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London legal update 2017: Fintech

Posted by: Sershen Ingram 01/02/17

What’s hot in Fintech for 2017?
Last year saw a real surge in Fintech activity in London, and the term is now becoming synonymous with a movement for change. However, with this growth and increase in competition also comes greater regulation and challenges. So just what does 2017 hold in store for financial technology?

Regulatory Technology

More commonly referred to as regtech, is without doubt going to be the buzzword of the next twelve months, as the likes of the Financial Conduct Authority seek to better control and monitor regulatory requirements surrounding data crunching, machine learning, blockchain and other technologies.

Given the speed of evolution in this area, it’s unsurprising that many commentators are predicting rapid changes. Kevin Petrasic, partner at White & Case LLP, has said: “The space is evolving rapidly, and regtech could bring significant change to the financial services sector in relatively short order, potentially transforming how regulators and institutions operate and interact.”

Mergers and acquisitions

As the Fintech landscape fluctuates, many firms are increasingly becoming more open to the idea of acquiring in order to introduce quicker changes. While last year the number of mergers and acquisitions was relatively low, as appetite for new technologies and approaches grows, it can only be assumed that so too will M&A activity, particularly given that the big banks are increasingly becoming aware of the treat that the Fintech industry poses to them.

Cybersecurity and risk

Naturally, cybersecurity – which has become a growing concern for many firms in recent years – looks set to remain a priority for the coming year, particularly when it comes to the safety of customer data. While there has yet to be any concrete rules outlined in the UK market, the FCA will this year update its regulations around automated, or robo, advice systems, as well as tweaks to requirements laid out for crowdfunding and peer-to-peer lending.

As the safety of online information increasingly becomes a top concern, we can certainly expect to see greater demand across Fintech for UK regulators to outline specific regulations in the very near future.

Fintech investment
There has been a real upward trend for London law firms investing in their Fintech practices in recent months, and this trend looks set to continue in 2017. A number of firms have already cemented their commitment to accelerating the growth of Fintech businesses by investing in a number of start-up budget schemes. Simmons & Simmons has launched a dedicated fund to help small Fintech firms tackle some of the legal challenges they are likely to face while in their infancy, and Hogan Lovells have also launched a regulatory accelerator to help Fintech businesses navigate the FCA regulatory landscape.

Finally, we can’t avoid mentioning the potential impact Brexit will have on the future growth of Fintech in the UK, particularly in terms of talent sourcing. As The UK looks set to leave the single market, firms will likely lose access to key EU talent that will likely be pivotal in the future growth of the field. On a positive note, we can’t see a real rationale to assume that the home-grown talent that has flourished in this space won’t continue to do so, and where there is creativity there will always be innovation in this sector.

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