Fintech: Challenge And Potential

Author:Mr Michael Barnea
Profession:Barnea & Co
 
FREE EXCERPT

Fintech combines for the first time the worlds of financial services and technology, as banks and insurance companies serve as fintech's main playing fields.

As such, both sectors must become more efficient and acquire the technological solutions that will help them fulfill their roles.

Fintech promises to bring innovation to existing players, but also threatens to disrupt conservative industries and replace them with new models and players.

The connection between the two components of fintech has proved challenging, in light of the fundamental differences in the characters of these two components. Technological solutions are provided by startup companies that, by nature, are small organizations driven by the need to work quickly and efficiently, due to the short time-to-market and the requirement to sell and recruit capital. On the other hand, the MVPs in the financial services sector are large, hierarchic organizations characterized by sluggish bureaucracy that negates rapid decision-making and agility in implementing innovative solutions.

Regulation and Fintech

Fintech companies operate in a regulation-intensive environment, and this is the first main challenge, because regulations essentially define their ventures and their feasibility. On the other hand, in most of the technological fields that startup companies engage in, the challenges are innovation, competition, and the business model. Regulation is less of a challenge, if one at all.

The dominant role of regulation in the fintech sector is unique. Therefore, gaining in-depth knowledge of the synergies between regulation and fintech is critical during any analysis of a fintech venture's prospects. And the venture must know how to maintain compliance with the various regulations in order to succeed.

By their very nature, financial services are subject to a wide range of meticulous regulations. The types of regulations that affect fintech include banking regulations, insurance regulations, and the prevention of money laundering, as well as privacy, consumer, and securities regulations. The various regulatory categories in the financial services sector follow and are adapted to the structure of the traditional market, with each sector being closely governed and controlled by its own set of regulations and regulatory authority.

In many instances, fintech strives to resolve the problems created by existing regulations, but it also must keep in mind that its operations are subject to...

To continue reading

REQUEST YOUR TRIAL