The financial technology — or fintech — industry needs to take a few pages from the Uber and Airbnb playbook when it comes to issues management.
The characters and scenarios will ring familiar: Young new companies. Novel use of technology. Creation of new markets. Many good actors. Some bad apples. A murky patchwork of regulations. Questions about consumer protections. Unbelievable growth.
The booming fintech sector has lent more than $20 billion in the last year and could climb to $120 billion by the end of the decade. That growth has brought increased attention, which is why the industry has dramatically ramped up traditional lobbying practices, targeting federal lawmakers and regulators. And rightfully so.
Last month, the U.S. Treasury Department released a report that found expanded access to credit for certain borrowers could be a good thing, but that the use of modeling, data and non-traditional underwriting tools remain “untested” and “risky.”
Setting aside the potential policy and regulatory implications, the nine-month study was a clear starting gun, a sign to the industry that more attention is coming its way: more media curiosity, more congressional scrutiny, and increased focus from outside groups.
This real-time exercise is a perfect example of how an emerging tech sector, one that is clearly filling a market need but at the same time is operating in various shades of gray when it comes to regulation, must proactively and aggressively tell it’s story.
For fintech, that means an exercise in education, explaining how it is making credit and capital available to underserved populations but at the same time detailing the strong consumer safeguards and protections that are firmly in place. Why the industry is needed, but the checks it has established to prevent abuse.
The hangover from the most recent financial crisis still lingers, coupled with the heated political rhetoric about how to best police Wall Street. This, understandably, fosters a reluctance to embrace new and innovative financial products. Whether or not the comparisons are fair, analogies to big banks, credit default swaps and liar loans will undoubtedly begin to permeate the discussion. It’s too easy for politicians and advocates to avoid, and it makes for a good soundbite.
More importantly it underscores why it’s crucial for fintech to educate not just regulators and lawmakers, but the public, the media, consumer groups and other stakeholders about why their industry will not bring about another financial reckoning. [Programming note: I am not advocating for or against fintech, and I am not paid by anyone associated with or against the industry.]
With the Treasury white paper as a clear signal, the fintech world should draw important lessons from the trials and tribulations of Uber and Airbnb. Both companies have proven wildly successful, in a short time turning their respective industries upside down. But they did not get there without challenges. Uber has wrestled with issues of background checks and fair labor practices. Airbnb has dealt with questions of stripping some cities of important tax revenue.
While each venture has embraced different strategies and tactics, both have worked very hard to define themselves and their issues on their own terms. Fintech needs to do the same.
These challenges of managing regulatory and policy communications aren’t unique to young companies. Google continues to slog on in a skirmish with the EU about anti-trust concerns. Facebook must routinely tackle unease over privacy and data sharing. Similar scuffles are unfolding around the commercial use of drones, and significant clashes await the inevitable autonomous vehicle explosion.
Bottom line: As tech innovation continues to move forward at light speed, it will always outpace government regulation. In response, regardless of the industry, it is incumbent of the entrepreneurs, the companies and relevant stakeholders to stay ahead of the game when it comes to telling their story on their terms.