The Future of Finance
By Emily Rice
West Virginia is paving the way in a new sector of business and commerce called financial technology, or fintech—an emerging industry that uses technology to streamline activities in finance.
Though the average consumer may not be aware of this new term, fintech is already a part of many daily transactions by making financial services accessible from an app or website. The term includes any technology used in the financial services industry.
“Simply put, fintech is part of our future,” says West Virginia Department of Economic Development’s Business Attraction Manager, Kelsey Staggers. “Technology is constantly progressing how we do nearly everything in our day-to-day lives. The financial industry is no different. More companies are going to require consumers to pay electronically for goods and services instead of using cash. Probably the most widely used form of fintech is payment transfers through smartphones.”
Online payment services like PayPal, Apple Pay and Transferwise are examples of fintech, but the term also refers to everything from traditional financial transactions like saving, investing and loan processing to innovative financial technologies like blockchain and cryptocurrency.
“The fintech industry has great untapped potential in the Mountain State,” Staggers says. “During the 2020 legislative session, House Bill 4621, which implemented a regulatory sandbox, was passed by the West Virginia Legislature and signed by the governor. The sandbox allows companies to bring their fintech products to West Virginia and test them for 24 months. We are one of only a handful of states with a fintech sandbox, which makes us competitive.”
In April 2020, West Virginia became one of the first states in the U.S. to adopt a regulatory sandbox that offers fintech companies a controlled testing environment to test their products with a limited number of customers under regulatory supervision. This supervision acts as a framework to help pave the road to authorization.
“The vast majority of regulations in any given field, from finance to health care, to education, sound reasonable when they’re presented on their own. The problem arises when there are so many overlapping, well-intentioned regulations that it becomes difficult to lawfully conduct business,” says West Virginia Delegate Riley Keaton. “Regulatory sandboxes provide relief from those stifling regulations and allow companies to focus on employing people and developing their product.”
With the guidance of its regulatory sandbox, West Virginia is poised to be an industry leader in fintech by allowing firms that would normally require state licensure to partner with financial institutions and test their products or services for a limited period.
“The fintech industry presents a rare opportunity for the Mountain State to not just keep up with the progress of the states around us but to exceed them and become a real industrial leader of the future,” says Max Gottlieb, attorney at Hissam Forman Donovan Ritchie PLLC. “The fintech space is growing rapidly, and West Virginia can be part of that burgeoning growth and become a regional, if not national, standard-bearer in the industry. If we can do that, West Virginia can be solidly in the driver’s seat for economic opportunities in the 21st century.”
By lowering the initial regulatory cost for a company, a startup working through the regulatory sandbox can speed up its development and testing process, according to Stagger.
“As an attraction manager for the West Virginia Department of Economic Development, one of my areas of focus is on the tech industry. As I began working in this area, I quickly realized how big the fintech industry is growing,” Stagger says. “A fintech regulatory sandbox allows companies to bring their fintech products to West Virginia and test them for 24 months. At the end of the period, they graduate from the sandbox. If they are successful, they can stay here and operate, or, if their model fails, the entrepreneur can exit without losing as much investment.”
In response to fintech’s influence and everyday use as a payment option for the average consumer, financial institutions are investing in fintech and its research and development. Similar partnerships are forming in West Virginia through initiatives like Vantage Ventures, a West Virginia University (WVU) program administered by the West Virginia Division of Financial Institutions, which officially launched in October 2019 in partnership with John Chambers and the college of business and economics, which shares his name.
Sarah Biller, West Virginia native and executive director of Vantage Ventures, says fintech is a critical driver of the creation and adoption of innovations in technology and important to building a more inclusive and financially secure future for individuals and small businesses.
“Fintech is a very broad category and touches all parts of an individual’s personal and professional lives. Foremost, it provides the state the opportunity to responsibly adopt emerging technologies that increase the likelihood of financial security and wellness for all West Virginians,” Biller says.
WVU is working to promote the Mountain State’s vision to grow into an innovation economy by giving entrepreneurs a mechanism to scale ideas to market through the Vantage Ventures initiative.
“We are uniquely positioned to connect fintech entrepreneurs, the creator economy and venture capitalists to attract the funding needed to support our makers as well as modernize the way they are paid and manage their cash flow. There has never been a better time to sell a unique item to the global markets from West Virginia,” Biller says. “The West Virginia fintech sandbox provides entrepreneurs an environment to collaborate with our regulators, community banks, small businesses and other institutions to build products and services geared to how we live, educate, work and play in West Virginia. It is an exciting opportunity for fintech entrepreneurs to innovate for people and businesses operating outside of big cities.”
According to Stagger, it takes support from resources and partnerships with venture capitalist firms and makerspaces to help any entrepreneur, especially a fintech entrepreneur, become successful.
“These partnerships not only create quality, high-tech jobs for residents, but they bring more technology-based industry to the state and thereby improve the economy,” Stagger says. “I believe West Virginia’s fintech future is very bright. Every industry needs a specific ecosystem to grow and thrive. West Virginia has exactly what a fintech company needs to succeed. Government, education partners, venture capitalists and incubators, existing financial companies and fintech startups form this ecosystem and create a domino effect of innovation.”
Fintech companies are often decentralized, meaning they can employ individuals anywhere. With access to the internet and the proper training, fintech can create jobs throughout the Mountain State. West Virginia is positioning itself to be the natural home of this new breed of entrepreneurs and companies.
“The fintech future looks bright in West Virginia. I can see a variety of consumer-facing and service-based enterprises becoming major employers and economic drivers in the state. And, just as importantly, I can see an ecosystem of startups and entrepreneurship that will blossom around those economic drivers,” Gottlieb says. “That ecosystem will not only support and grow the industry, but it will also open new possibilities for young West Virginians to dream and pursue entrepreneurship. Now, instead of leaving the Mountain State because of a perceived lack of opportunity, young West Virginians will be able to see the litany of needs and opportunities available in the industry here at home—whether that is training to be a skilled tech worker for a larger company or using West Virginian ingenuity to rethink and improve on the existing fintech offers to make the next cutting-edge company.”
