The rise of fintech raises trademark challenges
The rise of the financial technology, or fintech, industry has forced the world to redefine the wider financial industry as we know it.
The development of the industry challenges traditional notions of banking and financial services, and the portfolio of fintech products is growing rapidly. This growth is fuelled by a rich pipeline of technological innovations: from the integration of blockchain technology to speed-up global payments, and artificial intelligence (AI) assisted “bots” that can provide advice and consultation to consumers.
The myriad fintech solutions that are on the market not only provide customers with unprecedented choice, but also user-focused products and services that have improved the ease and efficiency of managing money. While the most successful products offer a solution to common financial problems, they are also created as means to differentiate a business from the competition. It is within this highly competitive fintech environment that trademark-related complications can arise.
The rising number of trademark registrations
Investors looking to capitalise on the industry boom are funding the development of more and more new products and solutions. According to research from London & Partners, over £825 million was pumped into UK fintech companies in 2017, while Forbes reported that US-based fintechs raised $6.2 billion in 2016.
This increase in fintech products has unsurprisingly caused a similar increase in trademark registrations. In 2016, UK fintech companies registered 4,228 trademarks in total – a figure that has risen by more than 25% since 2011.
The rate at which fintechs are registering trademarks shows no sign of slowing. Recognising how easy it is for emerging competitors to copy financial products in what is a highly competitive industry, these businesses have sensibly decided to protect their intellectual property before it’s too late.
This focus on IP protection pays dividends when fintech companies are looking for investment or are undergoing acquisition negotiations. Potential investors or buyers will carefully assess what trademark protection is in place during the due diligence process, as the IP assets of these companies are often their most valuable assets. Therefore, a fintech company’s intellectual property will greatly influence their market valuation.
Tackling the trademark problem head-on
Fintechs have no choice but to face the trademark problem head-on and put maximum effort into the clearance and registration process if they want to protect against possible infringement. They must also consider that, as the marketplace becomes more saturated, it will become more difficult to find a unique product name that can be successfully trademarked in the first place.
Traditional banks have excelled in this respect, amassing a vast intellectual property empire. Take the word “cashpoint” as an example. While many people in the UK use this word as a general replacement for the acronym ATM, the word is actually trademarked by the UK high street bank Lloyds. Therefore, technically, only their cashpoints can truly be called “cashpoints”. Fintechs could do worse than to take a leaf out of the book of the traditional banks.
With new start-ups, services and products being unveiled on a seemingly daily basis, the challenges of trademark clearance and registration are amplified in the fintech industry. Eventually, finding names and logos that are unique enough to be trademarked could become extremely difficult.
With such fast-moving competition and so much at stake, fintech businesses need to move quickly to secure all the trademarks they can if they are to sufficiently protect the value of their intellectual property.
By Rob Reading, director, CompuMark