The US FinTech business lending market has grown at an unprecedented pace in the last five years. The major players in the business lending market include Funding Circle, OnDeck, Kabbage, CAN Capital and others with OnDeck and CAN capital leading the market in terms of loan disbursed.
One of the important factors for the growth of the FinTech market in the US is the huge investor’s interest in this emerging sector. Recently, there has been a drastic incline in investments in the global FinTech space as well.
Equity crowdfunding involves trading equity of a company for the cash collected by the investors or individuals. Till 2015, the regulations in the U.S. only permitted accredited entrepreneurs to raise money from equity crowdfunding. These investors have to meet certain levels of wealth, established by the SEC. However, in the near future, the SEC would make it legal for entrepreneurs to raise money from the individuals who are not professional investors as well.
Although services offered by FinTech companies greatly differ from the traditional financial institutions, they are subjected to same AML regulations. Mobile payment systems, digital wallets, peer-to-peer money transfers and several other services offered by FinTech companies are all money service businesses (MSBs) and are therefore subjected to the Bank Secrecy Act’s (BSA) reporting and compliance requirements.
Financial services market in the country is increasingly regulated. As a result, a particular state or federal regulations can have large scale implication on a company’s performance and operations. FinTech companies need to pay closely follow developments in local, state or federal policies as early relevant notifications are very critical to overcome regulatory risk and utilize the developments to its advantage.
Another important driver of the FinTech industry has been the state and federal government’s regulations and rules which have facilitated the growth of this sector. Post 2008 crisis, there was a massive change in the working environment and several regulations.
The mobile wallets ecosystem has grown at an overwhelming pace in the last four years. Advanced payment security, faster checkout, loyalty rewards and customer ease have been the major factors driving the mobile wallets market in the country. However, in-store payments through mobile wallets have not had much of a success as of yet. Delay in adoption of the required infrastructure such as NFC terminal by retail merchants have prevented mobile wallets from achieving mainstream adoption.
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Ankur Gupta, Head Marketing & Communications