crafting an appropriate contractual structure and devising systems to identify and manage legal risks. For an established business, transforming its existing business means overcoming the inertia of legacy systems and processes and finding ways of doing new things within a framework developed over many years.