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How A Fintech Lawyer Can Help You

The increasing rate of technological advancement, customers’ desire for easier interface, faster and improved communication channels have all combined to make alternative banking – more formally known as Financial Technology (“FinTech”) an attractive option.[1] The term itself refers to “… innovative solutions in digital technology that aim to optimize financial services and banking.”[2] The astronomical growth of this sector is underscored by figures showing that “Fintech companies acquired $135.7 billion globally in investments during the last year” and “[t]he total transaction value of digital payments is expected to reach $4.8 trillion in 2020.”[3]

Nigeria, as the economic nerve centre of Africa, has also keyed into the use of FinTech for improved banking operations. Just recently, Paystack a local FinTech company was acquired by Stripe, a US-based payments giant in a deal dubbed as the biggest out of the continent.[4] Keeping up with its regulatory functions, the Central Bank of Nigeria has equally released a number of guidelines and regulations in ensuring that the industry adheres to necessary standards and play according to the book.[5]

Expectedly, there are a number of issues bedeviling this important sector in Nigeria. From failed transactions; delayed verification exercises; integrity concerns; fraud; breach of data, breach of regulations, the list is relatively long. The concerns raised seem a bit titled towards the consumers. However, FinTech Companies are not themselves exempted from the need to having a specially trained lawyer. With a terrain heavily regulated and easily susceptible to floodgate of litigations, the need for a dedicated in-house team and versed external counsel is all too important to remain afloat and keep up with the tides. Again, while this perspective takes a more bias stance from the point of view of private citizens and corporates, the government at the local, regional and international levels are also not left out from the need to be properly advised on their duties and obligations as they relate to FinTech issues.

This is exactly where FinTech lawyers come in. Given their background in the core aspects of the special area of law, they are equipped to handle these issues and provide beneficial advisory to all stakeholders. In what specific areas can they help? The next paragraphs will take a more focused look at some of the areas a FinTech Lawyer could help.

Corporates

It is trite that FinTech Companies need to keep up with the ever cascading regulations, their anti-money laundering and anti-bribery obligations, among others. This is to ensure that as they create disruptive technologies, they also keep up with the new demands of financial transparency regulations in area such as the payments and billing, trading and clearing, lending, financial and information services.

The major instance a FinTech Lawyer could be of help in this regard is to help the FinTech navigate the murky waters of the regulatory landscape to ensure that they are keeping up with their obligations under same. As noted by Seel, every FinTech start-up needs a regulatory compliance lawyer who would do the following, among others:

  1. To advise on the legality of a proposed business model;
  2. To help navigate complex and time-consuming registration requirements with regulatory agencies;
  3. To help understand the regulatory context in which their bank partners are operating. According to Seel, “this allows the FinTech to speak to the real bank challenges surrounding a solution, and to partner with the bank to refine the solution as needed.”
  4. To help with the design of RegTech products, specifically focused at helping banks to address regulatory challenges like Anti-Money Laundering, sanctions checking, customer due diligence, capital adequacy reporting, stress tests, and transparency.
  5. To advise on specific regulations impacting product design (for example cybersecurity and privacy requirements for products and services in a particular jurisdiction.

Furthermore, typical of any system which drives on technology, the FinTech architecture is highly susceptible to fraud, integrity glitches, data breach,[6] failures in payment transactions etc. The Government, notably the National Information Technology Agency (NITDA), has rolled out its Nigeria Data Protection Regulation which imposes obligations on FinTech as Data Controllers over the data of their consumers – the Data subjects. FinTech companies are obligated to keep records of their consumers in compliance with this law. A FinTech laywer, being an expert in this area, is better placed to advise the FinTech Companies from breaching their obligations under these Regulations.

Furthermore, a Fintech Lawyer is suited to defend the companies when an action is instituted against them or when they also intend to institute an action in Court. A FinTech lawyer is also able to provide required legal opinions on questions that require technical legal answers.

Private Citizens

As highlighted above, consumers are at the end of the rear of the hazards of the sector. They are often the first target of fraud; they bear the brunt of failed financial transactions with all that comes with them. If therefore, they are any set that need the services of a FinTech lawyer, certainly, the consumers do. A FinTech lawyer is able to interpret the regulations and laws and enlighten them on his rights and obligations. Where they need to slug an issue out in court, a FinTech lawyer is able to do that.

Government/ Regulatory Agencies

The Government comes into the picture as it relates to acceptable standards that parties must keep; the regulations to adhere to. In its regulatory/ legislative role, it is important that it seeks appropriate legal opinions/ laws and it is in this regards that a FinTech lawyer becomes most important.

Also, as countries are members of the international community, a FinTech lawyer provides useful guidance to countries to ensure they keep up with their obligations under International Treaties, Conventions or Declarations as they relate to the subject.

RESOURCES

[1] Fintech Overview, DLA Piper, <https://www.dlapiper.com/en/us/focus/fintech/ accessed December 13, 2020.

[2] J. Andjelic, ‘These Fintech Statistics Show an Industry on the Rise” Fortunly, (November 5, 2020) https://fortunly.com/statistics/fintech-statistics/#gref last accessed December 13, 2020.

[3] Ibid

[4] Tage Kene-Okafor, ‘What Paystack Acquisiton means for the Nigerian startup ecosystem’ (October, 2020) https://techpoint.africa/2020/10/19/paystack-exit-nigerian-startup-ecosystem/ Accessed December 13, 2020.

[5] Such as the Central Bank of Nigeria’s Guidelines for Licensing and Regulation of Payment Service Banks in Nigeria; Revised Guidelines for Finance Companies in Nigeria; Risk-based Cyber-Security Framework and Guidelines for Deposit Money Banks and Payment Service Providers; Central Bank of Nigeria (CBN) Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) Policy and Procedure Manual; E-Payment Dispute Arbitration Framework

[6] Such as those affecting Travelex, Lloyds, Halifax and Bank of Scotland and Rohinhood, among others. See Sharon Kimathi, ‘2020 Review: Top five outages, data breaches & cyber-attacks this quarter’ Fintech Futures (April 13, 2020) https://www.fintechfutures.com/2020/04/2020-review-top-five-outages-data-breaches-cyber-attacks-this-quarter/ Accessed December 13, 2020.

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