Regulation and FinTech – Team Talk Tuesday – #TTT

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For most start-ups legal and regulatory aspects are pushed aside until they become unavoidable. In FinTech however, regulation is quickly becoming one of the key elements for getting a company off to a flying start. Many start-ups actually want to be regulated because it adds a level of protection and certainty for the consumer. Given the recent financial crisis and the development of the untrustworthy ‘payday’ loan companies – many FinTech companies stress their focus on transparency and this goes hand in hand with keeping up with the regulatory environment.

It is also no secret that most start-ups do not have the funds to seek constant legal advice – probably because the spare money goes on buying coffee at Starbucks to not be kicked out of the ‘office’. Therefore, having a good understanding of the regulatory aspects of FinTech can help the company in many ways.

Here at Funding Invoice, we believe that staying on top of regulatory developments acts as a competitive advantage. Getting your regulatory and compliance culture right from the outset will pay off in the future.

Why should you pay more attention to FinTech regulation and compliance?

The power to shape regulation

FinTech regulation is far from complete and this means FinTech companies have the opportunity and power to shape future regulation by lobbying Government agencies. The Government is encouraging firms to shape regulation by sharing expertise through, for instance, the FCA’s Project Innovate.

Threats: Cyber-security, data privacy, money laundering

For many FinTech companies data is a hugely valuable asset but it also brings a high level of risk to the company. Ensuring that adequate data security procedures and policies are in place is essential and the company must know how to react in a crisis. Adequate training for the employees must also be provided. Mitigating cybersecurity and data protection risks should be at the centre of a FinTech compliance strategy as threats and attacks cause reputational damage and destroys customers’ trust in the company. Cybersecurity insurance is now becoming viable for many FinTech companies. It is also essential for FinTech companies to ensure effective anti-money laundering controls are implemented, to support the notion that FinTech solutions are trustworthy, transparent and reliable.

Brand Reputation

Knowing the details of the regulations that apply to your company can strengthen your brand reputation. Crowdcube’s CEO, Darren Westlake, has stated that adding an accredited label from their accountants added significant value to their brand reputation. Customers are always looking to be reassured.

The future of regulation and compliance

RegTech

Developing trends point towards RegTech becoming the next big evolution – technology addressing the inefficiencies in regulatory controls and monitoring. The development of RegTech will, as a consequence, ease the process of regulation and compliance for FinTech, and other, companies. Here are a few examples of RegTech companies that could benefit your FinTech start-up:

  • Trustev: online fraud prevention, scans transactions.
  • TradeFlow: trade data tracker
  • FundApps: cloud based compliance monitoring and reporting solutions

FCA Project Innovate

The project aims to promote innovation by identifying and remedying policies and processes within the regulatory system that are obstructive to innovation. The Government stated in the Blackett Review in March 2015 that the future development of FinTech requires a flexible, agile and principles-based regulatory framework. Regulators are to serve as supporters and guides to help new FinTech start-ups navigate the regulatory landscape.

To participate in Project Innovate or seek advice from the FCA Innovation hub on the specific regulation applicable to your company, check out this link.

https://innovate.fca.org.uk/innovation-hub/request-our-support

Sophie Lundsberg

 

 

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