A gathering of fast-rising players and investors in the financial technology – or ‘fintech’ – scene has cited regulatory issues as the market’s primary concern for the coming year.
Polled at the Fintech Mashup expo – hosted earlier this month in New York City by Silicon Valley Bank (SVB) – the 101 ambitious firms and backers said that current regulations, and the threat of more in the near future, were the main impediments to the sector’s growth (a sentiment shared by 43% of the delegates).
In particular, the attendees expressed frustration with how governments are handling the development of financial solutions based upon blockchain technology.
While blockchain software forms the bedrock of contentious cryptocurrency Bitcoin, it has numerous applications for mainstream cash management because of its facility for establishing a unified paper trail of transactions that every connected party has access to.
Even the blockchain that underpins Bitcoin maintains a record of every transaction that has ever been made in that currency.
However, speaking to specialist fintech journal CoinTelegraph in the wake of the event, Jamie Burke – founder of OutlierVentures.io – said: “I myself am building the HQ for a European Blockchain Incubator and fund set to invest millions in the UK – but will have to seriously consider moving it to a more friendly environment if hysteria [over] terrorism pushes the government into a regressive position.”
SatoshiLabs CEO Alena Vranova added: “I believe regulation [of Bitcoin technology] is not only unnecessary, but may be harmful. A central legislatory authority can never estimate well the evolution of such a new phenomenon.”
Other key issues that emerged as potential challenges to the sector were reticence by established corporations to adopt new technology (24%), rapid changes in consumer behaviour (18%) and access to funding (15%).
In terms of global growth opportunities, 36% of the delegates said that the US was the most fertile territory, followed by Asia (22%) and – despite the UK’s problematic regulatory stance – Europe (14%).
SVB Financial Group chief digital officer Bruce Wallace said: “The attendees at the Fintech Mashup event validated what fintech companies around the world have been voicing in recent years – an effective regulatory and compliance strategy is critical to their ultimate success.”
In late September, management consultancy McKinsey’s 2015 Global Banking Annual Review warned traditional banks that they are “under attack” from a wave of new, technological players.
It added: “To date, banks’ losses to [those] attackers have been little more than a rounding error. But as digitisation accelerates, banks will be in a battle for the customer that will define the next 10 years for the industry.”