Just a few years ago, the conversation across the fintech industry revolved around how new up-starts were using new technologies to disrupt and disintermediate traditional institutions and with it, the wider financial services industry.
Now, consolidation in the market, through acquisitions of new entrants and partnerships with these up-starts, means the dialogue has shifted from competition to collaboration, with the industry increasingly concerned with regulation, evidence and legitimacy. No area has raised more of these concerns than the swath of initial coin offerings (ICOs), with pointed questions surfacing around their legitimacy leading to regulators across global markets introducing strict measures against them.
The start of September saw China first off the mark to ban ICOs, closely followed by the US SEC (regulatory body to protect investors), with Singapore, Hong Kong, Russia and others following suit, albeit less stringently. And just last week, South Korea joined the ranks in parallel with the SEC issuing its first fraud charges against an initial coin offering.
What is an ICO?
Like an IPO, an ICO is a way of raising capital for an organisation, or unlike an IPO, for a project or initiative. For example, a tech start-up will launch a digital token, a coin or ‘crypto currency’ based on blockchain technology, which, because it is unregulated, can then easily be traded for BitCoin or Ethereum. These coins function as both company ‘shares’ or as well as currency to buy the companies’ services or products (not dissimilar to Crowdfunding).
In the latter case, as well as funding the project, the coins then also act as a catalyst for the business in the process. The idea is that, if the start-up project is successful, driven hopefully but the adoption and usage of the new currency, the value of the coins will increase and investors will see a strong return.
Despite the availability of cheap debt, ICOs continue to attract billions of investor dollars. To date, almost $2.3 billion has been raised in ICOs, with most of this taking place in the first half of 2017.
Why so serious?
The lack of regulation around ICOs is a double-edged sword. On the one hand, this helps keep innovation and development moving at speed but this is also exactly what makes these digital currencies a risk to investors.
Without accountability, however, the market is wide open to fraud with question marks raised as to whether the funds invested would be used as billed. At the moment, there’s little legislation in place to protect the investor although some have introduced measures to say that, if the target amount isn’t raised during the ICO, the money will be refunded to investors.
Despite these set backs, the ICO trend shows no sign of slowing down. For organisations planning an ICO in the midst of this heightened scrutiny, what do FinTech PRs need to consider if they are to fend off the doubters and win over the sceptics?
A pre-launch PR checklist for ICOs
- Credibility is critical – The first thing media will want to figure out is whether an ICO can put its money where its mouth is. And then, this will need to stand up the scrutiny of their morning meeting with the rest of the editorial team. Where possible, marketing needs to be as transparent as possible in any launch materials so basic questions of credibility from media can be quickly resolved. If demonstrating basic proof points is too much hard work for a time-poor journalist, the story won’t get written or, worse, will point to these shortcomings.
- Prepare to fail – Marketers should anticipate the questions they’d rather they weren’t asked. These are the ones to prioritise when preparing ahead of a media interview. Establish the person who is best placed to address these and agree on responses in advance. Here, it’s essential to cover regulatory implications. For consistency, ensure the spokesperson is briefed to relay a high-level description of the company’s overall approach to regulatory requirements and then also, a message which addresses each relevant market.
- Stress test the sign-up process – Does the pathway to registration tally up with the company’s story around regulation? Any gaps of compliance with regulatory frameworks? Journalists will be checking to see that these marry up and unpick any discrepancies.
- Think beyond The Financial Times – Yes, it’s the dream for any FinTech PR looking to build his or her company’s profile but traditional media sources may not be the right choice for businesses’ trying to reach an ICO investor audience. Consider niche coin and cryptocurrency outlets, podcasts, blockchain and investor online forums, influencer marketing with high profile individuals in the space, social media channels and Medium posts. These will help drive SEO and direct traffic to the registration page but also, may uncover niche investor communities that a company may not otherwise have access to.
For more info on what makes FinTech buyers tick and, more importantly, what makes them buy, check out our research here or drop a note to our Head of Fintech, Daniel Lowther: firstname.lastname@example.org.