Fintech companies from around Europe see opportunities
for expansion in the Spanish market as customers ditch traditional
banks, which are being forced to close branches and cut
Spain is seeing growth in its financial technology, or
'fintech', sector, with various local banks and financial
institutions setting up fintech-focused ventures, with start-ups
from other countries also eyeing the Spanish market.
According to Pablo García Mexía, of counsel at
Ashurst, the emergence of fintech has two significant
ramifications. The first, and most wide-reaching, is the
application of digital technology in the banking sector. This is
something that has been happening for a while as the banks have had
to quickly adopt new technology to better handle transactions. The
second significant impact is the emergence of a new sector of
companies, or start-ups, that are entering the financial sector to
compete against banks.
García Mexía describes such technological changes
as disruptive as they are changing the way transactions are carried
out in that there is an increasing use of online banking, cloud
computing and digital applications by a wide variety of companies
to streamline their operations. "All of this brings enormous
legal repercussions and challenges," García
Mexía says, citing the issue of online payments as the
largest concern. Such payments give rise to issues related to
privacy and cyber security, as well as the risk of fraud and
extortion. "But despite the risks, companies are obliged to
adopt these new practices in order to remain competitive, and this
applies to the financial sector," he adds.
As was the case with e-commerce, fintech has raised initial fears
regarding privacy and security, García Mexía says. He
adds that such issues will create a new challenge for law firms,
both in terms of potential litigation and the need to keep pace
with the latest developments.
Recent developments have included French marketplace lending
platform Lendix receiving approval from the Spanish financial
regulator CNMV to operate in Spain (see box). Meanwhile, another
French fintech company Linxo – which has 900,000 users
– is also reportedly considering expansion into the Spanish
market. Earlier this year, it emerged that leading Spanish bank
BBVA was setting up a fintech-focused venture capital firm –
Propel Venture Partners – which would have $250 million to
High street banks suffer
The emergence of fintech companies is having a devastating
effect on more traditional banking operations. The extent of the
damage suffered by high street banks was demonstrated earlier this
year when it emerged that Santander would be closing 450 of its
branches and axing 1,200 jobs in Spain.
"Fintech is a growth sector, and both a competitor of the
banks and a sector that complements the banks," says Fernando
Mínguez, a partner specializing in financial institutions at
Cuatrecasas, Gonçalves Pereira in Madrid. He adds that the
sector is beginning to attract a lot of talent from the financial,
technological and regulatory sectors. "However, fintech does
not yet have its own regulatory framework and such companies will
be governed by financial regulations and not by specific rules for
that sector – there will be more general credit regulations
Mínguez says that, in future, there should be a more
specific regulatory framework governing fintech, citing the example
of the UK's Financial Conduct Authority (FCA). "The FCA
has developed a fintech 'sandbox', which is a kind of
friendly regulatory framework to encourage the growth of such
firms," he explains. "It's a new area that is
generating much interest among law firms, as fintech firms are
sensitive to certain risks and are therefore potential clients
– evidently there will be more legal issues going forward,
because financial transactions inevitably imply risk."
The emergence of fintech also demands a harmonious collaboration
between law firms' IT and financial departments, García
Mexía says. This is because issues and litigation concerning
digital transactions will inevitably involve a number of different
law firm departments, requiring lawyers to be up to date on
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