July 27, 2021

Fintech and Corporate Governance


The pandemic undoubtedly accelerated the already  lightning-fast pace of tech development. People needed digital solutions for businesses to continue, and the agile players in the tech-driven sectors quickly responded with the creation and implementation of innovative new technology.

The incredible opportunity for fintechs shows no signs of slowing—people’s digital activity is only increasing as they continue to reshape their lives around online solutions.

It’s not uncommon for fintechs to regard corporate governance as a hindrance to their innovative and disruptive natures. But fintech’s challenges with risk and cybersecurity, plus its strict regulatory environment, make good governance a must-have. The fact is that well-functioning boards and effective governance are critical to a fintech’s success. That’s why it’s crucial for fintechs to
make governance a part of their overall strategy, right from the start.

Fintech Boards and Corporate Governance

The first step to strong corporate governance is building a quality board of directors. Fintech boards must ensure that they’re looking for candidates who have wide-ranging knowledge—filling their boards with not only the industry’s most forward-looking technology experts, but board members with banking, security, finance, and compliance backgrounds as well. A  balanced, diverse board has more experience to draw from, and more areas of expertise, ensuring that the strategy they’re developing and the decisions that they’re making are as well-informed as possible. 

Fintechs and Risk

Generally, public fintechs are more concerned with corporate governance than private firms, but even private fintechs must plan to mitigate risk. Make sure your board includes professionals in managing risk (operational, financial, regulatory, and reputational), as well as cybersecurity, compliance, and legal experts. A strong board is strategically important to fintechs—the processes that they implement and oversee are fundamental to the company’s growth and long-term success.

Fintechs that aren’t prepared with strong boards and corporate governance risk losing financing and even jeopardizing their IPOs. Investors won’t necessarily expect a recent IPO company to have the same high-quality board of directors and governance practices as a well-established firm, but good governance should be a priority for new fintechs. A well-selected board is indicative of a fintech’s commitment to growth.

Fintechs and Cybersecurity

Because they regularly collect and store consumers’ private information, cybersecurity is also a paramount concern for fintechs. As the digital transformation accelerates, the cyber threat to fintechs also increases exponentially, making it crucial for fintechs to maintain stringent security standards. Recent headlines—including ransomware and cyber-attacks on IT firm Kaseya, the  Colonial Pipeline AXA, and  the U.S. Government—u

nderscore the dangers of security breaches that threaten businesses every day. By their nature, fintechs are particularly vulnerable, and protecting peoples’ data is imperative to maintaining trust.


Some fintech firms are tempted to minimize the importance of adding a cybersecurity expert to their board, focusing on other aspects of establishing strong corporate governance. They’re confident relying on their internal IT and security processes and choose to wait until they’ve grown big enough to attract the attention of regulatory bodies that demand a high level of cybersecurity. Again, a strong board of directors and corporate governance practices can improve cybersecurity and mitigate the risk the company faces.

Fintechs and Compliance

Fintech’s strict regulatory environment makes good corporate governance a necessity, and most companies understand the need to quickly add a compliance expert to their board. Compliance hurdles differ across industries, but fintechs face growing and ever-changing  regulatory scrutiny and are expected to establish and nurture an unwavering culture of compliance. Creating a strong board at their foundation helps fintech firms keep up with compliance trends—the board will present expert insight, critical skills, and best practices that will ensure the company is meeting or exceeding its compliance obligations.

While it’s easy for fintech companies to populate their boards with envelope-pushing technologists and the VCs who have funded them, it’s important to ensure that their boards also include the expertise of bankers, regulators, and other financial professionals, who understand the risks and rewards that are inherent to fintechs.

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