The US leads the way in FinTech patent quality according to a new index

New research has revealed that the US is a leader in the FinTech innovation field in terms of quality and quantity of patent applications.

The findings come as a new index has been created to help companies measure the quality of FinTech patents when making investment decisions in acquisitions, joint ventures and licensing deals involving intellectual property (IP).

Research led by the new Center for Finance, Technology and Society at Nottingham Business School (NBS), part of Nottingham Trent University, used key indicators to assess more than 16,000 patents in the FinTech field registered over 20 years.

Through a comprehensive review of patent quality studies, researchers have collected and analyzed all possible indicators that have been used to assess the quality of patents in several fields, including but not limited to FinTech.

Patterns of registration and protection of intellectual property rights were then mapped in three focus areas – the distribution of FinTech patent quality based on different jurisdictions, the distribution of patent quality in relation to specific technical fields (IPC), and whether there is a relationship between average FinTech patent quality for firms and their incomes.

Findings show that the USA is the leading jurisdiction in terms of both the number of registered patents and patent quality, accounting for a total of 39.5% of the sample, followed by China (15.5%), Korea (12.2%), Japan (7, 8 %). %), and Europe (7.1%). The study also revealed a significant increase in the frequency and quality of registered patents in the United States between 2016 and 2020, and a significant increase in the number of claims in some geographic jurisdictions, such as South Korea, illustrating the region’s growth as a jurisdiction with significant FinTech innovation activities.

Using the IPC, which enables users to find a detailed patent document and its technical field, the research considered several categories – e-commerce or e-commerce, verification of the identity or authority of a user of the system, identification of payer or payee , payment protocols and electronic wallets.

It has been shown that the USA has the most patents in these categories, China and Korea follow, while Europe and Japan have the fewest number of patents for each IPC. In all but electronic wallets – where there is no significant difference between jurisdictions – the United States is again the leading jurisdiction for average patent quality scores.

In terms of organizational quality, the study collected data from 37 companies using the Thomson–Reuters database on revenue and EBITDA (earnings before interest, taxes, depreciation and amortization). The results showed a statistically significant positive correlation between a company’s average FinTech patent quality and its average earnings. When using EBITDA, the findings again showed a positive correlation between the average profitability of a company and patent quality.

A FinTech Patent Quality Index (FPQI) has now been created, which can be used to inform the development and deployment of FinTech technologies.

Furthermore, the FPQI can potentially be used to guide assessments of the quality and value of an organization’s IP assets and potential in a merger or acquisition situation, or when deciding whether to invest in defending patents.

The index also provides a tool for identifying high-quality patents owned by organizations that may be targets for alliances, acquisitions or investments.

Beyond industry, the FPQI will allow policymakers to better understand their jurisdictions’ status in FinTech patenting, thereby informing policy to improve their jurisdictions’ attractiveness as a destination for FinTech innovation.

Dr Milad Dehghani, lead researcher and senior researcher at the Center for Finance, Technology and Society at NBS, said: “Patents in the FinTech sector are being granted at an accelerating pace; However, due to the early stage of technology advancement in some FinTech fields, patents may be linked to frivolous claims and capital raising rather than legitimate technical or business purposes.

“So as the FinTech sector evolves, the valuation of organizations with FinTech activities and IP strategies is likely to become more critical. Organizations and investors will require practical approaches to valuing IP and commercial portfolios.

“Having up-to-date insights on high-quality patents, as enabled by FPQI, therefore represents a significant informational and strategic resource for organizations and managers. It gives them insight into potential organizations to approach, either in a partnership or user capacity.”

The full study, which was carried out with University College Cork and Queen Mary University, is published in the journal IEEE Transactions on Engineering Management.