Quite often we speak to founders who are concerned with their IP and how this replicated by developers and competitors. It’s always worth reminding fintech startups that 20/30% of their product will be bespoke code and the patenting process is somewhat evanescent in the software world.
IP law on software has been a hot topic in recent years and a patent is by no means absolute protection, especially when it comes to the “inventions” underlying a computer program. The .gov website is even cautious around patent advice, admitting that the process can be very expensive.
It’s worth observing the “unicorns” of the fintech world when considering IP. Of the top 35 unicorns, less than 25% have filed for one or more patents. This means that the average fintech is far from IP-intensive and more centered on commodified software technology than the mythology one would want to believe.
Apart from a core of IP or technical solutions that they may well (and should) keep in-house, well nursed by the CTO or an inner sanctum of skilled employees, the vast majority of the technology ecosystem that serves a fintech is nothing too strategic, nothing that hasn’t been done before and, most importantly, nothing that cannot be outsourced if the quality/cost benefit were to be there.
Rhydian Lewis, CEO and founder of the peer-to-peer lender RateSetter believes that banks don’t yet know how to incorporate innovations into normal business. For that reason, he says, fintech startups generally don’t have to worry about having their ideas copied or stolen by banks:
“Good intentions are not enough, banks need to change their ability to take new innovation to market if they want to see a return on their investments in the fintech community.”
This is not to say that the fintech startup cannot mitigate risk. This could be done by surrendering equity to the IT team to generate loyalty and project buy-in. However, it is more important for the fintech to partner with the right people, something that is perhaps easier said than done.
Identifying and creating, or using a team, that understands financial technology is the safest way to protect the long-term success of the fintech – where the correct tools help the fintech to identify risks at an early stage and spot the potential avenues to expand, helping them to beat the market curve.
This is an exert from the article
“Fintech Startups – How to focus on great development”
published by Gluon Consulting,
authors Steve Findley & Vanni Torelli.
