Posted by Martin Bartlam and Bryony Widdup on 20 January 2021
Tagged to Banking, Financing, FinTech

Sound collaboration agreements and modalities are at the heart of fintech

The rollercoaster experience of disruption to long-term relationship has been a breathtaking and sometimes stomach-churning ride for fintech and banking alike. Commercial “collaboration” is often hard to achieve, so here we aim to pin down more closely, from a legal perspective, what is meant, what is covered and where the pitfalls might lie.

Clear objectives

Commercial collaboration is achieved through a number of differently structured arrangements depending on the parties’ required outcomes. We work with a party to identify its key performance and success metrics as an essential prerequisite to successful collaboration. Possible structures include joint ventures, consortia and partnership agreements, services arrangements (including banking-as-a-service, software-as-as-service and white label banking), financing agreements and acquisitions. Startup incubators offer early stage, technology-friendly hubs with a mix of financing, professional advice, data access and a distribution network, but tend to be very early stage and we will not cover these in more detail here. We focus on the recent success of longer term, structurally integrated collaboration through consortia, services arrangements and increased M&A activities.

Collaboration models

A formal joint venture (JV) arrangement involves parties entering into an agreement providing for shared ownership of an entity or a project. The terms of the agreement will often cover capital contributions, allocation of liabilities, valuation matters and determination of profit-sharing, arrangements regarding governance, ownership and transfer, major decision-making and day-to-day running, restrictions on parties including exclusivity, confidentiality, tax matters and more. The use of traditional JVs in this space has been relatively prevalent, and some of the potential cons (culture clash leading to project failure, lack of proper sponsoring, failure to integrate and effective disintegration once the initial excitement has faded) have been clear in many instances. Understanding these realities during the contract phase is essential and is an area where an experienced international law firm like DLA Piper can guide the parties through the negotiation process with the aim of establishing a longer lasting relationship that meets the key objectives of the parties.

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