Financial Technology become popular today. But, its fastest growth entails with legal issues. There are seven areas currently engaged in Fintech. It includes payments, insurance, planning, block chains, lending/crowd funding, trading and investment, and retail banking.
A great number of Fintech customer comes from the various benefit it offers. But, many of them are not aware with relevant issues and risks from a legal perspective. Then, The problem becomes more complex when it also involves giant financial institutions. Moreover, if they come from different jurisdictions. From many problems that possibly appear, there are four biggest problems.
Data Protection and Cybersecurity
Fintech companies possess a huge amount of data. Their data comes from the form submitted by the customer. The data also comes from the financial activity. That data collection aims to shape and customize their service for each of its customers. Their purpose is to have products that can satisfy their customers. Thus, Fintech has to comply with data protection laws. That, because the data is significant for people. An even and adequate data governance is important to protect all parties involved.
Read more: Our Data Sucked in Financial Technology
Distributed Ledger technology and Smart Contracts
Distributed Ledger technology (DLT) is an amount of shared and synchronized digital data. The data spread across multiple sites and institutions. There is no central administrator and central data for it. An easy example for DLT is a blockchain system. DLT that operates in various jurisdictions needs to have a smart contract. Thus, if there is a guidance to solve any possible problems in the future.
Robo-advisors and legal responsibility
Robo-advisor is an online software. It function is to help people manage their investment. But, it is difficult to identify the liability between the entities involved in Robo-advisor. There is a possibility that the investment does not go well. But, the customer may not know who should be held responsible. So, parties involved should agree on the conditions before they use Robo-advisor.
Outsourcing Core System to the Public Cloud
In an outsourcing system there will always be a contract. It is discussed between a financial institution and an outsourcer. That discussion requires an adequate contract management process. Thus, parties should comply with the agreed level of transparency. If they fail, it can result in material legal and security risks.
We need to save thousands of people from getting trap into unnecessary legal problems. So, fintech should pay close attention to those four aspects.
