Why Fintech Entrepreneurs Should Make Friends with Regulations
Adam Nanjee, Head of Fintech at MaRS Discovery District, explains the key role of the regulatory environment at each stage of a fintech startup’s development.

Want to change the world with your fintech startup? You have to work within the world you have, says MaRS‘s Adam Nanjee.

Regulation is a big part of fintech.

Regulations are not designed to obstruct you or keep the status quo. They protect the economy from harm.

One of the reasons why Canada’s banking system survived the financial crisis is that we have a highly regulated environment.

There’s no carte blanche for a good idea. Following the rules must be part of the DNA of a fintech startup.

The worst thing that can happen to a fintech entrepreneur is they build this great solution, they invest a tremendous amount of capital, and they hit the regulatory wall and get shut down. 

The good thing is, regulators are open to discussion. Adam Nanjee’s fintech hub at MaRS helps make initial connections.

What we’ve seen here in the Canadian landscape is that a lot of fintech startups are actually working with the regulators to develop their solution.

After all, regulators understand that rules that can’t be adapted and applied also can’t respond to change.

If we stifle with all regulations, how does innovation actually happen?

The right time for entrepreneurs to get regulators involved is before they start.

They are spending a lot of time with their lawyers, and their IP patent lawyers, and their regulatory advisors to build the right solution from the beginning.

In Canada, especially, to achieve any sort of scale, you also must work with banks and think beyond your borders.

Once you build a solution domestically, you have to invest capital to build out your solution internationally having that regulatory lens.

Each environment has different rules on reporting, retention of customer data, and risk.

It’s very different operating in Hong Kong than Toronto.

Fintechs that proceed past the idea stage have to then budget time and money around regulation.

As startups scale and raise that capital, you see a larger portion of their capital in fintech dedicated to that regulation component. 

Although the consequences of not working with regulators might be catastrophic…

You can go against regulation and get shut down, you can skirt around it, or you can work with the regulators.

…without them…

We’d have the wild wild west. 

 

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