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Spotlight on: Top financial and professional risks for fintech companies

Marsh can help fintech businesses identify their most pressing challenges and determine the most effective risk management strategy.

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By Johannes D Veldsman , 

Head of Growth and Digital, Pacific

06/08/2022 · 8 minutes

From cyber threats to intellectual property theft, loss of reputation to fraud, the top risks for fintech companies are as complex as they are varied.

Fintech companies are subject to some of the same consumer and investor protection regulations as traditional financial institutions, but must balance compliance requirements with the need to innovate, grow, and develop new products. Meanwhile, privacy risks and ever-growing cyber challenges can contribute to significant economic loss and reputational damage, straining fintech’s day-to-day operations and threatening the assets of both companies and executives.

As the risks for fintech companies continue to evolve, those that are unable to adapt may face obstacles in their business models. Marsh can help you identify your most pressing challenges and determine the most effective strategy to mitigate and manage your risks.

Fintech companies’ top management liability risks

While technology can reduce the frequency of some risks, it can also exacerbate the severity of others as fintechs rely more on technology and data to deliver products and services previously provided by traditional financial services firms.

As they merge financial and technology opportunities, fintech companies also face new risks.

Unique risk profiles require tailored risk management programs

More than other industries, individual fintechs differ extensively depending on their subsector, and require innovative solutions to address their unique risk profiles. For example, a payments platform and a neobank touch different types of customers, hold different amounts of personally identifiable information, and are subject to different regulatory oversight; these distinctions drive varying risk transfer decisions.

Thoroughly understanding the individual circumstances of each fintech company is crucial to the development of a suitable risk management and insurance program. An experienced risk advisor can help build a long-term and sustainable risk management program that includes risk mitigation and management actions that are supplemented by risk transfer solutions.

Further, a broker with a solid understanding of a fintech’s unique risk profile can recommend appropriate insurance solutions and connect fintechs with the insurers most likely to provide comprehensive and stable coverage. An experienced broker can also help showcase your business’ risk management strategy during meetings with insurers, which could help you secure the most suitable coverage.

 

Why should fintechs purchase insurance?

Risk starts the minute a company is launched, irrespective of its size or its location. A single lawsuit or other unforeseen event can stall innovation and derail growth.

The right risk transfer solutions can help organisations protect against litigation and other risks. And purchasing insurance early in a company’s financing cycle can help build strong, long-term relationships with insurers. Over time, that can help you secure properly structured and broader coverage, reduce costs, and help maximise claim recoveries.

Purchasing insurance can also:

  • Enhance a company’s credibility, showing prospective clients, customers, and investors that it takes security seriously
  • Help attract and retain directors and officers and employees
  • Satisfy contractual obligations
  • Protect the financial health of a company when faced with unforeseen issues

Securing coverage early can help protect your company in the event of a future transaction (such as an IPO, merger, or acquisition).

Find out more about how Marsh can help fintech businesses in Australia

Learn more

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This publication is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein.

LCPA 22/255

“Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) (“Marsh”) arrange this insurance and is not the insurer. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). JGS is part of the Marsh group of companies. Any advice in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226827) which is a related entity of Marsh. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions. This website contains general information, does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements available from JLT Risk Solutions on request. Full information can be found in the JLT Risk Solutions Financial Services Guide.”