The innovations and industry disruption associated with Fintech is making lawyers and law firms in particular snap to attention. Law firms are beginning to have Fintech Practice Groups in addition to the other areas of practice.
Considering the novelty and complexity of Fintech, these groups are responsible to meet the needs of startups and companies across the financial technology industry, including financial services firms, venture capital firms, and private equity firms. As Fintech activity continues to expand, law firms are pulling lawyers from multiple practice areas to ensure they can meet demand.
Sam ‘Dele-Ogunti of Legal Business sat down with Mallick Bolakale, a Lawyer and Compliance Team Lead at Paystack, one of Africa’s leading technology company solving payment problems for ambitious businesses, to discuss the rise of Fintech practice in traditional law firms to adjust with growing demands for legal advice by Fintechs in Nigeria. Here are excerpts…
Fintech touches so many practice areas, and expanding services in this industry is a chance for law firms to encourage more internal collaborations. How involved do you think law firms are in the Fintech ecosystem so far?
Compared to the initial antagonist reaction of most financial regulators in Nigeria, Nigerian law firms are actively contributing to promoting seamless growth of the Fintech ecosystem. Like most startups, Fintech companies bootstrap at their early stages with very little or no budget. Several law firms have developed startup programs capable of supporting Fintechs at their early stages to their growth stage. With flexible or discounted payment plans, a lot of Fintech companies have access to affordable representation and routine legal advisory services.
For example, I co-founded Regcompass –– a nimble legal consulting outfit that’s specifically targeted at helping Fintechs navigate the ever complex regulatory compliance terrain and we’ve been able to support both large and small Fintech startups in Nigeria and Kenya. From setup to license acquisition and operationalization down to building and implementing effective compliance programs.
One key factor is the swift recognition of the need for collaboration among the stakeholders within the Fintech ecosystem. Law firms have remained in the fore front of fostering efficient collaboration within the Fintech ecosystem and between traditional banks and Fintechs. This has become imperative in the wake of regulatory uncertainty. Lawyers are becoming more creative in devising novel strategies within the bounds of the law to aid the deployment of emerging Fintech products despite regulatory constraints. This has helped to reduce the sheer volume of regulatory arbitrage and increased foreign direct investment. There are however exceptional scenarios where lawyers have also encouraged arbitrage by advising Fintechs to setup in friendlier jurisdictions. Speaking of investments, law firms have continued to champion the course of Fintechs seeing to the swift conclusion of various venture investment deals.
On the regulatory side, law firms have recently become highly instrumental to influencing government policies, decisions and regulations that would have otherwise killed innovation in the Fintech ecosystem. This is one of the factors that have influenced the 2021 Nigerian Startup Bill, which is “a joint initiative by Nigeria’s tech startup ecosystem and the presidency to harness the potential of our digital economy through co-created regulation.” Lawyers were heavily involved in setting the tone for this Bill by advising, drafting, reviewing and negotiating relevant clauses of the Bill. Recently, the Nigerian Bar Association-Section on Business Law (NBA-SBL) organized a stakeholder session to engage the regulators on the newly drafted National Information Technology Development Agency (“NITDA”) Bill and there have been several engagements like this in the past including the engagement of other Fintech regulators like the Central Bank of Nigeria (the “CBN”) and the Securities and Exchange Commission (“SEC”).
Similarly, in 2020, the Innovation Law Club Africa (ILCA), a private research think-tank and a community of tech professionals, partnered with the NBA-SBL, to provide a masterclass on Fintech, privacy and data protection. These are only a few of the recent involvement of legal practitioners in the Fintech ecosystem.
From the operational perspective, law firms are actively involved in incorporation and preparation of the license application documents of most Fintechs. Other law firms have setup shops as licensed Data Protection Compliance Officers (“DPCOs”) to conduct yearly data protection audits and identify as well as close gaps in the data protection programs of Fintechs and other tech startups.
To conclude, when we consider it from the broad spectrum of financial technology, there are aspects that have been with us for a while such as electronic transfer of funds, the use of debit or credit cards, intellectual property protection, etc. Within this class, one can say that a fair number of corporate and commercial law firms may at some point have interacted with laws that govern them. However, for frontier technologies such as distributed ledger technology, DeFi and the deployment of artificial intelligence among others, it is safe to say that only a few may have become “expertly involved”.
Considering the fact that many law firms are already marketing Fintech practice groups staffed largely by lawyers in existing practices. Do you think law firms have the expertise to keep up with the disruptive innovations in the Fintech space?
I believe expertise is not innate but acquired. With the dynamic nature of law, those who practice it must constantly build capacity to effectively navigate it. This implies that since law is not static, a lawyer must be capable of reinventing as the society demands. Expertise is attainable only when capacity has been effectively chartered. Therefore, the question of whether or not law firms have the expertise can be gauged on their willingness to position themselves to attain knowledge in frequency to the change.
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In positioning themselves for expertise, there are a number of learning opportunities that provide an understanding of financial technology and serve as a road map for navigating the industry and obtain engagements, which is equally another way to gain experience and build capacity. Some of these courses include; International Association of Privacy Professional (IAPP) courses on data protection and privacy, Certified Fintech Compliance Associate (CAFCA) course from the Association of Certified Anti-Money Laundering Specialists (ACAMS), Designate Compliance Professional Certification (DCP) of the Compliance Institute in Nigeria among others.
In addition to these certifications there are also online short courses that can be taken through massive online open course platforms like Coursera and Udemy and similar MOOC platforms. and many of them have affiliation with top international institutions. For instance, Harvard business school has a six (6) weeks course on Fintech that provides an up to date overview of the Fintech Industry, Imperial College Business School also has a Fintech programme that lasts for the duration of 2 days and is targeted at giving participants a strong grasp of how to implement Fintech within their own organizations.
The National University of Singapore also runs a 2 months online course on the Innovation and Transformation of Financial Services through Fintech which provides a glimpse at risks, opportunities and key considerations of deploying tech for provision of financial services. Also, the said Business School for the University of Oxford runs a 6-week Fintech programme that arms the students with a working knowledge of Fintech and also helps to identify new opportunities for innovation in finance.
It is also important to attend Fintech conferences and events where trending topical issues are discussed and properly explained. These kinds of conferences help firms stay abreast of what’s happening within the ecosystem.
I should also add that to help bridge the knowledge gap, I and two other colleagues formed an organization of tech lawyers – the Innovation Law Club Africa (ILCA) where we help facilitate trainings, masterclasses and events aimed at educating and identifying opportunities that exist for lawyers in Fintech and other technologies.
Another option open to future forward firms that are yet to effectively develop capacity, is the employment of an ‘Of Counsel’ who has acquired requisite industry expertise on the subject and is able to provide guidance to the firm on emerging technologies. For example, at TNP [a boutique firm with a nimble tech practice], I occasionally advise on various Fintech subjects as an ‘Of Counsel.
Is there a need for early exposure to Fintech law and regulations during law school as law firms take on more Fintech work?
In answering this question, an age long debate on the law of the horse [read it as Fintech law] between Judge Frank Easterbrook and Lawrence Lessig in the mid 90s comes to mind. Easterbrook’s argument is that having a dedicated study of technology law is no different from studying the law of the horse. According to him, the best way to learn the law is to study general rules on the law and apply them to specific situations. His argument emphasized how excessively specialized regulations can lead to the mismanagement of global issues; particularly cyber-property.
On the other hand, Lessig in his commentary on the subject argued for specificity on the law as it relates to cyber space. He agreed with Easterbrook that the aim of legal education should be courses that illuminate the entire law but further argued that there is an important general point that comes from thinking in particular about the relationship between law and cyberspace. To him, contrary to the argument that cyberspace cannot be regulated, in actual fact cyberspace has no particular nature that cannot be changed and its architecture comes from its code i.e. its design.
If we apply Easterbrook’s arguments we can easily conclude that since law is fluid syncing into every aspect of human endeavor, it will be overly ambitious to require schools to teach every aspect of it. As such what schools are to do is to confer the requisite skills that will enable you to navigate diverse paths. Therefore, for a lawyer, the 6 years of education is only a license to explore the legal profession and not a certification that you know it all.
However, if there is anything we have learnt from the COVID-19 pandemic it is the persisting presence of technology and how the world depends on it. As such Fintech may be introduced during the undergraduate years as an elective course giving those who are interested in that path the opportunity to learn its basics. However, what has become non-negotiable is that the use of technology be introduced compulsorily at the undergraduate level.
This can be explored by executing some aspects of legal education through the utilization of technology, such as artificial intelligence so as to give a practical knowledge of technology and put an end to the ‘technology phobia’ prevalent among legal practitioners. In addition to this, undergraduate institutions may partner with some of these certification bodies to cater to the technological knowledge of their students as a recompense for the seeming deficit of legal experts in that field. Giving them this foundation, will propel charting the different aspects of technology in relation to law in their postgraduate years.
I am not advocating for courses on the use of computers which have become irrelevant in this digital age, where adolescents can do so, with their eyes closed neither am I talking about theoretical discourses on technology where the lecturers cannot put their theory into practice. Rather I am clamoring for giving the students a foundation in technology law, exposing them to technological terminologies, helping them to chart the path of building a career in technology and preventing them from being lost in a world where technology cannot be alienated.
