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  • The next generation

Scaling in a heavily regulated industry, such as fintech, is not easy. You have both investors and regulators looking over your shoulder. Our youngest Finance partners, Jasha Sprecher (34) and Antonia Netiv (36), explain how they assist fintechs, why NautaDutilh is a frontrunner in this relatively new sector and why a firm with strong roots in the financial sector can help scaling fintechs.

Both Jasha and Antonia have impressive track records in fintech. Jasha is an expert in financial regulatory law, while Antonia specialises in investment and capital markets. They are both passionate about the industry as a whole. “Fintech is much more than just your run-of-the-mill banking app,” says Antonia.

“Fintech is a broad term for innovation in the financial sector, covering payments, investments, lending, trading in securities, KYC for the financial industry and much more," says Jasha. A fintech can be a small company, but also includes very large companies creating innovation in the financial sector. "One thing that many of these companies, whether big or small have in common is that they have a huge potential for growth and that attracts investment."

“These companies were providing services that were not traditionally viewed as financial, but now are regulated to facilitate payments between platform users."
 

The field continues to grow as a result of new ideas created by new fintech companies, innovations by traditional financial sector players, such as banks, and because of innovations by companies that did not start out as a financial services provider. Companies such as Uber, AirBnB, eBay and Takeaway.com are now offering financial services even though, originally, they began as pure tech platforms. “These companies were providing services that were not traditionally viewed as financial, such as buying a meal or ordering a cab, but now are regulated to facilitate payments between platform users. As a result, they operate in a regulated environment,” explains Jasha.

In a regulatory framework, companies must abide by governance and compliance rules, in addition to rules on customer relations, contracts, pay and stock option plans, investor relations and disclosure to the public. “It’s a big change in mindset,” agree Jasha and Antonia. "On top of that many of these companies grow or aim to grow exponentially which also requires more sophisticated governance and legal framework than your typical start-up.", says Antonia.

“It is interesting to see that, although the financial sector and the tech world were traditionally miles apart, they have been rapidly growing towards each other."
 

“We help our clients make their products work in a regulatory environment,” says Jasha. “Fintech start-ups begin lean, without many employees and, generally, without a large team of legal experts, let alone experts in the area of financial regulation. Often, they are trying to do something new in a situation where old laws and regulations do not take into account their innovative product. Helping such companies transition from an unregulated environment to a regulated environment is what I do. Venturing into the regulated space takes a very different mind-set and business set-up than operating in an unregulated sector. This is why we do not only assist our clients in applying for a license, but we also advise them on the set-up of their regulated processes and in their interactions with regulators. We have been able to do so very successfully, leaning on our extensive experience in the financial sector and with financial products."

“It is interesting to see that, although the financial sector and the tech world were traditionally miles apart, they have been rapidly growing towards each other; banks are heavily reliant on technology and tech companies see financial services as a new source of revenue,” says Jasha. We therefore also see quite a lot of partnerships between traditional financial sector parties and scaling fintechs. That is a way for banks to meet the technological challenges and for scaling fintechs to ensure further growth.

"If you end up scaling, it is most cost and time efficient to have planned for your success from the beginning."
 

Besides dealing with regulations, fast-growing fintechs often also need capital to grow its scaling business, be it through a funding round or an IPO. This is Antonia's area of expertise: “When companies scale, they need to think about things they didn’t previously need to. Sometimes governance that seemed logical at the time a company started out can scare off investors in an IPO. If you end up scaling, it is most cost and time efficient to have planned for your success from the beginning in terms of both structuring and governance and culture. ” If done right companies can scale quickly and you see the success stories scaling at a faster and faster pace. Scaling fintech companies have to be able to operate under the scrutiny of both their investors and regulators. A good relationship with investors and regulators is therefore paramount. We pride ourselves in successfully helping our clients navigate through this challenging but exciting landscape.

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