Regulation biggest threat to fintech growth - survey

Regulation biggest threat to fintech growth - survey

Regulatory issues are set to be the biggest hurdles facing financial technology firms over the next year, according to a survey of fintech founders and investors.

With the fintech industry booming, regulators around the world are scrambling to build frameworks that cover new products and services such as bitcoin and P2P lending.

Of 101 fintech entrepreneurs and investors surveyed by Silicon Valley Bank, 43% expect this growing tide of red tape to be their biggest impediment. A quarter of respondents think that reticence of corporations to adopt new technology will be their biggest challenge, 18% changing consumer behaviour, and 15% access to funding.

The US is seen as the market with the greatest potential for fintech growth by 36% of those quizzed, ahead of Asia on 22%, and Europe, which lags on just 14%, despite the UK government's high profile push to make London the global centre of financial technology.

While many outside of the industry worry about a fintech bubble, perhaps unsurprisingly just 17% of those asked by Silicon Valley Bank think that the sector is overfunded.

Traditional financial services players are now scrambling to embrace the blockchain but survey respondents are split, with 46% agreeing that it "is a technology looking for a problem to solve" compared to 54% that think it is one that "is providing a solution for financial institutions".

However, when asked to identify the greatest opportunity for fintech disruption, "infrastructure" (including blockchain and API) is the top pick according to 24% of respondents. Payments is the choice of 23%, insurance and alternative lending both receive the backing of 20%, with wealth management and robo advising identified by just 13%.

Comments: (8)

Clive Munn
Clive Munn - MFTSE Affairs S.A. - Luxembourg 18 November, 2015, 09:43Be the first to give this comment the thumbs up 0 likes

The only way to solve this is to have modern regulators that nurture innovation rather than killing it!!

Russell Bell
Russell Bell - Fastbase Ltd - Wellington 19 November, 2015, 06:03Be the first to give this comment the thumbs up 0 likes

Who buys lunch for the regulators, who swings the revolving door when they've had enough of making do on a government salary ?  Regulators always be looking after the established players with the big lobbying budgets, red tape always be accidentally-on-purpose tying the new players in knots not the incumbents.

A Finextra member
A Finextra member 19 November, 2015, 10:301 like 1 like

If regulators embraced DLT to allow for a “regulator app” to allow any regulator instant access to any data within the financial chain, this could ensure that all players capture data correctly and remove the need for “centralised” data stores that constantly need upgrading and monitoring with the risk that a single cyber attack could capture all relevant market or individual data in one go.

By “mining” data as and when needed, the regulators could rip millions of dollars of expenses out of the cost of reporting whilst maintain immediate oversight and supervision.



Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 19 November, 2015, 14:361 like 1 like

If fintech companies were really so innovative, they'd take a leaf out of Uber and AirBnB and operate in the regulatory gray areas. If they were really so popular with the consumer, they'd amass such a huge following at the grassroot level that they'd be able to thumb their nose at the regulator à la Uber and AirBnB. Looks like fintech is neither innovative nor popular. There's nothing new about regulation in fin services. IMHO, fintech is raising it to divert attention from the massive humble pie it's going to eat very soon for having to partner with banks. As Dwolla co-founder Ben Milne says in this WSJ article (, '“Time humbles you,” Working with banks, he says, is the difference between running a sustainable business and “just another venture-funded experiment.”' Regulation is just a smokescreen.

Clive Munn
Clive Munn - MFTSE Affairs S.A. - Luxembourg 20 November, 2015, 05:14Be the first to give this comment the thumbs up 0 likes

Some good comments and points of view. I believe that regulaton is essential. It is the equivalent of our police force and we all know that there are differences in the qualtity of security around the world! So go where the peace makers are innovative and where they work with you to make a better, safer world.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 20 November, 2015, 12:53Be the first to give this comment the thumbs up 0 likes

When investors lose money invested in blade companies, they file lawsuits. When employees lose their jobs in startups, they call their local politician. When cardholders lose money to fraudsters making unauthorized use of their NFC cards / mobile wallets, they lodge police complaints. If fintech were unregulated, wonder what these people will do - take their losses on the chin and treat it as their contribution to fostering innovation?

A Finextra member
A Finextra member 21 November, 2015, 19:32Be the first to give this comment the thumbs up 0 likes

A partner from a major law firm and former public prosecutor observed that for fighting financial crime, two big advantages of using the block chain to move payments are that there are no data retention issues (the record remains) and that it is borderless (they can follow the chain through the system). My point wasn't about the need for regulation but about the way to monitor and report thus saving all participants time and money

Russell Bell
Russell Bell - Fastbase Ltd - Wellington 22 November, 2015, 20:34Be the first to give this comment the thumbs up 0 likes

Earlier this year US prosecutors made use of the public blockchain to investigate and convict that corrupt DEA agent for extortion and money laundering.  So clearly a blockchain can help fight some sorts of crimes.

But regulation of fintech is a different use-case.  Regulators want to measure the health of institutions on an accrual basis not just a payments basis.  The blockchain is only a record of payments not liabilities.  A financial institution could be in seventeen different kinds of trouble that wouldn't show up on a payment ledger.

However the blockchain makes possible a class of financial businesses that do not require their customers to trust them.  Non deposit-holding institutions, that neither hold a customers assets nor are a liability threat (eg. stolen credit cards).  Such companies have a good claim to minimal regulation.