In a special episode of Hot Topics on the Edge of Show, a leading Web3, tech, and innovation podcast, Claire Davey of Relm joins the hosts for a timely conversation on the future of fintech, regulation, and risk. Hosted by the team behind Outer Edge and Edge of NFT, the show explores the intersection of decentralised finance, digital policy, and disruptive technologies.
This episode covers everything from Aave’s $50B DeFi milestone to major legislative developments during Crypto Week in Congress, including the Genius Act, the Clarity Act, and the Anti-CBDC Surveillance State Act. But it’s the closing segment, FinTech Risk and Innovation with Claire Davey, that delivers a crucial message for startups and scaleups alike: as fintech evolves, so must the way we protect it.
Claire shares why traditional insurance models fall short in this space, what purpose-built insurance really means, and how Relm is equipping innovators with the confidence to build fast, without breaking things.
Below, we’ve captured the key questions Claire answered in the conversation.
Why is purpose-built fintech insurance, which you guys [Relm] support, so important right now?
“Historically, the insurance market has viewed fintechs as two separate categories. So, either financial institutions or technology companies and not really seen how those two things interact. And the fact that their exposures need to be addressed holistically through an insurance coverage or insurance policy that responds to a number of risks that those entities are facing.
What we’ve seen is that fintechs are pushed into either purchasing a financial institutions professional indemnity policy which is quite traditional and also not really responsive to a technology company’s risk. Whereas tech E&O for those tech companies doesn’t respond to the regulatory investigations… one of the big risks and the big challenges that fintech face right now is the increase in regulatory activity and not only the increase in investigations but the uncertainty that comes with regulatory change.
So is this act going to pass? Is this bill going to pass? If it does, will there be any amendments? What does this mean to my business? How can we ensure that we’re compliant with it?
Where we’re seeing that is not just in terms of financial regulations like cryptocurrencies as you’ve been talking about, but also for instance AI. In the US you had sort of back and forth on federal AI bills and in Europe we saw the EU AIA act sort of brought in but then conversations as to whether it was going to be scaled back.
So really this lack of certainty for fintechs who are engaging with all of these emerging technologies to deliver their solutions… they’re just not really — they don’t really know where they stand and I think they’re looking for some certainty and resilience through different mechanisms and one of those is insurance.”
What do OMEGAFINTECH and NOVAFINTECH do, and how are they helping solve a lot of the challenges that you just spoke on?
Yes. So, I think you’re right. You know, they do want to move fast and investors want those businesses to move fast and the management of those entities want them to move fast. But if you move fast, it’s highly likely that you might break things or do things incorrectly, right? And so insurance is there as kind of a backstop but also a safety net.
OMEGAFINTECH [is] for those entities that provide the financial services but use technological solutions to do so and NOVAFINTECH on the other side is for the tech companies who are delivering the tech solutions to those financial institutions but they’re not actually providing the services themselves.
Now within these products what we’ve tried to do is really emphasize that no matter the cause of loss — whether that’s a cyberattack, operational error, negligence, mismanagement — the policy will respond.
And the policy will respond not by saying, ‘Oh well, it’s in this bucket or it’s in that bucket,’ but we’ll just provide reassurance that the same insurer is there to provide the support and the limit is available across those triggers.
So, we’ve been looking at sort of the exposures that fintechs are concerned about now and one of those is obviously decentralized technology within their solutions. It’s also the use of AI and financial institutions regulation… and what we’ve tried to do is group those sort of liability covers together and complement those with first party incident response so that if an incident happens we can get them back up on their feet as fast as possible to protect their earnings.”
So, with people having that in mind — still wanting to build and potentially being able to use these two products — why should this be top of mind for builders out there listening right now, when it comes to making sure they have insurance in place for what they’re building?
“I think it’s understandable that if you’re starting something and you’re not going to have a robust governance function, right? You’re not going to have a risk manager. You’re going to be focusing a lot of your resources and time on doing coding, on software engineering, on developing your MVP and trying to bring that to market and attracting investment.
But I think what you can do as a fintech founder or fintech manager is look at insurance and your insurance carrier as your partner in that journey. It’s about using the underwriting process as a way of getting feedback on what are the top three governance priorities that I could focus on in the next year that are going to have the most impact from the claims that you’ve been seeing elsewhere.
And then also lastly, I think the insurance partner is there almost as a badge of credibility. I think when you’re talking to investment partners to achieve that growth, having been underwritten by an independent insurer that’s financially rated, I think does add some credibility to the resilience of the technology, but also the management of the organization.
So I think that I would recommend using an insurance partner to really sort of add that additional credibility but also provide some unofficial consultancy to growth.”
