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Amanda Brief02/08/22 00:00

5 Compliance Challenges FinTechs Face Today

In our recent Women in Compliance fireside chat, leading global compliance experts came together to unpack five big industry challenges FinTech professionals are facing today. These topics include everything, from how FinTechs should respond to new regulations to how they can forge mutually beneficial relationships with banks.

 Read on to learn more.

This panel consisted of: Victoria Martin, Head of Compliance and Regulatory Affairs at 10X Banking, Valentina Poghosyan, Program Lead of Compliant Testing and Monitoring at Anchorage Digital, Alecia Chen, General Counsel and EVP of Operations at Climb Credit, Christina Rea, Founder and CEO of RayCor Consulting, Sasha Pilch, Principal at Fin Capital, and Gemma Young, Head of Marketing at TechPassport and Founder of Women in Fintech

1. Forging a solid collaboration between Banks and FinTech 

FinTechs and Banks can do much more to collaborate, going far beyond existing structures like bank-led accelerator programs. This is what Gemma Young, Head of Marketing at TechPassport and Founder of Women in FinTech, believes.

“Banks don't have to rely on their legacy systems anymore. They can start plugging into the technology FinTechs have to offer. And in doing that, they're forming some powerful allegiances that consumers are taking up at a fast pace,” she said.

The division between Banks and FinTechs was understandable a decade ago, but that era is gone. “When you see the partnerships that have already been formed between banks and FinTechs — and see how productive that's been — it would be so much more powerful if the industry came together as a whole.”  

It is about time that this challenge is tackled and turned into an opportunity that will largely benefit the whole ecosystem: banks, FinTechs and their customers.

2. Crypto’s next chapter

While FinTech matures, it’s cryptocurrencies that have been disruptive in recent years, with the fate of the industry still being hotly debated.  

Regulatory clarity is necessary to meet consumer demand for crypto, explained Valentina Poghosyan, the Program Lead of Compliant Testing and Monitoring at Anchorage Digital.

“Anchorage Digital conducted a survey back in December 2021, in partnership with YouGov, and found that nearly 40% of Americans believe that regulatory oversight would help cryptocurrencies gain acceptance nationwide,” she said.

“We don't simply need regulation,” she added. “We need regulatory innovation to create confidence in the market for digital assets. Regulators should bring applicable business models under their umbrella, so market participants can be protected, and efficient markets can develop.”

In addition to that, Sasha Pilch, Principal at Fin Capital, and co-founder of NYC Fintech Women, said there will be huge opportunities for B2B compliance startups to make an impact in crypto. 

3. Building a scalable compliance program

Whether your startup is in crypto, FinTech, or another vertical altogether, it’s important to get your compliance right early. Christina Rea, Founder and CEO of RayCor Consulting, warned startups against tossing money at vendors and consultants, without first understanding what they really need to achieve around compliance. It is also fundamental to make sure you pick the right vendors and partners. 

“Certain products and jurisdictions they want to operate in are going to be riskier, and that means they might have higher costs associated,” she said. “Beyond Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements, every company must consider vendor management. Make sure you're doing due diligence on all of your vendors and all of your partners.”

When it comes to prioritizing compliance areas, Christina noticed that FinTechs should first understand who their target audience is going to be and what jurisdictions they’re going to be offering their products in, i.e., will they be offering their products/solutions in one region or around the world? Additionally, they’ll need to have internal discussions to understand the risks associated with their product or solution. Once the business strategies and risk appetite are established, it’s important to build out a risk assessment that will help you define priorities and develop policies and procedures accordingly.

Christina stated, “It can take time to move from policies to operations, so it’s important to have the right regulatory technology (RegTech) in place and the right consultants and compliance officers. This can take some of the fear out of being overwhelmed in the beginning.”

4. Prioritizing compliance in a FinTech startup 

Like many professionals working for FinTech startups, Alecia Chen, General Counsel and EVP of Operations at Climb Credit, wears many hats in her organization. During the panel, Alecia shared her insights on how to prioritize compliance in a growing FinTech organization, while managing other high-value projects.

“It’s very helpful to identify the key areas of regulatory risk that are most relevant to our organization and then evaluate them based on the severity of the risk. This helps me get my head around which areas to prioritize. It’s also important to remind yourself that you can't do everything at once.”

When asked what kind of overlap she sees between her Legal and Operations functions, Alecia’s response was, “I know the company from a legal perspective, and now I'm seeing it from an operations lens as well. We work on all sorts of things together. Any change to the flow of our loan application is something the operations team owns, and that legal, of course, must weigh in on and review,” she said.

“A lot of us on the legal side try to be practical and commercial, and good business partners to everyone we work with, and it's interesting to be the one advocating for those [operational] requests, because it forces you to think hard about what's necessary.”

5. Responding to the new regulations under FCA’s Consumer Duty in the UK 

In the UK, the Financial Conduct Authority’s Consumer Duty has set out clearer and higher standards for financial services culture and conduct when engaging with consumers. Victoria Martin, Head of Compliance and Regulatory Affairs at 10X Banking, broke down the implications of the FCA’s measures.

“Products and services need to be designed to meet the needs of customers and sold to those who need them. You'll need to have metrics to show those products are being designed for that target market,” she said.  

Consumer Duty also sets high expectations for customer services to act in the best interest of the customer, and for financial services businesses to price products and services fairly. 

“This essentially should stop those bad practices happening in the first place,” she said. “It also means companies will have to take more marketing opportunities to make sure those products are communicated correctly — and that customers understand them.”

 For more insights, watch our recent webinar, Women in Compliance: The FinTech Edition.


Amanda Brief

Marketing Director Clausematch