Naivety is Alive and Well in FinTech


fintechNaivete_2.jpgI’m at the excellent Banking Disrupted conference in Palo Alto. After a day of presentations and meetings, I’m left with several positives and one negative. The positives include:

  • Several initiatives focused on providing banking services for the underserved (not just loans)
  • Some realism about the likely timely for significant blockchain implementations
  • An excellent panel on FinTech for Small and Medium Businesses (SMBs)

The negative? There is still naivety about FinTech’s need to be subject to financial regulation. Several speakers clearly get it. But there are a few, who are attracting significant funding, who still seem to feel they can step around regulation, or leave it to the banks. It isn’t going to work like that!

For example, one speaker talked about doing cross-border payments through Bitcoin as a medium of exchange. His belief was that since he isn’t actually doing the payment (he is facilitating conversion to and from Bitcoin which the banks would do) his company wouldn’t be subject to AML rules.

Whether or not FinTech companies sell to banks, integrate with banks, partner with banks, or go it alone, they are part of the overall regulatory infrastructure. Why? Because regulation is designed to protect society. This protection relates to our money – ensuring it isn’t lost, that we aren’t misinformed about risks, that we’re treated fairly, etc. It also relates to protection from the funding of illicit and terrorist activities. Everyone who is involved in financial flows, everyone who manages money on behalf of others in any way, has a responsibility to provide reasonable protections.

FinTech, this includes you!