Preparing a Fintech Business Model for Legal Review

What does a fintech legal review need to understand?

A fintech legal review begins with the activity the business will actually undertake, the parties involved and the way money, information and instructions move between them. A product label such as platform, technology provider or facilitator is not a complete description. The legal analysis should be based on the operating model, proposed contracts and relevant regulatory requirements.

Describe the customer journey

Explain how a customer enters the service, what decisions the customer makes and which entity communicates with the customer at each stage. Identify onboarding, instructions, payment, support and exit steps. A diagram should distinguish the interface presented to the user from the entity undertaking the underlying activity. Provide sample terms and communications where available, with personal information removed from illustrative materials.

Map participants and their responsibilities

Identify the proposed contracting parties, technology providers, financial-sector entities and other participants. State the activity each is expected to perform and the documents supporting that description. Do not infer another entity’s status or authorisation from marketing material. Counsel should be given the relevant records and asked to assess the role and requirements in context. Commercial responsibility and regulatory responsibility should not be assumed to be identical.

Explain funds and instruction flows

For each stage, record where funds are received or held, who can issue an instruction and what event triggers the next step. Explain failed transactions, refunds and reconciliation responsibilities. Where an account or payment arrangement is still being discussed, mark it as proposed. Accurate operational facts allow the advisers to identify the relevant questions; a diagram does not itself establish regulatory classification or approval.

Connect data and contractual arrangements

Describe the categories of information used, the purposes, access arrangements and external providers. Link the description to the customer terms and participant contracts. Identify which terms remain to be negotiated and what the business expects to change before launch. Security, privacy, liability, service availability and complaints processes need to be considered alongside the proposed product functions rather than left to a generic set of website terms.

A fictional platform example

A technology business proposes to connect merchants with a separate financial service provider. Its brief should identify the contracting relationships, the customer-facing journey, the movement of funds and the activity performed by each participant. It should also explain how fees and complaints are handled. Calling the business a technology platform does not resolve those questions. The example is a method of presenting facts, not a regulatory classification.

Maintain the review as the product changes

Provide the advisers with a versioned model description, draft contracts and a decision list. Use current official regulator material, including relevant RBI publications, when assessing particular activities. Return material product changes for review: adding a participant or changing a funds flow may change the facts on which earlier advice was based. Record what was reviewed and the assumptions used, without presenting the exercise as a generic licence or compliance certificate.

References

• Reserve Bank of India — official publications and regulatory information