What is fintech exactly?
Financial technology is a term that describes businesses that use technology in order to provide financial services for consumers as well as the business. It also includes companies that manage personal financial management, assets, insurance, and payment. Fintech is also known by Apple Pay and PayPal. You can even use your credit card online to purchase with it. Fintech can be described as any application of technology in financial services. It also includes the use of technology to help companies manage the financial aspects, including new software, applications and business models.
Fintech has become a fad in recent years. Everyone is interested or working towards it. Companies are realizing that without fintech, they risk losing customers. It provides a seamless experience for customers in today’s fast-paced connected world. Traditional banks, as well as startups, are adapting to fintech, which is changing the way that they interact and serve customers. Financial technology is a part of everyday fund transfers and currency exchange. It also helps with personal finance via applications and businesses like Venmo. NerdWallet. Transferwise. Kickstarter. China’s fintech boom is led by the rapid expansion of fintech companies like JD.com (China), Baidu Finance (China), Tencent and commercial bank branches.
Financial service companies have a monopoly on patents. Mastercard and Visa are the dominant players in patents, with more that 300 worldwide patent inventions each in mobile payments. The same applies to published patents: 1,784 Visa and 1,046 Mastercard. Bank of America is another financial services competitor with 260 patents and 422 publications patents. PayPal has 145 patents and 559 published Patents. First Data Corp, a US-based financial service company, has 40 patents and 136 published brevets.
Ajay Bhaka, Mastercard’s CEO has made it clear that they are not a financial services company but a technology firm. Mastercard uses several technologies, including in Control, which allows users to use one Mastercard and have it set up to charge a credit or debit card for purchases that exceed or fall below a predetermined amount. It can also limit where the card is accepted. InControl, which is patent protected for the next ten years, shows how mainstream firms are adapting in order to be part of the fintech race.
China’s fintech sector
China’s fintech revenue climbed by 55.2 percentage points to $101.6 billion in 2017, compared with $6421.4 billion in 2016. The figure is expected to increase to $1.97 billion in 2020, according data from iResearch. Statista data suggests that China had more than 914 million digital payment users last year. That number could reach close to 1.5 billion by 2022. China has a higher transaction value than the US, with $1.5billion in total transactions in 2018, as compared to $1.2billion in the US. Mobile payments reached $5.5 trillion last fiscal year — 50 times as large as the US market.
Chinese companies were awarded four of five top positions in 2017’s ranking of innovative fintech businesses worldwide. Ant Financial, China’s largest fintech company has been valued at around $60bn. This puts it on par to UBS, Switzerland’s largest bank. The Economist reports that “[W]hen It Comes to Fintech, The Rest of the World will Be Studying China’s Experience.”
China’s fintech success is evident in three areas, namely mobile payments, online lending and money markets funds. According to China’s Ministry of Industry and Information Technology (65 percent of all mobile users), phones can be used as wallets for around 425 million Chinese.
China is the global leader in fintech. It also has the largest market for digital payment, accounting for close to half of all global totals. China accounts for three-quarters worldwide market share in online lending. China is home to more than 3000 peer-to–peer (P2P), lending institutions, up from just 214 in 2011. This is due to the country’s growing economy and its unsophisticated banking systems. People built wealth by investing in their own assets. However, cash was the best option for purchasing goods. Chinese consumers now have new opportunities thanks to technology. They can bypass the old banking system. According to The Economist, fintech in China has great promise today. It is transforming a dysfunctional banking system, and helping to make it more efficient for consumers and small businesses.
How does IP interact with fintech
Intellectual property, as with all works and inventions, is protected by law. People can earn financial benefit or recognition for their inventions. IP rights may be used
It is important to protect fintech inventions’ branding and software. As start-ups seek funding from investors, an IP strategy is essential. They will need to know that the fintech being purchased is protected. Potential buyers will find it more appealing to have a strong IP strategy, should they need to sell the business.
What protection mechanisms are there?
Copyright
Copyright is one method to protect the code of software-based innovations. Copyright does not protect competitors from achieving the exact same result using code that was developed independently. Fintech innovators must be cautious about this. Copyright, in essence, protects an idea’s expression but not its idea. Software companies cannot always rely only on copyright protection to keep rivals away from reverse engineering computer software programs.
Design patents
Design patents could protect any physical attributes of fintech products like interfaces, cards, machines, icons and interfaces. This is especially valuable if one of these attributes promotes the differentiation of the brand, products or services, or increases usability of a product. However, because of practice differences, certain elements or icons used in application interfaces can be protected by design law in some jurisdictions. These include Europe and China.
Trade secrets
Trade secrets can provide protection for confidential business information. Trade secrets can be protected without formal registration. Companies must however take reasonable steps for keeping it secret. As long as the information is kept confidential and has commercial value, the protected information can be protected for an unlimited amount of time. Unauthorized trade secrets use is considered an unfair business practice.
Trademark and brand protection
Every fintech company needs to have a brand. A strong brand is essential for any fintech company to distinguish their products and services from others, regardless of how valuable or strong the invention. Without it, it can be difficult to build a trusting customer base. This is especially true when fintech companies deal in financial assets and documentation.
Brands may use a word mark or device. If China is the first country to file, it’s a good idea to file the same as well as the Chinese equivalents. This helps protect against competitors and squatters who unlawfully ride on or diminish the goodwill of a company’s brand. Trade mark registration and strong brand enforcement are vital to the protection of a company’s name and branding. They must be part a comprehensive IP strategy.
Fintech companies cannot sell physical goods so branding is crucial. Branding encompasses more than just a website and a logo. It’s the message businesses convey to multiple stakeholders.
You must be the preferred partner of your sector as more fintech companies emerge. This involves creating a community and setting up a partnership strategy. Also, it is important to plan how you will reward and engage your users to keep them engaged.
Not only is branding a tool for acquiring new customers, but it’s also vital to obtaining the right talent (mostly referred to as employee branding). A complete brand management toolkit is crucial for any fintech IP strategy.
Patents
Patents protect inventions that are based upon new technology or processes and have a life expectancy of 20 years. This allows companies the opportunity to secure their inventions while also gaining market share. Patenting the invention’s underlying technology provides an avenue to prohibit others from creating, using, or selling the invention. Patents offer fintech companies the strongest protection, but they can be difficult for many to obtain. Many fintech innovations are based on so-called business methods and computer-implemented inventions. It can be tricky to patent these inventions.
Different standards for global patentability — challenges
The US used to believe that business methods could be patentable. But, the case law has shown that this has become more difficult in recent years. The US Supreme Court declared that certain patent claims regarding a computer-implemented and electronic escrow services for financial transactions were invalid in Alice v CLS Bank International. The claims were drawn to an abstract concept, and it was not enough to implement those claims on a machine to convert that idea into patentable matter.
Patent law in Europe exempts computer software and methods of doing business from protection. However, the invention must be able to solve a technical problem using technical features. China’s position is similar to Europe. However the State Intellectual Property Office, (SIPO) might take a more positive approach in determining technical natures of fintech innovation in response to China’s vibrant financial industry.
Opportunities in China — Revised guidelines for patent exam
SIPO announced in February 2017 that it had revised the Guidelines for Patent Examination. This revision became effective on April 1, 2017. The revised guidelines bring significant changes to business practices and software patents.
China had previously faced difficulties with patent eligibility when it came to patent applications for business innovations in electronic commerce. These applications were rejected immediately by the examiners because they did not provide a technical solution.
The Revised Guidelines for Patent Examination have added the following to Section 4.2 Chapter 1, Part II: “For business model claims, if they contain both business rules and techniques, the possibility of obtaining Patent Rights shall not be excluded pursuant to Article 25 of Patent Law.”
This opens new doors to technical feature patentability and business methods, since they cannot be excluded. This however does not guarantee patentability, as the technical elements test is still applicable. In such cases, technical methods are employed to solve a technical issue and achieve a technological effect. For a business process-related application to become patentable, applicants must be in a position to show or argue technical contribution.
China was able to draft claims relating to computer programs earlier than in Europe, Japan, Korea, and the US. Revisions to Section 2, Part 9, Part II emphasize the fact that computer-implemented inventions are not exempted from patentability for computer programs recorded on media. This is only true if they concern computer programs .
This means that certain claim format formats, which were at risk of being rejected by the court as non-statutory matter and without further review, must be thoroughly reviewed. They may now be granted wider protection for software patents. This will increase the enforcement possibilities for patentees.
The revised guidelines clarify that a claim describing an apparatus for computer-implemented inventions may also include a part of a computer program. To better reflect the technical nature, and to distinguish clearly from “functional description” when determining scope of patent claims, “function module” was replaced by “program Module”. The changes in this section reflect SIPO’s growing willingness to protect computer-implemented inventions as per the Patent Law.
China fintech patent strategy checklist
The updated guidelines make it simpler for fintech inventions that pass the patentable topic hurdle. Once the invention has passed the novelty and inventiveness objections, it can be patented. Patent applicants are able to create patent claims that can be used for computer-implemented inventions with greater flexibility. This means that patents granted can be protected from different perspectives in case of future infringement disputes. The following should be considered by fintech companies when patenting their technology.
* You can take advantage the Revised Patent Examination Guidelines that are more relaxed for business method-related application, but remember that business method itself is not patentable.
* file aggressively — businesses are encouraged to apply for SIPO eligibility with force. To identify patentable claims, examine the technical side. The technical improvements are those that enhance the user’s experience or increase accuracy, reliability, and efficiency of the system. This will help you to find patentable subject material.
* Prepare arguments for objections regarding novelty and inventiveness.
* To influence the examination of similar applications in Europe or the US, use positive outcomes
* Graphical user interface (GUI), is subject matter protected under Chinese Patent Law. These design patents should also be used to protect applications.
Outlook and final reflections
China’s fintech leaders are also expanding. WeChat’s international mobile wallet makes it possible to use WeChat worldwide. Ant Financial (parted of the Alibaba Group), invested in mobile-finance businesses in India, South Korea, Thailand. Hong Kong and Singapore, traditional banks in the Asia Pacific region are racing to catch up with China’s fintech movement. One of the main differences is China’s openness to fintech actors on a regulatory basis. Hong Kong and Singapore have more stringent laws than Singapore, which causes problems. It will be interesting for these banks to respond to China’s fintech rise in the coming years.
China is without doubt the most important country for fintech. According to official global filings in 2016, global fintech Patents have increased 49 percent in five years to 9,545 by 2016. China came in second place with 4,523 patents. While the US is the leader in fintech patents numbers, China ranks second. Relecura has released the report fitech: An Intellectual Perspective showing that China is now the fourth preferred jurisdiction to file fintech patents. They are behind Japan, Korea, and the USA. China is also home for thriving online banking activities, which are driven by new internet technology, such as Alibaba, JD.com or Tencent, as well commercial banks that quickly respond to the hungry disruptionors that have catapulted China’s Fintech Movement.
Companies that are Fintech should file their IP, including their protectable patent material, in China. This will allow them to focus on the technical inventiveness. It is important to have counter-arguments in place for any objections. The backbone of an IP strategy should include patenting technical inventions, but it is important to also protect the brand. A strong, solid portfolio of IP will not only help protect but also increase the value for any fintech business.
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