Fintech and compliance: Managing the eternal balancing act

Published On : 03/29/2022

By Kris Simpson, Head of UK B2C for Cool Company

Any proposition that relates to finance is going to come under scrutiny. And rightly so. After previous, multiple scandals, the banking sector has got itself together, providing manifold layers of regulation, protection, and compliance. But for Fintech companies, this can prove problematic. While ethically minded entrepreneurs have no wish to flout the rules, regulations hold the potential to stifle creativity, scalability, and change. Bringing hurdles to the development of new products and solutions, slowing adoption, and making onboarding a far more complex matter than most businesses would like. 

And yet, ironically, it is Fintech that may hold the answer to supporting customers through the obstacles of industry compliance. Supplying a growing catalogue of services to help manage compliance while supporting scaling. 

How can Fintech help businesses with compliance?

Fintech was developed to smooth the technical stumbling blocks of financial services. Helping SMEs and startups to benefit from the advantages that the larger, more established companies already enjoyed. And as it has evolved it’s become key to supporting scaling businesses across many established sticking points. Automation, onboarding, reporting, checks, and other historically manual processes. 

Territorial expansion

Traditionally, providing services in different countries has presented many difficulties for scaling businesses. From navigating unknown legislation and cultural changes, to tax, business processes, registration, and many more, and diverse issues.  Previously, when moving to or operating in a new region, these issues have been tackled by hiring local people. Relying on local knowledge to guide your business through the maze of legislation and compliance. It works, to a degree. But it requires trust, and leaves you at the mercy of the people that you are working with. 

Tech has both made the world much smaller and expansion much easier, while removing the reliance on others. Replacing sharp learning curves with simple processes. 

Internal process scaling

Tech also allows for the simplification of scaling. Take document checking for new employees during the onboarding process. If you have a steady number of employees requiring checking, it’s entirely feasible that a small, in-house team will be able to manage the process. But what happens during peak periods? When your workload increases and there is greater demand on your team. Hiring more people to handle the checking increases the workload of those already struggling and adds to your company’s expenses.  With the right technology, working 24/7, the problem is easily resolved and scaling up and down becomes a streamlined process, removing the need to add additional headcount in peak times. And ensuring that all compliance issues are successfully managed – with an easily auditable trail. 

These solutions remove the headache of compliance for Fintech customers. While laying it firmly on the Fintech solution providers.   

How can Fintech companies face the challenges of compliance?

The key challenge in using tech to solve compliance is that you need to get it 100% right in the build phase. Otherwise, it will always be wrong. That means not only working current legislation into product builds, but allowing for easy infrastructure changes at a later date, should it become necessary. 

Why is compliance an issue for Fintech firms?

The difficulty for Fintech businesses is that creating solutions that won’t fall foul of compliance requires a degree of foresight. Because compliance regulations frequently change over time. And for a solution to offer any degree of longevity, it has to be flexible enough to change as the rules change. But rules change in different ways. Some compliance requires a certification process to gain market compliance – identity document validation technology (IDVT) is the latest example seeking to address this issue. Other areas of legislation call for a manual element for checking purposes, which is always difficult to replicate with tech. And, of course, businesses with products that may be suitable for more than one territory need to ensure that the regulations of each area can be accommodated. 

For Fintech companies aiming to provide products for regulated systems, these issues can prove hugely prohibitive. And finding workarounds can be the most challenging aspect of any platform launch.

Fintech and compliance go hand in hand. The one feeds the other. And as Fintech advances, providers are finding more and more inventive ways to serve SMEs as they scale. Helping with compliance, while finding new ways to ensure that their solutions remain flexible and scalable in the ever-changing financial environment. 

About Author:

Kris Simpson is the Head of UK B2C for Cool Company and is responsible for operational and compliance in the UK.   With over 10 year’s experience in Umbrella Payroll and the Recruitment sector. Kris is Cool Company’s go-to person when it comes to changes in the UK and providing solutions that our customers need.

Uma Rajagopal

Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.