FinTech, Payments and Digital Commerce

Dykema’s FinTech, Payments and Digital Commerce team is highly qualified to serve FinTech companies. Our integrated team includes attorneys with experience in financial services regulatory matters, corporate and intellectual property. We provide strategic and efficient legal advice and solutions to assist clients in navigating the regulatory, policy and business issues in the FinTech space and are up-to-speed on the industry’s constantly evolving platforms, services and technologies. Our team supports and counsels our clients through the entire life-cycle of a FinTech, payments or digital commerce product or service. This includes everything from regulatory compliance, to contracting and strategic partnership agreements, to mobile and physical hardware and software development, to protecting valuable intellectual property assets. Our decades of experience in traditional banking and financial services and payments, together with our cutting-edge understanding of emerging systems and technologies, enable us to help a wide array of clients turn digital opportunities into business realities.

The definition of FinTech companies is evolving, but generally the industry is characterized by companies that are providing a financial service without a depository charter. These companies are not banks, credit unions or thrifts, but rather are non-bank entrants into the financial services market. FinTech continues to grow at an incredibly fast pace as a sector, with many new entrants each year and significant investment from venture capital and private equity ($21.6B in 2016 alone). We serve on several FinTech industry trade groups and write and present extensively on topics affecting FinTech, and have served on the Federal Reserve Board’s Faster Payments Taskforce since its inception in 2015. Regardless of the particular FinTech product or service, each FinTech company has two things in common: (1) they operate in an environment extensively regulated by multiple federal and state regulators; and (2) they are innovating at a rapid pace, a pace that often pushes the boundaries of existing laws and regulations. Our lawyers regularly counsel clients in developing new FinTech products and services across a variety of FinTech verticals – mobile payments/remittance, online/mobile lending, regulatory technology (RegTech) just to name a few areas.

We represent a broad range of FinTech industry clients, including:

  • Start-up and emerging growth companies
  • Digital commerce and mobile payments companies
  • Retailers
  • Banks and financial institutions
  • Investors
  • Transactions processors and software developers

Dykema’s FinTech, Payments and Digital Commerce team also includes attorneys with substantial experience in all legal aspects of designing, launching and maintaining a range of prepaid and emerging payments products and services. Our attorneys also work closely with federal and state regulators to address licensing and other regulatory issues and participate in and speak to industry and trade associations in these areas. We were among the first to understand that by digitizing the transmission, receipt and processing of payments, the payment process becomes a readily available and effective through which sellers of goods and services can communicate with, and market to, their customers and provide “anywhere commerce” – physical point-of-sale, online e-commerce, mobile commerce, “in-app” commerce and buy buttons, and even commerce utilizing connected devices (the “Internet of Things”) and wearable technologies.

In recent years, the number of prepaid and emerging payment products offerings in the marketplace have increased rapidly. These include not only traditional prepaid cards (such as “open-loop” general purpose reloadable cards and payroll cards, but also “closed-loop” merchant gift cards), but also mobile payments and mobile/digital wallets and even virtual cryptocurrencies. New payment products often build on existing payment infrastructures – including credit, debit and prepaid programs and rails for authorization, clearing and settlement. While many emerging payment products are card-based, other programs use other technologies for transactions such as bar/QR code, near-field communication (NFC) chips, text messaging or in-app payment buttons, or offer virtual payment products useable only on the Internet or through mobile devices.

As prepaid and emerging payment products are increasing, federal and state regulators have taken notice and taken action. Since 2001, an increasingly large number of state laws regulating gift cards, prepaid cards or electronic/mobile payment products have been enacted. Since 2009, many federal laws and regulations have been passed, such as FinCEN’s Prepaid Access Rule, the Dodd-Frank Act, the Durbin Amendment/Regulation II and the CARD Act.

Depending on the type of FinTech, payments or digital commerce product or service offered, and the identity of the issuer and holder of any underlying funds, products may be regulated by a variety of laws and regulations, including:

  • Federal money services business registration
  • State money transmitter laws
  • Federal Bank Secrecy Act (BSA) and anti-money laundering (AML) laws
  • Federal and state consumer protection laws (including FTC/UDAP and CFPB/UDAAP issues)
  • Federal and state banking laws
  • Electronic Funds Transfer Act/Regulation E
  • Dodd-Frank and the Consumer Protection Bureau
  • Dodd-Frank and the Durbin Amendment/Regulation II regulating debit and prepaid card interchange and routing
  • Federal and state international remittance laws
  • Federal and state credit laws (including Truth In Lending/Regulation Z, credit licensing, reporting and collection laws)
  • Federal and state lending laws and licensing requirements
  • Federal and state privacy and data protection laws
  • Intellectual property licensing and patent laws

Any company developing, launching or expanding a FinTech, payments or digital commerce product or service faces significant legal questions on how to proceed and how to design and implement their product or service. In the current regulatory environment, payments entities need to secure up-to-date yet practical legal, regulatory and product design advice. Our firm maintains up to date surveys and information about both federal and state laws regulating FinTech, payments and digital commerce products and services (including state money transmitter laws, unclaimed property laws, consumer protection laws, lending laws and licensing requirements, and federal and state privacy and data protection laws).

In addition, our team offers advice and assistance regarding:

  • Product and program launches, including product design, fees, terms and conditions of use
  • Processing and vendor agreements, including back-office and platform vendors that FinTech, payments and digital commerce companies use to delivery their products and services
  • Co-branded/strategic partner marketing and promotion agreements
  • State licensing requirements and exemptions
  • State unclaimed property laws and compliance
  • Federal BSA/AML compliance policies, procedures and controls
  • Third-party distribution networks, including sales agency agreements, due diligence procedures, supervision and training.

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