Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: P2P, Lending, Digital Bonds, BNPL, Private Credit
Why financial services regulation is crucial to fintech
fscom | by Philip Creed | Jun 30, 2017
Harnessing internet and mobile technologies to create new and superior financial products, FinTech and RegTech firms are uniquely placed to compete with long-established firms and institutions.
Their offerings often far exceed the capabilities of the out-dated services and systems provided by their perennial competitors and can attract tremendous consumer interest.
Yet herein lies the danger.
Whilst innovation, competition and market disruption are always in the interest of the consumer, FinTech and RegTech firms typically explore technologies so new that most regulators struggle to keep up.
In an industry crippled by scepticism and consumer doubt, this is a precarious position for FinTech innovators. A recent survey by Bumberg Capital, a San Francisco-based venture capital firm, found that:
- 70% of those surveyed believe that ‘new solutions such as digital banking, online lending, payments and financial services, are making financial transactions easier than ever’,
- 65% of those surveyed agree that ‘FinTech levels the playing field by providing access to services previously only available to the wealthy’, however;
- 72% of those surveyed ‘listed security as something they worry about with the new banking services online and they are not completely confident their financial information is secure or private’.
The implications are clear. FinTech firms are widely regarded to provide genuine solutions to traditional banking and payment systems, but their public perception is one of vague distrust.
Financial services regulation is crucial to the growth of the FinTech industry.
Not only does regulation protect the end-user from unscrupulous start-ups and innocent failures, but, if done correctly, can foster a truly competitive environment while re-establishing public confidence in the sector and increasing the regulator's understanding of innovative solutions.
The right regulation
The United Kingdom’s Financial Conduct Authority (FCA) is the regulatory body for Great Britain and Northern Ireland, and leads the way in championing a liberal approach to regulation, with a strong focus on promoting both innovation and competition.
The ‘regulatory sandbox’ initiative is part of the FCA’s Project Innovate, and is promoted as a safe space for companies to test propositions that have not previously been offered in the UK.
It allows innovative firms to work with their regulator to trial products in a live environment, promiting effective innovation and competition by allowing FinTech firms to skip the traditional routes to regulatory certainty.
Products are tested in a live, but regulated, environment against real-world rules where, if the product or service fails, there are no consequences for the consumer or the innovator – in this instance, the FCA provides feedback so the innovator can make the necessary changes, and the product can be tested again.
See: Competition Bureau suggests Canadian FinTech sector’s slow growth due to regulation, consumer complacency
This is a marked improvement on the status quo – as firms can often lose their market advantage whilst working through a rigorous authorisation process – and has been held up as an example from which regulatory bodies across the world can learn.
Indeed, Singapore, Hong Kong and Australia employ similarly agile regulatory systems. The United States Office of the Controller of the Currency (OCC) recently stated it is moving to establish a framework for ‘responsible innovation’.
The ‘regulatory sandbox’ is a prime example of the effective regulation that FinTechs and RegTechs require, and it’s far better than the alternative.
A dire alternative
Lax regulation would permit a faulty product to enter the marketplace, where it would fail (and early adopters would lose their money), whilst excessive regulation would prohibit the product from ever entering the marketplace (with the potential innovation lost forever).
Continue to the full article --> here
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
FSB warns of third-party FinTech risk
Financial Stability Board | Jun 27, 2017
Technology-enabled innovation in financial services, or FinTech, is growing rapidly. As a result, the FSB has been analysing the potential financial stability implications from FinTech with a view toward identifying supervisory and regulatory issues that merit authorities’ attention.
This report identifies 10 areas that merit authorities’ attention, of which three are seen as priorities for international collaboration:
- managing operational risk from third-party service providers,
- mitigating cyber risks; and
- monitoring macrofinancial risks that could emerge as FinTech activities increase.
Addressing these priority areas is seen as essential to supporting authorities’ efforts to safeguard financial stability while fostering more inclusive and sustainable finance.
See: Competition Bureau suggests Canadian FinTech sector’s slow growth due to regulation, consumer complacency
While there are currently no compelling financial stability risks from emerging FinTech innovations given the relatively small size of the FinTech relative to the financial system, experience shows that they can emerge quickly if left unchecked.
To draw out the supervisory and regulatory issues from a financial stability perspective of FinTech, the FSB developed a framework that defines the scope of FinTech activities to be covered, classified by their primary economic functions; therefore the analysis is technology neutral. Applying the framework to various case studies of FinTech activities helped to draw out the potential benefits and risks from FinTech. Potential benefits identified in the report include decentralisation and increased intermediation by non-financial entities; greater efficiency, transparency, competition and resilience of the financial system; and greater financial inclusion and economic growth. Potential risks include institution-specific micro-financial risks that could emerge and system-wide macro-financial risks for instance increased connectedness and correlation risk. The FSB will continue to monitor and discuss the evolution of the potential financial stability implications of FinTech developments.
Continue to the full article --> here
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
Fintech Sandbox and Ontario Centres of Excellence Announce Partnership
CrowdfundInsider | By
The Boston based company Fintech Sandbox and the Ontario Centres of Excellence (OCE) signed a memorandum of understanding (MOU) to work together to bring the Fintech Sandbox model into Ontario and eventually the rest of Canada.
The President and CEO of OCE, Dr. Tom Corr, spoke on this MOU:
“This new partnership between FinTech Sandbox and OCE is a unique opportunity that will give the growing fintech ecosystem in Ontario access to data, networks, platforms and events that will help accelerate growth and support the creation of high-quality jobs in the province. Signing this MOU with FinTech Sandbox will allow OCE to continue building on our programs and offerings in fintech innovation in Ontario.”
See: Fintech Regulation: Achieving the right balance to foster innovation
Fintech Sandbox is a nonprofit organization concerned with the promotion of global financial technology innovation. They provide Fintech startups with free critical data and resources to assist them with their business development. By providing this service for free, new Fintech companies can avoid the expensive cost of accessing large, relevant data. In return for this free information, startups collaborate and share what they learn in order to benefit the whole Fintech market.
OCE is a government funded organization that works with the commercialization of new and relevant innovations that can potentially shape future markets, thus ensuring that Ontario will be a global competitor. They work closely with industries, universities, colleges, research hospitals, investors, and governments in order to help cultivate these new ideas. OCE’s investments include advanced health, digital media and information communications, advanced manufacturing and materials, and cleantech energy, environment, and water.
Continue to the full article here-->
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
Is the SEC About to Crack Down on ICOs?
CrowdfundInsider | By Jonathan Nieh | June 17, 2017
The exponential growth of Initial Coin Offerings (ICOs), which are being used to raise huge amounts of money using blockchain based tokens, have been increasingly scrutinized. According to a recent report on Reuters, regulators within the SEC are taking a hard look at the use of ICOs and how they might be a tool to circumvent securities laws.
ICO vs IPO
ICOs are similar to IPOs in that a company raises capital from the public. However, instead of receiving a share in the company, investors who participate in an ICO instead receive a cryptographic token, like Bitcoin, although the companies conducting an ICO create their own unique token. The token usually does not give the purchaser a share of ownership in the company, but oftentimes the token can be redeemed later for cash. Because of that distinction from IPOs, ICOs are not technically a “security” and thus not officially regulated by the SEC. However, ICOs can very much be characterized as the offering of securities in some situations. For an in-depth analysis of when an ICO counts as a security, here’s a great blog post by senior contributor Amy Wan.
SEC Concerns
Obviously, if companies are using ICOs as a way to circumvent securities regulations, the SEC will want to get involved. That’s why, as an anonymous source quoted by Reuters put it, ICOs are “high on [the] radar” at the SEC. The SEC notably hasn’t made any official statements on its position as to ICO’s, however. There were a couple ETFdenials related to cryptocoins a few months ago, but those were based on companies trying to create Bitcoin-based listings on different exchanges, the most famous being one funded by the Winklevoss twins
of Facebook fame. The denials of the ETFs do imply that the SEC is concerned about the inherent risks of cryptocurrencies. In fact, the SEC laid out their chief concerns in the letters explaining each denial. Still, ICOs present a different and unique problem in that the SEC has to balance two competing interests: capital formation for emerging companies and investor protection.
See: COMMENTARY: SEC rightly concerned about 'so-called SAFE' securities in crowdfunding
With many experts questioning the absurdity of the speed at which ICOs can raise huge amounts of capital and some even asking for the SEC give some guidance at the very least, the question isn’t whether the SEC will do anything to regulate ICOs, but when. Hopefully, when they do, the regulations put in place will be congruent with crowdfunding’s inherent goal of helping small businesses grow.
Continue to the full article --> here
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
How Asia Is Adapting To The Alternative Finance Revolution
In more ways than one, alternative finance has made borrowing simple, swift and suitable. Over the last few years, alternative finance providers have grown in number and garnered significant acknowledgement and traction from stakeholders such as regulators, venture capitalists, banks, enterprises and investors. They provide financing outside the parameters of traditional lenders, most commonly banks. Breaking it down even further, alternative finance includes domains such as crowdfunding, peer-to-peer financing, and invoice financing.
The rise of alternative lending
The sudden rise of alternative finance can be attributed to two reasons. First, the inability of traditional financial institutions to cater to certain segments of the market which need access to secure financial services. And second, because fintech firms have recognized these gaps, successfully experimented and developed solutions to fix these gaps with minimal red tape. Based on data from The World Bank, more than 200 million micro, small and medium-sized enterprises (MSMEs) in emerging economies lack adequate financing, due to lack of collateral, credit history and business informality. Until recently, alternative finance platforms have witnessed staggering success and even reached a stage of maturity in the Western markets, particularly in the U.K and U.S.
See: Research: Americas Alternative Finance Grows to $35.2 Billion in 2016
In recent times even the East has also joined the ranks and given the alternative finance industry a major boost. Countries such as China, Singapore, Hong Kong, and most recently Indonesia, Malaysia, the Philippines, and India have displayed a tremendously positive response to several platforms providing alternative forms of finance to enterprises and individuals. Rightly so, as Asia is home to a population of 4.4 billion and 5 key financial centers of the world. Aside from a considerably large consumer base and a relatively stable political system, most of the Asian economies emerged from the 2008/09 financial crisis in better shape than its western counterparts. The tightening of credit across several banks across the region has played a pivotal role in the growth of alternative finance in these markets.
As alternative financial products gather momentum, China’s state-controlled banks are losing share of the nation’s 44.8 trillion yuan in household deposits. The same can be said for many major Asian banks.
A special mention must be made of the Asian regulators which are actively encouraging and supporting the growth of alternative finance in their respective countries. Singapore’s regulator has set aside $225 million to develop and support fintech projects locally. It has also eased the rules for financiers to increase the level of unsecured lending. The Monetary Authority of Singapore has even housed an innovation lab called Looking Glass within its building. Hong Kong Monetary Authority has created a system which brings banks, financial technology platforms and the regulator itself to collectively brainstorm and experiment on developing innovative solutions.
See: Share Your VOICE and Help Define the Future of Alternative Finance in Canada (until Jun 30, 2017)
In the same manner, China has become the largest P2P market regionally thanks to its government which encouraged the growth online finance to cater to the underserved market instead of solely relying on local banks. Japan has taken a step further to collaborate at an international level by partnering with the Financial Conduct Authority to encourage a cooperation between financial technology platforms in Japan and in the U.K to be able to operate in both countries.
New kid on the financial block
As the alternative finance industry continues to grow and expand, it has seized a significant portion of market share from traditional lenders by attracting their investors and borrowers onto its agile and innovative platforms suitable for a wide range of users. For example, such platforms provide investors the opportunity to find and zero down into investments which suit their specific risk appetite with greater control over their investments than a portfolio manager. At this point one may wonder - how would banks react to such forces of fintech? Would it be hostile, or regressive? After all, investing and lending are the basic fundamental reasons behind a banks existence!
Continue to the full article --> here
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
Fintech Regulation: Achieving the right balance to foster innovation
Financial Post | Special 'Op Ed' Post, Dinaro Ly | June 4, 2017
For nine months last year, executives of Lending Loop, which describes itself as Canada’s first peer-to-peer lending market, voluntarily put the company’s ambitious growth plan on pause to spend some quality time with securities regulators. As CEO Cato Pastoll recounts, the unusual interregnum was all about figuring out how the firm could operate within a regulatory system that doesn’t really know what to do with fintech firms like his.
“The Canadian regulator’s approach is to say, `Let’s stop anything from happening until we’re 100% okay [with the business offering].’” While Lending Loop emerged from the process and is now operating, Pastoll’s frustration is evident. “You can limit everything by being super prescriptive, but if you’re not innovative, everyone’s going to fly by you.”
Lending Loop is hardly alone. Canadian banking and securities regulators, as well as innovation and competition policy-makers, have been cautiously moving ahead with the task of developing new rules for a group of startups that have little in common with the giant banking and investment entities regulated by provincial securities commissions, federal banking regulators and other agencies.
See:
-
Win $125 Take the 2017 Alternative Finance Survey in Canada
-
Download: 2016 Alternative Finance Crowdfunding Industry research
-
June 22: Join Us for the Annual Rooftop Summer Kickoff 'FINTECH & FUNDING Networking
Some agencies, such as the Ontario Securities Commission’s LaunchPad program, have sought to test more flexible approaches to rules, such as intensive financial reporting requirements that currently apply to relatively modest fundraising programs. “The regulator has to have the capacity to be able to help,” says Adam Spence, Associate Director, Venture & Capital Programs at the MaRS Centre for Impact Investing. “What LaunchPad is doing with intermediaries looking to expand into these new regulatory environments is key.”
In Canada, most current rules reflect more traditional ways of lending, borrowing, underwriting and selling, as well as the overlay of more recent banking regulations designed to short-circuit financial fraud. As Pastoll says, existing anti-money-laundering and know-your-customer (KYC) rules were built for an era of face-to-face contact with customers, which is not applicable with fintech offerings.
A May 2017 report on fintech regulation by the federal Competition Bureau echoes this sentiment, pointing to a “disconnect” between the expressions of enthusiasm for new fintech solutions by regulatory bodies and the rigidity of their staff tasked with the day-to-day enforcement of the rules.
“Regulation should be done in a way that encourages and enables innovative startups to offer better solutions in the marketplace,” says Dave Feller, CEO of fintech Mogo, adding that the high cost of regulation for new entrants effectively serves to protect incumbents and prevent consumers from accessing cheaper and more flexible financial services.
A case in point: when the U.K. banned embedded commissions for wealth advisors three years ago, about a quarter of the established players pulled out, leaving an opportunity for upstart “robo-advisor” firms that offer discount services at a fraction of the fee. (The Canadian Securities Administrators have taken note, and recently released a discussion paper on discontinuing embedded commissions.)
A key source of friction about the evolution of regulation has to do with the legacy of the 2008 financial crisis. Unlike many western countries, Canada didn’t experience bank collapses and its financial services regulation and oversight system was widely praised internationally. As Pastoll says, that success “has been an excuse for the last nine years as to why things are the way they are.”
Continue to the full article --> here
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
CIBC introduces free mobile credit score for clients – a first for a major Canadian Bank
CIBC Press Release | Olga Petrycki | June 2, 2017
CIBC introduces Free Credit Score for mobile banking (CNW Group/CIBC)
Bank partners with fintech Borrowell and Equifax Canada to take mobile banking beyond transactions
TORONTO, June 2, 2017 /CNW/ - CIBC (TSX: CM) (NYSE: CM) To help clients build a better understanding of their overall financial well-being, CIBC is working with leading fintech Borrowell and Equifax Canada to provide Canadians unlimited free access to their educational credit score through CIBC mobile banking, anywhere, anytime.
Available through the CIBC Mobile Banking App, clients can access their Equifax credit score which will be updated quarterly, allowing them to track their financial standing over time. In addition, they will have access to important information on factors that affect a credit score and advice on how to improve it.
"As we continue building a personalized digital banking experience for clients, we are also delivering technology that can help clients make informed financial decisions when, where and how they want," says Aayaz Pira, Senior Vice President, CIBC Digital, Retail and Business Banking. "With a simple tap on their mobile banking app, clients can easily access their credit score, allowing them to have a full-picture of their overall credit health, and better control of their finances."
See: CIBC partners with fintech innovator Borrowell to deliver “one-click” online loans
Recent CIBC research reveals that the majority of Canadians recognize the importance of knowing their credit score to safeguard against fraud, yet more than two-thirds do not know their credit score (69 per cent). Two-in-five (45 per cent) say they have no idea where to obtain their credit score.
Using Borrowell's online platform drawing on credit bureau data compiled by Equifax, CIBC's safe and secure Free Credit Score service is considered a "soft" credit inquiry, meaning it won't negatively impact a client's overall score. This speaks directly to almost half of Canadians (49 per cent) who said they fear checking their score will result in negative implications on their credit.
"Knowing your credit score is important, particularly if you're planning to purchase a new home or car, or if you are new to Canada and working to establish your credit," says Bijal Patel, Executive Vice President, Products, Retail & Business Banking, CIBC. "Clients can better plan for the future by having an up-to-date view of their credit score and then start a conversation with an advisor to help them achieve their goals."
Today's announcement furthers CIBC's commitment to broadening mobile banking beyond transactions. By adding mobile features that speak to a client's full financial picture, CIBC is taking a broader view of what mobile means to client relationships.
"There's no question clients look to mobile to get their routine banking transactions done quickly and conveniently," adds Pira. "Increasingly, clients also want a mobile banking experience that offers deeper insights into their overall finances keeping them connected to the big picture, and new services like free credit score make that a reality."
Launching on mobile first, free credit score will be available online for all CIBC clients later this year.
About CIBC
CIBC is a leading Canadian-based global financial institution with 11 million personal banking and business clients. Through our three major business units - Retail and Business Banking, Wealth Management and Capital Markets - CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada with offices in the United States and around the world. Ongoing news releases and more information about CIBC can be found at www.cibc.com/ca/media-centre/ or by following on Twitter @CIBC, Facebook (www.facebook.com/CIBC) and Instagram @CIBCNow.
About Borrowell
Borrowell helps Canadians make great choices about their credit. With its free credit score monitoring, personal loans and product recommendations, Borrowell empowers Canadians to improve their financial well-being and be the hero of their credit. Borrowell was named by LendIt as one of six emerging companies globally "that has demonstrated the greatest potential to impact the future of consumer lending," and is shortlisted as a top "disruptor" in PwC's 2017 Vision to Reality awards.
Poll Disclaimer
From March 29 to March 30 2017 an online survey was conducted among 1,517 randomly selected Canadian adults who are Angus Reid Forum panelists. The margin of error—which measures sampling variability—is +/- 2.5%, 19 times out of 20. The results have been statistically weighted according to education, age, gender and region (and in Quebec, language) Census data to ensure a sample representative of the entire adult population of Canada. Discrepancies in or between totals are due to rounding.
SOURCE CIBC release
For further information: Olga Petrycki, Director of Public Relations, CIBC, 416-306-9760 or olga.petrycki@cibc.com
The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.
