The role of legal in developing fintech products
Legal’s collaboration with product teams throughout the development cycle of fintech products is crucial for proactive adherence to regulatory standards. To work seamlessly with business colleagues, lawyers must focus on understanding and communicating key aspects of regulations, preparing businesses for changes, and strategically advising on parameters for product development.
“There are lessons to be learned from outside of fintech on how regulators expect financial products to be developed. For example, the UK FCA’s Consumer Duty and EU MiFID product governance rules provide a framework for the controls that should be in place as products are developed.”
- Simon Crown, Partner, Clifford Chance
Legal plays a special role in collaborating with product teams within fintechs. Being part of the entire product development cycle is the gold standard for making sure that lawyers can be proactive in making sure that products are fit for purpose, particularly from a regulatory perspective. But, if the relationship or communication between legal and product teams is poor, you can expect delays, frustration, and regulatory risk.
When regulation is continually changing, it can be easy to feel you are only able to be reactive, but being involved early on gives lawyers the opportunity to work with software developers or product developers from the start to see how things can be fitted into the regulatory framework and, if not, how legal can help ensure the business still achieves its aims. Part of doing this means asking the right questions - from making sure you have an understanding of what your business' goals are, to getting into the nitty-gritty of how its products and IP work.
There can be a perception that in-house lawyers curtail business ambitions or act as a blocker. While it's important to stay true to the key tenets of being a lawyer, to avoid that impression, lawyers need to focus heavily on understanding the regulation and any potential obstacles and workarounds that might be relevant and ultimately preparing business teams for changes so that it doesn’t come as a shock. Doing so gives lawyers the opportunity to be proactive rather than reactive. It also gives business teams time to adjust, which helps them to adapt and see that lawyers want to prepare them and care about how they can get products out and over the line.
Lawyers in fintechs should also proactively keep product teams in the loop on regulatory developments, even where those are in flux and it is hard to be precise on where new rules or regimes may land.
“Being a lawyer is not just about legal advice – the business needs to understand the parameters that product developers can work within, not actually the details of the law. That is, advising the business strategically.”
- Rhian Ravenscroft, Head of Legal EMEA, MarketAxess
“Sometimes it can be hard in Legal because you might not always be in a position to share all of the details [of regulatory developments]. But understanding that we [in Product] can’t miss a deadline, and working around that to give us as much time as possible, means we can work out where we need to make trade offs, and assess what the implications are if we don’t get things done by the deadline. It also helps those Product-side to assess when we might need to go out and find contingent resources too.”
- Surajan Singh, Product Manager, Visa