More than 10 years as a financial regulator has shown me that taking blind risks won’t get you very far in this game called “financial services”. At least not in the long run. But on the other side, I have also seen how calculated risk-taking and smart execution have hugely profited innovative entrepreneurs.
By initiating the FinTech workstream in the Estonian Financial Supervisory Authority, I had the pleasure to meet a variety of companies interested to face the great entry barriers of financial sector and bring change to this high league. Even though it is not a regulator’s job to criticize any business models or teams developing these new products and services, I couldn’t help myself but to secretly predict the success of each team by asking just a few straightforward questions. One of these was: “Do you know how to turn regulation to your advantage?” This unexpected question quite often revealed that the teams haven’t deciphered one of the most important keys to success in the financial sector — understanding regulations and the level of risk management it anticipates.
It is an unappealing and highly complex topic with so many layers and actors it takes great dedication and time to work your way through it. I also understood the need to focus on the technical aspects of the product. Yet I was surprised that during my days as the Head of FinTech working group I didn’t manage to meet any early stage financial start-ups who had a risk manager or compliance officer in their core team. I personally saw this as their biggest drawback due to the highly regulated and risk-averse nature of today’s financial services sector. I’m glad to note that Change is an exception here.
My job is to make sure that there are no legal obstacles that would stop our team from bringing the best product to the market. As already explained, in the financial sector this doesn’t depend just on how fast or well you can code, but also how fast you get all the necessary approvals, be them from financial regulators, auditors, tax authority, partners, or other parties.
With crypto-assets things get even more complicated. Just to draw one example — even after going through the process of successfully getting two necessary licenses from the competent authority, opening a bank account for this type of company is decided case by case by the bank’s management board. One could imagine the level of preparatory work it takes to make sure that this process goes smoothly, because you only get one chance. As a matter of fact, banks set even higher bars than regulations or regulators.
To draw a parallel from sports, in today’s framework the banks are the referees who have the power to decide who plays and who gets the red card on the field. Players must convince banks that they know all the relevant rules and are mentally and physically fit for the game. As the Head of Risk and Control at Change, I’m glad to be part of such experienced and reputable team that makes pole vaulting that high bar a much easier task. But even for us it is wise to take time for a few extra training sessions before heading to the championships.
Hopefully this shed some light to the complexities that Change is currently facing and the hard work that our team is putting into delivering not only a product with the best user experience but also a sound legal setup, so we could always be there for you.
