Why Fintech needs Wyatt Earp

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Over the past year, I have been reviewing the mandatory legal changes that had to be created and amended when CREST (The UK financial settlement system) was introduced in 1996. The project started in 1993 after the previous attempt at modernising the settlement system called TAURUS failed. CREST is the topic of an academic research study organised by B.I.S.S. Research and sponsored by leading industry firms; BT, CISI, Euroclear, SWIFT Institute and Travers Smith. A report on this research will be published on the 15th July.

Travers Smith was the provider of legal advice, circumventing the many legal obstacles, in introducing dematerialisation into the UK markets, and fundamentally changing; processes, systems and services. This took three years to succeed, and then only after Parliament (both houses) enforced the required changes.

It’s relevant to today, as we are in the middle of a Fintech boom where once again fundamentals are being changed through introduction of new technology. The question I have, is about the legality of many of these proposed changes.

So far I have witnessed plenty of proposed changes, but very few that have been legally tested. The cost of creating the legal environment is not cheap. What legal services are! So this begs the question, who pays? Also, at what stage does a legal investigation start? Do these changes all require modifications at industry wide level, or are they specific to each idea? Will this produce a ‘bugger’s muddle’ of an industry infrastructure, with far too much choice? A bit like walking into a store with every wine on the planet, all purporting to be the best, but what do you chose?

The UK Government and Brussels show intent, on allowing technology innovation to impact and change the markets. However, technology alone is not enough! What is required is the legal opening up of markets to allow change. This must be controlled to provide education and support choice, but who controls it?

Unless the Fintech wild west has some rules and controls, I can see the urgent need for Wyatt Earp, sooner rather than later.