Fintechs are, according to Mr Alain Clot who is the head of France fintech, companies using operational, technological or economic models in order to solve existing or emerging problematics of the financial sector. These new actors in the financial system are booming: the number of investment projects in the fintechs increased by 27 % between 2018 and 2019.
To understand the critical aspect of the partnership between banks and fintechs, the compliance aspect must be taken into account. A bank must respect some legislations. If it does not, it can be liable to fines. To help it keep up to date with regulations, banks can collaborate with fintechs specialized in this area called Regtechs which are using certain technologies such as blockchain, AI or Big data in order for the banks to meet the requirements. Fintechs are ideal partners: they are constantly evolving and have a greater capacity of agility than banking institutions.
However, if banks must comply with legislations, so must fintechs. Some get around the existing regulations which threatened their own credibility and their reliability as potential partners. Few fintechs are certified by the ACPR, which represents a risk of money laundering or terrorist financing.
Another key issue in the collaboration between banks and fintechs is related to cyber security. The protection of personal and financial data is a priority for banks which base their reliability and image on their ability to protect this data. However, to establish their activity, fintechs need access to certain data which may affect the banking secrecy. This risk may be increased by the use of PLCs or aggregators.
In order to face these non-compliance risks, solutions can be presented. In order to practice its activity, a fintech must choose a regulated status, which will give it an approval from the ACPR on the status of the company. An examination of fintech’s conformity is made before any approval is granted. This accreditation brings credibility to fintech. Moreover, some of the technologies used, such as blockchain, can be used to counter money laundering or terrorist financing. But eventually, only international cooperation could be effective.