The combination of finance and technology has given rise to what we call Fintech – short for financial technology. FinTech is a developing industry that utilizes digital technology to increase efficiencies in banking, financial services, and payment systems. The digital technology includes digital assets, distributed ledgers, digital marketplace financing, investment advice, etc. The rapid innovations in blockchain and artificial intelligence has brough cutting-edge digital experience to conducting financial business. In 2018, the global fintech market was worth around $127.66 billion. As these innovations in digital finance continue to flourish, so does the need to protect these innovations through digital payment system patents.
Patents serve as a powerful tool for providing Fintech pioneers with the necessary means to protect their unique ideas from being infringed or exploited by competitors. It gives them insurance to safeguard their technology.
Understanding Fintech and Digital Payments
Fintech includes a variety of services that range from mobile banking to cryptocurrency transactions. Digital payments, on the other hand, involve electronic transactions that can include online purchases or peer-to-peer transfers, which replace traditional cash or check-based payments.
Patent is a form of intellectual property that grant inventors exclusive rights to their technological inventions and prevent others from using, selling, importing, or profiting from their ideas without the permission of patent owner. You need a license of the patent before you use the technology in your product launches or buy the patent rights exclusively. Patents for digital payments and other innovations protect against competitors looking to replicate innovative digital payment solutions. They also attract investors by showcasing a company’s commitment to innovation and providing a competitive edge in the market. Research shows that the likelihood of getting an investment in digital technology increases if the companies protect their innovations through patents. This gives the investors confidence that their technology cannot be copied by others.
Challenges in Obtaining Patents for Fintech Innovations
Securing patents in fintech is challenging due to the complexity of technologies and stringent patentability criteria. WIPO reports that fintech patents often have a shorter lifecycle of 3-5 years. Patent litigation is another risk, with costs ranging from $1 million to $3 million per case and a 15% increase in disputes in 2021.
Strategies for Sustainable Growth - What to do for Maximizing Patent Protection
It is imperative to secure a competitive advantage for sustained growth and market leadership. Patent protection serves as an important tool for achieving and maintaining competitive advantage by safeguarding proprietary technologies and innovations through patents.
To maximize patent protection, fintech companies should focus on several key strategies:
Not all innovations merit patent protection. Patents are granted for inventions that meet specific eligibility criteria including novelty, non-obviousness, and utility. Companies should prioritize patenting only those inventions that offer significant market advantage and are likely to withstand legal scrutiny. Other inventions can be documented as defensive disclosures which saves a lot of money and time. Focusing on high-impact innovations for patenting can increase the chances of obtaining and defending patents.
A diversified patent portfolio can protect various aspects of a technology, making it harder for competitors to design around. Identify the possible ways the inventions can be protected such as a method, business process, system, package, and so on. IBM, for instance, holds over 1,000 patents, providing a wide-ranging shield for its innovations across different aspects.
Companies should file patents for strong inventions to prevent competitors from patenting similar technologies. This creates a “patent thicket” that competitors face difficulty to navigate, thereby increasing their costs and risks to stay competitive. A study by Harvard Business School found that companies who consider defensive patenting strategies reduced competitor entries into their markets. Quite often, the sole purpose of creating a patent portfolio is a proprietary and defensible market advantage.
You should conduct regular audits and whitespace analysis to assess the value and relevance of existing patents to ensure that the portfolio remains aligned with the company’s strategic goals and product vision. These audits and technology whitespace analysis can identify obsolete patents that you can abandon and not invest in maintaining them any further as well as highlight gaps that need new patent filings.
Strategic patent licensing and forming alliances for exclusive or non-exclusive IP collaborations, or patent acquisitions can help protect a fintech firm’s innovations to drive technological and business growth. Parties must carefully assess potential partners and effectively highlight the value of their intellectual property to maximize the gains from these strategic collaborations.
Intellectual Frontiers and other companies who own patents in smart-tech areas have a valuable selection of digital payment patents that offer fintech companies the opportunity to strengthen their patent portfolios and stay competitive. If you are interested in digital payment patents that address current payment challenges, write to us at hello@intellectualfrontiers.com.