Technology financing

Technology financing offers flexibility to a business in terms of balance sheets, cash flow, tax planning, and updating technology. There are multiple advantages in leasing, rather than buying, IT equipment. Technology financing offers flexibility to a business in terms of balance sheets, cash flow, tax planning, and updating technology.

Benefits of technology financing:

Here are five main reasons your business can benefit from technology financing.

• First comes the upfront cost. You may have to borrow money to cover the purchase of IT equipment. With a lease, you start with a regular monthly operating expense. That expense generally won’t change over the life of the lease.
• Taking out a loan to buy IT equipment means carrying debt on your balance sheet. Lease payments are an operating expense and can also provide tax advantages to a business.
• When it comes to technology, new is usually better than old. Leases allow for technology refreshing. One can upgrade or add equipment as your business needs require. If one purchases technology equipment, it becomes their own for years to come.
• Leasing can let you use technology to drive strategic business initiatives giving you a competitive advantage.
• The End-of-lease option. It can let you hold onto useful equipment when the lease expires through lease extensions or fair-market-value purchase options. If you choose, you can move on to a new generation of IT equipment setting up a new lease.

Technology’s impact on financial business models:

Any number of parties can help you with leasing IT equipment and technology financing. Also including capital leasing companies, IT hardware vendors, and IT services firms.

Technology has created a massive increase in the availability and use of data and social media, shaping customer expectations. The ability of financial institutions to use consumer data to price, target, and market their products and services. FS businesses are adopting new technologies to compete.

Technology is revolutionizing the way that the financial industry operates. Rapidly accelerating technological advances are creating entirely new business propositions. Such as crowdfunding, digital currencies, mobile banking, online investment, and new payment systems.

Technology’s impact on business models as financial technology:

Any number of parties can help you with leasing IT equipment and technology financing, including capital leasing companies, IT hardware vendors, and IT services firms.

Technology has created a massive increase in the availability and use of data and social media, shaping customer expectations and the ability of financial institutions to use consumer data to price, target, and market their products and services. FS businesses are adopting new technologies to compete.

Technology is revolutionizing the way that the financial industry operates. Rapidly accelerating technological advances are creating entirely new business propositions, such as crowd-funding, digital currencies, mobile banking, online investment, and new payment systems.

Technology as per client demand:

FS businesses are adopting new technologies to compete. Client demand for online access is causing a shift towards more direct and immediate interaction with financial products and services. Technological changes increasingly allow consumers to manage their savings and investments and firms need to demonstrate how they add value.

However, in its Risk Outlook 2014, the FCA acknowledges a risk that consumers will make “impulsive or ill-informed decisions due to more direct, more frequent and faster interaction with financial services”. Lawyers need to help firms navigate between serving client demand and mitigating risk.

Regulatory drivers for innovation:

Regulators need to grapple with how to respond to the impact of technological advances on the financial sector. For the moment, at least, the UK FCA is embracing the technology revolution. Martin Wheatley, the FCA’s Chief Executive, has announced that the FCA is considering “sweeping change” with a major consultation into how the FCA can encourage innovation in the financial services market. This will look at whether it does enough to promote competition and create room for new entrants into the market, particularly those with novel business models, and whether FCA regulation serves the needs of innovative businesses.

The FCA is also consulting on some “big ticket, advice-related” changes. It raises the possibility for new online business models where the firm might not have to comply with full regulatory safeguards.

This could have major implications all around and is an area where lawyers need to keep a close eye on developments.

Risks as well as benefits:

Although technology undoubtedly brings benefits, high-profile technical failures in the financial sector in recent years are alarming.  It has also had adverse implications on market integrity, consumer outcomes, and firms’ reputations.

The FCA is concerned that technological advances increase firms’ dependence on underlying systems resulting in exposure to the disruption in ways that can prove costly. Lawyers need to help firms implement effective oversight and controls for increasingly complex systems. The controls themselves need to be constantly reviewed to ensure they keep up with changing technology and regulatory requirements such as EMIR and MIFIR/MiFID II to ensure issues are minimal and can be resolved quickly.

Other Issues:

Another major issue is that despite the publicity which cybersecurity has garnered the risk has still not been countered effectively. Most institutions are vulnerable and do not have effective controls and frameworks in place to mitigate these risks. The rise of cybercrime requires firms to invest significantly to improve controls. The adequacy of businesses’ cybercrime prevention measures is firmly within the sights of regulators.

Another area of regulatory focus is the increasing interconnectedness of regulated and non-regulated activities, i.e., firms outside the regulatory perimeter providing technological solutions or platforms for services that are regulated.

In its Risk Outlook 2014, the FCA has identified technological developments as a key risk to its objectives. Meanwhile, at the EU level, the Joint Committee of the European Supervisory Authorities has identified IT-related operational risks as key risks to the stability of the European financial system in its report published on April 2.

The key message for firms is that the impact of technology on the financial sector is increasingly a central focus for regulators. The FCA expects firms to look at their business models, strategies, and structure which will identify and manage the root causes of technological risk. It will make judgments about senior management and firms and intervene, including taking enforcement action, where appropriate.

Lawyers offering integrated technology and financial regulatory expertise will be in high demand to help businesses minimize exposure to potential regulations and issues while capitalizing on the benefits that technology brings.