Phin Upham on Whether Regulation is Helping or Hurting Innovation

June 4, 2015 by  
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By Phin Upham

The concept of “FinTech” includes the word “tech” or technology. In order to have technology, you need innovation. Phin Upham eloquently summed up the challenge of regulation as a question of interpretation. Regulation is often well-meaning, and may have a positive effect. Banks today hold more cash in reserve than in the past, which better protects against a meltdown. However, consumers lose when banks refuse to lend to entrepreneurs and individuals with poorer credit.

So is the solution to cut regulation entirely?

How Much is Too Much

If one considers the payday loan industry of Russia, where data collection is part and parcel with the transaction, it’s easy to see where no regulation could go horribly wrong. Without regulation, what’s stopping a lender from selling your information to anyone? That information would go public, which could affect someone’s chances at getting a job or a place to live. In order to keep your lender from becoming a data broker, safeguards should be put into place that dictate what the lender can and cannot do with the details of your transaction.

Too much regulation, however, cripples innovation. Is this truly a bad thing? That’s left up to debate. Citi bank acknowledges that regulation has turned it into a slow-moving beast trying to catch up. However, the company also acknowledges that it invests in FinTech startups that are more agile and better equipped to deal with the changes coming to the world of finance. As long as smaller firms have a safe space to experiment and grow, innovation is still possible under heavy regulation but there will come a point where too much is too much.


About the Author: Phin Upham is an investor at a family office/ hedgefund, where he focuses on special situation illiquid investing. Before this position, Phin Upham was working at Morgan Stanley in the Media and Telecom group. You may contact Phin on his Phin Upham website or Twitter page.