What's Hindering the Growth of Fintech Industry?
The industry is in a lot of ways controlled by the government and because of that there are unforeseen problems, regulations and licensing issues
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The fintech market is growing rapidly with startups making a mark in the global landscape. Also known as financial technology, the industry has transformed the financial services sector. However, fintech companies still continue to face challenges that hamper their growth.
At Web Summit, Europe's biggest technology conference, Ritu Marya, editor-in-chief, Franchise India and Entrepreneur India moderated a panel discussion chaired by David Klein, CEO & co-founder, CommonBond, Emmanuel Schalit, CEO, Dashlane, Dr Christopher Oster, CEO, Clark and Marcus Swanepoel, co-founder & CEO, Luno. The discussion addressed certain difficulties faced by fintech startups. The industry, in a lot of ways, is controlled by the government and because of that, there are unforeseen problems, regulations, and licensing issues.
According to Marya, the fintech industry is facing a good many peculiar problems. "I've not seen such kind of unique challenges in different sectors," she said.
Given below are a few highlights from the panel discussion:
Rising Cost of Tuition
For Klein, fintech and regulation is a complex conversation. "There are multiple types of fintechs. Predominantly, they form three categories: lending, assets and payment side. We fall in the lending bucket of the fintech across the US horizontal, specifically in that little square we fall into student loans, personal loans, small business loans, mortgage loans etc. The reason why the US market is growing because the colleges and universities charge a lot of money for tuitions and there is not a natural market check for schools to keep tuition inflation under control. It is thus, the cost of tuition is rising faster than in any other sector," he said.
New York-based CommonBond provides more affordable loans to students in higher education, by sourcing capital from a community of investors who in turn receive a competitive financial return.
Schalit's password security company Dashlane makes identity and payments simple and secure everywhere, with its world-leading password manager and secure digital wallet. He feels in the US, fintech is a heavily regulated industry.
"In the rest of the world excluding the European Union, there is no global privacy framework so it's really a question of balancing the over-regulation in certain areas. The under-regulation is creating a situation where the companies are not accountable for their gross misconduct," he said.
Crypto: The Biggest Opportunity
London-based Luno is a leading global cryptocurrency company that makes it safe and easy for people and businesses to store, buy, use and learn about cryptocurrencies like Bitcoin and Ethereum.
According to Swanepoel, from a regulation point of view, the crypto industry is largely unregulated in most countries. And that doesn't make it easier for companies dealing in crypto.
"We self-regulate because we think it's a right thing to do. Most regulators are pragmatic about our industry. A lot of banks don't want to give crypto companies bank accounts as they are worried about the risk of anti-money laundering," he said, adding that in the end, cryptocurrencies is one of the biggest opportunities for the regulators.
Regulations are Good
Launched in 2015, Clark is Germany's smart insurance partner making it maximum easy to buy new insurances and manage existing contracts.
Oster believes as a fintech startup he doesn't want any specific rules because then people will not take his startup seriously.
"Sometimes, I also think about regulation in a positive way because as long as the rules count the same for everyone and they are not destroying the business, they might give you a competitive edge. So, regulation is not necessarily bad," he added.