Building tomorrow’s fintech today: A compliance-first approach

Remember learning to balance a checkbook? Every withdrawal had to be manually recorded, one missed transaction could throw your finances into disarray, and overdraft fees loomed as penalties for mismanagement. Now imagine that same kind of financial oversight process across a global corporation that’s moving billions of dollars daily — and where the stakes for making blunders are far higher.

Fortunately, financial technology has made that manual oversight a thing of the past. But today's sophisticated compliance systems are not just tools to keep finances in order. For fintech companies, a compliance-first framework is a strategic asset — a tool that not only ensures regulatory well-being but also expands the boundaries of growth and innovation.

By embracing compliance as a core value, fintechs can forge powerful partnerships, develop cutting-edge technologies, and lead the charge in a rapidly evolving business landscape. Ahead are three areas to focus on to leverage a compliance-first approach to future-proof your fintech.

Compliance as a strategic business value, versus a reaction  

At many fintech companies, compliance happens reactively — a scramble to meet the minimum regulatory requirements and avoid fines. But integrating compliance as a core business value has the potential to safeguard these companies on a much broader scale, often being the differentiating factor between those short-lived in the market and those offering long-term value.

The biggest strategic business value is being able to create a compliance playbook that drives greater commercial value.

Fintechs that prioritize compliance gain a competitive edge by demonstrating a serious commitment to regulatory adherence and build trust with their customers and partners. Those who fail to do so often face operational inefficiencies at later stages where a retrofitted embedded compliance approach leads to disruptions and intricate reworking of all systems at play. Proactive compliance integration is essential for fintechs to build strong and sustainable businesses.

“The biggest strategic business value is being able to create a compliance playbook that drives greater commercial value. As an example, we recommend that fintechs require a BSA/AML officer and automated transaction monitoring systems that fit their specific business model, within their core operational partnerships,” says Michael Bochniarz, head of Enterprise and Third-Party Risk at Cross River. “We see immense value in this approach as it allows fintechs to constantly fine-tune, and build strong, resilient relationships with their partners who trust this rigorous compliance to safeguard their operations," he added.  

Companies should also be investing in the right bank partnerships, advanced technology and robust compliance teams that monitor every transaction and work to mitigate every risk. This proactive compliance approach holds the inner workings of protecting partners from potential legal issues.

Putting compliance first ensures that you're getting both the right amount of data and the correct data from your customers. Without it, you may not be able to deliver a great customer experience. Being able to analyze that data is key to tailoring services to your customers’ specific needs, preferences, and circumstances.

A strong compliance framework can also streamline operations and reduce risks, leading to more efficient processes and reduced costs. For instance, Cross River’s use of sub-ledgers and APIs to manage customer records and transactions not only ensures compliance but also improves operational efficiency. This integration allows fintech companies to scale quickly without sacrificing security or reliability through Cross River’s proprietary core technology and BaaS (banking as a service) platform.

Building a compliance-first organization

Creating a compliance-first organization begins with weaving compliance into the fabric of your company. At Cross River, for example, this starts with a team of experts in regulatory areas like AML and Know Your Client (KYC), led by a head of Compliance who ensures that compliance is seamlessly integrated into business operations. Continuous training is key, ensuring that the team stays ahead of evolving regulations.

This approach also implies building and partnering with effective compliance teams from the bottom up with folks who are well-informed on regulatory guidance — teams should remain diligent about what’s out in the market. Companies are encouraged to constantly ask themselves: Does this apply to us or not? If so, how? Do we need to be concerned about it? What’s our strategy?

Since compliance is one of many risk pillars, fintechs should plan accordingly. “There are multiple risks,” says Bochniarz. “You have non-financial risk. You also have operational risk, IT security risk, and financial risk such as capital market liquidity. You need to take it all into consideration when you’re building a team and the right engagement model across your organization.”  

Future-proofing through compliance

Staying ahead of regulatory changes is crucial for long-term success in the rapidly changing fintech world. A compliance-first approach helps future-proof operations for fintechs and their ecosystem of partners. Continuous process innovation can ensure that businesses remain adaptable and resilient in the face of evolving regulations.

“We constantly ask, ‘What’s on the horizon? How can we create processes that are less manual, and easily adaptable as regulatory pressures change?’” says Bochniarz. “We encourage industry players to work with their partners to address what those might be for them.”

By integrating compliance into product development, companies can design offerings with future regulations in mind, reducing the risk of costly retrofits, and effectively passing those benefits on to their partners and customers.

We constantly ask, ‘What’s on the horizon? How can we create processes that are less manual, and easily adaptable as regulatory pressures change.

Fintechs can serve many different customers — selecting partners that offer compliance support for varying products and programs can also be an effective strategy to consider for those companies. This approach can provide fintechs with increased confidence in their compliance standards, so they can dedicate their focus to their core business.

Investing in compliance today not only mitigates risks and future-proofs your business, but it also creates more opportunities for growth: a proactive compliance approach scales more easily as a fintech grows, whereas remaining reactive can become unwieldy and resource-intensive as businesses expand. As regulations become increasingly complex, fintech companies with robust and adaptive compliance frameworks will be better positioned to attract investment, secure partnerships, and expand into new markets.

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