5 Legal Issues That Must Be Considered Regarding Fintech


A new dawn in the banking industry has emerged with the introduction of Fintech. It has allowed billions of under-privileged people to avail of financial services for the first time. Kenya’s M-PESA is a great example of Fintech.

Financial institutions and markets have some of the most complex legal regulations to protect us from numerous risks and illegal activities. Fintech is no exception. The new technologies have to be properly monitored in order to maintain customer engagement.

5 Legal Issues That Must Be Considered Regarding Fintech

Let’s jump straight at what Fintech means & the most common legal issues to consider.

What is FinTech?

Fintech means financial technologies. Here the word Fintech comprises a number of services, such as AI, peer-to-peer lending, blockchain, digital payments, Robo- advisors, and crowdfunding. Fintech is transforming the traditional banking system with the innovative use of technologies.

Also Read: Why Learning About Finance Is Important When You Are Young?

Fintech is not a buzzword anymore; instead, experts signify it as the new boon of the 21st century. That said, Fintech has already brought a significant niche in financial services, by providing an opportunity to those who were not eligible to have a bank account before.

If you can control every transaction & banking complexities by using your phone & phone alone, why won’t you adopt such an opportunity? That’s the motto of Fintech. Fintech is focusing more on the customer level interaction, which was previously invisible in traditional banking.

As mentioned earlier, Kenya’s M-PESA is a perfect example of Fintech.

They have been able to put 2% of the total housing population of Kenya out of extreme poverty. About 90% of the people of Kenya use M-PESA, which is solely a mobile-based banking system.

However, Fintech is not without scars. It has some major issues to consider. With the advent of cryptocurrencies, there are more complex legal issues. However, there are also crypto lawyers like Kelman the crypto lawyer who offer their services regarding fintech, cryptocurency, and corporate structuring.

The following legal issues need immediate rumination if Fintech has to become impeccable:

1. Ensuring Secrecy of the Database

Being in Fintech means you need to realize that Fintech authority knows everything about you.

As the management prioritizes digital banking, having access to data for their purpose is necessary. In contrast to providing the best user-friendly experience, customization questions the data safety.

Their services, per the customers’ demand, raise concern for the cybersecurity breach.

They hold many confidential data, social security numbers, credit card information, net income, bank balance, etc. That said, they have to establish compliance with the data protection law.

Also, they need to put a compelling firewall against cybersecurity breaches. That’s why it is of the utmost importance to ensure the users’ data’s cyber safety.

If any breach happens, they need to make sure they identify that immediately. Without this, the Fintech authority may have to face legal lawsuits from the customers. Their reputation will stumble to the ground as well.

2. Uncertain Jurisdictional Conflicts

Fintech follows a distributed ledger technology known as DLT. It is a process where there is no centralized administration to store much data. Instead, data is scattered across multiple institutions or sites.

What happens in DLT is that you possess a digital contract. All the transactions or financial decisions you make are basically done on a digital contract.

Saying so, it raises many complexities. Jurisdictional actions usually differ from country to country; what you can do in the USA may be illegal in Italy. That’s how it works. So, you might have to have a second thought before using Fintech and also about its validity.

Seemingly, it is of great concern to the Fintech authority. The risk of going into conflict with the regulation can deteriorate their image.

So, any contract digitally signed may not be validated by the jurisdictions all over the world. You may have questions about adopting Fintech.

Like you, many others can see this as a critical issue & refrain from using Fintech. The uncertain legal scenario thus needs to be pondered over immediately.

3. Perplexing Robo-liabilities

Another astounding feature of Fintech is that they use an AI-based interface to serve the customers better.

You need not wait for the call service provided by the banks anymore. Fintech even uses a mimic AI-based voice translator, just like a call center operator.

Although this feature may save your important time, it has some serious issues too. What will happen if there’s any trouble in the dealings or transactions? Who will take the blame?

This raises major concern for the companies relying heavily on the Robo features.

If you can’t find out whose liability it is, how will you solve the problem or get a verdict?

Even if you find out the liability here, which party will take the blame? This point is still inconclusive as there’s no written augmentation yet announced.

Another pressing fact is that even if you pin down the fault of robots, how will you press the charge? There’s still no firm legislation about the punishment of these AI-based Robo-advisors.

So, this is another grave issue that needs immediate attention.

4. Cloud Service’s Transparency Failure

Any contract signed between a financial institution & an outsourcer will require the cloud service provider’s recommendation. That said, cloud service providers need to maintain adamant transparency.

Most traditional banks have developed themselves by being strictly bookish to the rules & regulations of any kind of electrical money transaction. So, the complete openness of the cloud service providers is pivotal.

Therefore, cloud service providers will be under financial institutions’ scrutiny. The financial institutions will assess & audit whether these cloud service providers have minimum transparency compliance or not.

Also Read: The New Boom in Bitcoin is Highly Positive: The Reasons Must Be Taken into Consideration

5. Counterfeited fingerprint Issue

Although Fintech wants to be more careful about users’ security management, the fingerprint issues can adversely affect them. Fingerprint authentication has critical ICT security & legal risk.

Hackers can easily counterfeit your fingerprints by adopting different means & you won’t even know. This security breach is a serious threat.

All the data stored in the Fintech becomes vulnerable. If the Fintech authority cannot report the breach, imposing a lawsuit on them will be the least traditional approach. They may get a forever ban on the worst case. So, adopting biometrical data to ensure maximum security raises extreme risks too.


The points mentioned above require proper addressing if Fintech has to transform the entire traditional banking and financial service experience. With these legal issues considered, Fintech is going to bring in a revolutionary change.


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