A lot has happened during my little hiatus from blogging. I’m sure you have already figured out from my recent LinkedIn activity that I have stepped down from my role as CEO of Corl and my co-founder Derek has taken over while I continue to serve as a member of the board. This opportunity has allowed me to look at the industry with a fresh set of eyes, and perhaps to have stronger opinions about what’s the FinTech and Blockchain spaces.
Disclaimer: All opinions shared in this or future articles, represent my opinion as an individual and independent member of Corl’s founding team.
I’ve had the pleasure of sitting on many panels the past two years and most of the time I get asked whether FinTech, as an industry, is hindered down by the regulatory landscape. Panellists including myself always answer this diplomatically, at least sometimes, but truth be told, the answer to this question is YES!
Which is funny considering I recently had a discussion with a compliance officer at one of the top 6 Canadian banks and he made fun of how FinTech faces too little regulations.😅
As a FinTech ecosystem, we are faced with a mountain of expensive financial compliance and regulations, most of it is related to things that we don’t do 🙇🏼. Unfortunately, and like many other tech-driven industries, we’re trying to build the future with horribly outdated regulations, written at a time when mullets were cool (were they ever?). We’re talking about running a 2019 business with banking and financial rules that described how things should have worked in the 70s or perhaps earlier.
The irony is that discussing this subject with individual staff members of the regulators (perhaps with some drinks) they acknowledge how the laws are out of date, need to be rewritten to consider the recent tech advancements, but it’s too big and too hard of a job, so it makes more sense for FinTechs to adapt their business models to the existing regulatory framework while we continue to analyze the space (the “SandBox”). This has been the case since 2008!!
Between the initial financial crisis, and another looming one, banks and financial institutions have lost the trust of millennials and Generation Z. Their whole idea of banking is not the same anymore. It’s a generation that wants quick and frictionless access to services, zero branch interaction, and most importantly transparency about their financial records and fees.
To be fair, the U.K. have kept an open mind and a novel approach that the SEC (US) and the 13 Canadian regulators (yes, read that right, 13!) should adopt.
The one-size-fits-all model of financial services doesn’t work anymore, and giving it up is going to democratize access to these services and open doors for customizing financial services and improving customer relationships. We’ve seen this happen in other industries. Napster was shut down and was a lesson learned for newcomers like Spotify and Pandora, which led to a complete overhaul of the copyright rules. So why is it moving so slow in FinTech when the customers’ expectations have changed over the years?
It’s not just regulations though. The problem goes way deeper than that. For example, and in light with the recent data breaches, a modern regulatory framework should move ownership of data to costumers and let them decide who has access to their data, what to share or not to share for financial services, whether it’s in an investment, a payment, a loan, or a deposit product. This is how we ensure a proper path towards transparency, customer protection, and innovation. Until recently, and thankfully to FinTechs like Credit Karma and Borrowell, customers couldn’t access or monitor their credit score data, which is something important if we want to spread financial awareness with hopes of decreasing credit exposure.
Note: Mint released a credit score product in the early days limited to the US, and Equifax allowed access to a paid score few years after that.
It’s not all negative though. To be fair, PSD2 is a good start in the right direction, and I hope the open banking initiatives in the US and Canada see the daylight soon (keep in mind that from a regulatory perspective, soon is a 5–10-year range, we will have new tech by then 😂).
From their inception, the monolithic regulatory frameworks were never designed to allow for a dynamic and diversified range of financial products that customers expect these days. The banking experience is rapidly changing, whether the FIs and regulators are ready or not. The only thing a customer wants to open a bank account, send an international wire, get qualified for a loan or a mortgage, and/or open an investment account, is an app on their smartphone with tailored products and affordable pricing.
It’s time to let people choose the world they want, instead of forcing them into that of their grandparents, because it’s easier to not rock the boat.