Fintech start-ups: How to tackle crucial in-house legal issues

Fintech start-ups: How to tackle crucial in-house legal...Fintech start-ups are expected to significantly disrupt traditional financial services (FS) companies over the coming years. Recent PwC statistics showed 95 per cent of banks believe parts of their business will eventually be lost to standalone fintech competitors.


Steve Davies, EMEA fintech leader at PwC, said the Big Four firm predicts investment in these innovative start-ups will exceed $150 billion (£112 billion) within the next three to five years.


“While FS organisations have acted as intermediaries in the financial system by providing an invaluable service to clients, their functions are being usurped by new technology-driven business models,” said Manoj Kashyap, PwC global FS fintech leader.


But the road to success isn’t all plain sailing for fintech companies. In fact, they face a number of potential legal challenges stemming from both the financial and technology sides of their businesses. Let’s explore some of these issues and see how fintech organisations can overcome them.

Financial regulations

In-house legal teams at fintech firms must quickly identify which of their products and services must comply with financial services regulations. It’s possible that companies will require authorisation from the Financial Conduct Authority to carry out their business, particularly if they’re involved in consumer credit, payments and investment services.


Fintech lawyers that fail to address these issues and inform business leaders of potential risks could find their organisations fall victim to fines, penalties, reputational losses and difficulties securing funding.

Intellectual property (IP)

Fintech firms are known for innovation, making IP a key issue for them. In-house lawyers must ensure that these rights are properly protected through the appropriate filing of patents, registration of tradesmarks and relevant clauses in employment and supplier contracts that prevent IP theft.


The leaking of trade secrets can be devastating for up-and-coming businesses, especially ones that are trying to disrupt industries by using new and emerging technologies.


Many fintech companies collaborate with larger, more established FS businesses. PwC figures showed joint partnerships are the most common form of collaborative relationship between organisations.


However, working closely with other firms brings a range of potential legal considerations to the fore. For example, IT security, IP protection and differences in each business’s structure are issues that will need to be comprehensively understood and agreed between partner companies.

Data protection

Every business needs to be aware of data protection laws and obligations, but enterprises within the technology industry often have access to more information than organisations in many other sectors.


Privacy law and regulations aren’t the only problems. The increasing sophistication of cybersecurity threats means in-house teams need to keep abreast of the legal ramifications of serious data breaches within their companies.

Recruitment shortages

In-house teams are also suffering a lack of qualified candidates, which is unsurprising considering the high level of skill required to successfully manoeuvre the complex legal requirements of fintech start-ups.


Our latest figures showed 59 per cent of businesses reported their legal departments are under-resourced to meet the demands placed upon them. More than 40 per cent of respondents are increasing their recruitment budgets this year in an effort to tackle the problem.

What’s next for fintech firms?

Fintech start-ups are experiencing rapid growth, which is shaking up traditional FS models. The PwC survey revealed established financial institutions estimate that fintech firms will eat up as much as 23 per cent of their business offerings in the future.


However, the fintech industry must be aware of the legal and regulatory risks they will encounter in such fast-paced market environments. They need experienced in-house lawyers that can tackle key problems such as regulations, IP, data protection and industry collaboration.


Finding the right people can be difficult, but the good news for candidates with these skills is that they are likely to be in high demand over the coming years. This means organisations may need to ramp up their recruitment effort in order to secure the best talent.


Our Market Reports combine our review of the prevailing conditions in the in-house legal recruitment market together with the results of our latest employer survey. 


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