By Keisha M. McClellan • September 30, 2018•Writers in Residence, Careers, Firms and the Private Sector, Other Career Issues, Law School, Choosing a Career and Landing a Job, Internships and Clerkships
“Every technological revolution takes about 50 years.”
Jack Ma, Co-founder of the Alibaba Group
In the case of the Fintech revolution that is upending business models and competition in financial services, it is being digitized, streamed, podcasted and mobile-accessed now. It is a revolution that is taking place today as opposed to in the future. As Forbes Magazine’s Daniel Newman warns us, “If you have not heard about the Fintech revolution that is happening right now, you need to get out from under your rock.”
Fintech, the fusion of finance and technology, is here with all of the subtlety and transformative power of a tsunami. At its simplest, Fintech encompasses technologies that innovate industries such as mobile banking, consumer lending, insurance, corporate lending, blockchain, asset management and investment. Fintech is overhauling the financial services sector and creating new relationships with customers. What is more, these new business models and platforms--whose engines are rooted in greater access to customers’ data--create new privacy risks which legal counsel will be tasked to understand and mitigate.
A few examples are particularly notable:
BANKING: Fintech banks are coming and some predict that these new banks are likely to come from disruptors such as Amazon and PayPal because they “have the war chests to go after the traditional banks’ customers or the ones that are being ignored by the big banks.” By example, there are reports that Amazon may develop its own-branded banking option that is rooted in customer income and spending data. "With millions of customers, troves of data, access to cheap capital and seemingly unlimited leeway from its investors to enter new businesses, Amazon is a fearsome competitor. Its more-than $700 billion market value eclipses the combined value of JPMorgan and Bank of America Corp, the two biggest U.S. banks.”
CONSUMER LENDING: Fintech disrupts the traditional reliance on lending data. Data analytics and algorithms increasingly threaten the future of FICO score-based lending. New technology that streamlines the loan process and offers lenders more detailed and more expansive metrics on a person’s creditworthiness than a FICO score is a win for consumers and financial institutions alike.
BLOCKCHAIN: “Blockchain disrupts the current bank system by being a real-time updating digital ledger that cannot be changed. This takes paper and fraud out of the equation.” However, the opaqueness of this technology invites uses that have the capacity to circumvent regulatory scrutiny.
REGTECH: RegTech is the notion of infusing information technology into financial services to address regulatory challenges. Of course, new solutions to regulatory concerns necessitate new opportunities for attorneys well-versed in regulatory and compliance work.
So what should law firms think of the Fintech revolution? The explosion of Fintech innovations across many platforms will require firms to re-think and re-imagine the services they can offer financial services clients. New, more complex and more complicated legal issues face Fintech innovators. As such, the fusion of finance and technology, while rapidly changing the face of financial services in the 21st Century, is also transforming the knowledge, scale and skillsets of legal counsel.
Vanderbilt Law School’s Director of Innovation Design and Law Professor Cat Moon (@inspiredcat) perfectly sums up the notion of seizing legal opportunities in a single tweet: “Be prepared for unbundling – some work is not going to require a lawyer anymore. See this as an OPPORTUNITY to do more interesting work.”
The Fintech revolution is nothing to fear. Indeed, for the legal profession, it is something to be embraced.