Fintech 2021 - allenovery.com - Allen & Overy
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Fintech
2021
allenovery.com
“A&O’s fintech practice is one of the best in London. Its members
are very knowledgeable and experienced in a wide range of projects.”
Legal 500 2020 UK: Fintech
“A&O have been important in pushing new capital markets
technology and their own automated legal document drafting
solutions. It's a firm that's embracing and driving change in
this industry.”
Chambers Fintech Guide 2021: Global-wide
“Highly regarded for its ability to handle significant TMT-related
transactions for a high-profile client base. Represents a raft of key
technology players, with noteworthy strengths in robotics, cloud
computing and fintech matters. Additionally respected for its
strong following of telecoms operators, media and entertainment
companies and financial institutions.”
Chambers Global 2020 (TMT: Global-wide)
Ranked Tier 1 for Financial Services Regulatory (Corporates)
Chambers UK-wide 2021
2 Fintech | 2021
Fintech
Fintech describes the intersection between finance and technology.
Market participants may be providers of technological With a track record of providing high-quality and innovative
solutions which bring innovation to traditional financial legal advice, Allen & Overy is ideally placed to guide market
services companies or they may be companies delivering participants through all business and legal issues in this
innovative financial services offerings which disrupt the thriving sector. As a recognised banking powerhouse we
existing financial services market. have a huge knowledge base and extensive experience
of advising on financial services regulation. In addition,
What unites Fintech players is the pursuit of new ideas and
our strong connections with the leading financial services
business models to bring digital transformation to all aspects
authorities mean we can support our clients in all their
of the heavily regulated financial services industry.
dealings with local regulators. We marry this regulatory
Today’s Fintech market has been characterised by a period expertise with deep and broad experience in the technology
of significant growth. However it is also a crowded space sector. We have advised on some of the cornerstone
in which participants need to have a clear competitive edge projects in the banking technology market and we also work
to survive. As the market matures survival or failure can with some of the most successful technology companies
increasingly be ascribed to success in certain key areas. of the 21st century. From growth companies to established
market players, we know what it takes to succeed in Fintech.
These are:
– Getting regulatory compliance right;
– Making the right partnerships at the right time on
the right terms; and
– Driving adoption by ensuring excellent user experience.
Band 1 Tier 1 Band 1
Chambers Professional UK Legal 500 Chambers Fintech Guide
Advisers: Fintech 2018 Fintech 2021 2021: Global-wide
allenovery.com 3
How technology is
transforming finance
Payments
Banks, cards schemes and acquirers and payment processors are the traditional players in
the payments landscape. New entrants focus on taking the “friction” out of the payments
process and include providers of mobile payments, contactless and eWallets. Trends in this
area include further developments with biometric identification, implementations of platforms
using distributed ledger technology and greater use of big data to halt fraudulent payments.
Insurance
ne of the slower areas of Fintech to take off, insurtech is now gathering steam. Investment is
O
being driven in particular by established insurers investing in new market entrants, and hot
areas of technology include blockchain and smart contracts, data analytics and Internet of
Things applications which can assist with risk identification and mitigation.
Investment management
loud and big data have already rung the changes in the investment management
C
industry but a new shift has come with the application of machine learning and artificial
intelligence – and thereby the arrival of the robo-adviser.
4 Fintech | 2021
Fundraising
rowdfunding (both equity and reward-based) has become an established part of the early
C
stage company market, particularly for consumer facing companies for which engagement
with investors is all part of the spectrum of engaging customers. Platform-based tech has
also facilitated the rise of syndication of early stage investment, particularly in the angel
market where a syndicate typically allows less experienced investors to co-invest with
more established leads.
Process efficiencies
or many, Blockchain is the perfect example of the evolutionary power Fintech can have
F
on process optimisation. But Regtech is another subsector of the process efficiencies
market to receive significant investment and interest. Regtech applications look to save
organisations time and money by automating processes to ensure regulatory compliance.
They also offer the possibility of more accurate compliance efforts, and better reporting to
supervisory authorities.
Deposits and lending
eer-to-peer or marketplace lending is the most prominent example of the impact of Fintech
P
on deposits and lending. This part of the market has matured to show a particular symbiosis
between established players and new entrants, with P2P lenders, for example, picking up
the portion of the SME lending market in which banks on the whole had preferred not to
participate since the financial crisis. P2P lenders have turned to established institutions in
other ways also, such as by pushing out parcels of loans to hedge funds and other
institutional investors via their online marketplaces (something that has arguably given
P2P platforms greater exposure to the credit cycle than the “pure” P2P model).
allenovery.com 5
Legal and
regulatory issues
Regulatory requirements
Regulatory compliance is fundamentally a regulated entity, or, conversely, to other jurisdictions can create additional
important to Fintech companies, and help them seek appropriate licences or hurdles (albeit the UK’s “Fintech
can be a key competitive advantage, approvals. However attempts to map Bridges” initiative is one example of
but navigating the relevant regulatory regulation can be complicated by the attempts to mitigate such problems).
regimes is a significant headache fact that it can be very hard to assess
for many. whether innovative new products fall Regulatory uncertainty makes business
within the regulatory regimes, and if they planning very difficult, and indeed
Most Fintech companies will have do, how the various requirements might the financial and compliance cost of
undertaken a detailed analysis of their apply. This problem is compounded regulation has been sufficient to see
business model against applicable for Fintechs scaling internationally, some new companies exit the market.
financial regulation to fully understand where different regulatory approaches in A clear-sighted assessment of regulatory
what can be achieved without becoming risk is fundamental to Fintech success.
Dealing with data
Data is central to the business models There is significant regulatory activity Such changes require considerable
of many Fintechs, whether they are in this area. Aside from the obvious sophistication from data owners and
focusing on retail or investment banking. legislative changes affecting data processors. In particular, there is a
Companies that are able to derive handling and cybersecurity, such as the tension between the concept of open
business insights from financial services implementation of the new General Data innovation as a route to bringing new
data can spot and maximise new Protection Regulation in Europe, players into the market, and the appetite
opportunities and reduce risk. a shift to open banking is a further for more control and ownership over
Unlocking this value is however complication on the data horizon. data (as a valuable business asset).
dependent on far more than clever The new European Payment Services Intellectual property concerns, as well
algorithms and exponential processing Directive (PSD2), the UK’s recent retail as privacy considerations, loom large
power. It is also essential that banking market investigation from the here. The growth of new data handling
companies in this space build and Competition and Markets Authority and models may also foster a “co-creation”
maintain the trust of consumers and the promotion of data sharing by the environment in financial services where
other stakeholders. Monetary Authority of Singapore are all partnerships (eg JVs, strategic alliances
As a result, concepts of security and examples of how regulators across the etc) might be the optimum way to bring
transparency are essential industry globe are focusing on data as a way to diverse parties together.
principles in the Fintech sector – for both bring change to the traditional vertically
reputational and compliance reasons. integrated banking model.
6 Fintech | 2021
Protecting innovation
The development of innovative software companies must consider carefully and/or enforce intellectual property
and technology by Fintech companies the availability of other IP rights, rights is critical. Done too soon and the
has been critical to the rapid expansion such as copyright and trade secrets, risk is that innovation is stifled, left too
in this sector. Legal protection for such as well as protecting themselves late and it is possible to be locked out
innovation is integral to success in the through contractual arrangements of the market by peers and competitors.
Fintech sector, but the availability of with their customers, employees,
protection varies from jurisdiction to suppliers and/or other third parties. The importance of intellectual property
jurisdiction. While business methods to Fintech companies may also make
were previously thought to be patentable A strategic challenge in areas such them a target for patent trolls, which
in the U.S. this has become increasingly as blockchain is how to balance the may cause business disruption unless
difficult through recent case law. protection of ideas and technology with the Fintech enters into licensing
In Europe, meanwhile, they are per the desire to encourage industry-wide discussions or is prepared to fight
se unpatentable unless they can be adoption. Where there may be so-called a claim in the courts.
shown to solve a ‘technical problem’. “network effects” from new technology,
Given these difficulties, Fintech the timing for seeking to register
Collaborating, investing and acquiring to bring innovation into the business
Many established financial institutions and skills or combine with peers to build To make a success out of any of
recognise the benefit that financial scale, but commercial collaborations are these transactions, both parties need
innovators are bringing to the market. also a popular route to achieving these to determine how to accommodate
Frequently financial institutions goals. Equally, corporate venturing the objectives and needs of what
look to partner with emerging may offer a way to connect with may typically be two very different
technology players to speed up early-stage companies to assess organisations. This relationship dynamic
the innovation cycle. potential technologies, exert a degree impacts deal negotiation, the due
of influence on the future direction of diligence process (including the
A fundamental question is what form the emerging company and be in a all-important regulatory due diligence),
that collaboration might take. The heat good position to acquire or license and how the commercial aspects of the
in the Fintech market is certainly driving technology if it looks to be shaping deal are structured.
M&A as companies buy in technology up well.
allenovery.com 7
Sources of funding
The environment for growth companies The group of investors participating in With more companies staying private
is changing. A rising number of private late stage private company rounds has longer, and with a wider range of
companies (and particularly “unicorns” also expanded. This area is no longer investors operating in this segment
– those with valuations of over USD1 solely the preserve of traditional venture of the market, how do companies
billion) have successfully completed capitalists; we are seeing sovereign decide which funding option is right
either more private funding rounds or wealth funds, asset managers and for them? One key criteria is aligning
larger private funding rounds (or both). hedge funds, as well as corporate the investor’s timetable for exit with
This enables these companies to venture funds, participating in this the company’s growth plans. Another
fund direct growth rather than capital section of the market. These investors consideration will be planning for a
investment from injections of cash from are joining the market for reasons that liquidity event in the future – whatever
private investors. range from straightforward portfolio funding options are considered now
diversification through to opportunities must not have the effect of making it
to spot and nurture emerging talent and harder to, for example, gain access
innovation to build research pipelines. to the public markets at a later date.
Ultimately, the challenge faced by all those in the Fintech market
is how to capture innovation while preserving the stability of the banking
network. Facebook’s mantra, “Move fast and break things”, is a great
one for many emerging companies – but perhaps more problematic for
companies operating in highly regulated areas such as financial services.
Within the Allen & Overy team we have the unique combination of
resources to help market participants successfully navigate this path.
8 Fintech | 2021
allenovery.com 9
Our experience
Aegon CLS Volkswagen Financial Services
on a number of fintech-related projects the market leading FX service provider, on the acquisition of PayByPhone,
including its investment and strategic on the launch of two new products: the mobile cashless parking
partnership with Jungo, a Dutch fintech its CLSNet product (a bilateral payments business, from PayPoint
spin off of IT Company Topicus, that transaction netting solution) and its for GBP26.5m.
is building an innovative platform that related CLSTradeMonitor product
makes it possible to invest in Dutch (an innovative post-trade monitoring The NAGA Group AG
mortgages as a private investor and and reporting tool). Our advice on one of Europe’s largest Fintech
also on the formation of a strategic covered the entirety of the products’ Series A investments in 2017 by
partnership with Chytrý Honza, a development and launch phases, FOSUN International, a leading
leading Czech fintech company. and include advising on a range of Chinese investment group. Founded
We also advised on the disposal issues relating to the distributed ledger in August 2015, Hamburg-based
of its shareholding in Chytrý Honza, technology platform on which the NAGA’s mission is to develop, market
a leading Czech fintech company. CLSNet product can operate. and grow disruptive applications in
financial technology.
BACS and Faster Payments Eurogiro
the UK inter-bank payment systems, a unique payments network that A financial institution
on their scheme rules, settlement connects different payments on data protection intellectual
arrangements, technology development “ecosystems”, eg postal organisations, property (including screen-scraping),
and maintenance contracts for post banks, commercial banks and commercial contract, and financial
processing of payments in the UK. other payment service providers, on its services regulatory advice in relation
acquisition by Inpay, a regulated and to its creation of an innovative banking
China Ping An Insurance Overseas licensed Danish Fintech. software product.
a member of the Ping An Insurance
Group, on its USD90.9 million co- The Bank of Cyprus National Bank of Abu Dhabi
investment in a fund sponsored by on negotiating an agreement with IBM on a service agreement with Oxigen
Vista Equity Partners as part of the for a digital transformation program Services (India) in relation to mobile
CAD2.7bn acquisition of D+H Corp aimed to improve their online offering. banking services to be provided in
by Misys to create Finastra, one of the The agreement consisted of several India by Oxigen for NBAD customers.
world’s largest fintech businesses. separate components, including an
outsourcing component, software A Chinese technology and financial
A global financial services group development and a digital factory. services firm
on the data protection aspects of a on a number of data protection issues
biometry-based mobile authentication KASIKORNBANK (KBank)
including the implementation of the
system in approximately 30 jurisdictions. on a major managed services, GDPR, data retention policies and
transformation and insourcing transfer of data to third countries.
Funding Circle Goldman Sachs project with IBM to bring about the We advised the client on whether
and Numis establishment of five shared IT service and to what extent its business
on the IPO of Funding Circle SME companies within KBank and bring operations in Europe may be subject
Income Fund (by way of a GBP150m about the restructuring of KBank’s to GDPR and how to approach GDPR
placing and offer for subscription and IT operations to enable KBank to compliance in the context of a much
placing programme). pursue its digital banking ambitions broader business.
unencumbered by its historical terms
with IBM.
10 Fintech | 2021A provider of multi-bank PayU Nexi
internet services (a Naspers entity) on the acquisition (previously known as ICBPI) an Italian
on the application of PSD2 and of online payments rival, Citrus Pay, Bank specialising in payments systems,
other regulatory requirements. the largest all-cash deal India’s together with Advent International and
Fintech sector had seen at that time. Bain Capital, on a transformational
Rabobank project in the European banking
on the acquisition of a 22% stake Zopa and payment processing industry.
in the KBC subsidiary Fin-Force, a a leading UK fintech, on corporate, The transaction consisted of the
Belgian a joint venture of KBC and commercial and regulatory matters, following components: (a) Equens,
EDS that processes cross-border including its fundraising. the Dutch based provider of payment
payment transactions and cheques. and card processing solutions,
Simultaneously Rabobank entered Worldpay acquired the payment processing
into an outsourcing arrangement a leader in global payments, on a wide business of Atos and Worldline and
with Fin-Force. range of matters including its 2015 IPO, merged the two activities into a new
a reviewing of payment services and corporation; (b) Nexi (together with
SPiCE Ventures Capital related regulatory requirements in ABN AMRO, ING, Rabo and DZ Bank)
on its USD100m initial coin offering. some 20+ countries globally and, became a shareholder of the newly
most recently, its recommended created entity; and (c) Nexi entered into
A global company GBP9bn merger with Vantiv. a long-term outsourcing transaction
with the newly created entity.
in respect of its proposed stablecoin/
cryptocurrency blockchain facility. Trussle
Multiple institutional investors
We have performed an analysis of the on securing its GBP13.6m financing
roles of each actor in the blockchain from a consortium of international on their participations in the
in respect of controllership and investors led by Goldman Sachs international tranche of Ant Financial
associated risks and mitigations. Principal Strategic Investments Group’s c. USD14bn series C
We have also been looking in-depth and Propel Venture Partners in its fundraising, the largest ever fundraising
at the data that our client proposes Series B funding round. round by a private company. This deal
to collect on its customer using won Best China Deal from FinanceAsia
blockchain. This has involved complex Allianz Asset Management in 2018.
analysis of the various personal data; on its investment in European
in particular focusing on the legal basis
Annexum Invest
Fintech Moneyfarm.
that our client could rely on in order to on the establishment of a partnership
process each type of data as well as its Blue Sky Venture Capital with Bloqhouse, a fintech start-up
data minimization and data protection focussing on blockchain, and on the
on its participation in a USD 75m
by design and by default obligations. joint launch of a (pilot) market place
Series C funding round into Akulaku,
that allows private individuals to enter
a Southeast Asian e-commerce/
Multiple institutional investors the secondary real estate investment
FinTech platform with a significant
on their participations in the market. Using blockchain, the platform
presence in Indonesia which
international tranche of Ant allows private individuals to make
enables customers to shop using
Financial Group’s c. USD14bn investments as little as EUR100 without
credit instalments.
series C fundraising, the largest the involvement of any intermediaries.
ever fundraising round by a
private company.
allenovery.com 11GO-JEK NXMH Sungard
on its acquisitions of three Indonesian on its acquisition of Bitstamp on the disposal of its fintech business
fintech companies: 1) PT Multi Limited, one of the leading global in Malaysia and Singapore to Silverlake
Adiprakarsa Manunggal (Kartuku) – cryptocurrency exchanges. Axis (a Singaporean/Malaysian IT
a leading offline payments processing business listed on the Singapore stock
company in Indonesia; 2) PT Telenor, Telenor Financial exchange). The sale also resulted in
Midtrans – a market leading online Services and Telenor Myanmar the transfer of multiple subsidiaries
payment gateway company in on the establishment of a mobile from a number of jurisdictions including
Indonesia; and 3) PT Rekan Usaha financial services provider in Myanmar Malaysia, Czech Republic, Slovakia,
Mikro Anda (Mapan) – a leading by way of a joint venture with a local Philippines, Thailand and Pakistan.
local community-based savings and Myanmar bank.
lending network. These acquisitions Santander
were negotiated in parallel and were Crédit Mutuel Arkéa on the issuance of its USD20m
transformational to GO-JEK’s business, on its acquisition of an 86% stake in Senior dBond Nº1 due 2020,
as they created a leading fintech Leetchi.com, a France-based Fintech its inaugural blockchain bond and
company in Indonesia. group providing a digital solution to the first end-to-end public blockchain
collect money for group gifts and bond by a bank in the world.
Worldpay
events and an API solution to accept
on a broad range of regulatory matters online payments and manage e-money A global financial institution
affecting its business internationally for marketplaces, crowdfunding and on a loss of sensitive customer data,
in particular around integration of collaborative consumption (Mangopay). including advice on appropriate
new and emerging technology that is notifications to the data protection
transforming the payments ecosystem. A Dutch financial institution and industry regulators and on an
on the negotiation of a software internal investigation.
A global telecommunications
and services agreement with Murex,
services provider
a global software solutions provider
on international laws applicable for the financial sector, and leading
to mobile payment schemes. fintech player.
12 Fintech | 2021Discovery Health Arbor Realty Trust, Inc. OVO
on two Fintech joint ventures advising the managers and the issuing the leading Indonesian digital payment
concerning the integration of vehicles on a series of crowdfunded platform, on its acquisition of a majority
data-based technology platforms real estate funds sold on a proprietary stake in Bareksa, a digital money
into its wellness insurance programmes platform that conducts online securities market fund, and its integration of
with Sumitomo Life in Japan and offerings in compliance with Rule 506(c) Bareksa’s fund platform into OVO’s
Generali in Europe. of Regulation D, including advice to the payment and e-money application.
managers of these online crowdfunded
TransferWise vehicles on issues arising under the Telenor
on its USD300m secondary share sale Investment Advisers Act of 1940, on the investment by China’s largest
of shares in the company to a group the Investment Company Act of 1940, digital payment and diversified fintech
of new investors, including Goldman the Securities Act of 1933 and the company into, and associated business
Sachs, BlackRock and Fidelity. Securities Exchange Act of 1934. collaboration arrangements with,
We also advise TransferWise on a the Wave Money e-wallet business
range of other corporate advisory Dutch Star Companies One (Digital Money Myanmar Ltd.), a joint
matters and on lending and payments on its merger with CM.com, a global venture between Telenor and Yoma
regulatory issues. Conversational Commerce platform Strategic Investments Ltd, a family
that provides enterprises full-scale controlled Myanmar conglomerate,
CPaaS services with integrated and the subsequent sale to Yoma
payment solutions, and the EUR240m of Telenor’s entire equity stake in
listing of the combined business, as Wave Money.
CM.com, on Amsterdam Euronext.
allenovery.com 13Our team
EMEA
Tom Butcher Jane Finlayson-Brown Daniel Fletcher Jonathan Heeringa
Partner – Abu Dhabi Partner – London Partner – London Partner – Amsterdam
Tel +971 2 418 0414 Tel +44 20 3088 3384 Tel +44 20 3088 4651 Tel +31 20 674 1274
tom.butcher@allenovery.com jane.finlayson-brown@allenovery.com daniel.fletcher@allenovery.com jonathan.heeringa@allenovery.com
Etay Katz Mahmood Lone Dominic Long Ben Regnard-Weinrabe
Partner – London Partner – London Partner – London Partner – London
Tel +44 20 3088 3823 Tel +44 20 3088 4974 Tel +44 20 3088 3626 Tel +44 20 3088 3207
etay.katz@allenovery.com mahmood.lone@allenovery.com dominic.long@allenovery.com ben.regnard-weinrabe@allenovery.com
Jean-Claude Rivalland Tom Roberts Salvador Ruiz Bachs William Samengo-Turner
Partner – Paris Partner – London Partner – Madrid Partner – London
Tel +33 1 40 06 53 02 Tel +44 20 3088 3518 Tel +34 91 782 99 23 Tel +44 20 3088 4415
jean-claude.rivalland@allenovery.com tom.roberts@allenovery.com salvador.ruizbachs@allenovery.com william.samengo-turner@allenovery.com
Theo Trayhurn Filip Van Elsen Henri Wagner
Partner – London Partner – Antwerp Partner – Luxembourg
Tel +44 20 3088 2913 Tel +32 3 287 73 27 Tel +352 44 44 5 5409
theo.trayhurn@allenovery.com filip.vanelsen@allenovery.com henri.wagner@allenovery.com
14 Fintech | 2021Asia Pacific
Will McAuliffe Charlotte Robins Jane Jiang Jason Denisenko
Partner – Hong Kong Partner – Hong Kong Partner – Shanghai Partner – Sydney
Tel +852 2974 7119 Tel +852 2974 6986 Tel +86 10 6535 4318 Tel +612 9373 7809
will.mcauliffe@allenovery.com charlotte.robins@allenovery.com jane.jiang@allenovery.com jason.denisenko@allenovery.com
U.S.
Saranpaal Calais Justin Cooke David Lucking Deborah North
Senior Associate – Sydney Partner – New York Partner – New York Partner – New York
Tel +612 9373 7588 Tel +1 212 610 6351 Tel +1 212 756 1157 Tel +1 212 610 6408
saranpaal.calais@allenovery.com justin.cooke@AllenOvery.com david.lucking@allenovery.com deborah.north@allenovery.com
Barbara Stettner Gregory Mocek Anthony Mansfield Paul Keller
Partner – Washington, D.C. Partner – Washington, D.C. Partner – Washington, D.C. Partner – New York
Tel +1 202 683 3850 Tel +1 202 683 3887 Tel +1 202 683 3884 Tel +1 212 610 6493
barbara.stettner@allenovery.com gregory.mocek@allenovery.com anthony.mansfield@allenovery.com paul.keller@allenovery.com
“They provide us with fund-raising, “An excellent firm with a
corporate and regulatory advice. It is strong financial practice
technical advice of the highest quality; who can do everything.”
A&O has the edge on others when it Chambers Fintech Guide 2020: Netherlands
comes to creative solutions.”
Chambers fintech guide 2021: Global-wide
allenovery.com 15GLOBAL PRESENCE
Allen & Overy is an international legal practice with approximately 5,500 people, including some 550 partners, working in over 40 offices worldwide.
Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. Allen & Overy LLP is a limited liability partnership registered in England and Wales
with registered number OC306763. Allen & Overy (Holdings) Limited is a limited company registered in England and Wales with registered number 07462870.
Allen & Overy LLP and Allen & Overy (Holdings) Limited are authorised and regulated by the Solicitors Regulation Authority of England and Wales.
The term partner is used to refer to a member of Allen & Overy LLP or a director of Allen & Overy (Holdings) Limited or, in either case, an employee or
consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings.
A list of the members of Allen & Overy LLP and of the non-members who are designated as partners, and a list of the directors of Allen & Overy
(Holdings) Limited, is open to inspection at our registered office at One Bishops Square, London E1 6AD.
UK
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