A Guide to Financial Regulation for Fintech Entrepreneurs

CHAPTER 1Regulatory Strategy for Fintech Companies

The Fintech space—like the overall tech space a few years earlier—is evolving at breakneck speed, even though from a low base when compared to the incumbents currently present in the market. Financial services is a highly regulated industry—and for good reasons, as it is the lifeblood of a modern economy, and because it deals with people's live savings. Because of the lack of scale, Fintech has thus far mostly escaped regulation. However, this is coming to an end: as Fintech grows up and moves into the mainstream of finance, regulation on a par with that applied to other financial services is unavoidable.

Many people, especially in the tech world, see regulation as a nuisance, and something that at best needs to be reluctantly complied with. This is partially true—compliance with applicable regulations is tedious and a lot of work. However, from a strategic point of view this is not necessarily a bad thing: to the extent that a company is better able to navigate the regulatory environment than others, this can and will provide a competitive advantage.

This competitive advantage can be particularly important for tech companies because of way they slice up the underlying market: the current banking system is mostly designed on the assumption that customers want a one-stop-shop for all their banking needs, or even for all their financial needs, with most major banking groups now also sporting associated insurance and asset management ...