Interview with David Gardner, partner and head of fintech & payments sector at UK law firm TLT

Tuesday, 21st June 2022
  1. Firstly, I’d like to understand the role that fintech plays within TLT and what your experience can offer to clients?

TLT has one of the UK’s largest and most experienced financial services sector legal teams. We’re truly embedded in the sector – working across all legal disciplines with everyone from global banks to fast-growth fintech companies. Our lawyers have diverse backgrounds including experience working in FS institutions, regulators and digital businesses.

In fintech specifically, our team advises on everything from new product development and launch to investment and acquisitions. We can bring together expert teams covering a range of legal specialisms including corporate, commercial, technology, intellectual property, data, regulatory and disputes & investigations. We have decades of collective experience working together effectively with clients and colleagues to deliver practical solutions that achieve our clients’ ambitions whilst managing legal and regulatory risk.

  1. How would you describe the current state fintech sector?

Fintech was already a key driver of growth and change in UK financial services, attracting billions of pounds in investment and employing over 75,000 people in the UK prior to the impact of Covid-19.

Covid-19 changed and accelerated a wide range of consumer behaviours, with businesses and customers quickly becoming reliant on faster, more efficient and (hopefully!) safer solutions to meet their needs with less reliance on traditional face to-face interactions and use of physical currency. This raised the bar of customer expectations regarding solutions that integrate more conveniently and seamlessly into their daily lives. This created a huge opportunity for fintechs with solutions that met these needs.

In many respects, fintechs were already well set up to meet the challenges of Covid, as they generally offer efficient, technology- and data-driven services that can be accessed online rather than face-to-face. The best fintech solutions are build on scalable, flexible platforms that allow rapid deployment and configuration to meet changing customer needs.

  1. What does the future hold for fintech?

The global fintech market is anticipated to grow significantly over the course of the next three to five years. We’re already seeing more engagement between financial institutions and fintech providers in various ways, from acquisition and investment to collaboration and white-labelling. This will continue to be spurred on by growing relationships across the sector, where the forces of “co-opetition” pull different players together to pool their strengths and resources in order to develop better solutions for customers.  We expect to see more established financial institutions continue to look at investing in and collaborating with fintech providers that they may once have perceived as their rivals.

The challenge we face as lawyers is developing contractual arrangements that accommodate the flexibility and innovation offered by fintech providers as well as the governance and compliance requirements of more established institutions. This can be contentious when dealing with issues like branding, future development, data management, commercial arrangements and competition issues.

 Our team is on hand to guide clients through all the legal considerations in order to set up successful working relationships with other businesses, however they choose to do this.

  1. During our Trailblazing Tech event we will be talking about how payment trends have evolved and technologies like embedded finance are coming to the forefront. What is your view on payment safety and the effect it is having on business?

Embedded Finance

For digitally enabled customers, paying for goods and services has never been easier. The growth of payment options (PayPal, ApplePay, the rise of Buy Now Pay Later (BNPL) options) and the accessibly of payments via Embedded Finance (where payment functions are embedded into retail websites for everything from taxis, to tickets to takeaways) means paying for goods and services can be faster and more efficient than ever before. For businesses, there is no doubt these options can increase convenience, drive conversion and improve customer experience.

Risks to customers

It’s important to weigh the risks and issues arising from these new payment options against the benefits of choice and convenience. For those without access to smart phones or internet connections, or who don’t know how to use them, there is a real challenge around access as businesses and financial service providers more away from cash, cheque and face-to-face transactions.

The FCA is actively targeting the BNPL sector due to concerns about the ease with which customers can access credit. Online retailers spend significant time streamlining their customer journey and reducing friction to minimise drop-outs, but there is a case to be made for appropriate friction and challenge at the point of payment. This is also important to reduce the risk of fraud.

Payment security

In tandem with advances in payments technology, payment security standards have also increased, meaning these are now more stringent than ever before. This is important, because the increase in the variety of payment options and the ease with which payments can be made introduces a greater attack surface for fraudsters looking to target customers who are hasty, inexperienced or vulnerable (or all three!).

The payments industry has come under significant pressure from regulators and consumer groups to tackle issues like Authorised Push Payment fraud. A huge amount of investment and technical work has been done to deploy new technology such as Strong Customer Authentication and Confirmation of Payee for online/mobile bank transfer payments. Campaigns to increase customer awareness of scams and common techniques used by fraudsters are equally important!

From a technology and regulatory compliance perspective, many of the IT security requirements for payments businesses (and related parties like retailers and payments technology providers) are complex. This is an area where detailed regulatory language meets the reality of technical IT implementation projects involving multiple parties. At TLT we have the FS Regulatory, Technology and Data legal specialists who can help clients to navigate a safe course through this area.