While the term ‘fintech’ is largely synonymous with cryptocurrency and often talked about from the perspective of new financial technology such as blockchain, it actually has a far broader definition.
In simple terms, fintech describes new and cutting-edge technology that looks to improve and often automate the delivery of financial services to customers. From a business perspective, fintech aims to improve efficiency and minimise costs, while consumers can benefit from enhanced financial inclusion and access to better products and services.
Often built on advanced software and algorithms, fintech is a disruptive technology that continues to change the financial and business space. But what laws govern it, and how they evolved over time?
What is Fintech Law?
As you can imagine, fintech law firms characterise associated legislation as regulations and directives that cover all aspects of financial technology, including non-traditional investment vehicles (such as crypto assets), banking processes and evolving financial technologies.
While it’s considered to be a relatively new concept, of course, the term fintech actually started being used in the 1990s, as Internet connectivity started to take hold and digitisation started to dominate the financial and commercial realms.
However, fintech was popularised around the time of Internet (and subsequently mobile) banking, at which point consumer behaviour began to change and the need to create more stringent security protocols and data regulation measures became more pressing.
From customers who logged into their accounts using public networks to others who chose to save their login credentials on specific devices, lawmakers have sought to protect customers and prevent malevolent hackers from stealing sensitive data and funds.
Of course, the advent of mobile technology and banking was a trigger for even more laws and regulations, and for good reason too. After all, some 71% of fraudulent bank transactions are thought to be processed through mobile browsers and apps, so there has been a sharp spike in banking breaches in the age of the smartphone.
What’s the Future for Fintech Law?
Certainly, the innovative and disruptive fintech space has evolved at pace, from accessible mobile payment technology like Apple Pay and Google Wallet to the widespread use of AI and biometrics and security measures.
As of 2021, there are around 200 fintech unicorns valued at $1 billion or more, of which 20 are based in the UK and subject to various laws that govern their methodology and the way in which they handle their customer’s data.
What’s clear is that the relentless growth of fintech and this market has created a need for constantly changing and evolving laws, which must keep pace with advancement and ensure that growth and innovation doesn’t come at the expense of customer safety.
This is perhaps even more important as fintech and concepts such as crypto make their way into the consumer mainstream, with banks and institutional lenders across the globe now integrating financial technology into their own front and back-end systems.