TECHNOLOGY & GOVERNANCE
Emmanuel Bégat, partner and COO of mebs, sees the development of Fintechs as an opportunity for the future
Fintechs require specific governance skills
Fintechs are no more than technologically disruptive companies, that apply a number of recent technological and IT advances to the field of financial services, covering substantially all areas of the industry.
Very often, Fintechs are small and mid-sized companies that share with other breeds of startups the same governance challenges. First, they are often held majoritarily (if not in full) by their founder(s); there, governance plays a crucial role by challenging the owner(s)'s views, strategies and conflicts of interest. Second, Fintechs often look for new capital to finance their research and future growth; here also, governance plays a key role by challenging the forecasts and plans of owners and senior management. Sometimes, governance opens its own networks to help find additional long term funding sources, and acts as an undisputed partner in key negotiations with bankers, future shareholders or other stakeholders.
Fintechs require specific governance skills to provide best value to shareholders.
"Fintechs deserve specialised governance and will enable governance to refocus on its core missions"
Fintechs will allow governance to refocus on core missions
With the increased number of regulations affecting the financial industry nowadays, a significant part of Board meetings is dedicated to compliance and legal matters. The latter are utmost important, since they warrant an organisation's ability to continue delivering.
The primary mission of a Board of directors, irrespective of the activity of the concerned company, consists in setting up the organisation's strategy, monitoring its implementation and ensuring adherence to the highest ethical standards.
Too often, though, long reports require much attention by Board members. Boards are consequently devoting too much attention to details and forgetting the big picture. Fintechs and Regtechs will allow Boards to refocus on their primary mission by providing them with assurance that the organisation complies with all of applicable regulations.
Fintechs will require different skillsets from Boards
Before being able to rely on Fintechs and Regtechs to lighten the burden of regulatory oversight, Board members will need to be assured that applications used actually meet what they have been implemented for.
I see two options in this respect. Number one: Board members rely on specialised advice from external counsels, thus increasing their exposure to potential mis-advice and posing the question of ultimate responsibility as a result thereof. Number two: Boards develop or acquire IT and technological skills allowing them to appraise the efficiency of solutions being implemented.
There is no miracle: only a combination of external advice and internal challenge will allow Boards to effectively appraise the efficiency and reliability of Fintechs/Regtechs solutions.