Accounting for Law

Fintech companies and regulatory requirements around privacy

Financial technology companies need to incorporate ethical and privacy principles into the earliest stages of product development to avoid costly regulatory problems down the road, says Vancouver privacy and information lawyer Sara Levine.

“You stand a better chance of building a viable product if you understand the principles that govern the regulatory landscape,” says Levine. 

Fintech — short for financial technology — is the innovative use of technology to design and deliver financial services and products. It typically harnesses mobile technologies, big data and analytics, according to the World Economic Forum

As interest in the burgeoning sector grows, so do privacy concerns as companies request financial information about their customers, Bloomberg Technology reports.

The question of how the industry should be regulated is the subject of much debate, the economic forum says. 

The challenge is that fintech companies are developing products so new they are ahead of the regulatory curve, Levine says. 

But that doesn't mean they can ignore the regulators that will eventually catch up and start imposing standards, she tells

“You don’t want to be in a position of building something that‘s fundamentally going to take you outside of where the regulatory discussion is,” Levine says.

Fintech startups racing to introduce innovative products to market typically don't think about the debates raging among privacy and ethics experts, she says.

Most programmers and developers don’t want to get into the philosophical weeds; they just want to know what the rule is so they can apply it, she adds. 

The problem, Levine says, is they can later be surprised by regulations they hadn’t anticipated. They feel frustrated because they built a product the market demanded and their managers wanted, and now someone is telling them it's all for naught because of an ethical dilemma no one mentioned before, she says.

Levine believes fintech companies need to think outside of the technology-build mindset.

They need to understand not only the existing ethical, privacy and consumer protection rules but also the principles that underlie them; that way they will be in a better position to conform to whatever standards are adopted in the future, she says. 

“Or, they have to retain people as advisors who can help them understand the rules — and the purpose behind them."

Ensuring data accuracy is a fundamental privacy principle fintech companies should bear in mind, Levine says. Understanding this and other fair information principles can help companies in this sector think about why and for whom they are building their products, she adds. That’s because privacy laws, consumer protection and anti-discrimination laws often have overlapping ethical foundations, she says. 

"For example, we all know that online information about a person is not always accurate or up to date," she says. "Yet when analytics predicting creditworthiness include data from social media accounts or other online sources, the result can be credit decisions that are incorrect, unfair or even discriminatory. The data collection and use might breach privacy law, while consumer protection or anti-discrimination laws might apply to the resulting decision."

It’s also important to understand that laws in different countries are changing at different rates, Levine says. 

It helps to have staff members or outside advisors keeping abreast of the international debate among governments, regulators and the private sector, she says. 

“There’s never going to be no risk when you’re in an early stage industry that’s moving so fast and so far ahead of the regulatory framework. But if you understand the principles behind the regulations and the sensitivities, that can help you shape what you’re doing,” Levine says.

“It saves money if you do it at the front end rather than having to retool  that’s hugely expensive.” 


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