Much of our weekly Global Fintech Briefing deals with innovation in areas such as mobile payments, blockchain technology and biometric authentication, as well as funding deals and new accelerator initiatives. But in the last couple of months one term has cropped up significantly more frequently than in the past: ‘regulation’.
As upstart financial technology firms gain critical mass and start trying to eat incumbent financial institutions’ lunch – or sell traditional institutions the products and services they need to stay relevant – it’s clear that they will have to come to grips with at least some of the regulatory constraints and burdens with which established banks, asset managers and others are wearily familiar. The issue is no longer whether it will happen, but how and when.
The picture’s not all gloomy. To their credit, supervisory authorities are looking at how to draw a line that will protect the consumer but avoid strangling innovators with red tape. Some, as in the UK and Australia, are devising ‘fintech sandbox’ arrangements through which new products can be tested without being subjected to fully-fledged compliance requirements. But it’s an aspect of fintech that will loom larger as the sector progresses. No wonder ‘regtech’ is the newest buzzword in incubator facilities from Mountain View to Mumbai.