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FinTech Lawyers, London

FinTech combines the words and worlds of finance and technology. The term was originally used to describe the back end of established consumer and financial trade organisations; that is, the unseen, back room, computerised processes.

Now, though, its meaning has expanded to include any technological innovation in the financial sector. It comprises the digitisation of the economy and of economic players, as well as of the processes in financial dealing.

Where is FinTech important?

The term is now so wide ranging that a number of sub-terms have come into popular use, including “regtech”, “insurtech” and “paytech”. While FinTech covers online trading algorithms, online banking and lending, blockchain and bitcoin, there are a few aspects of the FinTech revolution that attract more regulatory and legislative attention than others. Importantly, FinTech comprises the following areas:

  • Payment processors. This includes contactless, mobile payments and eWallets.
  • Insurtech. Developments in other areas of technology are assisting in risk identification and mitigation.
  • Investment management. Machine learning and artificial intelligence, building on past developments in algorithms and Big Data have assisted the boom in investment management.
  • Crowdfunding and fundraising, and platform-based technologies.
  • Blockchain and regtech. These are examples of technology that act to make processes efficient. Regtech, for instance, automates processes to ensure regulatory compliance.
  • Peer-to-peer (P2P) lending.

The law will be important in different ways depending on your relationship with FinTech. Whether you are starting or running a FinTech business, or you are a user of FinTech services, you need to be aware of the regulatory and legal landscape surrounding the area as it is constantly changing as the technology changes.

At Selachii, we are industry leaders in Bitcoin and digital currency, and our large commercial practice is well equipped to handle any other FinTech issues that you may need expert advice on. We deal with contentious and non-contentious situations, so give us a call today on 0203 811 7936 to arrange a consultation.

Financial regulation

The Financial Conduct Authority (formerly the Financial Services Authority) regulates the financial services sector. If you are thinking of starting a FinTech business or you already run this kind of company and are seeking clarification over aspects of the law, then you need to be aware of the FCA.

FinTech regulatory landscape

According to PwC, global funding of FinTech businesses more than doubled from $5.6bn in 2014 to $12.2bn in 2015, and it is estimated that global funding for FinTech businesses will reach $46bn by 2020. When there is an explosive rise in a sector of the economy, regulation can be slow to catch up.

However, in the UK, the FCA has taken quick steps to ensure there is no regulatory friction slowing the advance of FinTech development. For instance, in relation to P2P lending, the FCA moved swiftly in 2014 to regulate the industry, which provided much needed clarity for business. The FCA’s quick-thinking regulation in the area has allowed the UK P2P lending market to become the biggest in Europe.

For new FinTech businesses, the FCA in October 2014 started its “innovation hub”, which allows new businesses to test their business model to ensure it is compliant with the regulatory environment, and to obtain advice from the FCA on how best to ensure compliance.

Overall, the FCA has acted to ensure that the UK FinTech industry is among the most highly and well regulated in the world, which has allowed London in particular to become a worldwide FinTech hub.

Compliance and consumer protection

The FCA is concerned that FinTech businesses – based online – shift risk from themselves to the consumer, and that consumers may not be aware of the risks they undertake when dealing with FinTech services.

Simultaneously, the FinTech space is one filled with start-ups and young enterprises; it is incumbent upon these businesses to be immediately aware of the regulations with which they have to comply and the law relating to FinTech.

At Selachii, we are uniquely equipped to ensure that you receive advice especially tailored to your business.

FinTech regulation internationally

Perhaps one of the most revolutionary aspects of the most recent and continuing raft of FinTech advancements is the fact that it is undermining traditional banking. Crowdfunding arose as an alternative means of financing new business ventures after the 2008 recession. Mobile banking and payment processes like Apple Pay take certain functions that were traditionally the domain of the banks and outsource them.

It is with this in mind and the fact of the inherently international nature of FinTech, that regulators have not only had to move fast to keep pace with domestic developments but they have had to work to ensure that regulations are, as far as possible, symbiotic across borders.

Brexit could throw the UK’s FinTech regulatory landscape into some uncertainty since it is European directives that govern much of it; though judging by the FCA’s progressive stance in the area, this is unlikely.

The Payment Services Directive (PSD)

Among some of the most important rules are those in the PSD and the PSD2. The PSD came into force in Britain through the Payment Services Regulations 2009. Among other things, it enhanced consumer protection, set standard terms and conditions and regulated payment institutions (to urge non-banks to join the market).

PSD2 may be a flashpoint for jurisdictional difficulties following Brexit, since it seeks greater harmonisation between EU member states. It has a deadline for being transcribed into national law of 2018.

Artificial Intelligence

AI in the context of the financial services sector has the potential to enhance and facilitate complex analytical and decision-making processes; it is for this reason that AI is very much seen as representing a vehicle for the next era of revolutionary change set to transform the financial services sector and society on a global scale.

Contact Selachii - FinTech Lawyers, London

At Selachii, we understand that while it is fundamentally important for existing FinTech businesses and customers of those businesses to be aware of the regulations that affect them, it is especially important that new FinTech companies are aware of which regulations apply so they can remain compliant.

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