Aaron Kouhoupt Of McGlinchey Stafford On 5 Things You Need To Be A Highly Effective C-Level Leader Of A Fintech Company

An Interview With Kieran Powell

Creative Problem-Solving: In the FinTech sector, where the technology and the laws governing it are often diametrically opposed, creative problem-solving is essential. Operationalizing square pegs into round holes requires nimble thinking to find ways to implement new ideas within legal bounds. This trait is crucial in navigating complex challenges and driving successful outcomes.

The fintech industry is rapidly evolving, blending technology and finance in innovative ways. This evolution demands leaders who are not only tech-savvy but also adept at navigating the unique challenges of the financial sector. Effective leadership in this dynamic environment is crucial for success. What does it take to excel as a C-Level leader in a fintech company? What are the skills, mindsets, and strategies required to lead a fintech organization to new heights? As part of this series, we had the pleasure of interviewing Aaron Kouhoupt.

Aaron Kouhoupt offers a unique perspective shaped by almost 20 years’ experience as both in-house and outside counsel to banks, FinTechs, and various financial institutions of diverse sizes and formats. Aaron applies his extensive grasp of financial services regulation for clients ranging from marketplace lenders and other FinTech companies to community, regional, and national banks, small loan companies, mortgage lenders and servicers, as well as money transmitters and payments processors.

Counseling clients on regulatory compliance matters including consumer loan documentation, e-commerce, underwriting, and advertising, a primary aspect of Aaron’s practice is advising both bank and non-bank participants in bank partnership arrangements. He also counsels on “traditional banking” issues involving privacy, bankruptcy, and enterprise-wide risk management.

Aaron is used to working with laws that might not yet be in sync with innovative financial products. A testament to his broad and varied experience, he has published extensively, presented continuing legal education, and served as an Adjunct Professor teaching Business Law, Constitutional Law, and American Government at the University of Maine at Presque Isle.

Thank you so much for your time! I know that you are a very busy person. Our readers would love to “get to know you” a bit better. Can you tell us a bit about your ‘backstory’ and how you got started?

I’ve worked in compliance and legal positions in the financial services industry for almost 20 years, as both in-house and outside counsel. My backstory is a bit unique in that I have built and run compliance management programs for banks and managed consumer regulatory teams at non-bank financial services companies. My advice for clients comes from personal experience on both sides of the house.

Currently, as a Member (Partner) and the Chief Privacy Officer at McGlinchey Stafford, I advise marketplace lenders, financial technology (FinTech) companies, as well as traditional banks, large and small. Financial regulatory compliance includes how banking and lending institutions interact with consumers. In the FinTech space, I focus specifically on advising both bank and non-bank entities in “bank partnership arrangements,” which come into play when tech companies, start-ups, and other non-regulated businesses want to get into lending, holding, and transmitting money, or otherwise partnering with “traditional” banks. I also guide clients through ‘core banking’ issues under federal and state consumer protection act, and address matters related to privacy, bankruptcy, and risk management.

What I like about this field is that we help innovators comply with and navigate laws that are often playing catch-up with emerging technologies. No two days are the same and it’s never boring. Whether I was Head of Legal at an alternative banking and digital payments company, in-house at a peer-to-peer lending and alternative investing company or supporting a European company in launching a U.S. consumer finance product — each role has deepened my understanding of the challenges and opportunities in the rapidly evolving FinTech sector.

It has been said that our mistakes can be our greatest teachers. Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lesson you learned from that?

Early in my in-house career, I encountered a situation during a regulatory exam that taught me a valuable lesson. The exam was proceeding smoothly until a minor issue arose surrounding the interpretation of a statute: the statute used the word ‘or,’ while the examiner insisted it should be interpreted as ‘and.’ Confident in my understanding, I challenged the examiner, pointing out the exact wording of the statute; with two decades of experience, he was unimpressed, to say the least.

He conducted the rest of the examination with a much more thorough and scrupulous eye to detail, and I learned to choose my battles wisely. Pushing back on a technical, but not overly impactful, point escalated unnecessarily, and I learned that sometimes it’s better to let the small things go, especially when the overall outcome is not significantly affected.

I often share this anecdote in board training sessions. In regulatory relations, it’s important to stand firm on critical issues, but understanding when to yield can be crucial for long-term success.

Are you working on any exciting new projects now? How do you think that will help people?

Working with FinTech clients, every day brings fresh and exciting opportunities. As lawyers advising FinTech companies (both within the company and as outside counsel), our team gets to guide and help refine their groundbreaking ideas, ensuring that they are not only competitive but also compliant with the existing legal framework. Our work contributes to the development of a financial sector that’s safer, more efficient, user-friendly, and accessible, ultimately benefiting the broader spectrum of financial service users.

The FinTech industry is known for its fast-paced and ever-evolving nature. How do you lead your team through periods of significant change or disruption? What strategies do you use to maintain team morale and productivity during such times?

Flexibility is key for FinTech leaders, and not only in the obvious ways. In legal compliance, it’s essential to be prepared to course correct, sometimes within hours, due to shifts in the regulatory landscape or the evolving nature of financial products. FinTech teams, including those who are building the technology, are continually pushing the envelope, often leading to a rapid evolution of ideas and proposals. This requires attorneys advising in this field to be highly adaptable, not just in reacting to external factors like competition and regulatory changes, but also in managing the creativity and innovation inherent within our team.

As in-house counsel and as outside advisors alike, we often encounter ideas that are exceptional but may not be feasible in their original form. In these situations, it’s about distilling the idea to its core objective and finding creative ways to achieve that goal. This approach requires a balance between maintaining our strategic direction and being open to modifying our approach based on what is realistically achievable and compliant. It’s about understanding the end goal and being resourceful in how the company can get there, acknowledging that there’s more than one way to ‘skin the cat.’ When I led the team in-house, I found maintaining this mindset helps sustain morale and ensures productivity, even amidst the industry’s rapid pace and frequent disruptions.

How do you come up with goals for your area of responsibility within the organization?

This came up a lot when I was in-house, and still does in my practice today. Setting rigid goals can be a bit of a pet peeve for me. The reality is that in the legal sphere, especially in a dynamic industry like FinTech, the primary goal is to support the client effectively. This means our focus can and often does shift rapidly, sometimes daily or even hourly. We might be fully immersed in one project, and suddenly the business needs pivot to something else entirely.

Of course every successful business needs goals, but in my view, remaining entrenched for the sake of “hitting numbers” can be more about appearances and less about practicality. My real, actionable goal in every scenario is to remain adaptable. It’s about being prepared to commit the necessary time and resources to refocus our efforts as the priorities of the business change. This approach, while it may not fit neatly into traditional frameworks, is what truly supports our clients and drives our success in the unpredictable world of FinTech.

How do you manage reporting to your board?

When I was in-house, reporting to the board was primarily about articulating risks in clear, tangible terms to effectively perform their roles. The board fundamentally wants to understand what’s at stake in any decision matrix — and why those stakes matter. This included highlighting not just the risks themselves but also the potential impact: whether it’s a minor compliance issue, a significant financial penalty, or a violation severe enough to threaten the company’s operation. Whether reporting to my own board or conducting board trainings I do for clients, I often use real examples, such as recent consent orders involving competitors, to illustrate the tangible consequences of these risks.

It’s also crucial to make sure the board is prepared beyond simply reviewing past events. Especially in disruptive industries, it’s critical to assess the compliance horizon, considering upcoming legal or regulatory changes and their potential impact on operations. This forward-thinking approach helps the board stay ahead of the curve, ensuring that the company is not just reactive but also proactive in addressing challenges.

Do you have any specific strategies that you use to manage your teams?

Unsurprisingly, my management style for in-house teams and for clients centers on adaptability, flexibility, and creativity. In the realm of FinTech, especially from a legal perspective, we often find ourselves in situations where we are trying to align innovative products with laws that were not designed with these advancements in mind. It’s like fitting square pegs into round holes — a challenge that requires both creative thinking and adaptability.

Decision-making in FinTech involves assessing various risks, including technological, financial, and security risks. How do you approach risk assessment in your role, and can you give an example of a tough decision you made that involved a significant risk?

In financial institutions, a “risk assessment” can mean many things, from a formal risk assessment of legal, compliance, and reputational risk — assessing controls — to determining the residual risk after controls are implemented. These assessments help management and the board direct resources. There is also the practical side of “risk assessing” which looks at a particular issue (or project) and what level of legal, compliance, or reputational exposure may exist with its implementation.

So our teams take a comprehensive approach to evaluating risks across legal, technological, financial, and security dimensions. The analysis entails rating each risk, using heat mapping or a scale from 1 to 10 — whatever works best for that company. The key factors we consider in this rating are the likelihood of the risk occurring and the potential impact, which could range from reputational damage and financial penalties to criminal implications in extreme cases.

For instance, a risk that occurs frequently but has minimal impact would be rated lower. Conversely, a risk that is rare but could potentially shut down operations if it materializes would be rated much higher. Once we assess these risks, we examine our control measures to determine the residual risk. This residual risk — what remains after applying our controls — is where we focus our resources and compliance efforts. We prioritize the areas with high residual risk, ensuring that our responses and strategies are proportionately allocated to mitigate these risks effectively.

Based on your experience and success, what are the “5 Things You Need To Be A Highly Effective C-Level Leader Of A FinTech Company?” How have these 5 things impacted your work or your career?

1. Adaptability and Flexibility: If I sound like a broken record, it’s because in my experience, this is the most crucial factor in the FinTech industry, in all contexts: responding to regulatory or technological changes, as well as harnessing the creativity and innovative spirit of the products team. Honing this capability has allowed me to guide my team through the unpredictable FinTech landscape where plans and strategies often evolve significantly. This is especially true in the example of state laws, which can change rapidly with very little notice. FinTechs need to keep a finger on the pulse of all applicable governing bodies so they’re not caught off-guard navigating major changes that could impact the revenue stream or require changes to a complex product.
2. Solid Risk Assessment and Management: Without this component, any financial services operation, especially one proposing to offer a new or different product, is sunk. The comprehensive approach to risk assessment discussed above has been instrumental in balancing opportunities with compliance challenges, shaping my strategic decisions in-house and my advice for clients today.
3. Creative Problem-Solving: In the FinTech sector, where the technology and the laws governing it are often diametrically opposed, creative problem-solving is essential. Operationalizing square pegs into round holes requires nimble thinking to find ways to implement new ideas within legal bounds. This trait is crucial in navigating complex challenges and driving successful outcomes.
4. Strategic Focus on Business Support: As discussed, I believe in dynamically supporting the client rather than setting rigid, artificial goals. I try to focus — and keep clients and management focused — on the big-picture end result, even if the path we take diverges from what was originally planned. Keeping my eyes on the horizon has enabled me to help the company pivot along the path to the end goal.
5. Communication and Team Management: FinTech teams can involve a cast of characters ranging from engineers and designers to bankers, lawyers, and business professionals. As General Counsel or as outside counsel, effectively communicating across these broad constituents is necessary to keep everyone on the same page and moving in the same direction. In an industry defined by change, my leadership style emphasizes clear communication and the need for team members to exhibit the five characteristics listed here. I’ve found that fostering a collaborative environment where ideas can be freely developed and exchanged greatly improves team morale and productivity.

Looking ahead, what do you believe are the key trends that will shape the future of the FinTech industry? How are you preparing your company to adapt to these trends, and what role do you see your leadership playing in this adaptation?

Looking towards the industry’s future, I believe the way regulations are shaped and enforced (at the state and federal levels) is going to be the most influential factor, as these regulations directly impact how FinTech companies operate and grow.

Another key trend is the challenge of securing investment capital for FinTech initiatives. State and federal laws specify how capital can be obtained and used. These regulatory shifts often dictate the flow of investment into the FinTech sector.

Finally, as with any technology application, data privacy and cybersecurity are integral parts of the FinTech regulatory conversation. As we continue to advance technologically, the emphasis on protecting consumer data and ensuring robust cybersecurity measures will only increase. These factors are encompassed within the broader regulatory frameworks at both the state and federal levels.

You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

I’m a big fan of programs that enhance financial literacy and inclusion. Across my career in banking and finance, I’ve seen first-hand the profound impact that a solid understanding of financial concepts can have on individuals and communities. Programs that demystify financial topics, from basic budgeting and saving to more complex subjects like investing and understanding financial products can empower people, especially those from under-resourced backgrounds, to take control of their financial futures, reduce debt, increase savings, and promote generational wealth.

How can our readers further follow your work online?

Readers can find my current and future insights, including our “Deep Dives into Consumer Finance” series, here.

This was very inspiring. Thank you so much for joining us!

About The Interviewer: Kieran is the EVP of Channel V Media, a Public Relations agency based in New York City with a global network of agency partners in over 30 countries. Kieran has advised over 150 companies in the technology, B2B, retail and financial sectors. Previously Kieran worked at Merrill Lynch, PwC, and Ernst & Young. Get in touch with Kieran to discuss how marketing and public relations can help achieve your company’s business goals.