Fintech Regulation

Integrating Fintech into heavily regulated industries presents some unique challenges. I ran across an example of this earlier this month.

Capital partner A factors both receivables and projected future cash flows for startup fintechs. Investment Bank B drums up outside investors to capitalize A. B approaches commercial bank C with “fantastic opportunity that has never lost money.” Never mind the fact that it has only existed for about 24 months.

One of C’s executives knows a few partners at B, and the deal goes through with zero independent analysis. After the fact, the only documents C can produce are basically the pitch book, and this is 7% of C’s equity.

Is it a loan? An investment? Has it been reviewed by any auditors or anyone who cares about risk management? Nope!

B encouraged C to book this in a separate General Ledger account, and that’s exactly what C did. So it has magically evaded both internal and external audit of loans / investments.

Now C wants me to talk to B to figure out what the heck they’ve put their money into. Fine, whatever, but I make about 1/3 what the senior analysts at C make. Why can’t they do it? Oh that’s right, C now realizes they’ve made a boo boo and don’t want anyone on the inside to realize how bad it is. How the heck do these dummies make it to the C-suite?