8. Governance and management: Often one of the last things FinTechs consider is how the control and management framework they have in place will be viewed by a partner, having the right policies and procedures will ease the partnership and ensure scaling of innovation is faster and less problematic with traditional partner.
9. Regulatory compliance: Since the financial crisis of the late 2000’s, regulation has become a constant area of change that large financial services businesses must build capability to cope with. FinTechs are no different and often these changes bring innovation opportunities.
10. Risk management framework: FinTechs must be highly vigilant, especially if they are given access to their collaborator's intellectual property and most precious, customer data. Algorithmic bias, risks and business resiliency also must be thoroughly tested. Be prepared to sign a mutual NDA early and understand the implications of non-compliance.
Key Challenge: Data Security & Ownership
Often the area of the most significant innovation for FinTechs is unlocking value in data or the ability to manipulate, visualise or represent data in previously unachievable ways. FinTechs that are able to generate insights from the enormous amount of untapped data in financial services can monetise opportunities. Capitalising on these opportunities requires far more than algorithms, cloud technologies and associated processing power. It is also vital that FinTechs can cope with the limits of reluctance to leverage cloud service for fear of data loss, data sharing protocols, data transport route limitations and concerns of long-term data sovereignty.
To overcome these issues, focus on both security and data management are of paramount importance for new entrants in the FinTech sector. Regulation in European markets is constantly evolving, Payment Services Directive (PSD2), General Data Protection Regulation (GDPR) have had a significant impact and the emergence of Open Finance is introducing new challenges as well as opportunities. Country or market specific regulation also amplifies the effort a FinTech needs to invest to understand the differences in processing, storage, retention and transportation of data.