Of the top ten fintech companies in the world, six are headquartered right here in the UK, according to research by Deloitte. Making the UK a leading innovation hub for fintech business.
With fintech firmly on the rise in the UK, we take a look at how the industry is covered for risks and which risks should be watched out for in 2021.
What protection is there for fintech businesses?
As the fintech market continues to grow in the UK, insurance companies are developing professional indemnity packages to help cover the risks involved.
Although relatively new, these insurance packages have been developed to cover the industry’s most pressing liability concerns.
The five biggest risks for 2021
Below, we outline the five biggest risks fintech companies could encounter this year.
Luckily, these risks are covered by a comprehensive indemnity insurance package.
1. Professional liability
One of the biggest risks to traditional financial businesses, professional liability is a threat to fintech companies too.
This often takes the form of negligent advice, errors, and omissions when serving clients.
Fintech companies face a greater risk here as well. This is due to their reliance on third-party contractor services.
2. Regulatory risk
As technology offers more and more opportunities for fintech businesses, it also increases the chance of regulatory risks.
Every fintech company will need to develop ethically sound and financially satisfactory risk management protocols.
They will also need to keep up with regulatory bodies ’ guidelines in all of the territories they operate in, such as the Financial Conduct Authority in the UK.
3. Theft of funds
One of the key selling points of fintech solutions is their ease of use. Funds can be moved very easily through mobile apps and online.
This could make the risk of theft higher, whether through a system hack or via a rogue employee.
Fintech companies need to take careful measures to limit this threat.
4. Cyber events
Fintech companies are prime targets for cybercriminals and organized crime. Keeping customer funds and data safe from attack is vital for any fintech company.
If a data or security breach does occur, insurance can help mitigate the risk. However, for tech-based companies, a data or security breach can have devastating reputational impacts.
5. Technology failures
Due to the heavy – if not ultimate – reliance on technology by the fintech industry, any disruption or failure to technology infrastructure could be severe.
It can result in lost income and financial disruption for an entire network of customers. Leaving fintech companies liable for huge losses.
As the fintech industry evolves in the coming years, there will undoubtedly be new and sustaining risks to be aware of.
The right indemnity insurance could make the difference between flying and floundering for emerging fintech businesses in the future.