By Y. Tatiana Clavijo

Technology disrupts the status quo. Through innovations, the standards are challenged, and new possibilities arise. Every sector of our lives is being impacted, disrupted, and constantly altered by innovations, and our finances are no exception. FinTech, or financial technology, is the new and exciting area of innovation for financial services changing how we manage our money, how we invest, and how we interact with financial firms. FINRA has been monitoring closely these developments which include pioneering products and creating new client-centric business models among others. The innovations rely on digital banking, the internet, and Blockchain technology. Consequently, private capital is pouring into innovation through investors across the board. Although the regulatory framework is not robust yet, supportive laws may lead to a balanced environment such that could foster innovation while protecting investors too – investors who often face the risk of losing the entirety of their investments.

FinTech and Blockchain innovations are shaking the financial markets to the core. FinTech’s developments have the potential to transform investment banking, wealth management, trading, research through artificial intelligence, machine learning, Blockchain, and many others. Meanwhile, Blockchain allows and supports much of the innovations. BlockChain is a digital ledger that maintains and stores complex databases and records of transactions. Facing this technological revolution, regulators face a split in their path to policy. Some regulators welcome development while others resist change.

Several initiatives grant the financial advancements room to grow, or the very least provide some legal framework to invite certainty without failing to protect investors. From a macro level, financial regulation is primarily intended to achieve market efficiency and integrity while insuring consumer and investor protection to ensure all market participants are safe from fraud, discrimination, manipulation, theft or other exploitative or abusive practices. Innovation drives change and economic growth. Therefore, the interest of FINRA to be an active participant in recent developments is well founded. FINRA’s Office of Emerging Regulatory Issues and a cross-departmental team created the Innovation Outreach Initiative, an initiative in support of Fintech innovation to “foster an ongoing dialogue with the securities industry” around Fintech that requests commentary from the business side on potential measures.

But, is investing in innovation something that suits your goals and appetite for risk? Most new innovations fail. As a result, most of the investments in innovation will fail. Prior to committing to a highly risky investment, obtain professional advice to prevent losing all your funds as Fintech becomes more complex thanks to technology.