In a recent blog we looked at the opportunities and threats surrounding open banking (the term being used to describe a new and secure way to give providers access to your financial information so they can find better deals and better rates for you).
Today we’re going to look more specifically at what you - if you are a financial institution or a fintech company looking to take full advantage of the opportunities offered by open banking - should consider from a legal perspective before you get involved.
The first point we’d make is that anything you want to do must be fully GDPR compliant all the way down the line. Whether you are the primary custodian of your banking client’s data or the software of app provider you need to ensure your users’ are completely protected and that you have the infrastructure in place to make sure you are handling all of the data you are given access to in a totally secure environment.
Similarly if you are going to deliver the service you have promoted (i.e. providing users with access to the best possible deals available), you need to make sure you are acting on ‘real time’ data and the provision and maintenance required to keep data in ‘real time’ will also rely on you overcoming a raft of additional technical and security issues.
While GDPR has been designed to protect personal data (and given open banking will not only collect how much you’re spending but also what you’re spending it on), if you stick to its guidelines it will also help you manage non-personal data like interest rates, new credit card packages, a particular accounts likely performance or marketing offers you may be interested in.
However, GDPR is not the only set of regulations you need to be mindful of. Everyone involved with the launch of a new open banking initiative will also have to comply with all of the FCA’s existing regulations so that the banks behind the platform able to pass any questions they may be asked regarding their security and assurances.
Now we’re sure some of this is going to sound like law for law’s sake or a manifestation of a lawyer’s over-caution but let us assure you, that is definitely not the case.
Open banking offers enormous opportunities for any number of new market entrants with either the customer access or the fintech knowhow to progress an open banking project. However, launching without comprehensive testing and a finite knowledge of the regulations you will have to adhere to will leave you open to potentially crippling legal disputes.
Also, as the growth of open banking is likely to challenge the traditional banking system, we can foresee the likelihood many of the existing banks will start to take direct legal action against the new platforms on the grounds of security and compliance to try and protect their own market position.
Having concentrated on the doom and gloom of compliance there are however more commercially positive legal issues to think about too.
The first is the valuation of your company if you are the fintech provider in the partnership.
Although the banks or other instructions you will be partnering with will be bigger, longer-established and have higher financial reserves at their disposal, don’t sell yourself short! Firstly there are few people around (at the moment at least) who can do what you do and secondly the project won’t get off the ground without your tech.
Right from the start make sure the terms of your partnership are bound by a legal agreement and that your agreement includes the value of your company, the structure of the joint venture, the ownership of the product and makes sure you won’t be limited from licensing or partnering with other organisations moving forward.
You also need to make sure your intellectual property rights (IP) are totally protected as this will be where the majority of the value in your business will sit.
Your IP needs to cover your business processes (which can be protected by patents and utility patents), the design of your app or interface and the trade marks associated with your name and branding. You also need to make sure your IP permits the implementation of any licensing strategy you think you’ll want to follow in the future.
In any new field these are the areas most likely to be infringed as new businesses start to get involved in open banking. This means you need to be sure you are in a position to fight back if your IP receives the unwanted attention of a competitor.
As a firm we specialise in resolving disputes involving technology and fintech in particular. We resolve disputes involving the breaking of commercial contracts, the infringement of intellectual property rights and the breach of data protection regulations (both from the subject of the data and the owner/user of the data’s perspective) on a daily basis. As a result we know only too well that if these disputes aren’t managed expertly, they will soon leave you facing escalating and increasing disruptions to your business.
Our job is to make sure your legal dispute will be conducted and concluded as quickly, easily and cost-effectively as possible so if you have run into any form of dispute involving a new Open banking venture or any other type of fintech project, please call us today on 020 7792 5649 or email us at This email address is being protected from spambots. You need JavaScript enabled to view it..
We will help.
