In the rapidly evolving landscape of technology, financial technology ("FinTech") has emerged as a transformative force, reshaping the way we manage and engage with our finances. As FinTech companies push the boundaries of innovation and disrupt traditional financial services, the importance of a robust technological legal foundation cannot be overstated. From safeguarding data privacy to ensuring regulatory compliance, addressing the legal aspects of fintech operations is not only necessary but also pivotal for long-term success and sustainability.

While the FinTech industry continues to evolve at a rapid pace, apart from the regulatory hurdles which a fintech organisation needs to navigate, experience has taught us that many fintech's tend to ignore the need for governing and regulating the "tech" aspects of running a FinTech business, and in this regard, the need for well-structured internal and client-facing documents (such as agreements and policies) becomes paramount.

For any fintech to establish credibility with customers and potential investors, sound IT governance needs to be adhered to, and this in turn, necessitates that FinTechs ensure that proper documentation is drafted and put in place. Apart from adherence to sound IT governance, expertly, well-crafted documentation by experts can provide a fintech with multiple financial and competitive advantages.

We provide an overview of some essential documents that FinTechs should ensure are in place in order to properly regulate the "tech" aspects of FinTech.

Essential documents required for fintechs to regulate tech aspects:

  • IP assignment agreements

It is essential that IP assignment agreements are executed by not only staff members of the FinTech but, crucially, as many FinTechs seem to ignore, also to founders and directors.

  • Developer contracts

FinTech companies rely on developer expertise to build robust platforms; therefore, well-drafted developer contracts are essential to ensure clear expectations and ownership of intellectual property in the business's platform. Further, where FinTechs are reliant on third parties to provide certain mission-critical services (for example, support and maintenance), robust service level agreements need to be concluded as well.

  • Employee technology use policy

Establishing guidelines for technology use within the business is important as it ensures consistent and secure practices among employees. Such policies can extend to regulating acceptable behaviour in utilising not only the company's technology but also third-party tools and technology, including popular technology tools such as ChatGPT.

  • Data governance and privacy-related policies

Data is the backbone of a fintech's business model. Therefore, it is important to ensure that data management practices, data quality standards, and data ownership have been dealt with accordingly. In addition, a full privacy compliance programme should be implemented in order to ensure adherence with laws such as POPIA.

  • IT security policy

The foundation of a FinTech's success lies in maintaining client trust through robust internal cybersecurity measures. An IT security policy outlines the businesses' data encryption, access controls, incident response, and preventive measures.

Client facing technology documents

  • Privacy policy

Privacy is paramount in FinTech, and with the matter being so topical, it has become one of the first things that clients look for in a business.

  • PAIA manual

Every organisation is required by South African law to have a PAIA manual available on their website. Not only does this ensure legal compliance, but it also enhances accountability within the business in order to foster trust with clients.

  • Direct Marketing

Direct marketing consent is crucial as it establishes legal permission to communicate with individuals, ensures compliance with privacy laws, fosters trust by respecting preferences and enhances the effectiveness of targeted marketing efforts.

  • Terms of service (TOS) or user agreement

Trust begins with transparency, and a comprehensive TOS agreement outlines terms and conditions which clients agree to in utilising the platform, helping to establish a foundation of understanding between the client and the business.

  • Electronic signature tools

Where FinTechs utilise signature tools in order to obtain signatures from clients which are prescribed by law, an advanced electronic signature may be required.

The list provided above serves as a starting point, but it is by no means exhaustive, as each organisation must conduct a thorough assessment of its own unique requirements and seek guidance from industry experts.

In the ever-evolving landscape of FinTech, it is imperative that organisations understand the critical role that well-drafted documentation plays in addressing the "tech" aspect of fintech operations, as these documents not only serve as a means of ensuring compliance with regulatory frameworks but provide a blueprint for enhancing operational efficiency, streamlining processes, and ultimately, lays the foundation for sustainable, long-term success in this dynamic and forward-thinking sector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.