According to the UK’s Financial Crime Authority (FCA), Citigroup sold $1.4 billion of equities in a “market they shouldn’t have been.” The result? A hefty £61.6 million fine – a glaring reminder that compliance gaps are incredibly costly.
Everyday, fintech companies deal with sensitive financial data and regulations that vary by market, making compliance a minefield. So, if you’re an ambitious fintech looking to expand your services in new markets, we’re here to support you.
Here’s your ultimate guide to regulatory compliance.
First, Understand The Market You Want To Play In
All markets are not the same. For example, Global City’s research shows the UK has a thriving fintech ecosystem with over 2,500 companies, which is expected to double in the coming decade. The Financial Conduct Authority (FCA) focuses primarily on consumer protection, market integrity, and promoting fair competition. At the same time, the Prudential Regulation Authority (PRA) is responsible for ensuring financial and market stability. Operating without proper authorisation from the FCA and PRA is a criminal offence.
In South Africa, the South African Reserve Bank (SARB) regulates the payment system industry, and the Payment Association of South Africa (PASA) oversees the participation of banks and non-bank players. In Nigeria, the Central Bank of Nigeria (CBN) is the appointed authority to regulate specific categories of fintech businesses.
With such variability in regulatory progress and differences in approach, running a fintech company across diverse geographical areas takes intentionality. As Dare Okoudjou, founder and CEO at MSF Africa, said on Mckinsey Africa’s Podcast, “In scaling across markets, the difficulty compounds.”
Speaking to Tech Cabal on an identity and KYC webinar, which discussed how early-stage companies can successfully establish themselves as regulatory compliant, Ebi Wanapere, head of operations at Bamboo, advised founders to do extensive research. “The first thing every fintech founder needs to do to be compliant is to research heavily and understand the regulations around the space you’re playing in.”
Looking for where to start? Check out our market research guide here.
Understand The Risks Involved
You’ve looked extensively at the new market, and you’re attracted to it, but you must also be clear on the risks and a plan to mitigate them.
Criminals are constantly seeking ways to clean dirty money. Data breaches can also be devastating for your customers and bottom line, as regulators impose hefty fines for non-compliance with data privacy regulations.
These threats mean that fintechs must consider compliance areas such as AML (Anti-money laundering), KYC (Know your customer), Data Security, and Customer Due Diligence (CDD).
Daluchi Iweanya, head of compliance at Quidax, advised fintechs on Tech Cabal’s KYC webinar to proactively engage with regulators and existing players in their expansion phase. She added that because regulation is still evolving, regulators often have to play catch-up, and collaborating with other fintechs will drastically reduce the possibility of encountering blindsides.
Here’s a detailed guide to help you choose the right KYC vendor in your region.
Understand the Best Practices to Adopt
In July 2022, Flutterwave, Africa’s biggest startup, addressed regulatory challenges in Kenya and Ghana, creating a template for other companies to adopt.
The company issued a statement claiming to have applied for a payment service provider licence. Flutterwave stated that, like many other financial technology service providers in Kenya, their entry into the market was through partnerships with banks and mobile network operators licenced by the Central Bank of Kenya.
Other successful fintechs in different markets now partner with licensed institutions like banks and mobile network operators to operate. This provides a crucial foothold in the market while navigating the licensing process.
In markets with limited infrastructure, consider building long-term solutions that meet an urgent need or gap. This strategy has proven successful for established players like Fawry (Egypt), M-Pesa (Kenya), and Interswitch (Nigeria).
Interswitch established Nigeria’s first transaction and switching infrastructure between 2002 and 2007, paving the way for payment acceptance across the country and over 185 countries globally. Since then, Interswitch has expanded its capabilities and geographic footprint.
Fintech and Regulatory Compliance: A Continuous Balancing Act
Regulatory compliance may be tedious, but it will help you mitigate fraud and avoid the reputational damage caused by sanctions and fines.
That’s why we offer seamless, quick, and accurate customer verification for fintechs of all sizes. From background checks to KYC identification to AML/PEP Screening, we help you comply with regulations while you focus on growth.
All you have to do is schedule a call to discuss your specific needs, and we’ll set you up in less than 24 hours. Click the button below to schedule a call; let’s help you today.
